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17 November 2006 Funding Political Parties: Not Ordinary Government Business The funding of political parties is an important democratic issue. It was one of nine matters addressed in the 1986 report of the Royal Commission on the Electoral System. We can learn from subsequent developments and research. There has been much public disquiet over the unlawful use of taxpayers' money to fund election spending in 2005. Cabinet is apparently to receive a report before Christmas on options for changing funding rules. Greater restrictions on private support and more taxpayer funding may be proposed. The Royal Commission's report identified the conflicting considerations. It considered that parties should be required to get the "bulk of their financial needs from their own supporters". On the other hand, it was also concerned that private interests should not have undue influence over political parties. It favoured banning large anonymous donations and third-party endorsements but did not favour capping identified donations. It also recommended that taxpayer funding be tilted against the governing party in order to promote political competition. Currently, anonymous donations are permitted (as long as the recipient party does not know the source). There is no cap on identified private donations but disclosure is required above $10,000. The Electoral Office has reported that nine political parties obtained $3.2 million in private donations (anonymous and identified) of at least $10,000 during the 2005 election year. National and Labour accounted for $2.8 million of this total. This left only $358,000 in such donations to the remaining seven parties, a significant proportion of which came from the salaries of sitting MPs. The concern that private donors might obtain improper influence is valid in principle and there is a case for safeguards against it. In practice, however, there is not a lot of empirical evidence that it is a major issue in the New Zealand context. Private donors represent diverse interests. Some are partisan, such as the unions, and others are relatively non-partisan (companies tend to spread their donations). Contrary to some claims, the Business Roundtable has never given money to any political party. It is also not clear that money buys necessarily votes or political favours. Some think that the Exclusive Brethren's campaign actually damaged National's chances in the last election. Unlike in the United States, business at large in New Zealand does not seek government favours in the form of protection, subsidies and tax breaks (although corporate welfare has been coming back). Some US research supports the Royal Commission's view that private funding enhances political competition and democratic participation. It also forces political parties to connect with their grass roots supporters for funding and volunteer labour. In short, private funding and advocacy do not appear to be serious problems under current rules. For the same reasons that we jealously guard the right to a secret ballot, any proposal to force disclosure above amounts as low as, say, $250 would seem to be an unjustifiable infringement of privacy. There are other considerations. Can it seriously be suggested that our politicians can be ‘bought' for such an amount? How would equivalent contributions like in-kind support (such as free services or voluntary labour) be effectively regulated? Tighter restrictions on advocacy would raise issues concerning the right to free speech. The current $10,000 disclosure limit may be a reasonable compromise between the case for transparency and the need to avoid intrusive regulation and costly administration. In contrast, there are more grounds for concern about the growth of state funding since the Royal Commission reported. Taxpayer-funded resources and services of more than $60 million a year are provided to parliamentarians. Labour's pledge card was state-funded, and last year saw the Working for Families package promoted with a $15 million budget. Researchers have pointed to the link between the decline in political party membership and the rise of state financing. More state funding would further crowd out private support. The Royal Commission stressed the importance for a democracy of the contest between an incumbent government and a credible opposition. The great twentieth century philosopher, Karl Popper, observed that what distinguishes a democracy from tyranny is the ability of the electorate to dismiss a government that it no longer supports. Power has already shifted from voters to parties and parliamentarians under MMP. More state funding would tend to protect incumbents and entrench party control. These considerations suggest the major problem New Zealand faces is the departure from the Royal Commission's principle that parties should obtain most of their resources from their supporters, not the state. Limiting the extent and abuse of taxpayer funding should be the key focus of any reform. Moreover, political party funding is too important an issue to be treated like ordinary government business. There is a strong case for an independent, Royal Commission-like, process for considering changes to current arrangements.
Roger Kerr is the executive director of the New Zealand Business Roundtable. |