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Good and bad starts

December 7th, 2007

The Rudd government has made a good start, but only a start, on improving standards of governance. One move that is particularly sensible is the complete ban on ministers having personal shareholdings. Any other rule is bound to create grey areas, and politicians being as human as they are, attempts to push the boundaries. That said, I’m sure someone will be found who is silly enough to breach even a clear-cut rule like this. When this comes to light, it’s crucial that Rudd should bite the bullet and sack the person concerned, regardless of their other merits. I’m struck by the extent to which the Beattie government has come unscathed through a string of scandals, largely because, once a breach of the rules became apparent, those responsible were sacked.

The big problem of ministerial accountability remains to be addressed, but at least we have some hope of an improvement in standards of financial probity, which is long overdue. More on this from Tim Dunlop.

Meanwhile, even allowing for a difficult position, I’ve been disappointed by Brendan Nelson so far. Surely, for example, it would be better to leave a frontbench position vacant than to appoint Bronwyn Bishop. On a more serious note, having supported the ratification of Kyoto, Nelson appears to have shifted to opportunistic opposition to anything that would build on this first step.

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  1. Kien
    December 7th, 2007 at 20:50 | #1

    The government is fortunate to have talented and ambitious parliamentary secretaries, waiting to take the place of any minister who fall foul of the ministerial code. Hopefully, that is sufficient to motivate ministers to remain on the straight and narrow.

    I like to think that the prime minister might secretly welcome the opportunity to promote some of the parliamentary secretaries while at the same time demonstrating how strict the ministerial code is.

  2. observa
    December 7th, 2007 at 20:54 | #2

    “One move that is particularly sensible is the complete ban on ministers having personal shareholdings. Any other rule is bound to create grey areas, and politicians being as human as they are, attempts to push the boundaries.”

    What a ridiculous notion. Most of our politicians are likely to be financially successful and as such hold a share portfolio like I do jointly with my wife. Having to divest themselves of these shareholdings immediately triggers capital gains tax consequences, when these shareholdings are built up for retirement purposes. What’s the difference between investing your savings yourself or placing them in a managed fund? Higher fees to finacial intermediaries that’s what and with the sub-prime fiasco, who wants to foster that nowadays? So you have some dinky rule that savings can only be placed in managed funds. That could be your dodgy accountant. Are you also going to require the dismantling of self-managed super funds? How far down the decision-making cahin should this policy be taken in the public service too? After all, their advice “without fear or favour’ could easily be tainted by the same reasoning. This is just partisan political posturing John. Just because you’ve given up your position in the ACTU, doesn’t mean you’ve suddenly thrown off the baggage when it comnes to IR laws or similar. If there’s a real conflict of interest(as distinct from the whispering classes) we’ll hear about it soon enough and it’s up to the PM to judge whether he wants to sack a minister on that basis. That’s what we elect them for.

  3. observa
    December 7th, 2007 at 21:05 | #3

    Or given the political partisanship of the union movement in the last election campaign, it also stands to reason that no person holding public office or working on the govt payroll should be a member of a union. Can they even belong to a political party, now there’s a question?

  4. SJ
    December 7th, 2007 at 21:33 | #4

    obby says:

    Having to divest themselves of these shareholdings immediately triggers capital gains tax consequences, when these shareholdings are built up for retirement purposes.

    I haven’t been able to find a link to the actual code, but the new ministerial code may not be as tough as Howard’s original one:

    ELEANOR HALL: Now, you say that this new conduct may not be as strict on shares. Under this code of conduct ministers are not allowed not only to own shares in their portfolio, but are barred from directly owning shares at all. Do you think that’s workable?

    DAVID JULL: Well, that was the problem that we had. I mean, at least they’ve got a safety valve under these, and as much as they can invest in superannuation funds and the rest of it. So all is not lost.

  5. December 8th, 2007 at 05:46 | #5

    what’s the problem? retiring ministers might be slightly less wealthy? does sitting on a parliamentary bench interfere with dreams of opulence? sit somewhere else, then.

    i expect politicians to be corrupt, so welcome any limitation on their opportunities to meet my expectations. rudd’s not going to change the culture, but give him some credit for pruning obvious mixtures of power and greed.

  6. Ikonoclast
    December 8th, 2007 at 06:00 | #6

    I think people who wish to become leaders of our country should observe a self-denial philosophy somewhat like that of Mahatma Gandhi. At the very least, they should be required to divest themselves of all material goods except their house, items necessary for their children, their parliamentary salary and partner’s salary. If they want to serve the nation as selflessly as they claim this should be no great sacrifice.

    If they wish to be millionaire capitalists their career path lies elsewhere.

    This post is only half tongue in cheek. With the coming difficult times the people might well benefit from the example of leaders who demonstrate austerity and even asceticism.

  7. Kien
    December 8th, 2007 at 07:07 | #7

    Dear Observa – there seem to be broadly two investment strategies – passive and active. The former can be easily implemented (and quite efficiently) via a managed fund, particularly an index fund. The latter involves directly investing in select assets, with a view to exploiting inefficiencies in the market (e.g., via access to superior information). It seems to me that ministers would want to forgo any active investments, otherwise it potentially exposes them to situations of conflict, including the use of insider information.

    You do make a good point about potentially significant transaction costs that a minister may need to incur to switch her investments into a passive fund. I think taxpayers should compensate ministers for this transaction cost. It is in our interest (as taxpayers) to immunize our ministers from situations of conflict (as far as possible). It is not something we should begrudge our ministers, who in my view are already not adequately compensated for the work they do (relative to the opportunities that would have been open to them in the private sector).

    Hope these views seem reasonable to you.

  8. Kien
    December 8th, 2007 at 07:13 | #8

    PS: Perhaps one area where the ministerial code of conduct could improve on is to provide compensation to ministers for any cost they incur to comply with the ministerial code. It may not be appropriate to compensate ministers for some of the costs. Nevertheless, the fact that compliance is costly to individual ministers and their advisers (if they are subject to the code) needs to be acknowledged and addressed.

  9. MH
    December 8th, 2007 at 08:44 | #9

    A good start maybe or merely window dressing and an over reliance on the mechanics of bureaucratic administration to solve our problems. The test that the Rudd Government will face over the coming decade are the huge ones that economic and political theory has grappled with for two centuries; overpopulation (Malthus), unjust distribution (Marx), unemployment (Keynes)and external costs (Daly). I see no coherent intellectual focus eminating from 2007 Labour in respect of this intellectual dilemma, just as New Labour failed the test in the UK. But it is a more agreeable alternative to the facist orientated acceptance of aggregate growth will solve anything world view of the illiberals. Any careful analysis of the evidence from biologists, ecologists and climatoligists shows we passed the ‘Must Stop’point about twenty years ago. Kevin will need to go back and read economics 101 about the law of marginal utility. The Carbon genie is out of the bottle! Entropy rules.

  10. Brendan
    December 8th, 2007 at 10:55 | #10

    Observa at #2, I would have thought that by the time someone was a minister the more than adequate retirement benefits would compensate for any other losses. Which would you choose, your present arrangements or the average ministers benefits?

  11. observa
    December 8th, 2007 at 17:21 | #11

    Can JQ, et al please explain to me the difference between a bunch of union reps getting elected to govt and then implementing IR policies that favour all their old union mates and a wealthy grazier PM like Fraser and others getting elected to partly implement policies in favour of their mates in the Bush? It’s up to their political opponents to point out why they think such behaviour means we shouldn’t vote for them and then we’re free to accept or reject that advice. Apparently Fraser wasn’t expected to flog the farm, but I’m being lectured that if some Rudd Govt minister owns a few thousand Optus shares and the broadband rollout is handed to the Group of 9 or some such, I’m to immediately get an attack of the vapours. Give me strength!

  12. zoot
    December 8th, 2007 at 19:14 | #12

    .. and then implementing IR policies that favour all their old union mates

    Aww come on Obby, leave Brendan alone.

  13. melanie
    December 9th, 2007 at 19:59 | #13

    Brendan is clearly applying affirmative action in the case of the Member for Mackellar. It looks as if Fran Bailey might lose her seat (as of last night she was trailing by 7 votes with 96% counted), so that leaves only Julie Bishop and Helen Coonan from the old front bench. Not a very good argument for affirmative action eh?

  14. observa
    December 10th, 2007 at 09:04 | #14

    As an aside here, I mentioned how flogging shares triggers CGT implications. Now that’s a consideration when you invest in the sharemarket directly like I and a record number of my compatriots do, but God forbid our fearless leaders do of course. You often get caught up with takeovers triggering CGT and with returns of capital and the like. You don’t have that hassle with managed funds but the tradeoff is their fees. I simply hand the inevitable tax/CGT advice from the takeover target to the accountant to nut out. Now one thing I do is keep on the weekly ATO email list for corporate, business and individual tax updates, to keep my finger on the pulse. When you do that you quickly become totally disillusioned with taxing income. I should say here I don’t engage in aggressive tax planning and leave it all to the really big boys. In my experience, the middle income earners who do, largely pour good hard-earned down the gullets of dodgy accountants and shifty lawyers, usually well in excess of any perceived savings. Here’s a typical example of the sort of weekly outpourings from the ATO as an army of taxeaters attempt to squeeze the income tax balloon to impact the big molecules of air in the middle. Like you, I wouldn’t have a clue why you’d clone a trust but I think we can all guess why-
    http://www.ato.gov.au/taxprofessionals/content.asp?doc=/content/00109677.htm
    Notice how the whole thing typically ends up- Any questions? Give us a call and we’ll give you the benefit of another of our private rulings. Ten thousand pages of bullshit and growing(as if anyone could measure it, let alone comprehend it in its entirety, particularly now it’s locked in the minds of thousands of taxeaters) One thing I’ve learned about being on the ATO’s email list- There must be a better way than trying to measure income and taxing that for revenue purposes. If you don’t believe me pop yourself on their email lists for a while.

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