Bookmaking on horse racing events was made illegal in New Zealand in 1911. Until 1949, the only legal form of betting was on-course at race meetings. When off-course betting was legalised in 1949, consistent with the statist approach of the time, a single national agency, the Totalisator Agency Board, was established to regulate and control betting in New Zealand.

Like most aged, monopolistic government agencies, it has struggled to keep up with the times, including the growth of on-line, offshore betting on sporting events other than just horse racing; on-line casinos; and other forms of gaming, like Lotto. The TAB’s ongoing financial viability has been an issue for some years now.

But because of mounting social concern about the proliferation of gaming opportunities and the impact on vulnerable people, as well as potential links to organised crime, no government has been prepared to abolish the TAB in favour of a competitive, properly regulated private sector market for betting. So, the current antiquated monopoly has remained, and increasingly frustrated punters have sought better returns from the range of mainly Australian and other offshore betting agencies now available online.

Against that background, the government’s announcement of a new strategic 25-year partnership between the TAB and the British betting Entain that will guarantee our racing industry additional funding of nearly $1 billion over the next five years seems sensible. At the same time, the government is proposing to extend the TAB’s current monopoly for racing and sports betting to cover online betting.

In other words, all forms of betting, other than through the TAB, are likely to be outlawed, effectively entrenching the intent of the establishment of the TAB, three quarters of a century ago. It is not clear whether this is a component of the Entain deal or separate from it. How this might be achieved without resort to Chinese-like censorship of New Zealanders’ online access is another matter altogether, raising its own questions about the extent to which the government is prepared to go to protect the TAB monopoly.

The racing industry’s delight at this latest windfall is drowning out other more concerning aspects of this new deal, specifically related to conflict of interest.

This has been a problem that has dogged the Hipkins’ government in recent months. First came the unfortunate case of former Minister Stuart Nash who proved himself incapable of separating his private connections from his Ministerial responsibilities. Then there was the situation surrounding Minister Kiri Allen and her now infamous speech at the Radio New Zealand farewell to her partner. In both cases, Prime Minister Hipkins was very slow to act, only dismissing Nash when it became impossible to retain him any longer, and declining any action regarding Allen, even after it became clear her speech was no accident.

In doing so, the Prime Minister appears to have relied on an overly literal interpretation of the Cabinet office rules regarding conflict of interest. There was arguably no material gain for both Nash and Allen from their actions, apparently explaining Hipkins’ reluctance to act. Nash fell in the end more because the egregious nature of his overall conduct, rather than any specific benefit gained, made it impossible to retain him. Allen’s remarks have so far been ignored by those at whom they were aimed and consequently, the Prime Minister.

However, the Cabinet Manual also makes the point that “public perception is a very important factor” in dealing with Ministers’ interests. In other words, the perception of a potential conflict of interest is as important as an actual conflict. This latter point is relevant to the government’s decisions regarding the TAB, specifically the proposal to extend the TAB’s current monopoly for racing and sports betting to cover all online betting.

Racing Minister Kieran McAnulty, who made the announcement, was previously a bookmaker for seven years with the TAB. There is no suggestion that he stands in any way to gain materially from the extension of the TAB’s bookmaking monopoly, but his involvement in, and presumably as Minister leadership of this plan, is of concern. It fails the Cabinet Manual’s “public perception” test and simply looks like an ex-bookie looking after his former colleagues.

While McAnulty’s expertise in the area is relevant to the issue, and should not be disregarded, it was unwise to have him fronting the issue, given his career background. At the very least, to avoid any perception of conflict of interest, the announcement should have been made by another Minister, possibly the Minister of Internal Affairs who already has responsibility for gaming matters.

Beyond that, and again from a perception perspective, given the sensitivity of matters relating to the TAB, it was unwise for Hipkins to have made McAnulty the Minister responsible for the TAB in the first place. But, given the lax approach he took to Nash and Allen and their potential conflicts, it is probably not surprising.

There is a danger in all governments of Ministers being seen to be the captives of the sector groups they represent. This is especially so when Ministers come from the sector group concerned. The Minister of Education, a former principal and teachers’ union official, has already risked looking like the unions’ plaything when it comes to the current salary negotiations. Similarly, the Minister of Health, a former Ministry of Health medical officer, comes across as more the protector of current health sector vested interests than the leader of the changes the public health system so desperately requires. McAnulty now risks being cast in the same light with respect to the current proposed TAB changes.

For his sake – he has so far proved to be an effective Minister in other areas – and for the government’s credibility, given that it is already riven by conflicts of interest, perceived or otherwise, the Prime Minister needs to move McAnulty aside from matters relating to the TAB. Otherwise, once again, perceptions risk becoming reality.

 

 

Budgets today are as much a political statement of a government’s intent as they are an economic management plan. They are a balance between what a government aspires to do, and what it can achieve in practice. As such, they are always compromises. Grant Robertson’s six Budgets show this – the first three were severely constrained by the shackle of Quixotic coalition partner New Zealand First, and the last three by the spectres of Covid19 and now, the disastrous January cyclones. Should this be his last Budget, he will leave office never having been able to present a truly “Labour” Budget, for reasons completely beyond his control. 

All these factors influenced the formation of this year’s Budget. It had two primary objectives. First, it needed to show a clear response to the ongoing social and economic ravages brought about by the pandemic, and more recently the summer’s devastating cyclones. At the same time, it had to do something to alleviate the impact of the rising cost-of-living crisis on average households. Its second objective was to set a political platform for Labour’s re-election campaign over the next five months. Robertson faced the classic dilemma of balancing the country’s longer term economic and developmental requirements against the government’s shorter-term imperative of securing its re-election. 

Prime Minister Hipkins had promised a “bread and butter” Budget, and Robertson has not disappointed in that regard. Rather than deliver assistance to families struggling with the rising cost-of-living through boosting Working for Families tax credits, he has opted for a more targeted approach. Extending the 20 free hours of the early childhood education scheme to 2-year-olds will help only those households currently with 2–3-year-olds, not all families facing rising childcare costs. Abolishing prescription co-payments may also help, but it is questionable whether these two measures will do much to help families already struggling to put food on the table. 

Similarly, free public transport for primary school aged children, and half fares for those up to the age of 25 is a pragmatic replacement for the blanket half-price transport scheme that has been in place for the last eighteen months as a cost-of-living relief measure. But it only applies to those living in cities or major towns where public transport is available. And the complete removal from the start of July of the fuel subsidy will hit hard those families relying on car transport to get to work or the kids to school, potentially negating the impact of the cost-of-living measures. 

The National Resilience Plan was a necessary response to the cyclones, but the initial impact will be limited as the focus is properly on long-term infrastructural development, with many details yet to be worked out. The $71 billion package, funded largely by borrowing, is substantial but there must be questions about the national capacity to deliver, given current labour market conditions, and immigration settings. 

The big picture looks a little less grim than that painted last year but is still far from rosy. A recession may now be avoided, ironically not because of any government policy initiatives, but rather because of post cyclone recovery investment. Inflation is predicted to drop to 3% by next September, but GDP is predicted to fall sharply over the next year. The return to a Budget surplus is pushed out a further year to 2025/26. 

Overall, the Budget is neither an election winner nor loser for the government. While young families look the immediate winners from the Budget, the impact on most other households – aside from the prescription charge abolition – is at best neutral. Reduced public transport costs for those under 25 will be offset by rising fuel costs after the subsidy goes in July. Meanwhile, those on fixed incomes, along with the economy’s productive sectors – industry, small businesses, agriculture, and horticulture – have been largely ignored. There is still no sense Robertson, and his colleagues have any idea how to grow the economy to generate the long-term income needed to sustainably fund their social programmes. 

Labour is gambling that its extension of 20 hours free early childhood education to 2-year-olds (estimated to save the small number of eligible households around $133 a week, but not until March next year) and the abolition of prescription charges will pay a significant political dividend. However, that looks to be overly optimistic. In March, ASB economists estimated that households were already likely to have to spend an extra $150 a week over 2023 to keep up with rising costs. With the fuel subsidy coming off at the end of June, rents and mortgages still rising, and the limited early childhood education relief still around 10 months away, the government has not yet done enough for those families to feel better off. 

Nevertheless, Robertson’s “no frills” Budget was probably the best he could do in the circumstances, given the constrained fiscal position. This is more a “bits and pieces” Budget than the “bread and butter” Budget Hipkins promised. Of itself, it is not a viable election springboard for the government. 

So, while the Budget has not set Labour off on a roll into the election campaign, as some undoubtedly hoped it would, it has put the focus more sharply on National. Christopher Luxon and his colleagues now need to show whether, and how, in the same circumstances they could have done any better.

 

 

Christopher Luxon’s announcement ruling out any post-election working arrangement between National and Te Pati Māori is more predictable than bold. Realistically, such an arrangement had never been likely, and recent events have merely confirmed that. So, Luxon’s announcement simply acknowledges the inevitable, but gets in first, sparing National the ignominy of being spurned later by Te Pati Māori. 

Beyond that, Luxon’s move at this point is a potentially smart one, although not without a measure of risk. By portraying a government of Labour, the Greens and Te Pati Māori as a “coalition of chaos” he is certainly trying to capitalise on the confusion of the last week or so. He is also trying to link Prime Minister Chris Hipkins into that by implying that he would not be able to run an effective government if he needed to rely on the Greens and Te Pati Māori. By unspoken contrast, he is planting the seed that a National/ACT government would be much more straightforward and effective. 

In so doing he has thrown down the gauntlet to the Prime Minister. While it is generally accepted that a future Labour-led government will have to involve the Greens, the position is not so clear regarding Te Pati Māori, with Hipkins so far ducking questions on whether they could be part of a future governing arrangement. Luxon is trying to force Labour’s hand – to rule Te Pati Māori in or out of its government formation calculations. And here is where things get interesting. 

If Hipkins says Labour can work with Te Pati Māori in government, Luxon will be able to home in on what concessions Labour will be prepared to make to achieve this. He will be hoping that he can reinforce his “coalition of chaos” message this way. For his part, Hipkins will be wary of giving away too much too soon, for fear of either alienating Te Pati Māori altogether (unlikely) or giving credence to Luxon’s portrayal. 

Luxon’s calculated risk is that there are more potential National voters who will be concerned about the possible involvement of Te Pati Māori in government than not. To them, his announcement provides comfort and certainty about what they might expect of a National-led government. 

Hipkins will be similarly mindful of scaring away some of his soft support if he embraces Te Pati Maori too fervently at this point. At the same time, he will know full well that if he distances himself too much from Te Pati Māori, he runs the risk of alienating some of his own support, especially among Māori voters. Hipkins’ emerging dilemma will be observed by Luxon with relish. 

Luxon’s announcement also creates problems for Te Pati Māori. At the weekend it boldly proclaimed it would be the “kingmaker” at this year’s election. By ruling it out as an option for government, Luxon reduces Te Pati Māori’s role significantly. Now, instead of being the party that could determine the shape of the next government as it clearly hoped, the best the party can wish for is being in some sort of governing partnership with Labour and the Greens. So, rather than being the independent voice of Māori that is has consistently promised to be, Te Pati Māori has now ended up being dependent on Labour to progress its aims. 

This may not please those of its supporters who imagined Te Pati Māori being able to leverage influence between both Labour and National to the overall benefit of Māori. Being at best a potential bit-player in a future Labour/Greens government – likely of itself to be a fraught relationship, given the Greens’ frustration with Labour’s general lack of progress on climate change – is not what those more conservative supporters of Te Pati Māori had in mind. 

Te Pati Māori’s leadership is sharp – the way it recruited Meka Whaitiri shows that – so, will not take Luxon’s rejection lying down. A smart move in these circumstances might therefore be for it to announce that should it hold the balance of power after the election, it will not formally join any government arrangement. Instead, it would sit on the crossbenches, and treat each issue on a case-by-case basis, whichever of the main parties leads the next government. That way, it could retain its mana, and meet the aspirations of its supporters. Given the polls showing neither Labour/Greens nor National/ACT winning a majority at present, such a move would put Te Pati Māori in a genuinely pivotal position. 

Luxon’s move has put the pressure firmly on the Prime Minister to state where Labour stands. The longer Hipkins avoids a definite answer, the longer he will fuel suspicion that a Labour/Greens/ Te Pati Māori arrangement is on the cards. 

For the first time in a while, National has taken the political initiative by raising the spectre of the “coalition of chaos”. How Labour and Te Pati Māori choose to respond could well determine the election outcome.