POLITICAL FUNDING – THE KEY CHANGES NEEDED
Accountability Round Table has made two submissions to the Joint Standing Committee on Electoral Matters’ inquiry into the Commonwealth Electoral Amendment Bill 2016. This standing committee inquiry is a regular occurrence after every election.
The first submission is by Colleen Lewis for Accountability Round Table. The second submission is by Ken Coghill, made in a personal capacity but reflecting the same principles. Both address the current problems with funding of political parties in Australia.
Both are available at the JSCEM website (see links below).
The substantive part of Colleen Lewis’s submission is reproduced below.
Colleen Lewis – 30 October 2016
Senator Linda Reynolds
Chair, Joint Standing Committee on Electoral Matters
Dear Senator Reynolds and Members of the JSCEM Committee,
Re: Submission from the Accountability Round Table
The Accountability Round Table (ART) is a non-partisan group of citizens with diverse backgrounds (academics, lawyers, journalists, authors, consultants, former judges and former politicians), who have come together through a shared concern about the erosion of integrity, transparency and accountability, increasingly evident in Australia’s democratic political system.
ART is dedicated to improving standards of probity and transparency and strengthening accountability processes and other forms of democratic practice across all levels of government in Australia.
ART appreciates the opportunity to make this submission to the Joint Standing Committee on Electoral Matters (JSCEM) on an issue that goes to the heart of Australia’s democratic political system, namely how federal politics is funded in this country.
The decisions made about this fundamental public policy, which directly or indirectly affects all other public policies, can strengthen or weaken Australia’s democracy, and can help bridge or widen even further the trust deficit that currently exists between members of parliament (MPs) and those who elect them to office.
Voters expect, and are increasingly demanding, that their elected representatives must always put the public interest above personal and party interests. This, the public office-public trust principle, is one that has been hallowed by time. Its recent neglect goes far to explain the present loss of confidence in democratic governance.
Recommending reforms designed to facilitate the speedy introduction of an open, transparent and accountable political donations regime will reassure the electorate that all members of the JSCEM committee and other federal MPs are placing the public interest where it rightly belongs: above the interests of person and party.
Such an approach will also demonstrate that the parliamentary committee charged with the high responsibility of recommending reforms to the current system, and all other elected representatives, respect the doctrine that equality is one of the vital corner stones of Australia’s democratic political system. Equality goes hand-in-hand with the public office-public trust principle and both should be the foundation upon which all forthcoming recommendations rest.
ART’s interest in reforming political donations policy goes beyond recommendations. It includes implementation and does so because no reforms have been made to federal political donations laws since 2008. This is despite the 2008 Electoral Reform Green Paper – Donations, Funding and Expenditure and JSCEM’s 2011 Report on the Funding of Political Parties and Election Campaigns making numerous recommendations for governments and parliaments to consider. Regrettably, all recommendations have been ignored. Consequently, Australian taxpayers find themselves having to spend their money to analyse, discuss and recommend changes to political donations laws – yet again.
This submission now turns its attention to the key elements for effective reform of political donations regimes in democratic societies. They are: bans on certain classes of donors; caps on donations; disclosure; third party entities; associated entities; public funding; limits on campaign spending; and penalties for not abiding by political donations laws.
Each element will be addressed. The submission will also address the challenges that surround public policy reform in an area where, to date, personal and party interests have often taken precedence over the public interest.
The current political donations regime at the federal level, coupled with inaction by governments over many years, demonstrates clearly that the public office-public trust principle has been forgotten or ignored, as has the democratic principle of equality. This, ART argues, must not be allowed to continue. The current JSCEM inquiry into the federal political donations regime offers the perfect opportunity to ensure that is does not.
Bans on certain classes of donors
Unlike some Australian states, the Federal Parliament does not place a ban on any class of donor. A justification for this is explained, in part, by a High Court decision (Unions New South Wales and Others v New South Wales 2013) where Unions NSW successfully challenged an attempt by the New South Wales Government to prevent any but eligible voters from making political donations. The High Court found that such a ban places an unreasonable burden on the ‘implied freedom of political communication’ in Australia’s Constitution. Federal parliamentarians currently opposing or questioning bans on particular classes of donors often refer to this decision.
However, it may be possible to, in effect, step around the High Court decision through the imposition of caps on all donations regardless of their source. While this does not have exactly the same impact as a total ban on certain donors, or convey the same message, caps can address the ‘undue influence’ concerns associated with receiving donations from certain donors.
Caps on donations
Keeping in mind the need for equality to underpin Australia’s federal political donations laws, ART suggests that a cap on all donations, regardless of their source, be set at a figure no higher than $1000. This is clearly a more equitable amount than the current ‘no limit’ approach, which has allowed extraordinary amounts of money to be donated to political parties. These donations, sometimes amounting to millions of dollars, cannot escape the suspicion – tending naturally in the public mind to certainty – that they are intended to purchase illegitimate influence.
ART suggests that any figure recommended by the current committee has to reflect what an ‘ordinary voter’ wishing to donate to the political process can reasonably afford. To recommend otherwise is to discard the equality tenet that is fundamental to a democratic political system.
The current threshold for the disclosure of donations at the federal level is approximately $13,200. Federal, state and territory branches of a political party are considered separate entities for the purpose of disclosure. This means that in practice, it is possible for a political party, through its various branches, to receive over $100,000 in donations without the need to disclose.
This unsatisfactory situation must be remedied. It can be easily overcome if caps for all donations are lowered to an amount which an ‘ordinary person’ can afford, thereby preserving their ‘implied freedom of political communication’. The issue of a cap no higher than $1000 has already been addressed in the ‘Caps on donations’ section of the submission.
Real-time disclosure of donations
The current system surrounding the disclosure of donations to a candidate or political party at the federal level denies voters the information they need to make an informed decision when casting their vote. As the laws stands, voters at the July 2016 federal election were not permitted to know who donated, how much, and to whom, before making the all-important decision of who should receive their vote. Instead, it will be February 2017 before they are told the name of donors, the sums they donated, and who received their donation. Even then, there is no guarantee that the original source of all donations will be revealed to the electorate, as money donated to an associated entity is often passed to a political party in the name of the associated entity.
Nothing can justify this. Such a system dishonours the public office-public trust principle.
The technology exists, and has existed for some time, to introduce real-time disclosure in relation to each and every political donation received. For example, a real-time system has been operational in the United States of America at the federal level for many years. While the law in that country states that donations are to be made public within 48 hours after receipt, in practice they are often revealed within 24 hours.
The expression ‘justice delayed is justice denied’ is, with modification, applicable to the disclosure of political donations. As a leader of the opposition in an Australian state parliament recently explained, ‘disclosure delayed is disclosure denied’. Political leaders in several Australian states are already moving to real-time disclosure. Federal Parliament’s obligation to uphold democratic forms of governance demands that it do likewise. Only then will it demonstrate that federally elected representatives give more than lip service to the democratic principles of openness and transparency.
Third party entities and associated entities
Chapter 7 of the 2011 JSCEM Report on the Funding of Political Parties and Election Campaigns, which covers sections 7.1 to 7.134 and recommendations 19 to 25 inclusive, canvasses extensively issues surrounding the complex matter of third party entities and to a lesser degree associated entities. In so doing, it refers to The Electoral Reform Green Paper – Donations, Funding and Expenditure (2008).
As third party entities have already been extensively covered in these reports (particularly the JSCEM 2011 report), there seems little point in repeating what was discussed in that report, particularly as none of the recommendations have been implemented. This means that the issues remain as they were five years ago.
The partisan political issues which must be addressed when considering the role of third party entities necessitates taking advice from respected, independent authorities such as the Australian Electoral Commission (AEC). Organisations such as the AEC, exist to serve the public interest and as such are in an excellent position to offer dispassionate guidance on one of the thorniest issues associated with political donations reform: third party entities.
Evidence of the thorny nature of this aspect of political donations reform can be found in the Dissenting Report (December 2011) issued by the 2011 JSCEM Inquiry, which was tabled by:
The Hon. Bronwyn Bishop MP;
The Hon. Alex Somlyay MP;
Senator Scott Ryan;
Dan Tehan MP; and
Darren Chester MP.
Many of the arguments in relation to associated entities are linked, in part, to third party entities and are covered in Chapter 7 of JSCEM’s 2011 report. ART suggests that the 2011 JSCEM report and the Dissenting Report referred to above, coupled with advice from the AEC, be used to help solve the partisan tensions surrounding this matter. It also urges, most strongly, that resolving matters surrounding third party entities not be put in the too hard basket.
Taxpayers’ currently contribute approximately $2.62 (262.259) per vote to candidates and parties, providing their ‘vote share’ exceeds 4 per cent. Unlike the penalties applied for non-compliance with political donations laws, the rate taxpayers contribute to the public funding of election campaigns is indexed to the CPI every six months.
In 2013,taxpayers contributed $58.1 million to the federal election campaign and did so with no strings attached. By that ART means that no limits were applied to the amount of money a candidate or political party could spend in their quest to be elected or re-elected to parliament and, in most cases, to win government.
The 2014 Political Donations Final Report (commonly referred to as the Schott Report) covered the issue of public funding well. While it was confined to New South Wales, the issues it raised transcend political jurisdictions. One of the most compelling arguments in favour of the partial funding of political campaigns relates to the importance of equality in the democratic process. As explained in the report, public funding allows many seeking to stand for public office access to the resources needed to inform voters about their platform, provided, that is, they obtain the 4 per cent threshold referred to earlier. Public funding also helps to prevent an undemocratic situation arising whereby only the wealthy can afford to stand for office in the Federal Parliament.
Public funding also means that candidates and parties are not solely reliant on private donations to fund an election campaign. Some politicians at the state level have advocated for full public funding for elections. They support their approach by arguing that it would diminish the ‘potential’ to ‘buy legislation’ and would result in ‘clean’ elections.
These propositions are self-evidently true. They are, however, open to the compellingly meritorious response that the right to free expression of opinion carries with it the citizens’ right to give financial backing to political parties and to causes which they support. This is one reason why ART does not support full public funding, and doubts that in the current political climate the electorate would accept such a policy. However, without retreating from its support for limitations upon campaign spending, ART does support the partial public funding of election campaigns. It does so in the interest of upholding the democratic principle of equality.,
Limits on campaign spending
Some eight years ago, then Special Minister of State, Senator John Faulkner in The Electoral Reform Green Paper – Donations, Funding and Expenditure raised concerns about the growing costs associated with election campaigns in Australia. He noted the prospect of elections becoming an ‘arms race’. In 2016 it can safely be argued that is what they have become.
Is this the path the electorate and its elected representatives wish to continue to go down? Do taxpayers want their money spent on endless and repetitive advertisements on radio, television and print media and the Internet?
ART maintains that an ‘arms race’ is not in the public interest. One of the primary reasons for this is the need for candidates and political parties to continually seek donations from the private sector and trade unions to cover the escalating costs of election campaigns. This leads to the perception of ‘privileged access’ to ministers and members of parliament for those with the ability to contribute large sums of money to both.
The escalating cost of election campaigns also means that MPs have to devote a considerable amount of time seeking donations. Is this how taxpayers, who already pay the salaries and expenses of members of parliament, wish their representatives to spend their time? In their pursuit of donations are members of parliament placing personal and party interests before the public interest? These are questions that ART suggests need to be addressed by the JSCEM when examining the ‘arms race’ that is currently a feature of electoral campaigning in Australia. Matters to be considered for recommendation include expenditure limits on candidates and parties. This already happens in some Australian states and should be implemented at the federal level.
Penalties for non-compliance with the law
The current penalties for non-compliance with political donations laws are grossly inadequate. Indeed, it is impossible to avoid the conclusion that in devising these penalties, personal and party interests were placed well before the public interest.
ART recommends that penalties be increased significantly. For example, if the breach involves non-disclosure of a donation, a penalty 10 times the amount not disclosed should be imposed.
Depending on the nature of the offence, a penalty could involve being disqualified from sitting as a member of parliament. This may seem overly harsh, but it is worth remembering that deliberately failing to comply with electoral laws is a serious breach of the public office-public trust principle and without that trust the credibility of the democratic political system is in jeopardy. The issue is that important.
In closing, ART again thanks the Joint Committee on Electoral Matters for the opportunity to make this submission. We hope that it helps the committee arrive at recommendations that embody the public office-public trust principle, which is central to the public interest, and strengthens the democratic cornerstone of equality.