Inside Story

Why we need full public funding of election campaigns

Taking private donations out of the equation would help restore trust in the political system – and we’re already partway there

Mike Steketee 12 July 2017 2016 words

Unity ticket: both major parties ignored ASIO’s warning about donations. Lukas Coch/AAP Image

Let’s be optimistic and say that it’s never too late to start restoring trust in politics and its practitioners. It is not as though we can return to some golden age of democracy, when voters considered politics an honourable and noble profession, because such an era never existed, at least not on this side of ancient Athens. But the healthy scepticism we used to display towards politics has developed a more malignant form, uncomfortably reminiscent of 1930s and 1940s Europe.

That includes Australia, if not as severely as in many other countries. The latest Lowy Institute poll finds that 52 per cent of Australians aged between eighteen and twenty-nine agree with the statement that “democracy is preferable to any other kind of government,” compared to 60 per cent for people of all ages. The fact that support for democracy enjoys only a bare majority among young people (compared with a third who say a non-democratic government can be preferable in some circumstances and 12 per cent who say the kind of government doesn’t matter) suggests we are in dangerous territory.

So here’s an idea. One of the major threats to democracy is the perception, and too often the reality, that politicians can be bought, particularly by wealthy donors to parties and candidates. One way to address that would be to ban political donations. Yes, outright.

That means election campaigns would be paid for by taxpayers. Not a popular move, you may think. But of course it happens, partially, already. The Australian Electoral Commission handed out $62.8 million in government funding to candidates in last year’s federal election, based on $2.63 for each vote cast for the House of Representatives and the Senate.

In case we needed reminding of the problem with the present system, this is what the 2014 inquiry into political donations in NSW discovered: “What stands out [in submissions from the public and others] are the feelings of shock and disgust at the brazen way in which some candidates and MPs have apparently sidestepped political donations laws for personal and political gain.” Headed by former senior public servant Kerry Schott, the inquiry was established by the Baird government in the wake of the scandal over illegal donations to prominent Liberals from property developers, some of whom had planning applications before the state government.

It is not just illegal donations that can compromise politicians. In 2015, the ABC’s Four Corners revealed how people associated with the Calabrian Mafia in Australia used donations to the Liberal Party to gain access to members of the Howard government and succeeded in overturning a deportation order against Frank Madafferi, who had a long criminal record in Italy and was subsequently convicted of drug trafficking in Australia.

Just last month, a joint investigation by Four Corners and Fairfax reported that Huang Xiangmo, a Chinese property developer who arrived in Australia in 2011, donated $770,000 to the Liberals before the 2013 election and another $100,000 to the campaign of the then trade minister Andrew Robb, who helped seal the free trade deal between China and Australia. Robb now receives $880,000 a year plus expenses as a senior economic adviser to the Landbridge Group, the Chinese company that obtained a ninety-nine-year lease on the Port of Darwin. He says he has acted at all times in accordance with his responsibilities as a former member of cabinet.

Labor has reason to be grateful to Huang as well. Together with two other members of the Australian Council for the Promotion of the Peaceful Reunification of China, of which he is president, he donated $500,000 to the party’s NSW branch in 2012. One of Huang’s advisers on the council was Ernest Wong, whom Labor chose to replace Eric Roozendaal in the NSW Legislative Council. Roozendaal now works for Huang’s property development company.

Before the 2016 election, according to Four Corners, Huang promised to donate $400,000 to the Labor Party. During the campaign, Labor’s then defence spokesman Stephen Conroy argued the Australian navy should be able to sail into the South China Sea, where China has laid claim to disputed islands, as a demonstration of the right to freedom of navigation under international law. Huang told Labor he was cancelling the donation as a result of Conroy’s comments. The day after Conroy’s comments, Labor senator Sam Dastyari appeared at a news conference for the Chinese media alongside Huang and said Australia should not meddle with Chinese activities in the South China Sea.

Four Corners also reported that Dastyari and his office lobbied the immigration department on Huang’s application for Australian citizenship. Huang’s company previously had paid a $40,000 legal bill for Dastyari. Last year, Huang was quoted as saying, “The Australian Chinese community is inexperienced in using political donations to satisfy political requests. We need to learn… how to have a more efficient combination between political requests and political donations.” He doesn’t seem to be doing too badly himself on this score.

ASIO’s director-general Duncan Lewis warned the heads of the Liberal, National and Labor Party organisations two years ago that the Chinese Communist Party connections of Huang and another generous donor of Chinese extraction, Chau Chak Wing, meant that their donations could compromise Australian political parties. The recommendations of the national security agencies generally are regarded as so important that they have bipartisan support. The decision was unanimous in this case as well: the major parties decided to ignore the warning and keep sticking out their hands for money.

What were Australian politicians thinking? As Michelle Grattan wrote, “Did they believe that, in the absence of democracy in the land of their birth, these businessmen were just anxious to subsidise it abroad? Hardly.”

Surely the game is up. The argument that political fundraising is conducted at arm’s length and never influences the decisions politicians make has been exposed repeatedly as a lie, as have the claims by large donors that they just want to support the democratic process.

The present laws on donations are a fig leaf pretending to cover a system designed to maximise donations and feed an ever-escalating political arms race. New South Wales has the tightest laws on paper in the country, but if they are not broken they are readily circumvented by channelling donations through Canberra, where the law governing federal parties is much more lax and there is no federal anti-corruption body.

Among those who have advocated a complete ban on private political donations is Geoffrey Watson SC, counsel assisting the Independent Commission Against Corruption in inquiries that uncovered illegal donations and the diversion of funds through Canberra. So did former NSW premier Mike Baird and former opposition leader John Robertson while they were in office. The review by former Queensland National leader Rob Borbidge and Liberal leader Joan Sheldon of the Newman government’s defeat in the 2015 election recommended that the Queensland Liberal National Party consider full public funding of election campaigns and the banning of trade union and corporate donations.

Implementing a pure public funding system isn’t without its challenges, of course. University of Queensland law professor Graeme Orr argues it would mean funding the cost of parties’ administration as well as campaigning and, as he told me, “It is difficult to imagine how you could come up with a metric of what is a reasonable amount to run a party,” given their often different structures and activities.

The Schott inquiry came out against full public funding. It argued that in a democracy small donations played an important role by making those seeking public office responsive to their constituents. Last year, New South Wales went part of the way, introducing an annual cap of $6100 for donations to registered political parties and $2700 for MPs, candidates and third parties.

The Schott report also argued that it would not be feasible to fund all candidates, including those from new parties, as well as third-party groups that contributed to the public debate. And it thought it likely the High Court would rule against a ban on private donations as a breach of the implied freedom of political communication under the Constitution.

In a chapter for a forthcoming book, Orr argues that it is possible for the campaigns of parties during election periods to be completely publicly funded where there are caps on election spending as well as on donations. Expenditure limits apply in New South Wales and, to an extent, South Australia, where they are a condition for accepting public funding. As well, writes Orr, “over time public funding may be leveraged higher and donations caps screwed lower to the point that parties generate and rely on no private money other than membership fees and any return on capital they may own.”

In fact, this trend is already under way, in Australia and overseas, in what Orr describes as a “creeping expansion” of public funding that has occurred with limited debate. It is driven not only by the worthy cause of reducing corruption but also by parties anxious to secure reliable funding, particularly with a decline in corporate donations.

In 2015, the Australian Capital Territory quadrupled public funding at one stroke to $8 a vote, with both Labor and Liberal parties arguing that it would prevent corruption or the perception of corruption. Orr calculates that this would have covered between 82 per cent and 97 per cent of the campaign costs of the major parties at the previous election. This compares to public funding accounting for about half of the election campaign costs of federal elections and up to 80 per cent in New South Wales.

As well, the ACT, NSW and Queensland help fund parties’ administrative costs. “In the space of just over thirty years Australia has gone from having no public support for parties (apart from modest tax deductibility), via funding at moderate rates based on votes received, to schemes of considerable generosity,” Orr writes. He adds that high levels of public funding, typically ranging between 50 per cent and 90 per cent of costs, apply in Europe and Canada.

Orr has previously suggested that full public funding could operate for parties and candidates for election campaigns, with private donations of up to $1500 a year allowed for administration. What’s to stop parties from transferring donations to campaigning? Distinguishing the two is already built into the regulatory system, he says.

The Turnbull government has promised reform of foreign donations, with further details and timing yet to come. Of 180 countries, 114 have banned foreign donations, most of them long ago. Labor introduced legislation for a ban in 2010 but the bill didn’t make it through the Senate. You can draw your own conclusions as to why the government continues to cogitate on the issue rather than acting. Let’s just say that the greed of political parties should not be an excuse.

When, or if, a ban on foreign donations is finally implemented in Australia, it will fall far short of what is required to restore a measure of trust in Australian democracy. Orr says it is using a sledgehammer to crack a single nut, when there is a bag of bigger nuts waiting.

It’s true that increased public funding could encourage politicians to exploit the system. Orr describes the $8 a vote now provided in the ACT as “a remarkable amount in a physically small jurisdiction, with a simple media market and a single house of parliament.” Moreover, other measures introduced at the same time completely remove the cap on donations, which previously was $10,000 per person. The rise of campaigning through social media presents another challenge, requiring new regulations and enforcement.

But ultimately it comes down to what our priorities are. Or, to put it another way, what price democracy? The constitutional barriers should not be insuperable, given the High Court’s suggestion in 2015 that freedom of political communication should be balanced by “equality of opportunity to participate in the exercise of political sovereignty.” The court also has acknowledged there can be some restrictions on freedom of speech, provided they are reasonable and proportionate to the issue being addressed.

This is a case where we should not allow the perfect to become the enemy of the good. •