Donor cash stays in shadows

MPs have stepped back from proposals that would have lifted secrecy surrounding party donations.

The Government has just announced a decision – a weak and disappointing one – that is much more important for New Zealand politics than David Benson-Pope’s knowledge of a phone call, or filming rules for parliament.

Until this week, ministers were promising to pass legislation outlawing secret financial contributions to political parties. Just three months ago they were offering the public “a clear choice – an open transparent system or the continuation of the current system which… is open to secret trusts and secret influence”.

Other countries did this years ago. But Labour has just deleted everything about anonymous donations and secret trusts from its Electoral Finance Bill and referred them for “review”, which quite likely means oblivion. It’s disappointing how casually this chance to clean up election finances is slipping through our fingers.

Secret election donors aren’t an issue that excites most people. But the reason they don’t is precisely because the public usually doesn’t know whose money is helping fund those politicians into power. When the donors are revealed, as in my book The Hollow Men, the importance of openness and transparency suddenly becomes clear.

In the 2005 election, as National proclaimed itself the “mainstream party for mainstream New Zealanders”, its list of financial backers told a different story. I discovered that National’s billboards and TV ads came compliments of a small grouping of former Business Roundtable heads, privatisation consultants and Act Party founders; wealthy businessmen from the far right of New Zealand politics with definite views about what they wanted from a National-led government. It’s obvious why they and the National Party preferred to keep their identities secret.

National Party documents showed party leaders visiting potential donors, negotiating their donations, sending thank-you flowers, reporting the results at board meetings and then telling the public and election authorities they had “no knowledge” of most big donors. I doubt other parties are different. “Anonymous” donations and the trusts are simply a device to avoid disclosure to the public, keeping embarrassing or sensitive backers secret.

The law says that every donor giving more than $10,000 to a party must be declared. Except, that is, if the donation is recorded as anonymous or siphoned through a secret trust. Thus our election donation laws, which supposedly safeguard the election of governments against corruption and inappropriate political influence, are almost completely ineffective.

In 1986, the Royal Commission on the Electoral System recommended that all anonymous donations and donations through trusts be prohibited. For 20 years that recommendation has been ignored by politicians who did not want to restrict their own corporate fundraising.

Finally, several months ago, the Labour-led cabinet approved legislation requiring every donation over $5000 to be declared. The cabinet paper said this move was required “in the interests of democratic transparency”. Then last week the Electoral Finance Bill arrived in parliament, but the centrepiece of the bill, on anonymous donations and trusts, was gone. What happened?

Justice Minister Mark Burton told Radio New Zealand that dropping these parts was “not a backdown”, but just “the nature of MMP”, implying the change had been forced on Labour by its coalition partners. This is not true.

What he’s talking about is Winston Peters and Peter Dunne reportedly refusing to vote for provisions giving new public funding for parties’ election campaigns. But it was Labour’s decision that if it couldn’t get extra public funding, it was unwilling to legislate on anonymous donations and secret trusts.

Prime Minister Helen Clark explained the party’s thinking to parliament, saying that “it is quite clear that the absolute banning of anonymous donations would have to be accompanied by more public funding, because otherwise there are political parties, I would suggest, across the spectrum that would simply be unable to raise money”.

But I don’t think Labour’s concern was parties across the spectrum. National has already said it would support a law on anonymous donations and trusts. Winston Peters could hardly vote in parliament against transparency for super-wealthy donors. This was primarily Labour worrying that openness might hurt its own election fundraising.

So the public did not get the “clear choice”. The “interests of democratic transparency” were deferred. The most important part of the Electoral Finance Bill was gone before it even arrived in parliament.

Of course if Labour really could not afford to fight an election without anonymous donations, it would be unrealistic to expect them to cut its own throats on this single issue of principle. After all, National already has a massive 2008 election fund stored away, ready to outspend its opponents. But it’s not like that.

To begin with, the new bill won’t be law until less than a year before the 2008 election, so parties have time to receive their usual “anonymous” donations this election. They would then have four years to adjust to fundraising without secret money for the 2011 election.

Moreover, the government did not even try to sell public funding to the public. It just had discussions in private with Dunne and Peters and gave up when they were resistant, and the usual knee-jerk carping began in public. But nothing of lasting value is achieved in politics if politicians cave in that easily. It’s all about how much political will and leadership they are prepared to exhibit.

It’s worth noting that Australia and other countries have had public funding of election campaigns for years. It is not a radical policy. New Zealand already has extensive public funding of parties’ election campaigns through broadcasting allocations, free travel and parliament-funded staff, which parties accept without complaint.

The extra few million dollars needed for an Australian-style system is a triflingly small price to pay for more democratic elections.

There are some good provisions that remain in the Electoral Finance Bill. It extends the official campaign period from three months to the whole election year. This is to stop well- resourced parties outspending their opponents before the spending-capped campaign period, as National did with the Iwi-Kiwi billboard campaign from April 2005.

Equally important, the bill follows other countries by putting restrictions on how much “third parties” (such as Exclusive Brethren) can spend on campaigning during election year. This is to stop wealthy lobby groups outspending others with advertisements helpful to their preferred party.

Stopping money buying unfair influence is as crucial for democratic elections as transparency.

Business lobby groups are already attacking both these provisions. Unfortunately they can argue – with some validity – that the government is controlling their activities while retaining for parties a self-serving regime of anonymous donations and secret trusts. As the pressure from these groups grows, there is a risk the government may give in on some of the remaining good provisions as well.

The answer is for the government to present parliament and the public with an election finance law that is demonstrably even-handed and principled. That means reinstating the ban on large anonymous donations and secret trusts and increasing the penalties for anyone who breaks the rules. It would be one of the genuinely important legacies of the current government. What’s the point of being in government if you shy away from making historically significant changes of this kind?