Legal Beagle by Graeme Edgeler


What was I thinking? What were they thinking?

One of the unintended consequences (and I use unintended advisedly – I'm pretty sure I warned them) of the Electoral Finance Act is that is has closed the historically substantial gap between political parties and their parliamentary wings. Whilst obviously linked, the operations of the divisions have been largely separately – to the extent that one may not know how the other intends to behave.

Though perhaps counter-intuitive, this can be viewed as a reasonably rational response to two concerns:

  • that we elect members of Parliament, and have no say in choosing those who hold high party office;
  • that members of Parliament should be seen to operate free from outside control

Placing control of parliamentary matters in the hands of parliamentary wings of parties ensures that elections may be used as a mechanism to hold parties to account for their use of public money – as some may find to their detriment following the 'pledge card' and related matters. It has been used by politicians as a reason for their opposition to direct public financing of political parties – arguing that giving money to people we've elected is acceptable, but giving money to wholly private organisations seeking political success is not.

The advertising paid for by funding from the Parliamentary Service previously was spent by the leader's office of the Parliamentary party – on the say so of the leader, or his or her chief of staff. No reference was had to the extra-parliamentary party.

The Electoral Finance Act has shifted the balance. Advertising, and other publications that fall within the definition of the broadly-defined term “election advertisement” (which includes websites and may extend to press releases) must now be promoted by a financial agent. And it doesn't matter who pays for it. Two previously distinct bodies, operating for good reason entirely independently, are now mandated to operate as one.

This – requiring Parliamentary leaders to obtain permission from internal party-appointed officials (the financial agents) before publishing anything, or spending their leader's fund on advertising – is quite an unintended consequence in itself, but the substantially closer formal ties between the wings of parties had me questioning whether there might be other consequences.

Questions which the Herald kindly aired on my behalf, and NZPA repeated in the ODT and elsewhere. My theory was that advertising funded through the Parliamentary Service might constitute a donation to a political party – Bill English was quoted as agreeing with me, and having an on-line column, and a captive audience, I thought I'd publicly state my reasoning.

“Donation” isn't really defined in the Electoral Finance Act – there are words that clarify its meaning (a donation doesn't have to be of money, and could be of goods or services, for example, foregone interest on a loan, or a mates' rates discount), but there's nothing that states donation means “a voluntary provision of something valuable without expectation of reciprocation” – as I imagine a dictionary might.

My starting-point is that, where the financial agent of a political party has approved spending on an election advertisement, and where that financial agent is legally to “promoter” of an election advertisement, if the party isn't paying for that advertising, someone has probably donated it. That's not to say that in all situations where this happens, there will always be a donation, but you start looking expecting to find one, and need a good reason to conclude there isn't.

I am saying “may” every time I posit this, because well, I'm pretty sure I'm the first person who thought of it, and it really can't be certain until a judge decides one way or the other. I may be right, or wrong.

If I gave the National Party $30,000 worth of leaflets it would be a donation – as it would be if Labour printed off $30,000 worth of leaflets, sent me the bill which I paid. Of course in this situation it's not an individual, or a company, making the payment, but the principle seems the same: a political party has received thousands of dollars worth of pamphlets without paying for them.

It's not that straightforward of course: the Parliamentary Service, acting under budget legislation and operating within directions laid out by the Speaker, is required to make the payment – which hardly seems the stuff of a donation – something I suspect they'd be pleased to hear.

It seems that if there is a donation then there are three options as to who the donor might be:

  • The Parliamentary Service
  • The taxpayer, or the “Government” or Parliament itself
  • The party's parliamentary wing

The Parliamentary Service is most directly responsible for the benefit the party has received – they're the ones actually making the payment – signing and sending the cheque to the supplier, but – under a legal obligation to do it – they've at least an argument they're not really donating anything.

Parliament, which passed the budget which included a line specifying the sum that was to appropriated to support the parliamentary parties, wasn't under any obligation to provide that money to the parliamentary wings – so its actions are somewhat more donation-like, but the money it provided need not have been used to the direct benefit (or control by) the extra-parliamentary wings of any political party.

It is entirely possible that the parliamentary wings for whose benefit Parliament voted that money could have directed its spending in a way that would have required no involvement at all from the party financial agent. If I give money to you to spend within broad parameters that neither require nor preclude a donation to a political party, I doubt if you choose to make that donation it can be sheeted home to me (even if I apprehended the possibility) – I gave the money to you to do with what you would.

The parliamentary wings of the political parties do not have access to the money, they merely pass on the bills to be paid by someone else. However, ultimately, the decisions over where the money goes, who benefits, and whether the money is to be spent in a way requiring the input of a party financial agent, is a decision made within the parliamentary wing. The money may not be theirs, but its existence is for their benefit, and they direct its spending. They are under no obligation to spend it to the benefit of the party proper, and could just as easily choose to spend it in a different way.

Though each is a possible donor, on balance the parliamentary party seems the most likely candidate. Who the donor is is of secondary importance – I don't mind if parties count this as a donation from taxpayers or Parliament – but if the law requires it, it should treat them as donations.

Why is this important? First, if there is a donation to political parties, then parties will have include these in their donation returns: we'll get to explore one more aspect of political party financing, and can do with the information whatever we want.

Secondly, if the value of any donation is more than $20,000 then the party must file a return within 10 working days. Failure to do this without reasonable excuse is an offence. Some may already have committed this offence, though its possible that because no-one had thought of this, they've got a pretty good excuse for failure.

Thirdly, public scrutiny of the spending of the leader's funds could greatly increase – getting around the pesky rule that means the Parliamentary Service isn't subject to the Official Information Act. I suspect our prurience over Parliamentary spending would decrease if the information became more commonplace (as happened in the United Kingdom when its parliamentary spending was opened to public scrutiny), but it was exceptionally surprising to find out after the 2005 election that not only was the 2005 pledge card publicly funded, so were the 2002 card and the 1999 one – even though that one carried a statement along the lines that it was “paid for by supporters of the Labour Party”. Despite the schedules to the Official Information Act, I think we had a right to know that.

Margaret Wilson has called for the opening of Parliament to the Official Information Act, a move I wholeheartedly support (and which is a far cleaner mechanism for public scrutiny of parliamentary expenditure than patchwork donation disclosure). We know that in the lead-up to the 2005 election that the parliamentary wing of the National Party didn't spend its money on electioneering advertising (though a few MPs spent some of theirs that way), but I think we can also be pretty confident that National did spent its entire entitlement on something, and I'd like to know what. It is public money, just as public as the money spent by the Ministerial Service and every other government department, and with far greater scope for misuse. It's time. But the arguments for that will come later (if at all). Right now, political parties are receiving advertising they haven't paid for, from funds that aren't available to all parties, and I'll take any disclosure I can find.

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