O’Farrell’s donations cap could lead to a radical shakeup of political parties

You wouldn’t know it from the coverage but the proposed changes to electoral donations in NSW could lead to the biggest shake-up of political party structures we have seen in a long time. Its impact could extend well beyond NSW and across the country.

The Election Funding, Expenditure and Disclosures Amendment Bill 2011 is the first attempt in Australia to restrict political donations to individuals. The rationale for the Bill is that it closes loopholes left by the Keneally Government when it introduced caps on donations to political parties and restrictions on electoral expenditure.

Under the proposed amendment, donations for political purposes will be restricted to individuals on the electoral roll and party affiliation fees will be banned. Electoral expenditure by political parties and any affiliated organisations will also be grouped together under a single expenditure cap.

It will severely limit the capacity of organisations with an affiliate structure that engage in third party campaigning. Groups such as Unions NSW, peak business and environmental organisations are effectively banned from receiving funding from affiliates for political activities. It also effectively legislates against political parties have affiliate members. A membership structure, based on individuals is practically mandated.

The amendments create a disincentive for affiliation to a political party. Affiliated organisations will be forced to choosing between participating in political parties as an affiliate or being able to campaign electorally as a separate organisation. It is an absurd situation. Political parties and their affiliated organisations are not one and the same and often disagree. Andrew Norton provided a good example where both would be penalised:

The ALP will be guilty of an offence if the spending of one or more of its affiliated unions pushes the collective union/ALP spend over $9.3 million. Yet presumably the ALP cannot control the unions. To take an example from the previous NSW Labor government, if Unions NSW campaigned against electricity privatisation during the restricted campaign period (from 1 October the year before the election) not only would the Labor Party have an unhelpful campaign, they could also be punished for something that did not do and did not want.

Understandably, Unions NSW has threatened to take the Bill to the High Court and challenge its constitutionality. However, if the challenge does not succeed, there may be massive implications, particularly for the ALP.

Unless ruled to be unconstitutional, an amendment that restricts donations to individuals is likely to pass both houses of NSW Parliament. Support may come from the Greens as their policy position is to prohibit “donations from corporations and other organisations to political parties, candidates, associated entities or elected representatives.”

The proposal to group electoral spending by affiliates with political parties may not necessarily pass. NSW Greens MLC John Kaye has indicated that the Greens would move amendments to exempt third party issues-based campaigns. However, it is likely that restrictions on affiliates advocating election votes would be maintained as Kaye indicated that the proposal to restrict donations to individuals is ”tough on Labor, but creates a level playing field”.

Furthermore, the adoption of restrictions in NSW may encourage similar legislation elsewhere. Agreement by the Greens and Liberals to restrict donations to individuals and effectively ban affiliation fees is very possible in other states and territories. Both may see a relative electoral advantage by weakening links between Labor and its affiliated unions. It will gradually close any loophole that allows transfers from other state ALP branches.

The ALP will, as a result of these actions, become more reliant on individual members and supporters. They will become the only source for money and campaigners. Unless membership levels turn around, the situation will necessitate far reaching party reform. What was suggested in the ALP National Review will not be enough. The debate about party reform will shift to being about electoral survival and having the resources to run an election campaign.

The reforms that will be adopted is hard to predict. There are a number of possible outcomes and most are likely to involve root and branch changes to party structure. Changes may include:

  1. introduction of a rank-and-file component in the election of party leader at state and federal level;
  2. a reassessment of how the formal trade union link operates, including a push to dilute the influence of unions;
  3. lowering of barriers to participation in the party (whether through making party membership easier or including “supporter” participation); and
  4. a greater say by rank-and-file members over administration and policy (more direct elections/rank-and-file preselections).

The main purpose of the changes would be to encourage more members. There will be a greater need to rally the party base to get donations and campaigners needed to win elections. Despite the objections of some, self-interest and the desire for electoral success will drive these changes.

These changes won’t only be isolated to the ALP. Any electoral success and substantial growth in membership is likely to encourage other parties to adopt similar changes. The gradual acceptance of One Member One Vote in leadership ballots by all political parties in Canada is case in point.

It may not have been intentional but party reform might be coming sooner than expected, courtesy of the NSW Government. The question is whether any of Australia’s political parties will be prepared for what may be coming.

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