Andrew Geddis

Funding ’s Election Campaigns recent stress points and potential responses

Abstract office in the Roman Republic became so rampant that it contributed to the end The nexus between money and politics creates particular problems of that system of rule; a fate that some for liberal democracies like New Zealand. Events during the last suggest conceivably may befall the United parliamentary term put our present system of regulating this issue States (Watts, 2018). Meanwhile, examples of political leaders using their governing under some stress. With two cases relating to political fundraising authority to enrich themselves and their now before the courts and other matters still under investigation by families unfortunately are legion. The link between these two kinds of the Serious Fraud Office, this is the right time to consider whether power becomes particularly problematic reform of the law is needed and what such reform ought to look like. in places governed according to liberal- Keywords political funding, electoral finance, corruption, electoral democratic principles, where freely elected representatives are expected to act in the law interests of those they govern. Money’s ubiquity means it is required for virtually s soon as human societies began economic sovereignty and dominance any sort of election-related activity. to accord exchange value to cattle, upon its holder. At the core of politics lies Although there may be the odd candidate Acowrie shells and shiny pieces of the struggle for and deployment of social able to win a local council seat without metal, money and politics became linked. influence and authority. The repeated spending anything on advertising, they still Each represents a form of power. The use of one form of power to obtain and need to pay for petrol to travel to meetings, possession of money, and the desire of buttress the other can then be seen across phone plans to talk to voters and supporters, others to obtain that money, bestows both time and place. Spending to gain elected any deposit required for their candidacy, and the like. Scale up to nationwide Andrew Geddis is a professor in the Faculty of Law at the University of Otago. elections – where, in New Zealand’s case,

Policy Quarterly – Volume 17, Issue 2 – May 2021 – Page 9 Funding New Zealand’s Election Campaigns – recent stress points and potential responses

you need to communicate a ’s Such caps on election expenses, message to some three million potential While the aim however, only apply to a relatively narrow voters in a way that will convince them of range of electoral practices: in essence, its merits – and an adequate supply of of creating advertising undertaken during the three- money becomes critical. It is noteworthy, a measure of month ‘regulated period’ preceding polling for example, that three of the most recent day. Activities such as opinion polling, ‘big splash’ attempts to enter our national political equality running focus groups, candidate travel, political scene – Kim Dotcom’s Internet hiring campaign advisors, renting Party, Colin Craig’s Conservative Party and can justify some campaign offices and the like are not Gareth Morgan’s The Opportunities Party included. Nor does the cap on election – all shared something in common. All limits on expenses include advertising that is carried three organisations largely emerged fully out before the three-month pre-election formed from the deep pockets of their election spending, regulated period begins. In this era of the leader/benefactor. ‘permanent campaign’, such continuous Of course, these examples also prove tightening those political messaging is regarded as very that while having some money may be a limits too much important. Recall why then National Party necessary ingredient for political success, leader Simon Bridges was so happy to hear having a lot of it is far from a sufficient one. can become from Jami-Lee Ross that a group of Even spending millions of dollars cannot businessmen had made a $100,000 compensate for a fundamentally flawed unjustifiable. donation to his party: electoral product. Equally, a strong political kaupapa may overcome a relative lack of Um, look, I just think we want it for, uh, funds, as the Mäori Party’s comparative the advertisements and the like, you success on the smell of an oily rag showed know? We want it for the things that at the 2008 election (and, to a lesser extent, Trying to manage the arms race we’re gonna need to do over the next again in 2020). So, a simple cause-and- New Zealand traditionally endeavours to year or so, sort of outside of the – not effect claim along the lines of ‘more money limit the threat of this political spending outside of the party but um, uh, you buys more political success’ is clearly false. arms race effect by placing caps on how know, like I say we want to do some Which is not to say that an opposite much parties, candidates, and third more attack ads – say we want to do claim – ‘money is irrelevant to political party ‘promoters’ acting independently another regional fuel one, say we want success’ – is true. Any candidate or party of these primary contestants can incur in to do an industrial relations one. We who tries to argue that this is the case ‘election expenses’. Individual candidates just want to keep doing those things, should be asked a very simple question: have been subject to such limits since the right? (Spinoff, 2018) why do you accept donations from late 19th century, political parties since supporters, and are you perpetrating a 1996 and third party promoters since Consequently, the regulated election fraud on them when you do so? Because it 2008. At the 2020 election, individual expenses incurred for each campaign is a pretty safe bet that, all other things electorate candidates were permitted to represent but a fraction of the total that being equal, a candidate or party given the incur up to $28,200 in election expenses will actually be spent on seeking election. choice of facing either an opponent for their campaign to win a seat. Political The full extent of such expenditure is possessing twice their funds, or one with parties could incur election expenses of shrouded in mystery as candidates, parties less funds than them, will plump for the $1,199,000 plus $28,200 for each seat in and promoters are required to publicly latter option. After all, if money might make which they ran a candidate (allowing for report only on their election expenses a difference in the electoral contest you are a maximum of $3,229,400 for parties that following each contest, not their full involved in, then you would be pretty silly contested all 72 electorates). Third party campaign accounts. to go into it at a significant disadvantage. promoters who register with the Electoral However, extending the existing That perception then creates problems in Commission were entitled to incur up to controls on election expenditure carries and of itself. It generates something of an $330,000 in election expenses. In theory, potential risks. Such political spending is arms race situation for candidates and these caps on spending not only allow for a actually a democratic good, insofar as it parties, where having ‘enough’ money measure of some political equality between enables candidates and parties to reach and depends upon how much your competitors electoral participants, but also limit their attempt to persuade voters. Limit that have available to spend (among other need to raise funds. If you can only spend spending too much, or for too long, and factors). And the logic of seeking to avoid a certain amount on your own campaign, you may create a less well-informed comparative disadvantage while also and can be sure your opponents will be electorate. This effect may be particularly obtaining a possible comparative advantage similarly constrained in their spending, keenly felt by smaller or newer political can drive behaviours that are harmful to then the requirement to get money to actors who find it more difficult to gain the operation of representative democracy. compete is consequently reduced. coverage from the ‘free media’. Such

Page 10 – Policy Quarterly – Volume 17, Issue 2 – May 2021 consequences may then create problems in exercise power over us, provided they then relation to the right to freedom of ... the criminal use it in our interests – is premised on an expression, as guaranteed by the New charges brought assumption that we all should have an Zealand Bill of Rights Act 1990, section 14. equal say in who gets to govern. We have While the aim of creating a measure of by the Serious long since rejected John Stuart Mill’s political equality can justify some limits on proposal that some groups of people election spending,1 tightening those limits Fraud Office deserve to cast more votes because they will too much can become unjustifiable.2 have better ideas about how to run our Equally, stricter controls on political (SFO) against society (Mill, 1977, p.475). Why, then, do spending by candidates or parties may have we allow for unlimited private funding of the effect of displacing such expenditure former National those who are competing for public power? in ways that actually are less accountable. Isn’t that a form of potential political For example, rather than a party or MP Jami-Lee Ross influence that is just as important, or candidate directly spending money on maybe even more important, than actually campaigning, they may coordinate with a and three casting a vote? Put it this way: if someone third party individual or group to do so on businessmen were to say to a candidate or party, ‘I’ll their behalf. either give you $15,000, or my vote on suggest a problem election day’, which option do you think Where does all this money come from? would be chosen? Even with the just discussed, and somewhat with the current Of course, by law all significant rudimentary, cap on election expenses in donations have to be disclosed first to the place, obtaining enough money to fund threshold for public Electoral Commission and then to the campaigns to a level that is competitive public, which is intended to disincentivise with (or, even better, greater than) your disclosure of exchanging money for policy influence. opponents is considered to be very The Electoral Act 1993 requires the important. If you cannot self-fund – see donations. reporting of the names and addresses of Kim Dotcom, Colin Craig, Gareth Morgan those making donations of over $1,500 to – you have to go out to supporters and individual candidates, or $15,000 to solicit donations from them. Which creates political parties in a calendar year. The a potential problem for a representative their bills. Engaging in these sorts of theory is that such reports will expose large democracy like New Zealand. Recall that explicit transactions – ‘in exchange for this gifts to the disinfecting sunlight of public elected representatives are expected to act personal gain, I’ll use political power thus’ scrutiny. Any policy decisions that favour in the interests of those they govern. This is – is considered to be a serious crime, as Philip donors can be queried and their the basic deal society makes when we vote Field discovered in 2009 upon being justification held up for close inspection. in elections: we accept that those who win convicted of and jailed for bribery and In turn, the prospect of such questioning at the polls obtain authority to exercise corruption. will dissuade donors and political actors power over us collectively, as long as they While such direct quid pro quo deals from even trying to exchange financial remain committed to using this governing thankfully remain extremely rare in New support for public policy outcomes. authority in our best interests. Zealand’s political culture, reliance on However, events in the last parliamentary Of course, determining what are the private funding of our national politics still term suggest that this disclosure regime has interests of the governed and how power poses a problem. Because, as is unavoidable serious flaws in both its design and its should be exercised in order to serve these in a country with a market-capitalist implementation. interests is not exactly a straightforward economy, the money that candidates and First, the criminal charges brought by matter. The entire basis for human politics parties seek to fund their activities is not the Serious Fraud Office (SFO) against is that different people will have different evenly distributed. You only have to look former National MP Jami-Lee Ross and views as to how much different interests over the list of disclosed donors to National, three businessmen suggest a problem with matter and how these can best be met. Labour, ACT or the Greens (as well as the current threshold for public disclosure There is a good reason why we have an ACT undisclosed donors to the New Zealand of donations. In short, these individuals party and a Green Party and a Mäori Party First Foundation) to witness that disparity. are accused of disguising the true source (and a whole host of other parties) all Only a very small segment of New Zealand’s of two donations of $100,000 to the advocating their different policies each society could even contemplate making a National Party by dividing them among election. But one thing that definitely has $15,000 (let alone $150,000, or even several ‘straw’ donors, each of whom then to be off the table in a properly functioning greater) donation to the political party of appeared to donate less than the $15,000 system of representative democracy is any their choice. amount requiring disclosure. If proven, idea that elected representatives will make Yet recall that our governing compact this stratagem is illegal and the attempt to decisions based largely on who is paying – representatives have our consent to use it a crime. However, New Zealand’s

Policy Quarterly – Volume 17, Issue 2 – May 2021 – Page 11 Funding New Zealand’s Election Campaigns – recent stress points and potential responses comparatively high disclosure threshold candidate in relation to a return. At most, still makes it a viable way of disguising the ... the $4,145,750 it has a statutory obligation in situations true source of a large donation. While where it ‘believes that any person has breaking a donation up and passing it on ‘broadcasting committed an offence …, [to] report the through several individuals is not entirely allocation’ facts on which that belief is based to the risk-free, it still is far less likely to be ’. In practice, rather detected than having to do so among (say) distributed than report suspected offending, the 20 or more individuals. commission has in past cases of apparently Second, the details of donations made between parties erroneous financial returns instead between 2017 and 2019 to the New Zealand preferred to seek the cooperation of parties First Foundation show that other, prior to each and candidates to have a corrected version apparently legal, ways may be used to filed. disguise the source of comparatively large election is a As a result, it may be that the existing donations. In particular, records of law on donations and their disclosure donations to the foundation show several hopelessly outdated became regarded as something of a paper related entities under one individual’s means of tiger. If those involved in election control making a number of donations just campaigns, whether as candidates, party under the disclosure threshold within a few supporting their officials or donors, conclude that a failure days of each other (Espiner and Newton, to follow the rules around party funding is 2020). The Electoral Act 1993, section electoral unlikely to be detected and not punished 207LA(1) makes it a ‘corrupt practice’ to even if it is, then those rules come to lose direct or procure ‘2 or more bodies campaigns. their efficacy. Donations that raise no corporate to split between the bodies particular concerns may still be reported corporate a party donation in order to as is required by the law. However, conceal the total amount of the donation donations that are considered politically and avoid the donation’s inclusion by the embarrassing or worse may be hidden from party secretary in the return of party offending. The source of information the public through legal means or donations’. However, none of the about donations to the otherwise. If that indeed is the case, then subsequent charges filed by the SFO against Foundation is not certain, but it appears the entire premise of the disclosure regime two individuals connected with the that some person or persons previously is defeated. foundation were brought under this involved in the administration of New Of course, the SFO’s actions in charging section. Rather, the charges relate to a Zealand First passed documents over to individuals in relation to the National Party general failure to transmit any of the party members of the media. In both cases, donation and the New Zealand First donations received by the foundation to audited annual party financial returns had Foundation’s activities, as well as its the New Zealand First party’s secretary, as been filed with the Electoral Commission ongoing investigation into donations to the required by law. Nor have any donors to that did not disclose any issues relating to Labour Party and the mayoral campaign the foundation been charged by the SFO. the donations in question. The National in , may cause those involved in As such, it appears that the SFO has Party apparently satisfied itself that the politics to reconsider the risk–reward concluded that this pattern of donating donations now before the court had come calculus around disclosing donations. cannot support criminal charges, despite from the various individuals identified as However, we should take this opportunity its net effect being that the source of giving the money, and so did not need to to consider whether the existing law donations amounting to some tens of report the apparent donors’ identity to the requiring disclosure of political donations thousands of dollars would have remained commission as their gifts were below the is fit for purpose, as well as whether the hidden from the public even if the gifts to disclosure threshold. The New Zealand Electoral Commission’s role in overseeing the foundation had properly been disclosed. First party secretary apparently was not that law is sufficient. These two cases also point to told about any donations to the foundation inadequacies with the current means of over a three-year period and so could not Beyond private funding of election activities enforcing the legal rules on disclosing report them as required by the Electoral Even a perfectly working disclosure political donations. Each alleged infraction Act 1993. system in which every donation above came to the authorities’ attention only This state of affairs underscores the a particular threshold becomes publicly because of quite unusual actions by Electoral Commission’s very limited role known does not really address the basic individual whistle-blowers. In the case of in receiving and publishing political party inequities involved in private political the donation to the National Party, it was (and candidate) financial returns. It carries funding. There still will be a very small Jami-Lee Ross himself who reported the out no independent auditing function to group in our society whose wealth alone matter to the police in an effort to implicate check that they are correct. It has no power gives them greater capacity to influence his then party leader in the alleged to compel information from a party or who will govern us all. And the parties and

Page 12 – Policy Quarterly – Volume 17, Issue 2 – May 2021 candidates that they choose to support (or supporting their electoral campaigns. and competitive electoral environment. not support) may thereby get an advantage There is no longer any good reason to apply This can be achieved by, for instance, in the political contest (even recognising, a different form of regulation to broadcast following the German allocation criteria, as I said at the beginning of this article, that advertising, particularly in light of the where the amount of funds granted for the having access to money is no guarantee of Court of Appeal’s radical reworking of the first four million votes received by parties, electoral success). legislative framework in the case of which is 0.85 euro per valid vote, is higher What, though, is the alternative? Electoral Commission v Watson & Jones than the amount granted for votes received Because we cannot hope to take all money [2016] NZCA 512. That decision effectively beyond that, which is 0.70 euro per valid out of politics, trying to starve such removed all broadcasting-specific vote. And whether the amount of money activities of resources is an invitation for constraints on political advertising from that the state provides to aid political even greater rule bending and outright everyone except individual candidates and parties’ election campaigns should be illegal practices. Furthermore, we really political parties. Consequently, interest augmented to compensate for increased should not try to do so. Having different groups or wealthy individuals can use controls on forms of private funding is a parties and candidates (and other groups broadcast advertising for political purposes conversation that we as a country really as well) advocating for their best views of subject only to the spending limits in the need to have. society and its future is both a necessary Electoral Act, while political parties cannot and a desirable part of public political life. use this form of communication at all apart Conclusion: the root of all evil is deeply Prevent that from happening and you from the money given to them through the rooted destroy the entire basis of democracy. broadcasting allocation. Furthermore, the Coming up with a satisfactory solution One response is to cap the amount that allocation criteria that the Electoral for all the issues raised by the intersection each individual or entity may give and Commission is required to follow when of money and politics is not easy. As replace that funding with grants of public distributing these funds are incoherent. Dan Lowenstein notes in a seminal law money, as Canada has done in recent years. They require both that larger and more review article on campaign finance Such ‘cleaner’ forms of political funding successful parties be given a greater share reform, ‘the root of all evil is deeply rooted’ are argued to reduce the potential for of the resource, while also that the (Lowenstein, 1989). But they are matters overtly corrupt relationships, limit the commission consider ‘the need to provide that we really do have to think about, for influence that private funding may have a fair opportunity for each party … to at their base lies the fundamental question over public policy, and also create a more convey its policies to the public by the of whether we can have trust in the process diverse and equitable electoral playing field broadcasting of election programmes on that determines how we all will have to live (Marziani and Skaggs, 2011). television’. together. Once that trust is lost, then we Certainly, there is room in New Zealand As such, these funds should be no longer have a basis for making such to rethink public support for political repurposed as general support for parties’ decisions. And without that, well, we really parties, and perhaps even individual electoral activities, rather than being tied don’t have anything to go on at all. candidates. In particular, the to paying only for advertising via the 1 Electoral Commission v Watson and Jones [2016] NZCA $4,145,750 ‘broadcasting allocation’ broadcast media or internet. The criteria 512 at [23]. distributed between parties prior to each for distributing them also should be 2 Libman v Quebec (Attorney General) [1997] 3 S.C.R. 569. election is a hopelessly outdated means of revisited to prioritise support for a diverse

References Espiner, G. and K. Newton (2020) ‘Wealthy and powerful NZ First Mill, J.S. (1977) ‘Of the extension of the suffrage’, in J.M. Robson (ed.), Foundation donors revealed’, RNZ, 4 February, https://www.rnz.co.nz/ The Collected Works of John Stuart Mill, vol. 19: Essays on Politics and news/in-depth/408785/wealthy-and-powerful-nz-first-foundation- Society Part II, London: Routledge and Kegan Paul donors-revealed Spinoff (2018) ‘The Jami-Lee plot tapes: a transcript of the Ross and Lowenstein, D.H. (1989) ‘On campaign finance reform: the root of all evil Bridges donation chat’, Spinoff, 18 October, https://thespinoff.co.nz/ is deeply rooted’, Hofstra Law Review, 18 (2), pp.301–58 politics/17-10-2018/the-jami-lee-tapes-a-transcript-of-the-ross-and- Marziani, M.M.D. and A. Skaggs (2011) ‘More than combating corruption: bridges-donation-chat/ the other benefits of public financing’, Brennan Centre for Justice Watts, E.J. (2018) Mortal Republic: how Rome fell into tyranny, New York: expert brief, 7 October, https://www.brennancenter.org/our-work/ Basic Books research-reports/more-combating-corruption-other-benefits-public- financing

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