The Mendacities of Mr Key #9: The Sky’s the limit with taxpayer subsidies!

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key and skycity

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We all know the story by now; how Key admitted to discussing a convention-centre deal over  dinner with Skycity executives on 4 November 2009,

“I attended a dinner with the Sky City board 4 November 2009 where we discussed a possible national convention centre and they raised issues relating to the Gambling Act 2003”.

The lack of transparency in the deal-making process was subsequently criticised by the Auditor-General in February 2013. Toby Manhire from The Listener listed ten quotes outlining the AG’s dissatisfaction with Key and his officials’  behaviour;

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1. “We found a range of deficiencies in the advice provided and steps taken leading up to [the] decision.”

2. “Although decisions were made on the merits of the different proposals, we do not consider that the evaluation process was transparent or even handed.”

3. “By the time it was expected that SkyCity would put a firm proposal to the Government for support, officials should have been working to understand and advise on the procedural obligations and principles that would need to govern the next steps. We found no evidence that officials were doing so at this stage.”

4. “The meetings and discussion between the Government representatives and SkyCity were materially different in quantity and kind from those between the Government and the other parties that responded.”

5. “SkyCity was treated very differently from the other parties that responded and the evaluation process effectively moved into a different phase with one party. In our view, the steps that were taken were not consistent with good practice principles of transparency and fairness.”

6. “Overall, we regard the EOI [expressions of interest] process in stage two as having been poorly planned and executed. Insufficient attention was given to planning and management of the process as a whole, so that risks were not adequately addressed and managed.”

7. “We did not see any evidence of formal discussions or decisions on the evaluation process and criteria, or mapping out of the basic options for what might happen next, or advice to Ministers on how the process would be managed and their involvement in it. We do not regard this as adequate for a project of this potential scale, complexity, and risk.”

8. “We have concluded that the preparation for the EOI process and the EOI document, fell short of good practice in a number of respects.”

9. “In our view, the result was that one potential submitter had a clearer understanding of the actual position on a critical issue – that the Government did not want to fund any capital costs – than any other potential submitters … We accept that it is unlikely that this flaw made a material difference to the outcome. However, we have spent some time discussing it because we regard it as symptomatic of the lack of attention to procedural risks, and therefore to the fairness and credibility of the process.”

10. “We are unable to comment on the value of any contribution the Government might make as part of any eventual agreement with SkyCity, because negotiations have not yet been concluded.”

Key’s response, in Parliament was an outright denial;

“Absolutely, and the reason for that, as the member will be aware, is that the Auditor-General’s report was divided into three parts. The first part of it was focused on my involvement, and I was totally and utterly cleared and vindicated in that. That was my only involvement.”

The Auditor General, Phillipa Smith, was less than impressed by Key’s attempts at mis-representing her Office’s report as a ‘vindication’;

”That fact that [the report] took 50 or 60 pages suggests that nothing was entirely clear cut. We have said that we found problems with the process that was adopted and so I think the report speaks for itself.”

Right-wing NZ Herald columnist and National sympathiser, John Armstrong, was trenchant in his condemnation of Key’s comments. On 20 February, 2013, he wrote;

Verging on banana republic kind of stuff without the bananas – that is the only conclusion to draw from the deeply disturbing report into the shonkiness surrounding the Government’s selection of SkyCity as the preferred builder and operator of a national convention centre.

The Prime Minister’s attempt to downplay Deputy Auditor-General Phillippa Smith’s findings in advance of their release yesterday by saying he had not lost any sleep from reading draft copies may turn out to be a costly political miscalculation.

John Key may have escaped personal blame for the serious flaws in the old Ministry of Economic Development’s handling of the convention centre project but the report is far worse than he had been leading people to believe.

He is taking refuge in the report’s assurances that no evidence could be found to suggest “inappropriate considerations”, such as connections between political and business leaders, were behind the final decision for the Government to negotiate with SkyCity as the preferred bidder.

In other words, no corruption. Or at least none that could be found.

Right-wing commentator, Matthew Hooton, was more scathing and pulled no punches;

The procurement process for the Auckland centre was a farce and as close to corruption as we ever see in New Zealand.

As reported by the Deputy Auditor-General, Mr Eagleson – whose best friend and Las Vegas gambling buddy is Mark Unsworth, SkyCity’s Wellington lobbyist – had been conducting private talks with SkyCity through 2009 and early 2010, including about what regulatory relief SkyCity wanted.

Mr Eagleson argued a procurement process was unnecessary and that the government should just go with SkyCity on the grounds no one else could realistically compete.

(Hat-tip: No Right Turn.)

Read Hooton’s full column. It is far more critical and insightful than any left-wing commentator (including myself) has been on this issue.

Even before the AG’s investigation and damning report, Key’s figures of extra jobs resulting from the proposed convention centre were in doubt.

On 3 April 2012, Key stated in Parliament;

“I might add, when we were out announcing that we were doing a deal with Len Brown in Auckland, he was quite a little lamb chops before the election, because Len Brown knew as well that it will create 1,000 jobs in its construction, 900 jobs ongoing, hundreds of thousands of visitor nights for a convention centre, and tourists who will be spending twice as much in New Zealand.”

By June, Key’s claims for “1,000 jobs in its construction, 900 jobs ongoing” were questioned by hospitality and travel specialist analyst, Horwath Ltd. Horwath director, Stephen Hamilton, was blunt;

Horwath director Stephen Hamilton said he was concerned over reports the convention centre would employ 800 staff – a fulltime-equivalent total of 500.

He said the feasibility study put the number of people who would be hired at between 318 and 479.

“That’s not the number of employees at the convention centre. That’s the number in the whole economy. Some will be at the convention centre, some will be in the hotels and some will be additional taxi drivers.”

[…]

He also questioned the construction job figures, saying: “I’m not quite sure what the source of that 1000 was.”

The original Horwath report said 150 jobs could be created over a five-year construction period for a total of 750.

But the most well-known promise from Key was that the convention centre would not cost tax-payers a cent. In May 2013, Key justified his deal-making with SkyCity by stating;

“The construction of the new convention centre will not cost taxpayers or ratepayers a cent, with SkyCity meeting the full project costs in return for some concessions from the Government.”

Nearly two years later, inflation appears to have  turned “not a cent” into an estimated “$70m to $130m shortfall”, with SkyCity hustling National for a tax-payer bail-out.

On 10 February, Key appeared to have caved to SkyCity pressure to pay a massive taxpayer-funded subsidy to the casino operator;

“I’m keen to see the best convention centre I can for Auckland, because this is a very long-term asset, so I would hate to see some sort of eyesore constructed down town.

There are issues around the construction of it. Obviously you can spend more and get something that looks a lot better, or spend a bit less and get something that looks worse.

In a nutshell, the Government has an agreement with them [SkyCity]. It could make them meet that agreement but the escalation in prices to build the convention centre, which is bigger than was proposed and flasher than was proposed, means there is a hole.

So there are a couple of options. Option one would be to say to Sky City, ‘Build the convention centre exactly at the price that we all agreed, on the conditions of the deal that we agreed’, but it would be smaller I think than we had hoped and less attractive.

Or the second option is to see if there’s any way of filling that hole and to identify how big that hole is, and that’s the process we’re going through.”

By the following day, as a public and media furore exploded in Key’s face, and even his own Finance Minister was cool on the proposed bail-out,  he was forced to do a sudden 180-degree u-turn;

“We agreed a deal at $402 million…our strong preference is that the SkyCity convention centre is built and paid for by SkyCity.”

It seems that the public and media have become weary of Key’s continual back-tracking; broken promises; and often outright lies.

This was not the first time that Key had promised the public one thing – and then delivered something else. In October 2010, as an industrial dispute erupted between SPADA and Actor’s Equity, there were threats that Peter Jackson’s “Hobbit”  movie project would be moved off-shore (an empty threat as Jackson later revealed).

On 26 October, Key was telling the public that his government would not be paying extra incentives to Warner Bros and that there would be no “bidding war” with other countries to provide greater incentives to the U.S. movie industry;

“If we could make the deal sweeter for them that would help; that’s something we would consider… but we can’t bridge the gap that is potentially on offer from other locations around the world. We’re not prepared to do that and… I don’t think the New Zealand taxpayer would want us to do that.”

When asked about any possible taxpayer subsidies, to match other countries incentives, he added;

“It’s not in the tens of millions, put it that way. There’s a lot of noughts.”

Key was  adamant; Warner Bros would not screw another cent out of the New Zealand tax-payer. There were already generous tax breaks in place. So said Dear Leader at 11.45am, on the morning of 27 October;

“They’ve got movies to make and in the end, money talks in Hollywood. That’s just the way it works. We can’t stop other countries around the world putting up much better and more financially-lucrative deals. If it’s just simply a matter of dollars and cents, I’m just not going to write out cheques that New Zealand can’t afford.”

By 7.38pm – barely eight hours later – Key had pulled out the taxpayer chequebook,

Tax rebates will also be changed for Warner Bros, which will mean up to an extra $NZ20.4 million per movie for Warner Bros, subject to the success of the movies…

… The Government will offset $NZ13.6 million of Warner Bros’ marketing costs as part of the strategic partnership.”

As Key lamely explained,

 “It was commercial reality. We did the business.”

The subsidy that was supposedly “ not in the tens of millionsbecame a $34 million tax-payer funded gift to Warner Bros  – on top of a 15% tax-break given to the movie industry – a tax-break not available to any other industry in this country.

Key had caved to the movie moguls from Hollywood, and the tax-payer would foot the bill.

Three years later, the next corporation to hold a “gun” to Key’s head and extort millions in tax-dollars was Rio Tinto.

As State Owned powerco’s were being partially privatised, the multi-national corporation demanded their electricity-supply contract be “re-negotiated” and tax-payer “assistance” to keep the smelter at Tiwai Point  afloat during low aluminium prices – or else the facility would be closed. The threat was the loss of 800 jobs (some claimed indirect jobs up to 3,000) and economic activity that was claimed to be 10% of Southland’s GDP.

With the possible closure of the smelter – which uses 15% of the country’s electricity – the price of power would collapse, making shares in Meridian, Genesis, and Mighty River Power worth only a fraction of their float price.

Key bravely asserted  on 3 April 2013  that government and the New Zealand tax-payer would not  be “held hostage” to Rio Tinto’s threats of closure;

“It’s quite possible that that power could be used either by new ventures that come to New Zealand or, alternatively, it would allow some less productive assets to be closed down or it would allow New Zealand not to build as much generation as might be required.”

Five months later, on 8 August 2013, Key had surrendered to Rio Tinto’s demands and as well as a deal for increased  electricity subsidies, National handed over a cheque for $30 million to the corporation.

Key justified the tax-payer bail-out and increased subsidies by pointing to saving jobs;

“If Tiwai Point had closed straight away then hundreds and hundreds and hundreds of jobs would have disappeared and the Greens would have said the Government doesn’t care about those workers and is turning their back on them so they really can’t have it both ways.”

However, the loss of thousands of jobs from the economy seems not to have taxed Key’s concerns when it came to thousands of State sector workers being made redundant;

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State-sector job cuts 'will make life tough'

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By February the following year, Rio Tinto  posted a US$3.7 billion profit, and issued a 15% increase in dividends to it’s shareholders. Part of the dividends pocketed by shareholders was no doubt made up of $30 million gifted  from the pockets of hard working New Zealand tax-payers.

Soon after the tax-payer funded bail-out of Rio Tinto, Green Party MP, Gareth Hughes made this remarkably prescient comment;

“Treasury told National right from the start ‘don’t give them any money’ – it just means every corporation will have its hand out for public money whenever they have any leverage over the Government.

[…]

Is that how you want your government to govern? Do you want your government playing fast and loose with public money; using your cash as a bargaining chip to cut deals over the phone with multi-nationals every time it finds itself backed into a corner?”

I can answer Gareth’s question: the next corporation with it’s hand out is SkyCity.

John Key plays fast and loose  with tax-payers’ money – not to save jobs – but to present an appearance to the public that National is “saving” jobs. It is a matter of the public’s perception he is focused on.

If that involves handing out cheques to Warner Bros, Rio Tinto, and now possibly SkyCity – he will do it.

This is the party that prides itself on being a “sound, prudent, fiscal manager” of the government’s books. Except that New Zealand governments have not engaged in this kind of  tax-payer funded largesse since Supplementary Minimum Prices were paid to farmers in the 1960s and 1970s.

That, to, was initiated by the supposedly pro-free market National Party.

Which leads on to an interesting situation regarding this government; it’s lip-service to the “free market” and supposed hands-off by the State. Committed right wing National/ACT supporters should be asking themselves three very pertinent questions:

  1. Is it ok if future Labour governments intervene and gives subsidies to various businesses as National has done?
  2. Does on-going State intervention by this National government signal the end of the neo-liberal experiment?
  3. Has National’s intervention in the “marketplace” illustrated the failure of neo-liberalism?

One thing, though, should now be clear to all; Key will say one thing, and then renege and do completely the opposite if it suits him politically.

One would think that any self-respecting journo from the media (no, not you, Mike Hosking) these days would be asking Key a very simple question;

“Mr Prime Minister, you have issued statements in the past and then flip-flopped months down the track. Why should we take anything you say at face value value, when you have back-tracked so many times previously?”

Put another way;

“Mr Prime Minister, you’ve said what you intend to do. How long before you change your mind when it becomes convenient to do so? You do have ‘form’, you realise?”

Or, even more bluntly;

“Mr Prime Minister, how long will this decision last? Days? Weeks? Six months?

I’ll leave it to esteemed members of the Fourth Estate to frame their questions in a suitable manner.

Just don’t be expecting an honest answer.

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Opening of Masu at SkyCity Grand Hotel, L to R, Nigel Morrison, Julia Smith Bronagh Key and PM John Key, October 12th 2013
Opening of Masu at SkyCity Grand Hotel, L to R, SkyCity CEO Nigel Morrison, Julia Smith Bronagh Key and PM John Key, October 12th 2013
Image acknowledgement: “The A List

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Postscript 1

As I wrote on 6 February;

In terms of past events; past scandals; and past instances where the PM has been caught out – it is by no means the worst.

This time, however, matters have reached a critical flash-point. The media has awoken to a smell of a government on the defensive and where Dear Leader has pushed the envelope once too often. Journalists and media commentators are no longer as tolerant;  no longer awed; and no longer willing to be mollified by a popular prime minister.

The Shipley Factor has kicked in.

At this point, nothing that National does will counter the  same style of growing clamour of criticism it’s predecessor faced in the late ’90s.

Nothing that has happened since then has caused me to resile from my earlier expressed belief that Key’s current administration is terminal.

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Postscript 2

‘Natwatch’ from The Standard wrote on 12 February;

“The focus group results are in and John Key is backing off from the Government injecting further money into the SkyCity convention centre.”

Which probably makes more sense than anything else this shabby government has done since 2008.

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References

NZ Herald:  SkyCity deal was PM’s own offer

Office of Auditor General: Skycity

NZ Listener: The SkyCity convention centre deal: 10 quotes from the Auditor-General report

Parliament Today: Questions and Answers – June 4 2013

Fairfax Media: Auditor-general backs Sky City report

NZ Herald: John Armstrong: Sky City report ‘deeply disturbing’

NBR: Close to corruption

Parliament: Prime Minister—Statements and Statements Made on His Behalf

NZ Herald:  Puzzle of Key’s extra casino jobs

Fairfax Media: Govt at odds over SkyCity convention centre

NZ Herald: John Key warns of SkyCity ‘eyesore’ if more money is not found

NZ Herald: John Key backtracks on taxpayer cash for SkyCity convention centre

NZ Herald: Sir Peter – Actors no threat to Hobbit

Fairfax Media: Key – No Hobbit bidding war

NZ Herald: PM – I’m not going to write cheques NZ can’t afford

NZ Herald: Hobbit to stay in NZ

NBR: Key on Hobbit deal: ‘It was commercial reality. We did the business.’

NBR: Key comes through: $34m deal sees Hobbit stay in NZ

TVNZ News: Relief in Southland over Tiwai Point deal

Radio NZ: Tiwai Point closing could have some advantages – PM

Otago Daily Times: PM defends Tiwai payout

Fairfax Media: State-sector job cuts ‘will make life tough’

RadioLive: Why John Key handed $30 million of your money to Rio Tinto

Te Ara:  Government and agriculture – Subsidies and changing markets, 1946–1983

Additional

Fairfax media: SkyCity’s ‘fair deal for all’ questioned (hat-tip Mike Smith, The Standard)

Previous related blogposts

Muppets, Hobbits, and Scab ‘Unions’

And the Oscar for Union-Smashing and Manipulating Public Opinion goes to…

Peter Jackson’s “Precious”…

National under attack – defaults to Deflection #2

Dear Leader caught telling porkies (again)?! (part rua)

Doing ‘the business’ with John Key – Here’s How

Doing ‘the business’ with John Key – Here’s How (Part # Toru)

The Maori Party, the I’m-Not-Racist-Pakeha Party, the Gambling-My-Money-Away Party, and John Key’s Party

ACC. Skycity. NZ Superannuation. What is the connection?

Skycity: National prostitutes New Zealand yet again

Witnessing the slow decay of a government past it’s Use-By date

The Mendacities of Mr Key #8: A roof over your head, and boots on the ground

Other blogs & blogposts

Imperator Fish: It’s about friends helping friends

Insight NZ: National splits in two over Sky City bailout

Liberation: NZ Politics Daily – 13 February 2015: SkyCity

Local Bodies: SkyCity’s Glorious Deal

No Right Turn: More money down the drain

No Right Turn: “Close to corruption”

Polity: Fleeced

Polity: Mo’ money

Polity: Small on “free” convention centre

Polity: I agree with DPF, Jordan Williams, and (mostly) with Matthew Hooton, too

Polity: Why all governments are bad at commercial deals

The Civilian: Disappointment as meteor misses Sky Tower

The Daily Blog: Key’s SkyCity Scam is a dirty deed done relatively expensively

The Daily Blog: Brenda McQuillan – A Problem Gamblers View of the Deal

The Dim Post: On Hooton on Sky City

The Dim Post: Win by not playing

The Standard: The SkyCity Deal

The Standard: Sky City’s playing us for suckers

The Standard: Key is in reverse gear about Sky City

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This blogpost was first published on The Daily Blog on 15 February 2015.

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9 COMMENTS

  1. More evidence of the ineptitude and corruption of the fifth National government.
    When columnist, PR consultant and Spin doctor and moral Sheppard of the Right: Mathew Hooten is scathing of the Government involvement with Sky City and the proposed convention Centre for Auckland should send alarm bells amongst the Government and its supporters.
    The level of corruption that this government is involved in is disturbing for a Nation that has never before seen corruption from its government, its something previously we read and hear about that happens in most other nations but until the election of the Key Government New Zealand has been free of government corruption.
    This government has always sold itself as a government that has amongst its midst great business minds especially the PM himself and the Minister of everything, the imperious, brusque bully boy Steven Joyce.
    The ineptitude and poor quality decision making that Key and Joyce have displayed during their negotiations with Sky City would have been hilarious if it wasn’t tax payer’s money that they are happy to grant to a multimillion dollar corporate. It also proves the so called business acumen of these two to be just a myth that we the tax payer will pay dearly for, let alone the social damage that Sky City will create with its almost unrestricted ability to increase gaming machines.
    The irony of corporate welfare will escape the minds of National supporters who have since the Key government has come to power have adopted the three monkeys approach to this government in giving unconditional trust and loyalty to this corrupt regime.
    The irony is of course, is the vitriolic disdain National supporters and the Party have for beneficiaries as all beneficiaries are seen as bluggers so by that definition surely the Sky City director’s are also bluggers.
    If a Labour led government had entered into such disastrous business decisions the outrage from the Right would be deafening.

  2. Good read.

    This debacle, often touted as a storm in a teacup in the early days, only affecting the beltway according to the late Paul Holmes, really does go to show how a man, who changes his story so often at any given moment can never be trusted, much less be the PM of this country. WHat an expensive lie this has turned out to be.

    However worse, given the effort to hide this matter, the secrecy, the involvement of Wayne Eagleson (he pops up again and again does he not) so early on and the never ending lies, I can only logically conclude this matter has little to do with a “convention centre” and everything to do with expanding Sky City’s profitability.

    So who in the National Party stood to do well out of SkyCity’s expansion? Has money, shares or other interests changed hands, I mean given this process was and is so opaque, who can tell? It’s a prime breeding ground for such corruption!

    This convention centre was supposed to go on the corner of Victoria and Hobson St, now the site to be for SkyCity’s next hotel.

    Why were we not told from the outset when this deal come out of the shadows that TVNZ land and buildings would be given to SkyCity?

    How does giving that valuable land and asset without public consultation or tendering equate to “Free” for the taxpayer?

    And add Patrick Gower to the Mike Hosking non starter list, along with sundry other Newstalk ZB celebs!

    • Xray, I find it amazing that Kiwis seemingly see no conflict of interest or lack of objectivity that talking heads like Hosking who accepts money from SKY city. Regardless of your political persuasion surely most fair minded kiwis expect our journalist, columnist and talk back host to have some degree of integrity authenticity and objectivity and not be in the pocket of a multi-national corporate. Perhaps I’m just to naive

  3. An excellent piece Frank. The research and analysis, backed up by dates and times of Key’s *mendacities*, is journalism at its best. Many thanks for this info.

    This is exactly what msm should be doing, but in its loyalty to Key is failing in its professional capacity of acting as the proxy of the people! How bad is that, when the PM of a country has the media eating out of his hand, along with the police and very likely the judiciary?

    Revolutions have been started for far less than what Key has done (and still doing) to us Kiwis!

    There is a questionable history developing now around Key through his lies and deception.

    Matthew Hooten, the NBR and now Rodney Hide in today’ Sunday Herald – http://www.nzherald.co.nz/opinion/news/article.cfm?c_id=466&objectid=11402124
    staunch right wingers, have begun questioning Key. If this continues, perhaps the rest of his support base might begin to sit up, take notice and follow suit.

    The Sky City deal, the Sabin case, combined with the prospect of Key taking NZ into a war against ISIS, all coming to the fore at virtually the same time, could be the crunch for Key!

    1) the Sky City deal wasn’t going to cost the taxpayers anything. Now it might!

    2) the Sabin affair, with the cover up and suspicious behaviour of Key and associated ministers.

    3) going to war against ISIS – something Key denied prior to the election. Now look where we stand. About to deploy military to Iraq, to do exactly the opposite of what Key said before the electorate cast its vote!

    All three issues exposing lies by Key prior to the election! An artificial election it seems, created by Key to allow him to complete his dirty, treasonous game against NZ!

    Enough evidence there to bring about a snap election I’d say!

    The Opposition parties are charged with the responsibility of demanding answers from Key and his odious ministers on these contentious issues, to the bitter end in Parliament, until Key is taken down one way or the other!

  4. Jesus ! Look at those four ! ? Who polished them ? They’re all pink and shiny ! In full bloom . Ripe with natures goodness . Moist and fruity .
    So , yes . They can have my money for their rude fruitiness and their Casino . Who cares about Ch Ch Rape Crises ? 250 thousand hungry who’s ??
    They wouldn’t need food hand outs at schools if the Pink and Polished could legalise child-labour sweat shops . Then the otherwise useless little shits could get jobs like us, pull themselves up by their boots straps , show some gumption and get cracking with their new found can-do attitude .
    Someone needs to take the gloss off jonky’s little cheeks .
    Well done @ Frank . Good work .

  5. Ok, can we leave this alone now, or at least put it on the back burner for a while, and get the attention turned to a few other burning issues that could and are rapidly changing the whole face of NZ society.
    I am speaking of the TPPA and the issue of the unaffordability of housing and sale of it to non-resident foreigners. I am also not in favour of open slather in the immigration department as it is contributing to the holding down, and in real terms, reduction of wages.
    Can we get on to some of these issues now.
    Another one that bothers me is the ever increasing intensification of dairy farming and its effect of the environment, which is wide ranging, all the way to SE Asian rainforests that are still being subjected to clear felling for palm plantations.
    Can we get on to some of these important issues, I know it is wearying, because, seriously, there are so many very important things going on in NZ and the world today that it makes it difficult to deal with them all, but let’s try, shall we?

  6. Been away from news and events for a year. No TV , no news paper ect. Great to have found a site with the “real ” news . Will be spending time keeping up with this blog and enjoyed this post in particular due to all the references. Congrats on a great read Frank.

  7. Congrats Frank,

    This is an awesome effort of compilation of the sordid history this corrupt man Key as he weaves his web of lies and diversion in the name of money and greed.

    Excellent work.

Comments are closed.