This article originally appeared in print in Kill Your Darlings Issue 18, July 2014. For more great articles like this one subscribe today!

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A meme has been doing the rounds recently arguing that politicians should have to wear the logos of their sponsors on their jackets, like race-car drivers or footballers.

If this were the case, we would see our prime minister adorned with symbols representing bar and club lobbyists the Australian Hotels Association (AHA) and ClubsNSW, chicken suppliers Inghams Enterprises, film company Village Roadshow, and the family crests of the Packers and the Pratts. In the case of Opposition team leader Bill Shorten, you’d also see AHA and Inghams, as well as Regional Express Holdings (owners of airline Rex), a few rich ethnic Chinese donors, and, of course, a bunch of unions. For Greens MPs, wearing name badges would suffice: apart from a couple of unions and a small handful of private donors, a large number of the Greens’ significant donations come from the party’s own elected reps. Clive Palmer could wear a T-shirt with his own face on it, or perhaps with the names of the businesses he owns that stand to benefit from the alteration of federal legislation.

Politics, it turns out, is expensive business. The way that Australia’s political and media systems work, political parties are in need of ever greater piles of money to convince voters. Former ALP national secretary Tim Gartrell estimated on Lateline in 2009 that the major parties had raised and spent $80 million on the 2007 federal election. According to Australian Electoral Commission disclosure data, total payments to political parties (which includes non-donation payments) in the three-year electoral period between July 2010 and July 2013 were huge: Labor took $188 million, the Liberals $232 million, the Nationals $30 million and the Greens $34 million. Even without falling membership and low levels of community trust, raising enough money to remain competitive would be difficult.

Millions of dollars are spent on advertising to sway voter choice. Inevitably, the main parties receive more money and are thus able to spend more on advertising. In his piece for The Conversation ‘Does Labor Massively Outspend the Coalition During Election Campaigns’, Graeme Orr, Professor of Law at the University of Queensland, estimates that during the 2010 election, Labor and Liberal outspent the smaller parties at a ratio of 19 to 1, when the vote share is around 4 to 1. This is partly because the Labor and Liberal parties both have broadly pro-business policy platforms, but also partly thanks to the lustre of holding government. Businesses and rich individuals, seeking to make friends in high places, tend to give more when it looks like a party is about to win government, or when they are in power. Thus smaller parties tend to be left with the idealists, or, in the case of Palmer, those who can see a benefit in holding the balance of power.

As it stands, despite partial public funding (parties received $2.38 for every vote for a candidate who received over 4 per cent of the tally at the 2013 election) large donors have the potential to hold significant sway over a party. The question of political financing goes to the heart of one of the contradictions of democracy: although citizens are equal before the law, they remain unequal in means. Giving moderate amounts of money to political parties is an important way for people to engage with politics, and can help opposition groups to counter the effects of incumbency. The problem is with companies that have a vested, usually financial, interest in the policymaking process, and use this to sway governmental outcomes. The sight of a single, rich individual giving half a million dollars in one go also makes many uneasy – even if there is no vested interest, the capacity of a few individuals to have such a significant impact on politics hardly gives the impression of democratic fairness. Although it is impossible to know how blatantly or often parties’ policy platforms are influenced by large donations, this need for rivers of money opens up the possibility of such corruption occurring.

After all, why would a business or advocacy organisation spend its shareholders’ or members’ money without the expectation that it would benefit in some way? This does not necessarily indicate there are explicit deals – though there may indeed be – but providing large amounts of money means you are more likely to be met with a willing ear. It also means that private entities can help boost a party whose policies may already suit their commercial interests, even when those interests are at odds with the rest of the community. Certainly, disagreeing with certain policies and parties is part of living in a democracy, but the unfettered flow of huge amounts of money can mean that a rich minority is able to capture the policymaking process at the expense of the public good.

Consider, for example, the amount of money given by companies who benefit from gambling, and advocacy organisations whose members do: between July 2010 and July 2013, different branches of the Australian Hotels Association – which says that mandatory pre-commitment technology in pokie machines ‘will lead to the immediate loss of many thousands of jobs’ – gave a total of $550,120 in declared donations to the Labor party. ClubsNSW – which contends that ‘The overall social impact of gambling is overwhelmingly positive’ – gave $237,600. Crown Casino gave $177,056. For the Liberals, those numbers are: Crown: $195,893; ClubsNSW: $569,130; AHA: $1,495,658; and Tabcorp also gave $109,650.

According to British consultancy, H2 Gambling Capital, Australians lose the most per adult of any nationality on gambling. Australians lose an average of over US$1000 each per year; in Germany, which sits among the lowest in the developed world, this number is around US$200 per year. Although it is difficult to draw a direct line between large political donations and the conspicuous failure of Australia’s regulation of gambling – other factors come into play, including the ability of private interests to wage advertising war against a government, but also culture, media and so on – it is difficult not to see a link between the two.

Certainly, if an issue comes to the forefront of public debate and there is a groundswell of community support for reforms that would hurt vested interests, a million or two in donations to political parties may not make a significant difference. But the ability of such interests to keep reform off the agenda at the same time as muddying the waters among those who would push for change through things like donations means that very often parties end up taking the path of least resistance, putting off change for a time when conditions are more amenable.

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Australia has one of the most laissez-faire political finance regimes in the world. At the federal level, there are few restrictions on who can donate and how much, and there are no caps on the amount parties can spend. Even compared to other English-speaking liberal democracies, Australia takes a very hands-off approach. Canada, for example, has the most restrictive regime in place among similar countries. It does not allow corporations or trade unions to donate, only individuals. Individuals cannot give money on behalf of a business, though this can be hard to police. The maximum that can be donated to any individual party or candidate in a year is C$1200. Candidates and parties are also limited in how much they can spend. Third parties (companies, unions, community organisations and the like) that engage in political advertising are regulated, and spending is capped. Other Anglophone democracies are somewhere between Canada and Australia: the United Kingdom and New Zealand focus on expenditure caps for parties and candidates, while the United States’ laws are aimed at donation caps, though the American system has proven remarkably ineffective at stemming the flow of big money into politics.

Although Australian federal law places few barriers to giving and spending political money, the states have tried to remedy this. In an example illustrating the potential pitfalls of political finance reform, the New South Wales government of Liberal premier Barry O’Farrell introduced sweeping changes in 2009 and 2010. These reforms were struck down, however, when in 2013 the High Court ruled invalid measures banning unions and corporations from donating for a state or local election, and overturned caps on third party spending on political advertising and electioneering. O’Farrell claimed to have presented the laws as a means of eliminating a ‘decisions for donations’ culture, but faced significant opposition as the laws targeted Labor in particular: the ALP stood to lose 98 per cent of its donations, whereas the Liberal party would only lose 75 per cent.

Nonetheless, NSW still maintains the strictest rules about who can donate. Tobacco, gambling and liquor ‘entities’ are prohibited from giving, as are property developers. These stipulations have been keeping the NSW Independent Commission Against Corruption (ICAC) busy recently, as it has emerged that several prohibited donors have used associated entities of the Liberal party to channel donations illegally. By donating to Liberal associated entity the Free Enterprise Foundation, which then donated to the Liberal party, prohibited donors seemingly hoped they would be able to continue giving money to the Coalition without getting caught. Indeed, the fact that several interests have been willing to risk breaking the law to donate suggests that making such donations reaps results.

It’s not just a lack of caps and limits that present a problem – Australia’s donation disclosure laws also lack transparency.  If you want to see who gave money between July and September 2013 – the final months before the election – you’ll still have to wait until February 2015. By contrast, New York City elections – covering a similar population to Melbourne and Sydney combined – require daily disclosure in the fortnight leading up to each primary and the general election day, and there are sixteen regular disclosure deadlines a year otherwise. The advent of the internet has made this an achievable feat, though Australians must still wait until seven months after the end of the financial year, when the election is all done and dusted, to see who helped the ruling party get into government.

To make matters even less transparent, we are only told the identities of those who make donations exceeding $12,400 (indexed for inflation). And because the state, territory, and federal divisions of each party are considered separate legal entities, it’s possible to donate that $12,400 to nine different branches of your chosen party – that’s $111,600 – before the party has to tell the Australian Electoral Commission who you are. The existence of ‘associated entities’ – organisations affiliated with particular parties that are technically separate – makes the task of tracking donations harder. This means you can donate over $100,000 to one party and no-one will ever know. And even if you decide to donate more than the threshold, it could be 19 months before the public knows.

Unsurprisingly, this situation did not come about by accident. Before 2006, the threshold for disclosure was $1500. Then the Howard government lifted the limit to $10,000, arguing this was necessary to ensure a ‘fairer, more competitive’ political system. How exactly the reform fulfilled this promise was not explained. Despite its policy to reduce the threshold to $1000, in six years of government, Labor failed to fix the problem. Instead, Prime Minister Gillard tried to do a deal with the Coalition to reduce it to $5000 and apportion a larger share of public funding to political parties. Outrage at the perceived cynicism of this proposal led to it being dropped – people don’t like to hear about politicians apportioning more money to themselves, and the Coalition chose to exploit this – and, like so many proposed reforms under the Rudd and Gillard governments, we ended up in the same place we started. (It did not help that Gillard’s reforms stood to entrench the position of the main parties, either.)

Nonetheless, Labor partially practices what it preaches. Federal Labor does more than is required by law in its declarations, reporting the identities of donors over $1000 to the AEC, though state branches do not do so. The Liberal party does only what is legally required – reporting anything above $12,400 to the AEC. The Greens, however, publish information on donors over $1500 every quarter on their own website. If you hadn’t already noticed, there is a pattern here: while Labor will at least pay lip service to fairness and transparency in political finance, the Liberals have, for a long time, been highly resistant to any notion of curtailing the ability of private interests to donate.

One of the key problems in political finance reform – the issue that has led the US to the complicated position in which it finds itself today – is the fine line between the promise of a fairer political debate and the potential to quash legitimate free speech. Thus, although the US has caps on how much can be donated to parties and candidates, currently there is no limit on how much third parties can take or spend. This has led to the rise of so-called Super PACs (Political Action Committees), which spend hundreds of millions of dollars on swaying electoral results. This obviously undermines the whole point of having caps on parties.  According to Melbourne Law School political finance expert Associate Professor Joo-Cheong Tham, ‘Regulating money anywhere can be like flattening a bump in a waterbed. The risk is that big business interests (and union money) will flow into unlimited and cleverly designed “issue advertising” with an underlying partisan purpose.’ This is exactly what has happened in the US.

And although Australians may scoff at American excesses, the issue of free speech presents a significant legal barrier here, too. In 1991, the Hawke government passed the Political Broadcast and Disclosures Act, a dramatic reform prohibiting the broadcast of political advertising on electronic media during an election campaign, with the exception of a fixed number of advertisements that media companies were bound to provide for free to political parties. Minister for Transport and Communications Kim Beazley argued the changes were designed to undermine the influence of donors in politics, cutting corruption. The Liberals attacked the laws as an affront on free speech. Eventually the court found that the measures violated the implied right to political communication found in the Constitution.

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The political question of restricting who can discuss what political issues can be difficult to overcome, and raises very serious questions about freedom of speech – the idea of a private organisation being restricted in its ability to criticise the government is something not usually considered a part of liberal democracy. This potentially leads governments and courts into deciding what is and is not acceptable criticism which – even absent the hysterical talk of tyranny and the like – sometimes leads to arbitrary and unintended outcomes. Moreover, poorly designed restrictions could lead to a resource imbalance between the government and Opposition.

That is not to say such problems render reform impossible. Associate Professor Tham thinks that the combination of laissez-faire laws and laissez-faire attitudes to self-regulation ‘has seriously undermined Australia’s democracy. The integrity of representative government is under challenge from the cloak of secrecy shrouding political donations with large political donations sometimes disclosed more than a year after they were made. An insidious kind of corruption also pervades.’

He believes the best way forward is not, as some have suggested, to take the sledgehammer approach and make all political financing publicly funded, which would undermine the ability of individuals to donate moderate amounts of money to political parties they support. Nor would banning organisations like companies and unions be a good idea, notwithstanding the fact that doing so would probably also be unconstitutional.

Instead, as Associate Professor Tham wrote in an op-ed for The Age in May 2014, we should look to NSW’s regime of prohibiting certain interests. Making it illegal for companies in certain industries – property development, alcohol, gambling and tobacco, in the case of NSW – to fund political parties would not solve the problem of money in politics completely, but would take away much of the impetus for corruption that exists currently.

Taking a leaf out of NSW’s book may sound strange given the level of corruption being uncovered by ICAC in that state, but the problem is not that the bulk of NSW political financing regulation is bad – though it is not perfect – but rather that the law is not being followed. The NSW laws can be tightened up: some fundraising organisations are not fully covered by the current rules. And despite allegedly engaging in what most would see as corruption by channelling tens of thousands of dollars from prohibited donors to the Liberal party, the greatest punishment former NSW energy minister Chris Hartcher could face is a fine of $11,000. So compliance measures need to be beefed up to make sure restrictions are taken seriously.

But Associate Professor Tham also thinks there are some further initiatives that could be adopted in the national regime: ‘There are also distinctive features of NSW laws worth emulating: its Policy Development Fund functions as a “start-up” fund for new parties, thereby reducing barriers to entry; and the exemption it provides to membership fees (including trade union affiliation) is founded upon respect for freedom of political association.’

Transparency, although it is a good thing, is not the be-all and end-all of political finance reform, says Tham. Merely knowing who gives the money does not necessarily undo the unfairness and potential corruption in the system. Transparency helps to a small degree, allowing journalists to uncover dodgy connections, but when faced with the undeniable power of piles of money, it can only be seen as the weakest instrument in the reform toolbox. Parties also need to make a greater effort at clean politics. Cultural change is needed; popular pressure can help drive this.

Like so many issues in a democracy, there is no silver bullet to solve the problem of big money in politics. Perhaps if Tony and Bill really were forced to wear the logos of their sponsors in Parliament, we would see our big political parties making a real effort to clean themselves up.

 

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Image credit: Cimexus