New South Wales puts the screws on political funding … but who benefits?

Individuals can give thousands of dollars to political parties in NSW, but corporations can’t. Rgs_

Since 2010, New South Wales has had the most regulated political finance system in Australian history. This includes caps on expenditure in the six month period before an election and low annual limits on donations to parties ($5000) and candidates ($2000).

And at midnight on Wednesday, the Liberal-National government, with Greens support, screwed the system even tighter.

Sadly, it did so with an unfortunate partisanship, steamrolling over a multi-party report released only that day. And it did so with such haste that elements of the new rules are constitutionally suspect.

Banning organisational donations

The new law does three things. The first is to prohibit anyone but New South Wales voters from making donations. Even small corporate donations are now banned. This adopts the individualistic approach to politics seen in US and Canadian law.

Reasonable minds differ on the desirability of this. The American approach, for over a century, was to assume all direct corporate donations to parties or candidates were corrupting, and to treat union money as the same. Also, as a basic legal principle, only individuals can vote.

In contrast, as Joo-Cheong Tham has argued, politics is not just about the interests of individual electors. Wealthy New South Wales electors will be able to donate $5000 a year to their favoured party, but what of poorer folk who rely on collective voices? And what of permanent residents, who are denied the vote but have interests deserving representation?

The most significant effect of the new law is that unions now cannot pay affiliation fees to New South Wales Labor. The multi-party report recommended limiting such fees to a few dollars per member, and requiring a union ballot. This would have lessened the burden of the law on the freedom of association.

Nobbling the union-ALP link

The second change is to count _any _spending by a body affiliated with a party as spending by that party. This “aggregation” rule is blatantly anti-Labor. The report had recommended that only “co-ordinated” campaigns be counted.

The combination of banning union contributions to Labor, and treating union electioneering as if it were Labor’s, is a heavy interference with freedom of association. I very much doubt this is constitutional.

Interest groups

The third major effect, which the government has not deeply thought through, is on interest groups.

A wealthy business like BHP (or a union) is still permitted to use its own money to run a campaign during an election period. A group such as Get Up! can continue to rely on its individual donors, but will have to be careful about any union money it accepts.

But a collection of not-for-profits would have been banned from pooling their money to run an effective campaign in the six month “election period”. Andrew Norton has argued that such laws risk stymieing interest group campaigning.

To alleviate this unfairness, the government introduced a last-minute amendment, seeking to exclude “issue advertising” from the regime. Only the cost of advertising with a “dominant purpose” of influencing voting is now regulated.

A loophole for “issue advertising”?

“Issue advertising” is an inevitably fuzzy concept. If the AMA campaigns for tighter anti-smoking policy in the election period, that surely is “issue advertising”. But what if it is supporting plain cigarette packaging – a Labor government measure opposed by the Coalition? The effect is partisan, but we have to guess as to the purpose.

In the US in the past, money flowed to front groups to take advantage of “issue advertising” loopholes. We don’t want that sort of sneaky politicking here, and hopefully our culture is more robust.

But regulating money anywhere can be like flattening a bump in a water bed. The risk is that big business interests (and union money) will flow into unlimited and cleverly designed “issue advertising’ with an underlying partisan purpose.

National implications

In the bigger picture, we can see that New South Wales, and Queensland with its 2011 reforms, are moving well ahead of the Commonwealth, which is proving timorous about capping donations or expenditure.

But such differentiation risks confusion between different levels of government. This confusion is exacerbated because politics is fluid. It is not always easy to pigeonhole affairs as "state” rather than “national”.

On the upside, these reforms remind us that in a federation, experimentation and leadership come from the states as much as the centre. But whoever legislates, especially in a sensitive area like political rights, they ought hasten slowly and build cross-party consensus, something that seems to have been lacking in NSW.