After yesterday’s disastrous electoral result, one decision of the former Queensland Labor government is looking good, at least from their perspective. This was the change to the public election campaign funding regime.

Previously Queensland, like other jurisdictions, had a pay-per-vote system of election public funding (about $1.65 per vote in the QLD case). In the reforms legislated last year, this was changed to a system of reimbursement, up to a maximum of about $5.3 million. The formula works like this:

All of the first 10% of electoral expenditure
75% of the next 80% of electoral expenditure
50% of the remaining 10% of electoral expenditure

I’m not sure how much Queensland Labor spent this time around, but presumably they will walk away with several million dollars in public funding, while the old system would have netted them $1.2 million on yesterday’s vote.

The main argument for the new system is that it introduces a counter-cyclical element to the system. With donations tending to follow popular support, parties on the downward part of their cycle are dealt a double blow. This system of public funding lets them mount a decent-sized campaign (I’m not sure how big the Queensland Greens or Katter Party campaigns were, but this system also helps small parties, provided they reach a 4% threshold).

However, as the NSW and QLD elections demonstrate there is only so much money can do. From a campaign finance theory perspective, each campaign was a fairer and more even contest than it might otherwise have been. But that did not stop two of the biggest defeats in Australian electoral history.

Barry O’Farrell’s campaign finance reforms were intended to diminish corporate influence in NSW politics. Certainly, they will stop corporations donating directly to political parties. But especially after the 2010 reforms capped these donations at $5,000 a year, and bestowed lavish public funding on the major political arties, this was not a very plausible conduit of influence in any case.

Issues politics has long been trending away from the political parties, and corporate Australia has been following the trend with increasing numbers of 3rd party campaigns. And in this space, ironically O’Farrell’s laws favour traditional vested interests like companies over not-for-profits.

This is because NSW’s campaign finance law tightly regulates spending money via donations at all times, but outside the campaign period from 1 October the year before the election does not regulate other forms of spending. So if a corporate spends its own money, or can structure its political payments to other organisations so that they are for consideration and not a gift (for example, paying a peak body to run a specified campaign), they can spend as much as they like.

Not-for-profits, by contrast, are usually reliant on donations. So under the O’Farrell campaign finance regime, on an issue that may affect voting in a NSW election, a not-for-profit can now only receive donations of up to $2,000 a year from people on the electoral roll. Even other not-for-profits are prevented from giving financial support, as are unions, corporates, permanent residents, people under 18, and others not eligible to be on the electoral roll. Because this includes the federal election roll, as a Victorian on the electoral roll I have more political rights in NSW than many people living in NSW.

Of course corporations have always had deeper pockets than most not-for-profit third parties. But NSW campaign finance law further tips the balance against the not-for-profits, severely hampering their fundraising while leaving corporate political funding largely unaffected.

It’s absurd – but it is now the law.

What issue has me lining up with NSW Labor, the ETU, the CPSU and the Shooters and Fishers Party against the NSW Liberal Party? Barry O’Farrell’s campaign finance laws, which were passed by the NSW Parliament this week. The report of the Legislative Council inquiry into these laws shows these organisations were my odd issue bedfellows.

As with the federal inquiry last year, I think my views were given a fair hearing. The final report quoted from my submission many times, though for once I was not a solitary voice on many of the issues I raised. Even many of the usual champions of a more regulated political system thought that this bill went too far.

Unfortunately, despite the report clearly expressing significant concerns with the bill, both on its merits and its constitutionality, the Greens in the end backed the bill with a minor amendment.

The two main effects of the legislation are to:

* during the campaign period starting 1 October the year before a NSW election, any campaign spending that has as a dominant purpose the influencing of voting will be included in the spending cap of any political party to which the campaigning organisation is affiliated (in other words, union campaigns will be counted towards ALP campaign caps);

* ban all political donations at all times to political parties and third parties from organisations (coming on top of an ban on donations from people not on the electoral roll – which of course includes permanent residents and citizens under 18).

The only advantage of this over-reach is that it will now almost certainly end up in the High Court. I’d be amazed if the unions did not challenge; while they are not certain of victory there is a viable argument on freedom of political communication grounds. And a victory on this point might curb the campaign finance excesses likely to eventually emerge from the Green-Labor control of the Senate.

Reflecting the current orthodoxy on campaign finance policy, the Age yesterday editorialised in favour of the threshold for political donations disclosure being lowered from $11,500 to $1,000.

Despite the popularity of the $1,000 figure, I have never seen any real argument as to why that number is the right one. The Age said this:

For as long as this situation has been allowed to continue, and various donors are – for whatever reasons – free to conceal themselves from public scrutiny, democracy is under threat. Voters must be confident that political donations are not synonymous with covertly buying influence.

But could $11,500 plausibly buy influence? In 2010-11, a donation of that much was 0.000012% of the ALP’s income. I won’t strain your eyes any further by making you count how many decimal places would be needed to calculate a $5,000 or $2,000 donation as a percentage of the ALP’s total income. And the numbers would be even lower for the Liberals, who raised more money than Labor in 2010-11. The parties have incomes that are large enough, and diversified enough, for a single donor at this level not to be important.Read More »