JOHN MENADUE. A Repost and update: The scourge of lobbyists and crony capitalism.

Sep 25, 2019

Abuse by lobbyists is back in the news .The most recent appalling example has been Crown Resorts. With Ex Labor and Liberal  ministers and officials on the payroll  of Crown neither the Liberal or Labor Parties raised the Crown scandal involving ‘Chinese junkets’ and ‘high rollers’ receiving favourable treatment . They ran away from the scandal. It was left to Andrew Wilkie, other Independents and the Greens.

Lobbyists are using their destructive influence more than ever.  Apart from Crown  consider three other recent instances of how they have corrupted open and good government.

  • The Pharmaceutical Benefits Advisory Committee recommended that for 143 of the most commonly prescribed medicines,doctors could double the drugs dispensed from a single prescription.  This would have saved costs for both the taxpayer and the patient.  After lobbying by the Australian Pharmacy Guild the Minister  Hunt ran for cover. We now also know that the APG makes donations to One Nation in expectation of support in the Parliament.
  • The National Health and Medical Research Council recommended that a range of ‘alternative’ clinical services no longer receive government subsidies through private health insurance.  As a result some subsidies were withdrawn. So the industry lobby group, Complementary Medicines Australia went to work on Minister Hunt and he ordered that a review be made of the withdrawal of the subsidies.
  • The Hayne Royal Commission recommended that trailing commissions by mortgage brokers be banned from 2020.  The Government accepted the recommendation. So the 16,000 well-organised and influential mortgage brokers went to work and Treasurer Freydenberg changed his mind.  There was no sign that borrowers or the public were consulted in any way.  The lobbyists won again.

Lobbying has grown dramatically in recent years, particularly in Canberra. It now represents a growing and serious corruption of good governance and the development of sound public policy. In referring to the so called ‘public debate’ on climate change, Professor Ross Garnaut highlighted the ‘diabolical problem’ that vested interests brought to bear on public discussion on climate change.

Martin Parkinson, the Secretary of the Department of the Prime Minister and Cabinet, has warned about ‘vested interests’ who seek concessions from government at the expense of ordinary citizens.  Some time ago the former ACCC Chairman, Graeme Samuel, cautioned us that ‘A new conga line of rent seekers is lining up to take the place of those that have fallen out of favour’. In referring to opposition to company tax and carbon pollution reform policies, Ross Gittins in the SMH said ‘industry lobby groups [have] become less inhibited in pressing private interests at the expense of the wider public interest. [They] are ferociously resistant to reform proposals.’

These problems are widespread and growing.

At my last count there were 252 lobbying entities registered in Canberra with the Department of Prime Minister and Cabinet. These entities employ a significant number of lobbyists.  Some accounting firms, including three of the majors who undertake lobbying, are not obliged to register. Charitable, religious and non-government organisations do not have to register. On top of these ‘third party’ lobbyists, there are the special interests who conduct their own lobbying, such as the Minerals Council of Australia, the Australian Pharmacy Guild and the notorious Business Council of Australia. These lobbyists encompass a range of interests including mining, clubs, hospitals, private health insurance funds, business and hotels that have all successfully challenged government policy and the public interest in many ways. Just think what the Minerals Council of Australia did to subvert public discussion on the Mining Super Profits Tax and the activities of Clubs Australia to thwart gambling reform, or the polluters over an Emissions Trading Scheme and the Carbon Tax. Only recently we saw the socially damaging role of the Beverage Council of Australia in undermining expert opinion on ways to address the growing epidemic of obesity. It is a repeat of Big Tobacco.

Lobbying is a feature of crony capitalism. It is winning political favours that corrupt markets and prevent open competition. Land rezoning is the most blatant example. Get a favourable re zoning and dramatically increase the value of the property.

I estimate there are over 1000 lobbyists, part time and full time, and of all shapes and sizes operating in Canberra. Secret lobbying is pervasive and insidious. It must be curbed and made transparent.

With journalism under-resourced, the media depends increasingly on the propaganda and promotion put into the public arena by these vested interests. Many of the so-called economic and business economists we read, hear and see on our media are in the employment of the banks and accounting firms with their own self-interested agendas. It was no surprise that they gave us no inkling of the malaise and corruption of the banks. Only a Royal Commission exposed what was really happening

The health ‘debate’ is really between the Minister and the Australian Medical Association, the Australian Pharmacy Guild, Medicines Australia and the Private Health Insurance companies. The debate is not with the public about health policy and strategy; it is about how the Minister and the department manage the vested interests. The lobbying interests in health win time and time again. As I have often said, health ministers may be in office but the health providers and their lobbyists are in power. They effectively have the Department of Health and Ageing in their pocket

The wealthy private schools with their lobbying and political clout are obstacles to needs-based funding, which is necessary for both equity and efficiency reasons.

Much of the policy skills in Canberra departments have been downgraded and ‘policy’ work is contracted out to accounting and consultancy firms with poor policy skills and no corporate memory.  This handing out of work is done in the name of downsizing government but it gives a major advantage to those the accounting and business associates are close to,  the large and powerful corporations who are hostile to government.

Policy work within the government is now undertaken more in specialist organisations such as the Productivity Commission rather than in the departments. Departmental policy capability has been seriously eroded.  That makes it harder for the public service to safeguard the public interest against lobbyists with their incessant demands for favourable treatment.

Inexperienced and young ministerial staffers are much more likely to listen to vested interests.

What can be done to assert the public interest against these powerful vested interests?

  • Federal lobbyists have to be registered with the Department of Prime Minister and Cabinet, but this is inadequate. They should also be obliged to promptly, publicly and accurately disclose the discussions and meetings they have had with ministers, shadow ministers and senior public servants. That same rule should apply to vested interests like the Minerals Council of Australia that lobbies directly on its own behalf. A clear lesson to be learnt from the subversion of the public interest by the AMC is that giving in to rent seekers doesn’t appease them. It just makes them and others much bolder. The government is seen as a craven ‘patsy’.
  • All lobbyists should be banned from Parliament Houses across Australia. Let them lobby MP’s elsewhere.
  • All proposals by special interest groups should be accompanied by a public interest impact statement prepared by an independent and professional body. That statement should be made public. This public impact statement would be attached to representations from the vested interest group. Many of the major private consulting firms and the four large accounting firms should be excluded from this process as many of them have shown themselves to be compromised in the interests of their clients.
  • Tax benefits for ‘think tanks’ like the Institute of Public Affairs and the Sydney Institute, which are secretly funded and act as fronts for vested interests, should be denied.
  • Departments such as Health which are so influenced by special interests should have different governance arrangements. The traditional minister/department model in Health is a happy hunting ground for lobbyists and vested interests that significantly undermine and sabotage urgent health reforms across the health field. The Reserve Bank, composed of independent and professional persons, has shown the benefit of such governance arrangements in keeping vested interests at bay and promoting an informed public debate. We need such an arrangement in the health field particularly.
  • No minister or senior official should work with a vested interest group that they have been associated with for at least five years after retirement or resignation.
  • Adequate funding of the Australian Broadcasting Commission to assert the public interest and promote public debate is now more important than ever. The ABC, despite its obvious shortcomings, is still the most trusted media institution in the country. News Corp is the least trusted.
  • Major reform of election funding to stop powerful groups buying political favours is essential.
  • A federal Independent Commission against Corruption and in each State is required to examine allegations of corruption.
  • Citizen Assemblies of randomly selected people who are fully informed on key public issues could assert the public interest and help governments counter powerful vested interests.

The problem of vested interests and their corruption of public debate must be addressed. It is urgent if we are to have democratic renewal, restore some faith in our public institutions and develop sound public policies.

The lobbying scourge and the undermining of good and open government must be urgently addressed.  A great deal is at risk.

29th of April 2019. 

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