Another embarrassment for our criminal justice system dealt with by  the Privy Council, the world’s best independent  top court.

There will be too much political resistance to admitting a stupid mistake in dumping that inexpensive heritage assurance of judicial objectivity. But the need remains.

We should promptly ask the High Court of Australia to accept our appeals where we need demonstrable assurance that the result will not be influenced by insider defensiveness or local groupthink.

According to the Wellington  Regional Council Mayor, not being allowed to lie in official advertising “could drastically restrict how local bodies operate”. She believes that having to live up to the standards expected of business “poses a real risk to robust political debate”. Putting aside the inconvenient fact that Council advertising should be informative, not political propaganda, it is incredible that there is no media furore over her further defence that seeking the Advertising Standards Authority ruling was “legal nitpicking”.

The DomPost has reported the matter under the heading “Advertising Standards Authority calls GWRC super-city ad ‘misleading’”. Note the implied warnings to ignore – “calls’ instead of “finds” and the word ‘misleading’ in quotes to distance the DomPost from the dreadfully unwelcome judgmentalism implicit in ‘misleading’.

Take a look at the ASA report, ( 15/004) which attaches my firm’s letter setting out the facts. Someone in the GWRC was either too stupid or too reckless to merit staying employed, or set out to deceive. See also the submission on behalf of the GWRC which says essentially that councils should be free from ASA supervision of their advertising, because being constrained to the truth would be problematic.

How do the honest members of the Council feel about this? Will they seek an inquiry into it. Will anyone be held accountable?

Businesses, remember that indifference to honesty, when you next want to shade the truth to GWRC. Its leader thinks that “misleading advertising” which was “not prepared with a due sense of social responsibility” is just robust debate.

In 2008 I blogged on journalistic blind eyes to lies by politicians, compared to their frothing pursuit of easily made mistaken business claims.

“As a commercial lawyer I’m sickened by the left’s sanctimony toward business. Labour love passing laws they could never satisfy in their own conduct. They lie happily, yet business people (properly) face prison or huge fines for faulty prospectus statements.”

I’ve had some journalists and politicians claim that it is because business can lose people so much money. We saw that claim in full lynch mob glory in the media’s repeated whipping of two former Ministers of Justice. They were found by a court to have been honest though mistaken. They’d failed to add enough emphasis to their written warnings of the risks facing Lombard Finance.

The company’s failure (like most mezzanine development finance lenders) had nothing to do with the misleadingly mild warnings. Many commentators wanted them in jail for years, nonetheless.

But in matters like the proposed amalgamation of a region to put it under provincial government the amounts at stake are enormous. If Wellington ratepayers end up funding the executive pay increases and rate increases experienced in Auckland the per household costs will dwarf anything a Fair Trading Act prosecution for misleading statements would usually deal with.

Why the double standard? Why are GWRC councillors not facing calls that they go before the courts and risk imprisonment for false statements, the way company directors do? The GWRC statements too may have been errors of judgment, not dishonesty. But that did not save the Lombard directors from criminal conviction .

Councillors are not at risk because there will be no media call for equal treatment morality.

As an MP I ran into it constantly – deep suspicion from politicians and journalists that business people are inveterate liars. Few of the former had the faintest idea how much everyday business effort goes into protecting a reputation for being honest. Standard due diligence for published statements was inconceivable. I found it impossible to shift their pre-conceptions. They simply applied to everyone their own absence of morality – they lie freely if they think they can get away with it, so to them everyone else will be worse.

But what about the days of boredom we’ve endured as the Gallery pursued John Key over when he knew something, compared with when he said he knew it? Surely that shows they still think lying matters?

It does – but just for their enemies. To them lying is OK when it is for their causes, and by people they want to win. It remains wrong, but only worth beating up for the mugs who don’t lie when it is suspected in their opponents.

Thank God we now have specialist and social media to bypass mainstream political journalists and their editors.

Does the DomPost still have a news editor?

Opposite the page this morning that headlined Annette King’s non-story on Health discarding a few thousand dollars worth of redundant pamphlets was a tiny item noting the Local Government Commission’s admission of a $30m under-estimate of the transition cost for its preferred Uber-City model for Wellington region.

Yet the DomPost thought amalgamation important enough to dignify with a weightless supporting opinion a few months ago. And it has recorded previous LGC confusion over such trivia as cost, though it has never thought to campaign for cost benefit analysis.  Could the Regional Council advertising budget have anything to do with the DomPost lack of curiousity about LGC incompetence?

Because today’s correction is a tip of the iceberg admission. There are two more glaring problems in the LGC report and draft recommendation. Will the LGC come clean on those?

First, they’ve ignored the very purposes of local government. Secondly there is a reasoning gap between their preferred solution, and their own financial analysis, that seems to show that the LGC’s objective for amalgamation is really bigness for its own sake, not the efficiency so often claimed.

Even after today’s correction ordinary people will not trust amalgamation cost estimates. Normal experience of empire-building IT and amalgamation projects should have made the LGC much more cautious about cost estimates. A glance at the woes of the Auckland integration ($100m over budget, late and still not delivered) should have been enough to tell the LGC its Wellington empire costings were unreliable.

But it may need a Court to set them straight on their other bungles.

Purposes – The LGC has set out to ignore the law that inconveniently tells them local government is about local government – that means decision-making by communities for themselves, not arrogant provincial government. The LGC is required to promote democratic local decision-making. Incredibly, in citing that criterion they blithely omit the vital statutory word “local”*. It is hard to think of more calculated ruler insolence or incompetence than a statutory body citing its own empowering legislation falsely, in the way it wants it to read, rather than how it actually reads.

Pretending the word ‘local’ is not there seems intended to help the Commission conclude that a single region-wide council with impotent/decorative local boards ranks higher in terms of [“local”] democracy than the existing genuine local self government by councils with real decision-making power.

The second bungle is equally important.

It seems the LGC chose to simply overlook efficiency – the other strand in the law for deciding on structural changes. They’ve recommended the option ranked fifth out of the eight alternatives in its own commissioned financial analysis.

Of the reorganisation options the standout performer was ‘Stronger Regional Delivery’ (the closest to the reform option advocated by Hutt City) It would build on current collaboration among the regions local authorities, for delivery of network services like transport and water. The net present value (NPV) of this option is expected to be $199m with an estimated transition cost of $129m.

In contrast, the LGC’s preferred option of a supercity is expected to cost $210m with a NPV of $58m.

How can the LGC have applied the statutory criterion when its recommended option is fifth out of the eight? How have they taken account of costs, expected returns, and implementation risks (things not turning out as hoped) if it is not in their own financial analysis?

Will there be another correction from the LGC. Will business ‘thought leaders’ in Wellington ask for them? Or might the Minister of Local Government step in as some councillors want?

Citizen opinion suspects LGC prejudice against genuine local self determination. But it is not easy for the Minister to now influence much other than the timetable. She’ll try to stay well away from the debacle looming for the LGC

*See paragraph Local Government Commission (p. 110, Section 4.96) – Draft Proposal for Reorganisation of Local Government in Wellington, Volume 2

Few business people are good at democratic politics. They expect what works in business to work in democracy. They’re frustrated by the messy necessity to maintain a working consensus, by multiple conflicting objectives, and by the unreliability of delegates.

They think that if only the right people were in charge, the best structures and systems would be like those in business, where everyone accepts single prevailing decisions from nominated rulers, and he who pays, rules.

Business people who get embroiled in politics commonly hate it so much they eject before they flame out. Those who survive and learn may be small in number but they are among the best we have, and we owe them a lot for their patience.

Many good business people are equally hopeless in assessing policy. I could not count the number of times I’ve heard the idiocy that the RMA is a good law, with nothing seriously wrong with it except how it is administered by council people who are stupid or wrongly motivated. These business defenders have no idea that they’ve just explained exactly why the RMA is  so badly conceived and written as to besmirch the rule of law.

They’re misled by objectives. In business, if you can get your objectives clear, and set them out for your staff, much of the work is done. But the promoters of all law recite noble objectives, usually purposes we can all agree on.  The key problem in both policy and law-making is the unintended, often the application of law for purposes never thought about.

What distinguishes bad law from good law is simple. Well designed and drafted law works whether or not ‘idiots’ are in charge. It is predictable because it limits what rulers can do. It is very carefully  designed knowing that people of malign intent will try to misuse any law. Frequently they will have power. Good law is drafted by wise sceptics about human nature. It remains predictable in effect despite attempts to distort it.

The RMA is set up instead to reflect the shifting fashions of ruling sentiment from time to time. It is therefore specially handy for those who like to claim they are acting in the interests of others, a common excuse for calculated abuses of power.

In many respect the RMA does not qualify as part of the rule of law. It enables decision-makers to dress up their aesthetic, spiritual, class, social and economic prejudices in complicated processes. They look legal, but they demean the reputation of law. If you can’t generally decipher in advance from a provision what you can and can’t do and how the rights of others will affect your plans, it is not law, it is just an instrument delegating decree powers.

Those who framed the RMA deliberately excluded normal rule of law certainty and predictability. It has taken 20 years for business people to learn that it must be judged on how it works, not on its claims to noble purpose.

I’ve come to the conclusion that I’m watching similar business naivete on super-city amalgamations. Here in Wellington the Chamber of Commerce and the Property Council have not bothered to offer their members any analysis, reasoning, or even debate, before joining the ‘bigger is better’ campaign.  Perhaps it is natural for business people to favour bigness – after all most probably regard growing bigger as the measure of success.

But I’m not aware of any evidence that small councils are comfortable berths for more stupidity than bigger ones. When I was in the Office of the Ombudsman many years ago experience often suggested the opposite. Counties and country areas seemed better run, on average, than their bigger neighbours.

That is not research evidence, but it is puzzling that business has not watched the Canterbury experience, and the extent to which Canterbury has been saved from presenting unrelieved incompetence by the safety valve councils of Selwyn and Waimakariri.  You’d think they might have asked Hugh Pavletich to come up and report. Christchurch has been hostile to business ever since Christchurch City was jammed together as a prototypy ‘super-city’ two decades ago.

Many Wellington business reps have an intuitive faith in  ‘bigger is better’ territorial government. I say ‘territorial’ because it would be a lie to call Uber-City Wellington and Super-City Auckland “local government”. Two councils governing half the population of New Zealand may be government, but it is certainly not ‘local’ government, on any measure.

This faith based policy development by business reminds me of the business elite of Britain on the Euro.

Twelve years ago Britain was consumed in deciding whether to adopt the EU common currency. Gordon Brown decided not to join, against the wishes of his PM, Tony Blair, and much of the UK elite, including the Confederation of British Industry and other business leaders. This Guardian article talks of the snobbery that divided the two sides. On the anti side with Brown were a comparatively few hard-nosed experts who demanded analysis. They pointed out that most Euro support was hope – a half-baked conviction that it was safer to be with the big battalions, whether or not they were right. Brown had Treasury support, but more importantly he had on his side the mass of his electors,  though much of the TUC and Labour leadership was on the other side. Ordinary people had an intuitive suspicion the euro would not end well, to their cost. And so it has proved for the poor in many countries whose leaders fell in with the elite Project. The Euro was sold on a combination of “bigger is better” fear, and the elite’s faith in their superior purposes, not careful calculation.

Four years ago, after the Project collapsed into the current morass, it became hard to find those who’d supported the Euro.

Here in Wellington are strong signs of the same wilful refusal to think. Those bent on a Uber-Council for the whole Wellington region are not worried that it will replace genuine community self determination. Perhaps they feel it goes without saying the peasantry would be better off ruled from afar by their betters. The LGC claim that Wairarapa is not viable is breathtakingly patronising. They don’t quite say that it will always need Wellington office tower subsidies but there is no other implication.

Why has that not signalled “Caution!” to the Property Council? They feel no need for research evidence that scale efficiencies are common in local government, or that they outweigh the inefficiencies of larger bureacracy and more distant representation.

To amalgamators it seems to be enough to believe there is widespread incompetence in local government and lost opportunities for ‘growth’. Even if that is right, how size solves it is not explained. Size would put more eggs in the same basket. How will it make the basket less dodgy? From experience it could mask even greater incompetence, or deter more able candidates. It is especially odd that business is not interested apparently in more pay on local politicians, not less.

I know many amalgamators. They are good people, and many have lead good businesses. But few understood politics when I was an MP. Things have not changed. Councils must preserve and respect and continually learn from dissension. Businesses are ruined by it.

The Economist explains for lay readers some competing considerations in the Obamacare challenge the Supreme Court is about to consider.

It is worth reading, though the reporter’s bias shows in a dismissive description of the legal principle that makes this such a serious challenge, even for lawyers who very much want Obamacare to survive.

The principle that the law is what the words say, not what politicians claim they intended, lies deep in the rule of law. Citizens should be able to know in advance, from the words of the law, what is lawful and what is not without asking any politician, or subordinare ruler what they want the rule to be made to mean.

This is now particularly important in New Zealand, where our ruling parties collaborate to pass undefined slogans as law, hoping they will get away with appearing to satisfy their supporters without fully alerting those who will have deep-rooted objections.

National’s Marine and Coastal Area Act, replacing Michael Cullen’s more principled Seabed and Foreshore Act is a case in point.

Despite the sloppiness in the drafting of the US law in question I think the Court will find a way to uphold its effectiveness, correctly.

Friends gave me this knowing vaguely that I’d had many hives. I saw that the author, Cliff van Eaton, was described as a beekeeping adviser and consultant and prepared myself to skim.
I expected a clumsily constructed amalgam of deep technical material with partisan opinion and passion. I thought I would know most of the content I’d be interested in.
Instead I found an absorbing story, a great deal of new and fascinating information explained for non-scientists, a well constructed narrative, vivid writing and respect for all he mentions.
The negotiation of the shoals of judgment in an industry offering plenty of people and conduct that justifies it, is a special achievement.
The affectionate description of Peter Molan and his vital role is timely. He gestated the scientific attention which has transformed the Manuka weed to its current status, then protected and sponsored it till it demanded the international attention well described in the book.
Highly recommended.

This morning’s withdrawal from the Wellington region DHB tender process for lab services leaves our DHBs waiting for a shafting. Other DHBs and the government are now in line for their turn when current contracts expire.

It is extraordinary for a tender party to withdraw after all the work is done and before the decision. So it looks as if the DHBs must have told Aotea they were coming second, and Aotea has decided not to throw good money after bad in the process. If that is not the explanation, the process must have become a shambles.

Whatever the reason, the DHB position is dire. From what Abano says in its announcement, a decision by the DHBs on Friday would not have formed a contract. Though it is best practice to ensure that the decision is conclusive, it seems likely that the DHBs thought they would have the luxury of  refining the details in negotiation with a winner remaining disciplined by competitive tension. Now of course the remaining party can dictate terms, unless the DHBs convince themselves they could set up the replacement services by October themselves. Doing that for less is improbable.

The withdrawal crystallises the risks I described in Friday’s post for the Ministry of Health and all other DHBs. Healthscope now has the monopolist’s inside running  across the country.

I had no knowledge of any Aotea or Abano plan to withdraw when I posted last week. It is a bombshell, but one that is consistent with the commercial logic of the situation. If a services buyer seems too naive to appreciate the risks for its whole portfolio (Health budget and DHB negotiation position) in letting a relatively small strategic contract, and it wants to use competitive tension without making sure that competition will remain healthy, it invites such a collapse in its position.

Wise admirals agonise about whether they’re getting ready to fight the last war they won. They know how easy it is to get better battleships after aircraft carriers have made them a liability.

But labour Unions distract their members into re-fighting battles lost decades ago, while their real enemies flow past and leave them behind for mopping up at liesure. Union ideology leaves them without the analytical tools to recognise enemies out of uniform.

Searching for the top hat and cigars of ‘private capitalism’ seems to drive the campaign by Association of Salaried Medical Specialists executive director Ian Powell against what the enemy he’s identified as “privatisation” in today’s DHB consideration of the laboratory services tender process. There’s a strong clue that fossilisation might be to blame in the NZ Doctor report’s repetition of George Santayana’s: “Those who do not learn from history are doomed to repeat it”. There’s no indication what history the ASMS relies on as its teacher. They’re whining about the colour of the uniforms of their next bosses, while pathology could be commodified and reduced to a least cost service under all the likely options.

Tim Hunter in Stuff’s Business Day lays issues out clearly, from an investor and taxpayer perspective, and what should be the perspective of the DHB Boards, and the Minister of Health and his Ministry.

The problem for ASMS members (and the other specialists who rely on pathology services) and indirectly for patients, is that three Wellington DHB’s are incentivised to bank a ‘below cost’ discount in the current tender round, and leave future managers to deal with the profound effects on DHB capacity to bargain in future rounds.

As Hunter sees it there would be such a huge strategic gain for the Australian bidder if it can sew up 90% of New Zealand health lab services, that it is worth almost any likely discount to eliminate the incumbent service providers (Aotea and Sonic). With no effective base of people and facilities and local knowledge for challengers in future tender rounds, the Australian company can expect to recoup quickly in the next rounds what it might lose in the current tender, not just from Wellington, but from the South Island where it controls all major services, and in the North Island.

With 90% of the services, there will be no effective benchmarking against others for the government and the DHB’s to rely on for comparative information. Australia itself will be no help. For example Tasmanian demand is pretty similar to the Wellington region demand. The Tasmanian authorities may be mulcted for nearly 3 times per patient what Wellington’s existing services cost, because Wellington has already benefitted from earlier competitive tender rounds, for which there is no Australian equivalent.

The strategic interest of the other DHB’s in preserving competition and benchmarking should see them contributing to Wellington, if necessary, just to ensure that 90% domination does not occur. That kind of strategic consideration should have had the Ministry of Health and the Minister taking a vital interest in this process.

Perhaps they have. But from direct and client experience of the naivete of government tendering processes I doubt it. There is a pathetic government sector belief in the price number that flops out of tendering competition. Business people know that relationships and multiple continual informal quality features are just as or more important.

Ordinarily competition law would have helped protect the Wellington DHBs from a strategic error. They’d have had to focus thinking on the long term dynamics, to get a massive concentration of power in a dominant provider past the Commerce Commission. Such reflection might have thrown up a “Whoop Whoop – Pull Up”. But the health industry has a statutory exemption. It does not extend to the relevant circumstances. But the DHBs may be unaccustomed to worrying about competition.

Competition law could indirectly protect the pathology personnel, even if their union does not see it. They should be much more worried about losing choices of employer in New Zealand. For employees it is vital not to lose the competitive tension that pliges even would-be ruthlessly profit (or Minister pleasing) bosses to preserve the goodwill of their employees. For example, it would be interesting to know if the DHB contract after centralisation will effectively oblige the employer to foster (or even grudginly permit) involvement in the professional development (College activity) and training and other sector good activity that preserves the status and independence and bargaining power and international reputation of the people.

Instead of looking at what actually protects high value and status in employment over the longer term, the union is fighting its 1980s campaign on ‘privatisation’. It ignores the evidence that monopoly employers of any stripe are a much bigger threat to long term job content and satisfaction, than whether the managers who disrespect them are state employees or private monopoly employees. And that ignores too the evidence that competition among hospitals is good for standards and for patients.

If the contract is a matter of crude price (perhaps muffled by camouflage concessions of branding or nominal ‘ownership’) then expect commodification of the service whoever owns it. From experiencing the laughable elements of government procurement tenders for legal services, I doubt that a great bundled contract of the kind reported by Tim Hunter and indicated in NZ Doctor, will even recognise the long term quality and relationship issues. Such contracts need a finely tuned specification flexibility that understands relationships.  In legal services that has been preserved by government agencies quietly ‘working around’ the new procurement rules.

In health I doubt that anyone can readily mitigate the ill effects on staff of creating a monopoly. And long term no contract can save them from the effects of monopoly employment across New Zealand.

The only competition that will protect employees then, will be for those who are qualified and prepared to leave New Zealand for a better job.

Disclosure – I have shares in Abano which is a part owner of a current provider in our region. It has told shareholders that it is bidding. But I do not know whether it is in its interests to win the contract or lose, because the dynamics pointed out by Tim Hunter could mean that the pricing is so tough it would be better to get out and not be a pawn in a game where the government is a naive counter-party. Providing complex services to a crude customer which does not have the tools to value and reward quality is not worthwhile over the long term.

A report placing responsibility for the US sub-prime mortgage crisis (and thence the GFC) squarely on the regulators,  coincides with intriguing dinner table conversation with three young German friends for whom we’ve been a base for exploring New Zealand this summer.

I asked how they felt about being expected to fund Greek fecklessness and corruption? Where would young Germans now put their famed savings, with the EU’s money printing threatening them with negative interest rates? Would it go instead into more lavish housing and consumption ‘squandering’?

They say there is not much discussion, even in social media, about the financial situation. Most attention is on the challenge to the orthodox view that it is improper to express anxiety about Islam. And patiently they explained  again (because we’ve explored this curiousity several times) that few have expectation or desire to buy a home “because it is bad investment”.

Pressed they agree “We do not expect to sell houses for more than they cost us. Building a house and keeping it in repair will mostly cost more than you can sell it for. So why would we save that way?”

They tell us that in rural areas people customarily own their own homes because they own land anyway. I ask how it is that population growth has not produced capital gains for housing renters. They see it as simple “Because people will build more apartments, and we like to live that way. There are social housing providers which provide inexpensive apartments, but also there are companies. Where there are one-story places will become multi-floor apartments”.

They are young teacher and psychology graduates, so cannot tell me how the notorious German penchant for regulation has managed to avoid regulating building intensification and land supply into housing shortages and booms and busts. But their account chimes well with Oliver Hartwich’s urging that we should examine and compare the incentives on local government in Germany, and here.

German local governments automatically share the benefits of growth in local economies. That counterbalances Nimbyism.  Not such natural predator keeps in check the RMA powered Knights of Ni nicely identified by Bernard Hickey.

Instead of wasting our time with amalgamation proposals a useful Local Government Commission (and badly orchestrated “Better [X, Y, Z]” campaigners) should be pressing for effective local government reforms.

A Democrat aligned polling firm engaged by the major US charter school (and voucher) supporter group has found Democrat support for school choice. The teacher union stranglehold on education reform may be ending.

Unlike New Zealand, where party whips can force MPs to stick with policies they know voters don’t like, Democratic party discipline is unlikely to beat a major shift in sentiment. Teacher union funding of Democrats may delay, but it will not preserve the union ability to lock poor kids into poor schools (and accordingly into their birth class).

The release from Beck Research, a Democratic polling firm, reports that nearly 70 percent of Americans support the concept of school choice, 45 percent strongly support it, and only 27 percent oppose it.

From their press release:

“The findings of this poll reflect what we saw in the 2014 midterms and what I am seeing in communities across the country – a demand from parents for more options in deciding how their children are educated”. “Educational choice through opportunity scholarships and charter schools provide these options … educational choice is an immediate solution for parents’ who have children trapped in underperforming schools.

…other signs of school choice momentum – the resounding victories of prominent school choice advocates in the 2014 elections and a growing sense that national education unions are losing their influence with voters. Teachers unions spent at least $80 million in 2014 to express opposition to candidates supportive of such education reforms – and lost every race.

Deborah Beck of Beck Research said, “The poll clearly shows widespread support, among both political parties, for school choice. Any public official – or potential candidate for President — who ignores these numbers does so at their own peril.”

Key findings from poll:

• 69 percent support the concept of school choice, including 45 percent who strongly support it, 27 percent oppose it.
• 76 percent support public charter schools, with only 20 percent opposing it.
• 54 percent of those surveyed believe that giving parents more choices of schools will improve the education system.
• 65 percent believe choice and competition among schools improves education.
• 62 percent believe we need to make major changes to the ways that public schools are run.

The poll also confirmed Hilary Clinton and Mitt Romney as the leading contenders for the Presidency, by a long shot