Chapter 9 Relationships between federal, and state and territory
arrangements
9.1
Evidence received by the committee suggested that the harmonisation of
federal, and state and territory political financing arrangements was seen as a
feasible option to address concerns that arise in relation to having different
systems in place. However, if this is not possible at this time, there is
support for ensuring there is a clear distinction between the responsibilities
of federal, and state and territory administering bodies, and for seeking
opportunities for cooperation on specific matters.
Background
9.2
Currently, in addition to the Commonwealth arrangements, some of the Australian
states and territories—New South Wales, Queensland, the Australian Capital
Territory, Tasmania and Western Australia—have funding and disclosure schemes
that apply to elections and related activities within their respective
jurisdictions.
9.3
The Electoral Reform Green Paper – Donations, Funding and Expenditure
(first Green Paper) discussed the issue of different systems operating at the
federal, and state and territory levels. It was stated that:
These schemes have all largely developed by reference to each
other and consequently are broadly quite similar in objectives and approaches.
Nevertheless, there are some significant differences that have evolved
independently of each other in response to local factors. An important point of
difference arises in the disclosure thresholds that apply, with the major
deviation being in the federal scheme’s
current threshold of $10,900 which is many times higher than that applying in
any of the state or territory schemes.[1]
9.4
It has been argued that having two different layers of arrangements can
be confusing and impose additional administrative burdens on groups and
individuals with reporting obligations—and in some cases on the administrators
of those systems. There is also the challenge in a federal system such as Australia’s
that changes made to arrangements at one level of government may have
implications for another. This is a particular concern in cases where a
decision taken at one level restricts or imposes a burden on individuals or
groups engaging in the political process at other levels.
9.5
It is generally agreed that harmonisation of political financing
arrangements between federal, and state and territory levels of government is
desirable. However, achieving greater consistency between these systems has
proven to be challenging when it comes to electoral matters. With options for
reform still under consideration at the federal level, and significant reforms
already undertaken and continuing in New South Wales and Queensland, as
outlined in Chapter 2, Australia’s systems for funding and disclosure seem to
be diverging rather than harmonising.
Support for harmonisation
9.6
Submitters to the inquiry suggested that different system requirements
can create confusion amongst groups and individuals with reporting obligations,
especially if disclosure and reporting requirements are different at the
federal, and state or territory level. The administrative burden on responsible
persons in keeping up with and meeting the requirements was also raised as a
concern.
9.7
It was suggested that one of the effects of the different Commonwealth,
and state and territory arrangements has been the potential overlap between
disclosure requirements and their administration in the different
jurisdictions.
9.8
The Australian Electoral Commission (AEC) expressed concern about
potential overlap between different jurisdictions, stating that:
Perhaps more fundamentally than possibly seeking
harmonisation, consideration will need to be given to the effects of
overlapping provisions.[2]
9.9
This concern emerged at the Joint Standing Committee on Electoral
Matters (JSCEM) Roundtable discussion on the first Green Paper. For example, a
participant expressed his concern about the element of confusion that can be
associated with the current arrangements and commented that:
Harmonisation is essential for no other reason than you look
at the definition of ‘expenditure’ and that blurs or includes state or federal
politicians. Just speaking on behalf of the punter in our office who has to do
the returns, it is a very annoying compliance cost to get your head around the
different regimes and to try to comply with them all. It would be good if we
could do one set of compliance.[3]
9.10
At the hearing on 14 September 2011, Mr Paul Neville MP, the Member for
Hinkler appeared in a private capacity to share his experience of having the
details of specific payments queried by the Electoral Commission of Queensland.
The payment queried that is relevant to this discussion is a fee that
Queensland Liberal National Party members pay to their head office for
administrative purposes. Mr Neville commented that:
I have no problems with transparency and accountability, but
I felt that that was an intrusion. Those are arrangements between me, a federal
member of parliament, and my state head office over matters federal. I do not
know exactly where the Electoral Commission of Queensland got the information
from. They either got my returns from the federal election or the LNP party's
returns, went through them, picked items out and then went about querying them.
To me, that is almost a form of double jeopardy. Do we accept a situation where
the state electoral commissions can double-guess the federal process?[4]
9.11
Mr Neville confirmed that once the nature of the payment had been
explained the matter was resolved. However, he felt the incident highlighted
the need for greater clarity between state and federal requirements and
administrative responsibilities.
9.12
Subsequent discussion at the hearing also indicated that the incident
could also be viewed in a positive light—as an example of transparency at work,
where the state administrating body had identified and queried the nature of a
specific payment, and then accepted the answer when it was explained to be a
matter for federal jurisdiction.[5]
9.13
Mr Andrew Murray, a former Democrats Senator, in his submission to the
first Green Paper, argued that while harmonisation represented a challenge for
reformers, it was possible. He observed that:
...in the Green Paper is expressed the hope that if electoral
reform does not achieve harmonisation, at least it might result in greater
consistency. Such a minimalist hope is undoubtedly prompted by the difficulty
facing any reformer of achieving significant change in the field of electoral
matters, where vested interests hold such strong sway.
Such a view may be too pessimistic. As in other countries,
the institutional self-interest of the political establishment can be overcome
to advance the reforms required to implement a much improved system of
accountability and transparency in political funding and disclosure. There are
already signs of willingness to consider meaningful change in Australia,
consequent to media and public pressure, and to internal party calls for
reform.[6]
9.14
The Liberal Party of Australia also highlighted the importance of
considering options for harmonisation when undertaking the broader process of
reform:
It would assist in simplifying the administration of
political parties if any changes at the federal level were administered in a
way which did not lead to unnecessary duplication and complexity in compliance
obligations between State and Federal levels.[7]
Key issues
Consensus
9.15
While a system developed by consensus between the Commonwealth, and
states and territory governments was presented as the ‘ideal’ option, its
proponents, in the course of this inquiry and in the wider debate, generally
conceded that this was not likely at the current time.
9.16
A single national funding and disclosure system with a single
administering body could help address concerns about confusion; the
administrative burden on individuals, political parties and other groups with
reporting obligations; and federalism issues. Mr Murray argued that such an
arrangement would also have practical and cost saving benefits, commenting
that:
Savings and efficiencies would
result from one rather than nine laws and nine electoral commissions. A similar
argument applies for the regulation of political participants and for funding
and expenditure.[8]
9.17
Mr Murray acknowledged that such an approach would need the agreement of
all parties in order to be effective. He stated that:
Political parties could be
forced into a federal regulatory regime by the simple device of requiring all
parties desirous of public funding to be an incorporated entity subject to the federal
Corporations law. Such a course of action would be unwise if there was a strong
reaction and resistance from the states and territories. Permanent change is
achieved when the transfer of powers is consensual and based on sound policy
considerations.[9]
9.18
Further, Professor Twomey outlined three benefits that could be derived
if such consensus could be achieved:
n Firstly, it would
eliminate some of the constitutional problems that could arise;
n Secondly, a uniform
approach would be more effective in addressing some of the potential for
circumventing requirements that exists when different system are operating at
the federal and state government levels, because ‘if you impose limitations at
one level and they do not exist at the other, the money comes back in through
the back door and the regulation tends to be ineffective. That is the major
problem in the United States.’;
n Thirdly, it will
improve administrative efficiency and reduce administrative burden, as ‘a
single political party that operates at the state and Commonwealth level only
has one set of administrative rules to comply with, it is going to be much more
efficient and easy for them to operate’.[10]
9.19
However, it is clear that, while desirable, much work remains to be done
on reaching consensus between key stakeholders in obtaining comprehensive
reform based on cooperation on these issues across Australia.
Constitutional and federalism issues
9.20
As discussed above, Professor Anne Twomey cautioned that constitutional
issues could arise if the Commonwealth sought to impose a uniform system of
funding and disclosure laws on the states.[11]
9.21
Concerns about federalism issues—the need to consider the implications
that changes at one level of government may have on the exercise of political
freedoms at another level—were also raised. Banning donations from certain
industry groups provides an example of the type of problems that may arise.
9.22
Professor Twomey noted that when New South Wales and Queensland were introducing
bans on donations, they were careful to consider the possible implications at
the Commonwealth level. She observed that:
...both of the states were very conscious of the fact that if
they legislated to ban donations or do anything in a way that affected
political parties supporting the Commonwealth campaigns that that would be
problematic constitutionally. So they deliberately put in provisions to say
that these limitations only applied with respect to special accounts that had
to be established for the funding of state political campaigns.[12]
9.23
When questioned about Senator Bob Brown’s Commonwealth Electoral
Amendment (Tobacco Industry Donations) Bill 2011, which seeks to create
offences to prohibit political parties or candidates from receiving donations
from manufacturers or wholesalers of tobacco products, Professor Twomey
observed that the bill, as it currently stands, would have implications at the
state level. She commented that:
I note that in the tobacco bill the proposal does not require
particular Commonwealth political campaigns to be set up. So the ban in this
proposed bill would apply to all the states and state political party branches
with respect to their funding of state campaigns. That is when you start
getting into trouble when your Commonwealth legislation is impinging on state
elections and vice versa—if your state legislation is impinging on Commonwealth
elections.[13]
9.24
This highlights some of the serious difficulties that may arise and the
necessity to ensure that in a federal system any significant changes to funding
and disclosure arrangements must take into account the implications on other
levels of government.
9.25
In Australia’s federal system, the relationship between the Commonwealth,
and states and territories reflects the nature of the funding and disclosure
system itself, as actors in the electoral arena cannot be easily
compartmentalised and actions taken in one area may have unintended and
unanticipated effects in another. The challenge for reformers and
administrators is to adopt a holistic approach, wherever possible, to maximise
desired objectives and minimise any negative effects.
9.26
Professor Twomey agreed that a single system addressing political
financing issues would be desirable, but noted that there were challenges to
address before greater harmonisation could be achieved.<>She advised the committee that:
Constitutionally, I do not think that can be imposed by the
Commonwealth. Ideally, one would have a cooperative scheme where the states and
the Commonwealth come together, reach an agreement and enact a form of uniform
legislation, perhaps with one jurisdiction taking the lead and the others
adopting mirror legislation—something of that kind.[15]
9.27
However the genuine relevance of the concept of federalism to political
financing regulation was questioned by Mr Murray. He further stressed the need
to simplify the laws and outlined how the arguments put forward against
harmonisation by proponents of federalism could be overcome. Mr Murray argued
for a more comprehensive review of the federal and state relationship, stating:
I ask a fundamental question in my submission: what is
national and what is federal? I actually think harmonisation is a bad second
best in this particular circumstance. I argue that there is only one system
that is genuinely federal, and that is electoral systems; constituencies,
whether you have an Upper House or not with fixed terms and all that is up to
the nine individual jurisdictions. But the conduct for elections, the
regulation of political participants and funding and expenditure, I argue, all
should be national. I would urge the minister to ask the Council of Australian
Governments to step back and ask themselves the question: what is federal and
what is national? And having agreed what is national, decide the principles
that they would support in a national scheme. It is much easier and much
simpler than trying to harmonise systems.[16]
Options for reform
9.28
The main themes arising in discussions during the inquiry for pursuing
reform in this area were to:
n Develop a uniform
national approach by consensus with the different levels of government,
including simplify the laws;
n Undertake reform at
the Commonwealth level and act as a leader on these issues; or
n Focus on developments
in areas where some progress can be made, for example seeking agreement on
disclosure thresholds and a shared electronic method for disclosure.
9.29
Mr Murray argued that the ‘best way to eliminate (or at least
drastically reduce) the negatives’ of the current system ‘is to have just one law,
one administrator and one regulator’.[17] Mr Murray suggested that
‘electoral matters’ can be divided into three categories; electoral systems,
the conduct of elections, the regulation of political participants, and funding
and disclosure. He proposes electoral systems should remain separately
legislated in a federal system, but that the oversight of the other three
categories can be managed under a national system. He argued that:
...there is no reason why the conduct of elections (federal,
state, territory, local and organisational); the regulation of political
participants (parties, associated entities, candidates, third parties); and
funding and expenditure could not be under one electoral commission and one
national set of laws.
Of course the principles and
main policies need to be agreed by COAG and the States and Territories
parliaments before a national regime replaces the federal system for these
three parts, but once that is done it becomes a question of timing and
implementation.[18]
9.30
Mr Peter Brent of the Democratic Audit of Australia agreed that
considerable reform of administering bodies was required. He argued that:
[In] terms of what is essential, I agree with what has been
said about harmonisation. What is desirable is to have no state electoral
bodies, along the lines of what Mr Murray has been saying. Not one national
body but possibly three national bodies—one that enforces things that we have
been talking about, another that maintains the electoral roll and another that
conducts the election. It would be desirable to have no state bodies. In terms
of local government, I think most local government elections are run either by
the AEC or the state commission. That part of what is desirable is already in
place. I imagine the other part is such a can of worms that it is desirable as
well to have uniform laws across all of the councils, but I imagine that would
be very hard to put in place.[19]
9.31
However, it has been suggested that pursuing cooperation on specific
components of the funding and disclosure schemes may be a more feasible option.
Accordingly, another approach the Commonwealth should consider is whether it
wishes to take the lead and seek to influence change at the state or territory
levels of government.
9.32
In the first Green Paper the Australian Government indicated its
commitment to working towards harmonisation of Australia’s electoral systems
and commented on what form this could take:
The Commonwealth is committed to working with the states and
territories to achieve harmonisation of Australia’s electoral systems.
Harmonisation of the Commonwealth, state and territory systems could, for
example, enable participants in the political process to lodge a single
disclosure return rather than lodging separate and sometimes different federal,
state and territory disclosure returns. Ultimately, harmonisation could enable
the establishment of a single authority to administer a national disclosure
system.[20]
9.33
Professor George Williams argued that action should be taken on these
issues, even if wider consensus is not reached between the different levels of
government. He argued that:
Without [consistency]...the possibilities are opened up to
work around one level of regulation by operating at a state or territory level.
Nonetheless, my view is that there are still great advantages of proceeding,
even if the federal parliament needs to do so initially and alone. It might
actually provide a model that can then be adopted elsewhere, so we have a
seamless network of regulation.[21]
9.34
Disclosure thresholds were identified in the first Green Paper as a
point for cooperation. It was stated that:
Coordinating disclosure thresholds between the Commonwealth
and the states and territories would be an important factor in achieving
harmonisation of the schemes and would simplify compliance for those that may
have disclosure obligations. [22]
9.35
The Nationals agreed that the Commonwealth, and states and territories
could enhance their cooperation on disclosure matters, stating that:
Ideally, there should be harmonised disclosure provisions
across all jurisdictions with a single disclosure system administered by a
single electoral agency, most appropriately the Australian Electoral Commission
(AEC). Such a system must be low cost, administratively efficient and cover all
participants in the electoral process.
Failing the achievement of a single harmonised system, there
should be clear distinction between the responsibilities of state and federal
electoral commissions. In simple terms, state electoral processes should be the
responsibility of state electoral commissions and federal electoral processes
should be the responsibility of the AEC.[23]
9.36
The AEC saw potential for enhancing administrative efficiency if greater
consistency of disclosure requirements could be achieved. It suggested:
If the various Commonwealth and State reporting and
disclosure requirements are not fundamentally dissimilar, opportunities could
exist for the establishment of a single, shared lodgement portal that could
satisfy both Commonwealth and State requirements. The approach to online
disclosure currently operated by the AEC that seeks information to be entered
or uploaded following a “wizard” format could be adapted to seek all the
information pertinent to both the Commonwealth and State obligations in a
single operation, but then produce two disclosure returns each tailored to the
individual legislative requirements. The shared disclosure portal could be
accessed from both Commonwealth and State websites.[24]
9.37
A shared electronic system such as that mentioned by the AEC could go
some way to addressing concerns about overlap of administrative functions
between federal and state electoral commissions. In setting up such a system
consideration must be given to clarifying the categories of information and how
the data could be organised into reports that meet the respective requirements
of the Commonwealth, and the state or territory.
9.38
The AEC also identified the area of administrative funding as one
requiring consideration, stating:
Harmonising Commonwealth and State schemes also could present
some quandaries beyond the more obvious ones of political parties and others
having to operate under broadly similar schemes but to different rules designed
to achieve those ends. One such issue would be where ongoing administrative
funding is to be offered at both the Commonwealth and State levels to take
account of the impact of rules that essentially have a singular impact. [25]
9.39
If administrative funding were to be introduced at the Commonwealth
level, then a review of what administrative funding is available in a given
state or territory would be necessary to minimise the potential for parties
‘double dipping’ for administrative funding.
Conclusion
9.40
Harmonising political financing arrangements between the federal, and
state and territory levels should be a goal of reforms in this area.
9.41
Significant reforms of funding and disclosure systems at one level of
government that are isolated or not reflected at the other level of government
may create confusion and impose a greater burden on those attempting to
understand and meet their obligations under both state or territory and federal
arrangements.
9.42
Greater consistency in federal, and state or territory arrangements
would help improve clarity and provide greater opportunities for cooperation in
the design, implementation and operation of these systems.
9.43
While harmonisation in Australia will take time, the Australian
Government should pursue opportunities to enhance cooperation sooner rather
than later. Technology supporting the operation of the funding and disclosure
systems as an area in which more immediate gains can be made.
9.44
In particular, the committee notes with interest the AEC’s advice about
the possibility of a shared online disclosure lodgement portal that could be
used to input information and produce returns to Commonwealth, and state and
territory requirements. Such a mechanism could enhance the efficiency of the
disclosure system and help to reduce the administrative burden on those with a
reporting obligation and the AEC in administering the returns.