Tainted money: Proposals for reform of electoral funding in Australia

While there has been much debate recently about the amount of private money donated to political parties, consideration of alternative ways of funding our democratic process has been limited.

The changes to the electoral law made by the Howard Government earlier this year underline the need for this issue to be on the public agenda.

The law has been weakened in a way that will make it much easier for corporate Australia to avoid disclosing donations to political parties. The previous system was inadequate, but it did expose corporations and political parties to some bad publicity about donations of $1,500 to $10,000 — which are now exempt from public disclosure.

Political donations can distort the political process. Access is power, and money buys access to politicians in our country. This means large donors can influence governmental decisions, which benefit them and their companies. Ordinary citizens don’t have this access and this leads many to feel alienated from the workings of government.

Certainly many donors believe it is crucial to give large sums of money to political parties, especially to the party either in power or likely to gain power in the near future.

The president of the Australian Hotels Association NSW John Thorpe is convinced of the need to contribute to political parties. In a 2004 interview on ABC’s Stateline NSW, Thorpe stated, democracy isn’t cheap. He went on to say everybody’s involved with assisting political parties because at this stage we need to keep these people in place to have the democracy we have today. Thorpe talks about the importance of having access to ministers and their staffers in order to help with policies and regulations governing the hotel industry.

During the past five years while the NSW Labor government has dealt with many issues affecting the hotels industry, the Australian Hotels Association donated over $525,000 to the NSW division of the Australian Labor Party (ALP) and less than $275,000 to the conservative Coalition opposition. Individual hotels contributed over $2 million to NSW Labor during this period and less than $800,000 to the conservative parties.

Money obviously follows power for an important reason — access to politicians is crucial for influencing a government’s decisions. It is a reality that a political party which is financially dependent on large donors is more likely to make decisions favourable to those donors. (see ‘Chequebook Democracy’ on www.democracy4sale.org).

In the recent debate over the changes to the electoral law diverse groups, including the Greens, Labor and many academics argued against the federal government’s proposed changes.

That does not mean there were no problems with the former system. In our research on political donations for the ‘Democracy for Sale’ project, we found that millions of dollars in contributions were not identified under the old threshold of $1,500 for the seven years we examined (1998/99 to 2004/05). With the disclosure threshold increased to over $10,000, a lot more information on donors will be hidden. We believe the amount of hidden money flowing into the coffers of the parties will sharply increase (see www.onlineopinion.com.au/view.asp?article=3978).

As the years roll by more of the big donors to political parties will be able to escape scrutiny as the new disclosure threshold is indexed to the All Groups Consumer Price Index. The threshold has already increased to $10,300 since the law was passed in June 2006.

We believe the answer to this growing problem of hidden money distorting our democratic process is to reform the entire donation and electoral funding system in Australia.

The Australian Electoral Commission (AEC) in 2004 recommended a total revamp of the disclosure system for political donations. The AEC described the pattern of changes to the 20-year-old law governing these matters as “ad hoc”, with amendments only addressing individual deficiencies. Unfortunately the Howard government responded by loosening the law rather than following the advice of the AEC.

What we propose isn’t radical as many aspects have recently been put in place in other Westminster democracies such as Canada and the United Kingdom. The following is an outline of our suggested changes to electoral funding in Australia.

We believe all donations from foreign sources should be banned. During the last financial year for which the AEC has data, Lord Michael Ashcroft, who has dual citizenship in Britain and the tax haven of Belize, contributed $1 million to the national office of the Liberal Party. Shimao Holdings, the property development company operating in Hong Kong and mainland China, gave $100,000 to the NSW ALP during the 2003 NSW state election.

What do these and other foreign interests hope to gain from their donations to Australian political parties? Such contributions would be illegal in over forty countries, including Canada and the USA. Yet Australia continues to allow these foreign gifts to our political parties.

We advocate that all corporate and union donations to candidates, political parties and associated entities (formal front organisations that collect money for parties) should be banned. Canada, with its donation limit of only $1,000 from corporations and unions, is virtually banning contributions on the principle that those who cannot vote should not be allowed to influence the outcome of elections in other ways.

There is also a clear need to cap other donations. We suggest that donations from an individual to a candidate, associated entity or a political party not exceed $10,000 in any one year. Any of these donations should be treated as the equivalent of a donation to the whole party. We believe multiple donations to different sections of a party as a way of avoiding disclosure must stop.

The $10,000 limit should include contributions from candidates to their own campaigns so the wealthy don’t have an advantage over their opponents.

The involvement of third parties in collecting money and campaigning in elections needs to be changed. The term third parties refers to individuals or organisations that engage financially in an election campaign but are not candidates, political parties or their associated entities. Third parties may be lobby groups or individuals, corporate or institutional supporters of a political party or candidate.

Third parties are required to disclose the following information to the AEC: donations made to political parties or candidates, donations they received and their expenditure over an election period on election advertising, campaign material, mail-outs, polling and research.

Yet, we see that a group can spend hundreds of thousands of dollars in an election campaign without lodging any of the required forms with the AEC. An example is the Exclusive Brethren. This fundamental Christian church has influenced elections in Canada, the USA, New Zealand and Australia (link here), including an attack on the Australian Greens in the lead-up to the last Federal election.

Under Australian law donations and election expenditures associated with these groups should be disclosed. We only know that the AEC is still considering whether the Exclusive Brethren have a disclosure obligation related to the 2004 election. Considering the vagueness of our disclosure laws and the weak powers of the AEC, it is possible that they will not have to make these disclosures.

Our electoral laws governing the roles of third parties in elections obviously need to be tightened, including strict limits on the amounts they can spend. In Canada third parties are limited to spending $150,000 on advertising during an election period.

We believe public funding for elections needs to be maintained. If Australia were to follow the Canadian lead in maintaining adequate public funding and limiting the amount political parties and candidates spend on elections, there would be less need for political donations. Rather than spend hundreds of thousands of dollars on 30-second television commercials, the parties would need to get their message out in a more responsible manner.

Both public funding and limits on election spending are crucial if political parties are not to be corrupted by the desperate need for money to fund the spiralling cost of election campaigns.

The proposed changes to Australian electoral laws outlined above are largely based on the 2000 Canadian Election Act. Australia and Canada have much in common, with similar populations, levels of ethnic diversity and economic bases. The new law is working well in Canada and has survived at least one legal challenge in the Supreme Court of Canada. We believe similar reforms would work equally well in our country.

The Howard government has shown it is interested only in making it easier for individuals and corporations to donate to parties’ coffers without scrutiny by the public. It is clearly not concerned with progressive reform.

The ALP has been the leader among the major parties on electoral reform. Earlier this year the Labor Party joined with the Greens and Democrats to vote against the Howard government changes to the electoral law. Labor now needs to commit to progressive reform of Australia’s rules for election and party funding.

We believe a good starting point for Labor would be to consider the reforms we have outlined above. Such changes are crucial for the functioning of our democracy. It is vital that the general public has confidence that the political process works for the public good rather than for vested interests.