|The current New Zealand First Foundation trial in the High Court continues to show why reform is required when it comes to money in politics. The juicy details coming out each day show private wealth being funnelled into some peculiar schemes in an attempt to circumvent the Electoral Act.
Yet they’re not the only ones doing this. The major political parties are currently in full fundraising mode – seeking large donations from the wealthy. And they’re doing so in a way that often gets around disclosure laws or is allowed by the Cabinet Manual.
Both Labour and National are currently using their controversial “cash for access” schemes, in which a large financial contribution can secure you a meeting with the Prime Minister or the Leader of the Opposition.
It was reported this week that Prime Minister Jacinda Ardern and her colleagues have been charging businesspeople $1750 for entry to a meeting in which they also received a presentation from Labour’s pollster David Talbot. The ticket also provided entry to a meeting with other senior Cabinet ministers as well as newer MPs presented as the “rising stars” in the party.
Of course, such meetings have become a regular occurrence over recent years. And Prime Minister John Key established “Cabinet Clubs” for the purpose of attracting large money from those wanting to network with decision-makers.
The Leader of the Opposition is doing something similar at the moment, with Christopher Luxon reportedly charging over $1000 for such access to these meetings – usually in the homes of supporters, reportedly in Queenstown and Parnell.
Officially, such contributions to the politicians aren’t classified as “donations”, and the parties don’t have to declare them to the public, even if numerous contributions exceed the current $1,500 threshold for donations to candidates, or the $15,000 threshold to political parties. This is because the payments can legally be categorised as “business transactions”. The wealthy are simply “buying a service” rather than donating. This classification mechanism isn’t illegal, but it means that large amounts of cash can be funnelled to politicians without the public knowing of their financial connections with the generous individuals.
This behaviour has been going on for years. The Labour Party, in particular, has got into trouble for auctioning donated artworks to wealthy supporters for very large amounts of money, therefore obscuring from whom the donation has been made. The Electoral Commission therefore does not receive a full set of information and the public cannot be informed of the donations.
This is a global problem – in many other countries, political parties operate as businesses selling all sorts of nominal services or products for many thousands of dollars to get around the rules. Authorities have no way to regulate such commercial activity when the rules deliberately only cover donations.
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Will “cash for access” be addressed in the Government’s reform programme?
Will the various “cash for access” schemes be outlawed in the Government’s current reform programme on political finance? It seems unlikely. Unsurprisingly, the Government has kept this issue out of the terms of reference for the reform of political finance being carried out by the Ministry of Justice’s independent panel. However, if pressure is applied on the panel from the public, then proposals to regulate “cash for access” schemes might still be recommended.
Alternatively, pressure could be applied to the Labour Government, which could easily just change the Cabinet Manual, which currently gives permission to ministers to participate in fundraising schemes. Of course, closing this loophole is not in the interests of any political party that has ministers or wants to have ministerial roles in the future. And that’s why even the Greens aren’t campaigning to fix this problem.
The Greens are, however, demanding that other areas of political donation laws be tightened. Spokesperson Golriz Ghahraman currently has a private member’s bill going forward for a vote which will include a sweeping collection of different reforms. One of these is to put a cap on the total annual amount that any one individual can donate to parties. The Greens suggest that individuals should be allowed to donate up to $35,000 each year, but no more.
There will be many that believe that even this figure is too high. And the Greens will have to justify why they believe that such large donations should be permitted, especially given their argument that large donations inherently corrupt democracy. It’s worth noting that in other countries the maximum annual figure is much lower than the Greens recommend. In Canada, for example, the cap on donations is $1675.
National Party opposition to reform
This week the National Party has been speaking out about its opposition to political donation reform. The party is particularly opposed to Labour’s proposal to reduce the disclosure levels of party donations from the current $15,000 to just $1500. National’s resistance boils down to both philosophical and pragmatic opposition.
National’s philosophical opposition is an argument that donations are an important part of democracy, and by making disclosure requirements even stronger, this will suppress this positive part of the political system. They also argue that suppressing the volume of donations will lead to state funding of parties being increased, which they argue has its own problems for politics.
Also, using the argument in favour of the “privacy of the ballot”, National argues that donors’ political preferences should be secret, in the same way that voting is a private matter. However, perhaps inconsistently, the party accepts that donations above the $15,000 level should be made public.
In practical terms, National also argues that tightened donation disclosure requirements will be too onerous on political parties – especially the proposal of quarterly reporting of donations (instead of annually). They say that it would require a full-time staff member to be employed, as well as additional auditing processes.
While all of these are valid arguments to be taken seriously, for those that are interested in transparency, such a stance simply looks like an attempt to keep big money in politics secret.
Secrecy in the Government’s reform process bodes ill
National’s opposition to reforms has come about because it has just released a copy of the party’s own submission that it made to the Ministry of Justice about the reforms in January. It appears that National is the only party to release this submission, making the party appear more proactive and open than others. In contrast, the Labour Party is refusing to release its own submission.
In general, the Labour Government is looking rather secretive in its reform process, which does not bode well for reforms that are supposedly about increasing transparency in the political process.
Part of the problem is that the political and electoral reform process has been designed behind closed doors, with minimum public consultation about what areas to reform and how to do so. And to make matters worse, when the Ministry of Justice called for public submission on the first phase of reform proposals it did so for a very short period of time over the Christmas break – which is hardly a good way to encourage participation and receive input.
Hopefully the Government will release all of the public submissions that were made about reforming political finance, including the one from the Labour Party. Ironically, however, the Ministry of Justice has been attempting to delay and stymie requests for these submissions. For example, I made a request to the government for these submissions under the Official Information Act in early April, but ten weeks later still haven’t received anything, in an apparent contravention of the OIA rules.
Perhaps under Kris Faafoi – who struggled with his justice portfolio – there was simply a problem of direction from the top. Now with Kiritapu Allen replacing him, the public may be able to expect a much more healthy, transparent and dynamic process. But we shouldn’t be too hopeful – because it seems that whenever politicians are controlling political finance reform, the results inevitably advantage incumbent politicians rather than democracy in general.