Chapter 6 Public funding
Background and current arrangements
6.1
The introduction of a Commonwealth public funding scheme was intended to
contribute to creating a more ‘level playing field’ and to reduce the potential
for both real and perceived undue influence and corruption.[1]
It was also aimed at assisting parties to meet increasing election campaigning
costs and relieve parties of the need to continually engage in fundraising
activities.[2]
6.2
However, some argue that these objectives have not been realised, and
that public funding now simply serves as an additional stream of income
factored into political campaign budgets.[3]
6.3
This chapter considered arguments about the effectiveness of the current
public funding arrangements and whether there should be a public funding system
at all. The chapter also examined the various models available for public
funding and the issues to be considered in ascertaining their suitability for
implementation at the federal level in Australia.
6.4
Political parties that are registered under the Commonwealth
Electoral Act 1918 (Electoral Act) and their state branches and candidates that
obtain at least four per cent of the formal first preference vote are eligible
to receive public funding. The current election funding rate for the period of
1 July 2011 to 31 December 2011 is 238.880 cents per eligible vote.
6.5
Some states and territories also provide public funding for state
elections. Each has its own separate funding rate.
6.6
The initial federal public funding scheme that was introduced in 1984
operated as a capped reimbursement scheme. Funding was limited to reimbursing
political parties, candidates and Senate groups for actual proven expenditure
up to the maximum entitlement.
6.7
The current direct entitlement scheme for public funding was introduced
in 1995. Political parties and candidates no longer need to substantiate
campaign expenditure to receive public funding; rather the public funding
entitlement is calculated purely on the number of first preference votes received,
once the minimum of four per cent of first preference votes has been obtained.
6.8
Where a disclosure based scheme is in place there are generally two key
options for public funding:
n a reimbursement
scheme whereby actual expenditure or expenditure incurred (depending on the
precise scheme in place) is reimbursed; or
n payment of public
funding according to a per vote formula, with either a low or high threshold
for entitlement.
6.9
Under the current public funding model in operation at the federal
level, there are some options providing flexibility in the way in which public
funding is divided between political parties with branches.[4]
However, the amount of public funding that a political party may obtain is not
capped or limited in any manner.
6.10
Public funding issues are intertwined with private funding and
expenditure issues in the consideration of electoral reform. Accordingly, this
aspect of the political financing regime may be better determined incidentally
to the broader scheme itself. Similar arguments are raised in Chapter 7 regarding
the regulation of third parties. For example, donation and expenditure cap
schemes in other jurisdictions invariably offset the resulting loss of income
to parties through the provision of additional ongoing public funding.
6.11
In the context of a broader system for regulating political financing,
the public funding system plays a revised role, in that it serves to offset the
loss in income to political parties that results from limitations on the
sources and amounts of donations that are able to be received. An examination
of jurisdictions that currently involve a varied range of regulatory mechanisms
indicate that, in general, there is the potential for three streams of public
funding:
n election funding—normally
administered through a reimbursement scheme;
n administrative
funding— sum paid periodically based on certain variables, such as the number
of elected members a political party has or a legislative formula; and
n policy development
funding—funding for newer parties that will not qualify for administrative
funding, particularly where it is calculated on the basis of an amount per
member.
6.12
Aside from discourse regarding the precise model of public funding that
is in operation, a broader debate exists in relation to whether there should be
a public funding scheme at all. Some argue there should be no public funding
scheme and that political parties should completely rely on private donations,
rather than the taxpayer having to fund political parties.
6.13
The alternative is for full public funding of political parties. Proponents
of this perspective focus on minimising the perception of undue influence and
opportunities for corruption through private donations. A detailed examination
of these arguments is undertaken below.
The effectiveness of a public funding scheme
6.14
The overall issue of whether there should be full public funding of
political parties and candidates, no public funding or a hybrid of public and
private funding hinges on whether the current regime is achieving its aims and
operating effectively.
Full public funding
6.15
As well as issues regarding its claimed ineffectiveness in curbing
election spending, arguments supporting a move to a system of complete public
funding are premised on the notion that the existence of unrestricted private
funding, donations and fundraising activities by political parties and
candidates takes focus away from solving policy issues and problems.
6.16
The presence of private funding as an option, whether unrestricted or
otherwise, is also argued to potentially add to real or perceived undue
influence from private funding sources or opportunities for corruption. The
Australian Democrats expressed support for complete public funding, stating that
‘the ultimate way to remove the distortions of private funding might be to
publicly fund all established political parties’. It acknowledged the
difficulties that could emerge with defining which political parties were ‘established’. [5]
6.17
Some arguments in support of a complete public funding scheme stem from
innate issues with the system that is in place. Proponents of complete public
funding generally justify their position by referring to the unfairness the
current system in Australia can potentially involve.
6.18
The Australian Labor Party (ALP) observed that it has been argued that
public funding ‘constitutes a public good’ for the following reasons:
n it removes necessity
or temptation to seek funds that may come with conditions imposed or implied;
n it helps parties to
meet the increasing cost of election campaigning;
n it helps new parties
or interest groups to compete effectively in elections;
n it may relieve
parties from the ‘constant round of fund raising’ so that they can concentrate
on policy problems and solutions; and
n it ensures that no
participant in the political process is ‘hindered in its appeal to electors nor
influenced in its subsequent actions by lack of access to adequate funds’.[6]
6.19
The Accountability Round Table argued in its submission that its starting
premise was that the ‘cost of election campaigns should be borne entirely by
the state’.[7] One of its
justifications for this position was that the per vote formula under the
current system unfairly advantaged the major parties. It noted that:
Major parties...would receive disproportionate funding which
has the effect of giving the incumbent government parties an unfair advantage
at the following election.[8]
6.20
The arguments from the Accountability Round Table in support of complete
public funding of political parties are based in the need to create a level
playing field.
6.21
Discussions regarding the existence of a complete public funding scheme
in which private donations are banned are also related to the broader political
financing scheme that is in place.
6.22
The Democratic Audit of Australia identified the link between proposals
for complete public funding and the broader political financing scheme that is
in practice, adding further to arguments that perhaps the nature of public
funding is best determined incidentally to the broader scheme:
It is doubtful if the suggestion of total state funding of
election campaigns would attract majority public support unless other measures
were adopted to reduce overall campaign expenditure on campaigns.[9]
6.23
The submitters to the inquiry generally indicated support for some form
of public funding of political parties at the Commonwealth level.
6.24
For example, the Australian Labor Party expressed strong support for the
public funding scheme in principle in its submission. It suggested that the
current system should be ‘improved’, but also stated that that the public
funding scheme was vital in protecting the integrity of the democratic process.[10]
No public funding
6.25
One of the principles governing the public funding scheme that is
currently in operation in Australia is the need to promote fairness between all
candidates and political parties contesting elections.[11]
As with the arguments supporting a system of full public funding, arguments to
remove all public funding are often intertwined with the criticisms of the specific
system of public funding that is in place.
6.26
The Electoral Reform Green Paper – Donations, Funding and Expenditure
(first Green Paper) identified the following as features of the current ‘per
vote’ system of public funding that rendered it unfair:
n the methodology
favours existing over new contestants, because funding is paid on the basis of
past electoral support; and
n the methodology
favours major parties in comparison with minor parties and independent
candidates, because minor parties and independent candidates can attract
significant electoral support without passing the 4 per cent threshold for receiving
public funding.[12]
6.27
The first Green Paper canvassed the notion of public funding creating an
‘un-level’ playing field, despite its intentions to the contrary. It indicated
that the aims of the introduction of a public funding scheme had not been met. The
first Green Paper suggested that:
...consideration could be given to whether public funding has
made established political parties any less dependent on private funding and
whether the position of new and small parties has been made more difficult by the
advent of public funding.[13]
6.28
As a further counter to arguments suggesting that a public funding
scheme assists in creating a level playing field, reducing the parties’ need to
consistently fundraise and allowing for concentration on policy ideas and problems
and similar arguments, critics of public funding have identified the following
risks:
n it can undermine the
independence of the parties and make them dependent upon the state
n it can lead
[political parties] to ignore their members and broader civil society
n decisions about the
amount and allocation of funding may be unfair to smaller, newer and/or
opposition parties
n it can entrench the
position of the major parties and ossify the party system
n opinion polls
indicate that public funding can be very unpopular with ordinary citizens who
may view it as a political hand-out or rort
n citizens may not
agree that political parties are a high priority in terms of public
expenditure.[14]
6.29
Likewise, the Australian Democrats stated that if public funding was
merely to act as a ‘top-up’ to private funding then it should be discontinued.
Further, in his submission to the inquiry into the conduct of the 2010 federal
election, Mr Andrew Murray, a former Australian Democrats Senator, argued that
in light of the fact that a public funding scheme had proven to be ineffective
in reducing the levels of election spending, it should be discontinued, unless
further limitations on party funds, such as caps, were introduced. He argued
that:
Reducing the reliance of political participants on private
funding has not occurred to any significant degree [following the introduction
of public funding]. If there is to be no change to the present system, public
funding for elections should be ended. There is simply no point in taxpayer
money being given to the political sector as an extra funding source over and
above unrestricted private funding.[15]
6.30
Similarly, GetUp argued in its submission that increased costs was not a
justification for increasing public funding. The group observed that:
A system of public campaign finance should not be called upon
to meet exponential growth in costs. Failure to meet increasing cost demands
is not in and of itself a reason for increased public funding.[16]
6.31
GetUp proposed a move away from public funding and argued that there
should be a ‘five-year phase-out period’ to allow for other models to be
explored. A primary reason for this was their views regarding the way in which
new political parties are dealt with under the current public funding scheme. GetUp
suggested a phase-out of public funding and exploration of alternative options.
Mr Sam McLean, GetUp’s Deputy Director, explained the group’s perspective,
commenting that:
It is clear that the public funding has been increased three
times in the last 20 years and there has still been an increase in the amount
of donations coming through the door and expenditure going out the door. We are of the opinion that public funding does not help
prevent the arms race of political expenditure and therefore should be phased out
and a new model should be explored. That is the idea of a five-year phase out
period.[17]
6.32
FamilyVoice Australia also argued for the abolition of public funding.
It stated that there was no evidence that the initial aims of the public
funding scheme, to reduce undue influence and corruption, had been met. FamilyVoice
claimed that the ‘main effect of public funding has been to increase the amount
available for election campaigning by all parties’. On these grounds in
part, it was recommended that the Commonwealth public funding scheme be
discontinued.[18]
6.33
Another significant issue in any discussions regarding a full private
funding scheme with no public funding is the effect that complete withdrawal of
public funding would have on actors in the political and democratic system.
6.34
The first Green Paper noted that public funding ‘represents a
significant proportion of the money received by political parties during
election years’.[19] Accordingly, it was observed
that:
If public funding were to be withdrawn, it would have a
significant impact on the conduct of election campaigns, especially for the
major political parties.[20]
6.35
The Democratic Audit of Australia presented an alternative perspective
in its submission. While acknowledging that the spiralling costs of elections
was having a ‘pull’ effect on the public funding rate, it argued that to remove
public funding after 25 years would have a negative impact on small parties.[21]
Further, the Democratic Audit claimed that like the introduction of public
funding, the abolition of public funding may not meet the ends that are sought
and may not reduce election spending. It commented that:
Given that public funding accounts for less than 20 per cent
of the big parties’ campaign expenditure, its abolition would have a negligible
impact on overall campaign spending.[22]
6.36
A majority of submitters supported the existence of some form of public
funding. Those that argued for significant reform in this area generally
supported an expansion of the public funding scheme.[23]
Those that support the current scheme tended to support public funding in
principle, but suggested amending the way in which the entitlement is
calculated.
Conclusion
6.37
The public funding of political parties plays a significant role within
the current scheme of reducing the perception of undue influence and corruption
in the political system.
6.38
The bulk of submissions to the inquiry saw a place for a public funding
system in the Australian political financing scheme. However views differ on
the precise scheme that was thought to be the most appropriate for the
Commonwealth.
6.39
There may be some merit in the proposals that the appropriate role for
public funding and the method by which entitlements are calculated should be
contingent on the design of the broader funding and disclosure scheme. Substantial
reform of political financing arrangements may result in the public funding
scheme needing to be expanded to offset the potential income loss to parties
through the implementation of caps and bans on their sources of funding.
6.40
The public funding scheme introduced in 1984 has not been effective in
curbing the increase in election spending. The first Green Paper noted that
public funding has most likely been integrated into campaign budgets as an
additional stream of funding and has played a role in supporting, expanding and
lengthening election campaigns.
6.41
The effectiveness of the Commonwealth public funding scheme requires
further examination, as stated in the first Green Paper. However, to eradicate
the public funding regime at this point would have a detrimental effect on the
minor political parties, and potentially on the major political parties.
The committee believes that one of the
key aims of the funding scheme should be to curb election spending. The Commonwealth
Electoral Amendment (Political Donations and Other Measures) Bill 2010 seeks to
provide for penalties and entitlement to the lesser amount of the application
of two different systems, which may be more effective in minimising the
potential for candidates to obtain a financial windfall.
Recommendation 15 |
| 6.42 |
The committee recommends that public funding to political
parties and candidates be allocated on the basis of the lesser of:
n the
application of the per vote formula to the first preference votes won; or
n reimbursement
for proven expenditure following the lodgement of a claim,
provided they obtain four per cent of the first preference vote,
as proposed in the Commonwealth Electoral Amendment (Political Donations and
Other Measures) Bill 2010. |
Election funding
6.43
The arguments surrounding a change to the current public funding scheme
are generally premised on a need to improve the fairness of the scheme and to seek
to restrain the spiralling costs of elections. As when it was originally
enacted, arguments pertaining to creating a ‘level playing field’ also serve as
justification by some submitters to change the system.
6.44
The first Green Paper also canvassed the idea of tying eligibility for
public funding to ‘desired political behaviours such as options for voluntary limitation
of election spending’.[24] This would need to be
assessed in the context of the broader scheme.
6.45
As previously discussed, the options for the design of a public funding
scheme are intertwined with, or incidental to, the design of the broader
political financing regime. However the models proposed to meet each aim of the
public funding scheme were assessed individually.
Increasing the fairness of the public funding system
6.46
The first Green Paper canvassed a range of options for public funding
schemes that were geared towards increasing the fairness of the scheme and
assisting smaller political parties. These included:
n Replacing the four per
cent threshold with a lower threshold, such as two per cent;
n Replacing the four
per cent threshold with pro-rata public funding;
n Introducing a sliding
scale of public funding, with the payment rate per vote decreasing according to
the number of first preference votes; or
n Setting the threshold
level for public funding at a level where such funding only supports parties
that have a reasonable level of support in the community.[25]
6.47
The rationale behind each suggestion is that a lower voting threshold
places smaller and minor parties on a more ‘equal’ footing with the larger and
major parties and increases their chances of qualifying for election funding. All
measures are intended to move the current system towards a more level playing
field for political parties.
6.48
The Australian Greens expressed support for the continuation of
calculating funding entitlements for candidates and Senate groups by reference
to the number of votes or the percentage of the vote won. It argued that no
candidate or Senate group should receive more than half the total pool of
potential funding available for the electorate contested. It also argued that
Parliamentary representation and party membership subscriptions should not be
factors relevant in determining public funding entitlements. The latter is a
measure aimed at increasing fairness in public funding distribution.
6.49
In his submission to the inquiry, Dr Joo-Cheong Tham proposed a public
funding system that drew on a number of the features identified in the first
Green Paper and some features applied in other jurisdictions. He recommended that
there should be a ‘Party and Candidate Support Fund’ comprising three
components:
n election funding payments
(calculated according to a tapered scale based on the number of first
preference votes with 20% of electoral expenditure floor);
n annual allowances
(calculated according to number of first preference votes and membership);
n policy development
grants (calculated according to number of first preference votes and
membership).[26]
6.50
Dr Tham argued that his proposed scheme was geared towards ‘fairness’. Payment
of public funding according to a tapered scale is the third dot point in the
first Green Paper mentioned above. The ‘20 per cent floor’ recommended by Dr
Tham is intended to increase fairness by guaranteeing reimbursement of a
portion of election costs. The reasoning behind including factors other than
the vote also stems from this aim.
6.51
One of the key features of the funding model proposed by Dr Tham is his
recommendation to consider membership in the calculation of entitlements to
administrative funding and policy development funding by new parties.
6.52
The Democratic Audit of Australia raised in general the possibility of
using broader factors in determining the public funding entitlements of
political parties and candidates. While acknowledging the difficulties
inherent in changing to a scheme that considers factors outside the number of
votes obtained may prove ‘problematic’, it commented that:
Consideration could be given to transforming the [public
funding] scheme by adopting some features of the similar scheme operating in
New Zealand, whereby additional indicators of support – for example, party
membership, number of parliamentary candidates, number of MPs and, for emerging
parties, even opinion polls – contribute to determining the level of public
funding.[27]
6.53
When questioned on the issue of taking broader factors into account when
determining public funding entitlements, the AEC acknowledged that it was a
complex and difficult issue.[28] The scheme currently in
operation in New Zealand uses factors other than the vote to determine public
funding entitlements and accordingly, this could be used as a guide if such a
measure was sought to be implemented.
A higher threshold
6.54
The logic behind arguments supporting an increase in the threshold for
public funding qualification is that if it is harder to qualify, less election
funding will be paid, reducing the burden on the taxpayer through less public
expenditure.
6.55
The first Green Paper cited advice from the AEC indicating that if a five
per cent threshold for public funding had applied in the 2007 federal election,
34 fewer candidates would have qualified for public funding.[29]
The first Green Paper also referenced AEC figures indicating that total public
funding entitlements would have decreased by approximately $482 000.[30]
6.56
A common-sense analysis indicates that regardless of the higher
threshold, the major parties are likely to obtain the minimum requirement to
qualify for direct entitlement election funding, even if the threshold is
increased. The AEC pointed out in its submission that ‘around 98% of election
funding entitlements at the last two general elections were paid to the Labor,
Coalition and Green parties’.[31]
6.57
In its report following the inquiry into the conduct of the 2004 federal
election, the Joint Standing Committee on Electoral Matters (JSCEM) recognised
the potential for ‘profiteering’ under the current public funding model. While
the option to revert back to a reimbursement scheme was not supported due to
the administrative burden, and the argument that profiteering could still be
undertaken was not supported, there was support for implementing a higher
threshold for public funding to be paid.[32]
Conclusion
6.58
Increasing the threshold for public funding could be perceived as
unfair, as it will reduce the chances of smaller and newer political parties of
qualifying for public funding of their election campaigns. There are ongoing
issues pertaining to the funding of new and emerging political parties that
require particular consideration in the design of an appropriate public funding
scheme for the Commonwealth.
A reimbursement scheme
6.59
Public funding at the Commonwealth level is currently paid to parties following
an election if they obtain four per cent of the formal first preference vote.
6.60
Election funding at the Commonwealth level previously operated as a
reimbursement scheme whereby parties lodged claims for expenditure with the AEC
which were then able to be reimbursed. The first Green Paper stated that the
scheme was changed to a direct entitlement scheme in an attempt to guarantee
more timely payments.[33]
6.61
The revised public funding scheme proposed in the Commonwealth Electoral
Amendment (Political Donations and Other Measures) Bill 2010 (2010 bill) includes
a reimbursement scheme for actual ‘electoral expenditure’.
6.62
The 2010 bill proposes that a definition for electoral expenditure be
included in section 287(1) of the Electoral Act.[34]
It includes matters such as broadcast during the election period of
advertisements relating to the election and the display in cinemas and theatres
during the election period of advertisements relating to the election. The
revised definition also incorporates suggestions made in the first Green Paper
that additional staffing or travel costs be included.[35]
6.63
The rationale for returning to a reimbursement for actual expenditure is
that it is less likely to result in a continual increase in spending than the
application of a ‘per vote’ formula that has no linkage to actual, proven
expenditure.
6.64
Emeritus Professor Colin Hughes expressed support for a return to a
reimbursement scheme if the public funding system is to be retained. He argued
that ‘the present situation brings discredit to the wider process by allowing
the occasional abuse’.[36] The NSW and Australian
Greens also supported having a reimbursement component in the public funding
system provided there is also adequate public funding for party administration
expenditure. The payment of funding through a reimbursement scheme thus appears
to be a key feature of frameworks with a range of mechanisms in addition to
disclosure.
6.65
The AEC stated that ‘long-standing calls’ to return to a reimbursement
scheme also stem from the need to prevent ‘profiteering’ from the payment of
public funding. However, the AEC noted that:
Election campaign expenditure reimbursement schemes can be
opened up to manipulation by various means, not least from the necessity that
expenditure need only be incurred, not paid, allowing invoices to be submitted
to support a claim, reimbursed, but then never settled.[37]
6.66
While acknowledging there was some appeal in a move back to a
reimbursement scheme, the AEC questioned the role such a move would feasibly
play in reducing election costs, stating that:
The AEC’s
experience of the previous reimbursement scheme was that less than 1% of
election public funding entitlements were not paid, with only $413, or 0.004%
of total entitlements, not paid at the 1987 election.[38]
6.67
It is noted that at the Commonwealth level, as well as in Queensland
before the implementation of a cap scheme, reimbursement schemes have operated
effectively as a feature of disclosure based systems.
6.68
The Canadian political financing scheme involves a public funding scheme
that draws on a combination of features from a reimbursement scheme and a per
vote formula. Under that scheme, candidates winning at least 10 per cent of
the popular vote are reimbursed for 60 per cent of their election expenses and
registered parties winning two per cent of the national vote or five per cent
of the vote in the districts where the party ran candidates are entitled to 50
per cent reimbursement of election campaign expenses.[39]
6.69
Criticisms of reimbursement schemes often stem from the precise
reimbursement model that is in operation. In this respect, arguments regarding
reimbursement schemes accord with those regarding public funding generally.
6.70
The reimbursement scheme proposed in the 2010 bill provides
reimbursement for ‘electoral expenditure’. It seeks to level the playing field
by preventing ‘double dipping’ by those that receive parliamentary
entitlements, allowances (except remuneration) or benefits. The explanatory
memorandum stated:
As sitting members of Parliament may be able to meet some
electoral expenditure by way of allowances, entitlements or benefits paid by
the Commonwealth in some circumstances, it is not appropriate that his
electoral expenditure is claimed for public election funding purposes.[40]
Conclusion
6.71
A reimbursement scheme is not necessarily immune to the practice of
profiteering. However, in the context of the current system, there is
significant appeal in the notion of a reimbursement scheme for minimising the
perception of misuse or abuse.
6.72
Flexibility is an important feature of a public funding scheme. However,
this needs to be balanced with broader considerations such as limiting election
spending levels and the integrity of the democratic process.
6.73
The committee supports the measures in the Commonwealth Electoral
Amendment (Political Donations and Other Measures) Bill 2010 that propose
payment of election funding based on the lesser of reimbursement for actual
expenditure and payment per vote once a minimum of four per cent of the first
preference vote has been made.
Funding for new political parties
6.74
New political parties do not receive funding from the Commonwealth
unless they qualify by receiving a minimum of four per cent of the first
preference vote at a federal election. This threshold can be very difficult to
obtain for new entrants to the political process.
6.75
The key justification for ongoing funding of newer parties is to level
the playing field for new entrants to the political and democratic process.
6.76
In its first appearance before the committee for this inquiry, the AEC commented
on the issues that arose for new parties in tying the public funding
eligibility requirements to a per vote formula, noting that:
The current process is tied to the voting threshold of four
per cent, so it would make it difficult for a new party to come in and obtain
funding at that stage. It also has to be remembered that public funding is
post the event. So part of the issue is making commitments to enter into
incurring costs; if you are a smaller party or a new player, you have no
guarantee of actually receiving public funding.[41]
6.77
Similar arguments would apply where a reimbursement scheme for public
funding is in place. Smaller parties logically have less money to spend on
election expenses, and will therefore be reimbursed for a lesser amount than
larger parties with large amounts of their budget dedicated to election
expenses.
6.78
There are two ways by which new parties could be additionally funded:
n through the payment
of election funding ‘up-front’; and
n through the payment
of additional ongoing funding.
6.79
The AEC raised the concept of payment of election funding up-front as a
means to negate the clear advantage that larger parties have in relation to
qualifying for public funding. It indicated that:
We have received feedback from a couple of parties in the
past where they have made a comment to us in effect saying that if they receive
public funding up-front they would be able to run a good enough campaign to
achieve the four per cent which is then the qualifier for them to get public
funding.[42]
6.80
The AEC acknowledged there were complexities involved with the criteria
and means by which election funding would be paid up-front.[43]
6.81
NSW has a funding scheme in place for newer political parties. The
state’s legislation allows for the provision of ‘policy development funding’.
The NSW policy development fund was established as a response to concerns that
capping donations could potentially hamper the development of new political
parties seeking to contest elections.
6.82
A political party is only eligible to receive policy development funding
under the NSW scheme if it is not eligible to receive administrative funding.
This funding is paid annually, and the amount paid is that which was actually
expended on policy development up to a maximum amount. That is, the policy
development fund operates as a capped reimbursement scheme. A new political
party would be eligible for policy development funding of at least $5 000
for the first eight years.[44]
6.83
The Greens NSW proposed that newly registered and very small political parties
and state divisions be able to obtain funding as follows:
..the greater amount of $10,000 per annum indexed, or 50
cents per vote received in a state or territory plus 10 cents per vote
nationwide for the federal division of the party.[45]
6.84
However, additional funding for new entrants to the political process
may prove difficult to obtain support for in the context of the current system involving
direct entitlement to public funding.
Conclusion
6.85
There is a risk that if election funding was paid prior to the election
based on factors that may include the number of MPs and opinion polls, for
example, there is likely to be greater disparity in the amount of public
funding paid between larger political parties, smaller and emerging political
parties, and Independents, than if funding was based on the actual vote.
Elected candidates and funding
6.86
Another issue raised with the committee is the case where a member is
elected who has not gained four percent of the first preference vote. At the
2010 federal election, the Democratic Labor Party (DLP) candidate John Madigan
received 2.33 per cent of the first preference vote, and following the
distribution of preferences obtained the full quota and was elected a Senator
for Victoria.
6.87
Senator Madigan noted that while other unsuccessful candidates, such as
Family First in South Australia received 4.08 per cent of the vote and were
eligible for public funding, he as an elected Senator only received a refund of
his $1 000 nomination fee. [46] An earlier example was
the 2004 federal election, in which Senator Steve Fielding was elected as a
Senator for South Australia with 1.88 per cent of the primary vote plus
preferences. [47]
6.88
In his submission to the inquiry, Senator Madigan argued that:
...the criteria for funding [should] be altered to include
the circumstances when a candidate receives less than 4% of the primary vote
but is elected after distribution of preferences. This would confirm the
importance we give to the preferential system by demonstrating that
parliamentarians elected on preferences other than first preferences are as
validly elected as those elected only on first preferences.[48]
6.89
In Canada, the reimbursement of election expenses extends to both
candidates that are simply elected, and those that achieve at least 10 per cent
of the vote. A move towards paying election funding to those who are elected
would bring Australia into line with international approaches in the area.
Conclusion
6.90
In cases where members are elected with less than four per cent of the
first preference vote, they should be eligible for reimbursement of their
expenditure. It can be hard for newer entrants to the political arena to secure
four per cent of the first preference vote, but their election to the seat is
sufficient evidence of community support to justify receiving some public
funding support.
6.91
Election to Parliament should serve as a threshold for election funding
entitlement. However, by applying reimbursement up to the level of the per vote
entitlement for the number of first preference votes received, should assist in
providing some financial support for this category of candidate but not serve
as a financial windfall for those with lower spending levels.
6.92
The committee believes this is a worthwhile change to ensure that this
category of persons receives appropriate financial support, even if a wider
reimbursement scheme is not adopted.
Recommendation 16 |
| 6.93 |
The committee recommends that members elected with less than
four per cent of the first preference vote be eligible for election
funding. These members should be entitled to the lesser of:
n the
application of the ‘per vote’ rate to the first preference votes won; or
n reimbursement
for proven expenditure following the lodgement of a claim. |
Payment of election funding
6.94
In its report on funding and disclosure in relation to the 2010 federal
election, the AEC raised an issue regarding the operation of provisions
governing the payment of election funding for parties that are formally
recognised in more than one, but not all states. The AEC cited the example of
the Family First party as being formally recognised as having state branches in
Victoria, Queensland and South Australia.
6.95
Section 299(1)(d) of the Electoral Act states that election funding for
a candidate in a particular state is paid to the state branch of a political
party agent of that state branch. Section 287(4A) provides that in relation to
a political party that does not have state branches, or only carries on
activities in one state or territory, a reference to the state branch of the
party is a reference to the party itself. However, where a party carries on activities
in more than one, but not all states, it is not covered in the terms of the
legislation.
6.96
The AEC listed the relevant of the formal recognition process, and
stated that it was required in order to identify:
n branches of
registered political parties with an obligation to lodge their own financial
disclosure returns under ss.314AB(1) and be paid election funding,
n entitlement to
elector information which is made available to a registered political party
under s.90B, and
n entitlement to
electronic lists of postal vote applications which are made available to a
registered political party under s189A.[49]
6.97
The AEC stated that the operation of section 287(4A) in conjunction with
section 299 cast doubt over its ability to pay election funding to parties that
carry on activities in more than one, but not all states, should they qualify.[50]
6.98
The AEC provided an example to demonstrate the problem:
At the 2010 federal election, the Family First Party endorsed
candidates in New South Wales, Western Australia and Tasmania as well as the
three states in which the party’s branches are formally recognised. If the
Family First Party was entitled to receive election funding in any state where
the party is not recognised as having a branch established there is some doubt
as to whether the AEC could pay election funding to the party for that state
due to the operation of s. 299(1)(d) of the [Electoral] Act. The Democratic
Labor Party (DLP) of Australia also endorsed candidates in a state where they
are not formally recognised and therefore could also have been affected in
regard to election funding entitlements for its endorsed candidates in that
state.[51]
6.99
To rectify the issue, the AEC recommended that the Electoral Act be
amended to ensure that ‘the payment of election funding entitlements for
eligible candidates and Senate groups can be made to the party whether or not
the party is organised on the basis of a particular state or territory’.[52]
Conclusion
6.100
The committee recognises the importance of ensuring that the provisions
for the payment of election funding are easy to administer and clear. It is
imperative that all candidates and parties that qualify for election funding
are able to be paid their entitlement.
Recommendation 17 |
| 6.101 |
The committee recommends that the Commonwealth Electoral
Act 1918 be amended, as necessary, to ensure the payment of election
funding entitlements for eligible candidates and Senate groups can be made to
the party, whether or not the party is organised on the basis of a particular
state or territory. |
Administrative funding
6.102
At the Commonwealth level, there is no ongoing administrative funding
for political parties. Public funding in Australia is based only on election
campaigns and calculated according to a ‘per vote’ formula.
6.103
The idea of providing ongoing funding to political parties emerged in a
number of submissions. Generally, suggestions and support for this was linked
to a proposal for a broader set of reforms. In cases where substantial reform
to funding and disclosure systems occurs, one rationale for ongoing funding of
parties by the state is to ensure parties have sufficient funds to operate when
stricter limits on other sources of finance are in place.
6.104
Targeted administrative funding also has application under the current
funding and disclosure system. The Australian Labor Party argued that parties
were already feeling the pressure of meeting their administrative obligations,
stating that:
The cost and burden of administration and compliance is
already significant and would in our view justify the consideration of public
funding for party administration as has already occurred in some Australian
states. Increasing administrative costs associated with Australia’s electoral
laws becoming more restrictive and placing increased burdens on political
parties in terms of reporting and disclosure would have the effect of
significantly adding to these pressures.
In response to this challenge Australia has begun the process
of moving towards the provision of administrative financing alongside a system
of election financing for political parties.[53]
6.105
The Liberal Party of Australia agreed that meeting disclosure
obligations can be challenging for political parties that are broad based
organisations with large volunteer wings often with limited resources.[54]
It argued that:
...should any changes to funding and disclosure obligations
proposed at the federal level further add to the reporting and compliance
obligations on parties appropriate regular funding for administrative purposes
would assist parties in meeting their increased compliance obligations.[55]
6.106
The Australian Labor Party identified the four features that it saw as
essential to an effective Commonwealth administrative funding model. It
indicated that it would support a model that:
n Provides a level of
certainty for parties with quarterly payments to those parties achieving more
than 4% of the vote over a three-election cycle, or that have five or more
seats in the House of Representatives. The ALP believes that existing political
parties represented in the current Commonwealth Parliament should qualify for
funding under any extension of public funding for party administration.
n Creates a central
Administrative Fund based on the total number of voters enrolled with a set
dollar amount per voter. The ALP believes that a central administration fund
provides the best model from the experience in state jurisdictions for party
administration funding.
n Allocates funding
based on the proportion of the popular vote received by a political party, over
a three-election cycle. The ALP believes that the popular vote is the best
reflection of the standing of a political party, particularly when applied over
a three election cycle. As stability is a key objective of party administration
funding, this would ensure that funding reflects enduring electoral appeal for
a party.
n Supports independent
members of parliament and smaller political parties. The ALP believes that
Independent members and smaller parties should be recognised under any
extension of public funding, as has occurred in state jurisdictions.[56]
6.107
The Australian Greens linked the notion of ongoing funding for political
parties to the concepts of education, involvement and access to the political
process. On the issue of ongoing public funding generally, the party stated
that:
Our...goal of access to political process, which will enable
an increase to the diversity of opinions, can be supported through public
funding of election campaign expenses, plus public funding and support for the
activities of political parties between elections. This type of explicit
operational support would not be unique in Australia if introduced as part of a
federal public funding regime as it is currently available in the state funding
arrangements in Queensland and New South Wales. Support of political parties
between elections provides a further means by which the voting public can be
educated and involved in the political process.[57]
6.108
Internationally, a number of jurisdictions provide financial support for
the administrative costs of political parties. In Canada, a registered party
that obtains at least 2 per cent of all valid votes cast at a general election,
or at least 5 per cent of the valid votes cast in the electoral districts in
which it ran a candidate in a general election, is eligible for an annual
allowance. Eligible parties receive a quarterly allowance of approximately
43.75 cents per valid vote obtained, or $1.73 annually per valid vote obtained,
which is indexed to inflation.[58]
6.109
In the United Kingdom, financial assistance is provided to opposition
parties. In the House of Commons, all opposition parties who have secured
either two seats or one seat and more than 150 000 votes at the previous
general election are eligible for ‘short money’ to assist parties to carry out
its Parliamentary business, for travel and associated expenses, and to assist with
the running costs of the Leader of the Opposition’s office. A similar scheme
exists in the House of Lords; ‘Cranborne money’ provides financial support to
opposition parties and the crossbench.[59] Section 12 of the Political
Parties, Elections and Referendums Act 2000 also provides for Policy
Development Grants, which are administered by the UK Electoral Commission.[60]
6.110
The ALP noted that in Europe public financing of election activity and
party administration has been a feature of political systems there for decades.
It commented that:
Germany, Netherlands, France, Portugal, Spain, Sweden, and
Italy all have public funding programmes for political parties. This has
included reimbursements for electoral expenses, as occurs in Australia, but
also extensive party administration grants in many countries.[61]
6.111
In Australia, New South Wales and Queensland have administrative funding
in place. Under the NSW scheme, parties with endorsed elected members are
eligible to obtain administrative funding. They must satisfy the annual
continued registration requirements. Unendorsed elected members are also
eligible for payments from the administration fund.
6.112
Parties can apply for administrative funding on an annual basis, which
is paid based on demonstrated expenditure, and are entitled to the lesser of
$80 000 for each elected member from that party or $2 million per party.[62]
6.113
The NSW scheme also makes provision for new and smaller parties through
the annual Policy Development Fund, when they are not eligible to obtain funds
under the Administrative Fund. This alternative funding stream can provide a
maximum of 25 cents for each first preference vote received by any candidate at
the previous Senate election who was endorsed by that party. However, the
policy development funding can only be claimed for up to eight years.[63]
6.114
The Queensland administrative funding system operates in a similar
manner. Registered political parties with elected members are entitled to
receive a regular amount of administrative funding to reduce their reliance on
donations. The requirement to continue to qualify for registration is also a
condition of the receipt of administrative funding with funding provided on a
six-monthly basis.
6.115
GetUp expressed its support for the NSW public funding scheme. It
acknowledged the need for funding models to be subject to continual review but
expressed support for a move to a system of increased administrative funding,
stating that:
...we believe a more effective use of taxpayer resourcing is
to give ongoing public funding for party administration and to increase public
funding for campaigns for a 5 year transitional period to help parties adjust
with re-targeting their donations gathering (towards smaller donations) and
their campaigning (away from broadcast).[64]
6.116
The Greens NSW support a funding scheme involving ongoing funding for
newer and smaller political parties. In its supplementary submission to the
inquiry, it proposed a funding model based on elements of the new regime in
NSW. It included administrative funding for registered political parties that
qualify and policy development funding for new political parties.[65]
6.117
Similarly to the arguments in the broader public funding debate,
criticism of the notion of ongoing funding for political parties is intertwined
with criticism of the way in which entitlements and amounts of such funding is
calculated. In its supplementary submission to the inquiry, the Greens NSW
raised a number of issues with the Queensland administrative funding scheme.
They observed that:
Both the NSW and Queensland legislation determine
qualification for administration funding and the amount of that funding based
on the number of elected MPs who represent that party. The absence of a
proportionally elected chamber in Queensland limits that funding to parties
able to win single-member electorates, and works in an anti-democratic way
against parties who secure substantial amounts of the state-wide vote but fail
to win a seat.[66]
6.118
The Greens NSW further expanded on the issues relating to the applicable
funding model at the federal level, noting that:
While the Senate is elected proportionally, the 14.28% quota
is more than three times larger than the threshold for electoral funding of
4%. The Greens NSW feel a solely elected-member qualification would not result
in a fair party administration funding outcome. Nevertheless, it is possible
for Senators to be elected with primary votes below the 4% funding threshold,
so a hybrid eligibility system could be desirable.[67]
6.119
Further concerns regarding administrative funding on an ongoing basis
were raised by the AEC. It pointed out in its submission that similar risks
for profiteering existed with administrative funding as existed with the
provision of election funding. The AEC observed that:
Profits can perhaps even more easily be realised under such
arrangements if there are no or very broad restrictions on the uses to which
those funds can be put. Unless there are strict processes for acquitting the
expenditure of administrative funding it may be impossible to stop such costs
leaking out into election campaigns…[68]
6.120
These concerns give rise to the need to consider the way in which the
use of administrative funding could or should be regulated. NSW and Queensland
have approached the issue by requiring that a dedicated campaign bank account
be set up. The deposits that can be made into the dedicated campaign account
are strictly regulated.
6.121
The AEC outlined a number of broad fundamental qualities for a
successful administrative funding scheme, which included that it be:
n well targeted;
n supportive of
identified, specific activities; and
n relatively modest in
scale so as to minimise the quantum of funds that could be used for other
purposes.[69]
6.122
The AEC also stated that it may be necessary to nominate thresholds of
party revenues to progressively or completely eliminate the provision of public
funds to parties generating sufficient income to independently undertake those
activities themselves.[70]
6.123
A further issue of significance in relation to administrative funding at
the Commonwealth level is the payment of any funding entitlements to political
parties. The most administratively feasible mechanism to carry out payment
would be to direct all payments of administrative funding to the ‘national
office’ or ‘federal secretariat’ of a registered political party. Where a
registered party does not have a federal body but has more than one registered
branch, alternative requirements will need to be devised.
6.124
Given that the election funding payments will be paid to one body of
each political party, the national body of each political party will have an
obligation to ensure the payments to state branches are only used for political
activities at the Commonwealth level.
Conclusion
6.125
If the recommendations in earlier chapters to decrease the disclosure threshold
and increase the level of detail to be disclosed are accepted, this will
increase the administrative burden on individuals and groups with reporting
obligations, in particular political parties. Administrative funding is one way
to provide assistance to political parties to ensure that they are
appropriately resourced to develop an understanding of and can meet the
increased demands that come with greater disclosure.
6.126
Administrative funding to assist political parties to meet the increased
administrative demands that are likely to come with reforms to Australia’s
funding and disclosure system could be seen as a necessary measure to help
improve transparency and accountability in Australia’s democratic system.
6.127
Administrative funding should be paid by the AEC to the registered
‘federal body’ or ‘national secretariat’ of each political party. Parties
without an ‘official’ federal body should be able to nominate the party to whom
the funding is paid. The body that receives payment of the administrative
funding has the responsibility to ensure the money is only used for
Commonwealth political activities.
6.128
The Australian Government will need to liaise with the Australian
Electoral Commission, political parties, Independents and other stakeholders to
devise an appropriate model for administrative funding at the Commonwealth
level.
Recommendation 18 |
| 6.129 |
The committee recommends that the Commonwealth Electoral
Act 1918 be amended to implement a scheme of ongoing administrative
funding for registered political parties and Independents. The proposal for
administrative funding is part of a broader package of public funding reforms
and should complement the changes to election funding arrangements in
recommendations 14, 15 and 16. The Australian Government should, in
consultation with key stakeholders, develop a model for the entitlement and
payment of administrative funding appropriate for application at the
Commonwealth level. |