A big idea 5: ‘Electoral funding vouchers’

Max Rashbrooke is a senior associate at Victoria University of Wellington’s Institute for Governance and Policy Studies, and has recently published the report Bridges Both Ways: Transforming the openness of New Zealand government. This article sets out the last of the five ‘big ideas’ drawn from the report, and was originally published on Newsroom.

One of the most long-standing concerns about democracy is that it can be distorted by money. Because running political parties and election campaigns is expensive, parties are reliant on private donors. That raises the prospect that, to keep those donors happy, parties will shape policies towards their interests, meaning that those who can afford to donate to parties will have more influence over politics than others – a fundamental contradiction of the ideals of democracy.

Is this concern real? It certainly is in the US: academics such as Martin Gilens have shown that the way American politicians vote is strongly connected to what their wealthy constituents want to happen, while bearing almost no relationship to the desires of their poorer or even middle-income voters. In the UK, there is a clear link between donating to political parties and receiving political honours.

In New Zealand, we don’t have such detailed evidence. But we know that both the main political parties openly sell access to politicians, National through its Cabinet Club and Labour through its President’s Club. Whether that access turns into influence is another question. But we have seen enough scandals involving favours given to wealthy donors, by both main parties, to think that something similar is happening.

And the amounts given by wealthy people are significant, in the New Zealand context. Between 2011 and 2014, donations over $30,000 totalled $12 million, while total advertising spending during the 2014 campaign was under $9 million. Donations from wealthy people are clearly large enough to influence campaigning.

For this reason, political donations are consistently one of the issues singled outby international bodies concerned about the integrity of New Zealand’s democracy. There are no limits on how much anyone can give a political party, and relatively little transparency: you don’t have to put your name on a donation unless you give over $15,000. This is a much more lax regime than operates in other countries.

The most modest response to the above concerns would be greater transparency: ensuring that donors were named if they gave more than, say, $1500. But that won’t really resolve the issues. Often, transparency just tells you how bad the problem is, rather than doing anything about it.

An alternative would be to increase government funding but also, crucially, to democratise it. This could be done through the government’s giving every citizen a small amount of money – an ‘electoral funding voucher’ – to give to the political party of their choice, once every electoral cycle.

More far-reaching reform of political donations would have two elements: a very strong cap on private donations, and either democratising or matching the public funding of parties.

On the first point, individuals could be limited to giving only small amounts, say, $1500 a year to any political party and $1500 to any candidate, to minimise inequality of influence. This would put New Zealand in line with Canada’s cap on annual donations, currently set at C$1550. Such caps are common in other countries, including Japan, France, Spain and Ireland.

Limiting donations in this way would cut party funding by around $20 million over three years. The most obvious way to address this shortfall would be to increase government funding of political parties, which is currently around $49 million over three years. And indeed many other countries provide extensive public subsidies, including Australia, Canada, Germany, Ireland, France and Sweden – sometimes as much as 80 percent of party revenues.

But this can be unpopular, and creates few incentives for parties to engage with the public. An alternative would be to increase government funding but also, crucially, to democratise it. This could be done through the government’s giving every citizen a small amount of money – an ‘electoral funding voucher’ – to give to the political party of their choice, once every electoral cycle. This could create a strong incentive for parties to engage with the public, while spreading influence equally. Such a scheme is being trialled in the US city of Seattle.

In New Zealand, the funding thus handed out would be the $49 million in existing government funding combined with an extra $20 million to make up the private donation shortfall: a total of $69 million per three-year electoral cycle, which would work out as an electoral voucher of around $20 per adult.

People on the electoral roll could be sent an email, once every three years, with links to simple online donation forms for each registered party, and a unique random number to identify their voucher and prevent fraud. Non-online options would also be needed, especially for disadvantaged communities. Unused vouchers would be allocated to parties based on their number of MPs and other criteria, and parties could be allocated minimal amounts at the start of each Parliament, to ensure some security of income. Spending another $7 million a year this way might be publicly unpopular, but it would be a small amount compared to the government’s $93 billion annual spending, and certainly less than the (three-year) $35 million cost of running an election.

If the voucher system were deemed too complex, another way to partially democratise funding would be for the government to match amounts given by members of the public, up to the above limit of $1500. Either way, the point is to ensure that influence over political parties is, as much as possible, spread evenly among citizens, in line with the long-standing ideals that guide our democracy.


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