The growing case for a federal anti-corruption agency

The growing case for a federal anti-corruption agency

Cuts to Commonwealth integrity agencies have undermined and even intimidated them.

The question of a federal anti-corruption agency is back on the agenda. A Senate select committee has begun an inquiry into a "national integrity commission" and held its first public hearing on April 21. Since Bob Brown's leadership, the Greens have advocated for a federal agency along the lines of the NSW Independent Commission Against Corruption, and they are gaining supporters.

The issue has acquired added prominence because corruption in all its forms has become a major political talking point. Most immediate has been the Coalition government's campaign against corruption in the building and construction industry, which involved a royal commission and now the proposal to reinstate the building and construction commission. In response, the Labor Party has focused on corruption in the financial and banking sectors. Some of the crossbench senators wanted to broaden the scope of the government's commission to cover corruption in other areas, including the financial industry. This was then linked to the Greens' demand for a federal ICAC. News that Australia had slipped a few more places on Transparency International's corruption perceptions index (from 10th in 2014 to 13th in 2015) appeared to strengthen the case.


Credit:Illustration: Pat Campbell


Public anger over corruption in high places has also been fuelled by revelations in the Panama papers about secret offshore financial facilities, which the rich can use to shield their holdings from scrutiny and tax offices. While many who use such facilities are acting within the law, secret offshore accounts obviously help criminals and corrupt leaders who want to hide their illegitimate wealth. Moreover, even if no laws are broken, the mere fact that the legal system helps the rich avoid their obligations confirms that the system itself is unjust. From this perspective, such facilities are also morally corrupt in the sense that a wealthy elite is harming the public interest for private gain, the classic meaning of corruption.

The political climate is therefore sensitive to the general issue of corruption. The Coalition government's new efforts to beef up the Australian Securities and Investment Commission reflect the shift in public opinion. Until recently, ministers were happy to listen to their business friends, who welcomed the Abbott government's reduction of funding for ASIC and other regulatory bodies. But now, spooked by the popularity of Labor's counter-attack on the financial and business sector, the government has significantly strengthened both ASIC's powers and resources.

Corruption at the federal level, it is argued, goes unnoticed without a functioning ICAC to detect it.

Corruption at the federal level, it is argued, goes unnoticed without a functioning ICAC to detect it.

How far this new mood of anti-corruption will help the case for a federal ICAC remains unclear. Corruption itself is a complex phenomenon and occurs in different places and different forms, which are not always distinguished in policy debate. Many analyses of corruption focus on the public sector. For example, anti-corruption agencies, such as ICAC, are normally aimed at public sector corruption (though commercial interests may be investigated as partners in government corruption). Transparency International's corruption perception index concentrates on the abuse of public, i.e. government, power for private gain. However, the corruption that is the subject of current debate is largely found in the private sector. Corrupt activities in the construction and financial industries, for example, are private-sector problems, as is tax avoidance.

Recent discussion of anti-corruption agencies has often been confused on this point, sometimes deliberately so. A federal ICAC, as normally conceived, would do little to combat the type of private-sector corruption at which the government's proposed building and construction commission, along with its revamping of ASIC, have been aimed. This has not stopped the advocates of a federal ICAC from bandwagoning on recent public anger against the banks and offshore tax-dodging. Public and private corruption may be interrelated but they typically require different institutional responses.

Another point of confusion is whether corruption refers to actions that are contrary to law or simply to actions that are seen as exploiting the public good for private gain without explicitly violating any law or code of conduct. For example, when people talk of politics or politicians as corrupt they are usually referring to behaviour that is morally reprehensible while perfectly legal. Such behaviour includes: failure to tell the truth, breaking election promises, soliciting party donations from wealthy special interests in return for favourable treatment, granting privileged access to well-heeled lobbyists as well as former colleagues and cronies, and post-retirement enrichment through exploiting contacts and inside knowledge attained while in public office. All such activities are within the law. Much of the public anger at alleged government corruption, one suspects, reflects disgust at these realities of modern democratic government. But unless the laws themselves are changed, politicians will not be liable to prosecution or to investigation by an anti-corruption agency.

A federal ICAC would need to look for illegal acts of corruption in government. These are more likely to involve individual politicians or public servants in the improper exercise of legal powers in particular cases; for example, in the awarding of contracts or licences, the making of appointments or interference in due process. Recent concerns over corruption have had little to do with these more mundane, though still important, types of corruption.

Does the extent of such corruption warrant the creation of a federal ICAC? Beyond two flagrant cases of overseas corruption (the Australian Wheat Board over Iraq sanction-busting and the Reserve Bank over its subsidiaries involved in banknote production), federal ICAC advocates have had trouble identifying evidence of any major corruption in the federal government. Instead, the case relies more on plausible supposition. Corruption at the federal level, it is argued, naturally goes unnoticed without a functioning ICAC to detect it. Policy areas such as defence contracting, immigration decisions and environment assessments involve individual decisions worth millions to particular individuals and companies. In the states, anti-corruption bodies have unearthed significant corruption and there is no reason to believe that federal politicians or public servants are more ethical than their state counterparts.

Some contrary arguments can be made in favour of federal exceptionalism. The intensity of minder and media scrutiny is greater in Canberra's goldfish bowl than in state capitals. Again, at the federal level, there are many more opportunities for legal enrichment after retirement, for politicians and senior public servants alike. The greedy can afford to bide their time until they are safely out of office. Official defences of the status quo, such as that recently given to the Senate inquiry, place their faith in the existing network of federal integrity agencies. Institutions such as the Australian Federal Police and the Australian National Audit Office, they say, are adequate to the task.

However, government complacency sounds increasingly hollow. According to many independent observers, cuts to existing integrity agencies have not only reduced their capacity but also generally intimidated them. The ANAO, for example, under its new leadership, appears reluctant to rattle the government's cage on matters of procedural compliance while it concentrates on the safer ground of effectiveness audits. The Commonwealth Ombudsman's profile could hardly be lower. The AFP is notoriously reluctant to involve itself in law-breaking by senior government officials unless under executive direction. The very intimacy of the Canberra community provides fertile ground for conflicts of interest, especially nepotism and cronyism. In this respect, the ACT government system, which is flagrantly incestuous and conflicted, may point to similar problems in the federal government.

The fall in Australia's Transparency International ranking should also be of concern. Admittedly, the rankings are rough-and-ready measures. Like international university rankings, to which Australia's leading universities have enslaved themselves, the indicators involve a degree of spurious precision. In addition, the rankings themselves depend partly on the performance of others. For example, Australia's position was affected by improvement in Britain, which rose several places and overtook Australia after David Cameron made anti-corruption a major goal of his government. Even so, it is notable that Australia now ranks last among the four mature Westminster-based governments, behind not only New Zealand, which has always led the way along with the Scandinavian democracies, but also behind Canada and Britain. Government corruption definitely deserves to be on the federal agenda.

Public and private corruption may be interrelated but they typically require different institutional responses.

But is a federal ICAC necessarily the solution? As Australia's leading academic expert on corruption, Professor Adam Graycar, keeps pointing out, the world's least-corrupt democracies do not rely on dedicated anti-corruption agencies. Of the 12 countries above Australia in the Transparency International rankings, only Singapore has an ICAC-like agency. If one widens the field to the top 20, only Hong Kong, at equal 17th, joins Singapore. Hong Kong, home of the first ICAC under British colonial rule, and Singapore are significant exceptions. Both are authoritarian regimes that chose to impose integrity on their bureaucracies and legal systems to attract business in a region notorious for government corruption. Well-established democratic regimes, by contrast, have combatted corruption by other means.

Other, less elaborate measures are certainly available. A federal ICAC is not the only possible institutional response and its supporters do a disservice to their anti-corruption cause by insisting on a federal ICAC as the be-all and end-all of combatting corruption in the federal government. Graycar, for example, suggests an anti-corruption council or network, reporting to Parliament through the attorney-general. It would coordinate anti-corruption strategies, while referring any cases to the relevant authorities. State anti-corruption agencies on the ICAC model, he argues, are not themselves free of problems, as demonstrated by the NSW ICAC's questionable pursuit of crown prosecutor Margaret Cunneen.

Whatever the formal structure, the main aim should be an independent, arm's-length authority whose sole focus is on government corruption by politicians and public servants. Such an authority could prod existing integrity agencies into more effective action without necessarily usurping their jurisdiction and provoking the turf battles that encourage resistance within the bureaucracy. It could also take a lead in tightening up many of the lax regulations surrounding matters such as political donations, access by lobbyists and restrictions on post-government employment.

The major parties have so far shown little appetite for initiatives against government corruption and the present Senate inquiry is unlikely to lead anywhere, especially in view of the impending election. Realistically, one should not expect any significant change in political attitudes short of a major corruption scandal in, say, defence procurement, immigration visas or environmental assessment. On the other hand, an election campaign offers promising opportunities for proposing reforms, as would a possible hung Parliament. The ground may be shifting in the longer term. In the meantime, advocates of reform need to think more creatively. They should be wary of identifying the case for anti-corruption reform in the federal government with the case for a federal ICAC, as if a federal ICAC were the only possible shot in their locker.

Richard Mulgan is an emeritus professor at the Australian National University's Crawford School of Public Policy.

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