Building and Maintaining Trust in Public Institutions DR. MURRAY PETRIE DEPUTY CHAIR, TRANSPARENCY INTERNATIONAL NZ DIRECTOR, ECONOMICS AND STRATEGY GROUP LTD
Overview of Presentation NZ as a high trust, high integrity society Risks to trust and integrity Proactively managing risks and building trust Transparency, participation and accountability Some specific areas for action Issues for discussion 2
NZ scores high on international integrity and transparency indicators TI s Corruption Perceptions Index (CPI): NZ has been rated 1st or 1st equal in 8 out of 17 years, never below 4 th ; raw scores 9.3-9.6/10 World Justice Project Rule of Law Index 2011: NZ ranked 2 nd on open govt. and 3 rd on regulatory enforcement out of 66 countries Open Budget Index 2010: NZ ranked 2 nd out of 94 countries Freedom House Index of Press Freedom, 2012: NZ ranked 16 th = 3
Global context: Map of CPI scores 4
Why the lack of corruption in NZ? 5 The absence of any systemic public sector corruption in NZ hitherto can be attributed to the mutually-supportive role played by key elements of the National Integrity System, underpinned by social norms in the context of a small and relatively cohesive society. Extract from the TINZ New Zealand National Integrity System Study 2003.
Trust is an (under-recognized) recognized) factor of production 6 Source: NZ Treasury 2001, Towards an Inclusive Economy Productive capability: land, labour, capital, technology and productivity Social capability: Norms, values, trust, institutions, v networks, human capital Well being
Social Norms Definition: informal rules of the game about what is desirable, permissible or tolerated One of a set of mechanisms of social control (coercive laws, incentives, customary laws, information provision, nudging) Reduce the costs of economic and social interactions Support the institutions of the state e.g. voluntary compliance with the tax system, benefit system integrity Laws ultimately require support from social norms Some norms constrain the miss-use of public power e.g. free and frank advice, willingness to report wrong-doing 7
Different types of trust and legitimacy Three forms of trust (Sako, 1991) 1. Contractual trust (adherence to agreements) 8 2. Competence trust 3. Goodwill trust (willingness to go beyond minimum contract fulfilment) Two dimensions of legitimacy: 1. Representativeness legitimacy 2. Performance legitimacy
Trust: some dynamic considerations Trust breeds trust through repeated interactions Distrust can be extremely difficult to break down low level equilibrium trap 9 Could apparent high trust eqm. unravel rapidly? Sunstein: social norms can be surprisingly fragile, can be a large discrepancy between people s private judgments and their behaviour to conform with norms small shock can cause large change in behaviour
Sources of increased risk of corruption in NZ Globalization : increased cross-border linkages with countries where corruption is the norm: Trade (X + M) Investment (inward and outward) Immigration Financial flows and money laundering Organised crime MMP greater potential influence of individual MPs over public policy Prolonged economic recession/slump Rapid increase in income inequality (Gregory et al) Earthquake re-build 10
Corruption = Monopoly + Discretion - Accountability (Klitgaard) Importance of competition and contestability Areas of particular concern within the public sector (monopoly + discretion): Regulation (central and local govt.) Police Immigration Tax and Customs Corrections Judiciary Procurement and contracting out 11
Might the returns on bribery be high in NZ? Economic perspective: high barriers to entry 12 Evidence from cross-country analysis of large number of grand corruption cases that rate of return on paying bribes is higher where the general level of bribery is low (Economist, 2012) NZers are naive about corruption, and are probably not very good at it At times, NZers seem oblivious to conflicts of interest ( small country syndrome)
Some weaknesses in NZ s s CPI rating 13 The CPI measures the perceptions of experts and businesspeople in each country of the extent of public sector corruption The assessments of two individual experts accounted for 1/3 of New Zealand s CPI 2010 score (Ignite Consultants, 2010) Risks of possible bias; and of self-fulfilling prediction if these experts perceptions might be drawn partly from the CPI itself The focus of the CPI may be on bribery, rather than other forms of corruption, such as political corruption (Edwards)
Some New Zealanders do admit to paying bribes TI Global Corruption Barometer 2010: a public survey of incidence of bribery (1,291 respondents) In the past 12 months have you or anyone in your household paid a bribe in any form to one of nine named public institutions/organizations: 3.6% of NZ respondents answered yes Has corruption in NZ increased in last 3 years? 73% said yes 14
Consistent with some other survey evidence SSC Integrity and Conduct Survey 2010 (8,200 respondents): o15% reported observing illegal conduct in previous 12 months o4% observed giving or accepting inappropriate payments, perks, or inappropriate gifts o5% observed inappropriate alteration of documents o4% observed falsification or misrepresentation of records or reports OAG Public Sector Fraud Survey 2011 (1,472 respondents): o23% have seen internal fraud in the past two years Yet the Protected Disclosures Act is hardly ever used 15 TVNZ poll 2011: Is NZ the least corrupt country in the world? : 57% No, we re deluding ourselves (Source: Patterson, SFO)
Increased visibility of corruption in NZ (Bryce Edwards) 16
Increased visibility: Self-fulfilling? fulfilling? Gregory et al 2012: 17 public scandals over allegations of corruption can become self-fulfilling, as people begin to assume that corrupt practices are becoming more frequent in their society.this may also be the case in what is arguably one of the least corrupt societies in the world, New Zealand.
Diversity of social norms in NZ From the NZ Study of Values 1998 18 Is accepting bribes unjustifiable? European : 91% said yes Maori-Maori : 72% said yes Is claiming unentitled benefits unjustifiable? New Zealanders : 83% said yes Pacific peoples : 47% said yes
Diversity of trust in NZ s s institutions: From the NZ Study of Values 1998 19 Is democracy in NZ ineffective due to poor decisionmaking? New Zealanders : 13% said yes primary education only : 44% said yes Should the Treaty of Waitangi be abolished? Europeans : 49% said yes Maori-Maori : 1% said yes Lowest income bracket: 47% said yes
Who is seen as corrupt in NZ? (GCB 2010: 1 = not corrupt; 5 = extremely corrupt) 20
What actions should NZ take to build trust and integrity and reduce risks? Fostering positive social norms Increased public participation in policy design and implementation Assess NZ against the concept of the National Integrity System Specific areas requiring greater transparency, participation and accountability 21
Fostering positive social norms Public information on compliance and framing (Rea) UK evidence on response of provisional taxpayers to first reminder letter (source: Thaler, 2012) Randomized controlled trial, 140,000 letters: Standard letter seeks payment within 6 weeks, after which sterner measures taken Alternative letters including data on levels of voluntary compliance with provisional tax system Best results from letter which included compliance data from the relevant locality: An increase of 15 percentage points in the number who paid before the 6 week deadline Naming and shaming; frowning? 22
Increased public participation 23 International transparency norms are now moving beyond disclosure, to expectations of increased public participation For example, the Global Initiative on Fiscal Transparency (GIFT) Draft High Level Principles on Fiscal Transparency, Participation and Accountability: Principle 10: Citizens should have the right and they, and all nonstate actors, should have effective opportunities to participate directly in public debate and discussion over the design and implementation of fiscal policies.
What does increased public participation mean? 24 Wide range of activities are described as constituting public participation, and the meaning differs across political systems, countries and cultures The International Association for Public Participation (IAP2) identifies a spectrum of increasing levels of public participation: To inform; to consult; to involve; to collaborate; and finally, to empower
Public participation: an example from fiscal policy (GIFT) 25 Inform Consult Involve Collaborate Empower Web sites. Press releases. Advertisements. Newsletters Social media Publication of information about government decisionmaking processes and timetables (e.g. the budget cycle) Routine public reporting (across whole budget cycle) Public surveys. Client satisfaction surveys. White Papers Stakeholder consultation processes (directly affected parties) Hot lines, complaints mechanisms. Commissions of Inquiry. Policy Taskforces (comprised of officials only but which consult through face to face meetings) Meetings of officials with the public. Green Papers. Parliamentary submissions Assist civil society to develop capacity to participate. Community liaison officers. Policy Taskforces including members of the public and NGOs Social audits. Social verification mechanisms Independent review mechanisms (nonjudicial) e.g. Ombudsmen Judicial review of process Judicial review of policy Local community governance (e.g. elected school or hospital boards)
Public participation: an example from fiscal policy (GIFT) (2) 26 Published public service quality standards Broad public consultation processes Contestable funds for grants Deliberative public engagement e.g. Conferences. Focus groups Participatory budgeting Public hearings e.g. legislative hearings on the budget. Citizens initiated referenda (nonbinding) Standing Consultative Panels (expert or representative e.g. Independent Fiscal Councils; sector expert groups) Citizen coproduction Individual vouchers for public services Binding referenda
g y y (TI Source Book 2000) 27
A National Integrity System Assessment 2012-13 13 Being led by TINZ Financial support to date from OAG and SSC Coincide with centenary of Public Service Act Collaborative and consultative approach Objective: 28 To test New Zealand s perception of itself as a country with high standards of transparency and accountability and free of and at low risk of corruption; to identify areas where action is needed to strengthen transparency and accountability; and to kick-start the necessary changes.
Some specific areas for action 29 More resources into diagnosis (collaborative approaches) Legitimacy of Parliament (Ethics Code, lobbying, OIA) Transparency of political parties (financing; use of public resources) More focus on areas of highest risk across public sector (monopoly + discretion) More transparent and results-focused public services ( performance trust/legitimacy ) Greater public participation ( process legitimacy ) Transparency and accountability of regulation Transparency of environmental impacts of govt. Local government
Specific areas for action (2) Earthquake re-build Challenge private sector complacency Financial sector integrity More training and awareness raising 30 Integrity of the professions Civics education Ratify UNCAC Join the Open Government Partnership
Some issues for discussion How would we know if our high levels of trust and integrity in NZ are at risk of unravelling? What are the most serious risks? In what specific areas is more transparency, participation and accountability needed? What should NZ do to maintain and build higher quality governance? Who should do what? 31
Selected References 32 TINZ web site: http://transparencynz.org.nz/ Ignite Consultants, 2011. The Derivation of NZ s High ranking on the CPI. Krieble. Global Corruption Barometer 2010 New Zealand Results. New Zealand National Integrity System Study 2003. Economist. You get who you pay for, June 2, 2012, p. 77. Edwards. Political corruption in NZ. 29 October, 2010. http://liberation.typepad.com/liberation/2010/10/politicalcorruption-in-new-zealand.html Global Initiative on Fiscal Transparency: http://fiscaltransparency.net/ Gregory, Zirker, and Scrimgeour. A Kiwi Halo? Defining and Assessing Corruption in a Non-Corrupt System. Asia Pacific Journal of Public Administration, Volume 34, Number 1, June 2012.
Selected References (2) 33 International Association for Public Participation (IAP2). www.iap2.org Paterson. Transparency International s CPI: New Zealand - 100% Pure. Serious Fraud Office. Petrie. Institutions, social norms and well-being. NZ Treasury Working Paper 02/12, 2002. Pope Ed. TI Source Book 2000. Rea. Would New Zealand s economic performance improve if we were more ethical? Institute of Policy Studies Working Paper 10/05, February 2010. Thaler. How science of behaviour aids policy. International Herald Tribune, July 7-8, 2012, p. 8.