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Political donations reform is not so easy

Jack Maxwell |  28 July 2015

Suited man holding dollar signThe need for reform of Australia’s political finance law is pressing. Last month, it emerged that Calabrian mafia figures have used donations to garner influence over members of Parliament. More recently, Bill Shorten’s appearance at the trade union Royal Commission has underlined Australia’s slack donation disclosure regime.

Money has become a potent force in Australian politics. Academic Graeme Orr has observed that, ‘in relative terms, money politics in Australia is not too far behind America’. The amount of money flowing to political parties is increasing dramatically. The amount received by the ALP and the Coalition increased by 37 per cent from 2004-05 to 2010-11. Moreover, the funds raised through private donations come predominantly from large donors. In 2004-05, 45 per cent of the money raised by the major parties came from donations of at least $100,000.

The waves of private money rolling into politics create a risk of corruption: the misuse of public office for private gain. The paradigm case is quid pro quo corruption, or the exchange of an official act for money. However, money also enables private interests to exercise undue influence over public decision-makers. If a donor is granted regular meetings with the relevant Minister, that donor’s interests will be, consciously or subconsciously, at the forefront of the Minister’s mind. Even where donors receive nothing in return, large donations give rise to the appearance of corruption. This undermines public confidence in the integrity of government.

The link between money and politics also undermines political equality. John Rawls thought that people should have a fair opportunity to hold public office and to influence the outcome of political decisions. However, donations confer on the wealthy privileged access to powerful public officials. In the absence of limits on campaign spending, those with financial means are also able to drown out the voices of those without.

To limit the role of private money in politics, most Australian jurisdictions use a combination of public funding and disclosure requirements. Political parties with a sufficient level of public support receive funding from the government, and parties are required to disclose private donations above a specified threshold.

However, this system is not up to scratch. First, public funding does little to reduce parties’ reliance on private money. Without limits on expenditure, public funding merely inflates party spending. Second, the existing disclosure schemes are too easily circumvented. Under the current federal system, only donations of more than $13,000 need be disclosed, and donations to federal, State and Territory branches of a party are not aggregated. A person can donate $117,000 to the ALP nationwide without needing to make disclosure. The efficacy of disclosure requirements is also undermined by the fact that donations aren’t disclosed for months or even years after they are made. The donations made in the critical final months before the 2013 Federal Election were not disclosed until February this year.

So what are the options for reform? First, we must tighten disclosure requirements. The threshold should be lowered, and donations to different party branches aggregated. Disclosure should be made in real time. In the ACT, all donations over $1000 made in the three months preceding an election must be disclosed within seven days.

Second, we should impose hard limits on private donations and political spending. Such measures have not been widely adopted in Australia. However, New South Wales has bucked this trend. In a financial year, a person may contribute only $5,800 to a political party and $2,500 to a candidate. Electoral expenditure by parties, candidates and third parties is also capped. Finally, property developers and tobacco, liquor and gaming companies are banned from making donations altogether.

These more radical measures raise significant constitutional issues. In 2013, the High Court held that a ban on donations by those not on the electoral roll was invalid. It impermissibly infringed the constitutional freedom of political communication. To avoid invalidity, limits on donations or expenditure must be tailored to pursue a legitimate purpose – such as preventing corruption – in a reasonable way. Another challenge to political finance legislation is currently before the High Court, this time targeting the New South Wales ban on property developer donations.

However, these constitutional questions should inform, rather than deter, a robust debate on the role of money in Australian politics. To ensure that public power is exercised in the public interest, and that citizens have fair access to our democratic institutions, we need legislative action on political finance.

Jack MaxwellJack Maxwell is a final year law student at the University of Melbourne who completed an honours degree in philosophy in 2012.

Political donations image by Shutterstock.



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Submitted comments

Thanks for a thoughtful contribution. In a political system is under stress, this is an area where progress should surely be possible. But that won't happen unless there is broad support for reform, so the article is timely.

Denis Fitzgerald 29 July 2015

Thanks for an overview of this massive problem. The average person wants equality, honesty and justice for all through our political process, so we have a long way to go. Politicians favour is bought and sold, no matter what Hockey and others say. Both sides play this game. However, banning all donation over $1,000 in any one year would not necessarily work. Generally, richer voters are better educated and have the money to donate, while the lower socio economic groups could not donate and therefore would not have influence, so that would not create a fair system. Also big companies have the power to advertise against policies they don't like, as we saw with mining companies. We must limit the misuse of influential power, however, I'm not at all confident this will ever happen.

Kate 29 July 2015

I definitely agree that controls over political donations need to be more closely regulated, and it would be a good idea to standardise rules across every jurisdiction in Australia. That way, there would be no room (nor excuse) for 'uncertainty'.

PaulM 29 July 2015

Is a $25,000 a seat for a dinner for access to politicians a 'donation' or just the cost of a dinner ticket? Or is is something else, or just 'politics'. This is what we've had in our state. Perhaps Jack could offer an opinion.

Eric 29 July 2015

Great article, Jack! White J in the Hockey defamation case stated that Australians regarded the type of political fundraising engaged by Hockey (North Sydney Forum) and Turnbull (Wentworth Forum) as acceptable. This piece questions that assumption in a measured and articulate way.

Raoul 31 July 2015

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