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The Letter – Monday, 8 May 2006

The Letter – Monday, 8 May 2006

The Letter Limited -

The Haps

Labour goes further down the regulatory road. The most serious budget leak in our history. More allegations against David Parker. Rodney dances with the stars.

The Leak

We suspect the government knows who leaked the cabinet paper. By publicly clearing their staff and appointing the State Services Commission to investigate Ministers are indicating they think the leak came from the Ministry of Economic Development.

It is corruption

Everyone involved knew how commercially valuable the information was. What else has been leaked? Why did they do it?

Media bias

The press gallery who live on leaks do not realise how much damage has been done to NZ's reputation for being not corrupt. Investors around the world who have lost money on the Telecom decision assume it is corruption. A reputation for honesty that has taken years to earn has been lost in moments. A secret inquiry that blames a civil servant will not restore confidence. A "political" Select Committee hearing will be dismissed as partisan.

A Commission of Inquiry

In Australia the Howard government has set up a Commission of Inquiry under a High Court judge to hear evidence in public into the Australian Wheat Board's sanction busting deals with Iraq. Not even John Howard has been exempted. Nothing less is required.

Minister negligent

Despite knowing how sensitive the information was Minister David Cunliffe took no measures to give the paper extra security or to review security measures with his department. We think it was the Minister's inexperience. He has never been in Parliament when there has been a budget that contained any sensitive information. Cunliffe is not going to be asked to resign because the most senior Ministers are more to blame.

Finance Minister negligent

Once the government decided that this was a budget announcement, then the policy was Dr Michael Cullen's responsibility. The paper was not marked "Top Secret, Budget".

PM negligent

Helen Clark is in charge of the Cabinet Office. The procedure for maximum security is for the paper to be placed in an envelope and marked "Top Secret - Minister's eyes only". This was not done. It is extraordinary that an estimated 30 to 50 Ministerial staff are believed to have had access to such a sensitive paper.

The Politicisation of the Beehive

Once all the staff who worked in Ministers' offices were career civil servants. Now Ministers' offices are staffed by political appointees. There just was no one in Cunliffe's office who knew what to do. The Beehive was more interested in how to news manage the announcement than in ensuring it was kept secure. Clark will not appoint a High Court judge who might point she was at fault.

Will it work?

For the unbundling to be a good decision it has to meet these tests. It needs to create over $1.6 billion in value, (the loss in Telecom's share price) and total investment in broadband has to be greater than it would have been; (the announcements by competitors so far are tiny). Then the devil is in the detail. Telecom has discovered in Australia that unbundling has not made it any easier to compete with Telstra. Then there is the long-term damage from undermining private property rights.

You lost money

Every NZ'er lost money last week. The Cullen Fund that is saving for our retirement holds Telecom shares. Nearly every private superannuation scheme, every passive scheme and most managed funds, as well as many mums and dads hold Telecom shares. The destruction of $1.5 billion in 24 hours will have an impact on the economy.

Regulatory creep

Regulations are like Uncle Remus' tar baby. One regulation just leads to more. There will be massive regulatory interventions required to try to make unbundling work. New technology means even the best thought out regulations are obsolete. The government's just realised that the Electricity Commission's decision against Transpower's new line means more fossil fuel stations, making it even harder to meet Kyoto obligations. Cullen's answer? More regulations.

Parker's woes

More allegations have been made against Parker that he hid assets from the liquidator of a failed business venture. Parker's response is that it had been investigated at the time. It is all too complex, "he said, you said," so National has dropped it. See "New questions for David Parker" at The real question is what inquiries has the PM made?

White men can't dance

The judges were a bit hard on our Rodney. If the Aussie and Pommie judges had seen Rodney campaigning they would have realised his weight loss could make a Jenny Craig ad and we were pleased to see he can dance! It will be a serious set back to white, middle, aged, males, a tribe we are very fond of, if Rodney is thrown out at the first hurdle. Vote at 0900 89 818 or text "Rodney" to 8981.

Youth rates

Some 27% of readers think youth rates should be abolished. Youth unemployment is a major issue in most OECD countries. One of our first jobs was working in the freezing works cleaning intestines. No money in the world would get us back to that shitty job producing high quality condoms. We thought that they were kidding when they said we were making frenchies and inadvertently punched most of the condoms we produced! A mistake that may have had long-term consequences. It is the sort of thing that makes young workers expensive to employ. Adult wages will make it hard for Maori and Pacific youth to get that all important first job.

This week's poll

"Do you support a full public inquiry under a High Court judge into the leak to Telecom?" Vote at We will send your answer to Helen Clark.


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