Purchasing influence

By Julie Haggie
Chief Executive Officer
Transparency International New Zealand

Money enables the expression of political support as well as competition in politics and elections. But political financing through donations, anonymous or not, should not purchase influence. The principle of one-person one vote underpins democracy. We need to protect the integrity of this essential democratic process.

This does seem to be a problem in New Zealand.  Currently criminal charges have been filed by the Serious Fraud office against six people in relation to a donation made to the Labour Party, against four people in the National Party, and against two people in the NZ First Foundation.  An SFO investigation is also underway into Auckland Council election donations.

The Ministry of Justice is currently preparing advice to the Minister on whether changes should be made to the Electoral Act ahead of the next General Election in 2023 to make political donations more transparent. Separately (but related) a wider review of New Zealand’s Electoral Laws is underway. You can read the summary of Summary of proposed changes to political donations rules, and this briefing offers the context and rationale for considering these changes.

TINZ’s Submission - What did we say?

We enthusiastically support some aspects of the proposed changes, but not all. There is much more to do to improve transparency around political donations and political funding in general.

Lowering of the public disclosure threshold for donations from $15,000 to $1,500 for parties and candidates is welcomed. This will frustrate efforts to reclassify donations from candidates to parties and simplify the compliance element. 

We’d like to see the law specifically disallow the splitting of donations.

To further remove any undue influence, anonymous donations should be directed through the Electoral Commission, so that neither the candidate/party nor the public is influenced by the donation. This also ensures that anonymous donations are properly accounted for.

The proposal that is quite puzzling is for the removal of the requirement to provide the identity of the donors and number of donations above $30,000. That appears to run counter to the objective of the Cabinet paper to “to simply ‘shine a light’ on the donations received.” The proposal also places New Zealand outside international standards and practice.

Source: https://www.idea.int

TINZ supports the introduction of more frequent disclosure by parties and candidates about in-kind donations and non-anonymous donation reporting. A simple way to facilitate reporting would be for election candidates and parties to have access to an online filing portal which is publicly viewable. The UK uses such a model: http://search.electoralcommission.org.uk/. In addition, simple due diligence procedures should be undertaken for donations, such as those that apply to AML/CFT customer due diligence.

The proposals could go much further to dissuade the use of money as influence. For example:

  • Banning political financing of candidates or parties by companies or organisations that hold a current contract with a government agency or who are progressing through a public procurement process.    
  • Restrict partly and fully owned public entities from involvement in political financing
  • An explicit ban on the use of state resources in favour of, or against, a political party.   
  • Ban pre-election agreements between parties and organisations or corporations, based on voting strength. Votes can be as persuasive as money.
  • We also need to see more transparency and integrity in lobbying. New Zealand’s lenient arrangements are increasingly out of step with those of other jurisdictions.

Many of the proposed political donation changes are positive. It is great to see the proposal for parties to publicly disclose financial statements and loans. This has long been needed and brings New Zealand into line with global trends.

But a fuller range of reforms is required to maintain a publicly trusted high integrity electoral system. Other important integrity elements that need to be built in are:

  1. There is a  need to maintain vigilance on the potential for cryptocurrencies to allow foreign contributions and anonymous donations to enter politics unnoticed. 
  2. Cryptocurrencies, and separately, enforceable offers or promises of future money, goods or services should be treated as money donations.     
  3. Funding for online political advertising needs to be considered as part of any broader electoral review. In this respect we refer to our October 2020 research paper Online Political Campaigning in New Zealand.

If you are interested in taking a comparative look at electoral concepts such as funding, gender quotas, global state of democracy indices and electoral justice database, we recommend a visit to The Institute of Democracy and Electoral Assistance.

Our submission is available here.

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