South Australia’s Plans To Prohibit Political Donations Is A Big Potential Risks, As Do The Benefits

The South Australian government has made a proposal of prohibiting political donations due to of the risks and perception that they purchase undue influence and contribute to corruption. The Premier Peter Malinauskas said the intention is to “give South Australians confidence that decisions are being made because they’re the right thing to do” instead of the reciprocity of donations.

Malinauskas said that the legislation had been hard to write, and many considerations given to the way it would stand when tested by the High Court.

What is this law proposing? What is the likelihood that it will stand up to legal contests? What does this be for the rule of law?

What Is The Law’s Role?

This legislation proposed will bar politicians and political candidates (other except new candidates) from receiving donations from political parties. Instead, they will be given public funds for both campaigns and administration. The amount of campaign spending for political parties as well as candidates will be restricted in the months prior to the state election in order to reduce the cost of public funds low.

Political parties can still be eligible for dues for membership in the party, which can be up to $100 per member. This is designed to motivate parties to be more involved in the community and increase their membership. In the absence of this there is a significant possibility that, if the parties are completely funded by government grants the party will lose touch with the local community.

Influence From Outside On Campaigns

One of the most difficult issues when it comes to reforming the political donation system is the issue of how to deal with third-party campaigners. These are those individuals and groups that aren’t in the race for elections themselves and are interested in politics and want to support. They include environmentalists and miners, charitable organizations welfare organizations and business associations and pubs and clubs, as well as Indigenous organizations. In the event that they spent more than specified amount of money on political activities in the months before an election, they are required to be registered.

Attempts to block third-party campaigners including trade unions from expressing their opinions during elections were previously rejected in the High Court. This is likely the reason why this new plan will not impose any limits on political contributions to third-party organizations or the amount they spend on their election. The only thing third parties have to comply with obligations to disclose the amount of their donations, debts and expenditure. They must also utilize an “state campaign account” for receiving donations and also for political spending.

The danger is that once the political parties and candidates are prohibited from receiving donations and are able to limit spending however, donations to political parties will go to third-party organizations who can be able to receive and spend however much they want.

This grants significant political power to interest groups from third parties that can leverage their money to influence candidates and parties to support their agendas. This has the potential to alter the course of elections, because well-funded interest groups dominate the debate and requiring the political parties to follow their own tune.

A better option is to place carefully-planned expenditure caps on third party organizations which allows them to express their political opinions effectively, however, they should not influence the election process in the face of political both candidates as well as parties.

The Rules Around “Associated Entities”

When spending caps are set when spending caps are in place, it is essential to stop parties from bending them by creating associated with third-party entities that have different caps or, in cases like the South Australian case, no spending cap whatsoever.

The proposed law bans the arrangement between a political group and a third party in order to bypass the limit on expenditures. Furthermore, any gift made to the “associated entity” is treated as a contribution to the entity with which it is affiliated.

The definition of an associate entity explicitly exempts “registered industrial organisations” (trade unions). The affiliation costs paid paid by trade unions can be considered donations, and therefore fall within the donation prohibition.

Preferring Incumbents

Another issue with public funding plans is that they are typically heavily influenced by major political parties and incumbents. This is due to the fact that they are linked to the number of first-preference votes a candidate receives or their number of seats that a party gets at an election.

In the case of donations, if they are regulated for a time, the SA scheme will be able to provide funds to party administration during elections. The money will be redirected to registered political parties in accordance with the number of MPs it has. This means that the funding is not just a benefit for incumbents however, it also has the effect of favoring the government (which usually has the highest number of MPs) over opposition and smaller parties even though all parties share the same administrative expenses.

The majority of the funds must be used to fund administration, the remaining funds can be used to fund election expenses. This increases the amount that is available to incumbent parties and favors the party that gained the most seats in the previous election.

Independent MPs receive less administrative assistance which is available for any reason. Additionally, MPs are provided with staff and allowances which give them an advantage in campaigning.

New political parties and independent candidates do not receive all from this support. Their only benefit is that they are not subject to the restrictions on donations to political organizations and can therefore raise funds that are limited to $2,700.

There are other distinctions in the advance financing of election campaigns. In the SA scheme that allows registered political parties to get a share of their campaign funds in advance, which is calculated through using the first preference votes that were given to candidates endorsed by the party in the last general election.

Because new voters do not have previous results from elections They are granted advance access to a very modest fixed amount per candidate. They cannot also claim this privilege unless they provide sufficient numbers of voters who support their candidate (100 for an incumbent House of Assembly candidate and 500 for the Legislative Council candidate). If they fail to garner at minimum 4% of first-preference votes in the following election, they’re legally entitled to no funding from the public whatsoever.

What is the significance of this? First of all, an effective democracy must accept newcomers, competition, and disruption. A law that only protects and supports the existing parties will likely lead to political stagnation and a decline of the public’s involvement in the political process.

Then second, The High Court in the Australian Capital Television case invalidated an act that prohibited political advertisements due to the fact that it unfairly favors incumbents. The law bans political ads in electronic media, with the exception of for political advertisements that were free that, for 90% of the time, were given to parties that had elected members in accordance with their percentage of votes in the first preference vote at the previous election.

A mere 10% of free time was allocated to the newly elected and unrelated candidates. This was not enough to protect the law. Justice McHugh argued one cannot justify a law as if it levelled the playing field when that law “favours the sitting members and their political parties at the expense of the views of those who do not hold political power”.

If the SA scheme is doing enough to help new participants is a question for the High Court to assess if the scheme is being challenged.

Constitutional Challenges

A law that has the goal of restricting political advertising could be subject to being challenged for violating the constitutionally-protected liberty of political communication. Alongside the possibility that the law could be biased in favor incumbents The High Court has also previously upheld an act that sought to block political donations from any organization or individual that is not a registered voter.

In this case however, there was a gap in what amount of government money given and the amount of expenditure caps that the party was required to pay for, including donations. The question of whether a ban that goes further (prohibiting all donations to political parties) could be enforceable would depend on the relation to the spending cap and different types of funds that are available to independents, parties and newcomers.

Can This Be A National Issue?

Federal government officials have indicated its interest in reforming the electoral system. We aren’t aware of the details of its plans.

One of the benefits of the federal system is that reform experiments can be conducted by states with a smaller size. All the rest of nation will then be able to determine if they succeed and if they should be applied elsewhere.

The SA proposal is a prime example of an trial. If it succeeds, is able to withstand any constitutional challenges, and achieves its goals, other countries could be tempted to adopt it. However, it must demonstrate itself first.

June 30, 2024