Can the lobbying industry be reformed?

There is little incentive for politicians to reform the lobbying industry when they are the ones to profit from it.

By , Guest blogger

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    A combination of pictures shows former British cabinet ministers Stephen Byers, (L) Patricia Hewitt (C) and Geoff Hoon (R). Britain's ruling Labour Party has suspended three ex-ministers over claims they were prepared to influence policy in exchange for cash, in a scandal that has erupted just weeks before an election. Former Cabinet minister Stephen Byers – who has been at the centre of the row – was suspended late Monday shortly after a documentary was aired in which he was secretly filmed apparently offering his lobbying services for payment. Geoff Hoon and Patricia Hewitt, also ex-Cabinet ministers, were suspended along with Byers after featuring in the programme, said the Labour Party in a statement.
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“I’m like a cab for hire – for up to £5,000 a day”. Stephen Byers’ claims to have accepted financial payment in return for influence on government policy should not be too surprising. Politics is prone to manipulation by interest groups.

This problem is universal, but it is worrying that the issue is rarely treated in terms of the fundamental incentives at play. Politicians are human, and as such they respond to financial enticement - the platitude ‘everyone has their price’ must not be forgotten in this discussion. The point is that there is always an asymmetry of resources between large firms who can organize effective lobbying campaigns, and members of the public whose voice is heard only once every four or five years. The problem is inherent to public office, a ‘Government Failure’.

It is misleading that many of the media reports on this issue seem to gravitate towards a discussion of the lacking integrity of those involved. This distracts from the point that the problem is a structural one, stemming from the misalignment of the incentives of politicians and the ‘public good’.

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I am skeptical about the prospects of successful reform on this issue. Any new rules and regulations will be written by politicians and civil servants, who have absolutely no incentive to effectively cut off what is a potential cash cow for them. Complete transparency would theoretically act as a disincentive to engage in such activities, but it is not difficult to imagine ways around such measures. It is hardly possible to monitor every conversation a minister has.

The responses of politicians have been equally misguided. David Cameron has said:

These are shocking allegations. The House of Commons needs to conduct a thorough investigation into these ex-Labour ministers

Cameron seems to imply that the problem is unique to the Labour Party. The Conservatives may score some points off the back of this, but the fundamental conflict of interest remains regardless of who is in power.

All this would be worrying at the best of times. But with the increasingly hyperactive FSA and increased regulatory proposals emerging from government, Byers’ claims contradict the idea that public officials always make decisions based on sound reasoning of what is in the ‘public interest’. It is difficult to imagine the much-needed injection of competition into the banking sector taking place given the powerful international lobby on behalf of the monopolistic behemoths such as RBS and Lloyds TSB – HBOS.

But back to parliament; the current guidelines relating to lobbying rely far too much on the personal integrity of the individual in power:

Holders of public office should take decisions solely in terms of the public interest. They should not do so in order to gain financial or other material benefits for themselves, their family, or their friends.

Is this really a sustainable position? This latest revelation, coupled with the recent expenses scandal, should raise suspicion amongst the public as to the potential malleability of those setting the policy agenda. To reinterpret a phrase of Nietzsche’s, they are “human, all too human”.

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