Why I don’t support the full public funding of elections

The ongoing revelations at ICAC are strengthening the case for reforming donation laws in NSW and there is an emerging consensus that change needs to happen. NSW Liberal Premier Mike Baird has said he favours full public funding and has commissioned an expert panel to investigate it as an option by December. Labor Opposition Leader John Robertson has also called for a ban on all donations and the implementation of full public funding for elections.

While I agree that political donation and expenditure laws need to be reformed, I do not support full public funding of elections. Constitutional law experts Anne Twomey and George Williams have both argued against it with good reason. Questions remain about the constitutionality of such a ban and about the practical implementation of such a scheme.

Much of the debate about reforming donation laws is based on the premise that donations equals corruption, that interest groups are “buying” democracy and influence. It ignores the fact that all political parties represent some kind of interest groups and that meddling with donations is unlikely to change that. It is also naive to think that by banning donations, groups will not seek to exercise influence in other ways, particularly seeking leverage through third party campaigns (or threats of campaigns) to extract concessions. Donations are not the only form of transactional politics.

The fact is that NSW already has the toughest set of laws in the country as this summary from the Expert Panel shows. The laws include caps on expenditure and donations, prohibited donors and regulation of third party campaigns. If anything, the recent ICAC investigations have shown that where laws are introduced, there are attempts to get around the new laws. Rather than for elections to public office, donor money may shift to factional slush funds for internal contests to preselect MPs in safe seats and the Upper House. There needs to be a greater focus on enforcement as there will be attempts to circumvent whatever reforms are adopted.

There are also practical questions about the amount of public funding available under a fully funded model and how the allocation of funding be determined. Then there is the issue for parties that do not have representation or are newly formed – how much funding do they get? How will administrative funding for political parties and membership fees be treated?

Within parties there will be questions about who gets to determine the distribution of public funding within the party to campaigns and candidates. Will it be based on previous results in the seat or left up to head office? This is my biggest concern given that political parties are not always the most democratic organisations and scarce resources will mean that candidates who are not favoured by the party machine will not be able to get the resources needed for their campaign.

Finally, there is also the assumption that public funding will not be rolled back. It ignores changes to public funding that often have a partisan undertone, for example, the Liberals decision to target unions by changing donation and expenditure legislation. It isn’t an isolated case in Australia, in Queensland, the Liberal National Party have raised the threshold to receive public funding. Overseas, Italy is ending state financing of political parties and the Canadian Conservatives raised donation thresholds and ended per-vote subsidies. It is not inconceivable that a future government tries to roll back public funding.

There is a lot that could be done such as real-time public disclosure, lower donation and expenditure caps and tougher penalties but what needs to be addressed the most are the inconsistencies between federal and state laws. The implication of Brian Loughnane by ICAC shows that there is a level of co-ordination between state and federal branches to get around donation laws. It would also address a major loophole in the NSW legislation that allows the transfer of funds from other branches of the same political party. Until these inconsistencies are addressed and the loophole is closed, there cannot be full confidence in any donations and expenditure regime.

Why progressives should oppose NSW-style donations laws

Over past few days, an opinion piece by Keith Ewing, a professor of public law from King’s College, has been doing the rounds on social media. In it, Professor Ewing argues that the donations laws passed in NSW effectively make labour parties illegal. It is mainly being shared by Labor Party members and, in some instances, has turned into a Greens bashing exercise.

Some Greens members have responded to the criticism. One response I saw from a Greens member was that the laws stop parties from taking money from big business and developers. From companies, maybe, but not individual developers and executives in big business.

It made me stop and wonder whether many progressives actually understand how insidious these laws are. If they have looked at the legislation and still think they are good laws, they are likely to argue in support from a small ‘l’ liberal perspective about the influence of vested interests, procedural fairness and exercise of individual choice. This is the approach of supporters of the law such as Norman Thompson and Justin Field.

Personally, I am not opposed to caps on election expenditure and the role of money in politics needs to be addressed but the laws as they are disadvantage progressives far more than they disadvantage developers and big business.

There are two key elements to the laws that progressives should know about:

  1. restrictions third party campaigning by peak bodies; and
  2. disincentives for organisations to affiliate to a political party.

Restrictions on third party campaigns by peak bodies

A lot of the confusion is around the restrictions on third party campaigning. Mark Lennon, Secretary of Unions NSW, has argued that the Your Rights at Work campaign would not be possible under the NSW laws while NSW Greens MLC John Kaye has claimed:

“There is nothing in the current act that would impede another Your Rights at Work movement being funded by unions.”

Which of them is correct? Well, both are in a sense.

A campaign about rights at work can be run through a third party, however, what will be illegal is the funding structure of the Your Rights at Work campaign, where a levy was placed on affiliates of the ACTU to pay for it. A levy on affiliates would be considered a “political donation” under Section 85:

(1) For the purposes of this Act, a “political donationis: (d) a gift made to or for the benefit of an entity or other person (not being a party, elected member, group or candidate), the whole or part of which was used or is intended to be used by the entity or person: (i) to enable the entity or person to make, directly or indirectly, a political donation or to incur electoral expenditure

Under Section 96D of the Act, political donations that are spent on electoral expenditure can only come from individuals on the electoral roll:

(1) It is unlawful for a political donation to a party, elected member, group, candidate or third-party campaigner to be accepted unless the donor is an individual who is enrolled on the roll of electors for State elections, the roll of electors for federal elections or the roll of electors for local government elections.

What this means is that in order for peak bodies to run a campaign to influence voting, they would have to get individual members to donate to a third party entity. Field and Thompson think that would be a good thing but in practice it is very detrimental to progressive organisations.

Firstly, it would be an absolute privacy minefield for unions to pass on member details to a third party entity without the permission of individuals. Secondly, imagine the amount of resources needed to for a peak body to personally contact every member of an affiliate, whether they be members of unions (600,000 in NSW) or environmental groups, to get them to directly pay into a third party fund. Peak bodies are not set up in this manner & massive resourcing will be required. Given how limited resources the Left has are, the diversion of additional resources would aid the Right.

The NSW Greens have argued that the laws still allow for issue-based campaigning by peak bodies. The problem is that the definition of what is electoral expenditure is so broad that campaigning by peak bodies on “issues” during an election campaign may be seen as indirectly influencing voting. There are two relevant parts in Section 87 of the Act:

(1) For the purposes of this Act, “electoral expenditure” is expenditure for or in connection with promoting or opposing, directly or indirectly, a party or the election of a candidate or candidates or for the purpose of influencing, directly or indirectly, the voting at an election.

And:

(4) Electoral expenditure (and electoral communication expenditure) does not include expenditure incurred by an entity or other person (not being a registered party, elected member, group or candidate) if the expenditure is not incurred for the dominant purpose of promoting or opposing a party or the election of a candidate or candidates or influencing the voting at an election.

How can one clearly show that issue-based campaigning does not have the dominant purpose of indirectly influence voting during an election? Unless an entity does not make a single demand on an issue during the election campaign and does not highlight any party responses to those demands, it is pretty hard to show that main purpose is not to influence voting. It truly is absurd.

Disincentives for organisations to affiliate to a political party

The restrictions around organisational membership of a political party are far more complex. Instead of an outright ban, the laws creates a series of disincentives for both parties and affiliates. This primarily affects the Labor Party as the Greens and Liberals do not have organisational membership but the Shooters and Fishers are also impacted. What the laws do is privilege a political party structure based on individual membership.

The ban on donations to political parties under Section 96D is well-known:

(4) Annual or other subscriptions paid to a party by a person or entity (including an industrial organisation) for affiliation with the party that are, by the operation of section 85 (3), taken to be gifts (and political donations to the party) are subject to this section. Accordingly, payment of any such subscription by an industrial organisation or other entity is unlawful under this section.

The truly insidious part of the legislation, however, is less well-known or understood. It is the aggregation of expenditure under a single cap under Section 95G that creates a massive disincentive for affiliation:

(6) Aggregation of expenditure of parties and affiliated organisations Electoral communication expenditure incurred by a party that is of or less than the amount specified in section 95F for the party (as modified by subsection (2) in the case of associated parties) is to be treated as expenditure that exceeds the applicable cap if that expenditure and any other electoral communication expenditure by an affiliated organisation of that party exceed the applicable cap so specified for the party.

(7) In subsection (6), an “affiliated organisation” of a party means a body or other organisation, whether incorporated or unincorporated, that is authorised under the rules of that party to appoint delegates to the governing body of that party or to participate in pre-selection of candidates for that party (or both).

It makes it very difficult for a union or any organisation to justify continuing its affiliation if their election expenditure is counted under the same party cap regardless of what electoral expenditure is on. As I have previously mentioned, Andrew Norton provided a good example where both would be penalised when disagreeing:

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.

The intent of the laws are pretty clear when you read the legislation. The goal of this aggregated cap is to end union affiliation to the Labor Party by making organisational membership of a political parties as unattractive as possible.

What happens after the High Court challenge?

Fundamentally the current laws are an indirect attack of freedom of association by making it difficult for organisations such as trade unions join a political party. The laws are also an attack on freedom of expression as they heavily restrict the ability of peak bodies such as Unions NSW and the Wilderness Society to campaign against political parties when an election is occurring. Unions NSW is right to try to get rid of these laws through a High Court challenge.

There is a lot at stake if Unions NSW loses this case. If the High Court upholds these laws, more conservative state governments are likely to adopt similar laws. Queensland will and Victoria could as the Coalition controls both houses of state parliament. The aim would be to weaken the union movement, peak environmental groups and the Labor Party permanently.

Progressives across all parties need to understand that the Coalition only proposes NSW-style laws because they know any collateral damage to them would be far less than the damage caused to the Labor Party, unions and peak environmental bodies. Progressives across all parties should unite to oppose these proposals in other jurisdictions and work together on donation and expenditure laws that do not attack our allied social movements.

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.