SUBMISSION 90 1 SUBMISSION TO JSCEM’S INQUIRY INTO 2010 FEDERAL ELECTION * DR. JOO-CHEONG THAM * Associate Professor, Melbourne Law School. This submission draws heavily upon various chapters of Joo-Cheong Tham, Money and Politics: The Democracy We Can’t Afford (UNSW Press, 2010). Thank you to Clara Jordan-Baird for excellent research assistance. SUBMISSION 90 2 TABLE OF CONTENTS LIST OF RECOMMENDATIONS .......................................................................................... 5 LIST OF TABLES AND FIGURES ........................................................................................ 8 I. INTRODUCTION......................................................................................................... 10 II. AIMS OF A DEMOCRATIC POLITICAL FUNDING REGIME ...................................... 12 A Protecting the Integrity of Representative Government ....................................... 12 B Promoting Fairness in Politics ............................................................................. 19 C Supporting Parties in Performing their Functions ............................................... 24 D Respecting Political Freedoms ............................................................................. 26 1 Respecting Freedom of Political Expression ................................................................. 26 2 Respecting Freedom of Political Association................................................................ 29 III. FUNDING AND SPENDING PATTERNS OF FEDERAL POLITICAL FUNDING ............ 32 A Private Funding of Federal Political Parties and Candidates ............................ 32 1 Corporate Political Contributions ................................................................................. 36 2 Trade Union Political Contributions ............................................................................. 38 B Public Funding of Federal Political Parties: Election Funding and Tax Subsidies ................................................................................................................... 42 1 Election Funding ........................................................................................................... 43 2 Tax Subsidies ................................................................................................................ 44 C Election Spending of Federal Political Parties and Third Parties: Intensifying Arms Races ............................................................................................................... 45 IV. KEY PROBLEMS WITH FEDERAL POLITICAL FUNDING AND ITS REGULATION ..... 50 A Porous Disclosure Scheme ................................................................................... 50 B Corruption Through the Sale of Access and Influence ......................................... 56 C Undermining the Health of the Political Parties .................................................. 66 D Ineffectual and Unfair Public Funding Through Election Funding and Tax Subsidies ................................................................................................................... 69 1 Election Funding ........................................................................................................... 69 2 Tax Subsidies ................................................................................................................ 74 E Abuse of Parliamentary Entitlements for Electioneering ..................................... 78 SUBMISSION 90 3 Principle One: The Rules Governing Parliamentary Entitlements Should Be Accessible and Transparent .............................................................................................................. 82 Principle Two: The Rules Should Clearly Limit the Use of Parliamentary Entitlements to the Discharge of Parliamentary Duties and Prevent their Use for Electioneering .......... 83 Principle Three: The Amount of Parliamentary Entitlements Should not Confer an Unfair Electoral Advantage Upon Parliamentarians .................................................................. 86 F Party-political Government Advertising ............................................................... 88 G Unfair Playing Field ............................................................................................ 92 1 Money Buying Elections? ............................................................................................. 94 2 Elements of Unfairness................................................................................................. 98 V. A BLUEPRINT FOR REFORM ................................................................................. 105 A Comprehensive and Integrated Regulation through Federal, State and Territory Schemes .................................................................................................................. 105 B A Scheme for Transparency ................................................................................ 106 C Election Spending Limits .................................................................................... 112 1 The Case for Election Spending Limits ........................................................................ 112 2 A Case Against Election Spending Limits? Freedom of Political Expression and the Commonwealth Constitution ........................................................................................ 120 3 Australian and Overseas Spending Limits .................................................................. 127 4 Preliminary Observations on the Design of Federal Spending Limits ........................ 135 D Contribution Limits (with an Exemption for Membership Fees) ....................... 141 1 An Exemption for Membership Fees (including Union Affiliation Fees) .................... 143 2 The Anomalies of Banning Organisational Membership Fees ................................... 144 3 A Ban on Organisational Membership Fees: Misdirected at ‘Trade Union Bosses’ ... 145 4 Unjustified Limitation of Freedom of Political Association ........................................ 150 5 Re‐emphasising the Scope of the Argument .............................................................. 154 6 Contribution Limits and the Implied Freedom of Political Communication .............. 155 7 Design of Federal Contribution Limits ........................................................................ 159 E Enhanced Accountability for Third Party Political Spending ............................ 161 F A Party and Candidate Support Fund ................................................................. 168 SUBMISSION 90 4 G Reducing the Risk of Parliamentary Entitlements being Used for Electioneering172 H Preventing Party-political Government Advertising .......................................... 173 1 Accountability Through Parliamentary Scrutiny ........................................................ 175 2 Accountability Through Statutory Rules and Guidelines ............................................ 183 VI. CONCLUSION ....................................................................................................... 188 SUBMISSION 90 5 LIST OF RECOMMENDATIONS Recommendation 1: The federal political funding scheme be based on the following principles: 1. Protecting the integrity of representative government; 2. Promoting fairness in politics; 3. Supporting parties to perform their functions; 4. Respect for political freedoms. Recommendation 2: COAG and the electoral matters committees should liaise to ensure that federal, State and Territory laws governing political funding are properly integrated. Recommendation 3: The Commonwealth Electoral Amendment (Political Donations and Other Measures) Bill 2010 (Cth) should be enacted subject to the following changes: • ‘due diligence’ defences be available in relation to offences; and • the definition of ‘political expenditure’ (which applies to third parties) be tightened up. Recommendation 4: Registered political parties and associated entities be required to provide: • expenditure disclosure returns; and • donation reports (modelled upon the British system). Recommendation 5: Weekly donations reports be required during the election period. Recommendation 6: Federal election spending limits should apply 2 years and 5 months after the previous election. Recommendation 7: Federal spending limits should apply to ‘electoral expenditure’ under the Commonwealth Electoral Act with an exclusion for expenditure incurred substantially in respect of an election to members of Parliament other than the Commonwealth Parliament. Recommendation 8: Federal spending limits should apply to parties, candidates and third parties. Recommendation 9: There should be federal spending limits applying at the SUBMISSION 90 6 national, State and electorate levels. Recommendation 10: Federal contribution limits should be introduced based on limits that apply under EFED Act with the following modifications: • the limits should be set at a lower level (e.g. $1,000 per annum); and • the limits applying to the party subscriptions exclusion should be lower (e.g. $500 per member). Recommendation 11: There should be a compulsory third party registration scheme at the federal level requiring third parties that spend more than $2,000 in ‘electoral expenditure’ during the period which election spending limits apply to register. Recommendation 12: This scheme should make public the following information regarding registered third parties: • their constitutions