Democracy for Sale

August 2008

On Easter Saturday 2008 there was a seismic shift on political donations reform in NSW. Premier Morris Iemma announced that he now supported a ban on political donations. This was a major reversal of NSW Labor policy. For years the Premier and former Premier Bob Carr had resisted overhauling the NSW political funding regime, arguing that national reform was the only way new laws would work.

Within a few hours of Premier Iemma's backflip being reported in the Sydney Morning Herald opposition leader Barry O'Farrell followe suit and reversed the Liberal's opposition to a donation ban.

While the tipping point for the major parties on this issue was certainly the Wollongong corruption scandal, years of campaigning by the Greens and numerous community groups on the corrupting influence of corporate donations has helped lay the basis for the exposure of this damaging aspect of how the Labor, Liberal and National parties operate.

Political donations have grown to be a cancer on the democratic process.

The current NSW law on electoral funding only covers disclosing information on donations not limiting or banning these contributions. Interestingly when the Election Funding Act was introduced in 1981 the political controversy was not over donations but the issue of public funding. The Coalition parties voted against the legislation and declared that they would not accept public funding.

But when Labor picked up an extra six seats and the Liberals were hit with a $2 million debt at the 1981 state election they applied for public funding. The National Country Party was unwilling to engage in such a quick policy reversal. They chose to wait until the next state election to take up public funding.

The Liberals' embarrassment over their backdown on public funding was compounded when the NSW Election Funding Authority determined that the Liberals could not receive any money as they had not registered in time to qualify.

Throughout the 1980s and 1990s the major parties picked up millions of dollars in public money while pocketing increasing amounts of corporate and group funding.

The scheme set up in 1981 under the Election Funding Act involves public funding for state elections and disclosure of both election expenditure and political donations. While no funding is provided for local government elections the disclosure requirements do apply.

While the law does not put any limits on donations it did for the first time set up a form of transparency with obligations on both donors and the political parties and candidates who received their money to publicly reveal information on these transactions.

The Election Funding Act 1981 set disclosure thresholds at $1500 for political parties, $1000 for groups and $200 for candidates. For contributions less than the threshold the total number and value of donations need to be disclosed, but not the source.

Although details of the donations have been available from the Election Funding Authority since 1981 it was only with the establishment of the Greens Democracy4sale research project in 2001 that the public could readily access information on the quantity of money coming from individual donors and from categories of donors such as property developers, the finance sector, clubs and hotels and the finance sector.

This website has proved to be an invaluable tool for journalists, community groups and concerned individuals wanting to highlight the impact of political donations on the democratic process.

Democracy4sale has been the centrepiece of the Greens campaign for far reaching reform of political funding. The campaign has also included private members bills, public meetings and the preparation of many briefs on donation stories for journalists.

Premier Iemma's decision to reform the political funding regime is certainly linked to the growing number of scandals that have dogged both the Coalition and Labor parties. Without a massive public outcry the major parties would have happily continued to pocket the millions of dollars from corporate and group donations that have become the lifeline for their exorbitant election campaigns.

In 2003 Greens MP Lee Rhiannon moved a Ban Developer Donations Bill in the NSW Upper House. If passed the bill would have stopped developers from buying influence with politicians.

In 2007 Greens MP Sylvia Hale moved the Environmental Planning and Assessment Amendment (Restoration of Community Participation) Bill.  The changes included banning donations from property developers to political parties, officials and candidates.

Both Greens Bills were voted down on the combined vote of Labor and the Coalition parties.
 
At the time of writing (July 2008) the first round of reforms to the Election Funding Act 1981 has just been passed. If the Premier extends the reforms to include the promised ban on political donations is yet to be seen. He has stated that this action will be taken and the new laws will be in place before the 2011 state election.

In June 2008 the NSW parliament passed two bills presented by the Labor government as the first stage in this reform package.  But the Election Funding Amendment (Political Donations Expenditure) Bill 2008 and the Local Government and Planning Legislation Amendment (Political Donations) Bill 2008 will not stop Wollongong style corruption scandals. 

The Premier mislead the public when he stated these laws would reform political donations in time for the September local government elections. In fact they further entrench the culture of donations buying political access in NSW. 

While disclosure of donations has been changed from every four years to every six months voters in the 2008 local government election will have no information on who donated to parties and candidates between July 1 and the date of the election September 13. Information on donations handed over in this period will not be available until the end of the year.

Donations received by first-time candidates will also escape any scrutiny. We need a level playing field. All candidates—whether sitting councillors or first-timers—should reveal their monetary supporters before the election. The Greens moved that there should be continuous disclosure of donations with the information set out on a public website. Labor and the Coalition parties voted together to defeat this amendment.

The Labor government and the Coalition supported changes that mean that when a developer submits a development application to a Council the developer will only have to disclose donations made to local councillors and not those made to the political parties.

It is vital that any party-affiliated councillors be held to account for the influence of the donations that their party has accepted from developers, corporations and organisations.

It’s a loophole the major parties and their developer sponsors could drive a large bulldozer through.  Labor and the Coalition voted together to block the Greens amendments to stop this.

Everyone would agree that if a councillor has taken a donation of $1,000 or more from a developer, the councillor should not vote on an application from that developer. The same should apply if the developer has made a donation to the councillor's party. Councillors rely on party support for their preselection and election campaigns and this raises the possibility of them being pressured by party figures to vote in a certain way.

Wollongong City Council is a salutary example of how this happens. It has been alleged in relation to that council — and this is supported by taped telephone conversations — that the local member of Parliament, Noreen Hay, was asked by a developer, who had made significant donations to her campaign and to NSW Labor, to influence the way Labor councillors on Wollongong City Council would vote when that developer's application came before council.

The new law will do nothing to stop such a situation because the developer will not have to disclose the donations he or she had made to the party, and the councillors will not have to absent themselves from any vote on an application by that developer.

Only independent councillors who have accepted developer donations will be excluded from voting because parties will simply launder all donations through their head offices. Premier Iemma has already said that Labor will move to centralise all donations.

The new law will have the perverse effect of making political donations and their influence on development decisions less transparent by allowing political parties to centralise all donations and thus avoid the reporting requirements contained in the bill.

The new laws will bring changes to how councils operate. The general manager of a council now has to record how all local councillors vote on each planning decision and to make that record publicly available.

Also when any relevant planning application is made to the Minister for Planning, the Department of Planning or local council, the applicant, or any person making a public submission opposing or supporting the application, is obliged to disclose political donations and gifts made within two years before the application or submission is made.

The Greens also moved amendments to ban corporate donations, place caps on election spending, and require all candidates to continuously disclose their donations in the two months leading up to an election. The major parties combined forces to defeat these amendments.

Labor and Coalition MPs argued in the debate on these bills that more time was needed to draft legislation on these more far reaching reforms of political funding in NSW. The Greens will work hard to ensure they honour this commitment.

by Lee Rhiannon