Showing posts with label campaign finance. Show all posts
Showing posts with label campaign finance. Show all posts

Thursday, January 11, 2007

You wouldn't credit it

Occasionally a commenter will make a point which not only has us nodding our heads in agreement at their wisdom, but which results in a round of forehead slapping and "Why didn't we think of that?!"

But a comment on our last post actually had Watchers slapping one another's foreheads. It's an obvious question, and one we'd overlooked. But it deserves to be asked, and answered:


It might be interesting for the council to join other local bodies in getting a Standard and Poor's credit rating about now ... to see what effect Mad Mickey's Big Spendup is having on Whanganui's credit worthiness. No doubt the news would not be good.

- Anonymous @ 11.25am, January 11
Christchurch City Council, for instance, not only has Standard and Poors assess its own credit rating - and thus financial performance - but also that of Christchurch City Holdings Ltd. It was recently reconfirmed as AA+.

Wanganui "does not have a recognised credit rating" as it admits in the LTCCP (pdf file, see p 76).

A credit rating isn't just about measuring performance (though that's obviously why we'd like to see the WDC's rating published) but assists in raising capital at lower rates of interest. A sturdy credit gives investors confidence, which means that they're more likely to lend to you at a lower rate since they have an independent assessment of risk and likely performance.

The Local Government Association of South Australia lists the benefits (pdf file,see p 12) of a credit rating as:

  • Improved borrowing terms (Treasury estimates that councils pay .3% over the bb (base bond)rate because they use the local banks that they know and they are then captive markets and cannot shop around)
  • Ability to tap a wider source of finance
  • Financial discipline
They quote the cost of obtaining a corporate credit rating at AU$33,000 +GST - so around NZ$37,000 but that cost would probably be recouped in interest savings in the first few months.

So by not allowing Standard and Poors (or another respected agency) to rate them, the WDC are not only denying the Wanganui public a benchmark of their financial performance, but quite possibly subjecting ratepayers to higher interest on borrowings for, as Anonymous puts it so well, "Mad Mickey's Big Spendup" on swimming pools, carparks, libraries etc.

Ratepayers are perfectly entitled to demand that the Council subject itself to external scrutiny from Standard and Poors or a similar ratings agency. If you'd like to see just how Mickey is performing, contact the Council and tell them so. We'd love a copy of any response you may receive.

Meanwhile, to assist the finance gurus at Council to keep up with Mickey's ever-increasing expenditure demands whilst obfuscating the public about the city's level of indebtedness, we'd recommend the Official Calculator of the Zlotnian Space Program (pictured at right).

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Tuesday, October 10, 2006

Danger: money

Michael Laws, Mayor, WanganuiFunding of politics - everything from election campaign advertising to politicians' salaries - has long been a fraught topic. Given the standard of "representation" offered by elected representatives in most Western democracies since at least the mid-1980s most people are averse to being taxed to pay for what they see as unaccountable politicians living in the lap of luxury.

And they have a point. Like any service business, politics is suffering from not having done a particularly good job of serving the needs of its customers - so why should they keep paying? It's incredibly tempting to say that not only should they have to fund their own campaigns, but that once elected they shouldn't even get paid. That'll show 'em.

But, like most simple solutions, it doesn't work.

The problem for most people, disenchanted with the process and disillusioned by those elected through it, is that the notion of investing to improve the political process seems like an anathema. "Don't give them a cent; their superannuation is too generous; they waste our money on the baubles of office; hell, don't even pay them a wage" is a seductive battle cry. But it will have precisely the opposite effect - a fact that a political operator as canny as Michael Laws knows only too well.

That's why those who have done the research don't agree with him. In the UK the Power Commission, whose final report is well worth reading, was recently tasked with discovering "Why has disengagement from formal democratic politics in Britain grown in recent years and how can it be reversed?". It would have been easy for the Inquiry to appease the disenchanted by recommending less, not more, public money be invested in democracy. But it didn't. Amongst a raft of recommendations aimed at getting people to re-engage with the political process at all levels is this one:

State funding to support local activity by political parties and independent candidates to be introduced based on allocation of individual voter vouchers. This would mean that at a general election a voter would be able to tick a box allocating a £3 donation per year from public funds to a party of his or her choice to be used by that party for local activity. It would be open to the voter to make the donation to a party other than the one they have just voted for.
The Inquiry pointed out that "if 30 million people voted in a general election, there would be a potential pot of £90 million available to fund local party political and candidate activity". Why pay for politicians who are increasingly isolated and seemingly unwilling to listen? Because, as The Independent (the UK version) put it recently, "If you don't pay for politicians, the rich will".

At the same time as seeking to reform the political process to make politicians more accountable (and Power has many other recommendations seeking to do this) it's important to maintain access to, and equity within, our democracy by ensuring that lack of money isn't a barrier to running for office - and that an excess of money ought not to provide one candidate with an unfair advantage over his or her rivals.

Equally importantly, anyone who devotes their time to elected office needs to be remunerated - and for exactly the same reason. As Democracy Matters puts it "those without access to wealth are locked out of the system, unable to afford to run for office". If they don't earn their salary, then by all means sack them. Even institute some performance indicators which they must meet during their term. Make them subject to recall. But pay them - or risk a homogenous and unrepresentative council (or parliament or senate or congress); one at risk of widespread corruption.

Because to claim, as Michael Laws does, that holders of elected office ought not to be paid assumes one of two things:
  1. Either that we are comfortable returning to the days when politics was the pursuit of "gentlemen"- wealthy landowners with independent incomes and time on their hands, elected by people who knew that their place in life was to be ruled by their betters. There were no women, no people of any ethnicity other than white, and of course no one who did an honest day's toil - they were too busy toiling.

  2. Or that we want diversity but we're happy to have our politicians derive an income from sources other than the public purse. Inevitably, that will be business and other special interests.
Clearly the argument is populist nonsense, debunked perfectly by Laws himself: if a person is elected who is wealthy enough not to need the income, they can simply "put it back in the pot" by giving it to the body to which they were elected or, like him, devote it to private philanthropy within the community.

Similarly, allowing someone (in this case, Laws himself) to privately fund the election campaigns of people on a particular party ticket further erodes choice: why would someone less well resourced even try to run a campaign against a diVision candidate with access to the Mayor's deep pockets? And if they do run, what are their chances against an opponent who can afford billboards, glossy fliers and even electronic media?

By hand-picking the starters, it's possible to run a completely fair race but still bias the outcome. Then, as The Nation (Thailand) noted back in 1998 (in an article on increasing corruption in Asian democracies), "since for the most part only the rich people backed by wealth can afford to run for office, leading to effective control of the political system by economic elites that have the added advantage of legitimacy owing to their democratic election".

Even if election spending is capped, the candidate who didn't have to fund-raise from multiple donors, who got all their money from one source and could devote all their energy to campaigning, is at an unfair advantage. And more importantly, once elected they owe their allegiance not to a local branch made up of many people with divergent views but solely to one man or woman - their benefactor.

Unless we restore the people’s sovereignty over government, unless we reform our public institutions to meet the demands of a new millenium, we will squander our destiny... I have spoken against forces that have turned politics into a battle of bucks instead of a battle of ideas. - US Senator John McCain
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