Secure democracy through more effective regulation of political funding

The debate on political funding in Australia is now at a turning point. Sanguine acceptance of the status quo has given way to a broad discussion on how to overhaul the system.

Fundamental changes seem imminent to the current regime based on lacklustre disclosure obligations, with radical proposals being tabled including one from NSW Premier Morris Iemma advocating the complete banning of political contributions. As this debate gathers pace, it is important to remember, however, that the absence of regulation itself is not sufficient cause for concern. If the parties and candidates were able to self-regulate to ensure fairness and integrity, this would testify to a deep and robust democratic culture.

The facts, however, speak of the failure of self-regulation on three counts.

First, the problem of corruption has become more acute. In some cases, there is outright graft with property interests bribing local councillors to secure favourable planning decisions. When conduct falls short of graft, there can still be pervasive corruption due to undue influence. This was clear in the 2004 Geelong and Gold Coast council elections when business interests secretly bankrolled a swag of candidates, many of whom were elected to office.

Conflicts of interest are purveyed through the shameless sale of influence in both state and federal politics. It is now the core business of the major parties to organise fund-raising events where their corporate benefactors can secure influence over their leaders by paying thousands of dollars.

Second, fairness in politics has been compromised. The major parties enjoy an unfair advantage in their ability to raise funds. Corporate money goes overwhelmingly to them – at the expense of minor parties and independent candidates – while investment vehicles such as the ALP’s Curtin House and the Liberal Party’s Cormack Foundation consolidate their financial advantage.

They are also key beneficiaries of generous parliamentary entitlements; some of which can be easily used for campaigning purposes. Further, there is a growing imbalance between the ALP and the Coalition parties, with the former not only receiving corporate largesse but also trade union funds. With the ALP controlling office federally and in all states and territories, this imbalance threatens to worsen through greater access to state resources, in particular, government advertising.

Yet this imbalance seems marginal compared with the barriers to entry resulting from prohibitive costs of campaigning. Greater reliance on expensive electioneering techniques like TV ads in the context of competitive extravagance means that millions of dollars are now needed for a proper election campaign. The idea of free and fair elections seems so distant, with the playing field skewed to the considerable advantage of established players.

Third, and no less important, the health of parties has been sapped. Political leaders are forced to engage in constant rounds of fund-raising that divert them from questions of policy. And, of course, they – rather than the electorate – are also beneficiaries of this: their power is enhanced as they become products to be sold in the peddling of influence. When in office, their grip over power grows even stronger through their control over state resources.

Rather than being vibrant vehicles of political participation, the major parties are hollowing out with a decline in membership activity coming hand-in-hand with the centralisation of power.

These problems of corruption, unfairness and party atrophy should be addressed through a range of measures. Transparency is crucial and so are measures that deal with the increasing demand for cash. Limits on spending are particularly vital. They will staunch the appetite for funds and, therefore, curb the more unsavoury fund-raising practices, as well as level the playing field.

Measures tackling the flow of money into politics should be added to this complement, in particular, bans on contributions giving rise to conflicts of interest. There should also be limited state funding directed at opening up access to electoral contests and supporting legitimate party activity.

The path to regulation holds out the hope of a more democratic Australian political environment. It also poses serious risks. First, there is a danger of legislative overreach. Regulation is crucial but must be built upon a respect for freedom of speech and association. Second, the powerful might exploit the current debate to further rig the system in their favour. The major parties, for instance, may seek to entrench their position by denying state funding to smaller parties. Party leadership may also attempt to neutralise competing sources of power. For example, contribution limits that diminish the power of trade unions within the ALP will strengthen the hand of the parliamentary leadership, resulting in more oligarchy.

For all these risks, the current debate on political funding should be welcome. It is far preferable to the “relaxed and comfortable” state that has prevailed in the past years.

Moreover, the changes recently proposed by the Federal Government to enhance the transparency of political funding by requiring more frequent and effective disclosure of donations justify a chastened hope that the outcome of this debate may very well shore up the foundations of Australia’s democracy.

This piece was first published in The Age.

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