Recent revelations and media scrutiny in relation to political donations at both the Commonwealth and state and territory levels have brought the effectiveness of Australia's federal political funding and disclosure scheme squarely back into focus. There is a growing concern about political donations made by vested interests and their influence on public policy.
In a properly functioning democracy, citizens can expect their elected representatives to be transparent and accountable in carrying out their public duties. Moreover, citizens can expect elected officials to act in the public interest, and to not partake in corrupt behaviours.
Political funding has the potential to undermine the fundamental principles of accountability and acting in the public interest, and by extension, the integrity of representative government, by 'leaving in its wake particular kinds of corruption'.
Of specific interest to this inquiry is the risk that political funding; in particular, large donations from private interests, poses in terms of 'corruption through undue influence'. Such corruption constitutes a type of conflict of interest.
As explained by Associate Professor Joo-Cheong Tham, political donations can:
…create a conflict between private interests and public duty and, therefore, create the possibility that holders of public office will give undue weight to the interests of their financiers rather than deciding matters on their merits and in the public interest.
Corruption through undue influence is arguably more insidious and damaging to the democratic process than explicit forms of corruption, where the receipt of private funds leads directly to political power being used to favour financial contributors. In contrast, corruption through undue influence:
…does not require explicit bargains or that a specific act results from the receipt of funds. Rather, it arises when the structure of incentives facing public officials results in implicit bargains of favourable treatment or a culture of delivering preferential treatment to moneyed interests.
Corruption through undue influence can be demonstrated in a variety of ways, and incentives are not necessarily always of a strictly monetary nature. However, in examining the issue of political donations, a typical and more flagrant form is the 'sale of political access' in which 'money may be given in return for access and the potential for undue influence on decision making and policy development'.
As Professor Tham explained:
…some businesses secure favourable hearings by buying access and influence and also through the lingering effect of their contributions (a phone call from a big donor, for example, being more likely to be returned than one from a constituent). With perceptions of the merits of any issue invariably coloured by the arguments at hand, preferential hearings mean that when judging what is in the ‘public interest’, the minds of politicians will be skewed towards the interests of their financiers.
The payment of political donations with the intention of 'buying access' to elected representatives and the risk this poses in terms of corruption through undue influence is discussed throughout the remainder of this chapter.
Failure of current political finance regime
It can be said that a fundamental aim of any democratic political finance regime should be to maintain the integrity of representative government by facilitating accountability and acting in the public interest, and preventing all forms of corruption. In other words, political finance regimes should, when operating effectively, act as a transparency measure by enabling public scrutiny and reducing the likelihood of undue influence on political process.
As recognised in 1983 by the then Special Minister of State, the Hon Kim Beazley MP, when introducing the legislation to enact the current political funding and disclosure scheme; '[i]t is essential for public confidence in the political process that no suggestion of favours for large donations can be sustained'. Mr Beazley further noted:
The whole process of political funding needs to be out in the open so that there can be no doubt in the public mind. Australians deserve to know who is giving money to political parties and how much.
Many participants of the inquiry expressed strong concerns that the existing political funding and disclosure scheme does not effectively achieve the aim of preventing corruption and consequently, undermines the democratic process.
A more detailed discussion of the extensive problems afflicting the current federal political funding and disclosure regime and proposed measures for reform is set out in Chapter 5 and Chapter 6.
Patterns suggesting undue influence
It is difficult to objectively establish the intent behind political donations and whether they have had any influence on government policy outcomes. However, strong indications of undue influence are provided by patterns between political donations over time and their proximity to key policy decisions.
As summarised by the Synod of Victoria and Tasmania, Uniting Church in Australia (the Synod) in its submission:
There is a pattern between large industry and organisation donations to political parties and associated organisations and a linear progression from donation, access to Ministers and government officials and policy changes that meet the vested interests of the donating industries and organisations.
Submitters and witnesses pointed to trends in political donations from the gambling, alcohol, and mining industries as displaying patterns of possible undue influence. These are outlined below.
ClubsNSW donations and Gillard-Wilkie gambling reforms
Dr Charles Livingstone and Ms Maggie Johnson argued in their submission that '[t]he Australian gambling industry has utilised political donations as a mechanism to exert considerable influence over relevant public policy'. In support of this argument, Dr Livingstone and Ms Johnson provided the committee with their interim report into gambling industry interests. The report focused on donations declared by ClubsNSW for the period from 1999–2000 to 2014–15.
The report found that during the period examined, ClubsNSW made donations totalling $2,569,181 to the Australian Labor Party (ALP), the Coalition parties (Liberal Party of Australia and The Nationals), and their associated entities. The quantum of donations varied widely, ranging from just $7,000 in 1999–2000 to a maximum of $426,675 in 2010–11.
As outlined in the report, the allocation of donations to the ALP and Coalition varied over the period, with the proportion of donations notably skewed toward the Coalition in certain years:
In 1999–2000 and 2000–01, ClubsNSW donated only to the ALP. However, in every year after that a proportion of donations was made to the Coalition as well as the ALP. In 2013–14, the Coalition received over 90% of ClubsNSW’s total declared donations. In 2010–11, when ClubsNSW reported its maximum donation level over the period examined, the Coalition received 85%, or $361,930 of the $426,180 donated. The ALP received the remaining 15%, $66,250.
Figure 3.1 shows the amounts donated to the ALP and Coalition parties during the period examined.
Figure 3.1: Total donations from ClubsNSW to the ALP and Coalition parties, 1999–2000 to 2014–2015
The report noted that some 'patterns emerge from inspection of the data' and its comparison to political decisions and events. The data showed that ClubsNSW allocated 'about twice as much in donations' to the Coalition as to the ALP over the period reviewed. As outlined in the report, this unequal division in donations:
…was particularly evident in the period since 2009-10, notable by the arrangements entered into between the ALP Prime Minister Julia Gillard and Mr Andrew Wilkie MP after the 2010 federal election. Under these arrangements Mr Wilkie sought the introduction of a system of electronic pre-commitment for the use of electronic gambling machines (EGMs). The members of ClubsNSW operate about 70,000 EGMs which collectively generate revenue for the Clubs of over $3.5 billion p.a.
Also noted in the report was the fact that until 2009–10, ClubsNSW's declared donations were made almost exclusively to NSW branches of the ALP and Coalition parties. Following 2010–11, ClubsNSW donations 'were increasingly made to federal campaign funds or to individual campaigns, in many cases to named political candidates'. Reflecting on this change, the report argued:
At the level of Federal politics, it is clear that ClubsNSW sought to provide financial resources to the coalition parties, who opposed the Gillard Wilkie arrangements and whose frontbench representative on gambling policy prior to and after the election of the Abbott government in 2013 (Mr Kevin Andrews) was provided with campaign donations amounting to $40,000 ($30,000 in 2013–14 and $10,000 in 2014–15).
Wine Equalisation Tax and Rebate
In its submission to the inquiry, the Foundation for Alcohol Research and Education (FARE) provided a case study relating to political donations from the alcohol industry and correlating trends with changes to the alcohol tax system; in particular, to the Wine Equalisation Tax (WET) and WET rebate.
The WET is a tax of 29 per cent imposed on wine made, imported, exported or sold by wholesale in Australia. Wine is taxed under the WET on the basis of its wholesale price, whereas other alcohol products are taxed on the basis of the volume of pure alcohol they contain.
As explained by FARE, the WET favours larger wine producers, 'who benefit from greater economies of scale and are therefore able to produce cheaper bulk wine'. In 2004, the WET rebate was introduced with the intention of alleviating the impost of the WET on small rural wineries in Australia. The WET rebate entitles wine producers to a rebate on the WET they have paid up to a maximum amount each financial year.
FARE's case study of political donations pointed to correlations between political donations from alcohol industry stakeholders and the introduction and subsequent reviews of the WET and WET rebate. Stakeholders noted in FARE's analysis include Southcorp, one of the largest wine producers in Australia in the period preceding the introduction of the WET, and the Australian Hotels Association (AHA); in particular, the AHA's South Australian branch. As argued by FARE, the South Australian branch of the AHA 'has had particular interest in the WET and its rebate, as a major
Findings from FARE's analysis included:
A series of donations (totalling more than $675,000 in 2015–16 terms) from Southcorp to the Liberal–National Coalition in the lead-up to and immediately following the introduction of the WET in 2000.
Significant donations (totalling more than $220,000 in 2015–16 terms) made by Southcorp in the 12-month period leading up to introduction of the WET.
A marked increase in donations by the South Australian branch of the AHA in 2001–2002, predominately to the Howard Government, prior to the introduction of the WET rebate.
A substantial increase in donations from the AHA in the two years to 2012–13, following the 2010 recommendations of the Henry Tax Review that all alcohol tax be moved to a volumetric system.
An increase in donations from the industry in 2015–16, following the release of the Treasury discussion paper on reform and possible abolition of the WET rebate.
Political donations from the mining industry
In September 2017, the Australia Institute published a report—The tip of the iceberg: Political donations from the mining industry—looking at patterns of political donations declared by the mining industry during the 10 years to 2016. Figure 3.2 illustrates the disclosed donations to the major parties from the resource sector during the period examined.
Figure 3.2: Disclosed donations to major parties from resource sector
The report found that, from 2006 to 2016, the mining industry donated $16.6 million to the major parties, with 71 per cent of those donations being made to the Liberal Party of Australia (Liberal Party).
The report also found that donations from the mining industry over the period examined 'correlate with the election cycle, timelines on project approvals, and debates on key industry policies such as the mining tax and carbon price'. Specifically, the report noted that:
Donations from the mining industry increased dramatically in the 2010–11 returns surrounding the 2010 federal election and mining tax debate, and again in the 2013–14 returns corresponding with the 2013 federal election, where the carbon tax featured prominently in the campaign.
Motivations and reasons behind political donations
Under its terms of reference, the committee sought to examine the motivations and reasons behind why entities give donations to political parties and candidates. In addition to evidence received through submissions and public hearings, the committee wrote to a number of organisations to inquire as to the nature of their political donations, as well as their motivations for, or for not, making political donations and what outcomes they have achieved, or expect from those activities.
The committee is grateful to those organisations that willingly engaged with the inquiry and contributed frankly and transparently to discussions. However, the committee also notes that there were a number who declined the committee's invitations to participate in the inquiry.
Nature of donations
Responses to the committee's request for information highlighted the various forms that political donations can take as well as the different approaches organisations take to reporting their political expenditure.
The Minerals Council of Australia (MCA) submitted that it 'makes donations and contributions to political parties' and discloses contributions to the Australian Electoral Commission (AEC) in accordance with the Commonwealth Electoral Act 1918 (Electoral Act). In 2016–17, the MCA declared donations to federal and state and territory branches of political parties and their associated entities to a total value of $57,345. The majority of the MCA's declared donations for 2016–17 ($50,645) were made to the Liberal–National Coalition.
ANZ advised that it 'makes a single, annual donation to each of the two major Federal parties' to a value determined by its Board each year. ANZ disclosed donations to the Liberal Party and ALP of $150,000 each in 2016–17.
The Financial Services Council (FSC) stated that its Board 'has a policy to make equal financial contributions to each side of politics annually'. In 2016–17, the FSC disclosed donations to a total value of $89,570.75. Of this total, comparable sums were donated to the federal and state and territory branches of the major political parties.
Deloitte informed the committee that:
We prefer to make political donations primarily in the form of covering the cost of providing facilities and hosting functions (typically boardroom style lunches, formal dinners or stand up events). These events are coordinated by the political parties including sourcing the guest speaker (typically a Minister, Shadow Minister or Member of Parliament), inviting the majority of guests and determining timing.
Major party business forums and events
Several donors highlighted membership subscriptions to the major parties' federal business forums (i.e. the Liberal Party's Australian Business Network and ALP's Federal Labor Business Forum) as making up a considerable proportion and, in some cases, the majority of their political contributions expenditure.
For example, Macquarie Group (Macquarie) noted that it 'provides financial support to the Government and Opposition, primarily through paid attendance at events and membership of Government and Opposition business forums'. Macquarie further explained:
These fee-for-service expenditures have, for many years, formed the vast majority of Macquarie's political contributions. Direct donations constitute a very small percentage of Macquarie's political contributions expenditure. For example, in the 2015/2016 disclosure year, direct donations represented only seven per cent of overall expenditure.
Similarly, Deloitte submitted that it includes the cost of attendance at political party events in its political donations. Deloitte also advised that '[w]here we make cash donations to political parties it is for the purpose of membership of political forums allowing the firm to attend certain events and presentations'.
Nine Entertainment Co (Nine) informed the committee:
With regard to political donations Nine makes annual donations to the business forums of the Labor Party and the Liberal Party which provide informative policy briefings and networking events. On occasion we make donations to attend events hosted by members of Parliament and political parties outside these forums.
Ms Navleen Prasad, Head of Government Relations at Macquarie, told the committee that the company subscribes to the federal business forums at an annual cost of $33,000 to the Federal Labour Business Forum and $27,500 to the Australian Business Network. Macquarie also subscribes to The Nationals federal business forum (the National Policy Forum) for a $22,000 subscription fee.
The MCA reported that it has subscribed to both the major party federal business forums during 2017–18 at a cost of $25,000 per subscription. The MCA also noted that its staff 'occasionally attend fundraising dinners hosted by individual members of parliament'.
In providing further evidence to the committee at a public hearing, Mr David Byers, Interim Chief Executive of the MCA, explained that the organisation's $25,000 subscription to each of the major party forums constitutes a 'base level' of membership, and entitles the MCA to partake in two federal policy briefing sessions and two boardroom-type events.
Mr Byers also summarised the nature of such events in terms of who and how many people are generally involved:
A typical one could be with 100 people if it's a big event, or it could be in the nature of a smaller boardroom event where there are probably 14 to 16 people. They come from a variety of industries. It may well entail briefings with a couple of ministers or a couple of parliamentarians rather than just one person.
Ms Prasad from Macquarie echoed these comments:
If I can give you a flavour of what those events look like, they will typically be an event that might have 15, 20, 30 or sometimes 100 people there. There'll be a discussion with the guest speaker. Depending on the size of the forum, the attendees—who come from a range of industries, and some of our competitors would attend as well—may have the opportunity to ask a question.
The committee also heard evidence from Woodside Energy Ltd (Woodside) regarding their subscriptions to the major parties' business forums. Woodside told the committee that they subscribe to 'platinum level' memberships to both major party business forums at an annual cost of $110,000 per subscription. Woodside includes these forum subscription fees in its annual disclosure returns to the AEC.
Mrs Sandra McInnes, Vice President of Corporate Affairs at Woodside, outlined the different privileges that subscribers to each level of membership are entitled to:
CHAIR: The rate that you're charged, the $110,000, is that a standard fee for anybody who wants to get annual access to one of these forums, or is it just charged depending on who's applying? Are there differential rates?
Mrs McInnes: They have different levels of membership. That is, I understand, the top tier of membership. The membership levels reduce from there but so does the access to events. That is the platinum, tier 1 level of membership. I don't know how many members they have that are subscribed at that level, but then they have a gold level and a silver level. With the different levels of membership, you will get different amounts of invites. You might only have one person being able to attend or you might not get invites to all of the events, just some of them.
Woodside also provided the committee with information as to the number and type of events included in their membership subscriptions.
In 2017, Woodside's platinum level subscription to the Liberal Party's Australian Business Network entitled the company to two places at numerous federal parliamentary briefings and boardroom policy forums, two places at the 'Budget Night Dinner' in Canberra, and two places at two of the 'Prime Minister's Networking Dinners'.
Woodside's membership package to the ALP's Federal Labor Business Forum for 2017 included:
Policy Briefing Sessions—Two (2) Policy Briefing sessions, designed to address achievements, issues and challenges in key portfolio areas.
Leader Events—tickets to Leader events in Perth.
Federal Budget Reply Dinner 2017—Four (4) tickets on an opt-in basis.
Federal Labor Business Exchange Program 2017—Two (2) tickets to the Federal Labor Business Exchange program, a two-day conference with Shadow Federal Ministers, to be held in Sydney in 2017. The program provides delegates with a unique opportunity to receive briefings on major policy areas, and to network with Federal Shadow Ministers.
End of Year Drinks with the Leader of the Opposition—Five (5) tickets on an opt-in basis.
Federal Labor Business Forum Program—Tickets to Boardroom events with Federal Shadow Ministers Australia-wide as they arise (Woodside will be informed as events are announced, and can opt-in as part of this package).
Approach to disclosure
Under the Electoral Act, the current definition of what constitutes a 'gift' places no obligation on donors to lodge a return for payments such as membership subscriptions or attendance at fundraising events.
The committee heard from some donors that they take a conservative approach in reporting their political expenditure and include membership subscription fees in their annual returns to the AEC.
For example, Mr Paul Marriott, Head of Corporate Communications at Macquarie, explained:
Macquarie has a long-standing and conservative approach of disclosing the contributions it makes to political parties to the Australian Electoral Commission each year without relying on any exclusions or exemptions. While the Commonwealth Electoral Act has disclosure thresholds and permits donors to exclude amounts such as payments to attend political party functions, we have for many years chosen not to utilise such exemptions and instead to declare all payments made to political parties.
Representatives from the MCA also informed the committee:
The approach we've certainly taken in recent times, to my knowledge, is to just disclose everything…and not to look closely at those definitions. If it's attending a fundraiser or a lunch, we disclose it. Amongst other things, I think there's also a cumulative requirement. If you make a number of donations below the threshold but they accumulate to the threshold or greater, that triggers an obligations [sic]. We just want to avoid inadvertently breaching the obligations on us.
Supporting democratic and electoral process
In response to the committee's request for information, a number of donors cited support of the democratic process as a main motivation behind their donations to political parties.
ANZ informed the committee that it 'considers that it has a role to play in supporting democracy by providing funding. Our donations are aimed at promoting the development of social and economic policies to benefit Australia'.
Equally, the FSC submitted that 'our Board has historically taken the view that it is important to make a modest financial contribution in support of the democratic process'.
PricewaterhouseCoopers (PwC) explained that:
PwC makes donations to Australian political parties to support the democratic process in Australia. Political parties are a key element of the Australian system of government, which provides the context in which our firm operates. An effective and stable system of government benefits business generally, including ours. Our policy is to provide similar levels of financial support to both major parties over time.
Similarly, Crown Resorts Limited (Crown) submitted that it 'makes donations to registered political parties to support the democratic and electoral process in Australia'. Additionally, Crown pointed to the cost of election campaigns, noting that 'registered political parties in Australia rely heavily on donations in order to communicate their messages and policies to the Australian public'.
The Insurance Council of Australia (ICA) also noted the cost of election campaigns:
The ICA donates to parties on both sides of the political spectrum at both federal and state level. This is done because we consider public funding is inadequate for parties to mount modern election campaigns and we wish to contribute to a stable political environment.
Fostering and contributing to policy dialogue
Some donors pointed to a need to engage in and contribute to policy discussions as a motivation for making political donations.
Deloitte informed the committee:
Deloitte makes political donations to Australia’s major political parties for the purpose of promoting and fostering political debate and the contribution of ideas by business and the broader community in the development and formation of policy, particularly as it relates to the economic prosperity of the country. Political donations are made at both Federal and State levels. Deloitte aims to contribute equally to Australia’s major political parties.
Macquarie explained that participation in policy and regulatory discussions 'better enables it to understand the relevant political and policy drivers impacting its operations and business activities, its employees, its clients, and the broader Australian community'.
Woodside echoed this reasoning, submitting that attendance at paid political party events 'allows Woodside to understand the policy environment within which we operate and provides the opportunity to contribute and inform policy dialogue pertaining to our business'.
Representatives from Woodside reiterated this point in further evidence to the committee:
We seek to have open and constructive relationships with governments of all countries where we have a presence, and we believe that the exchange of information and opinion is essential to inform decision-making. We contribute in a number of ways to the policy dialogue.
In addition to those motivations noted above, building and maintaining relationships with key political stakeholders was raised as a reason behind donors' political contributions. Donors noted that attendance at business forums and other political party and candidate events and fundraisers provides them with opportunities to engage with members of Parliament on matters relevant to their industry.
Ms Annabelle Herd, Chief Operating Officer at Network Ten, noted that 'we are a very high profile and very heavily regulated company', and pointed to using participation at events as a means of engaging with members of Parliament on regulatory priorities that impact their business:
Matters come up in the political and parliamentary process all the time around our business, so we like to have strong relationships with members of parliament and government decision-makers across all sides of politics. We use these events as an opportunity to further those relationships or to, as others have said, gather broader political information about what's happening in the legislative sphere, or what priorities there are in legislative terms so that we can understand how that impacts us and our regulatory priorities.
Similarly, the ICA commented that attendance at political party events provides 'an opportunity to build new relationships, and further develop existing relationships, with key political stakeholders across the Federal and State Governments'. The ICA continued:
It provides a platform for engagement and allows the ICA, and other organisations who attend, to learn about the priorities and challenges of the Government and Opposition across several jurisdictions.
The MCA explained the motivations behind their donations to political parties, divulging that their contributions to attend events 'provide additional opportunities for the MCA to meet with members of parliament'. The MCA also commented that it 'uses these opportunities to update members of parliament about conditions in the Australian minerals industry and the policy priorities of the MCA'.
Denial of undue influence
The committee questioned donors as to whether their political donations, including paid subscriptions to the major parties' business forums, constitute a form of 'buying access' to elected representatives, and moreover, whether there was any expected benefit from such contributions. Donors sought to assure the committee that there is no expectation of preferential access or direct benefit.
ANZ assured the committee that 'other than generally benefiting from a robust and democratic political process', it 'does not expect, and has not received' any benefit from its political donations.
Mr Byers of the MCA stressed that there is no expectation from membership to the major parties' business forums other than the capacity to attend in itself:
We have no expectation of obtaining any direct benefit from attendance at such functions. The only expectation is attendance at the event in question. In our view, these events can provide an efficient way to understand the policy environment and also to meet with members of parliament outside the rigors of busy parliamentary schedules and in view of the many meeting requests fielded by all politicians. Where we have specific matters to discuss, our normal practice is to arrange a meeting or make a written representation to the relevant parliamentarian in the usual way.
The ICA expressed a similar argument, submitting that attendance at political party events 'does not influence or shape political or policy outcomes, it simply creates an environment in which there is an effective and valuable exchange of ideas and information'.
Ms Herd vehemently denied that Network Ten donates to political parties to gain access to political representatives:
No. Absolutely not. I spend a lot of time in Canberra and we spend a lot of time talking to people about our policy issues. At the events that we go to through political donation you actually don't end up talking that much about your own political issues. It's more about understanding what the environment is and just general relationship-building and networking with other people that are at these events. But, no, we certainly don't rely on political donations to further our policy or regulatory cause.
Likewise, Mr Marriott sought to assure the committee that Macquarie has no expectation of 'preferential access' to policymakers through its donations to attend political events, arguing that '[w]e wouldn't see it as preferential access; it's about being part of that conversation'. The committee further questioned Macquarie as to how contributions of this kind could not be seen as constituting preferential access, particularly given that the general public is unlikely to be able to afford such expenditure:
CHAIR: You wouldn't say there's preferential access? Not many people can afford to spend that much money to attend forums with their political representatives.
Mr Marriott: The forums are specifically for business to engage with their political representatives. I think it's a matter for parliament and the political parties as to how they engage with the rest of the community and their constituents.
Criticisms of donor motivations
A number of participants were sceptical of donors' claims regarding the motivations behind their political donations, suggesting that the access to elected representatives that is obtained through donations cannot be separated from the risk of undue influence.
The Synod put it plainly in its submission—'political donations buy access and influence'.
Professor Peter Miller, Director of the Centre for Drug, Alcohol and Addiction Research (CEDAAR), expressed similar sentiments:
Overwhelmingly, the aim is to buy out influence, to purchase influence. When somebody gives you $1,000, they are trying to support you. When they give you $100,000, they are trying to buy you.
Some submitters and witnesses argued that donors cannot claim to make political donations in support of the democratic process when they donate to both major parties. Participants also highlighted that doing so with no expectation of benefit would be counter to a company's legal obligations to act in the best interests of its shareholders.
Professor Miller from CEDAAR expressed the view that when businesses 'support one political party, it's about ideology. When they support two political parties, it's about buying access. So it's very clear that the aim is to influence politics, not to show support for a political ideology'.
Dr Belinda Edwards noted that her analysis of political donations data from the past 10 years gives strong indications of payments being made 'for access rather than being paid to support a political cause'. Dr Edwards told the committee that:
This is evident in donors giving to both sides, and increasing payments to those in power. This is evidence of donors paying for access where they believe their business interests are served and they are more likely to get government decision-making to go their way, if they have made payments, significant payments, to whoever is in power. I would point out that it is illegal for businesses to make such payments to political parties if they do not expect the payments to advance the interests of their shareholders.
Mr David Templeman, President of the Public Health Association of Australia (PHAA), observed that '[b]usinesses, by their very nature, usually have business rather than ideological interests'. Mr Templeman also highlighted company directors' legal responsibilities to shareholders under the Corporations Act 2001; that is, 'company directors must act in the best interests of the company and its shareholders and must not enter into risky transactions without any prospect of producing a benefit'.
Mr Templeman further considered this point:
Logic suggests that, when one business is making donations to respective sides of politics simultaneously, it is not about supporting a political ideological position. Some don't even pretend but simply make equal donations to both. When those donations are worth hundreds of thousands of dollars or even millions of dollars, questions about the responsibilities to shareholders arise.
So, if donations are not about supporting an ideology with express commitment of the shareholders, what are they about? What could they be getting for their money which would be in the best interests of the shareholders and would not represent a risky investment? Responses to this question have been made publicly from several sources, and all have the same answer, which is about access and influence.
The committee heard evidence to suggest that political donations, and the privileged access they buy, can risk leading to undue influence whether or not the recipient is mindful of this effect.
For example, PHAA reflected on psychological evidence which argues that the receipt of a gift 'creates an obligation in the mind of the recipient, and creates a positive view of the giver'. PHAA elaborated on this point and its significance with regard to political donations:
Psychologists have long argued that ‘pure gift’ is impossible because of obligation and reciprocity being involved. More specifically, the reciprocity is not repaying the gift as such, but as expression of affirmation, and mutuality. In the realm of political donations, this would indicate that the multiple donations are setting up ongoing mutual relationships between the donor and the recipient.
FARE also alluded to this unconscious risk of undue influence that political donations can pose:
Most of the time it is not possible to know whether or not a donation has actually affected decisions. The public is beholden to the good will of the political class to ensure that this does not occur. Even then, political donations purchase access to decision-makers, establishing relationships that may influence such decisions whether or not the decision-maker is aware of it.
Consequences of the current regime
Undermining political equality
Some participants in the inquiry expressed concerns that the current federal political funding and disclosure regime undermines the fundamental principle of political equality—that each citizen has equal political status, irrespective of their economic and social class. In accordance with this principle, citizens are entitled to equal representation by their elected officials and should have a broadly equal opportunity of influencing government policy.
However, as highlighted by Professor Tham, political equality 'is perhaps the most difficult challenge facing political finance regimes in capitalist economies like Australia':
The value of political freedoms will depend upon background inequalities. Specifically, significant social and economic inequalities will undermine the value of such freedoms for those who are marginalised—the poor, the disadvantaged, the powerless. In such contexts (as in the case of Australia), there is a serious likelihood that such freedoms, while formally available, cannot be meaningfully exercised by many.
The McCusker Centre of Action on Alcohol and Youth (MCAAY) clearly summarised the current inequality that exists between wealthy political donors and everyday citizens—'Well-resourced donors can afford to buy influence in ways that others cannot'.
Similarly, PHAA highlighted the exclusionary nature of political donations against ordinary citizens:
In permitting particular groups an unfair advantage in pushing their interests, in affording them inequitable capacity to influence or pressure candidates and elected representatives, and through allowing undue influence in the system, political donations weaken rather than strengthen democracy and the democratic process. Ordinary citizens, community groups and civil society without the financial capacity to purchase influence are further excluded, while the wealthy, big business, unions and lobby groups are invited in as special guests, whose interests should be looked after.
Mr David Crosbie, CEO of the Community Council for Australia (CCA), a
member-based organisation representing the charities and not-for-profit sector in Australia, described the donations made by large vested interests as being 'prohibitively expensive for the vast majority of charities'. Mr Crosbie further observed that:
If you want to be a special guest at the ALP annual conference, there's a fee of a certain amount, and it's in the thousands, I believe. Most charities are not going to spend that money to go, and they can't afford to...If you work in charities you don't have that kind of discretionary spend beyond what you're trying to do, and most charities, let alone the average citizen, cannot participate equally in that process.
Damaging the democratic process
A number of submitters argued that the damage caused to the democratic process due to the risk of corruption through undue influence arises regardless of whether that influence is real or perceived. The perception of undue influence can harm the public's trust and support for their elected representatives. Moreover, it can betray general public confidence and willingness to engage with democratic institutions.
Dr Yee-Fui Ng clearly summarised this point, submitting that 'it is not just actual corruption that is the issue; even the perception of corruption can damage trust in the political system'.
Mr Jon Shirley expressed a similar view, suggesting that 'it does not matter whether the risk of inappropriate influence of this funding model is actual or perceived, the damage is done: citizen disengagement with government and its institutions is the result'.
The NSW Independent Commission Against Corruption (ICAC) expressed the firm view that 'using political donations to procure favourable government decision, or even favourable access to decision makers, causes serious damage to representative democracy'. ICAC reiterated its opinion from its December 2014 report into the influence of political donations on the integrity of government decision-making:
A situation in which citizens believe elections can be bought or that there is some quid pro qua for helping a candidate win must be seen as seriously damaging to the proper functioning of a democratic government. A corrupt member of parliament can be voted out of office if elections are free and fair. But if there is a loss of trust in the election process, then the whole system of representative government is weakened.
The Anglican Church of Southern Queensland considered the 'corrosive effect' that the deficiencies of current political finance regimes across all levels of government can have, asserting that:
This presents us with a serious challenge to address, not just because of the individual cases of corruption that it might give rise to, but because of the corrosive effect it can have on our entire body politic, and the damage it can have for citizens’ trust in Government. Indeed there may be an erosion of faith in our democratic system itself, particularly when the public perceives that money is buying influence.
Transparency International Australia (TIA) also conveyed serious concerns, submitting that the current political funding and disclosure regime 'represents a serious corruption of the political and democratic process' and has 'contributed to a collapse of support for democratic institutions'. TIA further contended that:
The public perception is that the present donations system suits the political parties and big money interests but betrays the community at large.
In apparent support for this argument, National Australia Bank (NAB) noted that it ceased making political donations to all levels of government from May 2016. In response to questions about the policy change during an appearance before the House of Representatives Standing Committee on Economics in October 2016, Mr Andrew Thorburn, CEO of NAB, pointed to unfavourable public perceptions as being the reason behind the decision:
Mr Thorburn: …The reason why we felt that a change was needed comes back to the point around wanting to be respected as a bank and as a company, and for us to make sure that our community and our customers do not see conflict.
I think the things we are doing around remuneration are other examples of that but, in essence, we felt that the donations we were making to political parties was being misconstrued, misinterpreted, incorrectly.
To be clean, direct and decisive, our board decided to stop making such political payments or payments to political parties, at Commonwealth, state and local level.
The committee accepts and supports that all stakeholders have a right to have a legitimate say in the democratic process. However, there is significant public concern around the motivations of some donors, and that the influence they have on the decision-making of governments is disproportionate to the influence other citizens enjoy.
The committee heard compelling evidence that the current political funding and disclosure regime fails to provide the necessary safeguards to prevent corruption of the political process. The fact that the source of the significant majority of funding to those involved in the political process is undisclosed and unknown, is inimical to maintaining trust in the process.
There are obvious loopholes in the current regime around how some fundraising activities are defined. Political parties and their associated entities do not have to disclose all fundraising activities, including recent innovations such as membership of business forums, as donations. This allows for substantial sums to be raised, in circumstances that by their very nature, allow privileged access to those who subscribe to them. In the committee's view, there is no discernible reason why any category of fundraising activities should be excluded from the obligations to disclose them.
The committee recommends that the Australian Government amend the definition of 'gift' under the Commonwealth Electoral Act 1918 to include payments made in return for membership subscriptions and attendance at events and fundraisers of candidates, political parties and associated entities.