Should Developers Be Allowed to Make Political Donations?

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Tuesday, January 26th, 2016
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If a property developer wanted to gain influence over public sector decision makers, there would be few more brazen ways to go about this than to hand over brown paper bags stuffed with wads of cash.

Yet in the case of Newcastle developer Jeff McCoy, that appears to be exactly what happened. McCloy admitted to the Independent Commission Against Corruption in 2014 that he gave tens of thousands of dollars to state Liberal MPs to such an extent that he felt like a ‘walking ATM.’

While the majority of developers throughout Australia no doubt operate within the law, McCloy’s case is sadly far from the only one in which residents in New South Wales have heard about allegations of improper behaviour between developers and elected representatives or public officials. The simple mention of names like Eddie O’Beid or companies like Australian Water Holdings is no doubt enough to leave residents of that state feeling sick.

Beyond allegations of untoward behaviour, however, concern regarding the closeness of relationships between influential property developers and state/local decision makers has been brewing for some time. In Queensland, for example, a study of rezoning decisions by University of Queensland economists Cameron Murray and Paul Frijters found that developers whom the researchers considered to be well connected were able to buy up land on the urban fringe and use their influence to ensure their holdings falls within final rezoned areas at the exclusion of neighbouring lots.

One area of contention surrounds whether or not political donations from property developers should even be allowed. In October last year, the High Court rejected a challenge to a law which bans such donations in New South Wales. The Greens in Victoria are pushing for similar laws in that state, though major parties are cool on the idea.

The idea of banning political donations from developers has long had some support. Writing in The Sydney Morning Herald in August 2014, for example, former NSW Premier Nathan Rees declared that the NSW law was helping to ‘safeguard democracy.’

Rees – who brought in the NSW legislation in 2009 – says developers are not necessarily bad people but adds that the amount of money going into the sector combined with the volume of decisions which officials, planners and politicians are forced to make created a situation which was ‘ripe for exploitation.’

Following the upholding of the NSW law, meanwhile, Victorian Ombudsman Deborah Glass called for similar laws in her state.

‘The High Court referred to the well evidenced corruption risk in that state between developers and politicians when ruling on the New South Wales case,” she said. “The risk in Victoria is no different. It must therefore be time for Victoria to put this issue back on the table with a view to reform before the next election. We should not wait for a scandal for this to happen.”

Not surprisingly, however, others see the bans as an undue restriction upon freedom of political expression.

“Ultimately, political donations are a form of participation in the public policy system,” Institute of Public Affairs senior fellow and ABC columnist Chris Berg says. “Involving yourself by donating money to a political party or to a politically aligned organisation is as much as an expression of your values and of what you want to see from the world as political speech or any other form of expression.

“I don’t think that we should be banning political donations from any person of any category in this country. “

Murray says the notion of donations being banned should not be dismissed outright, but adds that donations are a small part of larger picture of influential relationships between developers and decision makers. A ‘revolving door’ which can see former staff from planning departments employed by private developers and vice versa represents a much bigger part of the problem, he says.

In order to address these broader issues, Murray would like to see a cooling off period of say, three years, within which those who have held public roles in which critical decisions regarding development approvals or planning are made would not be able to be employed by private developers after the cessation of their former employment. Likewise, he would like to see planning departments themselves hire more staff from other jurisdictions, who do not come with the same entrenched set of loyalties as those with a history of private sector employment within the jurisdiction concerned, and who can at any rate bring fresh perspectives and question existing practices with fresh eyes.

On the narrower question of banning donations, Murray cautions that those wishing to gain influence will likely find ways around these bans. He says an alternative might be to have all donations made anonymously through a centralised clearing house, which would then pool the entire amount of donations given to a particular party over a given period and then forward them on to the party concerned – leaving the party in question with no way of finding out who made individual donations and how much.

Berg, meanwhile, says the problem lies in the degree of power and influence vested in the hands of public sector decision makers over the over the fortunes of developers in the property sector and more broadly private businesses and individuals per se.  He says the desire to influence politicians and public officials can only be addressed through reducing the size of government and the degree of control public officials have over private citizens.

The High Court has held up the constitutional validity of the New South Wales ban on developer donations to political parties.

Whether or not such bans should be introduced elsewhere remains a topic of divided opinion.

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