Missing the point on corruption

On Friday 28th April I am appearing and Queensland’s Crime and Corruption Commission’s Operation Belcarra as an expert witness on relationships between councillors and property developers, and how that leads to favouritism.

A narrow focus

What is interesting from my perspective is how narrow the focus of the inquiry really is. Here are the main objectives from the Terms of Reference:

1) investigating whether candidates in the Gold Coast, Moreton Bay and/or Ipswich 2016 local government elections

a) advertised or fundraised for the election as an undeclared group of candidates, an offence contrary to section 183 of the LGE Act.

b) provided an electoral funding and financial disclosure return that was false or misleading in a material particular, an offence contrary to section 195 of the LGE Act.

c) have not operated a dedicated bank account during the candidates’ disclosure period to receive and/or pay funds related to the candidates’ election campaign, an offence contrary to section 126 of the LGE Act.

 2) examining issues or practices that are relevant to the identification of actual or perceived corruption risks in relation to the conduct of candidates and third parties at local government elections, including issues or practices relating to groups of candidates, independence of candidates, election gifts and funding, conflicts of interest or material personal interests by councillors.

3) examining strategies or reforms to prevent or decrease actual or perceived corruption risks in relation to conduct of candidates and third parties at local government elections.

Notice that the inquiry is focussed on narrow technical matters concerning laws about donations, disclosure, candidates negotiating in groups, personal material interests, and so forth.

The important question

The big question is missed: Why are councillors such attractive targets for corruption?

After all, I’m not being seduced by vested interests every day. I don’t have hundreds of thousands of dollars placed in my bank account from people I apparently don’t know.

The reason is that councillors have ‘grey gifts’ to offer. That is, they get to decide who wins, and who loses, in a multi-billion dollar game of land rezoning and town planning. I’ve estimated that the value given away in Queensland from such decisions by councils and the State government to be about $2.3 billion per year (read about it my book).

No wonder councillors are attractive to vested interests. Unlike me, they can make decisions worth billions to others, but that cost them nothing!

A proposal

My proposal is simple. Remove the value of the ‘grey gift’ by selling or taxing it. It’s not hard to do. The ACT has for over 30 years charged landowners 75% of the value gains from rezoning. Doing that in Queensland would raise $1.7 billion a year, and reduce the potential give-aways down to just $500 million. A much smaller pot to share, and one that will attract far less lobbying.

Another alternative is to sell the rezoning rights. Sau Paulo, Brazil, has been doing this for over a decade in certain parts of the city, and has raised over $USD 1 billion.

I recommend simply adopting the ACT system here in Queensland. The State could require councils to recover the value increases during the planning approvals process, which would be very easy. It would also deter many speculative planning applications that seek approvals that are far outside the scope of the town plan, as developers who do will end up paying for any extra development rights they get.

My submission to the inquiry is here.

Comments

    • Mining BoganMEMBER

      Is he still alive? You’re correct though, textbook stuff right there. Toowoomba was always a town with dark deeds and secrets.

  1. You seem to believe that taxing almost anything is a good move, David.

    Do you also propose that government subsidize developers if the market is falling…I think not from your apparently one eyed view…I any case such a subsidy for developers is also absurd but by your rationalesensible.

    All you are proposing here is to increase the cost of purchasing end buyers by imposition of a GST like tax on developers. The end result is higher property prices and reduced supply.

    Your proposal also makes delaying property development approvals, if the market is riding, a benefit for government…an absurd proposition.

    Facilitating speedy development is the solution, not exploiting home and other property buyers.

  2. Due to the typos in my previous iPhone rushed response I am correcting the post and resending it. My apologies.

    You seem to believe that taxing almost anything is a good move, David.

    Do you also propose that government subsidize developers if the market is falling…I think not from your apparently one eyed view…In any case such a subsidy for developers is also absurd, but by your rationale sensible.

    All you are proposing here is to increase the cost to purchasing end buyers by imposition of a GST like tax on developers. The end result is higher property prices and reduced supply.

    Your proposal also makes delaying property development approvals, if the market is rising, a benefit for government…an absurd proposition.

    Facilitating speedy development is the solution, not exploiting home and other property buyers.

    You seem to believe that taxing almost anything is a good move, David.

    Do you also propose that government subsidize developers if the market is falling…I think not from your apparently one eyed view…I any case such a subsidy for developers is also absurd but by your rationale sensible.

    All you are proposing here is to increase the cost of purchasing end buyers by imposition of a GST like tax on developers. The end result is higher property prices and reduced supply.

    Your proposal also makes delaying property development approvals, if the market is riding, a benefit for government…an absurd proposition.

    Facilitating speedy development is the solution, not exploiting home and other property buyers.

      • Correction. The above post should refer to Cameron Murray not “David”. Thank you, footsore.

    • Money for nothing should be taxed and taxed hard.

      Given the profit is being created by a government decision, government should be paid a royalty for making that decision.

  3. LabrynthMEMBER

    It is easy, strip all land zoning decisions from councils and give it to a state government entity. Employees of such entity will be stringently watched just like workers who work at the ASX. Done and done.

  4. Cameron

    I’ve no great knowledge of the issues here but I just have several observations:

    First, all of ACT land is leasehold whereas most of the Qld land likely to be rezoned for urban use is freehold. I suspect this changes who should benefit when the land prices go up.

    Secondly, my memory is that HK also uses a similar system to the ACT – again all land is leasehold in HK (?) – and yet there are a number of HK property developers who are amongst the richest people on earth. Sure, there are clear signs that the HK system is rigged in favour of the developers but I consider our white shoe brigade just as smart and sinister as theirs and just as likely to work the system to their advantage.

    Thirdly, as far as I can tell all that has happened in the ACT is the rip off from property rezoning has been transferred from the private sector to government. The ACT government is hugely dependent on income from property development and sales which is why property prices in the middle of a sheep paddock are up there with prices to be found in major cities crammed onto the seaboard. An example is the ACT government agency a while back began developing a new suburb called Lawson. Instead of selling the blocks by ballot they auctioned them off, reportedly getting premiums of around 40% over valuation. This together with the agency wilfully holding back land releases amongst tricks ensures that the ACT government can feed its addiction to chronic overpricing of ACT property prices.

    • Cameron Murray

      Hi triage,

      Good comments.

      First, the freehold/leasehold distinction is not meaningful in practice. The only difference is that the title says 99 year lease in the ACT, with a policy to roll over for a small fee in perpetuity. Freehold doesn’t mean “absolute rights to gains from all future policy changes”. A rezoning in a freehold system is also a property right that can be sold, the same as a leasehold system.

      Second, I’m not sure about the HK system. But even if it is rigged, that value taken by private interests that could instead by captures by the government to reduce taxes elsewhere is much lower.

      Third, the ACT’s LDA that sells blocks does not hold them back. When I wrote my report on their system they had developed more new housing per-new-capita than any other city. I did ask the department why they don’t just flood the market with new homes, and they said that they target price stability. But of course, any flooding of the market is likely only have temporary effect on prices.

  5. Good Luck for Friday Cameron.
    Do you know who will be cross-examining you at the CCC?
    What are the current public disclosure requirements for local govt political donations in Qld?
    How could these be improved?