Electoral finance reform: first impressions

The Government has announced what it plans to do with the law on electoral financing. Not all that much, actually.

For anyone who doesn't know, my specialist area of academic research is electoral law, with a particular interest in the law that regulates how electoral contests are financed. So I've been waiting for the Government's proposals on reforming the law in this area in the wake of the late, ill-fated Electoral Finance Act with quite a bit of anticipation. (Sad, I know ... but everyone's got their weird little quirks.) The following is my immediate, albeit rather lengthy, first impression of those proposals. I'll follow up with another post on my thoughts on the forthcoming MMP referendum questions/processes in a couple of days.

First of all, the Government actually doesn't propose very much reform at all to the existing law on election financing. This fact is not that surprising, given the Government's overall approach to the issue: seeking to ensure the law is "based on broad consensus so that the public can have confidence in the outcome of parliamentary elections and that the rules are enduring and consistent across general elections." Because electoral finance rules are subject to so much fundamental disagreement, an approach that says "we won't change unless most everyone agrees to change" is a recipe for the status quo.

A couple of further points on the Government's overall approach to the topic, before I look at its specifics. It seems pretty clear that the desire for "broad consensus" really was a desire for near-unanimity amongst political parties; most of the occasions on which a "lack of consensus" is cited it is one or another party that is named as blocking change. Other submissions on the issues from non-party sources are sometimes cited along the way, but my general impression is that the Government's chief concern was ensuring the current political players are all on board with any alteration to the law.

Second, that aim isn't either surprising nor particularly regrettable, given how the reform process was run. Once the Government decided to can the Citizens' Forum on electoral funding reform and return the decision of what to do next to the Minister of Justice, the best way to proceed is on the basis of what all political parties can live with. Yes, the extended public consultation process had some merit in feeding ideas into the process. But I'd be very uncomfortable with rewriting the law in this area based on what a majority of 47 self-selecting submitters happened to say (and I write that as one of those submitters, whose suggestions largely were ignored in the Government's proposals).

On to the specifics of the Government's proposals. As I say, the "all must agree to change" approach means that the Government is steering clear of large areas of electoral finance regulation, despite some pretty major problems with it. So, for example, the present regulation of broadcast election advertising will not be changed (due, apparently, to Labour and the Greens preferring the current set-up). Consequently, political parties still will only be able to spend as much on TV and radio ads as the Electoral Commission gives them pre-election. (I'd also note as an aside that following the Court of Appeal's recent decision in Alliance Party v Electoral Commission, TVNZ is going to have to give the political parties more free time to screen closing statements on the eve of the election.) Non-party participants (the vexed "parallel campaigners"/"third parties", of more below) will remain barred altogether from running overtly partisan election ads.

Equally, the Government is choosing to retain a "regulated period" of three-months before election day, even though you can only know when this begins once the election date is announced. The reason for doing so rather than fixing the start-date in law is that with our messy and unpredictable electoral timetable, fixing a start date in law would require constant revisions of the law as the election day moves about. (I'd like to take credit here for being the submitter cited in the Government's proposal document as drawing attention to this downstream problem.)

So, just what change is the Government proposing? The proposals can be broken down into five areas.

1: Changes to the regulation of "parallel campaigners"/"third parties".

2: Changes to the limits on political party election spending.

3. Changes to the disclosure of donations to political parties.

4. Changes to the controls on the use of parliamentary funding.

5. Changes to the role and responsibilities of the Electoral Commission.

1: Changes to the regulation of "parallel campaigners"/"third parties".

This was the big one, given all the fuss and hoopla over the Electoral Finance Act 2007, which for the first time put limits on how much such individuals or groups may spend on election-related advertising (just like those that apply to individual candidates and political parties actually contesting the vote). In it's previous proposals document, the Government looked like it might be open to adopting similar forms of regulation, albeit with far higher spending caps/registration thresholds in place. However, the Government has now backed away from this idea altogether, citing "no consensus" and "strong opposition" as the reason.

Instead, the Government will require all individuals or groups intending to spend more than $12,000 on election advertising in the regulated period to register with the Electoral Commission. That's it. Just register. No limit on what they can then spend, no requirement to disclose what they spend, no requirement to disclose where their funding comes from.

The idea behind this proposal is that a central register of "big spending" parallel campaigners/third parties will improve transparency, by providing "a central point where the details of parallel campaigners could be readily accessed by the public and the media". (Individual election advertisements from such parallel campaigners/third parties also will have to carry the name and address of the person who authorised them, although another proposed change is that this address can be a business one rather than a home address.)

Fair enough - but a couple of lingering questions. First, the amount at which parallel campaigners/third parties have to register dropped from $20,000 in the Minister of Justice's initial proposal to $12,000 in cabinet's final decision. I wonder why that happened (not that I disagree particularly with the move). Second, transparency will only work if the registration process actually reveals who is behind the advertising. So, for example, if the "Advance New Zealand Trust" is able to register as a parallel campaigner/third party, with a lawyer serving as it's secretary/financial agent, then the public will learn nothing about who is really behind that group's spending.

We also need to look at the proposed regulation of parallel campaigners/third parties in light of how political parties continue to be regulated. As I'll get to, political parties will face the same limits on their election advertising as they do presently. At the 2008 election, this limit actually constrained National and Labour (i.e. both parties spent as much on election advertising as they were allowed to in that campaign). Consequently, as these parties literally cannot spend any more on advertising than they already do, there will be an incentive to "farm out" advertising spending to individuals or groups not subject to limits: parallel campaigners/third parties. Note also that there is nothing in present (or the proposed) law to stop officials in a political party meeting with parallel campaigners/third parties to plan how the latter individual or group will mount an advertising campaign. So, I'd suggest you can expect to see more such spending from parallel campaigners/third parties in future election, whether genuinely independent or coordinated with parties and their candidates.

One last point to note here. Existing law states that parallel campaigners/third parties who wish to campaign for a political party/candidate must get that party/candidate's permission to do so (i.e. parties/candidates get an effective veto over such messages). Election advertisements that oppose a political party/candidate do not require such authorisation. The Government appears to be proposing to change this rule so that parallel campaigners/third parties will be permitted to run "election advertisements" for or against political parties/candidates without any need for authorisation. If so, that is a welcome move as it might see a shift away from the predominantly negative campaigns that parallel campaigners/third parties currently are required to run. [Update: "[Simon Power] announced that lobbyists running supportive campaigns for a party would have to seek the party's consent, and they would count towards that party's spending limit. Earlier, his office had insisted that positive campaigning would not count towards party spending limits."]

[Actually, a quick, grumpy aside to finish. In it's editorial on the Government's reform proposals, the New Zealand Herald states: "Those who register a parallel campaign, as National calls them, will not face the spending limit the Clark Government tried to impose. They will continue to be prohibited from publishing material which expressly supports or criticises a party or candidate." This is flat out wrong, and continues the Herald's rather unfortunate habit of making factual errors in its editorials on this particular issue. A suggestion - if you want to be taken seriously as a champion for free speech, do your readers the courtesy of speaking to them truthfully.]

2: Changes to the limits on political party election spending.

As I intimated earlier, the big change is that there really isn't any. Yes, the limits will be inflation indexed from now on, but there won't be any retrospective adjustments to take into account that they were last raised in 1995. I'm reasonably comfortable with that - it's only in the last couple of election cycles that the limits on parties had more than notional application, while there's no evidence to me that the spending limit on individual candidates is stifling competition in electorate races. However, as noted above, the fact the limits will continue to be a real constraint on parties and candidates does create an incentive to redirect spending into less regulated areas.

3. Changes to the disclosure of donations to political parties.

I had hoped to see an indication that the Government was prepared to lower the current disclosure threshold of $10,000 for political parties/$1000 for individual candidates. However, these figures appear set in stone.

That aside, the proposal to require parties to release additional information about how they are funded (in terms of how many donations they receive of a particular size) is a useful extra measure of transparency, and further recognises how political parties have become quasi-public organisations. Equally, the indication that the Government plans to introduce an "associated persons" test to further tighten the loopholes by which donations may be given without disclosure is encouraging; Winston Peters may yet have been good for something in New Zealand politics.

The one big thing that is missing here? Any indication that the Government will define what a donation actually is. For example, if a union meets with a political party and agrees to spend money on advertising in support of that party, is that a "donation"? Equally, if a political party charges money to attend a dinner and meet with a Minister, is the amount in excess of the cost to supply the dinner a "donation" or does meeting with a Minister have a value all of its own? These questions will arise, and unless there's some legislative indication of the answer, they will be resolved by the Electoral Commission (and eventually the courts).

4. Changes to the controls on the use of parliamentary funding.

This is an overdue and welcome move, albeit one that largely is phrased in terms of "more work will be done in this area". As Bryce Edwards has long argued, being concerned about private campaign financing is silly without taking into account the massive state subsidies provided to parliamentary parties and their MPs. An indication the Government is taking the matter seriously is thus very welcome.

5. Changes to the role and responsibilities of the Electoral Commission.

This change, albeit to the administration of the electoral rules rather than their content, is actually pretty big. The Government is proposing that the Electoral Commission (which will be a new body, formed from an amalgamation of the old Electoral Commission and Chief Electoral Office) not only be required to provide advisory rulings to parties, candidates and the public on whether their proposed messages are "election advertisements", but that reliance on this advice then will give its recipient a defence against any future prosecution for breaching electoral law. In other words, the Commission's word will be final on this topic (at least as far as an individual enquirer is concerned).

I'll put my hand up as the submitter cited in the cabinet paper as suggesting this regime, although I suspect there are electoral officials who'd like to knife me for it. My reasoning is that as this is an area of law where there will be grey areas of application, as well as being an area of law where there are political incentives to accuse your rivals of breaching the law, it is preferable to have the administrative agency able to make immediate rulings that can be relied on by their recipients. Yes, the courts will be able to review the "correctness" of that ruling as a matter of law, but the individual candidate/party/parallel campaigner can be sure that they won't suffer later consequences for relying on a "wrong" bit of advice. That will allow the campaign to proceed in far more certain waters, rather than risk having participants trim their sails for fear of getting caught in an unexpected judicial gale.

So that's it - the Government's reform proposals in a nutshell. Now we have to wait for the actual legislation that will put them into practice. For as we learnt with the Electoral Finance Act, the best of intentions can come apart when you actually try to turn them into law. So expect to hear more from me on this topic in the future ... .