Government, Service Scarcity & Spending Other People’s Money

Duplication is consistently inefficient particularly when the priorities of the duplicators are different.

The recent Federal election ‘lolly shop’ suggested no distinction between the roles of the 3 levels of Australian Government with election promises to fund state (railway crossing) and local roles (sports grounds).

Yet resources are finite, duplication creates waste and expenditure has an opportunity cost.

Lobbying to Governments and Oppositions of different political persuasion creates duplication across Federal and State Governments, Councils and Government Trading Enterprises with:

  • the luxury of compulsory taxation
  • access to a large revenue stream
  • a significant asset base owned by taxpayers/ratepayers
  • no threat of liquidation or insolvency
  • limited liability for individual Government Ministers, Councillors or members of Government-Owned Enterprises

The Brisbane City Council (BCC) is the biggest local government authority in Australia. BCC’s investment arm City of Brisbane Investment Corporation (CBIC) is facing calls to be shut down, with Right to Information documents revealing “fundamental and systemic issues” with the fund and a “substantial risk” to ratepayer money.

Elected and appointed officials who see themselves as entrepreneurs, using tax or ratepayer’s money, too easily delude themselves about their capability, the risks and their accountability. Directors of Government-Owned Enterprises also delude themselves if they lack the essential expertise for investment decisions and create unnecessary risk for taxpayers/ratepayers.

Accountability is further reduced when the investment arm of a government enterprise:

  • obtains planning approval from the same government enterprise that owns it
  • relies on the same government enterprise that owns it to deny access to information by the Office of the Information Commissioner or equivalent.

The 2018 BIC Annual Report is a ‘blue sky’ dissertation on strengths and opportunities but not weaknesses or threats. The Report doesn’t mention who is the current Company Secretary but confirms the previous incumbent was appointed on 6 November 2017 and resigned on 13 September 2018.

The number of public sector, including Brisbane City Council, members of the City of Brisbane Investment Corporation Board contrasts with the statement

“CBIC is managed at arms-length from Council, by an independent Board of Directors.” 

It is also in contrast with:

  • a Company Secretary who was also Legal Counsel Corporate Governance and Commercial of Brisbane City Council
  • the role of government which is better known for levying taxes/rates than generating investment return.

When government and government-owned enterprises compete against the private enterprise, those who fund them, they often do so with impunity. When they then seek to avoid transparency, including freedom of information obligations, they spend other people’s money without the asset owners knowledge or constraints such as insider trading laws.

Private enterprise is entitled to fair competition consistent with the principle of the National Competition Policy (NCP) that stated:

“competitive markets will generally best serve the interests of consumers and the wider community.”

NCP has been replaced by the National Reform Agenda which aims to:

  • improve the economic environment through further competition and regulatory reforms
  • leverage human capital

to increase Australian’s standard of living by raising economic productivity and workforce participation,

Taxpayers and ratepayers are entitled to accountability and performance by those spending their money. Opportunity cost is the opportunity foregone by investing in one option against another and is felt by taxpayers and ratepayers when essential services are non-existent or scarce or the cost of services is increased.

Business is tough enough. Unfair competition and taxpayers/ratepayers paying twice with limited, scarce or no services are equally unacceptable.

Taxpayers or ratepayers funding the losses of a government-owned enterprise is a corruption of the role of government. When accountability fails in a government-controlled enterprise, the cost can be greater than the asset owners can afford. It may also be contrary to the aims of the National Reform Agenda.

Ask Western Australians, who still annually pour large amounts of tax revenue into the decades-long and unresolved legal proceedings over the Bell Group’s insolvency,

Have the lessons of WA Inc be learned or are the mistakes still being repeated by Government across Australia?

“If you had the choice, would you support the establishment of a government-owned enterprise?

Your response might be different under 3 preconditions:

1.Transparency, with no exemption, under Freedom of Information laws

2. Guaranteed Return on Investment

3. No reduction in the introduction or availability or level of Essential Services

It’s past time that:

  • the role of government was more clearly defined at Commonwealth, State and Local level with significant deterrents to duplication
  • government-owned enterprise met the 3 pre-conditions above rather than continue to enjoy exclusive use of taxpayer/ratepayer funds with unfettered privacy and even less accountability.
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