by frog
Once again, our papers are filled with speculations and allegations about who gave money to whom and when, as well as to what end. The self-declared King of Transparency has lost his crown.
This is precisely the reason that the EFA was needed. We can debate all day about the efficacy (or not) of that particular piece of legislation. I’d rather not bother. Because for me, the key principle behind that Act, whether or not the Act actually succeeds in achieving it, is transparency.
If we know who gave how much to whom and when, and it is all a matter of pulic record, then we can, as voters, decide for ourselves how bad a particular situation smells.
The problem with the current NZ First crisis is that we don’t have all the facts. We can all smell smoke, but we’re having a hard time finding the real fire. People from all quarters, including the Greens, are asking tough questions about Winston and his money handling.
As an aside, it is interesting to note that only the Greens had the courage to make the money-racing-NZ First connection in the House. Everyone else had to limit their speculation to the money-Glenn-Tauranga issue. I wonder why that is? 
Rather than re-hashing the EFA debate, which I suspect the politicians are likely to do soon anyway, I’d prefer to start with first principles and debate whether or not my readers believe that donations to political parties should be a fully transparent matter of public record, and if not, why not?
Published in Justice & Democracy by frog on Sun, July 27th, 2008
Tags: donations, EFA, money, NZ First, Owen Glenn, political, racing, winston peters
on the trolls and those who are unable to keep on topic
I agree. No political party should be allowed to effectively receive anonymous donations through secret trusts.
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“believe that donations to political parties should be a fully transparent matter of public record,”
Absolutely, no arguments from me.
Be mindful it is a bit of a leading question because 99.9% of the people will so yes.
The real EFA question revolves around third party electioneering. That is were the disagreements will start.
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I am prepared to allow a low level of anonymous donations (maybe <$500 per person per year) to avoid tieing up small parties in paperwork.
If a party member uses stamps from their wallet, for example, to mail a letter on behalf of the party I’m fine with that not having to be a named disclosed donation. Similarly if someone uses some spare wood from the basement to put up signs.
But, as a general principle, let’s aim for equality of influence in roughly the same way we aim for equality of voice/vote.
1) Only very small anonymous donations should be permitted
2) Only small named donations
3) Only donations from people (not businesses or trusts)
4) Only from people entitled to vote in NZ
I think I’m ok with extending 4 to people who would be entitled to vote in NZ if they were old enough. I think children and young people should be given as much ability to engage with political processes as possible. So a 16 year old should be able to support a campaign and use stamps out of her wallet.
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Gerrit,
Some people will argue for no cap to anonymous donations and for no cap to election spend at all.
They’ll argue it’s based on free speech; personally I reckon it’s based on their misunderstanding of the concept of equality.
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Indeed Anita. People often conflate freedom to spend as much as they want on politicians transparently with freedom to spend whatever they want in secret, and cry that it’s undemocratic!
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Frog,
I don’t even the right to spend as much as one wants on politicians transparently is necessary for freedom of speech.
I can’t vote as often as a I like. The rules ensure that on election day I have exactly the same weight as you, as my neighbour, as Alan Gibbs, as an unemployed 20 year old from South Auckland.
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Couldn’t agree more Anita. I’m just flaming a bit about those who argue that anonymity is a requirement for free speech. I, personally, believe that there should be limits on donations and who donates. The notion of only those who can vote being able to donate is an interesting one. The corporations won’t like it, but I do!
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I agree with this theme. I have never understood the need for anonimity regarding donations. Yes, I like the ideas suggested around individual donations only, small, and transperant.
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frog,
“The notion of only those who can vote being able to donate is an interesting one. The corporations won’t like it, but I do!”
Wont work in practise as someone like Alan Gibbs for example could donate as a voter but still influence political parties. Much like Robert Jones has done with NZ First and others.
Coorporates dont need to donate, just their CEOs’ or CFOs’
Would say though, at least we would know who the individuals were, but one would never know what affiliations they had with any corporates.
Problem that I would see is corporate donations, and the influence it would sway, would be hidden behind individuals. Who would know if XYZ corporation had donated to Labour if the donation was made through a employee?
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Gerrit,
The Electoral Finance Act sayss that if Fonterra gives me money to give to the Greens then I must tell the Greens I got it from Fonterra, and it will be treated as a donation from Fonterra to the Greens.
So if we banned contributions from not-people then they can’t use people to launder the donation.
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Frog, you say that for you the key principle behind the EFA is transparency. I am not sure why you think this because it should be patently obvious that the EFA achieves nothing of the sort.
Under Section 3 (d) the purpose of the Act is to ‘provide greater transparency and accountability on the part of candidates, parties, and other persons engaged in election activities in order to minimize the perception of corruption’
When the Electoral Finance Bill was first introduced in July 2007, there was nothing in the way of controls over anonymous donations, so despite the lofty ideals the original Bill provided nothing.
The Electoral Finance Act as passed however, does have nominal controls over anonymous donations and the Select Committee Report records how these were negotiated between the Green, NZ First and Labour MPs after public submissions closed.
Notwithstanding these provisions in the EFA, all of the practices that would appear to have been used by NZ First could be used today in 2008, despite the EFA. This must make it clear to all that the EFA does little, if anything, to provide greater transparency.
Let’s be VERY CLEAR, the sole purpose of the EFA was to restrict the rights of ordinary New Zealanders to speak out and to campaign against the incumbent government, in a way far beyond what the Human Rights Commission thought was reasonable. I noted with interest Sue Bradford’s questioning last week in Parliament but despite this, the Green MPs along with Labour and NZ First voted to impose restrictions of a type never seen before in our democracy and I believe every one of those MPs should be ashamed of their actions!
We have had restrictions on our right to speak out and to campaign for or against any political party since 1 January this year. No other democracy in the world has restrictions for one year in three. The Human Rights Commission said any restrictions should apply for no more than three months prior to an election and why the Green MPs in particular, were prepared to ignore our Human Rights Commission on this issue, I do not know.
With regard to the revelations made in The Dominion Post last week, it was perfectly legal for NZ First to receive multiple donations of $10,000 or less from separate legal Vela family-related interests and not disclose these. That was the case in 2003 and is exactly the case in 2008, despite the grandstanding of Green, Labour and NZ First MPs to the contrary.
With regard to Bob Jones’s donation of $25,000 to the Spencer Trust, it is quite possible that this money (along with other donations) was donated anonymously to NZ First by the Spencer Trust in $10,000 or less multiples. Once again, this was perfectly legal and no disclosure was required in 2005. This practice could also occur this year; the only difference the EFA will have made is that the anonymous donations from the Spencer Trust to NZ First will now need to be for $1,000 or less. In other words, at least 25 anonymous bank cheques will be needed rather than three. Otago University political science lecturer, Bryce Edwards, makes this very point in an article published in the New Zealand Law Journal in April this year. Alternatively the Spencer Trust may wish to use the anonymous donation facility provided by the Electoral Commission.
New Zealanders can decide for themselves whether they feel what Winston Peters and NZ First have done is morally correct. My point however is that it is entirely possible that it is legally correct and the hypocrisy of the issue is that New Zealanders have been silenced in election year, the very time when we should be able to speak out, by the votes of NZ First MPs who knew the EFA did not stop practices of this nature.
As for the issue of greater disclosure, this is a complicated issue indeed. In its submission to the Justice and Electoral Select Committee on the EFA, the Human Rights Commission stressed the importance of as much participation in the electoral process as possible. By requiring much greater disclosure of donations it is likely to result in less giving rather than more. Bob Jones is already quoted this weekend as stating he regrets his involvement and has no intention of donating to political parties again. Owen Glenn has also said he is likely to turn his back on New Zealand in future. That would be a tragedy.
Having said that, reading The Sunday Star Times today readers were being asked to draw an inference that donors such as the Velas and Hogans, had gained a financial benefit (particularly from the accelerated bloodstock depreciation write-offs – Sue Bradford’s point) far in excess of any donations they made to NZ First and this is of course a major worry. The extent to which politicians are prepared to do things in return for donations surely simply comes down to the calibre and integrity of the individual politicians concerned.
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John Boscawen has (above) referred to an article I published in the NZ Law Journal earlier this year. For sake of the argument, I’ve cut and paste the most relevant bit from that below. The main point is that donation disclosure rules haven’t actually worked in other countries – if they had worked I’d personally be a lot more enthusiastic about them.
Bryce
http://www.liberation.org.nz
The Effectiveness of the Regulations
In evaluating the impact and appropriateness of the state regulations it is important to ascertain their effectiveness in achieving their stated objectives, because the interventions of the state into party affairs are always prone to failure. It is in the interests of at least some parties and citizens to evade the rules, and they inevitably find legal means to do so. Wherever in the world EFA-style controls have been introduced, they have been followed by the discovery of new loopholes and technique of funding parties that avoid the rules…
The failure of regulation is most obvious in regard to the disclosure of donations. In this area there are a number of loopholes whereby large donations can be made without being declared….. Likewise, in New Zealand, wealthy donors are still able to donate large sums under the EFA regime – they will easily construct devices to get around the legislation’s parameters. And although it has been widely reported that the EFA imposes upon parties a limit of $240,000 worth of anonymous donations, the overlooked fact is that this only applies to anonymous donations over $1000. Parties are allowed to receive as many sub-$1000 anonymous donations as they want. In practice, a wealthy anonymous donor can still make unlimited sub-$1000 deposits into a party bank account without breaking the rules or triggering disclosure.
Similarly, trusts will still effectively be able to transfer unlimited amounts of money to parties without having to disclose the original source. As an example, the Panda Trust will be able to pass funds onto the Zebra Trust, which will gift the money to the Kangaroo Trust who can make the obscured donation to the Animal Party. The use of private businesses will also allow obscured political contributions to be made. For example, in theory there would be nothing to stop a party setting up a unit to provide advice to trade unions or business. This unit might provide confidential “advice? to various clients such as trade unions or business and charge, say, $1m to each client. Likewise, according to rules outlined by the Electoral Commission, ‘People who pay to attend a fund-raising event will generally be paying for goods or services rather than making a donation’ and hence are not subject to the disclosure regulations (Electoral Commission, 1998: p.14). Political parties can therefore hold fundraising events, such as a dinner function with the attendance of party leaders, to which entry would require a large amount of money, and this would be deemed a business transaction rather than a political contribution.
In terms of these inevitable loopholes, political finance scholars often refer to the ‘hydraulic nature of political money’. Like water, political finance is thought to always find the weakest links through which to flow. Barriers erected merely re-direct funds through other facets. This relentless ability to locate a multiplicity of avenues means that state intervention in this area is somewhat futile.
Due to these inevitable inadequacies, political finance regulation usually acts to actually obscure the public’s understanding of where parties obtain their finances and how they spend them. A false sense of security is therefore created about the legitimacy of the political process. The regulations succeed in reassuring voters of the legitimacy of the political system, but such confidence is unfounded.
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Another thing for Anita to consider – the lessons from donation disclosure operations in other democracies show that to be even slightly effective, the rules have to *totally* ban anonymous donations. I’m not advocating this, but just pointing out that political finance reformers have a major weakness in their policy on anonymous donations – when they say they want to “ban” all anonymous donations they always seem to put in a caveat (such as Anita does) that says that we should still allow “small” anonymous donations (in Anita’s case this is $500, in Russel Norman’s case I think it is $1000 per year), which makes their whole policy a sham in terms of big donors that wish to donate anonymously – it just opens up yet another loophole.
Anita (and others such as Russel Norman) are effectively saying that the rich should be able to donate as much as they like as long as they do so in parcels under $500 or $1000. And of course with today’s technology and banking devices this means that it is incredibly easy to donate huge sums of money and easily evade the rules.
Bryce
http://www.liberation.org.nz
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Bryce,
I’m saying that we need to decide what we want to allow, and then find a way to do it. I’d be happy to ban all donations (anonymous and named) if that’s the only way to prevent people laundering donations. However if we can get a tax system mostly right surely we can fix this!
Why can’t we transfer the obligation from the party to the donor?
Could we have legislation which said
1) A person entitled to vote in New Zealand may donate no more than $5000 to any party in any calendar year.
2) A person who donates more than $500 to any party in any calendar year must declare …
3) No non-person or person who is not entitled to vote in NZ may give money to any political party
4) The totals are cumulative
5) Money passed through multiple hands to get to a party counts against all the hands’ (including the initiator’s) totals.
6) It is an offence for any person or non-person to attempt to circumvent either the caps or the transparency rules.
7) There is a regular and on-complaint independent audit and enforcement regime.
8 ) The audit and enforcement process will include an annual report to parliament which will identify any loopholes or ambiguities discovered and recommend fixes.
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Anita
The regulation of political finance is a very different matter to the regulation of tax. Whereas tax loopholes are relatively easy to identify and plug up, the political finance ones aren’t. This is partly a function of the size of the issue – the NZ state collects something like $50b annually through taxes. And so if the state loses money through tax avoidance it means that government departments that run health, education, welfare etc might be poorer by billions of dollars, whereas if a loophole exists in political finance law nothing much is affected in the day to day running of the state. The state has less incentive to even bother with fixing political finance loopholes and avoidance. So the IRD in NZ has something like 4000 employees (and a budget of hundreds of millions of dollars) making sure that tax is paid, whereas the toothless Electoral Commission has about 4 staff to ensure that a similarly complicated system of regulations is adhered to. And while tax loopholes can be closed when they are identified, the nature of political regulations mean that when authorities attempt to close one loophole their actions merely opens another one.
I’ll let someone else comment on the rest of your proposals. It’s certainly a good idea to investigate and debate such ideas. And it’s also incredibly important to learn from the experience of other countries attempts to control political finance. Unfortunately neither of these two things seemed to be encouraged by the political parties involved in passing the dreadful EFA last year.
Bryce
http://www.liberation.org.nz
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Oh Frog
You disappoint me!
>
>>it is interesting to note that only the Greens had the courage to make the money-racing-NZ First connection in the House. Everyone else had to limit their speculation to the money-Glenn-Tauranga issue. I wonder why that is?
>
If we do away with MMP this won’t happen in the future. Is that what you want??????
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Anita
When you say “we” need to decide what “we” want to allow, can you tell me who “we” is? As I understand it, we the people voted for who we wanted to vote for, and the result is that we decided that the lot we have now is the right lot for now, and so we decided we want the bill as it is?
This ‘we’ stuff is pretty confusing eh!
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Strings,
We voted for some people in 2005, at a point that very few of us had discussed electoral finances. Two years later the people we voted for made some decisions, we very little attempt to talk to us about what we wanted.
IMO electoral finances is an issue which should be largely determined by the voting public – probably in some representative forum of some kind. The voters would then tell the politicians what we want, and they do their job and implement it.
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Given all the apparent problems with ensuring transprency of donations (some of which seem to be well founded) perhaps we should ditch the notion. Instead, ban all political donations and opt for state funding. With a $51b tax take per annum, $10m spread across all parties with a certain minimum membership would amount to about $4 pa tax per voter, a small payment for equity, especially if it included the costs of research and policy development.
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Anita
OK, so what do you think? A plebescite on a proosal, or perhaps a simple “equality for all game on the basis of ‘if you’re a registered party you get an equal share of (say) $5 per registered voter?
My problem is how we deal withj the “we” making the decision you see! I must at some point boil down to a yes or no decision on a question worded by the spinners of the current government when the question is asked. If we’re all involved that’s the only option, and I don’t see many of us delegating the franchise to un-elected representatives!
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Michaela – you’re totally correct that spending $10m per annum on direct state funding of parties is fairly insignificant. And it would obviously have some positive benefits.
But such state funding also has a lot of consequences for the party system that might not be viewed so positively. One of the main consequences of state funding is that parties then marginalise their membership even more as they have no reason for them at all. The Royal Commission on the Electoral System was particularly worried about this issue, and said: ‘We share the fears that have been expressed that an unnecessary increase in State assistance would reduce parties’ need to rely on their ordinary members for financial support and voluntary work. This could, we consider, lead to a lessened commitment to recruitment of, and responsiveness to, those members (RCES, 1986: p.211).
Another huge problem is that state funding leads to a much more moderate party system. The independence from civil society that state funding affords political parties has a strong tendency to shift parties further into the centre of the political spectrum as it frees them to a large extent from the ties of their present backers. Personally I think this is a very undesirable thing. This increasing independence (or weakening linkage) also means that some of the classic functions of parties, such as the articulation of interests, the aggregation of demands, and the formulation of public policy become undermined.
Of course we already have a huge system of (backdoor parliamentary) state funding of parties – so a lot of this has already happened. The Greens for example get the vast bulk of their financial resources from the state now.
The point is that such funding doesn’t solve political corruption (just as it hasn’t in Italy, Germany, France, US etc), but actually creates just more and greater demand for state funding and further corruption problems to do with state funds
Bryce
http://www.liberation.org.nz
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Bryce
Doesn’t the EFA prohibit the use of Parliamentary party funding monies for electioneering ?
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Strings – my understanding is that the EFA does quite the opposite: it legalises such expenditure and states that any parliamentary funds are by definition not election expenditure. This is still very unclear though and open to different interpretations. This in my view was the biggest problem with the EFA – it strictly regulated what non-parliamentary parties, third parties, and voters could do during election year, but gave the parliamentary parties the freedom to speed more parliamentary money on electioneering.
As the Listener pointed out last year, the EFA combined with 2007′s Appropriation (Continuation of Interim Meaning of Funding for Parliamentary Purposes) Bill, will have a profound impact on elections by allowing incumbent political parties and MPs to have a huge advantage over any challengers. Essentially the ruling parties will face different spending rules to any challengers and will effectively have a ‘legalised advantage’.
Bryce
http://www.liberation.org.nz
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Actually I’d be pretty happy with a ban on donations and state funding.
I would want a slightly more complicated system
a) There should be a parallel stream for funding issue advocacy/promotion. It’s an equally important part of democratic participation and fixing one without the other will skew the system.
b) I’m tempted by straight even split across parties, but I worry about how we handle both the moonbats and small parties just starting up. Perhaps a two tier system so a small party starting up gets some funding so they can get big and strong enough to reach the threshhold for grown-up funding.
I’m sure there are lots more issues I haven’t thought about yet
What we need is a public lead, public focussed discussion so we can understand and talk through all the issues.
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Bryce,
Some PS spend is counted under the EFA, some isn’t.
No Right Turn has my favourite diagram: http://norightturn.blogspot.com/2008/04/electoral-finance-act-explained.html
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Bryce
My understanding was that this money, the same as any from other sources, has to be counted in as election expenses, and so does not increase the overall amount a party is allowed to spend. Wasn’t there something just after the Labour Party conference about the president telling people to use government publications as campaign literature, and that being reversed by the Party Leader?
I’m getting old, so my memory may not be serving me too well right now.
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NRT has a great diagram to explain this:http://norightturn.blogspot.com/2008/04/electoral-finance-act-explained.html
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Strings – I share your worries about memory and age…. It’s also complicated in this instance by the sheer bloody complicatedness, problems of interpretation, and changes that the EFB underwent last year!
But I’ll be very surprised to see the Green Party (or any other party for that matter) putting in a post-election expenses return to the Electoral Commission that includes the millions of parliamentary-funded dollars they spend on electioneering this year!
Anita – yes, NRT’s diagram is very useful. The diagram obviously isn’t attempting to show the proportionality of these different expenses (but instead just their relationship to one another) – but if it did, then the “Parliamentary Advertising” circle would need to be significantly bigger than the other circles.
Bryce
http://www.liberation.org.nz
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As I understand it, the law says that parliamentary funds cannot be spent on things that are deemed by law to be ‘electioneering’. And before the EFA, parliamentary funds could not be spent on things that are deemed by the law to be ‘electioneering’. The question is entirely over what is deemed by the law to be electioneering, and there is no assumption that the definition of ‘electioneering’ in the law will be in any way congruent with what the word means in ordinary conversation.
But, bear in mind that it is only the things that are deemed to be ‘electioneering’ by the relevant law that count. Whether or not something is deemed to be ‘electioneering’ by other laws is irrelevent.
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Anita said . . . . .
>
>>I worry about how we handle both the moon-bats and small parties just starting up. Perhaps a two tier system so a small party starting up gets some funding so they can get big and strong enough to reach the threshold for grown-up funding
>
And therein lies the problem, of democracy in an MMP environment. There is an argument that suggests that all should be equal, and another that says loonies don’t deserve equality. I think equality is the only way to go, because sometimes the loonies rule the bin; however, we could set the hurdle a bit higher to eliminate the basically ridiculous.
Suppose we say that to be registered as a “political party’ for general election purposes you need to produce registration papers for at least half of all constituencies (with deposits), a registration fee of $50,000 and evidence of having at least 20,000 paid up members with a minimum membership fee of $150 per person and no ‘non-human’ memberships allowed within the constitution of the party. To my mind that combination, with a requirement that all parties intending to stand in the next election renew their registration on the above basis (plus inflation) by December 1st the year prior to a scheduled election, would provide some assurance that the energy and investment required to facilitate a party’s participation in the election was worthwhile. On the basis of this approach to registration, I would be happy to afford each registered party an equal share of an election spending pool that was fixed at ten 2008 NZ dollars for every registered voter as at the day the election was called, with the proviso that there could be no other monies spent on electioneering of any kind, and the money could not be spent in advance of receipt, including polling. (This would enable the country to benefit from about 32 months of government per election as opposed to the 22 we seem to get now (this parliament seems to have started in February 2006 and my observation would be that it moved into election mode about December last year).
As for funding research on issues, etc., I would be happy to see central funding of $250,000 per MP, to be spent on all support services (other than travel to and from parliament), including all party and personal office expenses. If a party wanted to spend more then that should be at their own expense for which I would expect them to undertake fund-raising. Cabinet Ministers do have greater costs, so I would provide them with $2 million for the PM, and $500,000 plus $100,000 per portfolio for the others, to cover ministerial costs including travel. If the governing party thinks ministers need help through the appointment of Associate Ministers, it would have to spread the funds already available.
Might as well finish this off I guess. I would provide MPs from out of Greater Wellington (i.e. more than 45 minutes one-way by commuter train) with a two bedroom apartment in a purpose built campus, Ministers, including the Prime Minister, would be housed in the same campus, but with a higher standard of furbishment. I would pay the Prime Minister $4 million a year, Cabinet Ministers $2 million a year, all other MPs $500,000 per year, Pensions would be managed through Kiwi Saver and there would be no “life-time” benefits. Travel to and from the nearest Railway Station or Airport (if the train journey is more than 2 hours) would be provided, all other travel costs would be personal expense (I don’t think going to the local RSA for an ‘event” in the electorate is ‘official’ business, it’s part of getting re-elected.
SO there’s a somewhat all embracing proposal – discussion would be good I think.
(OH. on the basis of 120 MPs and 20 Cabinet Ministers with a total of 30 portfolios the cost, apart from housing and travel, would be $140,000,000 or circa $1 per tax payer per week. I would regard that as reasonable value for money. )
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