NSW electoral funding changes


In recent weeks, the news has been dominated by stories about the desire of the NSW Liberal Party to reform the state electoral funding system in New South Wales – supposedly to reduce the influence of private donations. Today, Mike Baird announced new legislation to change the electoral funding system in the lead-up to March’s state election.

The media reporting has focused on tougher sanctions, and a supposed increase in the proportion of election spending that will be publicly-funded.

But it’s missed a major story – about how the public funding regime will substantially favour the major parties over smaller parties, giving major parties 55% more public funding per vote, and possibly locking out some smaller parties out of getting any public funding at all.

Under the proposed changes, funding will again be based on how many votes you receive (unlike in 2011), but this funding will be disproportionately weighted towards the major parties. Substantially more funding will be provided to a party that wins seats in the Legislative Assembly.

On my reading of the law, a major party that wins 32% of the vote in both houses would be entitled to spend $9.3 million, and receive back the same amount, effectively funding their entire campaign.

Smaller parties would be entitled to spend more than they would be entitled to receive in funding, but if they spend less than they are entitled to receive, they will receive less funding. This effectively provides certainty to the major parties while denying it to smaller parties. I may be wrong on that point – this law is quite a mess.

There is in particular a huge amount of uncertainty for the Greens, who could be entitled to approximately $3 million or $2 million based on the result in two inner-city seats.

Under the current electoral funding scheme, any political party that wins at least 4% of the vote in either the Legislative Assembly or the Legislative Council is entitled to public funding. In addition, public funding is allocated to candidates in individual electorates who poll over 4% of the vote in each seat. Once a party or a candidate passes the 4% threshold, funding is allocated without any consideration of how much of the vote that party or candidate received. If you receive 5% or 50%, you are entitled to just as much public funding.

This scheme means that parties that have more money to spend (and are willing to spend more money that they will not receive back in public funding) can gain more public funding and effectively expand the size of their campaign, while those with less money in the bank will spend less, and thus get less public funding.

(At the bottom of this post, I explain a bit more about how the current public funding system works in New South Wales, but prepare to be confused).

Every other Australian jurisdiction that provides public funding gives it out on the basis of a dollar-per-vote model. Some jurisdictions simply give out the money, others use the dollar-per-vote model as a maximum to be provided based on spending receipts. New South Wales state elections up until 2010 followed the latter model: you are entitled to funding for a particular amount based on your vote in a particular Legislative Assembly district or in the Legislative Council, but must demonstrate you spent the money to receive funding.

The proposed legislation returns to the dollar-per-vote model, but hands out substantially more money per vote to larger political parties, in a way that will favour the major parties.

Under the proposed legislation, political parties would be split into two categories:

  • Parties that win at least 4% of the vote in either house, and win at least one Legislative Assembly seat, will receive $4 per vote for each Legislative Assembly vote, and $3 per vote for each Legislative Council vote.
  • Parties that win at least 4% of the vote in either house, and don’t win any Legislative Assembly seats, will receive $4.50 per vote for each Legislative Council vote, and nothing for the Legislative Assembly vote.

Assuming that most parties receive a similar vote for each house, this effectively means that parties that win seats in the Legislative Assembly will win $7 per vote, and parties that only win seats in the Legislative Council will win $4.50 per vote – 55% more per vote for parties that win lower house seats.

The only parties confident of winning lower house seats are Labor, Liberal and National.

While the Greens won their first seat in the NSW Legislative Assembly in 2011, and have a good chance of winning up to two seats in 2015, there is no guarantee of winning those seats. On the basis of the Greens vote last time, the party would be entitled to just over $3 million in funding if they win Balmain or Newtown, and just over $2 million if they don’t win either seat. Since funding is only provided based on reimbursement, the Greens would have to risk spending up to $1 million in funds that may not be reimbursed in order to possibly qualify for the higher amount.

It’s hard to compare the funding situation for 2011 to this proposed model, because the models are so different. The Greens and the CDP were both entitled to receive huge amounts of public funding, but only if they spent up to the cap.

It’s more useful to look at the amount of public funding provided in 2007. Bear in mind that the ALP polled much higher in 2007, so that explains why the public funding was skewed more to Labor compared to a projection of the proposed new model on 2011 votes.

Party2007 entitlement2007 funding2011 entitlement2011 fundingProposed
Greens (1+ MLAs)$1,131,623$1,131,623$9,525,000$1,711,525$3,067,951
Greens (0 MLAs)$1,131,623$1,131,623$9,525,000$1,711,525$2,039,063
Independents and others$337,346$352,349$3,682,500$1,080,982$1,362,256

I have used the 2011 entitlements that the EFA listed, but it seems likely that the actual cap in entitlements was slightly over $8 million, which would slightly reduce the theoretical entitlement pool.

Compared to 2011, the theoretical funds that could be available has dropped substantially, but the actual funds that will be given out will slightly increase.

There’s a few other points to make based on this table:

  • The CDP and the Greens do get an increase in funding, but a relatively small increase, and will get a lot less than what they theoretically could have gotten, but it will be easier to receive.
  • The difference between the Greens winning a seat in the lower house and not is massive – over $1 million in funding. What does this do to the election campaign?
  • The Coalition vote will drop, and Labor’s vote will rise, so they will probably both receive the $9.3 million. They would have both received $9.3 million if you model off the 2007 vote.
  • According to my reading of the law, Labor and the Coalition will actually receive all of their funding back up to the $9.3 million cap. So while small parties will receive a certain amount of funding back, they will not know how much in advance, and if they underestimate their vote they will receive less than their entitlement.

How the current system works

Under the current system, public funding is based on how much you spend. For a party that runs in at least eleven seats, and polls over 4% in either house, they are entitled to public funding equivalent to:

  • 100% of their spending for the first 10% of the spending cap, and
  • 75% of their spending for the next 80% of the spending cap, and
  • 50% of their spending for the final 10% of the spending cap.

The same concept applies to funding for individual candidates, and for parties that run in 10 or less seats but win 4% of the Legislative Council vote. If you’re confused, you’re not alone.

The current donations thresholds can be seen here.

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  1. The other aspect of this is that all public funding for parties will be paid centrally – there’ll be no public funding reimbursement for individual party-endorsed candidates (independents do get funding, but will be worse off unless they poll more than about 17,000 votes by my reading, so the new model will only benefit very successful independents). However – this doesn’t mean there’ll be no spending by individual party-endorsed LA candidates. Parties have a $50,000 cap on spending on a specific electorate, but the individual candidate has a $100,000 cap, so there’s still an incentive for LA candidates to raise and spend money from their own campaign accounts, they just won’t get any of it back.

    I also noted the addition of travel and accommodation for candidates and staff, and research, in the category of capped and reimbursable expenditure.

  2. @Ben yes, but what i mean is only up to $50K per electorate, yet they still have the option of spending another non-reimbursable $100K from a local campaign account. That’s how I read it.

  3. When you say …the party would be entitled to win just over $3 million… I think you mean “reimbursement of” rather than “win”.

  4. After reading this analysis by Anne Twoney I noticed I did misread one clause in the bill

    Ben is right that the spending by endorsed candidates is included in calculating the maximum reimbursement that a party can receive, so spending by lower house candidates can be reimbursed provided it falls within the maximum allowable for the entire party state-wide. But it is an important point that each party-endorsed candidate can still raise and spend up to $100,000 per electorate in addition to the $9.3m state-wide cap for each party, and because the maximum entitlement can include candidate spending, as Twoney points out, $9.3m is not the maximum reimbursement a party can receive.

    Now I think I’ve understood it now???

  5. I really don’t know. The amount of money claimed by the major parties in 2011 suggests the cap is closer to $9.3 million, not $18.6m, but I couldn’t claim to be certain.

  6. Parites have a spending cap of $9.3m, plus party-endorsed candidates have a spending cap of $100,000, that’s still the same. Under the 2011 scheme candidates get a much lower proportion of their spending reimbursed, max $30,000, so what your table shows as the entitlements for 2011 looks like $30,000 per eligible electorate + the amount the party was entitled to.

    It looks to me like the effective spending cap for a party contesting all seats is $18.6m, same as 2011, but this time the maximum reimbursement will be dependent on votes, and with parties that don’t win a lower house seat being entitled to a lower return per vote.

    I might also observe that the threshold for getting any funding remains quite high for a party. For a party contesting the upper house you need 4% or to get someone elected, which usually takes over 2.5%, but the campaign you’d need to get even 2.5% of the state wide vote would be pretty expensive, so as a mechanism to create a ‘level playing field’ current public funding models fail. They just enrich the established parties, they don’t do much to reducing financial barriers for new entrants. Not to mention, whilst I’m at it, that reimbursement doesn’t negate the need to find money in the first place, although NSW does now offer advance funding for parties based on their vote at the last election, this again disadvantages new parties and candidates who have to be more reliant on private donations. We need to think of different funding models than ones based on reimbursement.

  7. Nick,

    I’ve followed up on your points. I now think that Anne Twomey is correct and the cap is effectively $18.6 million, not $9.3 million, If she is correct, that has been the case since 2011 since there is nothing in the bill that changes how the caps operate, it just lowers them back to where they were before the last four years of indexation.

    However I’ve checked and parties definitely get reimbursement for money spent by their candidates, but the funds are centralised to the party, not given back to the candidate.

    The key clause is the proposed section 103C, subpart 2b

    2 The amount to be distributed from the Election Campaigns Fund to any such
    party in respect of the 2015 State general election is (subject to subsection (3)):
    (a) $4 for each first preference vote received by an endorsed candidate of
    the party in the Assembly general election and $3 for each first
    preference vote received by an endorsed candidate of the party in the
    periodic Council election, or
    (b) the total amount of the actual campaign expenditure of the party and of
    those endorsed candidates of the party
    whichever is the lesser

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