Casey Costello’s problems with integrity, transparency and competency

Oct 03, 2024

Is Casey Costello up to the job of reducing smoking and tobacco use? Many are starting to conclude that the answer is “no”. The Minister is facing a continued vote of “no confidence”, and the Opposition has raised the stakes by saying some of her decisions on tobacco “stink like corruption”.

The latest blow to Casey Costello comes from business leaders. The Herald published their annual Mood of the Boardroom this morning, and CEOs judged Costello’s performance as the worst in the Cabinet, with a score of only 2.55 out of 5. The only ministers considered to be performing worse than her are two ministers outside of Cabinet, who were demoted earlier this year – Melissa Lee and Penny Simmonds.

Incompetence in regulating heated tobacco products

Incredulity is being expressed this week about Costello’s handling of the rules about Heated Tobacco Products, or HTPs. On the one hand, Costello has convinced her Government to reduce excise taxes on these products by 50 per cent to encourage their use as a smoking cessation device. On the other hand, this week, the Government banned the sale of the only HTP device on the market.

The absurd situation is not what the Government intended, and now causes a headache that is difficult to fix. The problem has arisen because the Government, especially the new Minister in charge of tobacco and smoking, Casey Costello, is in favour of HTPs because they might help in getting people to quit smoking.

Essentially, HTPs are alternatives to vaping. Hence Costello has convinced her colleagues to reduce taxes on the tobacco products that get used by the devices. And Cabinet agreed to put aside $216m in the Budget to make up for the potential decrease in tax revenue because of the tax cut.

However, the new Government has also inherited the last Labour Government’s tighter rules on vape and HTP devices. Labour had scheduled the implementation of a new rule that means that vape and HTP devices can only be sold if they have a removable battery and a child safety mechanism. The problem is that the main HTP device on the market in New Zealand is the Iqos sold by Philip Morris, which doesn’t meet those criteria.

Hence, the Iqos device is now illegal. While Philip Morris sells a few other HTP devices, these are hard to find, and until now, that made up only three percent of the market for HTP devices.

Costello wasn’t aware of this problem. She did, however, try to delay the new regulations. Initially, the ban on such devices was scheduled by the last Government to come into practice on 21 March this year. Costello tried to convince her Cabinet colleagues to delay this ban for two years, but they only agreed to a six-month deferral, which meant the ban came into effect on 1 October – Tuesday this week.

There’s now some confusion about what Cabinet knew about the potential problem. Some say that the Government and Prime Minister Luxon have been made to look stupid because of the situation.

Today, the Otago Daily Times newspaper calls the situation “beyond farcical” and says the Prime Minister “looks more like a weak boss being pushed around” by Costello. The paper also says that Luxon’s “attempts to convince the public” that “Costello is the heroine of anti-smoking measures, are almost laugh-out-loud absurd.” The newspaper calls for him to take a harder line on the Minister.

Officials advised against reducing taxes on Heated Tobacco Products

On Monday, RNZ revealed that the Treasury had advised Costello against the tax cut on HTPs. Their advice was based on several issues, but their main concern was that HTPs caused harm and that reducing tax on them would encourage their use.

Although Costello has claimed that HTPs have a “similar risk profiling to vapes”, RNZ’s Guyon Espiner uncovered that Treasury advised her that they are actually toxic and more harmful than vaping. According to Treasury documents, the “evidence is clear that HTPs are more harmful than vaping” and that it might turn out that they are as harmful as cigarettes.

According to Treasury, “emerging research suggests that heated/smokeless tobacco products still produce toxic emissions similar to those in cigarette smoke, and also expose users to some toxicants specific to heated/smokeless products which could also expose bystanders”. They conclude that HTPs “may generate harm through exposure to toxicants, cardiovascular impacts, and chronic respiratory disease”.

The worry for Treasury was that a reduction in taxation on HTPs might send a message that they were safer: “Removal of duty is likely to be interpreted as a Ministry of Health endorsement of lesser harms from HTPs compared to smoked tobacco and use as a smoking cessation support, for which there is insufficient evidence, and to increase awareness of their availability.”

Treasury was also concerned that a reduction in tax on HTP might not actually be passed onto consumers anyhow, meaning that Philip Morris would be the biggest winner from increased profits, especially since the company has a monopoly in the HTP in New Zealand.

Costello found “independent advice” that she preferred

Guyon Espiner’s research on Cabinet’s decision-making processes on HTPs showed that Costello then found “alternative sources to back up her claim that HTPs help people quit”. Official documents justifying the Minister's decision record: “I, the Associate Minister of Health, have received independent advice on the efficacy of HTPs as a smoking cessation tool”.

This independent advice has become a mystery this week, with the Prime Minister admitting that he hadn’t seen it, but still expressing confidence in Costello on the issue. Costello herself wouldn’t answer Espiner’s questions about the advice, however. She declined to be interviewed or say where she got the independent advice from.

Yesterday, however, this changed. Costello explained to RNZ political editor Jo Moir that this independent advice hadn’t been presented to Cabinet: “It's 10 to 12 pages long. It's not usual to attach evidence to a Cabinet paper”. More reported yesterday that the independent advice “includes international studies, advice from ASH, and other evidence from countries like Japan regarding their use of HTPs to cut smoking rates”.

What’s more, Moir reported that Costello has agreed to make this crucial advice public. Costello says: “This will all be released, it's not an issue”. The Minister expressed surprise that anyone was interested in it.

Labour on the attack

In response to the ongoing scandal, the Labour Opposition are doing two relatively rare things: 1) calling for the minister to resign, and 2) calling the decision “corrupt”.

While both these things might be viewed as hyperbolic, Labour doesn’t normally make these calls without careful thought. If oppositions constantly call for ministers to resign whenever they disagree with them, it ends up looking petty and the demand for a resignation loses it power over time.

And the use of the “C word” is also rarely used by either main party. This is because such a weaponised word can rachet up tensions between Labour and National, with the other side throwing back other allegations about their opponent’s integrity, sometimes leading to both sides being damaged. Labour will only be attacking Costello is they truly believe there’s a chance that the Minister is trouble and may lose their job.

Labour’s health spokesperson, Ayesha Verrall, is leading the charge against Costello. She says the latest developments raise “serious questions about what Casey Costello told the Prime Minister and when”. Given that Philip Morris’ HTP device is now banned even though the products for the device are now considerably cheaper, Verrall suggests that Costello must have either “misled” Luxon by not saying “what was really going on with these products – or she's incompetent”.

Verrall says the move to reduce tax on HTPs “is the closest decision I can think of where government has acted in the financial interest of a single company that only does harm”. Verrall has said there was “no reason for making these changes other than benefiting the tobacco industry” and that it “does absolutely nothing for the health of New Zealanders. It is just a handout to the tobacco industry.” And more aggressively, Verrall says: “The whole thing stinks like corruption”.

For the record, however, Costello bristles against any such ideas that she is in the pocket of Big Tobacco. She told 1News yesterday that she has never had any engagement ever” with the tobacco companies.

Costello also told RNZ’s Jo Moir yesterday that she found that whole scandal “frustrating” and that “I suppose what hurts me is, you know, my Dad died from respiratory illness because of smoking.”. She stated: “I hate smoking, I've never smoked in my life, and so I'm absolutely committed to achieving this target… Māori have the highest smoking rates. I'm a Māori. I want people to know that there's hope, and you can quit smoking.”

HTP devices still being sold illegally

The farcical situation with the Government’s prohibition on current HTP devices is worsened by reports that many retailers are not enforcing the ban. RNZ reported yesterday that “An undercover sting led by grassroots volunteer group Vape-Free Kids NZ has unveiled more than 20 stores across Auckland, Wellington and Christchurch selling IQOS heated tobacco devices.”

RNZ then verified this by purchasing the banned products as well. They reported that one store in Christchurch sold them the prohibited device on the proviso that the purchaser “didn't work for the government”. Similarly, 1News also found shops in Wellington that were willing to sell the device.

Fails on integrity, transparency and competency

Pressure has been building on Casey Costello this week over the HTP issue. But unfortunately it’s not the first time. There’s been a sequence of mini scandals relating to her smoke-free portfolio, all of which have ended in her being painted as acting in favour of the tobacco industry.

Probably Costello’s biggest enemy now is Health Coalition Aotearoa, who are highlighting how the sequence of scandals means, in their view, Luxon should sack her. Spokesperson Chris Bullen, an Auckland University public health expert said this week: “I think, you know, integrity, fail, transparency, fail, competency fail. Three Strikes should be out. I think the Prime Minister should stand up, take leadership and find someone who could better do the job and get us to smoke free 2025.”

But increasingly, the focus might also go on other senior members of the Government, who have been part of the tobacco decision making. Prime Minister Christopher Luxon is increasingly having to answer for Costello. And today’s Otago Daily Times editorial is stinging about his apparent ignorance about Costello’s “independent advice” and why he continues to back her:

“Would any chief executive commanding a big salary be happy to support a project that could cost a company millions of dollars without wanting to see the information supporting that move? Is turning a blind eye to the expensive behaviour of junior executives which bring the company into disrepute the way Mr Luxon believes companies should roll (to use his business lingo)?”

Of course, Luxon and his colleagues probably also know a fair bit about the tobacco industry. After all, Chris Bishop worked as a lobbyist for Philip Morris before entering Parliament. Finance Minister Nicola Willis used to be a director of the think tank the New Zealand Initiative, which has been funded by British American Tobacco and Imperial Brands.

But even Luxon has a close connection to the tobacco industry – his sister-in-law, Barbara Luxon, has worked for British American Tobacco as a trade and marketing coordinator for the last twenty years.

Therefore, if Labour and Health Coalition Aotearoa ever got their way, and Luxon sacked Costello, they might find she’s replaced by someone else with even better connections to big tobacco.

Dr Bryce Edwards

Political Analyst in Residence, Director of the Democracy Project, School of Government, Victoria University of Wellington

Previous analysis on this issue:

Bryce Edwards: Finding Casey Costello’s “smoking gun”

Bryce Edwards: Is Casey Costello fit to be a minister?

Bryce Edwards: The Role of tobacco interests in making government policy

Key Sources

Adam Burns (RNZ): Vape stores caught selling non-compliant Heated Tobacco Products

Felix Desmarais (1News): Smoked out: Banned heated tobacco devices still being sold

Richard Edwards, Janet Hoek, Andrew Waa, Nick Wilson (Public Health Communications Centre): Risk proportionate regulation of nicotine and tobacco products: More rhetoric than reality

Guyon Espiner (RNZ): 'Most benefit' of government's tobacco tax cuts will go to tobacco company Philip Morris, officials told Casey Costello

Guyon Espiner (RNZ): Casey Costello’s tobacco tax cut plan stalled as device pulled from shelves