Proposed changes to NSW election funding laws

Last week the NSW government introduced a much-trumpeted new bill to amend the state’s election funding laws before next March’s state election in response to revelations from recent ICAC investigations and interim recommendations from an ‘expert panel’ appointed earlier in the year to investigate longer-term reforms.
You can find the bill here$FILE/b2014-096-d15-House.pdf

@piecritic was after an analysis of what these proposed changes involved, so here goes.

Firstly, Schedule 2 increases fines and jail terms for breaches of the funding and disclosure rules, and increases the statute of limitations for prosecutions of offences to 10 years. Currently the statute of limitations is only 3 years, which means that cases investigated by ICAC relating to the 2011 state election can’t result in prosecutions because the time period has already passed. The opposition moved amendments in the lower house attempting to make these changes retrospective, but this was rejected by the government.

Schedule 1 contains the provisions which have attracted more attention, and are to apply to the 2015 state election only.

Despite calls for significant reductions in current caps on donations and election expenditure, the bill simply reverses the CPI indexation and returns the caps to the original levels set when the current scheme was introduced in 2010 - $5,000 for donations to a party, $2,000 for donations to a candidate, $9.3million expenditure for a party contesting all 93 lower house electorates, $100,000 expenditure for a party-endorsed candidate contesting a lower house seat, $150,000 for an independent candidate in a lower house seat, and so forth.

However, the spending cap that applies to ‘third-party’ organisations (ie lobby groups, unions, etc) is being reduced significantly, from $1.05million to $250,000. This meausre has attracted criticism from some unions, and Getup. The effect of this cap is however not altogether clear. The cap only applies to ‘electoral communication expenditure’ during the regulated campaign period (October 1 this year up until the election) which has a ‘dominant purpose’ of influencing voting at the election. In other words, it arguably does not apply to issues-based advocacy campaigning against government policy that doesn’t mention the election itself or urge people to vote for, or not to vote for, a particular party or candidate. Arguably most of the sorts of advertising campaigns we usually see around election time from unions, community organisations, and business lobby groups, would not, or could easily be tweaked to not, get caught within this spending restriction unless a very strict interpretation was to be applied by the Election Funding Authority.

The other aspect of that and why I don’t think the concerns expressed about the lower cap are valid is that, under the regime since 2010, in order to make expenditure within those criteria a ‘third-party campaigner’ is required to register and to operate a campaign account to be used for said expenditure, similar to the rules for parties and candidates. Donations to this campaign account are capped at $2,000 per individual or entity - including any from the parent organisation - hence a union for instance can’t put $250,000 of its own money into its campaign account, it can only put in $2,000 and then has to raise dedicated funds elsewhere, from its members or other entities. In practice I think it would be hard for unions or community organisations to raise $250,000 for their campaign accounts, let alone $1.05million. Business lobby groups on the other hand, with contributors more likely to be able to each put in a full $2,000, are presumably far more likely to be able to exceed $250,000. But given the administrative burden of having to operate within that system, most organisations would presumably try to tweak their campaigns to avoid being caught within it, or to minimise the portion of their expenditure that they’d need to classify within it. In other words, unless the EFA comes up with an unexpectedly draconian application of the definition of this expenditure, I don’t see this cap reduction as having much practical impact at all.

The other provision of the legislation which has attracted criticism is a new public funding reimbursement model for parties and candidates. Under the current 2010 model, parties and candidates who qualify for funding (essentially either they get elected, or get 4% of the vote in the seats they contest) are entitled to reimbursement for expenditure based on a proportion of the relevant spending cap. Parties can get 100% reimbursement for spending within the first 0-10% of the cap, then 75% for spending within 10-90% of the cap, and 50% for spending within 90-100% of the cap. Party-endorsed lower house candidates get 100% for 0-10%, then 50% from 10-50%, and nothing beyond that. Independents get 100% for 0-10% and 50% from 10-80%. Under this scheme, once you qualify for funding, the reimbusement you can claim depends on how much you spend, not how many votes you get.

Under the proposed new scheme, the reimbursement entitlement for parties and their endorsed lower house candidates will all be rolled into one, and instead of being based on the amount spent relative to the applicable cap, will instead be capped at $4 for each lower house vote and $3 for each upper house vote - provided the party wins a lower house seat. If a party does qualify for funding but does not win a lower house seat, their reimbursement entitlement is capped at $4.50 for each upper house vote, and nothing for lower house votes.

This proposal has unsurprisingly not impressed the Christian Democrats, who have no chance of winning lower house seats, but do often poll ove 4% in several, so would get no entitlement from those votes, and also from the Greens, who would be entitled to roughly $1 million less in reimbursement if they failed to win a lower house seat. Either way the CDP, Greens and Shooters Party probably do end up getting more money out of this, but disproportionately less than parties that win lower house seats.

Eligible independent candidates in the lower house also get an entitlement capped at $4 per vote, which by my calculations means they are worse off than under the current scheme unless they get more than about 17,000 votes.

There will also be a special one-off disclosure period where parties and candidates will have to disclose donations received between July 1 2014 and February 1 2015 within 7 days of the end of that period. Sadly for donations between then and the election, there will still be no disclosure until the end of the financial year.

Last but not least, party administration funding is also increased, including the ‘policy development’ funding which PPAU will be entitled to 12 months after we gain registration in NSW. This amount will increase from $5,000 per year to $11,200.

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Is a national body of a political party considered a third party organisation for the purposes of this legislation? If so, what kind of restrictions could that potentially place on us?

The reason I ask is that it is quite likely that we would continue various national campaigns (FOI campaigns, pro-privacy, whatever) even during the course of an election in NSW. If one of those campaigns happened to touch on issues which were also relevent to the NSW election, particularly if we had a registered state branch contesting that election, would we then find ourselves subject to the whims of someone at this Election Funding Authority (though my first reaction would be to tell them to go fight with the AEC for jurisdiction and wait to see who won the pissing contest).

It’s clearly intended to cover campaigns that have some direct relevance to the state election, so the answer has to be no, because otherwise every other party would have a problem with this too. I checked the disclosure reports from the 2011 election and there are no federal divisions of parties listed.

After what was obviously much behind the scenes haggling, the bill was passed with various amendments, the main effects of which were:

  • The cap on third-party spending is not reduced and remains at $1.05m.
  • The regulated campaign period appears to have been back-dated to 1 July 2014, which I guess means parties will be able to claim reimbursement for expenditure prior to October 1.
  • The special pre-election disclosure period has been extended from 1 February to 1 March.
  • A further increase in party administration funding, particularly for parties with 3 or less MPs (ie the Shooters and Christian Democrats), and changes to the way the funding is paid.
  • The reimbursement entitlement for parties of $4 per lower house vote and $3 per upper house vote will now be available to any party which either gets a combined total of at least 4% of the vote in all the lower house seats they contest, or wins a seat in the upper house and had candidates in at least 10 lower house seats.
  • The prohibition on political donations except from individuals on the electoral roll and entities with a ‘relevant business number’ has been relaxed, to now also allow donations from an individual ‘who has supplied to the Commissioner identification that is acceptable to the Commissioner showing the individual’s full name and an Australian residential address’ and an entity ‘a principal or executive officer of which has supplied to the Commissioner identification that is acceptable to the Commissioner showing the principal or officer’s full name and an Australian residential address’.

In theory this last Labor amendment presumably means that NSW political parties are now again able to accept money, including membership fees, from people not on the electoral roll such as people aged under 18 or permanent residents. However I have no idea how this procedure is meant to work - it sounds as though any such donor will have to be pre-approved by the Electoral Commissioner, which doesn’t exactly sound like a measure that will simply allow your average 16 year old or permanent resident friend to pay the admission fee at your next local party branch fundraising trivia night, it rather sounds like the kind of procedure that might be used only for a handful of prospective wealthy donors keen to donate the maximum allowable. The rest of the Act makes it the responsibility of the party or candidate’s agent to be satisfied the source of a donation is legal, so it’s totally at odds to the way the rest of the Act operates.

Cool, that’s the logical assumption, but I’ve certainly seen more than enough examples of over reach by every level and branch of the government and judiciary over the years to need to double-check from time to time. On the other hand, given the general resistance to any kind of anti-corruption reforms at pretty much every level of government and law enforcement, I would expect things like this to be more curtailed than legislation which merely affected the populace.