Friday, September 07, 2007


Below is the draft of my submission on the Electoral Finance Bill, based primarily on arguments made here,here, and here. It's a bit of a monster, but then so is the bill.

  1. I support the purpose of the Electoral Finance Bill but recognise that its implementation is flawed. I therefore ask the committee to recommend it proceed with amendments.

    A. General Comments

  2. The right of New Zealanders to elect their governments in genuine elections is right affirmed in s12 (a) of the New Zealand Bill of Rights Act 1990 as well as by numerous international human rights instruments, including the ICCPR and Universal Declaration of Human Rights.
  3. Election finance laws protect this right by establishing a level playing field between parties, preventing political corruption, ensuring that parties are accountable to voters and not just wealthy donors, and (most importantly) ensuring substantive political equality between citizens by preventing wealth from exerting undue influence over the political process. In doing this, they constitute a justified limitation on freedom of speech, provided they are reasonable and protect the right of the public to participate in the political system.
  4. The 2005 election exposed fundamental flaws in our current election finance laws, as rich parties sought to circumvent them for political advantage. Parties effectively circumvented spending caps by starting the campaign early, misusing parliamentary resources, making convenient “mistakes” around the payment of GST, and using front groups and third parties to advance their agenda in secret and while not counting against their spending limit. It also saw wealthy donors exercise an unseemly amount of influence over policy, while using loopholes in the disclosure regime to keep that influence secret from the public. It is vital that these loopholes are plugged before the next election.

    B. Anonymous donations and disclosure

  5. The biggest failure in the bill is its failure to address the issue of anonymous and laundered donations to political parties. In 2005, political parties received $375,000 in anonymous donations. In addition, one party received $1.74 million in donations laundered through trusts. This creates public suspicion that policy is for sale – suspicion heightened by the revelation in The Hollow Men that one large party knew very well who its major donors were despite their identities being legally masked from the public.
  6. The 2002 New Zealand Election Study asked the public about the practice of anonymous donations. It found that 78.3% of voters thought that parties should be forced to fully disclose the sources of their income. Support was high across the political spectrum, ranging from 70% among ACT supporters to almost 90% for supporters of the Progressive Coalition . Politicians were rather less concerned.
  7. As a voter, I want to know who is trying to buy my elected representatives. And I want to know who they are beholden to, so I can see whether those people are exercising any undue influence over policy. The practice of allowing anonymous and laundered donations prevents this. In doing so, it invites political corruption, prevents politicians from being held accountable by the public, and erodes public confidence in the political system.
  8. Some argue that forcing full disclosure will reduce the income of political parties by making people and companies less willing to donate, and that it should therefore not be implemented without public funding of political parties. I do not accept this argument. Someone who is only willing to donate large amounts of money if they can do so in secret (and thereby exercise any resulting influence in secret as well) is exactly the sort of person voters want to know about and scrutinise. If political parties fear disclosure will result in their losing such donors, then that is all the more reason to have it.
  9. Democracy should serve the voters, not politicians. Anonymous and laundered donations must be banned.
  10. The bill already includes clauses which effectively bar third parties from receiving anonymous donations, and limit laundering by requiring those passing on donations to disclose the identities of the original donors. This language should be adapted to apply to political parties and candidates. If full disclosure is good enough for third parties, it is good enough for politicians.
  11. As for the “specified amount” above which donations must be declared and anonymous donations barred, the bill currently sets this at $500 for third parties. Again, if it is good enough for third parties, it is good enough for politicians. However, any improvement on the current situation, which allows people to donate up to $10,000 to a party before having to give their name, would be broadly acceptable.
  12. While the bill improves the current disclosure regime by requiring immediate disclosure of large donations in addition to annual returns, this is still not good enough. Most donations happen in election year, but are not disclosed until six months after the election. As a voter, I want to know this information before I vote, not when it is too late to do me any good. Parties and candidates should be required to make an interim return of donations before an election, and face serious consequences for failing to do so.
  13. It is unclear whether the duty to disclose the identity of an anonymous donor (s24) actually applies to candidates. It is unacceptable for donors to remain legally “anonymous” while candidates (but not their financial agents) know full well to whom they are beholden. Section 24 must be amended to explicitly include candidates.
  14. I am concerned that the bill does not require parties to disclose loans. These have been used by parties in the UK to circumvent disclosure laws and hide donations. While the bill does require favourable loans to be partly declared as donations, there is nothing to stop a donor lending a party money on commercial terms, then writing it off after an election, effectively shifting the time of donation to frustrate disclosure (if indeed it has to be declared at all). I would prefer that parties disclose all debts as well, so that the public can see who they are beholden to.
  15. I would also like to see a ban on overseas donations. As the Royal Commission on the Electoral System noted in 1986, it is not legitimate for wealthy and powerful interests outside New Zealand to intervene in our electoral system. The right to vote is restricted to New Zealand citizens and residents; the right to donate should be as well.

    C. The regulated period

  16. I support the extension of the regulated period to one year. The 2005 election saw a party circumvent its spending limit by starting the campaign early and spending a massive amount of money outside the regulated period in an attempt to influence voters. And we are already seeing suggestions that they will do the same next year by effectively starting their election campaign on January 1st.
  17. If election advertising is going to start early, then so should the spending limits. Otherwise, we are allowing rich parties to buy themselves power.
  18. It is vital that the regulated period for parties and third parties is identical. Otherwise, parties will simply channel their pre-campaign spending through front groups and circumvent their limits. I therefore oppose any attempt for a split in the regulated period.
  19. I do not believe the current spending caps on parties are too low. The richest parties have only just begun to strain against them. Raising the limit whenever a party reaches it defeats the purpose.
  20. However, I am concerned that the current spending cap on candidates may be too low, particularly for candidates in large rural electorates, and I support increasing it if that is shown to be necessary.

    D. Election advertising

  21. While an expansion of the definition of “election advertising” to include negative and “issue” advertising was necessary in light of the loopholes revealed by the 2005 election, the bill goes too far in limiting the latter, and violates the right to freedom of expression affirmed in s14 of the New Zealand Bill of Rights Act 1990.
  22. In particular, subclause (iii) of the definition, covering advertisements “taking a position” on an issue associated with a party or candidate is so broad as to include almost any public statement at all, whether related to an election or not. While the bill must be interpreted in light of its purpose and in a manner consistent with the freedoms affirmed in the BORA, it should not be left for a court to make the obvious clarification.
  23. Any limit on “issue” advertising should draw a distinction between advertising which uses an issue in an attempt to influence voters to vote in a particular way, and advertising which merely sets out to highlight an issue or set the political agenda without favouring or highlighting any particular party. The obvious distinction here is the attempt to influence voters. The bill should be amended to reflect this. This can be done either by rewriting the definition so as to be more in line with that used in s85 of the UK Political Parties, Elections and Referendums Act 2000, or simply by deleting subclause (iii).
  24. The exemption for the media in sections 5 (2) (c) and (d) applies only to printed or broadcast material, and fails to recognise that the web is a significant news source. This is best dealt with by including websites with newspapers and periodicals in s5 (2) (c).
  25. I support the exemption of material published by a body to its members in s5 (2) (f), as this encourages democratic participation and the seeking of a wide membership by political organisations.
  26. I support the exemption in s5 (2) (g) of websites publishing personal viewpoints. However, such websites are not limited to blogs. It should also be noted that some blogs, such as Public Address, are commercial propositions which gain revenue from advertising and could thus be considered “election advertisements”. Other blogs carry commercial advertising (whether by choice or because it is forced on them by their provider) while also primarily being a venue for the authors personal views. The exemption should be amended to recognise these facts.

    E. Third parties.

  27. I support the regime for third parties. Given that parties have begun using front groups in an effort to circumvent election spending caps (as documented in The Hollow Men), the only solution is to subject such groups to tighter regulation. However, I have a number of concerns with the implementation.
  28. The requirement that all members of unincorporated bodies be registered electors excludes many groups which include people under 18. If the aim is to prevent foreign influence on elections, a requirement that all be New Zealand Citizens or Permanent Residents (and hence eligible to vote of aged over 18) would be preferable.
  29. The total spending limit of $60,000 for a third party is too low. While they should not be the focus of the election, third parties must be able to participate meaningfully. A spending limit which does not allow them to purchase a full-page ad in every major daily newspaper does not allow this.
  30. I strongly support the requirement for third parties to disclose their donors and the restrictions on anonymous and laundered donations. As mentioned above, I also want to see the same rules applied to politicians.
  31. The requirement for unregistered third parties (those to whom s53 (3) applies) to make a statutory declaration each time they advertise is unduly onerous, and place significant barriers in the path of those wanting to have a say while not seeking to influence the outcome in a significant way.

    F. Enforcement

  32. I support the moves to tighten enforcement of electoral law, introduce strict liability for parties and financial agents, and extend the time-limit for prosecution.
  33. While the increase in penalties for corrupt and illegal practices is an improvement on the current situation, it goes nowhere near far enough. Some groups (e.g. the Kyoto Forestry Association) are already announcing their intention to violate the law, so clearly the proposed penalties are not a sufficient deterrent.
  34. Current criminal law allows a penalty of up to seven years imprisonment for stealing a TV, but the bill provides for a penalty of only one year for trying to steal an election. This does not build public confidence in the political system, and will be seen by the public as politicians protecting their own interests.
  35. I would prefer to see the penalty for a corrupt practice increased to seven years imprisonment and/or a $1 million fine, with a corresponding increase in the maximum sentence for an illegal practice as well.
  36. I do not wish to make an oral submission to the Select Committee.