The major parties now compete to outspend each other at elections while devoting ever increasing resources to raise the funds this demands.’

John Madigan

My appointment to a Senate committee inquiring into political donations was blocked, the inquiry failed to call for submissions and its reporting has been delayed –
we need to know why

Australia’s electoral finance regime is among the most liberal of all comparable political systems. Most democracies employ a mix of caps, bans on certain types of donor, expenditure limits and public funding to regulate the flow of money from private sources. However, in our federal sphere, there is no limit on how much can be donated to politicians, or the amount political parties can raise from donors. There are no restrictions on who can donate (not even foreign nationals, companies or governments are precluded from financing our politicians) and there are no limits on electoral spending.

This free-for-all has given rise to an “arms race” between the major parties, who now compete to outspend each other at elections while devoting ever-increasing resources to raise the funds this demands. The lion’s share of funding comes from private donors, leaving our major parties, in particular, increasingly reliant on this mix of large corporations, unions and wealthy individuals to remain electorally competitive.

It is naive to think donors don’t expect something in return. In fact, there is compelling evidence that donors seek to exploit the extraordinary access to politicians this arrangement engenders to influence policy to their perceived benefit. Professional lobbyists are an accepted part of the political process, as is the idea that if you have enough money to throw at a political party, you can buy access to its key decision-makers.

In October last year, I established a parliamentary inquiry into political donations. By resolution of the Senate, the joint standing committee on electoral matters was appointed to carry out the inquiry.

Terms of reference directed the committee to examine the complex web of relationships that exist between political parties, their donors, and the lobbyists and fundraising entities that have become integral to raising, distributing and spending electoral finance within the federal sphere.

Critically, the committee was asked to consider how these relationships are influencing the political process and to consider alternatives for reform. In particular, it was directed to look at how comparable democracies regulate electoral finance from private sources and the effectiveness of the various measures they employ.

While there are a number of international examples worthy of analysis, the most obvious point of reference is New South Wales and the reforms implemented in 2009. Under the new laws, donations are capped at $5,000, while property developers and alcohol and cigarette companies are banned from donating outright. The reforms also included the introduction of expenditure limits and an increase in public funding.

Similar reforms are desperately needed at a federal level in order to restore Australians’ confidence in our political institutions and in our elected officials. While I don’t personally support excluding specific industries, there is a strong argument to be made for a mix of caps, bans, expenditure limits and recalibrated public funding. We also need an agreement between the commonwealth and the states for a uniform approach. Without this, the integrity of any state or federal regime is inevitably compromised.

While I hoped the inquiry would be the first step towards realising this vision, this was not to be. Instead of scrutinising the unseemly relationships between politicians, political donors, lobbyists and fundraising entities, before considering how these relationships are corrupting the democratic process and finally, turning their minds to appropriate reforms, the joint standing committee on electoral matters pursued a course of action that can only be reasonably interpreted as intended to stultify a genuine inquiry.

Why would the committee do this? While I was not privy to its deliberations, which occurred in private meetings, it is worth reflecting on the fact that this particular committee is stacked with members of the two major parties. Given what we know about the relationship between these parties and their donors, there was every chance the inquiry would uncover material that would embarrass them. One need only look at any of the numerous scandals that have emerged over recent years to get an idea of the type of issues the inquiry would have raised.

A recent case that is archetypical and which illuminates the way the current system typically operates is that involving the member for Menzies, Kevin Andrews. In the lead up to the 2013 federal election, Andrews was responsible for formulating the Liberal party’s gambling policy. It later emerged that while he was at it, two gaming industry lobbyists, Clubs NSW and the Australian Hotels and Hospitality Association, made payments totalling $65,000 to a fundraising body that would be backing Andrew’s election campaign.

As it turned out, the Coalition’s gaming policy was good for the industry. So much so, that Monash University academic Dr Charles Livingstone said: “It is as though the policy had been drafted by Clubs Australia and then delivered for Mr Andrews to adopt”.

Andrews has labelled suggestions he was influenced by the lobbyists’ donations “offensive”. I have no reason to doubt his sincerity, or his integrity.

However, whether he was directly influenced is not the point. It is plainly wrong that the payments were made at all.

Relationships of this nature between politicians and political donors create a classic conflict of interest. Conflicts of this type, whether in politics, business, or elsewhere, involve the introduction of a source of bias into the decision-making process. This is undesirable for two reasons. Firstly, there is obvious potential for the decision-making process to be corrupted. Secondly, whether or not this actually occurs, the conflict gives rise to a perception in the minds of observers that the decision-maker is biased, undermining confidence in any decision he or she makes.

In the commercial world, this problem is dealt with by strict rules that generally see company directors stand aside from management decisions where they have a personal pecuniary interest in an issue. This ensures shareholders can have confidence that management decisions will be made exclusively in the interests of the company. A failure to demand the same level of probity from our politicians is undermining confidence in our elected officials and our political system more broadly.

In October last year, the high court rejected a constitutional challenge by property developer, Geoff McLoy, to the 2009 NSW electoral finance reforms. The court held that regulating the relationship between politicians and private donors did not unreasonably restrict the constitutionally protected right to political communication, as McCloy had argued.

In fact, the court held that reforms of this type are suitable (and may be necessary) to address the threat to the principle of representative government posed by the unregulated flow of private money into the political sphere. The majority judgment of justices outlined the manner in which political donations can corrupt public decision-making. Beyond the typical “cash for votes” (or quid pro quo) type corruption, their honours identified a more insidious form of corruption, termed “clientalism”.

Clientalism arises from the disproportionate access major donors have to politicians in comparison to other citizens. Having the ear of, and a personal relationship with, a minister improves anyone’s chances of influencing policy. If you are also funding his or her election campaign, even a basic understanding of human nature suggests your chances of a sympathetic hearing improve. Due to these factors, the inevitable outcome of the current arrangements is that the major donors to our political parties exert a disproportionate influence on government policy compared with the average voter.

The judgment warned of the risk of not addressing this issue, which they expressly asserted to be a problem here in Australia. As they put it:

The particular concern is that reliance by political candidates on private patronage may, over time, become so necessary as to sap the vitality, as well as the integrity, of the political branches of government.

Given the court’s status as our ultimate constitutional authority, it would be profoundly stupid for our politicians to ignore the clear implications of its judicial pronouncements on this issue.

The inquiry referred to the joint standing committee on electoral matters last October came in the wake of the McCloy decision. The procedure followed by that committee (and similar parliamentary committees) once an inquiry has been established is, initially, to advertise the inquiry and call for submissions. The committee then schedules public hearings where witnesses give oral evidence.
Remarkably, committee on electoral matters at no stage advertised this inquiry, called for submissions or scheduled hearings (public or otherwise). While I was not privy to the committee’s deliberations, it is difficult to see how the decision to proceed in the manner it did could have been understood as consistent with its obligation to act in accordance with the Senate resolution under which it was empowered.

Concerned by the committee’s inexplicable, and to this date unexplained, divergence from its usual procedures, in November last year I sought to become a participating member of the committee. This would usually be uncontroversial and occur as a matter of course. However, on this occasion, the government used its numbers in the House of Representatives to block my appointment.

The inquiry was due to report on the final sitting day of March this year. It failed to report and instead, a motion was moved to extend the reporting date to 22 June. Given the political landscape at the time, effectively, this meant joint standing committee would not be required to report.

As I see it, the major parties used their stranglehold over the committee to bury this inquiry.

Earlier this month, I wrote to the committee raising my concerns. My letter included a detailed analysis of Australia’s electoral finance regime and a number of recommendations for reform.

A key recommendation was that an independent statutory body (whether newly established, or an expanded Australian Electoral Commission) take over all functions of the joint standing on electoral matters and, in particular, take responsibility for future inquiries into electoral finance.

Comprised of individuals drawn from the major political parties – that is, the beneficiaries of the financial largesse bestowed by political donors – the joint standing on electoral matters’ inquiries into this policy area are inherently tainted by a conflict of interest.

In my view, this is one of the main reasons for decades of inertia in this policy area, despite overwhelming evidence of the need for reform. Until we see this committee hand over its role to an independent body, we are unlikely to see the reforms needed to restore confidence in our political system.

Originally published in The Australian 24th May 2016