Action point 3: Better Manage Conflicts of Interest

New Zealand has no provisions for the management of conflicts of interest for government appointees who have other employers or clients and work on policy development.

People outside government are frequently paid to play a role in public policymaking, for example, by serving on government boards or advisory groups, or doing consultancy or contract work. In a small country like New Zealand where people are closely connected it’s inevitable that commercial conflicts of interest will arise. Both personal and commercial interests need to be declared, avoided where possible, and closely managed where they cannot be avoided.

New Zealand has weak management of commercial conflicts of interest for government appointees who work on policy development but have (or have recently had) other employers or clients who have a financial vested interest in the outcome of that policy.

In its code of conduct for all public servants (the Standards of Integrity and Conduct), the Public Service Commission, defines a conflict of interest as, “a conflict between a public duty and private, personal and/or other interests. Personal interests can be financial or relate to family, friends or associates. Conflicts of interest may be actual, potential or perceived.” Note that this definition refers to personal gains but commercial gains for the person’s employer or their clients is not explicit. Added provisions are needed to make commercial conflicts of interest explicit.

Conflicts of interests that involve the commercial interests of people or businesses influencing government policy, law making and procurement are particularly serious. If people are paid by a firm, they may use their position advising government to covertly advance the interests of that company or industry.

If commercial conflicts of interest in the public sector are not recognised and controlled appropriately, they can undermine the integrity of policy making, compromise the reputations of officials and agencies and erode public trust in government.

The cooling off period proposed in Action Point Two would limit the ability of former ministers or their staff to abuse insider knowledge and access to confidential state information for the benefit of private interests. But the revolving door effectively moves in both directions, with lobbyists frequently moving into government roles, especially ministerial staff roles. The potential conflicts between the interests of their previous employer and/or clients and their new employer, the government, need to be more transparent and better managed.

In the previous (2017-2023) Labour Government for example, four out of five of the people in the role of the Prime Minister’s Chief of Staff had previously been lobbyists. Senior public service appointees who have come from the private sector should face much stronger scrutiny over potential conflicts of interest that their previous private sector work might create in their new role. e.g. A former alcohol lobbyist who’s appointed to the PM’s Office might favour their ex-colleagues by making pro-alcohol decisions. Stronger measures to manage these potential commercial conflicts of interest are needed.

What we are asking for

business people shaking hands

What these measures will achieve

It makes sense for standard policies and procedures to apply to all non-public servants who are involved in the development of public policy. This would include routine declarations of any conflicts of interest (i.e. any potential commercial interests that the person’s employer, clients, or employer’s clients may have in the policy being developed). Standard risk management processes should also apply.

A strengthened code that is explicit about the commercial conflicts of interest will help to improve the transparency and management of those risks.

Providing extra protection for the development of certain policies at risk of commercial lobbying pressures would reinforce the lobbying regulations recommended in point one of this action plan. An independent Integrity Commission is needed to enforce these rules.

These measures follow the latest recommendations of the OECD on international standards for regulating lobbying, which advocates for OECD nations to call for, “rules and procedures for identifying, managing and resolving conflict-of-interest situations, and for a system that manages the conflict-of-interest risks posed by individuals both entering and leaving the public sector, including at the international level.”

Why action is needed

New Zealand has long been regarded as one of the least corrupt countries in the world, consistently ranking within the top few countries on Transparency International’s Corruption Perception Index (CPI). So why should we be concerned about integrity and conflicts of interest in public policy-making?

New Zealand’s CPI ranking has been trending downwards over the last few years, which sends a signal that should not be ignored. Although New Zealand is not yet regarded as having an ingrained culture of bribery and corruption, we don’t have strong integrity systems in place to protect against conflicts of interest. The mere perception of a lack of integrity undermines public trust and business confidence, and weakens democracy.

  • Labour MP Stuart Nash was sacked in 2023 after leaking confidential information to political donors. An investigation into the conduct of the former Minister for Regional Economic Development (MBIE), found that Nash should have done more to manage a conflict of interest that arose when Nash suggested Labour Party donor and high school friend, Phil McCaw for a role on a body supporting MBIE.
  • Former PM Chris Hipkins recruited lobbyist Andrew Kirton to be his chief of staff, and subsequently cancelled a policy initiative on recycling that conflicted with the business interests of the chief of staff’s former clients.
  • During the four-month period in which lobbyist GJ Thompson worked for former PM Jacinda Arden as Chief of Staff, he failed to identify the firm’s clients or update Ministerial Services on potential conflicts of interest.
  • Reporting by RNZ in 2023 found that staff from a consultancy, SenateSHJ, worked in the offices of the Commerce Commission on sensitive competition policy – dealing issues in the grocery, energy and residential building supplies sectors as well as fair trading and retail payment systems – while at the same time lobbying for private sector clients.