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The public’s trust in the competency and integrity of the public service is an essential element of any democracy. If citizens think that those running government departments are foolish, dishonest, or dodgy, then the whole system can start to fall apart. We see the results of such distrust in plenty of other countries. Here in New Zealand the public generally has faith in government departments.

It would not be surprising if this faith is slightly eroded as a result of the fiasco over how Treasury handled the so-called Budget “hack” – when the Police were called in, and a panic started over the notion that New Zealand government agencies might be losing a war in a serious and criminal cyber-attack. The whole episode was bewildering.

The release of the report from the official investigation was supposed to resolve the issue. It was hoped that it would clarify, once and for all, the disturbing question of whether the senior public servant earning about $670,000/year had been incompetent or whether he had misled the public. And it was supposed to lead to some sort of closure, allowing the public to feel that accountability had been achieved.

However, the report released on Thursday – a day that was notable for being both Gabriel Makhlouf’s last day of work and also the time that a Cabinet reshuffle announcement was expected – was less than clear in its outcome.

On the one hand, the report clearly identifies that Makhlouf erred, providing numerous criticisms of how he handled the situation. The public record now shows that the Treasury boss acted “unreasonably” in coming out with alarmist and inaccurate explanations for how Budget secrets had come into the Opposition’s hands.

For the best news coverage on this, see Derek Cheng’s Gabriel Makhlouf responds: ‘My honesty and integrity are not in question’. This discusses the State Services Commission (SSC) report on the whole scandal, and details how the Treasury was actually well aware that the Budget leak had probably come from their own website, and that Makhlouf was informed of this before he went nuclear with his inflammatory public statements.

This article also makes it clear that the SSC boss Peter Hughes is completely condemning of Makhlouf’s actions. Hughes is reported saying, “It was a clumsy response to a serious issue and is not what I expect of an experienced chief executive.”

Hughes also told journalists that he had high expectations of government department bosses: “When things go wrong, I don’t want ducking, diving, running for cover, spinning. I want people to stand up, own it, fix it, learn from it and be accountable.”

However, the main problem is that the SSC has chosen not to take the issue further. No sanction or penalty was imposed on Makhlouf. This lack of reprimand is discussed by Newsroom’s Sam Sachdeva who asks “why don’t the State Services Commissioner’s actions regarding Gabriel Makhlouf match that ethos” of high standards? – see: Makhlouf falls short – so why the shortage of SSC action?. He concludes “While the SSC report is clear, it is the response to those findings where it feels like Hughes has fallen short.”

Hughes explains that a formal reprimand of Makhlouf was out of the question because he was leaving his job anyhow. Hughes believes it would have only been symbolic, and therefore “meaningless and cynical”. To this, Sachdeva replies: “but it seems just as cynical to deliver a tongue lashing for inappropriate behaviour yet stop short of doing anything tangible to register that impropriety. Does failing to register an official caution now set a precedent for any SSC employees who find themselves in a similar situation?”

Herald political editor Audrey Young also takes issue with Makhlouf’s lack of leadership and his failure to take responsibility for what he’d done wrong. On reading the report, she says: “what is clear is that there were more than sufficient grounds for Makhlouf to have offered his resignation” – see: A case of good faith butt-covering by the head of Treasury (paywalled).

So why did the Treasury boss act so badly in this? Here’s Young’s explanation: “One is left to surmise that he believed admissions of failure and responsibility might impact on his new job than protestations that he acted in good faith at all times. It appears a clear case of good faith butt-covering”. And she takes issue with the report describing Makhlouf as having acted in “good faith”, suggesting this could simply mean that he was acting “sincerely” out of self-interest.

The most scathing critique of the scandal comes from veteran political journalist John Armstrong who suggests that the New Zealand public service now has an accountability problem: “So just where exactly does the buck now stop in the separate, but interconnected worlds of politics and the public service? If your regard for accountability is as similarly bankrupt as seems to have been the case with Gabriel Makhlouf, the now (thankfully) former boss of the Treasury, then the answer is that the buck never stops at your door” – see: Gabriel Makhlouf’s refusal to resign over ‘Budget hack’ saga sets a truly awful example.

Armstrong describes Makhlouf’s actions over the whole episode as panicking, wreaking havoc, “bungling and blundering”, and resulting in a “spectacular gaffe” which has overshadowed everything else in his career. Armstrong says what he did was “inexcusable”.

Makhlouf did put out a statement on the same day as the report was published, in which he showed scant contrition, instead suggesting exoneration. On this, Armstrong is highly critical: “Makhlouf’s parting gesture was to instead issue a brief statement in which he belatedly apologised ‘that Budget information was not kept secure’. That offering was very carefully worded. It might have been an apology. It was not an acceptance of responsibility.”

Armstrong’s problem isn’t just with Makhlouf, but with the SSC – the government agency tasked with ensuring the integrity of the public service. He concludes his piece by saying: “Faced with Makhlouf’s refusal to be accountable for the mess, Hughes should have fired him. Failing that, Hughes should have formally reprimanded Makhlouf. The State Services Commissioner acknowledged the inherent symbolism of such a reprimand. His decision not to issue one is just plain wrong.”

Long-time critic of public service standards, economist Michael Reddell, has been outraged by how the SSC has handled the scandal. Reddell focuses on why no one else in Treasury or in the SSC were apparently helping Makhlouf and preventing him making his endless mistakes: “it was Makhlouf’s job to lead the organisation above the embarrassment and to do the right thing. He simply didn’t do that, and no one else –  in his department or elsewhere in the public sector (the very top tier of public servants) – was willing or able to stop him. Where, for example, was his employer –  Peter Hughes” – see: The SSC on Makhlouf.

Reddell says “We – citizens – deserve much better. We deserve more answers from SSC themselves.” The answers don’t appear to be in the report. And he’s highly critical of Hughes for so publicly and effusively praising Makhlouf at his farewell party, just a week or so before the damning report was published.

According to Reddell, Hughes praised Makhlouf as “authentic and straight up” as well as being “calm and unflappable”. In Reddell’s view, “In no conceivable universe (except perhaps some parallel one inhabited by SSC) could Makhlouf during that Budget episode be said to have displayed ‘calm and unflappable’ leadership. Had he done so, there’d have been no inquiry. And the inquiry report demonstrates just how far from calm and unflappable Makhlouf’s conduct appears to have been, and how little ‘strong leadership’ and ‘personal integrity’ has been on display.”

In the end, according to Reddell, the SSC seems to have shown their tolerance for Makhlouf’s very poor performance. And there’s a suggestion that the close relationships between the top echelons have simply helped protect him: “What message does that send? That really severe misjudgement by one of the most senior public servants in the end doesn’t matter that much, cos’ he’s a good bloke?”

Of course, there was always a chance that the whole scandal would prevent Makhlouf from taking up his new job as the next governor of Ireland’s central bank, but Derek Cheng has confirmed that Gabriel Makhlouf’s job in Ireland appears to be safe.

Cheng also confirms that right up until the end, the top public servant has also refused to make himself accountable to the public via media interviews: “Makhlouf has repeatedly refused any interviews since May 29, the day before Budget day, and again refused interviews yesterday, his last day of work at the Treasury.”

Finally, Maklouf’s replacement has now been announced: Australian economist and academic Caralee McLiesh. Most, but not all, are impressed. Victoria University of Wellington’s Simon Chapple puts the argument against employing, once again, a non-New Zealander for this crucial role – see: Public sector pick carries disheartening message. And for a reply from one of Chapple’s colleagues, see Jeroen Van Der Heijden’s Treasury pick carries risk of tall poppy paradox.

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