Cross-Examination: Political Donations and Transparency

BY JASPER LAU

Who funds our political parties? That is the $31m question that has been asked of New Zealand political parties since 2011.[1] Whilst $31m might seem like a drop in a bucket compared to the money channeled in American politics, this still constitutes a large sum of money that cannot simply be ignored. Despite New Zealand being labeled as one of the least corrupt countries in the world by Transparency International, there remains the concern that New Zealand politics is influenced by a raft of wealthy private donors.[2] In a recent article released by Stuff, it was shown that at least four out of every five dollars were donated to the Labour and National parties anonymously.[3] This reliance on private donations raises the prospects that political parties will inadvertently shape their policies and interests towards their private donors, therefore, it is likely that they would have more influence over the country’s politics compared with the wider public. This is a fundamental flaw in a democracy and as a consequence, transparency in political funding ought to be an issue that is worthy of examination in this election.

Why is transparency of political funding important in a democracy?

Although most people would consider money as being inseparable from politics, New Zealand still aims to uphold the ideal of political equality within our political sphere. Political equality shows respect for every individual as a valued participant in the community and makes it imperative that everyone has the chance to have their interests represented through an elected representative.[4] However, this is undermined when wealthy individuals and organizations are able to gain economic leverage over the political parties so that their interests are represented at the forefront.

Although there is a lack of detailed evidence concerning this phenomenon in New Zealand, studies conducted overseas have shown that politicians are likely to vote on what matters to their wealthy constituents instead of the beneficial interests of their middle class or poorer voters. For example, in a Princeton University paper prepared by Martin Gilens, it was found that higher income respondents’ views were more strongly related to government policies and were twice as likely to be adopted even when they were overwhelmingly opposed to by the majority of the other income groups.[5] Private political donations also have various detrimental consequences which includes: increasing the risks of political corruption through bribery; having the ability to dominate media coverage despite the current expenditure caps and undermining civic participation as people will think their interests are overshadowed by those who are more resourced.[6] As New Zealand policy expert Max Rashbrooke explains, political parties are getting more expensive to run and are therefore more likely to be sensitive to the needs of the people who give them money (even if they argue it has no influence in their decision-making).[7] In this sense, it would seem paramount that having a greater degree of transparency with regards to political donations would be paramount if New Zealand were to uphold political equality within a democracy.

Existing law on political donations given to New Zealand political parties

The laws regulating political donations are found within the Electoral Act 1993. Currently, every registered political party has to file an annual return by 30th April detailing the donations given to the party and to the candidates.[8]  Donations (including goods or services) that are under $1500 can be given anonymously by the same individual or organization over the year and do not have to be disclosed under the current regime.[9] The Electoral Commission only requires each party to disclose the details of their donors if that donor has donated $15,000 dollars or more within a given year, which means any amount given below that threshold only has to be reported without the donor’s’ details.[10] The only exception is that donations by the same donor that are over $30,000 within 12 months have to be disclosed within 10 working days and are published on the Electoral Commission website.[11] Because there are no limits to the amount of donations that a party can receive, it has been suggested our current laws remain relatively lax on the information given by donors. Furthermore, section 208A (‘Donations protected from disclosure’) allows any person making a donation exceeding $1500 to be given anonymity to both the party and public if the person wishes so — however this is rarely used.

 

Whilst the general public might think that the funding of political parties come from the large donations given by trade unions or industry lobby groups, it has been shown that the vast majority of funding actually comes from private donors as shown by the graph below.[12] This inherently raises concerns about the amount of influence these people would have, as they remain discrete.

 

Fig 1. Graph showing the amount and category of political donations given to political parties in New Zealand between 2011 and 2016. Taken from Henry Cooke’s Stuff article released on 20 June 2017.[13]

Another concern with the existing laws is that they can be bypassed if the goods or services given are for free and have a reasonable market value of $1500 or less, as they fall out of the definitions of ‘political donations’. For example, it was recently revealed that Labour had collected tens of thousands of dollars in anonymous donations through art auctions.[14] Both Labour and National have also set up exclusive societies for wealthy donors to contribute towards, allowing for greater access to the party such as exclusive dinners attended by party officials and strategists.[15] Based on such donations, many commentators argue that it would be naive not to think there was some degree of influence from these classes of people.

What can be done with regards to the donations in politics?

Despite the need for greater transparency, transparency in itself is not a practical solution because it only informs the public on how bad the problem, is without doing much about it.[16] Rashbrooke argues that in order to have significant reforms of political donations, there would need to be a strong cap on private donations and a need to democratize the way in which parties are funded. Rashbrooke suggests that firstly, individuals should only be allowed to give donations in small amounts such as $1500 for any political party and $1500 to any candidate. Secondly, he suggests the government would need to fill in the shortfall by increasing the funding to political parties, but as he points out, this would be unpopular amongst the electorate and creates few incentives for the parties to engage with their constituents. Therefore he suggests that instead of the government just giving money directly to the political parties, the government would instead give every citizen a small amount of money, which he calls an ‘electoral funding voucher’, which allows for people to give this money to a political party of their choice for each election cycle. He calculates the electoral voucher amount would equate to $20 per adult and this would also incentivize parties to engage with the public for this funding. The consequence of such a policy would be that the influence over political parties are spread more evenly so that private donors do not have undue influence over political parties.

This idea is similarly expressed by Elisha Watson in her 2014 thesis, where she argues that ‘Manapori dollars’ (also known as ‘democracy dollars’) could be a viable alternative to our current status quo. She suggests that there should be a mixed model of private funds and Manapori dollars. This is because the use of some private funds would keep incumbent politicians honest as they would be advantaged at the initial implementation of the scheme, as incumbents can use their influence to keep out challengers.[17] In addition, she also suggests there should be a donation cap given by any donor and increased regulation on third-party campaigns which are ancillary to the main political parties, which are likely used to circumvent this regulatory regime.[18]

We know from overseas, especially in the United States, that the unbridled power for private donors, unions and corporations to fund political parties has subjugated the parties to their donor’s interests.

George Orwell once stated said that ‘in a time of universal deceit, telling the truth is a revolutionary act’. Although this was a reference to the manner in which authoritarian governments would deceive their fellow citizens, his message could be interpreted as a stark warning to current democracies about the dangers of being complacent to external influences. In this respect, democracies thrive because there is political equality amongst their participants as their voices and interests are represented by the people they choose. As private political donations become the major mechanism by which political parties are able to function, this undoubtedly raises concerns to the extent of influence such donations would have on politicians and whether their interests and values thereby prevail over those of the majority. We know from overseas, especially in the United States, that the unbridled power for private donors, unions and corporations to fund political parties has subjugated the parties to their donor’s interests. This is the antithesis of democracy. For New Zealand to uphold its democratic ideals there has to be significant reforms in the manner in which our political parties are funded or else we run the risk of turning our very institutions into those that about which Orwell forewarned us. In this sense, the issue of donations to political parties should be at the forefront of the upcoming election.

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[1] Michael Wright and Catrin Owen “Four out of every five dollars donated to big parties in secret, sparking new push for transparency” Stuff (online ed, Auckland, 20 August 2017).

[2] Transparency International “Corruption Perceptions Index 2016” (25 January 2017) <https://www.transparency.org/news/feature/corruption_perceptions_index_2016>.

[3] Wright and Owen, above n1.

[4] Elisha Watson “Manapori Dollars: Revolutionising political finance in New Zealand” (LLB (Hons) Dissertation, University of Otago, 2014) at 7.

[5] Martin Gilens “Inequality and Democratic Responsiveness in the United States” (paper presented to Conference on the Comparative Politics of Inequality and Redistribution, New Jersey, May 2007) at 11.

[6] Elisha Watson, above n4, at 13.

[7] Max Rashbrooke “A big idea: ‘Electoral funding vouchers’” Newsroom (online ed, New Zealand, 24 August 2017).

[8]  Electoral Act 1993, s 210.

[9]  Electoral Act 1993, s 207C(2)(b).

[10] Electoral Act 1993, s 210(1)(a).

[11] Electoral Act 1993, s 210C.

[12] Henry Cooke “Over half of major political cash comes from donations of over $15,000” Stuff (online ed, Auckland, 20 June 2017).

[13] Henry Cooke, above n12.

[14] Wright and Owen, above n1.

[15] Lloyd Burr “Labour launches exclusive ‘President’s Club’” Newshub (online ed, New Zealand, 12 April 2017).

[16] Max Rashbrooke, above n7.

[17] Elisha Watson, above n4, at 36.

[18] At 38.