Victoria gets serious on its political donations rules – now it's the federal government's turn

Victorian Premier Daniel Andrews has announced a suite of reforms to the state’s political donations system. It includes:

• a cap on donations by individuals, unions and corporations of A$4,000 over a four-year parliamentary term;

• public disclosure of donations above $1,000;

• a ban on foreign donations; and

• real-time disclosure of donations.

Harsh penalties will be imposed on those who breach the rules, with fines of up to $44,000 and two years in jail.

These proposals follow several dubious events, including Liberal Party fundraiser Barrie Macmillan allegedly seeking to funnel donations from a mafia boss to the party after Opposition Leader Matthew Guy enjoyed a lobster dinner with the mafia leader.

According to Andrews, these changes are intended to:

… help put an end to individuals and corporations attempting to buy influence in Victorian politics.

Are these reforms good?

The proposed reforms will significantly improve Victoria’s donations system.

The caps on donations will level the playing field and reduce the risk of corruption in the state’s political system. It will prevent rich donors from exerting greater influence over politicians than those who lack the means to do so. Parties will no longer be able to rely on these wealthy donors to fund their election campaigns.

The caps equally target individuals, unions and corporations, meaning that money cannot be channelled through shady corporate structures to evade the rules. However, donations can still be channelled through the federal level, where there are no caps.

Real-time disclosures, which have already been introduced in Queensland, will improve the timeliness of disclosures. Combined with the lower disclosure threshold of $1,000, these are commendable steps towards enhancing transparency.

The move to ban foreign donations may face constitutional issues.

The tough penalties may deter people from breaching the rules. But proper enforcement by the Victorian Electoral Commission is still essential for the laws to be effective.

Further reading: Banning foreign political donations won’t fix all that ails our system

How will elections be funded?

Election campaigns are currently funded by a mix of public funding and private donations. As there will be caps on private donations, public funding of Victorian elections from taxpayers’ pockets will need to increase.

There will be debate as to the level of public funding that should be given. Public funding should adequately compensate parties, but not be overly generous or allow them to rort the system.

Detractors may argue that, in the age of social media, there may be cheaper ways for political parties to get their messages across, so less public funding would be needed.

It is tricky to work out how to allocate public funding between established political parties, minor parties and new parties. There is also a question of whether public funding should cover activities such as policy development and party administration.

But public funding is already part of Australia’s system. In the 2016 federal election, $62.8 million of public funding was provided, which is about half of federal campaign costs.

Victoria’s move toward more public funding is not unprecedented. New South Wales already has caps on political donations of $5,800 per party and $2,500 for candidates, as well as a ban on donations from property developers and those in the tobacco, liquor and gambling industries. This was accompanied by an increase in public funding of elections, amounting to about 80% of campaign costs.

Further reading: NSW is introducing full public funding of major political parties – by stealth

In Europe and Canada, there are high levels of public funding: between 50% and 90% of costs.

Another worry is that enterprising people and businesses might still circumvent the rules through creative means.

In the US, super PACs (political action committees) are special interest groups involved in fundraising and campaigning that are not officially affiliated with political parties. These groups can raise unlimited sums of money from corporations, unions, associations and individuals, and then spend this money to overtly advocate for or against political candidates.

If this possibility is not regulated in Australian jurisdictions, then our system will remain broken.

How can we improve our national system?

Australia’s political donations system remains fragmented. Ideally, we would have a uniform system with tough rules at both the federal and state levels, so that donors cannot easily evade the rules by channelling their money through more lax jurisdictions.

Further reading: Explainer: how does our political donations system work – and is it any good?

The time is ripe for reform. A federal parliamentary committee is looking into how to improve the federal donations rules. The committee will issue its report by December 2017.

Victoria has thrown down the gauntlet – and it’s now time for the federal government to take heed.