Follow the money: the difficult path to political donation reform

The O'Farrell government had a law limiting political donations struck down by the High Court. AAP/Dan Himbrechts

Revelations of mafia-linked donations to the Liberal Party have once again prompted calls to reform Australia’s extraordinarily lax system of political finance regulation. Former Liberal leader John Hewson said the only way to guarantee transparency is to ban all corporate or union donations, to limit individual donations to A$1000 and to have immediate disclosure.

The shadow special minister of state, Gary Gray, was less ambitious in his call for timeliness and the lowering of the threshold for disclosure. At the federal level, disclosure often comes long after the electoral event for which the donations were made. Labor already discloses donations of more than $1000, but the Coalition has traditionally opposed legislation requiring this.

So, what is an achievable way forward on reform?

History of public funding and reform

Public funding of election campaigns was first introduced in NSW in 1981 and federally in 1983. It was intended to reduce the dependence of political parties on private money. However, parties accepting public funding were not required to refrain from taking private money. The dependence of the major parties on private money continued to grow.

This helped pay for increasingly expensive television advertising campaigns. Australia lacked any restrictions on this, unlike comparable democracies like the UK.

A series of scandals at state level involving political donations by property developers led to a tightening of political finance regulation in NSW and Queensland. This started with a ban on developer donations in NSW in 2009 and led on to the introduction of caps on donations and expenditure in both states. However, some candidates still believed they could ignore political finance rules.

In 2012, the NSW government attempted to go beyond existing caps and source restrictions to follow the Canadian example of banning all corporate or union donations. The right to make political donations was to be restricted to individuals on the electoral roll.

The legislation was extremely controversial because it prevented the payment of union affiliation fees to the Labor Party, thus interfering with the party’s 100-year-old internal structure. It also required that any electoral expenditure by affiliated unions be counted towards the party’s expenditure limit.

The High Court struck down the legislation on the grounds that it was impermissible to discriminate between donors who were electors and those who were not (such as permanent residents), or to apply aggregation to unions but not to other kinds of third parties.

The way forward

Reformers tend generally to favour caps rather than a ban on donations. This is to avoid High Court challenges and ensure a mix of sources of party funding, both public and private.

Internationally, small donations (below the level of political influence) are regarded as desirable and to be encouraged through means such as tax deductibility or credits. Proposals for total reliance on public funding would undoubtedly and perhaps unsurprisingly result in a “snouts in the trough” reaction.

Despite some to-ing and fro-ing as governments have changed or High Court challenges have been mounted, it is at the state and territory level that most progress has been made in the past five years.

In South Australia, cross-party agreement has been achieved for a new system whereby parties or candidates that want public funding have to agree to comply with expenditure caps. Nonetheless, the loopholes in Australia’s political finance regulation cannot be closed without movement at the federal level.

Expenditure caps at the federal level were removed in 1980. While once a source of pride, they had become anachronistic through referring only to candidates and not to parties. In the new era of centralised political campaigning, one of the many arguments for expenditure caps is a reduction of the volume of negative advertising, with all its consequences for political trust.

Why now?

It is unfortunate that it is only scandals and the perception of corruption or criminal involvement that prompt moves to reform Australia’s political finance regime. While it is important to remove perceptions of undue influence, it is equally important to uphold democratic principles such as that of political equality and a level playing field for electoral competition.

Those whose supporters have deep pockets should not be given an unfair advantage in electoral competition. Nor should cashed-up voices be able to drown out others in the electronic media.

Political equality does not exist when some are able to purchase access to ministers or senior political figures through large political donations or paying inflated prices for seats at a dinner.

While systems of public funding and access to broadcast time are not perfect, they are based on relatively transparent formulas such as votes at the last election. They do enable all parties with a threshold level of community support (usually 4%) to get their message out during elections. This is important for healthy electoral competition.

Yet there can be major problems with the way in which public resources are used for undeclared political purposes. This unfairly advantages incumbents over challengers in elections. Unlike comparable democracies, Australia has taken a laissez-faire approach to the use of staff and parliamentary travel allowances for electioneering rather than representational purposes.

Campaign launches are now delayed until after pre-poll voting has already begun, because of the convention that restrictions only begin with the policy launch. The use of government advertising for partisan purposes in Australia is also notorious.

In a context where the unrestricted role of private money and the abuse of public resources has become normalised in Australian elections, the shock of discovering mafia involvement in political donations may be a positive one. Hopefully, there will be renewed momentum for electoral reform – concerned with first principles, not just with integrity issues.

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