Delighted to see, after I have been blogging on the issue for some time, that TVNZ started asking questions about the scheme where the Greens vest property in their superannuation fund, so they can claim rent from themselves.
It turns out to be even worse than I suspected. Not only are they doing this, they were charging $1,000 a week for a modest house in Thorndon, and secretly paid the money back.
First the transcript from Q+A:
GUYON Okay in the last section of this interview I want to talk about one of the roles that the Green Party has had in politics this year, which is the greater transparency around MPs’ expenses, and I want to look at the way that you manage your own accommodation. Now you have the Green Futures super fund, your own super fund, it owns two properties it rents to three MPs in Wellington. Now they take about $48,000 a year to live in those homes owned by the Green Party, and they plough that money back into your own super fund. Now do you think that the average worker would think that that was a fair use of taxpayers’ money?
METIRIA Well look there’s four issues that need to be understood here. First, the super trust has been going now for 12 years, has been approved by Parliamentary Services and by the Speaker, and has been transparent. Second, MPs have to live somewhere, some MPs buy flats in Wellington and then claim housing allowance for those flats, the super fund, the super trust has been consistently seeking, asking rents that are below market value.
The arrangements were at first within the rules (but as Bill found out that does not count for a lot!), but they were not transparent – we have only found out today what happened secretly.
Secondly Turei is not quite correct when she says an MP can buy a flat and claim a housing allowance for it. If the MP owns the flat directly, they can only claim the cost of interest on a mortgage. But by vesting it in their super fund, they get to claim a much higher market rental.
Finally, as we leant, they were literally double dipping by having two MPs charge close to the maximum for the same place – well above market rental.
GUYON Well let me pick you up on that point about market value.
METIRIA Earlier this year we did – those went out of whack, between February and March of 2009 one of the houses, MPs were claiming over the market value, we fixed that valuation in June to make sure they’re only being asked to pay under market value, and last week we refunded that over claim. So we made a mistake and we fixed it.
GUYON So you have refunded Parliamentary Services. So you’ve become a second party to refund. Let me talk viewers through this because they won’t know about it, and let’s look at this Wellington home where Jeanette Fitzsimons and Catherine Delahunty live, now it’s a fairly modest house, but over a four month period from February to May this year, those two MPs paid a thousand dollars a week in rent out of taxpayers’ money to live there, nearly double the market rate. Now that’s a rip-off pure and simple isn’t it?
METIRIA We made a mistake, we’re not happy about it, we fixed the rent in June to make sure that they were paying under market value from that point on, and we have refunded the money, I mean I agree mistakes are – you know they’re not a good look…
I would love to know who made the mistake, and who discovered it and put ir right. Surely they knew you can’t have two MPs living at the same place both charging almost $500 a week in rent?
The residence in question is in Thorndon and is valued at around $510,000. It is a three bedroom residence taking up 99 square metres. Hardly the sort of place you could think is worth $1,000 a week.
GUYON Well let’s look at this mistake though because there is a certain degree of cynicism about this. On June 1st when you took over as leader you said we’re throwing open our expenses to the public, we’re going to be open about this, what you didn’t tell us is that behind the scenes you were doing a market valuation on this property and you found out that you were actually charging the taxpayer double, you didn’t tell us that, then you came out and released your expenses and it’s only become public because we started asking questions this week, I mean you’re no better than anyone else.
METIRIA I was not aware of the market valuation at the time that we …
GUYON Well why wasn’t a market valuation done in the first place?
METIRIA We did, we do them every year.
GUYON But this is the problem with these cosy arrangement isn’t it because you are your own landlord so no one really cares what the market value, muggings the taxpayer picks up the bill.
This is why I have consistently advocated that MPs should not own directly or indirectly any property they claim rent for as a tenant. You can not be landlord and tenant. It has been legal to do so up until now, but I think the rules should change.
METIRIA That is why we released our expenses before any other party did, don’t forget we did this off our own back, we released those expenses, we’ve got out of whack with the rent, and we’ve refunded.
GUYON How much?
METIRIA It’s about six thousand dollars. About six thousand dollars we refunded.
GUYON To Parliamentary Services?
METIRIA To Parliamentary Services.
GUYON Where was the press release on that?
METIRIA We made sure – well that’s why I’m telling you now, on national television so you’ve got the information, and so the whole public have got the information.
You’re telling because Guyon asked the right questions.
GUYON But you wouldn’t have if we hadn’t started asking questions would you, that’s the thing.
METIRIA We made a mistake, we acknowledged that mistake, we fixed it, we fixed the mistake and we’ve refunded the money, and you’re quite right to raise it, and the public quite rightly has a right to know which is why we’re telling you about it today.
GUYON It was cynical though wasn’t it, because you didn’t tell people that behind the scenes you were tidying up your own arrangements before you laundered them, and made sure that they were actually legitimate before you released them, you never told us about that.
METIRIA I can understand that you want this to be kind of you know a big story and I understand why that’s the case…
GUYON No it’s a question because you have been telling other MPs and other political parties that you’re the moral compass of parliament, yet you’ve been ripping the taxpayer off.
METIRIA But the fact is that we made a mistake, we’ve fixed the mistake, and we’ve refunded the money, we made a mistake, we fixed the mistake and we refunded it, in 12 years that’s not too bad. The public has known about our super trust for all of that time and we’ve made information about it public, and so we’re quite happy to be open about the process that we’ve done, which is we make a mistake, we fixed the mistake, and we’ve refunded the money.
The Greens have been open (and kudos for that) about the existence of the fund, but have never detailed publicly exactly how much money they make from its own MPs living in the property they own.
You see the issue is not just the over-charging of rent. It comes back to them using the super fund as a way to maximise the amount they can claim. Let me demonstrate.
The Super Fund gets $24,000 a year rent (that is the maximum) plus the Fund gets $26,200 as the taxpayer contribution to the super, and $10,480 as the MP contribution. That means they have a total of $60,680. It was somewhat less in 2001when the property was purchased, but the comparison is still valid. I understand the cost was around $300,000.
Not over the last eight years the average interest rate has been 8.5%. This means that in the first year there would be $25,500 of interest on the property and $60,680 of repayments (if all goes into the mortgage) which reduce the principal by $35,000 or so.
This results in the mortgage being paid off after around seven years, so the MP gets left with a mortgage free property (now worth $500,000) and ongoing rental income of $24,000 a year.
If the Greens had not vested the property in their super fund, but registered it under their own MPs names, they could only claim interest on the mortgage.
Now in the first year this is $25,500 so they would claim the same – $24,000 maximum. But in the second year the interest would be just $22,500 and then $19,300 and this is all they would have been able to claim as rent.
Over the eight years they have owned the property they would have only been able to claim rent of $116,000 instead of $192,000.
They have a second property they currently rent to themselves, so that is the potential advantage per property above.
So there are really three issues here:
- The fact the Greens were charging almost $1,000 a week for a property whose market rental value was $540 or so a week (and we do not yet know how this happened, and who blew the whistle)
- The secret repayments, despite claiming they were setting the model for transparency
- The appropriateness of using the super fund to maximise the amount that can be claimed from the taxpayer
Again I don’t think any MP should have an interest in a home they rent out to themselves. Either just pay them all flat allowances (as Ministers will soon get) or require them to have no direct or indirect interest in the property.Tags: Greens, Metiria Turei, MPs expenses, Q&A