Limit Government Discretion, not Donations

Critics of political donations fear for the integrity of government. They believe disclosing donations, or even prohibiting them, will help make sure government decisions are made in the right way for the right reasons. But what if this analysis has things the wrong way around? What if political donations are not a sign of the wider civil society corrupting government, but rather a defence mechanism against a state that controls too much?

In July this year, The Age opened a crusading series of articles against political donations with these words: ‘corporate donors to the Victorian Labor Party are almost invariably companies with lucrative public contracts or development, gaming or alcohol interests at the mercy of Government discretion‘ (emphasis added). People at the mercy of someone else’s discretion are naturally apprehensive about what might happen, but here the problem is more the discretion than the donations. Gaming, for example, is still an industry where government picks winners, rather than an industry anyone can enter according to fair rules of the game. The alcohol industry has long been heavily influenced by government decisions, from NSW licensing laws to the federal tax on alcopops.

Those involved in industries ‘at the mercy of government discretion’ want, and democratically should have, the right to defend their interests politically, because often there is no other way left. They cannot defend their interests by letting consumers decide in the market, or by letting a neutral regulator decide according to established rules. Though proposals to ban corporate donations are intended to limit improper influence, the effect would be to let the state do anything it likes to corporate entities, while leaving them only restricted rights in response. An already lopsided relationship would become even more unbalanced.

The political priority ought not to be electoral law reform to deal with the symptoms of discretion-driven government, but limiting the underlying problem by keeping government discretion to a minimum. The government’s job is to set rules of the game that are fair and efficient, not to be a player in the game. This is not a radical idea: in the post-protectionist era, it is the practice in many industries. It is just an idea that needs wider application.

The threat a pervasive state poses to its citizens is why we should oppose the federal government’s plan to reduce the maximum private political donation from $10,500 to $1,000. Many people, either personally or through organisations they are part of, must interact with state or federal governments. This makes them anxious about openly displaying views contrary to those of the governing party. While this anxiety may often be baseless, it nevertheless affects attitudes and behaviour. The Australia Institute’s survey of non-government organisations that receive government funding found that the vast majority thought that offering dissenting views put their funding at risk. I know of no equivalent survey of business, but anecdotal evidence suggests that they are very careful in their political involvement for fear of putting their businesses at regulatory or contract risk.

The existing $10,500 cap on donations permits anonymous gifts that cumulatively can add up to a reasonable campaign fund, while individually still being too small, as a percentage of major party revenues, to provide any serious incentive for inappropriate decision-making.

The chilling effect of disclosure laws on political activity is no longer restricted to donations to political parties. A little-noticed 2006 federal reform to electoral law extended it to any organisation engaged in expressing views ‘on an issue in an election by any means’. As there is an annual disclosure requirement (and even more frequent if the current federal government’s reforms pass), donors and organisations are required to work out whether the issue they want to campaign on, or even simply discuss, will be an issue in an election that may be years away from being called. Given this provision’s serious rule of law problems-it is near-impossible for citizens to know for sure whether or not the law applies to them until the election is over-the only prudent response is to assume that all issues are potential federal election issues. So if the current electoral reform bill becomes law, any citizen wanting to spend $1,001 on an issue must also have his or her name disclosed.

For a nation that was the first to use the secret ballot to minimise political pressure on citizens, this is a huge backwards step. There are many legitimate reasons why people might want to involve themselves in politics anonymously. Fear of government reaction is one, but also concern about the reaction of employers or potential employers, or worry about what friends or colleagues might think. I run a blog, and many of those who leave comments use pseudonyms for these reasons. I respect their privacy (often they use real email addresses only I can see), but if they want to move beyond a blog read by a few hundred people and give $1,001 to a political cause that would, if the governments’ electoral law reforms pass, be public knowledge.

These disclosure laws move way beyond what could conceivably be necessary to protect the integrity of political decision-making. The link between $1,001 given to an organisation to support expressing views in debates with numerous other different voices and interests, on topics that may or may not be election issues some time in the future, on some final policy decision by a government of uncertain party and personnel, is so tenuous as to be impossible to take seriously as a possible source of corruption.

Far from being measures to keep government clean, the electoral law provisions dealing with spending on election issues look like the previous government harassing its political opponents with needless bureaucratic obligations. In a speech to the Sydney Institute in late 2005, the then responsible Minister, Senator Eric Abetz, complained that ‘blatantly political campaigns such as those run by GetUp! and the ACTU escape accountability’ (under electoral law). But disclosure laws on GetUp! and ACTU campaigns are a nonsense: the whole point of their campaigns is to attract as much attention as possible. These attempts at influence are already out in the open, unlike money quietly placed in a political party’s bank account. Exactly how much money was spent by GetUp! and the ACTU on their campaigns may create internal accountability issues for the two organisations, but it is none of the government’s business.

Despite the dubious motives and logic of the previous government’s reforms, the new government’s election law reform bill threatens to make the situation worse by lowering the disclosure threshold to $1,000. Thousands of organisations, and not just big-spenders like the ACTU or GetUp!, will have to report to the Australian Electoral Commission if they comment on matters that may turn out to be election issues. Particularly for volunteer and small organisations, the compliance costs in time and money will be onerous. For some, avoiding comment on potential election issues might seem preferable to hours of calculating expenditure and filling in AEC forms.
It may be prudent to have laws requiring large donations to political parties to be disclosed, so that we can see whether political decisions and the interests of big donors coincide. But extending these laws to require disclosure in more circumstances at lower thresholds turns a defence of democratic integrity into an autoimmune disorder; a democracy attacking its own democratic defence mechanisms.

Good government is not achieved by giving political parties greater protection from political pressure. Laws that discourage financial support of opposition parties or controversial causes make life easier for bad governments, and harder for those whose legitimate interests are threatened by misguided policies or politicians with too much discretion. Over the years, Australian democracy has successfully self-corrected many times, pressuring politicians to change policies, and removing corrupt, failed, or tired governments. Donations to political causes and parties are one of these self-correcting mechanisms. Tampering with these mechanisms is anti-democratic folly.