Keneally’s grab for cash

The NSW Labor government is currently using the cover of supposed “campaign finance reform” to rig the public funding system to give more money to major parties and radically cut the funding to smaller parties.

Last Tuesday, Keneally announced that she would be proposing campaign funding reform legislation before the impending state election. While the details were vague, they included a cap on donations of $5000 and a cap on spending of $100,000 per electorate. Pretty weak, but a step in the right direction.

Hidden in her plans was a vague reference to plans for a “tiered” funding system.

A Sydney  Morning Herald article on Saturday revealed that this plan is to fund a proportion of each’s candidate’s expenditure, with a greater proportion for candidates receiving a higher vote. This scheme would massively increase funding  to major parties, while slashing it for smaller parties, and forcing political parties, particularly smaller parties, to rely on even more donations to supplement the limited public funding.

In addition, it’s now been revealed that the Keneally government also plans to introduce a new scheme for funding of administrative party activities outside of election periods.

In New South Wales we currently have the “Political Education Fund”, which gives funding to all parliamentary parties for non-election work outside of election periods, based on the number of Legislative Assembly votes received at the last election. While it is meant to be spent on ‘political education’, all parties use much of their funding for general costs of running a party outside of campaigns.

The new administrative scheme would be based on the number of Members of Parliament each party has elected. It doesn’t need to be said that this would also massively assist the major parties, due to the current electoral system disadvantaging smaller parties by locking them out of the Legislative Assembly. It doesn’t seem clear to my why a party with more Members of Parliament, with all the extra resources that provides, needs a disproportionately greater amount of public funding to run their party.

But back to the election funding model.

At the moment, all candidates and parties who receive  over 4% in an electoral district are entitled to public funding. The formula allocates how much each candidate is entitled to based on how many votes they receive. A candidate with 10% of the vote would be entitled to half of what a candidate with 20% would be entitled to.

This is all very similar to the federal system. The difference is that federally you receive all money you are entitled to without needing to demonstrate that you actually spent that money. In the NSW system, you need to show receipts. If you could receive $10,000, but only spent $7800, the remaining $2200 stays in the pool.

Under the Keneally plan, this is all thrown out the window. If you poll between 4% and 8%, you will be entitled to 25% of your spending being paid back. If you poll between 8% and 20%, this will increase to 50%. Candidates with over 20% of the vote will be paid 75% of their expenditure.

There does not appear to be any limit on how much expenditure could be funded. Under the Keneally plan, parties are entitled to spend $100,000 per electorate in which they stand, and another $9.3 million in the Legislative Council, adding up to $18.6 million, even more than the obscene $16 million spent by the ALP in 2007.

If a party spends $100,000 in an electorate, and poll over 20%, they would receive $75,000 in public funding, much more than would be currently allocated.

This system would seriously damage small parties. Analysis by the Greens shows that, in the Legislative Council at the last election, the ALP was entitled to $3.4 million, the Coalition $3 million, the Greens $800,000, the CDP $387,000, and the Shooters $244,000.

Under the new model, the ALP would have been entitled to almost $7 million, with the Coalition also increasing substantially their funding. The Greens would get less than a third of what they were previously entitled, as would the CDP. The Shooters would get nothing. A similar situation would take place in the 93 lower house races.

It’s obvious enough that a system where the ALP and Coalition gain millions of dollars each in extra funding while slashing funding to smaller parties is clearly to their partisan advantage, but it’s worse than that.

The previous system encourages fiscal restraint. If you’re a small party without the ability to rake in massive amounts of donations, the previous system encouraged you to limit your spending to whatever you would be entitled to. If you spend under the cap, then you can get every single dollar refunded. Under Keneally’s model, if you conserve two dollars in spending, you lose a dollar in public funding. The more you spend, the more you get back, right up to $100,000 per seat.

It also makes it impossible to run campaigns without massive amounts of donations. Much of the discussion around campaign finance reform has focused on the need to allow parties to run campaigns almost entirely reliant on public funding. Morris Iemma and Nathan Rees both discussed designing a system that would result in campaigns being 100% publicly funded.

The Keneally model means that all parties, regardless of how fiscally conservative they may behave, would require a large proportion of their funding to come from donations. For smaller parties that generally conserve their spending in order to fund most of their campaigns from public funding, they would run at huge deficits that would quickly bankrupt them.

It’s difficult to avoid the impression that this is a system cynically designed by Sussex Street backroom boys to cripple smaller parties, particularly the Greens, while not seriously impacting on spending levels by major parties.

We’re yet to see whether Barry O’Farrell’s Liberals will go along with Keneally’s ploy.

About Ben Raue

Ben Raue is the founder and author of the Tally Room. If you like this post, please consider donating to support the Tally Room.