Issue: 167
Sent: 30-06-2009 13:49:02
In this issue:

Ute-Gate: How Corruption HappensEmail Marketing Business Opportunity - Helen BairstowYet Another Reason for Working LongerThe Easiest way to do a Client NewsletterWhy Warren Buffett won't buy a NewspaperMore Consolidation in Funds Management?
Return to full article list
HomeFree weekly newsletterSelf Managed Super Fund ArticlesContact usLogin

Ute-Gate: How Corruption Happens

Click here to buy - A How To Book of SMSF's by Tony Negline
John Robertson

Behind the politics of "Ute-gate" is a new risk of corruption as Australia's politicians start micro-managing policy at the national level.

The Australian national government has been remarkably free from allegations of corruption over many decades no matter which of the major political parties has been in office.

Ministers have certainly been forced to resign from time to time but mostly, like hapless defence minister Joel Fitzgibbon most recently, for bad judgment and administrative sloppiness.

When political corruption has surfaced in Australia it has most often been in state and local governments. In those jurisdictions, one is more likely to find crooked politicians and officials doing deals with cronies and lobbyists.

Partly, the reason for the different track record rests on the quality of people attracted into the different layers of government. Opportunity is also critical. In the states and local governments, planning decisions, poker machine licenses, contracts to supply stationery to local schools and having a road built to your farm are some of the myriad ways benefits can be conferred on or withheld from local people.

While the national government can have a momentous impact on the daily lives of Australians through decisions to tax, support incomes and go to war, Canberra's politicians are less likely to become directly involved in the implementation of customized decisions affecting individuals at the community level.

In Canberra, meanwhile, specific decisions tend to be taken by public servants within rules and regulations outlined by legislation. Ministers, in many cases, have no overriding discretion and, where they do, many are delegated to officials or subject to disallowance by parliament.

Representations from constituents for a review of their treatment are routinely passed to the relevant departments for review before a minister becomes involved.

One qualification to this arises when a minister receives a representation from one of his own constituents relating to an area within his own ministerial responsibility. This presents a special predicament.

Many years ago, I worked for the then member for Flinders and, subsequently, the member for Bennelong, in their capacities as Commonwealth Treasurers. I had never visited Flinders or Bennelong but I knew the names of every locality and postcode in those electorates and departmental officials had a list of them, too.
There was never any suggestion that this was corrupt practice. It is the same in every workplace. A request from the company chairman will be treated with more deference than one from the cleaning lady. Such is life.

However, once the minister has discretion over conferring a benefit on a constituent the circumstances change because the constituent can potentially jump the queue through the intercession of the minister. This is more serious if there are limited benefits and a benefit to one person necessarily precludes others from receiving it.

In recent months, the Australian government has become engaged in micro managing government spending to an unprecedented extent. Rather than simply establishing the parameters for a program and leaving the rest to officials in Canberra or state bureaucracies, ministers are more actively engaged than ever. Members of parliament, knowing funds are up for grabs, have been using whatever influence they can muster to lobby for their share.

In this context, a well known constituent of the Prime Minister and acquaintance of the Treasurer approached his local member to get access to OzCar funding. In tried and true administrative fashion, the request was passed on to departmental officers. In accordance with well established departmental practice, the request was flagged for its political sensitivity and the basis for preferential treatment began.

Eminently sensible macroeconomic policies to help stimulate economic activity have inadvertently opened up probity risks elsewhere. The changed role of the Commonwealth in funding government programs and the personal involvement of politicians in promoting individual projects within programs has opened the way to more shady dealings at the Commonwealth level.

At this stage, the tendency will be to simply treat this as an unrealized and exaggerated risk. That could be dangerous. We have discovered in a corporate context as the global credit crisis swirled about us last year and, before that, as Enron and HIH fell on their corporate faces that risks left to fester will eventually be realized.

There is no reason to believe that government systems are immune from corruption in ways that control systems within industrial corporations and financial institutions are not.

Share this article
Click to share this article on Facebook Click to share this article on Twitter

Previous article         Next article

If you liked this article and would like more by email, subscribe! It's free.

[Bold fields are required]

Your details

Your alternate email address is used only if messages to your primary email address are returned to us.


Do you work in the financial services industry?

This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.

Site design by Raycon