Why a federal ICAC wouldn’t work

Why a federal ICAC wouldn’t work
Tim Lyons

As anyone who remembers the Jeff Kennett-era bumper stickers “Vote 1 Auditor-General” knows, institutions designed to make the government accountable and honest enjoy strong support from the public. The same is true of state anti-corruption commissions such as the Independent Commission Against Corruption in New South Wales and the Crime and Corruption Commission (formerly the Crime and Misconduct Commission) in Queensland. It tends to be the political class that expresses reservations about them.

There is a satisfying schadenfreude in watching various colourful characters do the walk of shame into corruption inquiries, but it also tends to reinforce a deep frustration with, and alienation from, politics in general and party politics in particular.

Similarly, on political donations, the public reacts badly when shown the mechanics of political fundraising because it just smells like turning money into power – and into more money. Or vice versa. A cursory glance at the patterns of political donations shows a high correlation between regulated industries and the cash flows to parties. The democratic instinct on all this is dead right: not all fundraising is corrupt but there is a real sense in which all of it contains the possibility of corruption. And when dark money meets a faulty moral compass, the result is entirely predictable.

Which explains why two common responses to corruption allegations and donation scandals in national politics are to call for a “federal ICAC” and royal commission into political donations. Both are fine suggestions, and need to be taken seriously, including because they are advocated for by people with a long record of support for anti-corruption measures, such as Tony Windsor.

We probably do need both, but it’s certainly not all we need to do. Done on their own, they are likely to be ineffective, because they would deal with only part of the governance issue.

For one thing, appeals for a federal ICAC-style body seem to miss something important about the contours of corruption. ICAC-type bodies with significant and coercive investigatory powers are particularly good at unravelling, albeit after the fact, a specific species of corruption – a species of corruption that directly relates to a core function of state and local governments, namely licensing and permit issues and especially those relating to land.

In simple terms, it’s basic brown paper bag stuff, involves the personal enrichment of individuals, and falls into one of three categories.

The first is money or other advantage in return for a favourable decision on a specific question – say, funding or a mining lease or a planning application. Much judicial corruption, which has been mercifully rare in Australia, also falls into this category.

The second is regulator corruption in the form of payments to look the other way or even facilitate an illegal operation or act, such as illegal brothels, drug distribution or dumping waste. Police corruption, which is like a fungus you can never quite kill and a function of the opportunities presented by daily proximity to illegality and cash, is the most obvious example.

The third is common or garden-variety stealing, often via procurement manipulation and the payment of secret commissions. A classic of this genre is the current scandal at the Education Department in Victoria, where a network of managers siphoned off cash and goods meant for public schools.

Our major scandals at a state government level tend to fall readily into these categories. Much of the WA Inc scandal was about resources and property, as well as government investments. Queensland’s Moonlight State was a miasma of grog, developers, cops, pimps and bookies. The ICAC sagas of recent years that hit both major NSW parties involved infrastructure, land, property and mining rights, as well as something as mundane as the lease on the coffee cart at Circular Quay.

Further back in NSW history, premier Robert Askin, who said his wealth came as a result of saving hard and being a very lucky punter, was outed immediately after his death as being at the apex of a network of corruption around liquor licensing and prostitution. The end of the 1970s also saw a Victorian Liberal government caught up in serious corruption around land and housing in outer Melbourne.

There’s a pretty clear pattern. And that pattern says something important about what institutions we might need at a national level.

In contrast to the grand episodes of state corruption, national politics appears to have a better record. Politicians padding their travel expenses, while egregious, is hardly a systemic threat. It’s possible that the fact we have never had a really major corruption scandal at a federal level is because we have never had an ICAC to uncover it. But perhaps it is more likely a sort of happy constitutional accident – our national government does a lot less of the specific sort of regulation and licensing that states and local councils do, and it does a lot less direct procurement because it doesn’t run things such as schools and hospitals.

This does not mean that there isn’t a corruption risk. It means that the main “corruption” potential is different but actually much bigger and more serious. The problem is that it’s not black-letter-law-type corruption. It’s not brown paper bag stuff and personal enrichment. At least as far as we know.

What the federal government does do is write the fundamental rules of the economic game, including in relation to tax, trade and the finance sector that dominates all our lives. And the key players in these games are the largest and most powerful corporations, foreign and domestic.

A government decision can be entirely free of corruption but still not be an example of good governance. And it can still be a catastrophe for the public interest. For example, if the banks secure a major tax break, or a de facto government guarantee, this is worth literally billions to corporations and costs the public accordingly. I would argue that it is an illegitimate manipulation of public policy when this is done privately, using privileged access and economic or other leverage. But it’s also different to brown paper bag corruption. It’s opaque decision-making and power that are the issues. Although they made plenty of them, the mining companies didn’t have to use donations to kill Labor’s original mining tax, they used their hard and soft power.

Rent-seeking may not be corrupt, but in terms of its negative consequences for the country and corrosive effect on governance, it can be as bad.

Would an ICAC be suitable to untangle a “corruption” mess involving multinational drug companies, the Pharmaceutical Benefits Scheme and free-trade negotiations? Almost certainly not. We should not presume an institution that is good at catching mid-ranking bureaucrats who are rorting the printer cartridge contract will deal with the bigger issues about how politicians become subalterns for immensely powerful interests playing an inside game.

There are a series of important and urgent issues in relation to integrity and transparency in Australian public life. A core problem is that governance institutions are assembled and altered in a remarkably ad hoc fashion, which reduces the chance they can be effective. A national carbon copy of ICAC and an inquiry about donations seems to me to be just treating some symptoms.

We shouldn’t deal with capital C corruption and political donations by themselves. Not while other key governance and transparency institutions in Australia are either totally broken, such as freedom of information laws; overhyped, such as the Parliamentary Budget Office and whistleblower protections; handicapped by jurisdiction or poor funding, such as the Ombudsman and the National Audit Office; hilariously ineffective, such as the Charter of Budget Honesty and Ministerial Code of Conduct; or thoroughly pointless, such as most parliamentary committees.

During the Asian century white paper process, former treasury secretary Ken Henry was fond of saying that good governance can be a source of national competitive advantage for Australia. He’s right, but our system needs work.

Australia should have a royal commission into governance. It would consider the national mechanisms and institutions Australia needs to secure transparency and integrity but also good governance more generally. It would consider not just corruption and electoral funding, but also policymaking and accountability in public administration.

Although it’s unnecessary as a matter of law, the parliament should establish the commission so it’s not a mere creature of the executive. And as fantastic as it sounds in these times when commissions are appointed to investigate such partisan flim-flam as pink batts, the government and opposition should agree on the names of three commissioners.

Restoring public faith in institutions and political actors is a big, complicated task. Establishing a royal commission into governance would be a way for the prime minister and the opposition leader to show some dedication to the public interest.

And if, as I suspect it may be, our polity is so broken at present that it can’t get a task like this done, then perhaps civil society should organise its own inquiry and let the public lead the political class.

A few “Vote 1 Commission for Governance” Facebook memes would scare a lot of them.
This article was first published in the print edition of The Saturday Paper on Jul 18, 2015 as "Brown paper bag tigers". Subscribe here.