Bryce Edwards: The Budget “hack” scandal reveals some big accountability problems

Bryce Edwards: The Budget “hack” scandal reveals some big accountability problems

Can we trust government departments? Can we trust Treasury not to lie to us? What about the Minister of Finance? Have they lied for political advantage? These are some of the questions that naturally come out of last week’s abysmal Government handling of National’s early release of budget details, in which senior officials and politicians made alarming claims of criminal hacking being responsible.

New Zealanders will be right to feel extremely suspicious that they were deceived last week by authorities. The whole scandal is a big deal, and the announcement last night of an independent investigation is welcome. The issues at stake go to the heart of integrity in public life.

The main problem is that Treasury boss Gabriel Makhlouf, followed by Minister of Finance Grant Robertson, informed the public there had been a “deliberate and systematic hack” of Treasury’s website, when we now know that this account was untrue.

The second problem is that Government politicians then used this claim to suggest the Opposition were somehow involved in criminal activity.

A lot of this is well explained today in Tim Watkin’s blog post, Gabriel Makhlouf’s already had three strikes. Can he really avoid being ‘out’? According to Watkin, “Makhlouf is in serious trouble. A new inquiry will have to uncover something yet unknown to excuse the three strikes he committed last week”. He says that Grant Robertson also has some big questions to answer, as there is a chance that “Makhlouf is covering for Robertson”, in which case “both are toast”.

For more details on how the whole scandal could have so easily been avoided, see Richard Harman’s How the Treasury leak could have been contained. He reports that “From what we now know, it is clear that the whole question of the Budget ‘leak’ could have been resolved last Tuesday afternoon. This is it when it appears the GCSB, National Cyber Security team concluded that Treasury had not been hacked by the National Party.”

According to Harman, the story about the “hack” could have been clarified early on: “The GCSB could have cleared that up on Tuesday, and either the Prime Minister or Robertson should have insisted they made a public statement and at the same time”.

For more on how the whole episode unfolded, see Stacey Kirk’s article, Smartest men in the room? Pffft! Treasury stands alone on Budget bungle. Her conclusion is this: “How Gabriel Makhlouf is still in a job is beyond me.” She says the actions of Treasury over the “hack” were “a total waste of police resources and an example of extreme arse-covering.” She argues “All signs suggest Makhlouf knew what had happened, and went ahead with his own version anyway.”

On the political right, there’s been outrage over the “hack” scaremongering. David Farrar, for example, says: “If these reports from within Treasury are true, we should expect resignations or sackings. Making false accusations of criminal activity to police to deflect from one’s organisation’s own basic incompetence is not acceptable” – see: No Dorothy, using a search engine is not a hack.

Farrar suggests the Government is essential guilty of incompetence at best or of dirty politics at worst: “Both Grant Robertson and Winston Peters have smeared National. Jacinda Ardern claims to lead a Government of kindness. Does smearing your political opponents as criminals because they used a search engine, fit with that? Robertson may claim he acted on Treasury advice, but he didn’t. He explicitly linked National’s material to an illegal hack, which goes beyond what Treasury said. But regardless a competent Minister should push back when an agency says ‘hey boss, we were hacked, it wasn’t incompetence’ and ask for at least some basic details of what is alleged.”

In contrast, the political left have mostly been inclined to respond to the scandal with silence or defend the Government. According to one leftwing blogger, this isn’t good enough. Martyn Bradbury challenges his own side to take the issue more seriously: “Comrades of the Left. If Treasury had just pulled a hacking manipulation this audacious while National was in power, we would be screaming for heads to roll, yet the majority of the Left are ignoring what Treasury did out of a misplaced loyalty to Jacinda & Grant. It’s infantile” – see: I think almost everyone on the Left who are trying to underplay what Treasury did hasn’t read this….

Bradbury concludes: “Shouldn’t we be incandescent with rage at such a manufactured deception by one of the most powerful Government Departments? If Grant doesn’t sack him, Grant should be sacked. It’s as simple as that.”

However some on the left have strongly condemned what has occurred. The best example is No Right Turn, who says: “I’m surprised they didn’t charge Treasury with wasting police time. Meanwhile, Treasury secretary Gabriel Makhlouf has presided over incompetence and smeared the opposition. We pay public sector CEOs the big bucks supposedly to take responsibility. We pay Makhlouf over $600,000 a year on that basis. So how about we get what we paid for? By running a muppet show, Makhlouf has f**ked up his agency’s biggest event of the year” – see: What a muppet show.

Other political commentators have taken a hard-line stance on the issue. For example, veteran political journalist John Armstrong makes the case that Makhlouf has now spoilt Treasury’s important neutral image, and should resign – see: Grant Robertson and Treasury boss should resign over Budget data leak.

Armstrong also makes the case for the Minister of Finance to go, but concedes that simply won’t happen: “Robertson is exempt from having to fall on his sword. That exemption is by Labour Party decree. He is just too darned valuable. Both he and the Prime Minister have made it very clear that they will move mountains to ensure Robertson emerges from this episode as untarnished as possible by placing responsibility for the breach fairly and squarely in the Treasury’s lap.”

The focus is increasingly on Robertson now. Many suspect he was likely to have been fully aware that he and Treasury were unfairly smearing his National Party opponents with criminal allegations, or at least allowing such insinuations to continue. Therefore, questions will be asked about what he knew about the so-called “hack”.

Richard Harman explains that the public needs to know what happened in the Minister’s office: “This whole affair now centres on one critical meeting or conversation; between Makhlouf, Robertson and Ardern’s Deputy Chief of Staff and Chief Press Secretary around 7.00pm last Tuesday night. After that meeting, Makhlouf issued a statement saying that Treasury had been subject to a systematic and deliberate hack and then 17 minutes later, Robertson went one step further and linked the National Party to the hack” – see: What did Makhlouf say to Robertson.

David Farrar asks some difficult questions: “What was said in this meeting. Did Robertson and the PMO really ask no questions about the basis for the claim of being hacked? And when did Ministers learn there was no hack? It almost certainly was well before 5 am Thursday. It may have even been Tuesday evening. Yet they said nothing” – see: SSC launches investigation of Treasury Secretary.

He also asks why the Government or the GCSB didn’t make any sort of statement to correct the incorrect perception last week that a “hacking” had occurred: “We now know that the GCSB did not regard Treasury as having been hacked. When Treasury then put out a release saying they had been hacked, surely GCSB informed one or more Ministers (or at least DPMC) that this information was incorrect. Could you imagine the GCSB saying nothing for 48 hours while stories around the world were proclaiming the NZ Treasury had been hacked? Treasury did not correct the record until 5 am Thursday. But when did Ministers get informed the statement was incorrect, and why did they allow the misinformation to persist?”

There are obviously some major issues of public accountability at issue. Some are wondering why the Treasury boss has neither resigned nor been fired. Economist Eric Crampton suggests the whole episode “extends the stench of Wellington unaccountability” and asks: “Just how bad does a public sector Chief Executive’s performance have to be before accountability kicks in?” – see: Protecting the privileged (paywalled).

Crampton argues that “when a resignation is not offered for performance this far off the norm, and the appointee continues in the position, something is manifestly wrong – either employment law as it relates to senior executives, or the government’s willingness to put up with exceptionally poor performance.”

But it could be, Crampton argues, that the Government is worried about a legal challenge from Makhlouf, especially if the State Services Commission review results in the departing Treasury Secretary also losing his new position at the Central Bank of Ireland.

Problems of accountability are also examined by former Reserve Bank economist Michael Reddell who sums up the hack debate as being “an extraordinary couple of days, and an extraordinary display of poor judgement by one of our most senior public servants” – see: On Makhlouf and standards in public office.

Reddell is trenchant in his criticism of the Treasury boss: “of things that have come to public view, it is hard to think of any (departmental chief executive) episodes that plumb the low standards on display by Makhlouf in the last week (not just a single choice, word, or act) but the accumulation of words, actions, choices over several days, each compounding the other, with no sign or act of any contrition). He should go, and if he won’t resign, he should have been dismissed (yesterday’s Cabinet would have been the opportunity).”

But Reddell isn’t convinced the State Services Commission inquiry will be adequate: “I have little confidence in this inquiry. For one, the inquiry is supposed to look into Makhlouf’s handling of last week’s events, but recall that the SSC made themselves an active player in those events when they agreed to a coordinated statement with Treasury on Thursday morning. They are, at least in part, inquiring into themselves.”

He then concludes with a picture of a cosy situation: “the State Services Commissioner is fully part of that same self-protecting establishment –  appointed by them, from among them, and now supposedly reporting independently on actions of another member that he himself was part of as recently as last Thursday morning. This must not be the standard we settle for.”

And, so should the public have confidence that everything is under control? Not according to technology writer, David Court, who can’t believe that politicians and officials have misunderstood and mishandled so much – see: Politicians and technology are a bad mix.

Here’s his main point: “The Treasury and Peters’ should be deeply embarrassed and apologetic. The rest of us should be worried. Having politicians with Luddite qualities is sometimes amusing and bemusing. It’s also dangerous. We have a Government that thought it was hacked. By Google. And reported it to the police. Give me strength. These are the same politicians that will be making decisions on important technology-related matters. Do you have confidence that these ministers will make the right decision on 5G and/or cyber security? Or is it more likely they’ll make an ill-informed, but politically motivated, decision? This week’s embarrassing display suggests the latter.”

Finally, for humour on the hack, see Steve Braunias’ Secret diary of Treasury Secretary Gabriel Makhlouf, and Andrew Gunn’s Budget leak more than a train-wreck.