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1266 words

Is the party over?

7 October 2016

With the parties under growing pressure to reform political finance, the only real obstacle is a lack of will

Right:

No more money: NAB chief executive Andrew Thorburn discussed his bank’s decision to stop making political donations at the parliamentary inquiry into banking ths week. Lukas Coch/AAP Image

No more money: NAB chief executive Andrew Thorburn discussed his bank’s decision to stop making political donations at the parliamentary inquiry into banking ths week. Lukas Coch/AAP Image


After decades of halting debate, the momentum for political finance reform has never been greater. At a national level, this comes off a low base. Australia has the laxest political finance system of all our common law cousins: Canada, Britain, the United States and New Zealand.

But don’t hold your breath. Any systemic reform faces two hurdles: one real, one largely imaginary. The real hurdle is political will. The perceived hurdle is constitutional. Let’s take them in reverse order.

“Chosen by the people” or “Chosen by the court”?

Fact 1. The Australian Constitution is a thin thing. Scour it and you’ll find no guarantee of anti-discrimination or free speech, or even an explicit right to vote. The Founders, good anglophiles, favoured parliamentary sovereignty. So they framed a “political constitution,” not a judicial one.

Fact 2. Yet the High Court rules the Constitution. With reform by referendum at a perennial stalemate, the court drives evolution on this otherwise constitutionally frozen continent. Until 1992 that meant overseeing federalism, typically by expanding Commonwealth power.

In 1992, though, the court began “discovering” implied constitutional values that act as limits on parliamentary power. The first was an implied freedom of political communication. Then came an implied universal suffrage. And then, most recently, it discovered an implied equality of political opportunity.

The court reasoned that these values necessarily underpin the phrase in the Constitution decreeing that parliament is to be “chosen by the people.” Fair enough. It would be a paradox if a modern parliament could abolish the free press or disenfranchise groups based on gender or race.

But the Founders wanted a different value read into the Constitution. Their value was “trust the political branches” rather than “trust the High Court” – even on basic political “rights.”

Liberté, egalité, intégrité

If money makes the world go round, politics is meant to make that world fair. Money and politics are in tension. One vote, one value ought to make citizens more equal by smoothing out the inequalities of fortunes and misfortunes. Yet money and politics are inextricably linked.

Money helps lobby groups translate interests into influence. And political campaigns and organisations need resources. Here lies a central democratic conundrum: how to regulate to improve political integrity and equality, without unduly restraining political liberty and activity?

In 1992, the High Court alighted, like a butterfly, on one of those values, and began exalting freedom of communication. It began by striking down a Hawke government law to replace paid broadcast ads at election time with free airtime for policy statements. The model drew on Britain and New Zealand but was deemed too “unfree” by the High Court.

In a brace of recent cases, however, the court has nuanced its position. Two of the cases grew out of reforms introduced in New South Wales. There, both sides of politics have rejected the laissez-faire approach to political finance. The NSW system is now the most comprehensive of control over political money in Australian history. Coupled with the powers of the Independent Commission Against Corruption, or ICAC, and an emboldened NSW Electoral Commission, the state is working itself clean.

New South Wales has limits on electioneering expenditure, bans on donations from the property and vice industries, and caps on donations. The spending limits and caps also apply to lobby group campaigns during elections.

But the limits don’t apply to union affiliation fees. The O’Farrell government sought to remedy this by banning corporate and union contributions to parties. But in a 2013 case brought by Unions NSW, that solution was struck down. The High Court reasoned that limiting donations to citizens/electors hurt the freedom of community groups and permanent residents, and for little benefit. After all, if donations from everybody were capped to $5000 per year, the corruption risk was minimised.

A more significant decision in 2015 upheld caps on donations and bans on developer donations. This case was brought by Jeff McCloy, a developer caught up in ICAC’s investigations of unlawful donations to NSW Liberals. McCloy argued that donation limits hobbled political expression unnecessarily, and that the disclosure of donations and a nimble media could deal with integrity concerns. The court disagreed. But instead of undoing freedom of political communication, it doubled-down, discovering a second fundamental principle, the “equality of opportunity” to participate in politics.

This is like swallowing a spider to catch a fly. The Court grounded the principle in early commentary about the Constitution as a document to share political power. This was ironic, because the point was that parliamentary government should be trusted to express a popular will, rather than relying on a bill of rights to empower the highest court.

Be that as it may, here we are. The judicial bird has two wings: liberty and equality. And it has made clear that caps on donations, selective bans and, by implication, reasonable limits on the size of political campaigns are all constitutional. As long as regulation is based in evidence and reason, it will be respected by the court.

Union dollars and public funding

If the High Court is no hurdle to reform, what is? The simple answer is a lack of political will. This isn’t insuperable. Regulatory experiments not only in New South Wales but also in Queensland, South Australia and the Australian Capital Territory show that.

But achieving a national consensus has proved less easy. The status quo – a system with annual disclosure, and public funding worth around $5.50 per voter per three-year term – has been in place since 1983.

A major stumbling block remains union contributions to the Labor Party. Limiting union affiliation fees would limit freedom of political association. Labor is the paradigm case, but it is not alone: the original Country Party and the Shooters and Fishers Party have relied on institutional members.

But whatever the democratic arguments for not touching union fees, not touching them leads to an imbalance. Unions protect Labor’s financial base, especially in the drought of opposition. With corporate donations staunched since the global financial crisis, the ICAC scandals and increased shareholder pressure, the Liberal Party lacks such guarantees. That corporate money follows power more than ideology was shown during the barren decade of Liberal Party opposition in New South Wales from the mid 1990s until 2011.

The favoured conservative position is to ban organisational contributions to parties. Confining contributions to individuals sounds simple: parties just need to check the electoral roll or ask donors for evidence of permanent residency. This is the Canadian and (roughly) the US model.

It’s a model that would benefit the Liberal Party, which embraces a network of well-heeled individual donors. And within the party, it would further empower MPs in well-off electorates. It is problematic in terms of principle rather than law, for politics is not just about individuals, it’s a collective enterprise. On the other hand, unions might do better to spend their money directly on campaigns over issues, to attract more members.

If we did go down the path of limiting donations, some of that shortfall would have to be made up with “clean” public funding. Not long ago, the idea of expanding public funding for elections was anathema. But sentiment goes in waves. If parliament embraced limits on the size of election campaigns, the public would see that the parties are serious about self-limiting the arms race. •

This article first appeared in Pearls and Irritations.

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The United States isn’t the obvious place to look for ideas about how to clean up political funding. But Graeme Orr found a New York agency that can teach us a lot about timely transparency

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Donation caps, continuous disclosure and innovative public funding: New York’s model for running an election. Peter Dutton/Flickr

Donation caps, continuous disclosure and innovative public funding: New York’s model for running an election. Peter Dutton/Flickr