Election Funding (Amendment) Bill

About this Item
SpeakersHannaford The Hon John; Johnson The Hon John; Kirkby The Hon Elisabeth
BusinessBill, Second Reading

Second Reading

The Hon. J. P. HANNAFORD (Attorney General, Minister for Justice, and Vice President of the Executive Council) [8.4]: I move:
      That this bill be now read a second time.

I seek leave to have my second reading speech incorporated in Hansard.

Leave granted.
      Election funding and the public disclosure of political donations and electoral expenditure has been a feature of this State's electoral system since 1981. Since that time, a number of changes have been made to the requirements of the legislation for disclosure and the entitlement of parties, groups and candidates to receive funding for elections.
      The election funding scheme in New South Wales has been the subject of strong criticism over the past few years. The Independent Commission Against Corruption has perhaps been the most vocal critic of the legislation in its current form. In its investigation into the North Coast land development, the Independent Commission Against Corruption identified two key weaknesses in the disclosure requirements of the Act.
      The first weakness or loophole was the ability of a donor to divert a donation through a third party, enabling the donation to be disclosed under the third party's name rather than the real donor's name. The ICAC considered this an "artificial and transparent device". Although the commissioner expressed doubt that any modern court would uphold it, the point was made that the practice had been "so freely and notoriously followed for so long, apparently without challenge" that amendment designed to meet it was overdue.
      The second key failing of the legislation, as expressed by the ICAC, was the ability to avoid disclosure if the donation was described as being to the party's "administration fund" or "maintenance fund". The ICAC called the distinction between donations for administrative purposes and those for electoral purposes "illusory". The commissioner went on to say that substantial donations to political parties are as likely to influence, whatever label they may be given, and whatever purpose they may have.
      It is clear that these two aspects of the legislation have operated to undermine the system of disclosure under the Act, allowing many donations to escape the disclosure net. It is important that the public maintain their confidence in the integrity of the system of election funding operating in this State. The public examination of the system which has been conducted over the recent years has revealed inadequacies in the system which has failed to ensure that donations are uniformly disclosed.
      The loophole created by the distinction between administrative and electoral donations was also raised by the Independents as a matter for concern in the negotiation of the memorandum of understanding. The Government undertook to remove this distinction.

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      In 1990, the Government moved a motion to establish a parliamentary committee, the Joint Select Committee on the Process and Funding of the Electoral System. The committee was established with broad terms of reference to recommend ways in which the current system of election funding could be improved. The committee was to have regard to: the need for accountability as regards the efficacious, efficient and equitable use of public money; the public interest in the integrity and impartiality of the political process; and systems of election and electoral mechanisms.
      In particular, the committee was to consider and recommend ways in which the system of election funding could be improved in relation to: the disclosure of true sources of funding to candidates, groups and political parties; and the disclosure of the expenditure of funds by candidates, groups and political parties.
      The committee produced its first report, dealing with the entitlement of parties, groups and candidates to receive funding for elections. Legislation was introduced in early 1991 as a result of that report.
      The joint select committee's second report was delivered in September 1992, and careful consideration has been given since that time to the recommendations made by the committee.
      The predominant purpose of the bill before the House today is to tighten disclosure requirements under the Act. The Government has taken on board the criticisms of the ICAC and the media and has taken the difficult decision to substantially decrease the disclosure thresholds and introduce third party disclosure.
      In this regard, the bill does not reflect the views of the majority of the parliamentary committee. It is the Government's view, however, that the amendments contained in the bill will go further towards ensuring the integrity of our election funding and disclosure regime.
      I propose to now deal with some of the main provisions of the bill.
      The bill introduces a number of changes which are aimed at increasing disclosure under the Act. Firstly, the artificial distinction between electoral donations on the one hand and maintenance or administrative donations on the other, is to be removed. The purpose of the donation will be irrelevant for disclosure purposes.
      Secondly, the thresholds for disclosure are to be altered. This aspect of the bill departs from the recommendations of the joint select committee. the committee suggested disclosure levels be substantially increased. The bill instead decreases the disclosure thresholds.
      The new thresholds are to be $1,500 for political parties, $1,000 for groups and $200 for candidates, consistent with the levels applying under the Commonwealth legislation. It is the Government's view that consistent disclosure thresholds will reduce the scope for confusion between the two schemes. The new levels to be applied will result in many more donations being placed on the public record, for public scrutiny. The system will thereby achieve a greater degree of openness and transparency.
      As a related measure, the bill requires parties, groups and candidates to ascertain the names and addresses of persons who make donations of amounts in excess of the relevant disclosure threshold. To reinforce this provision, the bill prohibits the receipt of gifts of these amounts without those details, and provides that any such amount received will be forfeited to the State.
      The bill also expands the definition of "gift" in the Act. The definition will now include the provision of a service, other than volunteer labour, for no consideration or for inadequate consideration. This means that "in-kind" gifts, the monetary value of which exceeds the disclosure threshold, will have to be disclosed. This amendment will ensure that all donations are treated consistently under the Act, no matter what form they take.
      The bill introduces into the Election Funding Act a new concept - that of third party disclosure. For too long the disclosure system has allowed funds to be "channelled" through a third party, leaving only the third party to be identified as the donor. The addition of third party disclosure is designed to reveal the real source of the donation. Again, this measure is designed to improve the transparency of the scheme.
      The third party disclosure requirements will apply to persons other than political parties, groups and candidates who incur electoral expenditure of more than $1,500. Third parties will be required to disclose details of the expenditure incurred, together with details of gifts or donations of amounts of $1,000 or more received by the third party to finance or partially finance that expenditure.
      The electoral expenditure to be disclosed by third parties under the Act covers all items already listed in the legislation as electoral expenditure, such as expenditure on advertising, printing and distribution of electoral material travel and accommodation for a candidate, and election campaign research. However, for the purpose of disclosure by third parties, an additional item of expenditure is classed as electoral expenditure and must be disclosed - any gift made to a party, group or candidate will be required to file a return disclosing the expenditure - that is, the donation made - and also any gifts of $1,000 or more received by the third party to finance the donation. This provision has been included to overcome the problem of the "channelling" of donations, and will allow the real source of the donation to be disclosed.
      The bill also makes changes to the requirements which apply to fund-raising events. Fund-raising events are now to be treated in a manner which is more consistent with reporting of other donations. The net proceeds of a ticket to a fund-raising event - that is, excluding the relevant cost of staging the event - must be disclosed in the same way as an ordinary donation, if over the disclosure threshold. For those amounts received in the course of the event which do not individually exceed the threshold, the existing requirement to disclose the overall net proceeds less the amounts individually disclosed will remain.
      The bill provides that political parties must now disclose annual subscriptions received by providing a statement of the subscription rates and the number of subscribers at each such rate, as well as the total amount of annual subscriptions paid. No other details are to be given in relation to membership. This provides sufficient detail to inform about the party's financial receipts without compromising the confidentiality of members.
      The bill also provides for a number of more minor administrative amendments. For example, the bill will enable, in appropriate circumstances, the early recovery of advance payments made to a political party. Currently, the Act only provides for repayment to be demanded after the relevant general election. This is of course appropriate if the party concerned contested the election but merely failed to qualify for funding. However, there may be circumstances in which a party has received some advance payments either ceases to operate, winds up or otherwise fails to contest the election. The bill will allow the Election Funding Authority to demand repayment of the money on the happening of that event.
      The bill also extends the offence provisions for false statements in a claim for payment or a declaration of political contributions received and electoral expenditure incurred. Candidates may now be liable in addition to the official agents. The bill provides that it is an offence for a person to give, or withhold from giving, information to the official agent knowing that it will result in the making of a false claim.
      The bill introduces a new fund, known as the political education fund. The establishment of this fund was recommended by the joint select committee. An annual appropriation is to be made to the fund of an amount equal to the cost of one ordinary postage stamp for each elector in the State.

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      A political party will be eligible for annual payments from this fund, based on the electoral performance of the party at the previous general election. That is, a party will be entitled to receive funding based on the number of first preference votes received by candidates endorsed by the party for election to the Legislative Assembly at the previous general election.
      Payments received by parties from the fund must be spent on political education purposes, such as the posting of written materials and information. The bill specifies that expenditure on travelling or accommodation expenses may not be regarded as expenditure for political education purposes.
      The Election Funding Authority, which will administer the political education fund, may make and publish determinations concerning the purposes for which a party is entitled to spend monies received from this fund. Expenditure by parties must be in accordance with those determinations. Party accounts in relation to political education fund matters are to be subject to auditing requirements.
      The Election Funding (Amendment) Bill represents a clear move towards increased reporting of political donations. The bill should ensure that the past inadequacies of the legislation will be redressed.
      These changes should result in a greater degree of public confidence in the process of election funding and disclosure. They will ensure that political donations are fully disclosed and open to scrutiny. The integrity of the system will be ensure.

I commend the bill to the House.

The Hon. J. R. JOHNSON [8.5]: The Opposition supports the Election Funding (Amendment) Bill. The bill is the result of a wide-ranging and extensive inquiry by a joint committee comprising members of all parties, as well as the crossbenches, of both Houses of this Parliament. The Election Funding Authority has for a considerable time carried out a very worthy job, and consequently the Government finds itself in the position of moving amendments to the Act, and the Opposition is happy to support them.

The Hon. ELISABETH KIRKBY [8.7]: I am heartened by the introduction of the Election Funding (Amendment) Bill. When the Australian Democrats held the balance of power in this House between 1988 and 1991, we were most concerned by the inadequacies of the Election Funding Act, which had been graphically illustrated by the Independent Commission Against Corruption investigation into North Coast land development. The Australian Democrats pressed the Premier to establish a joint select committee to look at ways of reforming the New South Wales election funding laws. It was only because the Australian Democrats obtained a firm commitment from Premier Greiner that we agreed to the Government's legislation to reduce the numbers in this Chamber and in another place.

Previously I had opposed the Labor Government's attempt to increase the numbers in the Legislative Assembly from 99 to 109. So it was logical that I agreeD to the numbers being reduced again to 99. As a member of that committee - it should be remembered that the committee was established in 1991 - I was most disappointed with the delays in deliberations and ultimately with the majority report, which I considered to be retrograde in a number of respects. Therefore, I was forced to issue a minority dissenting report. Now I am happy to see that many of the suggestions in my minority report are reflected in the provisions of this bill. Members of Parliament are entrusted with the power to make decisions which affect the people who live in this State. It is therefore imperative that they act, and be seen to act, with impartiality and in the public interest.

While there is nothing inherently wrong in wanting to give or receive donations to political parties or to candidates, a problem arises when donations are made in order to purchase influence. We may not be able to completely dissect the motives of those involved in public decision-making, but disclosure of political donations and their source is crucial to the ability of the public to evaluate the pressures brought to bear on a member of Parliament. I refer to pages 3 to 4 of the evidence that Mr Kevin Zervos of the Independent Commission Against Corruption gave the committee on 25th November, 1991. He stated:
      Serious difficulty arises distinguishing between the honest and the corrupt when donations are made secretly and not openly and publicly . . . If official corruption is to be minimised, public officials cannot be allowed to have confidential or private financial dealings which could give rise to a conflict of interest.

I believe that the aim of the disclosure law should be to discourage attempts to purchase influence and to encourage openness where not only is there no corruption, but also no appearance of corruption, or as Mr Kevin Zervos put it on 25th November, 1991, at page 11, ". . . so that disclosure of political donations is effective, full and frank". The provisions of this bill are moving in this direction. In this respect, the current laws relating to disclosure are in urgent need of reform. Although one of the objects of the present Election Funding Act is to ensure the public disclosure of substantial donations made to political parties or candidates for electoral purposes, there are two blatant loopholes: donations can be channelled through third parties, thereby masking the true source of the donation; and there is an artificial distinction between donations for administrative and electoral purposes. This, of course, has permitted donations for administrative purposes to go undeclared.

More importantly, the spirit of the law is being violated. I applaud the removal of the artificial distinction between electoral donations and maintenance or administrative donations. I welcome the lowering of the threshold for declaring political donations, in line with Federal legislation. This was one of the key recommendations of my dissenting report. I made it clear to the committee at that time - although I received very little support - that it would be imperative that the threshold be the same for both State and Federal elections. The minimum threshold for a contribution to a party will be lowered from $2,500 to $1,500; donations to groups will have a threshold of $1,000; and the minimum threshold for a contribution to a candidate will be lowered from $500 to $200.

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While the size of a political donation has a bearing on its ability to influence a political party, the fewer donations that are exempt from disclosure the better. This is even without considering donations being split up in order to use the anonymity afforded by thresholds. The Joint Select Committee upon the Process and Funding of the Electoral System heard evidence in favour of far greater openness in the disclosure of donations, again from Mr Kevin Zervos of ICAC and Dr Ernie Chaples of the Department of Government at Sydney university. Dr Chaples said to the committee, "Political parties and candidates are not like the Smith Family, people are really not involved in political campaigns for altruistic purposes".

I was appalled when the majority of the committee recommended an increase in the thresholds and expressed, in the words of the report, "confidence in the good faith of the overwhelming majority of political candidates who comply with these requirements". Opposition to tighter disclosure laws has, above all, been because of the unstated fear that they would scare away potential donors. But the question must be asked: What do these donors have to hide if their donations are not harmful to the public interest? Dr Chaples said in evidence on 28th October, 1991 - which can be found at page 21 of the report - "There are many people who would be totally discouraged from being public donors who are better left out of the process, quite frankly".

Other individuals and groups which have a valid reason for donating will still do so. What would be considered valid would be tied to the public perception of propriety, which is what should happen in the whole political process anyway. There has also been the suggestion that no threshold encourages the splitting of up donations. However, I am sure that this would be true of any threshold. Certainly, it would be more difficult to disguise the splitting of donations if the threshold were lowered; certainly it would be more inconvenient. I also welcome the introduction of the concept of third party disclosure. As Robert Maher told the committee in evidence on 9th December, 1991:
      I think they [third parties] should come within the same parameters as political parties do . . . They certainly do participate in the process and they don't only participate in the process during elections either.

We must not allow donors to hide behind political parties and third parties. The third party disclosure requirements will apply to persons other than political parties, groups or candidates who incur electoral expenditure of more than $1,500. Third parties will have to disclose details of expenditure incurred and details of gifts or donations or amounts of $1,000 or more received by the third party to finance or partially finance that expenditure. Third parties will have to disclose items already listed in the legislation as electoral expenditure. They will also have to disclose any gift made to a party, group or candidate of $1,500 or more and any gifts of $1,000 or more received by the third party to finance the donation.

I point out, though, that the Federal law provides that any third party that incurs expenditure of $200 or more must furnish a return, must indicate what they spent on the campaign, and must give details of gifts as well. In my opinion the State law should have been brought into line with that. I do not believe it would have caused any hardship for the political parties. A major political party or any registered political party already has office-bearers within the party who have to conform to the Federal laws. They would therefore be used to that legislation and would find no difficulty with it. Also, they would be able to comply with the State law in line with the Federal law.

The bill will also reform the requirements that apply to fundraising events. The net proceeds of a ticket to a fundraising event will now be disclosed in exactly the same way as all donations above the disclosure threshold. The point has often been made that it is very easy for the true source of the donation to be hidden through the purchase of tickets for a fundraiser. I also point out that there is an added danger in that with this kind of event one would expect that multiple units of equal amounts would be donated at about the same time; splitting up would be facilitated.

The bill will also make the necessary requirement to disclose annual subscriptions received by providing a statement of the subscription rates and the number of subscribers at each such rate, as well as the total amount of annual subscriptions paid. Another provision of the bill is to permit the Electoral Funding Authority to demand repayment of advanced payments made to a political party if it ceases to operate, if it winds up or otherwise fails to contest the election. The current law only provides for the recovery of money after the relevant general election. I also applaud the fact that the bill will extend the offence provisions for false statements in a claim for payment or a declaration of political contributions and expenditure. Candidates, as well as official agents, will now be liable. It will be an offence to give or withhold information to the official agent knowing that it may result in the making of a false claim. The penalty will not exceed 100 penalty units. However, I also believe it would be appropriate if a candidate guilty of knowingly holding or giving false information in a return lodged by the agent had his or her seat declared vacant.

I have some reservations about the establishment of the Political Education Fund, which was recommended by the majority of the committee. I have two problems in relation to that. First, it is a dubious proposition that political parties should be given money to carry out political education. One must seriously question the way in which parties will choose to interpret the term "political education". The existing political education carried out by parties would be highly partisan. The important task of educating the public about the political system would be far better served if it were carried out by an impartial body such as a special section of the Electoral Commission, and not by a political party. That special section could be expanded and funded by the money that will be raised.

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Second, the proposal that money from the Political Education Fund be allocated on the basis of the formal vote received by each party in the preceding election for the Legislative Council militates against new political parties and Independents becoming known to the public. The Australian Democrats believe that the goal of political education would be better served by a special section of the Electoral Commission or by the publication of a free booklet containing information on all candidates standing for an election. This procedure is used in New York City, as the committee found on its tour of investigation of political funding systems in the United States. That booklet, which is prepared by New York city, is produced in two languages: English and Spanish, because of the large Hispanic population of that city. A voter guide is issued by the New York Campaign Finance Board. It contains general information about the electorate, polling booths, the date of the election, how to vote, voters' rights and electoral finance. Candidate information includes party affiliation, occupation, occupational and educational background, organisational affiliations, public sector experience, a photograph and a half-page mission statement. So it is a comprehensive document, and I am certain that a great deal of confusion would be avoided if New South Wales had such a guide.

An increasing number of so-called Independents are standing in State elections. In some electorates there could be as many as 15 candidates, including perhaps candidates from the five main parties - the National Party, the Liberal Party, the Australian Labor Party, the Australian Democrats and Call to Australia. In addition, there could be eight or nine Independent candidates. Many of those candidates are not true Independents because they have been requested to stand by one of the major groups to facilitate an exchange of preferences. That would be crystal clear if a voter guide were published, or at least it would be much more difficult to hide the true affiliation of the so-called Independent candidate. I am well aware of what will happen when I report the passage of this bill to my State Council on 4th December. The Treasurer and the party agent of the New South Wales Division of the Australian Democrats will be extremely disturbed by the complexity of what they will now have to do. Like other political parties, the Australian Democrats has had to face an audit by the State Electoral Funding Authority.

That audit has made us aware that many of our candidates are not keeping proper accounts, that they are providing extremely sloppy information to the party agent and are not being truly accountable in the way they should be. That is certainly a great burden for candidates from parties like the Australian Democrats, which has a small administrative base. We have no full-time paid party officers and this work is done on a voluntary basis. However, I believe that in the long term the implications of the new legislation will serve to make the funding process more transparent and, therefore, it will be in the best interests of the people of New South Wales. Therefore, I support the bill, although, as I have said, I am perturbed about the section dealing with political education and how that education is to be provided. I believe that the New York system is fairer than the one suggested by the majority of the committee. I support the bill.

The Hon. J. P. HANNAFORD (Attorney General, Minister for Justice, and Vice President of the Executive Council) [8.26], in reply: I thank honourable members for their support of the bill and I commend it to the House.

Motion agreed to.

Bill read a second time and passed through remaining stages.