Opinion : Oversight committees under-resourced | Sunday Observer

Opinion : Oversight committees under-resourced

When certain groups manipulate policy to win preferential tax or legal privileges such benefits could add up to a substantial transfer of wealth to these privileged groups from the public. Pic: Courtesy higgsjohnson.com
When certain groups manipulate policy to win preferential tax or legal privileges such benefits could add up to a substantial transfer of wealth to these privileged groups from the public. Pic: Courtesy higgsjohnson.com

The state plays a major role in the provision of services ranging from education to transport. Of late, its scope has expanded, the view being that the state should drive development.

Many people will readily agree that most politicians are corrupt and there is tacit admission that they are incompetent. Witness the repeated calls for ‘professionals’ and ‘educated’ people to enter politics.

Yet, whenever there is a problem, people seem to expect the government to solve it. There is a contradiction here: if people believe that politicians are incompetent and corrupt, how can they expect a good solution?

Analysing the motives of political actors, the nature of the political process and what we may consider to be ‘the public interest’ gives some insight to what people can and should expect from the state.

People assume that political actors are mainly concerned with the public interest and the State exists to carry out the wishes of the public.

Unfortunately, the State is made up of people and the dominant motive in people’s actions in the marketplace — whether they are employers, employees, or consumers — is a concern for themselves.

When these same people become politicians, they are expected to transform: personal interests are abandoned, a broader perspective takes hold and guides them to make morally correct decisions in the ‘public interest’.

While most people will base some of their actions on charitable instincts only in rare cases are these likely to be primary motives? Most often politicians act to please the interest groups that support them, push policies that may lead to reelection and pursue other personal agendas.

Collective decisions

The decisions that politicians make are collective - made by politicians on behalf of the public, not the public themselves. It is important to remember that all decisions involve a trade off in costs and benefits.

When a person makes an economic choice, he experiences the costs and the benefits so he will only act if it is in his interest but in collective decisions the beneficiaries are not always the people who bear the costs. For example, if jobs are given to unemployed graduates, the graduates benefit, but the costs are borne by the taxpayers.

If a new road is built, some homeowners may lose a part of their property but this benefits a different group: road users.

In a market transaction, both sides have to agree, if either disagrees, they can walk away. In political decisions, those who disagree cannot walk away, they are bound to accept the decision and bear whatever costs the collective choice demands.

These are very simple examples, most political decisions are highly complex and involve multiple stakeholders. Good politicians should weigh overall costs and benefits on our behalf, to determine if ‘social welfare’ – the well-being of the community as a whole – might be increased by the right choices but as we have seen above they may be driven by other motives.

Collective decisions are sometimes unavoidable, but we must recognise their inherent weakness and resort to them only where strictly necessary.

The public interest

What is ‘best’ for ‘the people’? Society is complex, made up of groups with different interests. The young may be interested in education or jobs but pensioners in retirement homes. Decisions involve different stakeholders with varied interests. There is no single ‘public interest’.

When collective decisions are taken, a choice will be made between many competing sets of interests - a choice in where only one set of interests can win.

Politicians face conflicting pressure, from voters, lobbyists, businesses, family and friends. Those with the greatest leverage will win, which is not the same as saying policies that bring the greatest social benefit will win.

Small, homogeneous groups (trade unions such as the GMOA or businesses) find it relatively easy to organise and have a great deal to gain (or lose) when collective decisions go for (or against) them. The opposite is true with large groups, such as consumers or taxpayers.

With large groups, the impact of collective decisions on a single member is small so they have little incentive to lobby. Being so diverse, they are also difficult to organise.

The result is concentrated interest groups have a powerful incentive to organise and campaign for policies that will specifically benefit them. By contrast, the public, with very diffused interests, have little motivation to put much effort into the public debate.

A protective tax of around Rs.10 on a loaf of bread may not amount to much to a consumer but to the flour millers this represents a gain of around Rs. 20 bn a year.

When certain groups manipulate policy to win preferential tax or legal privileges, such benefits could add up to a substantial transfer of wealth to these privileged groups from the public.

In Sri Lanka, the practice is widespread; the plethora of special tax concessions, (about 200 according to the Finance Minister) exclusive import licences, permits and protective tariffs is a testament to this.

Weaknesses

The cost of elections automatically excludes the majority of citizens, particularly the educated from politics. Wealthy backers, some connected to the underworld, provide labour and fund campaigns in return for political protection or rewards. If they hope to seek re-election, the whole cycle is repeated and MPs spend a good deal of their time in office raising funds for their next campaign which creates ongoing incentives for corruption.

A group selected on the basis of access to cash and manpower – not intellect or ability; is elected to a Parliament that bears little or no resemblance to the wider society it should be serving.

Politicians are under pressure to reward their supporters with ministerial posts, ambassadorships and government jobs. Decades of politicised recruitment have seriously weakened the skills of the public service.

This combination has undermined the technical capacity of the state: how can proper policy be formulated if the politicians and bureaucrats are ill-qualified to perform the analysis? The concept of independent policy analysis does not exist leaving a vacuum vulnerable to capture by special interest groups.

Governance

Political actors will pursue their own interests but functional governance systems can check the worst of these impulses. The most important is Parliament, which works through questioning government ministers, debating and the investigative work of committees, principally the COPE (Committee on Public Expenditure) and COPA (Committee on Public Accounts) which scrutinise expenditure.

Unfortunately there are serious deficiencies in relation to the existing committee system while the practice of engineering crossovers in return for political office has reduced Parliament to a rubber stamp. As per the constitution Acts of Parliament cannot be challenged in court, removing another a possible check on legislative excess.

Cabinet appointments which present opportunities for gain and a furthering of political careers are eagerly sought. Once ensconced, the incentive is to enjoy office, not to risk the privileges by questioning authority.

The multiplication of the cabinet is driven by the need to lure Opposition MP’s to maintain a rubber-stamp majority than strictly functional requirements.

They key oversight committees COPA / COPE are under resourced, lacking staff (particularly audit) and proper IT systems, as indicated in some of their own reports. The government is not required to respond to the recommendations of these committees within any stipulated period of time, leaving the accountability loop open.

Contrary to best practice, the hearings of COPA and COPE are not open to the media or public minimising external scrutiny.

Role of the State

It is evident that something is radically wrong with the political system. It actually rewards and embeds corruption while limited technical capacity leaves it vulnerable to ‘capture’ by special interests. The politicians and their business associates benefit, but at the expense of ordinary citizens.

There is an ever expanding cycle of spending that largely benefits those within the political system: from state employees to contractors. Spending quadrupled between 2005-15 (from Rs. 584,783m to Rs. 2,290,394m) but how far did this average living standards improve services?

The behaviour of citizens with regard to basic services tells a story. Education is free, yet how many parents spend on tuition? Growing numbers send their children to private fee levying schools, but why? How many seek care in the private hospitals, even when the state offers free services?

As the problem is in the system, electing better people will not, by itself, lead to much better government. Instead reforms that can hold politicians accountable are needed.

Government spending can be controlled by limiting it by law-through medium term expenditure frameworks. Strengthening oversight bodies such as the COPE/COPA and the auditor general is needed along with measures to hold MPs accountable: for example, MPs should face a bye-election if they cross over. The judiciary should have the power to review legislation.

These are long term solutions, until adequate safeguards are in place, people need to rethink their faith in government. The role of government in society should be determined by the extent to which it can be held accountable.

As Sri Lanka’s current system is quite dysfunctional, there needs to be a two-sided strategy, one of resisting further expansion of government activity (new regulations or new fields of activity) and second of systematically reviewing current activity to see where its role could be made redundant, leaving citizens the freedom to decide. 

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