Bryce Edwards: Fixing the problems of money in politics

Bryce Edwards: Fixing the problems of money in politics

A consensus is building around the need for reform of New Zealand’s rules governing political party donations and spending. Many commentators are asking whether our electoral laws are fundamentally broken and, if so, how they should be changed. Currently the leading ideas appear to be to clamp down further on donations, better regulate loans to parties, and to increase the state funding of political parties.

The latest calls for reform have been prompted by revelations that New Zealand First apparently uses a separate “foundation” to get around the current rules – see last week’s Political Roundup columns on the substance of this scandal and its impact on the Prime Minister and her administration: What’s going on with NZ First’s mysterious donations and NZ First scandal raises integrity issues for the Government.

The strongest expression of the need for reform has come from Victoria University of Wellington’s Max Rashbrooke, who writes in the Guardian that Prime Minister Jacinda Ardern has a responsibility to “to clean up the mess”. He argues that “if her government’s famous pledge to be the most ‘open and transparent’ ever is to mean anything substantial, she cannot let the donations regimes stand” – see: A weeping sore – Jacinda Ardern must clean up New Zealand’s political donations mess.

Rashbrooke calls for state funding of parties, and he generally wants more transparency imposed on the parties: “In return for allowing parties that power, New Zealanders might reasonably expect much greater transparency about their finances: their expenses, membership fees, contributions from affiliates, other sources of income, assets and so on. This would help limit financial murkiness and is easy to achieve from a technical point of view. Britain, for instance, requires all political parties to publish annual accounts and makes them publicly available on the website of its Electoral Commission.”

Electoral law specialist Andrew Geddis endorses a wide-ranging investigation into reform, saying “Those are proposals that New Zealand ought at least to consider seriously. For as long as the country continues to leave the funding of political parties and candidates up to those individuals and groups with wealth to spare, we will see scandals like the current one reoccur” – see: NZ deputy PM under fire, but maintains no laws broken in party donations scandal.

Geddis points out that NZ First’s arrangements might actually turn out to be legal, which would be even more reason to hurry up reform: “It would demonstrate New Zealand’s electoral law simply is not fit for purpose. It would mean a key part of the government can be intimately connected to a legally opaque foundation that has raised hundreds of thousands of dollars from primary industry leaders, wealthy investors and multi-millionaires; that the foundation can use that money for the benefit of a party and its MPs; and that no one outside of the party and those who gave the money need know what is going on.  Such a state of affairs surely would threaten New Zealand’s ranking as the world’s second least corrupt nation in the world.”

He also points out that “The country’s Serious Fraud Office already is examining allegations relating to the opposition National Party’s treatment of some NZ$100,000 in donations.”

When that National Party controversy arose late last year, there was also a round of calls for political finance reform. For the most wide-ranging call for reform, then, see Simon Chapple’s article, New Zealand politics: how political donations could be reformed to reduce potential influence.

Chapple mostly looks at recent Green Party proposals for reform, and endorses them, but suggests reform could be much more radical. For example, currently donations of under $15,000 are exempt from disclosure. The Greens say the threshold should be lowered to $1000. Chapple argues “New Zealand could go lower still, to NZ$200, without being radical”, pointing out that in Canada, “the maximum amount of an anonymous donation was set at C$200 in 2015, while in Ireland it is currently €100.”

Similarly, the Greens have proposed that individuals should have an annual cap of donating $35,000. Chapple says: “Again, New Zealand could go much lower without being out of step with other countries. For example, in Canada donations to each political party are capped at C$1500 a year. Like Canada, Ireland has a maximum annual cap of €2500.” Chapple also suggests that all donations from businesses, trade unions, and foreign sources could be banned.

The proposal to increase state funding of political parties was given a major boost last week when former National Party prime minister Jim Bolger promoted this on RNZ’s Morning Report, saying that it was needed to stop private wealth “buying influence” – see Thomas Coughlan’s Ex-prime minister Jim Bolger calls for state funding of political parties after NZ First, National revelations.

In this article, the Greens’ spokesperson, Golriz Ghahraman is quoted agreeing with Bolger: “We want our political donation system to be more transparent and not to be beholden to vested interests and state funding would be an amazing way to do that, it would make our politics equal.” And she is promising to push for that after the next election.

Ghahraman has also spoken about a clampdown on donations in terms of freedom of speech, suggesting that current laws need to be amended because they allow some to have a louder voice than others – see Henry Cooke’s Simon Bridges rejects state funding of political parties.

The same article reports that the National Party opposes increased state funding. Leader Simon Bridges also questioned whether the NZ First scandal even indicates that reform of the financing rules is required, saying that it could turn out to be that NZ First are actually doing something illegal, and hence the laws are fine, but they need to be policed better. He questions whether the Electoral Commission currently has enough powers to investigate such cases.

But would state funding fix the current problems with money and politics in New Zealand? Or might it actually make things worse? I dealt with this question late last year in a Political Roundup column, Should taxpayers fund political parties?, and with my own analysis: State funding of parties is bad for democracy.

An editorial in the Dominion Post last week also raised some concerns about how state funding would work, pointing to the argument that such an intervention is likely to professionalise the parties further, pushing the politicians further away from the voting public – see: State funding of political parties one way to remove the doubt and questionable deals.

Here’s the main point: “The modern democracy has been characterised, in part, by the rise of a political elite removed from those they purport to represent. Greater state funding might widen that gulf by removing the need to go to rank and file members for support, further centralising power in the parties. Ring-fencing that funding around established parties and effectively outlawing donations might also hamper the efforts of other, smaller groups keen to get involved.”

Of course, there might be solutions to such problems. And in Max Rashbrooke’s article, he puts forward “democracy vouchers” as the answer, “in which every citizen is given a small amount of money to donate to the party of their choice. This could radically democratise party funding, encourage politicians to develop policies that appeal to poorer and middle-income people, and help newer parties get off the ground.”

How likely are we to see any reform? The Government has already signalled that state funding is not a starter, with Justice Minister Andrew Little saying late last year that it won’t happen, because it’s “not our tradition, it’s not our culture” – see Dan Satherley and Simon Shepherd’s State-funding political parties ‘not our culture’ – Andrew Little.

Little did indicate back then that “some changes are possible before the 2020 election” in terms of political finance reform. Also at that time, he “signalled a review of the country’s political donations regime and says some electoral law changes could be in force by 2020’s election” – see Victoria Young’s Justice minister to review political donations disclosure regime (paywalled).

According to this earlier article, “Little has instructed officials to look at the electoral laws including the disclosure of donations, saying he wants to start a conversation”. And he is quoted saying, “We are dependent on contributions from outside and we need to make sure we don’t have a regime where policy gets bought and candidacy gets bought. It’s about having transparency.”

However, also speaking about the general regime of political finance regulation, the Prime Minister is reported saying that New Zealand had a “pretty good suite of measures when it comes to electoral law” and “Our laws are adequate”.

This seems unlikely to change, and more recently the Government has signalled the reform of political finance rules is now no longer going to happen prior to the election.

Finally, for a satirical look at the current issues of political party financing, see my blog post, Cartoons about the NZ First donations scandal and political party funding.