Push to cut access to ‘unfair’ donor organisations for election funding

Labor and the Coalition could be barred from using cash donated by their investment organisations to help fund election campaigns in Victoria if the state government accepts an independent review’s recommendation designed to level the playing field.

The review panel, which is chaired by former Victorian Electoral Commission deputy Elizabeth Williams, has recommended culling “nominated entities” in its report tabled in parliament on Tuesday.

Voters at a polling booth at Fitzroy North Primary School on the day of the 2022 state election.Credit: Justin McManus

The Centre for Public Integrity, the Greens, so-called teal candidates and the Climate 200 fundraising body have all argued to remove the exemption that allows political parties to receive unlimited cash from one nominated entity.

While any party can register a nominated entity, only Labor, the Liberal and National parties have done so. Since 2018, entities have been blocked from receiving donations of more than $4670 in a four-year election cycle from each donor and critics say, in practice, that nullifies the benefits for a newer party to bother.

Victorian Liberal Party state director Stuart Smith objected to the recommendation in a response to the panel. He said the existence of entities was not unfair given any political party could establish one, and that it did not create a risk of improper influence because the entities were effectively intra-party rather than external donations.

The three-member panel did not reach a unanimous consensus, but the majority view of Williams and former Labor senator David Feeney was recommended to the government. The pair agreed the law significantly benefited parties established before the 2018 donation reforms.

“Existing rules on nominated entities provide some [political parties] with significantly more funds that can be spent on political expenditure, creating a risk that those [parties] drown out other voices,” Williams and Feeney said.

The third panel member, former Liberal senator Helen Kroger, did not support the recommendation. She said the entities held assets that “generations of party members have accumulated and preserved for the [political party’s] long-term prosperity and in support of its ideals”.

The Victorian government will consider the recommendations and respond in due course, a spokeswoman said.

“We acknowledge and thank the electoral review expert panel for their contribution to further strengthen the integrity of Victoria’s electoral and political donations system,” she said.

Victorian Liberal Party state director Stuart Smith opposes the recommended changes to the donation system. Credit: Simon Schluter

The panel investigated how the state’s new donation regime functioned in 2022, the first time reforms were tested at an election.

The Centre for Public Integrity on Tuesday welcomed the recommendation to remove the nominated entity exemption that director and Melbourne Law School Professor Joo-Cheong Tham said had unduly favoured the major parties.

“The panel should be congratulated for its comprehensive and rigorous report. Its recommendations to plug gaps in Victoria’s caps on political donations are to be welcomed,” Tham said.

The panel recommended capping how much a candidate or MP can spend on their own election campaign, and said third-party campaigners and associated entities – such as unions – should be limited to spending no more than $1 million every election period.

But Tham said it was “deeply troubling” the panel did not recommend capping expenditure. Instead, the panellists decided restriction donations acted as a de facto expenditure cap.

“The panel was persuaded by submissions received from several [political parties] that a cap on donations, if appropriately designed, can act as a de facto expenditure cap,” the report said. “That approach would minimise the complexity and administrative cost associated with the introduction of expenditure caps across all election participants.”

Labor, the Liberals and Nationals all argued against campaign expenditure caps, as was recommended by the Centre for Public Integrity, the Accountability Round Table, constitutional law Professor Anne Twomey and the Greens.

Six other jurisdictions in Australia have expenditure caps.

Tham said using donation rules as a de facto expenditure cap would “allow the major parties to unfairly outspend their competitors, who tend to receive less proportionately in terms of political donations and public funding”.

Electoral commissioner Sven Bluemmel welcomed the review findings and said the VEC supported recommendations on how to govern political funding and donation disclosures.

“The VEC supports a level playing field for all electoral participants. We appreciate the panel’s recommendations to close known gaps in political donation rules and extend some of these laws to local council elections,” Bluemmel said.

The independent review panel also said it was clear political finance laws for local government elections need “significant reform”.

Parliament’s electoral matters committee is separately reviewing the 2022 state election.

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