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Political Finance in Australia: A Skewed and Secret System

The following comes from the Democratic Audit of Australia at Australian National University, to whom thanks for permission to reprint this Executive Summary, and from whose website the full report can be downloaded in pdf (700KB).

Political Finance in Australia: A Skewed and Secret System
Democratic Audit of Australia: Focused Audit Number 7
by Joo-Cheong Tham and Sally Young (both University of Melbourne)

Executive summary

This audit directly addresses the controversial role money plays in Australian politics by asking the question: How democratic is the way political parties are funded in Australia?

It identifies two central problems with the funding of Australian political parties: a lack of transparency, with secrecy a hallmark of private funding, political spending and the use of parliamentary entitlements and government resources; and the political inequality that is maintained and perpetuated by Australian political finance. The distribution of private funds favours the Coalition and ALP and so do election funding, parliamentary entitlements and state resources like government advertising. This is especially the case when these parties hold government. The broader picture then is one of institutional rules designed to protect the joint interests of the major parties by arming them with far greater war chests than minor parties and new competitors. While electoral competition exists, it is largely confined to the major parties, with players outside this cartel disabled by financial disadvantages.

To address these problems and other deficiencies, 35 recommendations are made in four areas: private funding, public funding, government advertising and political expenditure.

Recommendations in relation to the regulation of private funding

Recommendation 1: Changes enacted by the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) that reduce disclosure obligations should be repealed.

Recommendation 2: Changes enacted by the Act requiring third parties to lodge annual returns should be amended to require parties and associated entities to disclose details of political spending.

Recommendation 3: Changes enacted by the Act that broadened the definition of ‘associated entity’ should be amended to include less formal means of influencing party activities and restricted to entities wielding a significant level of influence.

Recommendation 4: Payments at fundraisers and like events be deemed ‘gifts’.

Recommendation 5: Parties and associated entities submit ‘gift’ reports disclosing details of gifts received by them.

Recommendation 6: Parties and associated entities should be required to make more frequent disclosure and especially during election periods.

Recommendation 7: Adequate resources must be provided to electoral commissions to enable them to effectively enforce disclosure obligations.

Recommendation 8: All returns, or at least those of parties with significant income, be accompanied by an auditor’s report verifying accuracy of returns.

Recommendation 9: Large contributions should be taxed.

Recommendation 10: Contributions from persons and companies holding contracts with federal and State governments should be banned.

Recommendation 11: Bans on contributions from companies with particularly strong interest in governmental actions should be investigated.

Recommendation 12: Foreign donations should be forfeited unless full disclosure is made and consideration should be given to banning foreign donations.

Recommendation 13: Corporate political spending should be heavily taxed with a view to eventually imposing a ban on such spending.

Recommendation 14: Measures to improve the internal accountability of companies and trade unions should be considered and, if instituted, introduced simultaneously.

Recommendations in relation to the regulation of public funding

Recommendation 15: In order to receive election funding, parties and candidates should be required to document their actual expenditure.

Recommendation 16: Failure to comply with disclosure obligations should result in a deduction of election funding.

Recommendation 17: In conjunction with taxing large contributions, parties and candidates should only be allowed to receive donations below a specified amount as a condition of receiving election funding.

Recommendation 18: If expenditure limits are not imposed, parties and candidates should be required to cap their spending as a condition of receiving election funding.

Recommendation 19: The possibility of requiring parties to dedicate some of their public funding to activities which benefit the polity such as long-term policy development, party building and encouraging political participation (as in other countries) should be investigated.

Recommendation 20: Changes enacted by Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) increasing and extending tax-deductibility for political donations should be repealed.

Recommendation 21: An income tax credits system like the Canadian system should be considered.

Recommendation 22: There should be increased accountability and transparency in regard to the use of parliamentary entitlements including a concise, publicly-available document outlining all available benefits as well as annual reports documenting MPs’ expenditure.

Recommendation 23: New guidelines should restrict MPs to using their printing and mail entitlements only for parliamentary or electorate business and not for party politics or electioneering.

Recommendation 24: There should be regular independent scrutiny of the use of parliamentary and public benefits including MPs’ adherence to the guidelines. Audits and reports should be made publicly available.

Recommendation 25: Consideration should be given to greater restrictions on the use of parliamentary entitlements during election campaigns.

Recommendations in relation to the regulation of government advertising

Recommendation 26: There should be new guidelines prohibiting the misuse of government advertising for partisan purposes.

Recommendation 27: There should be a mechanism to monitor and enforce compliance with guidelines on government advertising. Consideration should be given to the Senate Finance and Public Administration Committee’s recommendation that the Auditor-General scrutinise the advertising content of government ad campaigns valued at $250 000 or more.

Recommendation 28: There should be annual reports on government advertising and public opinion research. These reports should document spending and also include evaluations and results for each campaign.

Recommendation 29: Consideration should be given to imposing ‘public interest’ licence requirements on broadcasters so that they donate free time for government advertising of a community/public service nature.

Recommendations in relation to the regulation of political expenditure

Recommendation 30: Parties and candidates should be required to disclose details of their political expenditure.

Recommendation 31: Expenditure limits for election campaigns should be re-introduced with careful consideration to their design.

Recommendation 32: Policing and enforcement of such limits would need to be undertaken more comprehensively than in the past when limits were widely ignored due to lack of enforcement.

Recommendation 33: Overall campaign spending limits, if set at a reasonable level and enforced properly, would force parties to limit their spending on paid advertising.

Recommendation 34: Free air-time should be widely available.

Recommendation 35: Commercial broadcasters should be required by legislation (as in the US) to provide broadcast time for election advertising at the lowest possible rate, to counter the current situation where candidates and parties are reportedly paying unusually exorbitant rates.

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Political financing

The major problems with politics arise from the power of parties over the elected MP’s.  The party machines have become an industry in themselves, where the people involved have no interest in anything but the perks and power of having their party in government.

Regrettably, too many MP’s have shown themselves to be far more interested in the perks and their pensions than they are in representing the interests of the people of their electorate. The result is a handful of ‘power brokers’, who, as Howard put it in another context,  ‘are far more interested than their own (fossilised) ideas than in the good of country’ (A case of the kettle calling the pot black, with a vengance!

The simple solution is to scrap all tax payer political funding, all industry funding, and limit business contributions to a maximum of $10,000 per business, no matter how many branches they may have, and restrict individuals to $1000, with the requirement that the individual must be of voting age, and that all subscriptions must be recorded on a public register.

Restrict the contributions to the candidate/s in the electorate in which they reside or operate, and allow the candidate to fund their campaign from their own resources to a maximum of one for one, contributed.

Cost electoral support visits by party heavies against the funds of the candidate, to prevent funds being transferred across electorates.

Scrap the payment per vote garnered, forthwith. End all public funding for party affiliated ‘think tanks’.

Finally restrict the time a person may be in politics to a maximum of three terms.

This would ensure a continual influx of fresh ideas from people with recent contact with real life, minimise the forming of power blocks and open the system to genuine community involvement.

It may also encourage people of competence, and hopefully even talent, who are prepared to contribute their skills to the well-being of the country without their egos being enmeshed in the sort immature point scoring antics exhibited by so many of the present incumbents.
    This should encourage communities to select and support candidates to promote their interests and help dispel the ‘god king’ mentality that appears to have so many adherents.

This idea that once elected ‘leader’ that person becomes ‘all knowing’ can be dispelled simply by looking at the current ‘leaders’, Howard and Beasley.

This would  be the death of the party system?  Wouldn’t that be wonderful?

Let Qantas shareholders decide

Malcolm B Duncan, re “Take the story of the day - the Qantas takeover bid.   That will involve policy decisions which, in turn, will involve the disclosure of a great deal of commercially sensitive material, not least material that is sensitive to the people's interest as the majority shareholder.”

I’m pretty sure that the Qantas bid can be resolved by shareholders alone. Considering that Macquarie Bank is Australian owned and the federal govt no longer holds any stake in Qantas. There is no need for govt interference here.

Re “We actually need a national airline in majority public ownership in order to back up the Air Force in times of emergency.” Are you suggesting that the federal government should buy back Qantas? I’m not sure how much value a 747 is to the Air Force anyway. If we need more Air Force assets, we should buy aircraft designed for the intended military purpose.

I have to agree with Roger’s comment that “Governments have no business being in business. Collecting tax or excise is not the same as running a government owned corporation in direct competition with private concerns who are not constrained by political interference and populist policies.

Malcolm, I think we need to get used to corporate ownership being borderless. This is not a one-way street, Australian companies are buying up offshore assets, some examples. Macquarie Bank owns motorways in North America and airports in Europe. Westfield owns shopping centres throughout the US. The NAB owns banks in the UK and NZ. Other Australian firms with significant holdings and profits based offshore include Paperlinx, Brambles, ANZ, Rinker, James Hardie, Sims and QBE. This is globalisation in practice.

Borderless huh?

It sounds as though it has face validity  Gareth Eastwood but it ignores several realities peculiar to Australia.

1.    We are a vast landmass (apologies to Taswegians - you are generically included).

2.    We have a relatively small population.

3.    Arguably, the population we have now has reached sustainable limits.

4.    Our Constitution is unique and (at least until the Tuesday before last) presented unique inherent differences in the balance in funding/revenue raising between the States and the Commonwealth.    That will now undergo considerable change following the Work Choices Case.    The net political effect of it will be massive instability as, inevitably, this government or one of its successors will lose power to a radically different ideology (whether that be the unions or, further down the track some form of Greens.)

For those reasons at least I maintain that we are unique and we need unique approaches to our particular problems.   Adopting a mindset that we can operate like a similarly sized landmass e.g. Europe, the Rebel Colonies or Canada simply ignores 2 and 3 above.    Parliaments have a responsibility to legislate for all the people and I don't see that happening at the moment for the poor or the poor bastards in the bush.   Simply assuming that a foreign model will resolve that responsibility ignores reality. 

I shan't even start on local companies sending profits off-shore or the morality of the market.

Are Academics really necessary?

For my views on political funding generally see my "Let me at the trough" in the Political Donations thread.

More importantly, however, this piece is a perfect example of one of the chief sources of malaise in the polity: assume the status quo.

This is neither an argument for abolishing political funding nor one for allowing open slather.   Rather, it is an argument for regulating it further.

The problem with regulating it is the problem we have now both at State and Federal level: the regulators are the people who are already elected.   For those of us who are not, we simply have no say.

A close examination of any electoral law will demonstrate the way the incumbents advantage themselves to the detriment of those who would be incumbent.

The major problem with the proposals contained in this drivel from a couple of academics who, no doubt, got paid to think this crap up is precisely that they got paid to do it. If they actually went out and ran for office without being paid, they might be more inclined to my way of thinking. More accountability sounds lovely - all warm and feely and gushy and pro-democracy and motherhood and same-sex marriages and everything else that is good and Australian - like Aeroplane jelly really (oops - we sold that didn't we?).

Try running a political party (or even running for office). When one has to comply with the sort of regulation these two duffers want, one finds, like the GST, that one spends an inordinate amount of time keeping compliance records as opposed to what it is actually about - campaigning and selling the message. More time gets spent accounting for the money than actually having the time to earn it.

Effectively what they are proposing, whether they realise it or not, is a diminution of democracy.    The accountability they wish to introduce really means that only an organised party with the resources to employ an accounting branch (there's $100,000 before you even start to print a flyer) can run.

Up theirs for the rent.

As for Roger Fedyk, you are wrong again but not quite so comprehensively this time. There are legitimate reasons for things being kept from the public: we don't disclose infromation which might compromise active operations for example (whether they be of a policing, investigative or military nature). The reason is that premature disclosure may compromise the operation or place lives at risk.   We don't disclose commercially sensitive information which may threaten the waste of public money or unfairly prejudice or advantage a participant.   There are many other examples.

In order to head off the inevitable: yes, secrecy is always liable to abuse and there are those who will always seek to gain an advantage from non-disclosure but there are ways of controlling that: the Court system is one; the auditor-general another; ultimately the 30 year rule. Now, if you want to have a debate about shortening the time under the last, I'm happy to do so. In most cases it is difficult to see why it should not be shortened to perhaps six years but that raises questions of preserving reputations during the lifetime of the participants. Just because questions are difficult, however, does not mean they should not be asked. Ultimately it is a question of balancing fairness. There is not much fairness in the current system.

Over to you old chap but I don't think open slather is a sensible model for governance.

For Starters

Malcolm, as I see that we agree in substance (does that make you equally as wrong), I will address only the need to enunciate a starting position. Mine is unequivocal, the opening gambit is to allow no secrets. My disgust of all political parties is universal, even though my natural inclinations favour the policies of the Democrats and Greens

I doubt that a world of no secrets would come crashing down. Similarly, I doubt that the Australian electorate would be shocked at the necessary double-dealing, prevarication and bloody-mindedness that is required to negotiate the pitfalls of realpolitik.

I am not calling for any high-minded notions of fairness or truthfulness to come to the fore. Rather, if it takes deceit and sharp-practice to survive, then let us all be party to it openly.

You have already highlighted the dichotomy between the popular perceptions of our governance and the reality. Very few Australians would dispute that the modus operandi of political life is to lie and call it the truth and every variation thereof.

This dysfunctionality has produced the cretinous, my-vote-can-be-bought-for-a-bowl-of-porridge response that characterizes our political expression.

If we are all “bastards”, and in large measure we are by default if not deed, then let’s give that fact a good airing. It cannot be any worse than the lugubrious vista of political office as it now exists.

One comment on necessary trade secrets; Governments have no business being in business and therefore have no need of a dispensation. Actual businesses would not be affected except that they would no longer be able to gain legislative favours without their competitors and everyone else knowing about it.  If one wanted a commercial advantage via legislation then they would have to compete in an open market, the highest bidder gaining the favour. The rest would need to get more creative or die and Australians would benefit. This is not a radical notion, we already do it in many areas. Let’s extend it to everything

Seconds?

"Equally as" is poor usage - one or the other.

Substantively, Roger Fedyk, we do not agree.   Take the story of the day - the Qantas takeover bid.   That will involve policy decisions which, in turn, will involve the disclosure of a great deal of comercially sensitive material, not least material that is sensitive to the people's interest as the majority shareholder. I do not see why that should, in the negotiating stages, be publicly disclosed [see my submissions to the Cross-city Tunnel Inquiry on the NSW Parliamentary website].

The reason a "world of no secrets" would come crashing down is that there is no absolute truth. The burden of full disclosure of everything would be overwhelming and probably counterproductive (not entirely in point admittedly but I hope you see what I'm getting at.)   The sheer volume of information available now is already beyond us; what would happen if we had a duty of disclosure of everything?   I'll lay you odds that it would all be disclosed but you'd have Buckley's of finding the bit you needed.

Two examples of that: the documents ultimately produced re the Cross-city tunnel filled about 250 sq m, ran to thousands of pages and had deliberatly been produced willy-nilly, out of order and without an index (it's just because I'm used to those tactics that I managed to pick the eyes out of the mess fairly efficiently and with some help from others engaged on the same task - I doubt anyone has yet read every page); the release of the Nazi records after WWII - historians are still sorting through them. It's just too easy to swamp people with information. Here, I refrain from commenting on the tactics of Roslyn Ross.

Where we differ markedly I think is in the view that government has no business in business - you bet it does. That's how to generate revenue to defray the need to rely on taxes (remember the name of my Party?). The Constitution gave the Commonwealth the right to collect excise - that is inherently a business-oriented activity.    It also gave the Commonwealth the power over banking other than State Banking and likewise insurance.   That was not just regulatory power as Nugget Coombs so successfully managed in post-war reconstruction.

There is a real role in Governments having the ability to generate revenue by business activity - banks, insurance and more and more importantly as time goes on, information and how it is delivered (copyright is a live issue for example).

Qantas is a quintessential example. We actually need a national airline in majority public ownership in order to back up the Air Force in times of emergency. Equally, I find it gobsmacking that, in a country of this size, diversity and limited capacity that we have allowed communications infrastructure to be sold offshore - how does that compute? Distance has always been an enemy of efficient governance in this country - why allow foreign controlled corporate structures to control how we deal with it?

Certainly there are some areas where entrepreneurial skill is more effective than centralised control but can I just say to you - Enron?

Yours aye,

Malcolm

35 Points To Miss The Point

What is it that moves some people to rearrange deck chairs on the Titanic?

It is not the political finance system that is at fault in our governance system. The problems with finance are an artefact of the real problem, which is our system of governance.

Who was it who gave our politicians the right to decide things in secret in the first place? We elect these arseholes and then they automatically conclave, in secret, and come out and tell us what they want us to hear.

Since when, as a citizen and one of the 20 million genuine stakeholders, did it become acceptable for the government that I elected to keep secrets from me?

I demand to know everything and to hear all the arguments for every proposition. I want in-camera Cabinet meetings to be abolished immediately. There is nothing, absolutely nothing, that the government has the right to keep from you and from me.

They are accountable to all of us and it is time that we asserted our pre-eminence. This should not be a country run by politicians for politicians and their parties. This is a country that has elected representatives whose only role is to represent their constituents, not keep them in the dark. Read the Australian Constitution!

Get rid of these liars, thieves and con-men, get rid of the political parties and reclaim your country.

Eliminations

A school of thought in SA suggests that Premier Rann called the SA election on the last possible day so that he could exploit the publicity budgets of departments till the last possible instant.

Implementation of these recommendations would mean that donations paid by  property developers may become a little more transparent.  I wouldn't mind that, either. 

And let's not even discuss who's getting what from which corporation... 

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