09 March 2016
by Max Atkinson

Gaming the system

The late Padraic P McGuiness, editor of Quadrant and scourge of the left - in a rare moment of magnanimity - once wrote a column conceding that 'process' reforms, those which ensure the integrity of government, were invariably the province of Greens and Independents, because major parties aiming to govern in their own right are loathe to accept constraints on the means used to win elections.

This was certainly true in Tasmania when Dr. Bob Brown, during his first term in the House of Assembly in 1983, and among his many private member's initiatives, pushed for freedom of information laws. In 1989, when the Greens won five seats in the House he became leader and signed the Accord with Labor agreeing to a more open parliamentary process, a legislative research service, parity in parliamentary staffing and a reform agenda which included equal opportunity and freedom of information.

In the same year the Edmund Rouse bribery scandal exposed the reality of corrupt donations. It led to the Carter Royal Commission and an opportunity for Brown, in the absence of moves to implement transparency provisions of the Accord, to introduce in 1990 a private member's bill for disclosure of donations larger than $100. Frances Bladell, a progressive Minister for Administrative Services and Consumer Affairs - perhaps anticipating the Commission's recommendations - committed Labor to support this reform. (After Brown moved to federal politics the new Greens leader Christine Milne introduced a private member's bill to ban secret donations above $200).

By contrast, the Liberal Party informed the Commission it opposed any disclosure of political gifts. Robin Gray, when referred by the Commission to a $100,000 secret gift to his party in 1989 "by a company registered in another state with business interests in this state", professed ignorance of the donor's identity but agreed that without this secrecy his party would have little public financial support. But the official reasons remain a matter of conjecture because the Liberal submission was never made public.

Notwithstanding, the Carter Report recommended clear laws to ensure all gifts to political parties, politicians and candidates be disclosed, and for annual returns in respect of the income and expenditure of parties. It also recommended spending limits be reinstated for all candidates in House of Assembly elections. As Frances Bladel pointed out, this was necessary to ensure that no one can 'purchase a seat', and to extend the scope of the office to include the broadest range of talents in the community.

It has taken a long time for the major parties to accept process reforms of this kind, and only after a public outcry from major scandals in Queensland under Joh Bjelke-Peterson, in New South Wales under Robin Askin and in Western Australia under Brian Burke ('WA Inc.') But systemic corruption over secret deals to fund political parties is a never-ending story - we see it once again in NSW under the O'Farrell administration with the conviction of Eddie Obeid and resignation of several ministers and in Queensland with its Electoral Commission now investigating $3 million of undeclared gifts to Labor.

This history shows the need for donors to fund elections is a recurring theme in Australian politics and one likely to resist reform. Some readers may recall the 1979 state election, when several Tasmanian politicians were fined for exceeding a $1500 limit and three seats had to be recontested. But instead of setting realistic thresholds indexed to costs, the government used this minor scandal to remove all limits in what critics saw as a joint-party conspiracy against the public interest.

One lesson from this history is that the public does not regard political parties as charities and contributes only a minor portion of the funds. The problem arises from big-money donors, especially the ability of company directors to donate shareholders' funds which, prior to 2008, could be written off as business expenses. Around the time of the Carter hearings, statistics produced in the trial of a Federal Labor secretary for omitting to disclose gifts reveal that, while 4425 supporters gave a total of $290,000, 60 donors gave $1, 570,000. Likewise the WA Inc. Royal Commission heard evidence that gifts to Labor of several millions were organised from a mere half-dozen business entrepreneurs.

This feature - that major donors are able to give away other peoples' money - sees Liberals arguing that large corporate gifts are needed to compete with the monies raised by unions from members' fees while unions argue, with no less reason, that they must protect members from the abuse of financial power by employers, especially when they have the ear of government. But as the WA, Tasmanian and NSW experience shows, the ALP competes with Liberals in attracting big bucks from big business.

The result is a system in which major parties depend on corporate and union funds sourced largely from the pockets of members and shareholders who have no say in the matter. It leads to a media focus on the scandals when these gifts break the law - often a technical issue with each state having its own laws. It feeds and responds to a public concern for justice when party officials and donors cheat or lie or game the system.

This focus on wrongdoing, and on journalists who break these stories, often risking careers and intimidatory actions for defamation, is important, but not the whole picture. There is, in fact, a good argument that it distracts the public and media from the real problem, which is the huge systemic distortion posed by legal donations, predominantly from the world of big business.

Despite reforms requiring disclosure of donations above $12,800, four matters in particular stand out. The first is that, despite overwhelming criticism of the US Supreme Court ruling in the Citizens United Case, which permits corporations to spend unlimited amounts on indirect political donations, the situation is the same in Australia, where currently there are no limits on spending by or donations to parties or candidates in federal elections.

Which is why wealthy businessmen like Clive Palmer can spend $10 million to secure a seat. As Francis Bladel warned years ago this is not just unfair, it deprives the nation of the broadest range of talents in the community.

The second is the fact that there are no limits on donations from foreign government bodies, companies or wealthy persons seeking to influence national policy by funding the election of Australian citizens and parties.

This works both ways - as journalist Greg Sheridan found when reporting that the Government has in recent years given $75 million to the Clinton Foundation , one of many from foreign nations which have raised questions of financial propriety. In a May 2015 book, Peter Schweizerwrote of 'a pattern of financial transactions … contemporaneous with favorable U.S. policy decisions benefiting those providing funds.'

A third flaw is that a donor's identity can be disguised by funnelling gifts through 'associated entities', such as the Liberal fundraisers' Cormack Foundation and Labor's Labor Holdings Ltd. These act like the controversial American 'super-pacs' - they launder both small and large donations by masking their source.

A more serious problem is the lack of transparency due to lax laws which permit the declaration of gifts to be delayed for a year or more. It means voters cannot respond to attempts to influence policy by voting against those who solicit gifts. It also blunts the media's role in exposing this distortion of democracy. There are no technical barriers to prevent full disclosure on the web within 24 hours, with a penalty (such as a forfeit to general revenue) for failure to comply.

The failure to deal with these issues must concern those who care for the health of Australian democracy. In America two right wing billionaires, the Koch brothers, are giving $889 million to help the Republican Party win the 2016 Presidential election, with Donald Trump now the front runner. But there are hundreds, perhaps thousands, of big money donors likewise using their wealth to overwhelm the votes of ordinary citizens. We see the beginnings of this culture in Australia with Clive Palmer, and with Gina Rinehart's attempt to buy political influence by spending vast sums to get a seat on the board of a media empire.

What is at stake is a principle recently highlighted by the High Court in Mc Cloy v New South Wales, a case in which a wealthy property developer claimed a constitutional right to break NSW state laws prohibiting donations made to get access to politicians in order to influence their decisions. The Court ruled against him, declaring that:

'guaranteeing the ability of a few to make large political donations … to secure access to those in power would seem to be antithetical to the great underlying principle of representative government that involves equal sharing in political power'

But the record of history suggests that neither Labor nor Liberals are likely to take this principle seriously. They mask this disinterest by emphasising those laws designed to fight corruption by requiring disclosure, however tardy. But, as the High Court principle reminds us, the real problem is not corrupt dealings but unequal political power.

This brings us to the heart of the matter - how can institutions and practices which are against the public interest be reformed when they benefit major parties? If we agree with 'Paddy' Mc Guiness we will look to Independents and Greens, and to Lee Rhiannon's private member's bill on disclosure which, if it gets a hearing, is unlikely to go to a vote and in any case does not limit the size of donations.

But past experience suggests little will be achieved unless and until party leaders are required - in an appropriate public forum - to defend the present practice to journalists and constitutional experts, as well as political philosophers and ordinary citizens with a non-partisan concern for the public good.

This is, in the end, what makes the ABC's weekly Q and A program a major contribution to public debate, aided by the good humour and respect host Tony Jones has managed to cultivate. Unlike parliamentary question time, panellists know they are likely to pay a penalty for dissembling and for being glib, facetious, too clever, ignorant or uncaring.