Editorial: PM to blame for sloppy trust affair

Prime Minister John Key. Photo / Dean Purcell

When the Prime Minister's personal lawyer approached him about a report in the Herald that Inland Revenue was changing its attitude to foreign trust funds, John Key says he told him to "go and see the [revenue] minister".

He should not have said anything of that kind. He should have given this message to Ken Whitney: "You are my lawyer. I'd rather you didn't approach anyone in the Government about issues of public policy. Surely somebody else in the industry can do it."

He should have said something such as that not only because it would look bad for him if Mr Whitney's role became public knowledge, as it has, but just as important, a Prime Minister needs to protect his ministers from any pressure they might feel from someone close to him. The Minister for Revenue at the time the foreign trust review was dropped, Todd McClay, has said, "The assertion that I was influenced by Ken Whitney's relationship to the Prime Minister is insulting." That it is, but a minister should not be put in the position of having to ignore the reported view of a Prime Minister, who has complete power over Cabinet appointments under the National Party's rules.

Exactly what view Mr Key expressed to Mr Whitney remains unclear after Parliament returned this week and opposition parties had their first chance to question him. Last week, Mr Key said that when approached by Mr Whitney late in 2014 about reported proposals to change the tax treatment of foreign trusts he had told Mr Whitney there were no changes as far as he knew, but that Mr Whitney should talk the minister. Mr Whitney then sent an email to Mr McClay telling him, "I have spoken to the Prime Minister about this and he advised the Government has no plans to change the current status of the foreign trust regime." That was rather overstating the Prime Minister's view, but whose version was correct?

On Tuesday, Mr Key said he had discussed this with Mr Whitney and, "He is absolutely confident my version is correct." He added, "Maybe the email was sloppily written. I was certainly aware we weren't making any changes." That last sentence sounds more like the email his lawyer sent to the minister. If "sloppy" messages are the problem here, Mr Key may be as guilty as anyone.

But the more serious problem is that he should not have entertained this approach from his lawyer. A Prime Minister needs to keep his personal wealth and investments well away from his public responsibilities. Mr Whitney did his client no favours by bringing this issue to him, even if none of Mr Key's wealth would be in a foreign trust administered here.

In Parliament this week, the Prime Minister argued that Mr Whitney was no different from many other people he knows in this country who talk to him about issues of concern to them. "I did what any professional Prime Minister would do and referred him to the minister." In the light of this embarrassment, he should make a practice to talk to the minister himself when these issues are raised. Putting himself at risk of misrepresentation to a minister is not what a Prime Minister should do.

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