This briefing paper sets out ART’s thinking on the twin problems of funding election campaigns – the scramble for donations to provide the wherewithal for candidates to run, and the continual escalation of the costs of running a campaign.

PART 1:  CANDIDATE AND PARTY INCOME  addresses party income, including donations.  it shows which parts of party funding are from private sources and which parts are currently from the public purse.

PART 2:  ELECTION EXPENDITURE  sets out the figures on Political Party election receipts and expenditure 2018-2019 and Political campaign caps on expenditure in Australian and comparable Commonwealth jurisdictions, and then makes the case for caps on electoral expenditure.

In our view, both political donations and election spending should be capped. To see how, read on.

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PURPOSE OF THIS BRIEFING PAPER

The purpose of this briefing paper is to set out the Accountability Round Table’s (ART) recommended policy for Federal electoral campaign election fundraising and expenditure.

The Briefing Paper provides background information and argument in support of reform of political campaign finance, inclusive of the sources and amounts of election funding and the manner and amount of its expenditure.

It also looks at the related issue of better control of expenditure of taxpayer funds on community grants made for party political benefit.

It is divided into two major sections, the first devoted to sources of MP and candidate revenue that can potentially be used as election spending, with a view to looking at how effectively they are currently managed and what weaknesses there are in controlling misappropriation or undue influence.  The second part covers the problems associated with uncapped electoral expenditure.

It should be noted that in the overall objective of ensuring a reduction in undue influence by the few over political outcomes for the many, campaign finance is a subset of the exercise of power, which has many other forms of influence over political outcomes.

Power can be exerted to influence outcomes on a spectrum from the collegiate to the coercive. It can be a coming together of MPs and other interests over a wish to achieve the same objective. It can be the provision of a favour to further a personal or business end in exchange for a reciprocal gift of a different end for the giver, or power can be used for coercion or even blackmail in pursuit of a personal or party-political benefit.

But all these forms of power, while they can be closely related to money in politics are outside the scope of this briefing paper.

This paper focuses only on the relationship between the supply of campaign finance and its expenditure in pursuit of the principle of equal political representation of the governed by the government.

ART’s position, in line with its overall objectives, has been:

• To make political finance (donations and expenditure) transparent, accountable and democratic.
• To ensure members of parliament, candidates, parties and executive government decision-making are not influenced by donations.
• To ensure that grants and allowances from public funds not be used for private purposes, in particular in pursuit of a personal or party-political benefit (political parties being private entities).

ART has developed its thinking on these issues over the last 10 years, as described in Appendix 1.

Options recommended in this Briefing Paper are already established in several Australian State and Territory models and comparable jurisdictions such as Canada, New Zealand and UK.

This paper will inform recommendations to be advocated to all parties and candidates at the forthcoming Federal 2022 election.

THE PROBLEM

There are two major components contributing to the public perceptions of corrupt conduct and to the loss of trust [1] in the results of the electoral process:

• donations to political parties and candidates, and
• campaign expenditure by political parties and candidates.

The two have an obvious link: parties and candidates need to fund the communication and other costs of campaigning; donations must be attracted to provide those funds. Candidates and political parties seek to outdo their competitors which drives them to maximise their campaign funds. The need to attract funds creates pressures on leading members and officials of political parties and on candidates to raise funds.

Accordingly, caps on donations are a necessary but not sufficient measure to counter the pressures to raise ever more to meet increasing campaign expenditure.

Third party campaigners[2] are subject to similar pressures.

In aggregate, uncapped campaign expenditure by candidates, political parties and third-party campaigners are an extraordinary cost to the Australian community.

Policymakers and the public, however, tend to notice the problem of donations over the problem of expenditure and to imagine problem donations largely as private donations, overlooking the  public purse as both a source of legitimate public funding, and of improper even if not illegal diversion of public funds to serve political party campaigning ends.

A good deal of public attention has been paid to the problem of spiralling campaign donations and their capacity for introducing corruption to the political process.  They confer increasing political advantage to donors, the more they donate.  The effect is to skew the democratic process away from equal representation of voters in any particular polity. The few gain a political edge over the many.

The NSW ICAC has specifically drawn attention to the resulting effect of loss of trust in democracy;

A situation in which citizens believe elections can be bought or that there is some quid pro quo for helping a candidate win must be seen as seriously damaging to the proper functioning of a democratic government. A corrupt member of parliament can be voted out of office if elections are free and fair. But if there is a loss of trust in the election process, then the whole system of representative government is weakened.[3]

Uncapped campaign expenditure has great corrupting potential. But it is not yet an issue which has as great a recognition in the public mind as have excessive donations. We argue that it should do.

The solution then is to control not only the supply of donations by introducing donation caps – it is more necessary to control demand for them by also creating election expenditure caps.

Creating new rules and laws to govern both political donations and election spending will not prevent attempts at evasion. There will always be people who test any restrictions to the limit. Rules and laws will not eliminate bad behaviour. But what they will do is create a set of publicly accepted enforceable standards and a new set of social expectations for good behaviour.

PART 1: CANDIDATE AND PARTY INCOME

The rise in the extent of campaign donations and the illegitimate or unethical ways to raise and distribute them as new communications technologies and more sophisticated voter persuasion techniques are developed means the sky is the limit.  Political ‘necessity’ means demand for more and deeper pockets to win elections will continue to grow.  This has increased reliance on ‘third party’ donations from organisations that have vested interests in electoral outcomes, but are not themselves standing candidates for election and so are not subject to the rules that govern parties and candidates. There is no natural limit to this growth, fuelled as it is by the appeal of power.

The political need for ever larger sums of money increases reliance on those who can supply it. An ever-narrowing pool of key donors – the mega rich – become more essential and more influential on election outcomes and there is no limit on what they can give.

But because there is no cap on expenditure either, all sources of political income become vulnerable to misuse in pursuit of winning elections.

Funding for election campaigns comes from a wide and ever-increasing pool of sources:

1. Private Funding

(A) Private funding – donations

Donations to political parties by supporters for election purposes have at present some degree of transparency and control, but these controls are weak to non-existent. The present system relies instead on transparency reporting, carried out with a months’ long lag and a somewhat lackadaisical approach to how donations are described by those who must report them.

The primary constraints mentioned in the Federal Electoral Act are:

1. Political parties or candidates as well as political campaigners or ‘associated entities’ who pass a threshold test for registration are required to report donations to the Transparency Register. Disclosure of donations is required only above a high threshold for disclosure that applies to expenditure of more than $14,500 for 1 July 2021 to 30 June 2022. [4]
2. Foreign donations are strictly controlled
3. In kind donations are required to be identified
4. There is a relatively clear definition of who constitutes a ‘donor’.[5]
5. The Commonwealth Electoral Act has provisions to counter ‘Anti avoidance’ schemes and tactics intended to launder the source of donations, so the donor is clear on the transparency register.[6]

However, although these constraints are necessary, they are not sufficient.

They are inadequate to control escapades such as creation of a blind trust to hide donors to Christian Porter’s legal fees. While his was not a campaign donation, the temptation to others to utilise blind trusts as a form of money laundering for election donation purposes still remains. [7] There are plenty of trusts to be seen on the ‘donor returns’ section of the AEC Transparency Register. [8]

Equally, a primary requirement for “transparency” does not control the capacity of millionaires such as Clive Palmer to alter the course of an election outcome through sheer money power even if he is not personally standing for election.

The AEC transparency register shows of the top 12 donors in the AEC disclosure periods ranging from 2001 – 2002 to 2019- 2020 seven of them, totalling a massive $125,027,379 were made by organisations associated with Clive Palmer, Mineralogy Pty Ltd, Queensland Nickel Pty Ltd and Palmer Coolum Resort. The rest of the top 12 totalled $7,223,448, i.e., only 5.8% of the remaining non Palmer associated donations in the top 12 for that 18 year period. [9] Such dominance of political donations by three companies associated with one person over such a long period of time can only be described as undue influence to the point of monopoly.

It is important to note that only a tiny fraction of Australian businesses make donations to political parties. The vast majority do not. Among those that do donate, a disturbing proportion are potential beneficiaries of government approvals and contracts.

Furthermore, company directors and officials who authorise donations risk being found to have either (1) misused business resources for purposes other than the best interests of the business, or (2) attempted to have corruptly influenced public officials (i.e., MPs) to act to the benefit of the business.

As a further example of inadequate control, electorate based private donor groups such as the Kooyong ‘500’ or Higgins ‘500’ can raise from their wealthy electorates enough money to fund the bulk of campaign spending of other candidates standing for their party in less well-off electorates.[10] Once raised within a wealthy electorate, this money becomes internal party funding, so voters in less well-off electorates never know who, beyond the party, really contributed to the party political spending in their electorate.  Wealthy electorates are indeed rich pickings for those MPs and parties with incumbency, and the disadvantage to other parties and independent candidates who do not dominate wealthy electorates is obvious.

Another matter not currently covered by any controls is payment for political access. The ART submission to JSCEM of 2011 suggests, “the current practice of raising funds by offering access to members of parliament, particularly ministers and shadow ministers, should be made illegal”.

This was on the argument that “Payments for access are already a significant source of funding for political parties. Full details should  be promptly disclosed. If more rigorous disclosure rules are to be applied to other sources of funding but not payments for access, that source is likely to become an increasingly popular way to seek and receive funding — particularly for large amounts.” [11]

The section of the Act on which this argument was based [12] has not changed since 2011. It remains untested by a court of law as to whether it could be used to prevent payment for access.

The existence of so many blind spots show the current reliance on transparency as the primary method of private donation control is simply insufficiently effective.

It is hampered by:

• A high disclosure threshold meaning that up to a majority of donations are undisclosed. For the financial year 2020-21, $68 million income of political parties was undisclosed (38.6% of total receipts), according to the Centre for Public Integrity.[13] While some undisclosed income comes from other sources such as investment income, it is fair to assume that the majority comes from direct donations undeclared and indirect private donations, such as payment for political access.[14]
• No provision to aggregate together multiple successive donations by the same donor source that are each under the disclosure threshold.
• A months long delay between an election for which donations were made and the disclosure to the public of those donations.
• Lack of definition of what constitutes a “gift”.[15]
• No controls over payment for access such as for fundraising dinners.
• Ineffective restrictions on an MP’s post-parliamentary income from business entities affected by the former exercise of ministerial powers e.g., contracts, grants, approvals.

 

(B) Private funding  – party income

Political parties raise private funds through a range of means, including membership and affiliation fees, fundraising activities, donations from organisations and individuals, investments and loans. [16]

The estimate made in the 2008 Electoral reform Green Paper was that private party income, particularly membership and affiliation fees and returns on investments, contributed the majority of funds available for election funding and other party expenses – some 60% of total funds, the remaining 20% coming from donations. [17]

Current breakdowns of proportions of party income by source are a murky mess. Income that is not from donations are reported on the AEC Transparency Register as “Other Receipts”, giving no indication of their origins. [18]

Worse, many receipts shown on the Register are simply listed as “unspecified” giving no indication as to what type of income they represent and absolutely no indication of whether they are in fact a donation. At the time of writing, 4521 party income items were shown on the AEC Transparency Register as “unspecified”. [19]

In February 2021, the Grattan Institute estimated the private funding income for the two major parties to be:

LNP – private income 2019 – 2020 $47 million composed of 8% donations, 40% “other receipts”, and 52% of their private income remained undisclosed.

ALP – private income 2019 – 2020 $38 million composed of 11% donations, 49% “other receipts”, and 40% of their private income remained undisclosed. [20]

That is to say 92% of LNP private income and 89% of ALP private income is from untraceable sources, even though some of the amounts are disclosed (as ‘other receipts’).

Neither of the two Acts making legislative changes to financial disclosure that were finalised in December 2021 made any changes to the reporting requirements for political party private income.[21]

Political parties are private entities in the centre of the public realm of Australian democracy. They are essentially private fund raising and marketing factories for promoting the political products, – ideological and human, that they produce. But because they occupy such a pivotal position in our political system, they should be obligated to much greater levels of transparency about sources, uses and amounts of private funding and income.

Sources and amounts should be constrained via caps on donations of all forms, direct and indirect, and detailed public descriptions of those sources and amounts that remain should be mandatory.

2. Public Funding for Political Parties and Candidates – Formal

(A) The automatic payment amounts

Other sources of electoral campaign funding over and above private donation have since been added, such as direct government funding as of the 2019 Federal election, by an amount known as the “Automatic Payment amount”, a flat rate of public funding which from 1 January 2022 to 30 June 2022 stands at $10,656. [22]

This payment is made “to the agent of each eligible political party, candidate, or Senate group, as soon as practicable after 20 days after the polling day for an election.”[23]

(B) The Primary vote payment

The Automatic Payment amount is topped up by rebates to parties and candidates that receive more than four percent of the primary vote, for each formal first preference vote received. For 2022, the amount is $2.914 per eligible vote.[24]^,[25] This latter form of campaign funding was the one first introduced by the Hawke Government in 1984.[26] The latter form of funding has been criticised as entrenching winning parties and unfairly tilting the playing field against smaller players and not taking account of funds raised by other means. [27]

Both these forms of government funding are indexed six monthly, guaranteeing a regular increase.

The rationale for providing government funding for election expenses since 1984 has been that it was intended to “provide a greater equality in the opportunity to present policies to the electorate and to reduce the risk of corruption and undue influence“.[28] In other words it was intended to reduce party and candidate dependency on private funding. However, in practice it was, and continues to be treated as a supplement to private funding and to any other sources of funds that can be appropriated and used for electoral influence.

(C) Salary, electoral expense and other allowances

The general principle for parliamentarians’ use of salary and allowances paid for out of public funds is in general that they should be used for the public good, and specifically (depending on the particular allowance) that they be used in accordance with the uses and standards set out in the relevant legislation or regulation.

There is considerable variation however, in how both regulation and scrutiny of use of salary and allowances are managed.

Senators and members receive an annual base salary, the use of which is entirely at the discretion of the member and is not subject to checking.

Electorate allowances provided to MPs for staff and facilities are prone to misuse.

The current IBAC inquiry in Victoria on MP’s use of electorate office staff and resources for party political purposes is an example of what can occur. But this inquiry has only revealed what it has because of two factors absent at the federal level.

First, the Victorian premier himself referred his own party activity to IBAC, the Victorian integrity commission. Without this referral, investigation would have been impossible as investigative reach of integrity commissions rarely extend beyond the public sphere, especially into political party activity.

Second, there is an integrity commission and an ombudsman available to carry out the investigation, both lacking at the federal level

Other allowances on top of salary are residential internet and telephone expenses claimable for up to two residences and a private plated vehicle, or allowance in lieu of private plated vehicle. These are the main forms of publicly funded parliamentary remuneration. [29] [30]

The use of salary supplement allowances is at least broadly specified, i.e., expenses claimed for internet usage should be for actual internet usage. Cars provided through the public purse should at least in theory, probably not be driven to political party meetings or used to transport people or materials for electoral purposes, on the basis that this is a party-political benefit. Nevertheless, cars are used for both.  That is allowed by the Parliamentary Business Resources Act 2017 definition of “parliamentary business”, [31] which includes “the party-political duties of the member” which the Parliamentary Business Resources (Parliamentary Business) Determination 2017 Schedule 3  clarifies as;

” a)         a formal meeting of the political party (including a meeting of the party executive, a committee or a subcommittee);

1. b) a national, state or territory conference.” [32]

This definition provides a small window of opportunity to use the public purse for a private party-political benefit. The admission into allowable salary supplement expenses of party matters is a quite recent phenomenon, occurring since the 2016 Tune and Conde recommendations.

A high level of scrutiny is warranted for monitoring the use of these facilities and allowances, so they do not creep out of hand through shared understandings and reinforcing group affirmations, that it is ok to push the boundaries between personal use and party benefit.

In 2016 the Parliamentary Entitlements System was reviewed on the basis “that the ad hoc and piecemeal reforms adopted by successive governments mean the system is complex, ambiguous and out of step with community expectations“. [33]

This review resulted in a consolidation of regulation under the Parliamentary Business Resources Act 2017 (PBR Act) and the Independent Parliamentary Expenses Authority Act 2017  (IPEA Act).

But even this reform still leaves a maze of rules and regulations under various departments and with variable oversight. It’s not surprising that parliamentarians either fall foul of the existing regulation unintentionally or are able to game it with ease if they want.

Additionally, the reporting requirements for claims for expenditure of parliamentary allowances are clear on transparency for dollar amounts claimed but other than the information in general headings, remain completely obscure as to what precisely the claims were actually for.

(D) Tax deductibility of donations

Indirect subsidies also accrue to political parties and candidates via tax deductibility of donations. Party membership payments are tax deductible, and gift or donations made to parties, candidates or MPs which are worth $2 or more can be claimed to a ceiling of $1,500. [34] These deductions constitute a form of public funding since they represent income foregone to the public purse.

Collectively, donations, direct subsidies of various sorts, and tax deductions constitute the formal sources of external political income and thus potentially, electoral funding, beyond the funds raised internally by party organisations.

But there are also informal sources of electoral funding that can be accessed and misused.

3. Public funding – gaming government funds

Australia, unlike other countries, has historically relied on transparency and disclosure as its primary control on election finance. The idea that in addition to disclosure, “a range of alternative regulatory approaches, including placing statutory bans and caps on donations, and statutory caps on expenditure on elections” was first suggested in the 2008 Electoral Reform Green Paper. [35]

However, these suggestions have never been implemented.

In addition, as Holmes points out, “Under the Commonwealth Electoral Act 1918 as it currently stands, registered political parties are eligible to receive public election funding regardless of electoral expenditure”.  The failure to consider the two together opens the way for perverse incentives for gaming the regulations.

The fact that AEC controls are only exercised over the sources of funds for electoral campaigns and not over the amounts that can be spent, creates a motivational driver for constant probing for weaknesses in the donations regime, by donors and recipients alike, avoidance and evasion of transparency measures also by both sides, and an absolute incentive for costs and therefore donation thresholds to spiral ever upwards.

The pressure to outspend political rivals is insatiable, and can also give rise to the unethical, even if not illegal supplements to party and candidate election spending, through practices designed to achieve the same end of swaying the public vote, this time using access to the public purse obtained by government incumbency.

Examples include:

• Pork barrelling electorates. In per capita terms, marginal Coalition seats have received $184 per person in national grants, while safe Labor seats received just $39 per person since 2013 [36]. The use of public funds via ‘pork barrelling’ in selected electorates is simply yet another boundary pushing diversion of public funding to the self-interested purposes of party re-election. [37] This issue is covered separately below.
• Using government advertising as de facto party-political advertising paid by the public purse, and
• Potentially utilising budget “decisions taken but not yet announced and not for publication” as an electoral war chest for pre-election spending. [38] [39]

It is precisely these unethical, but not illegal practices that public funding was first designed reduce or eliminate.  Yet still they multiply.

Another source of government funds and resources which are potentially available to parties and sitting MPs for misuse for party electoral support are those dubbed by Yvonne Murphy as “Tools-of-trade allowances.”[40]

She notes the growth of systemic reviews of the spending of public funds on parties and politicians for the conduct of their jobs, but then adds:

“Yet one set of taxpayer funded allowances has consistently escaped the gaze of such reviews and has received little attention from scholars: the staffing, office space and information and communication technology (ICT)  equipment  provided to qualifying parliamentary parties to facilitate them in organising and supporting their members and working with government and other  parties to coordinate parliamentary  business“.[41]

The low profile of such allowances has made it possible for them to avoid regular scrutiny, so it is very difficult to tell to what extent and how widely they are abused for party political ends. But the potential is certainly there and occasionally boils to the surface in a scandal, such as in 2015 when then Liberal Speaker of the House of Representatives Bronwyn Bishop used her parliamentary travel entitlements to attend a Liberal Party event. .

In the “red shirts” affair, Victorian Labor eventually reimbursed the State for a substantial amount of electorate office expenses that had been used for campaign purposes.[42]

Murphy points out that her research into use of parliamentary resource allocations was made difficult because of “the lack of formal guidelines governing the allocation of parliamentary party resources and the lack of formal review mechanisms“[43].

Her summation: “this is an area of parliamentary life ruled by convention rather than formal regulation, discretion rather than certainty and backroom negotiations rather than transparency“[44].

It is clearly an area ripe for reform that can only be addressed by tackling it amongst capping and reviewing the totality of the various forms of campaign spending.

As in the corporate sector, where capital has a well know tendency to monopoly unless regulatory brakes are applied, electoral competition will surmount all obstacles and pull in all available resources in its pursuit of political monopoly. Corporate Australia must bow to the anti-monopoly powers of the ACCC, but where are such powers to control competition overreach within the Electoral Commission?

What must be done therefore, is to remove the incentive for election competition to create an expanding campaign funding black hole sucking in all available forms of finance, no matter their source.

This means controls are required on election spending as well as on campaign funding. Controls on election spending includes defining ‘in kind’ spending, third party spending, resource allocation spending and where the line between government proper expenditure and using government funds for party political purposes should be drawn.

OPTIONS FOR CHANGE – CANDIDATE AND PARTY FUNDING

1. Restricting and disclosing donations

There are no limits on the size of donations that may be made by corporations or individuals to a federal candidate or political party. However, limits apply in half the states:

• New South Wales (AUD 6,600 to political donations to parties and AUD 3,000 to independent candidates),
• Victoria (AUD 4,160 to any party or candidate), and
• Queensland (for parties, AUD 6,000 to the party and AUD 4,000 to the candidate; for independents AUD 6,000).

In contrast, in Canada, only people on the electoral roll can donate, and only to a maximum of     CAD 1,675  per year (adjusted periodically) aggregated to all parties, constituency associations and independent candidates (i.e., corporations, trade unions, associations and groups cannot make contributions). In the words of the Quebec Court of Appeal, this ensures that citizens are central to the electoral process and prevents corporations from dominating political debate during election campaigns. There are also caps on campaign expenditure. There is public funding of a portion of campaign expenditure but at a rate effectively lower^,  than already applies in Australia (estimated at almost four times as much).

Canada’s lower level of public funding does not seem to have harmed Canadian democracy! Indeed, the reforms decentralised fund-raising and hence control of political parties – something Australian rank and file party members would welcome.

The UK has no cap, but donations are limited to “permitted donors”, who must be registered voters or other entities registered in the UK, including companies, trade unions, building societies, friendly societies and partnerships. This has had a major impact on the number and size of corporate donations.

New Zealand has no cap on donations.

Political donations over AUD 1,000 from foreign entities and individuals were banned in 2018 in Australia. Other than this there has been no substantial change to Australia’s Federal political funding and disclosure regime despite recommendations made to several parliamentary inquiries into these issues.

Whilst limits on donations have not been shown to prevent the problems outlined above, they can be designed to reduce the corrupting potential of donations, as suggested below.

Recommendations

1. There should be uniform political donations regimes across Australia, based on a Federal standard as recommended below.
2. Donations should be permitted only by citizens (natural persons) who are enrolled and entitled to vote in Australia.
3. Donations by each donor should be capped at an amount that is reasonably within the capacity of each voter e.g., AUD 1,000 per annum.
4. All donations and gifts in aggregate made by individuals to all Federal election candidates and parties (including related entities) in each financial year should be disclosed in continuous real time (1-2 business days).
5. All monetary donations should be credited to the campaign account.
6. The ATO tax deductions for donations to registered political parties’ candidates should be maintained. Independents and new party candidates that stand should have their registration and donations deductibility apply from the time that they register in an electoral cycle.
7. The definition of donations and other gifts should be extended to include disclosure of all payments for dinners, social functions and (by default) any other form of fund-raising.

Each voter’s donation cap of AUD 1,000 in each financial year would effectively prevent ‘donation splitting’ intended to circumvent limits on donations and disclosure.

2. Public funding

Recommendation

Public funding of Federal election campaigns through the payment per vote should be available to all candidates and the threshold for parties and candidates receiving more than 4% of the vote in their electorate should be scrapped.

 

PART 2:  ELECTION EXPENDITURE

There is strong, consistent evidence from Australian and international research confirming that caps on expenditure:

• affect not only who is elected, but who chooses to run
• where decreased, lead to an increase in the number of individuals who run for office, and candidates who are less wealthy on average  and, where more stringent, lead to the election of less wealthy candidates, and of candidates who spend less of their own funds in their campaigns.
• lead to re-election rates that are lower in places with more stringent expenditure caps, suggesting that expenditure limits reduce incumbency advantage

Australian research has found that:

• although the party or candidate with the deepest pockets does not always win, there is generally a positive relationship between expenditure and electoral performance.
• money appeared to deliver similar electoral benefits to those seen internationally, although the size of that benefit varied in connection with the level of political volatility at any given election.
• comparisons of election expenditure in Queensland and NSW before and after the expenditure caps were introduced show that caps do work to ‘level the playing field’ but also that parties continued to receive significant donations, which could not be spent.
• the introduction of caps appears to have significantly reduced financial disparities between the two major parties in Queensland—at least on the expenditure side. The ALP and the LNP went from expending vastly different amounts on their campaigns to having budgets that were almost identical, as is evident from their respective expenditure per voter.
• the introduction of caps has somewhat narrowed the financial gulf between the two major parties and their minor counterparts, but again only on the expenditure side.
• referring to Queensland data, “minor parties do not spend or receive anything like the amount of money that major parties do, regardless of what campaign finance rules are in place. While the ratio of minor to major party expenditure fell in 2012, The Greens were still expending just 18 cents per voter compared with approximately AUD 2.60 each for the two major parties, while One Nation spent slightly more than 1 cent per voter.”[45] (See Table A1.3 for historical Australia-wide party expenditure data for Federal election years.)
• while this analysis suggests that donation and expenditure caps do not provide a substantial benefit to minor parties at a State-wide level, NSW offers one case that suggests that they may do so at the individual electorate level.

While Australian States have a wide range of electoral financing rules, Australia’s federal electoral system has few constraints on donations and expenditure, and a weak disclosure regime:

• There are no caps on campaign expenditure.
• Competition between the major parties is driving up expenditure on elections, funded largely by donations from individuals, associations (including unions) and other organisations (including corporations) that have a vested interest in the outcomes of those decisions.
• Donations under AUD 14,300 (2021; adjusted annually) can be made anonymously and donors have 20 weeks after the end of the financial year to disclose them which means voters cannot be fully informed before they cast their vote. More seriously, large donations facilitate much greater access and disproportionate influence.

The current regime has resulted in an ‘arms race’ of election campaign expenditure and the assumption seems to be that the greater the expenditure, the more likely the electoral success. This competition to raise increasing amounts of money for elections places Australia at great risk of corruption and excessive influence. Large amounts of funds are raised by candidates and parties (and possibly third-party organisations) from donors whose identity is not disclosed (“dark money”).

As a result, the public perceives that high levels of corruption are associated with donations, which erodes public trust in governments and elected representatives and, through amplifying a sense of powerlessness in voters, creates apathy and the disengagement in the democratic system that serves the vested interests of many of those behind the funding.

Manifestations of these problems include:

• Parliamentary Party members attend private fund-raising dinners and other functions with the express purpose of giving attendees (prospective donors) privileged access to ministers or shadow ministers which compromises their entrusted responsibilities as public officers.
• Those donors whose identities are disclosed are disproportionately individuals or entities who benefit from government approvals and contracts.
• Directors of corporations that make donations are either inciting corrupt behaviour by politicians, or breaching each director’s responsibility to act in the best interests of the corporation by expenditure corporate funds with no benefit to that company. Corporations law requires directors to act in the best interests of the company, which do not necessarily coincide with the interests of shareholders.

Improved disclosures alone cannot address the underlying issues and would be of little effect. Without campaign funding reform, Australian electorates will continue to be offered major party candidates pre-selected for association with campaign donors and party power-base interests.

Without reform Australia is becoming an increasingly unequal society where wealth (personal or corporate), equates to the ability to influence and to control the narrative, which undermines democracy. Excessive inequality disenfranchises the majority of voters, harms the most vulnerable and destroys social cohesion.

The extraordinary amounts involved in campaign expenditure are shown in Table 1[46].  (See Appendix 2 for historical data on party expenditures 1998-2020.)

Table 1. Political Party election receipts and expenditure 2018-2019 (AUD million)

	Labor	Liberal National	United Australia (formerly Palmer United)	Australian Greens	Other Parties	All Parties
Party Receipts	126.3	181.2	89.5	20.4	17.3	434.7
Party Expenditure	121.8	178.3	89.5	23.2	20.4	433.2
Public Funding	39.0	52.0	5.6	7.7	9.2	113.5

 

These sums are vastly greater than the comparable figures in the Territories, States, New Zealand, Canada and the United Kingdom. The explanation lies in campaign finance laws. Australian federal elections have no caps on expenditure and involve significantly higher expenditure per voter than other jurisdictions that do have caps (Table 2).

Table 2. Political campaign caps on expenditure in Australian and comparable Commonwealth jurisdictions

Jurisdiction	Expenditure Cap (most recent)	Expenditure per Voter (AUD)
Australia (Federal)	No cap	AUD 29 (2019)
New South Wales	AUD 122,900 per party for each assembly electorate.                      AUD 184,200 for independent candidates.	AUD 2.10 (parties) AUD 3.30 (independent candidates)
South Australia	AUD 75,000 per assembly candidate for each party. AUD 3,525,000 total for each party with a cap of AUD 100,000 per electorate. AUD 100,000 for independent candidates	AUD 2.86 (parties)AUD 3.81 (independent candidates)
Queensland	AUD 57,000 per party for each electorate.                                         AUD 87,000 for independent candidates	AUD 1.55 (parties) AUD 2.37 (independent candidates)
Tasmania	No cap for parties. AUD 17,500 per candidate	AUD 2.44
Northern Territory	AUD 1,000,000 per party. AUD 40,000 per candidate	AUD 6.98
ACT	AUD 42,750 per party or independent candidate	AUD 3.50
Canada	Varies between electorates depending on the number of names on the preliminary or revised lists of electors for each electoral district. For a party, the electoral districts are those in which the party has endorsed confirmed candidates. Range CAD 105,000-136,000.	AUD 1.83-1.89 (2015)
New Zealand	NZD 1,169,000 per party. NZD 27,000 per individual candidate	AUD 0.39 (2014)
United Kingdom	Greater of GBP 810,000 or GBP 30,000 per contested constituency for parties. GBP 8,700 + GBP 0.06-GBP 0.09 per registered voter for independent candidates	AUD 0.034 (parties) AUD 1.28-1.82 (independent candidates) (2015)
Scotland	Greater of GBP 120,000 or GBP 30,000 per contested constituency for parties. GBP 8,700 + GBP 0.06-GBP 0.09p per registered voter for independent candidates	AUD 0.028 (parties) AUD 1.28-1.82 (independent candidates) (2015)
Wales	Greater of GBP 60,000 or GBP 30,000 per contested constituency for parties. GBP 8,700 + GBP 0.06-GBP 0.09p per registered voter for independent candidates	AUD 0.025 (parties) AUD 0.27 (independent candidates) (2015)
Northern Ireland	GBP 30,000 per contested constituency for parties. GBP 8,700 + GBP 0.06-GBP 0.09p per registered voter for independent candidates	AUD 1.80-2.34 (parties) AUD 0.20 (independent candidates) (2015)

In the USA 2020 elections, total campaign expenditure in Federal (President & Congress) and States has been estimated as almost USD14 billion[47]. We have estimated this as AUD76 using the total adult population. However, these figures are indicative only, due to the complex exceptionalism of the US electoral system.

 

Arguments have been raised against expenditure caps, as follows:

1. The need for providing effective information for voters to make a judgement.

Making expenditure limits too low may have unintended consequences.

Political expenditure is actually a democratic good, insofar as it enables candidates and parties to reach an attempt to persuade voters. Limiting that expenditure too much, or for too long, may create a less well-informed electorate. This effect may be particularly keenly felt by smaller or newer political actors who find it more difficult to gain coverage from the ‘free media’.

Anne Twomey, in a recent discussion on radio [48] about methods to elect a new head of state, provided an interesting solution. She says:

“The problem with election inherently is that once you elect someone, you’ve got yourselves a politician”, meaning someone competitive who focuses on political wins rather than national interest. “How do you get an election that is non political and get the type of person you want?  I think that’s the real issue.”

She argued firstly that particularly for that kind of election, solutions needed to be found to select the type of people that would be of high repute, but who would not usually stand for election.

Second, that in general it is a good idea to minimise campaign expenditure.

” If you want to get good people to run it might work better if you banned all campaigning, if you banned all advertising, if you made it so there was no expenditure on the campaign at all, and instead like a yes no case in a  referendum campaign, you just distributed to all voters a pamphlet with one page by each person, saying what their background is and how they would fulfil the role, and just took all the politics and campaigning out of it.

And that would also reduce the role of political parties as well, and the need for political parties which you would have if you were trying to run a national campaign.”

This approach may be a good one to adopt for all elections. It enables a focus on selecting people who wish to serve rather than on people who wish to win.

2. The “free speech ” argument

Expenditure limits should not be characterised as curtailing ‘freedom of speech’. They curtail expenditure, not speech. While courts have found there is an implied right to free speech in the Australian Constitution, there is no right of any sort to having that speech amplified by money from any source to buy media coverage, photo opportunities or to curry favour with media barons.

Certainly, MPs themselves already possess access to possibly the country’s biggest megaphone for announcement and self-promotion – the Parliament. They should have no need for further leverage through unbridled campaign spending.

We are making an argument for moderation in expenditure limits rather than not having them.

3. Specific limitations

Although expenditure caps help curb the ‘arms race’ between parties and candidates, some caps only apply to advertising within a specified period prior to the elections and may not include expenditure on activities such as opinion polling, running focus groups, candidate travel, hiring campaign advisors, renting campaign offices and the like.

A study of the Canadian model investigated the impact of expenditure limits on broader measures of electoral outcomes and found that larger limits lead to less close elections, fewer candidates, and lower voter turnout.

OPTIONS FOR CHANGE – ELECTION EXPENDITURE

Australian federal elections have no caps on expenditure and involve significantly higher expenditure per voter than other jurisdictions (see Table 2).

The form of caps on expenditure are meant to level the playing field for candidates in each electorate and to give “clear air” to voters during an election campaign period in deciding which candidate can best represent them or their electorate  as noted by Reid (2018) quoting a UK Court of Appeal decision:

In Attorney General v Jones, the Court of Appeal explained that the purpose of spending caps is to promote “a level financial playing field between competing candidates, so as to prevent perversion of the voters’ democratic choice between competing candidates within constituencies by significant disparities of local expenditure.” [49]

It prevents the massive campaigns conducted by the major parties and corporate actors over the last 25 years that flood national media with misinformation, outright lies and scaremongering.  It allows voters to focus on how the individual candidates present policy and how they will represent the electorate in parliament.

It also acts as a pre-selection process, returning the power of selecting representatives to the voters rather than voters only being able to vote for party power structure selected candidates who owe their allegiance solely to their party.  Good candidates with a good policy story to offer voters will attract donations and be able to fund their campaigns up to the cap.  Poor incumbents and weak candidates will find it difficult to raise donations and have less funding available to promote their candidacy.  If electorates have many good candidates, then they have a more equal opportunity, while incumbency comes with an inherent advantage.  Under the present arrangements the major parties pour extraordinary amounts of money into electorates they want to ensure they win and members they want to save: real competition and representation of the electorate are drowned out.

The proposed caps on donations also have the potential to alter behaviour of the mainstream commercial media.  At the present time Australia has two major political groupings, one of which is outspending the other by 85% (see Appendix 2, Table A1.1).

Recommendations

1. There should be caps (limits) on election expenditure for candidates, political parties, associated entities and third-party campaigner entities, to reduce the “arms race” and lessen the influence of individual donors.
2. The caps should be equivalent on a dollars per vote basis to those applying to elections to the New South Wales Legislative Assembly.
3. The cost of campaign staff employed by candidates and parties i.e., campaign workers, and the costs of materials or advertising supplied by parties, should be included as costs subject to the cap.
4. During the campaign period for an election, defined as the 6 months preceding expiry of the current Parliament, or from the time a Prime Minister calls an election (if earlier than that), all campaign activities to be carried out via candidates within their own electorate, i.e., national party-based advertising campaigns are restricted to non-election periods
5. Expenditures made by a candidate during the defined election period, up to the cap, to only be made out of donations received directly by the candidate and expenditure made within the candidate’s electorate only.
6. All payments for campaign expenditure should be made from the campaign account.
7. Excess of donations over expenditure in each electorate should be directed to social goods, , in the electorate in which the donations were raised. Disposition of excess funds to be administered by an independent body.
8. Successful candidates’ donations and expenditures, and the transfer of excess funds,  should be reported and approved by the Auditor General’s Office (ANAO) as a pre-requisite to taking up a seat in parliament.

 

PART 3:  COMMUNITY GRANTS – MEETING COMMUNITY NEEDS OR BRIBING THE ELECTORATE?

 

In addition to direct expenditure on  election campaigning, expenditure on community grants schemes is increasingly and routinely used by politicians of all major parties to shore up election prospects in key electorates. As at the December 2021 Federal mid-year Budget update, some AUD 16 billion of funding sat in the “Decisions made but not yet announced” category, and such has been the levels of expenditure that one can assume without being overly cynical that a high proportion of these funds will be announced close to the election and will show exquisite political targeting.

 

In fact, senior Australian politicians have openly boasted of buying votes through politically targeted delivery of State and Federal funding under various grants schemes. Corruption is so pervasive and free of consequence that MPs themselves publicly acknowledge their own involvement in such activities and state that as long as such expenditure is covered by parliamentary appropriation it is not illegal and therefore fair game.

 

The effect of this approach is to give incumbent governments a double advantage – not only are they able to portray themselves as concerned for maximising community welfare across the nation by developing and announcing programs of support for community priorities (sport and leisure facilities, improvement to commuter infrastructure etc) but they can send a not so subliminal message when the individual grants are announced – vote for us if you want these facilities in your electorate.

 

But the second ‘advantage’ undermines the first.  If a scheme has been devised with the ostensible aim of improving community welfare, allocation decisions across the country should give priority to the greatest need according to the criteria developed for the scheme.  Allocation for political benefit is unlikely except coincidentally to coincide with such need.

 

An alternative arrangement would allow governments to develop and announce programs according to transparent criteria but leave the allocation of individual grants to arms-length processes managed by public agencies and advisory bodies.  The Minister and the local member or senator could still make the announcements, and the government get the credit for devising such a scheme.

 

In this way the bad smell around such schemes can be removed while governments can still get credit for recognising and responding to community needs without being seen merely to be engaging in bribery.

 

Recommendation

 

That Ministers’ roles in relation to community grants programs be limited to devising the programs, allocating a budget, approving criteria and announcing results, with decisions on individual grant allocations to be decided at arm’s length.

 

CONCLUSION

A cap on election campaign expenditure is the key reform to resolve voters’ suspicions and concerns about the integrity of the Australian Commonwealth electoral system.

Caps on donations to political parties, candidates and third-party campaigners are also necessary but are not sufficient in themselves to address the integrity issues associated with campaign finance.

State, territory and international schemes provide examples of models that successfully address the straw-man arguments against reform.

Adoption of the recommended complementary caps on campaign expenditure and donations and rules on community grants can restore confidence and trust in Australian democratic government.

NEXT STEPS

The Recommendations made in this Caps on Campaign Costs Briefing Paper have been developed by the Accountability Round Table  to be presented to political parties and candidates in the 2022 Federal elections, seeking their support.

Further information – contact: Ken Coghill email- kencoghill1944@gmail.com; mobile- 0419 426 888

 

[1] Contrasting with Australia, a trend in decline of political trust is difficult to discern in most democracies. In Australia however, political trust has been declining since 2007 with some recovery after election until 2013, since  when political trust has ceased its recovery. See Dassonneville, Ruth, and Ian McAllister. ‘Explaining the Decline of Political Trust in Australia’. Australian Journal of Political Science 56, no. 3 (3 July 2021): 280–97. https://doi.org/10.1080/10361146.2021.1960272.

[2] Third party campaigner: a person or entity that incurs expenditure to promote or oppose a party or candidate or influence the vote at an election. NSW Electoral Commission

[3] See ICAC (NSW) (2014) Election Funding, Expenditure and Disclosure in NSW. Strengthening Accountability and Transparency. ICAC. p.7.

[4] See, https://www.aec.gov.au/parties_and_representatives/public_funding/threshold.htm

[5] For all donation constraints see; Australian Electoral Commission. ‘Financial Disclosure Guide for Donors to Political Parties and  Political Campaigners – 2020-21 Financial Year’. Commonwealth of Australia, 2021. Available from https://www.aec.gov.au/Parties_and_Representatives/financial_disclosure/guides/donors/files/donors-2020-21-parties.pdf.

[6] Commonwealth Electoral Act 1918 (2021 version) Volume 2, Part XX, Division 1 Subdivision D – Anti – avoidance.

[7] Note the very limited controls requiring transparency applied to actual donors to trust funds in the Act. Commonwealth Electoral Act, Volume 2 Part XX, Division 4 -Disclosure of donations, Section 305A  Gifts to candidates etc, Subsection 4 (b) Gifts to trust funds

[8] https://transparency.aec.gov.au/AnnualDonor

[9] https://transparency.aec.gov.au/AnnualDonor visited 24/01/2022

[10] For some dollar amounts see https://www.accountabilityrt.org/the-letter-that-should-have-been-published/

[11] Accountability Round Table per Tim Smith. ‘Submission of the Accountability Round Table to the Joint Standing Committee on Electoral Matters  Inquiry into the Funding of Political Parties and Election Campaigns’. Submission, 11 July 2011. https://www.accountabilityrt.org/wp-content/uploads/2014/09/ART-JSCEM-Funding-Inquiry-Submission-11-July-2011-final-3.pdf.

[12] Commonwealth Electoral Act 1918, Division 4—Disclosure of donations, Section 304 Disclosure of gifts.

[13] Centre for Public Integrity (2022). $68 million in political funding hidden from public view. Available from https://publicintegrity.org.au/media-release-68-million-in-political-funding-hidden-from-public-view/

[14] Wood, Danielle, Kate Griffiths, and Tom Crowley, (Grattan Institute). ‘More than Half of Funding for the Major Parties Remains Secret — and This Is How They Want It’. The Conversation, 1 February 2021. http://theconversation.com/more-than-half-of-funding-for-the-major-parties-remains-secret-and-this-is-how-they-want-it-154364.

[15] Compare for example with Victoria which defines as Gifts: money; services (including paid labour); loans; guarantees; property (including a loan of assets). Available from https://www.vec.vic.gov.au/candidates-and-parties/political-donations

[16] Australian Government. Electoral Reform Green Paper: Donations Funding and Expenditure. Canberra ACT: Commonwealth of Australia, 2008. https://australianpolitics.com/downloads/funding/2008/08-12-01_electoral-reform-green-paper.pdf p 12

[17] Ibid

[18] https://transparency.aec.gov.au/AnnualDetailedReceipts

[19] ibid

[20] Wood, Danielle, Kate Griffiths, and Tom Crowley. ‘More than Half of Funding for the Major Parties Remains Secret — and This Is How They Want It’. The Conversation, 1 February 2021. http://theconversation.com/more-than-half-of-funding-for-the-major-parties-remains-secret-and-this-is-how-they-want-it-154364.

[21] The Electoral Legislation Amendment (Annual Disclosure Equality) Act 2021 and Electoral Legislation Amendment (Political Campaigners) Act 2021. See https://www.aec.gov.au/parties_and_representatives/financial_disclosure/

[22] The current rate of funding for both the election funding rate and the automatic payment amount can be found on the AEC website https://www.aec.gov.au/parties_and_representatives/public_funding/current_funding_rate.htm

[23] See; https://www.aec.gov.au/parties_and_representatives/public_funding/index.htm

[24] See, https://www.aec.gov.au/parties_and_representatives/public_funding/threshold.htm

[25] For further information on public finance see; Muller, Damon. ‘Political Finance’. Text. Parliamentary Library Briefing Book (blog), July 2019. Australia. https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BriefingBook46p/PoliticalFinance.

[26] Australian Government. Electoral Reform Green Paper: Donations Funding and Expenditure. Canberra ACT: Commonwealth of Australia, 2008. https://australianpolitics.com/downloads/funding/2008/08-12-01_electoral-reform-green-paper.pdf p 33.  Op cit.

[27] Holmes, Brenton. ‘Electoral and Political Financing: The Commonwealth Regime and Its Reforms’. Research Publications. Canberra ACT: Australian Parliamentary Library, 30 March 2012. Australia. https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/BN/2011-2012/ElectoralFinancing. p 5

[28] Ibid p 34

[29] Ministerial and Parliamentary Services. ‘Salary: Parliamentarians’. Australian Government – Department of Finance, 30 April 2021. https://maps.finance.gov.au/pay-and-employment/parliamentarians/salary-parliamentarians.

[30] Madden, op cit.

[31] The elements of “parliamentary business in full are;

(a)  the parliamentary duties of the member; or

(b)  electorate duties of the member; or

(c)  party political duties of the member; or

(d)  official duties of the member.

[32] Parliamentary Business Resources (Parliamentary Business) Determination 2017 Schedule 3 https://www.legislation.gov.au/Details/F2017L01691

[33] Tune, David, and John Conde. ‘An Independent Parliamentary Entitlements System’. Department of Prime Minister and Cabinet, 11 March 2016. https://www.pmc.gov.au/government/independent-parliamentary-entitlements-system.

[34] Australian Taxation Office. ‘Gifts and Donations’. Australian Government: Australian Taxation Office, 30 August 2021. https://www.ato.gov.au/individuals/income-and-deductions/deductions-you-can-claim/other-deductions/gifts-and-donations/. See section ‘ Political party and independent candidate donations’.

[35] Australian Government. Electoral Reform Green Paper: Donations Funding and Expenditure. Canberra ACT: Commonwealth of Australia, 2008. https://australianpolitics.com/downloads/funding/2008/08-12-01_electoral-reform-green-paper.pdf p 19.  Note: Original Green Paper no longer available on the Australian Government website (as at Jan 2022). Original link was http://www.dpmc.gov.au/consultation/elect_reform/docs/electoral_reform_green_paper.pdf

[36] Melville-Rea, Hannah, Robyn Seth-Purdie, and Bill Browne. ‘Grants with Ministerial Discretion: Distribution Analysis’. Discussion Paper. Canberra ACT: The Australia Institute, November 2021. https://australiainstitute.org.au/report/grants-with-ministerial-discretion/.

[37] Melville-Rea et al, op cit.

[38] Canales, Sarah Basford. ‘“Arrogant”: Pork-Barrelling Concern over $16b MYEFO Item’. The Canberra Times, 16 December 2021. https://www.canberratimes.com.au/story/7554847/arrogant-pork-barrelling-concern-over-16b-myefo-item/.

[39] Hawkins, John. ‘$16 billion of the MYEFO Budget Update Is “Decisions Taken but Not yet Announced”. Why Budget for the Unannounced?’ The Conversation. Accessed 6 January 2022. http://theconversation.com/16-billion-of-the-myefo-budget-update-is-decisions-taken-but-not-yet-announced-why-budget-for-the-unannounced-173654.

[40] Murphy, Yvonne. ‘Who Gets What, When and How: The Politics of Resource Allocation to Parliamentary Parties’. In Party Rules: Dilemmas of Political Party Regulation in Australia, edited by Anika Gauja and Marion Sawer. Canberra ACT: ANU Press, 2016. https://press-files.anu.edu.au/downloads/press/n2109/pdf/book.pdf.

[41] ibid

[42] Australian Associated Press (2019) Victorian Labor MPs exonerated in ‘red shirts’ election rorts scheme. In The Guardian, 14 Feb 2019. Available from https://www.theguardian.com/australia-news/2019/feb/14/victorian-labor-mps-exonerated-in-red-shirts-election-rorts-scheme

[43] ibid

[44] ibid

[45] Jennifer Rayner (2016) More regulated, more level? Assessing the impact of spending and donation caps on Australian State elections, chapter in PARTY RULES? Dilemmas of political party regulation in Australia, Australian National University Press p. 163. Available from https://press-files.anu.edu.au/downloads/press/n2109/pdf/book.pdf

[46] AEC Transparency Register available from https://www.aec.gov.au/parties_and_representatives/financial_disclosure/transparency-register/

[47] BBC (2022) US election 2020: How much did it cost and who paid for it?. Available from https://www.bbc.com/news/av/election-us-2020-54696386

[48] Adams, Phillip. ‘The Australian Republic Mark ’22’. Late Night Live. ABC Radio National, 25 January 2022. https://www.abc.net.au/radionational/programs/latenightlive/the-australian-republic-mark-22/13727860.
Link to sound file https://abcmedia.akamaized.net/rn/podcast/2022/01/lnl_20220126_2205.mp3. Relevant section starts at 26 minutes.

[49] Reid, Madeline (2018) Ch. 13 Campaign Finance Laws: Controlling the Risks of Corruption and Public Cynicism. In Ferguson, G. Global Corruption: Law, Theory and Practice Course Book (Third Edition, July 2018). p. 49