Regulating money in New Zealand Politics

Simon Chapple

In the aftermath of the controversy surrounding former National MP Jami-Lee Ross and Opposition National Party Leader Simon Bridges, discussions have focused on possible reforms of political donations in New Zealand.

My colleagues Bryce Edwards and Michael Macaulay have raised the issue of taxpayer funding of political parties. So too has Minister of Justice Andrew Little.

Lowering threshold

Green Party MP Marama Davidson has suggested that the donation threshold for the disclosure of a donor’s name and address be lowered from $15,000 to $1000.

She has also proposed banning foreign donations outright and capping individual donations at $35,000.

Several of these proposals warrant further discussion and contextualisation.

Foreign interference

Foreign interference in domestic politics is an increasing phenomenon worldwide.

Currently in New Zealand, foreign donations to a Party of up to 1500 are permissible.

Moreover, foreign donations below this amount are not individually or collectively disclosed.

It would be easy for a foreign state or corporate body seeking political influence to channel a large number of donations into the system just under the threshold via numerous proxies.

Whether such interference has been happening is unclear, since New Zealanders do not know how much money currently comes in to political parties via foreign actors.

Even if foreign donations are not a problem now, one could rapidly develop.

A strong argument can be made that foreign money has no place in democracy, including New Zealand.

New Zealand would not be going out on an international limb by banning foreign donations.

Foreign donations to political parties are not permissible in the United Kingdom, Ireland and the United States. They are also banned in Canada but unfortunately a significant loophole exists. Australia is currently in the process of banning foreign donations.

Anonymity Factor

As noted, the threshold below which political donations can be anonymous could be lowered. A lower threshold would make it more difficult to evade name disclosure rules by splitting donations and attributing each part to a different donor.

Splitting may be what happened to the alleged $100,000 Yikun Zhang donation.

The $1000 threshold proposed by the Greens would be a huge improvement on the status quo. A donor of $100,000 seeking to evade legislation and to remain anonymous would have to coordinate 100 individual donors, rather than seven.

But New Zealand could go lower still, to $200, without being radical.

Giving $200 to a political party is huge for an ordinary New Zealander, and the reality is that only a very small minority would need to disclose their names under such a law.

There is international precedent for setting much lower thresholds for anonymity than the Greens propose. For example, in Canada, the maximum amount of an anonymous donation was set at C$ 200 in 2015, while in Ireland it is currently €100.

Transparency vs privacy

One concern with non-anonymity is that it delivers public transparency at the cost of private donor privacy. Currently, the Electoral Act 1993 contains a mechanism for anyone wanting to donate to a political party and not wanting their identity disclosed to either the public or to the party receiving the donation.

To obtain such anonymity, the donation needs to be more than $1500.

The Electoral Commission aggregates all such donations. It passes them on to parties at regular intervals. When doing so, it does not identify the dollar amount of individual donations or the number or names of donors.

Not many donors use this protected disclosure avenue.

For example, between September 2015 and June 2018, the commission passed on only $150,000 in anonymised money to parties. At the same time, amounts well in excess of $10 million were passed on by donors identifiable to political parties (but not necessarily to the public).

A preference for identifiable channels suggests current donors get value from non-anonymity. It implies most donors feel they are buying something. The fact that donors feel they are buying something should be cause for concern.

Capping Donations

The Greens have suggested $35,000 as a maximum cap on donations.

Again, New Zealand could go much lower without being out of step with other countries.

For example, in Canada, donations to each political party are capped at C$1500 a year. Ireland has a maximum annual cap of €2500.

However, Opportunities Party Leader Geoff Simmons has argued that a cap would make it difficult for small parties to get started.

Simmons’ Party was kick-started by large donations from multi-millionaire Gareth Morgan, who was also the Party’s first Leader.

Another possibility for the reform agenda is the Canadian approach of only permitting donations from individual people. Corporate and trade union donations are banned.

However, this proposal is unlikely to be popular with neither National, which receives considerable corporate donations, nor Labour, which traditionally gets significant trade union funding.

Public debate needed

All these proposals, inevitably, have pros and cons and possible unintended consequences. They are deserving of wide public debate. One hopes that the current government can provide the public with a credible forum for such discussions, as well as a clear pathway to sensible future reform.

This editorial was initially published on The Conversation

Refer also to Porous line between political access and political influence in November 2018 issue of Transparency Times.

Simon Chapple is Director, Institute for Governance and Policy Studies at the Victoria University of Wellington. The above story appeared in the February 2019 Edition of ‘Transparency Times’ of Transparency International New Zealand.’

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