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Payola: a state-sanctioned business model

HERE'S a tale of two cities. On August 23 the NSW Urban Taskforce will hold its annual Development Excellence Awards night. The next night the NSW Greens will hold their Bad Developer Awards, also known as the Toasters. Report by Michael Duffy Sydney Morning Herald August 12, 2006.

The first is at the Westin Hotel in Martin Place and costs $1900 a table for non-members (plus GST). The second, to be held in the glittering surrounds of the Teachers Club in Surry Hills, is free.

It's unlikely the organisers of the events chose different nights so guests could attend both. But they do have a few things in common. They might have some of the same winning entries. And the Planning Minister, Frank Sartor, is guest of honour at the former function, while last year the latter named an award after him: the Frank Sartor Destruction of Community Award.

The Toasters are the idea of the Greens MP, Sylvia Hale. Nominations have not yet closed and there's a strong field. The Aussie Home Loans chief, John Symond, has been proposed for Most Environmentally Damaging Development, for the mansion that swallowed Point Piper. He faces stiff competition from Lend Lease and the Catholic Church for the Spring Cove housing estate at Manly.

The Urban Taskforce is an interesting Sydney phenomenon. Not a taskforce at all, it's an industry group set up in competition with three existing groups in 1999 to improve the relationship between big developers and the Labor Party. Its founding patron was Neville Wran.

The relationship between this state's developers and its government is a key element of what might be called the political business model. Developers appear to pay political donations to government to get the access they need to stay in business. Some might survive without making pay-offs, but most seem to think they should. In 2004-05, at least 164 development companies contributed a total of $1.4 million to state Labor.

According to the Greens' wonderful website,, this makes developers the largest donor group by far after the unions. Clubs and hotels, often thought of as having significant influence on government, contributed a mere $203,600. (Fairfax, publisher of this newspaper, gave $2475.)

Access is particularly important to the property industry because its members live and die depending on government zoning and regulatory decisions affecting land use. Perhaps no other industry is so dependent for its daily survival on the decisions of government. Few others of its size operate in such an uncertain environment, where so much activity depends on how a vast range of often changing regulations will be interpreted by bureaucrats and their political masters.

In practice, thanks to policies such as urban consolidation, zoning is one of the last examples of the rationing of something many people desperately want. Whenever this occurred in the past, as with bans on gambling or various forms of sexual behaviour, corruption resulted. In the 1960s people had to pay off politicians if they wanted to run a casino. Now it appears as if they have to pay political donations to build almost anything.

The great conceptual leap that's occurred is that the process has been brought out into the open and legalised. Sometimes the safest place to hide something is where everyone can see it.

The more government decisions involved in a process, the more a business person will feel the need to ensure access. Ironically, given the Greens' good work in publicising political pay-offs, many of the layers of regulation developers now have to deal with were created by environmentalists. The proposed "biodiversity bank" will add to their number. Environmentalists often ask why we have all these laws if government flouts them so often.

The model applies to local government, too. A small developer has told me how an official of the local Labor Party branch will call just after an entrepreneur has lodged a development application to ask if he "needs any help with the paperwork".

If this account seems to be sympathetic to developers, it's because they deserve some sympathy. Naturally they'd rather not have to pay government in order to do business. But things have to be built, money must be made. We pass this way only once, and have to play by the rules as we find them.

The model involves many ex-Labor politicians acting for developers, but this is not just a Labor phenomenon. The Coalition is as keen to accept money from developers as Labor.

It's not as if the political class was short of a quid or two. Not only does it extract political donations from businesses (and therefore all their customers), it funds much of its campaign costs from the public purse. After the state election of 2003 we gave politicians $10.3 million.

Why were these public payments introduced to Australia by NSW in 1981? To stop political parties needing private donations. They are a gift from the people, made with the intention of cleaning up our political process, which our political representatives have abused.

As well as campaign funding, there is another form of public funding, known quaintly as the Political Education Fund, which goes to every party annually. The total for all state parties is about $1.6 million a year. Expenditure of this money has little to do with political education.

It's a sad fact that government in this state involves a business model based on a legal form of payola.

Any readers concerned about this might like to have a look at It makes harrowing reading.

Source: Payola: a state-sanctioned business model
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