Hutt Labour profiting from the taxpayer

Thomas Coughlan at Stuff reports:

The Party’s wing has been running an apparently unusual subletting “arrangement” in which it gets cheap rent on office space off a local union, sublets the rooms to its local list MP Ginny Andersen, and then bills parliament at a markup, pocketing the difference.

I’ve never heard before of a party renting office space to when it doesn’t own the space itself. This looks like an arrangement designed to allow it to profit from the taxpayer.

Rent for MPs’ offices are paid in bulk by Parliamentary Service. Accounts seen by Stuff for the Labour Party’s Hutt South wing, home to Andersen, show a sublease arrangement where Parliament pays the local Labour Party significantly more in rent than the Labour Party actually pays the original landlord, the New Zealand Professional Firefighters Union (NZPFU).

Accounts seen by Stuff appear to show $6000 of public money going into a Labour Party account for “rent” in 2019, but with only a quarter of that money, $1500 a year, actually going to the building’s owner.

So Hutt Labour makes a $4,500 profit from the taxpayer for space they don’t even own.

If the Hutt Labour List MP wants to rent space in that office, then they should rent it direct from the building owner, not rent it via their own party, allowing the party to mark it up 300% on the way.

Parliament’s rules allow such subletting arrangements. For the purpose of Parliament, the Labour Party is just another commercial property company renting office space to an MP.

Except the MP decides who to rent off, creating a conflict and a reverse incentive.

Say most MPs have a $40,000 annual budget for electorate expenses. It is in their interest to pay as little rent as possible for their office space so they can use more of their budget on stuff such as advertising, brochures, direct mail etc. So if an MP wants to hire an office in a building owned by ABC Corp, they want the rent to be as low as possible.

But if the building is owned by their own political party, then they want the rent to be as high as possible. Because the higher the rent, the more money their party gains from it, and the more money they have to spend on direct voter advocacy (which a party funds) rather than parliamentary information (which PS funds).

When initially approached for comment, Andersen disputed the figures and declined to comment further.

“Those figures are not correct,” she said.

But a member of Andersen’s electorate committee, Graeme Sharman, told Stuff that the figures were themselves correct, but were “not telling the full story,” although he wouldn’t say what the full story was.

A day later, Andersen decided to comment, saying that “the rental arrangement was signed off by Parliamentary Services and is within the rules.”

So does Andersen still maintain the figures are wrong?

And PS may sign off on such an arrangement, but the MP is the person who tells PS they want to rent in that building.

Andersen was backed up by Parliamentary Service who said the rent represented “a very good deal”.

That isn’t the issue. The issue is Labour making a 300% markup on the office which they don’t even own.

Stuff has seen draft financial statements for the Labour Electorate Committee (LEC)’s 2020 AGM, covering the 2019 calendar year. They record backdated rent payments to the NZPFU of $3000, although they don’t say what years that backdated rent is for.

This suggests someone in Hutt Labour is leaking to the media.

“If the local branch of the Labour Party who lease the space to the member have managed to lease the property for even less, then it is reasonable to assume the lessor is making a donation-in-kind to the Labour Party,” a spokesperson for Parliamentary Service said.

Andersen however denied that the rent was a donation, saying that the agreement with the NZPFU going back decades was “commercial”.

Of course it is a donation (in kind). This raises real issues which the Electoral Commission may take an interest in.

If the value of the entire office space (for both Labour and the sublet to Parliament Service) is say $18,000 a year and they are charging only $1,500 a year for it, then that is a donation in kind of $16,500 a year which must be disclosed.

”The ongoing provision of office space to Labour formed part of a commercial agreement when Labour sold the building to the Firefighters Unions in the early 1990s.

“That provision was reflected in the building’s sale price. As such that commercial arrangement doesn’t constitute a donation,” Andersen said.

I doubt that interpretation. Unless the sale deed specifies how much the ongoing rental will be, then the difference between what is paid and what it is worth is a donation. You can’t avoid electoral donation disclosure laws on the basis of a sale that took place 25 years ago.

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