Speaker by Various Artists

In Praise of the Auditor-General

by Jim Evans

The article by "Rex", "Auditing the Auditor-General" (Public Address, October 13, 2006) is typical of various attempts that have been made in recent weeks to obfuscate1 the issues surrounding the Auditor-General's report on advertising expenditure by political parties in the three months before the last general election. Now that Parliament has passed retrospective legislation to validate the expenditure that the Auditor-General held unlawful, this obfuscation is particularly dangerous, since it may make that legislation seem justified.

In this article I will try to remove some of the confusion surrounding the report. I will start with the relevant law and then discuss some of the arguments made by Rex and others.

The law starts with the Appropriation Acts of 2004 and 2005, by which Parliament appropriated funds (in each case a little over $14m) to be spent on "Party and Member Support", within a broader allocation for "Vote Parliamentary Service".

A long-standing constitutional principle is that the Crown or an Office of Parliament must not spend public money except as authorized by an Act of Parliament. The Public Finance Act 1989 states this. It also provides that the authority to incur expenses under an appropriation is limited to the scope of the appropriation and must not be used for other purposes.

It is therefore important to determine the scope of these appropriations. Some assistance is provided by the more detailed description of them in the relevant Budget estimates. Although these were not part of the Acts, they provide an indication of the purpose of the appropriations. In the 2005 Budget estimates, the appropriation was made to each party "to support its Leader's office, research operations, Whips' office and members' parliamentary operations".

Another important indication of the purpose of the appropriations comes from the Parliamentary Services Act 2000. This had as one of its purposes "to establish mechanisms for providing services and funding entitlements for parliamentary purposes". It does this partly by imposing a continuing duty on the Parliamentary Services Commission "to administer, in accordance with directions given by the Speaker, the payment of funding entitlements for parliamentary purposes".

Both members and officers of Parliament have always assumed that the appropriations for "Party and Member Support" were to be administered under this provision. So, clearly, the appropriations were understood as being for "parliamentary purposes".

This Act also required the Speaker to give written directions to the Commission annually on the nature of the services to be provided. Across the period covered by the Auditor-General's review, the Speaker's directions allowed expenditure on "communication services" including "signage and advertising". But they excluded the use of funds:

For producing or distributing promotional or electioneering material by mail or other means of communication for the purpose of supporting the election of any person or the casting of a party vote for any political party.

The directions are also important because they defined "parliamentary business":

The undertaking of any task or function that a member could reasonably be expected to carry out in his or her capacity as a Member of Parliament and that complements the business of the House of Representatives.

This, then, was the business for which MP's could incur expenditure.

To sum up, the Auditor-General potentially had two questions to consider for each item of expenditure he reviewed: (1) "Was it for 'parliamentary purposes'?" and (2) "Was it electioneering material produced or distributed to support the election of any person or the casting of a party vote?".

However, because he was concerned only with communications he in fact considered only the second question, since that was sufficient to settle the issues in front of him. He says in his report, "I took a common-sense approach based on what I considered a reasonable member of the public would think from looking at the advertisement as a whole, in its full context." He judged that each of the items he identified as "unlawful expenditure" was for producing or distributing "electioneering material".

I do not know the character of each item, but like most other households in the community ours received the Pledge Card from Helen Clark about a week before the election. I think it is beyond serious argument that this was electioneering material distributed for the purpose of supporting the election of any person (i.e. in each constituency, the local Labour candidate) as well as the casting of a party vote for a political party.

Rex argues that the term "electioneering" should be understood to apply only to communications that explicitly ask people to vote for a candidate or a party. He relies on the opinion given to the Speaker by Hodder and Davies, from Chapman Tripp.

They argue that there is a need for a "bright line" test to separate legitimate and illegitimate expenditure, and that this is the only workable test available. They disparage the test suggested in the opinion of the Solicitor-General, upon which the Auditor-General relied, which argues that electioneering material is any material that attempts to persuade a voter to vote for a person or a party, whether or not it says "Vote for X", "Vote for the Y Party", or similar.

Hodder and Davies are no doubt right that their test would be easier to apply than that proposed by the Solicitor-General. However, I do not agree that it would be a better test.

The problem with it is that it trivializes the constraint. Any competent Member of Parliament could frame a communication designed to persuade voters to vote for a candidate or party without explicitly asking the voter to vote that way. The Pledge Card is a good example.

Like the Solicitor-General and the Auditor-General, I think it is important to keep alive the difference between the activities of a member of Parliament as a Member of Parliament and the activities of a Member as a candidate (which I shall take as shorthand for as a candidate or prospective candidate or as an advocate for the election of a party). The first are properly fundable out of public funds, but the second are not.

But, even if Hodder and Davies test would be a better test, that is irrelevant. It simply was not the test in operation at the time of the expenditure. The actual test used the words "electioneering material" and something that displays an intention to persuade people to vote for a person or a party is electioneering material. (That is also the view that courts have taken in cases on excess election expenditure.)

Rex makes a great deal of two points. The first is that other similar expenditure had not been challenged in the past. The Pledge Card was a particularly blatant case, but I think Rex is partly right about this. The boundaries of parliamentary purposes have been progressively pushed by MP's and parties for some time back so as to include advertisements or communications that are essentially for electioneering purposes. As Rex suggests, a similar pushing of boundaries may have taken place for some other expenditure, such as meetings held solely to discuss an election campaign.

Expenditure of this second type is in a different category to advertising, since the explicit exclusion of electioneering does not apply to it, but if it is not for "parliamentary purposes" then it is not authorized by the appropriation.

But all any of this shows is that it was past time that someone took a stand. The Auditor-General did so, and in a careful and measured way.

His report says that in June of 2005 he reported to the House of Representatives a range of concerns he had about how parliamentary advertising was managed, drawing attention to the need for MP's and parliamentary parties to take care when advertising in the pre-election period. Worried about some of the expenditure in this period, he sought legal advice from the Solicitor-General and then proceeded to a careful review of the expenditure on advertising in the three months before the general election, being scrupulously careful to be impartial.

That seems to me exactly the course of action we should expect from a public servant in his position. So what is "difficult to stomach" is not the Auditor-General's decision, but Rex's unfair criticism of him.

The second point made by Rex is that the Auditor-General's definition of "electioneering" would include vastly too much. It would include all sorts of activity going way beyond advertising, such as travel to meetings purely for planning an election campaign or the employment of staff to help with a campaign.

In fact, the Auditor-General did not define "electioneering", for the rule on electioneering applied only to communications, not generally. He defined "electioneering material", which, he says: "is something that is intended to persuade a voter to favour a candidate or party in an election, and is not limited to material that expressly solicits votes".

The Auditor-General had given warning only about advertising. As his report shows, even investigating that required a great deal of work to ensure fairness. A wider enquiry would have involved a wholly different undertaking.

Nevertheless, on the principles applied by the Auditor-General, things other than communicating done by an MP as a candidate are not covered by the appropriations and are therefore unlawful. Let us then consider the scope of work for "parliamentary purposes".

We can start by noticing the obvious point that MP's will often intend their competent performance as a member to encourage people to vote for them or their party. Plainly, that should not render expenditure that is properly incurred in the performance of their role as an MP unlawful. But simply because competent work as an MP may be one way of securing votes it does not follow that everything done to secure votes is work as an MP. That point implies, of course, that we can draw a line between work as an MP and work as a candidate.

So what, then, is the role of an MP?

Very broadly, it is participating in the work of Parliament. The core work of Parliament is to keep a check on the Government, including the bureaucracy, to approve the expenditure of public money, to review the law and to make legislation. No doubt that is not a complete list. Nowadays, keeping the public informed about proposals, reviewing issues of public concern and giving people an opportunity to be heard are rightly thought to have value for their own sake and not just to be of value because they can improve Parliament's performance of its core activities (although they can also do that).

My point is that while the scope of work as an MP may occasionally be controversial (as many concepts used in the law may be) we share enough common understandings about the role of Parliament to be able to agree on most occasions about what counts as something done by an MP for a "parliamentary purpose" and to know what is relevant to arguing about the remaining cases.

In their opinion to the Speaker, Hodder and Davies seek to expand the notion of things done by an MP for a parliamentary purpose to include all lawful means of seeking votes, so long as one does not explicitly say "Please vote for me" or similar.

Their argument is that a robust political process serves to create a better parliament. That may be true. But it does not follow that everything done by MP's that is part of a robust political process is part of the work of Parliament. Like other members of the public (for example, constituency members of a party), MP's may engage in activity that contributes to a robust political process without thereby engaging in the work of Parliament. Activity as a candidate is of this type.

Would a strict approach to the boundaries of expenditure for "parliamentary purposes" include vastly too much?

Rex takes a very broad interpretation of the word "persuade" in the Auditor-General's definition of "electioneering material". He treats any communication that may be intended to make it more likely that a voter will vote for the MP or her party as intending to persuade voters. He then applies that idea to all forms of expenditure. That is how he is able to suggest that the Auditor-General's interpretation would require refunding "possibly more than a hundred million dollars".

Perhaps "persuade" is capable of bearing that meaning in some contexts, but in the context of the Auditor-General's report it does not. The Auditor-General plainly understands "persuade" to require an active attempt to persuade voters to vote in a particular way. For example, he does not preclude MP's or parties from efforts to keep an electorate informed about public issues or of their views on them.

One more point will have troubled the reader. What is the position if something is done partly for one purpose and partly for another? The Solicitor-General's opinion gives the example of a monthly newsletter that informs constituents about matters of parliamentary business but also contains electioneering material. The Solicitor-General took the view that at least in the case of this example the wrongful purpose would make the whole act unlawful.

I think that is right when the same act serves both purposes; but in other cases a division of the expenditure may be appropriate. The point is tricky, but my tentative view on the example is that the whole cost of distributing should be recoverable, since all of it serves the wrongful purpose. But the cost of publication might be divided between the bits that are lawful and those that are not.

I have been asked what all this implies for the Green Party's monthly newsletter or payments to a campaign specialist. It will depend on the detail, but prima facie I am inclined to think the newsletter may be OK, so long as it merely keeps the public informed of public issues and of the Party's views on them. Payments out of public funds to a campaign specialist to run an election campaign seem highly dubious.

Let me sum up. I think the view the Auditor-General took of the law was right. It requires a distinction between the work of a Member of Parliament as a member of parliament and his activity as a candidate. Properly understood, that is neither an impossible distinction to make, nor one that has absurd consequences. It is no more difficult than many distinctions that lawyers and others have to make in applying the law.

It seems to me better to have a law that maintains that distinction than to abandon it simply because its application may occasionally be controversial. However, whether or not that is so, the law at the time of the expenditure reviewed by the Auditor-General required that distinction.

Not only did the Auditor-General get the law right, he acted with sense and courage in a difficult situation.

Let me return briefly to the retrospective legislation. If any Member of Parliament or party disagreed with the Auditor-General's report it was open to them to test the issue in the courts. That the Labour Party promoted, and other parties supported, retrospective legislation to validate expenditure the Auditor-General had held unlawful was appalling.


The Auditor-General's Report can be found here:. The Solicitor-General's Opinion is available as Appendix 2 to that report. The opinion of Jack Hodder and Briony Davies is Appendix 3 (at page 14ff) to the Speaker's Report on the Report of the Auditor-General.