ACT NEW ZEALAND

ELECTORAL FINANCE REFORM

Submission

1.0 Submission Status

1.1 This submission is on behalf of ACT New Zealand (“ACT”) a registered political party under Part 4 of the Electoral Act 1993 and is submitted by Dr Michael Crozier, President of ACT.

1.2 This submission responds in detail to the issues broadly raised in the Issues Paper issued by the New Zealand Ministry of Justice and published in May 2009 (“Issues Paper”).

1.3 This submission reflects the views of ACT as at 26 June 2009.

1.4 This submission does not indicate any degree of pre-determination by ACT New Zealand Members of Parliament on the matters canvassed by the Issues Paper as they might be eventually reflected in any Bill before Parliament.

1.5 This submission does not provide an indication in advance of ACT New Zealand parliamentary support for or opposition to any Bill or any provision of that Bill resulting from this consultation process.

1.6 This submission does not derogate any of the undertakings, rights or responsibilities recognised or created in the National-ACT Confidence and Supply Agreement dated 16 November 2008.

1.7 The Ministry of Justice is free to make this submission available under the Official Information Act 1982.

2.0 Preliminary Observations

2.1 ACT supports the Minister of Justice’s stated aim to provide for an open consultative process that enjoys a broad base of support from the public, candidates and political parties.

2.2 ACT does not accept the contention by the Ministry of Justice that “[h]istorically electoral law reform as be characterised by broad cross party and public support.” It is ACT’s view that historically (pre- Electoral Finance Act 2007) New Zealand’s electoral laws have been largely shaped by the interests of the National and Labour Parties as dominant incumbents. For example, the Broadcasting Amendment Act 1996 introduced and extended an authoritarian allocation regime for both access to and subsidy for broadcasting. It extended coverage of the regime into radio, a medium that was already deregulated and segmented thereby allowing cost effective targeting. Thus, in advance of the introduction of a more competitive mixed member proportional electoral system, National and Labour regulated access to arguably the most effective medium of political advertising - radio. Radio spending had previously been permitted subject only to the general spending caps.

2.3 Aside from the voting system itself, many elements of New Zealand’s electoral system prior to the Electoral Finance Act 2007 (which favoured one of the dominant old parties over the other) have and continue to reflect the interests of the two dominant old parties. In this regard New Zealand’s rules around the financial aspects of political competition share similar characteristics to all of those in the Anglo-American world; the implicit intention is to reduce competition for political power. Almost every aspect of the regulation of political competition both here and abroad is justified by appeals to “fairness” or the “risks” of “unfair competition” or the “corrupting influence” of “big money”. Whatever the rationale, the effect of most of this regulation is to reduce political competition and enhance the advantages of parliamentary incumbents.

3.0 Chapter 1 – Guiding Principles

3.1 “Question 1.1

Do you agree with the six principles for guiding the development of the new legislation?”

3.1.1 No. Not as drafted. Principles 3 to 6 are the broad features of an electoral system as a whole and not particularly helpful in the particular task of devising rules covering the financial aspects of political competition.

3.2 Principle 1 – Equity (Fairness)

3.2.1 This principle is far too broadly crafted in the Issues Paper to be of any real assistance in drafting rules to cover the financial aspects of political competition.

3.2.2 Traditionally “fairness” or “equity” in the context of electoral systems relates to the notions of universal suffrage, secret balloting, the qualification of candidates, independent election officials, robustly run electoral enrolment systems, votes of equal value and the extent to which the composition of a Parliament reflects candidate or party choice by voters. Section 12 of the New Zealand Bill of Rights Act 1990 encompasses many of these notions, and other provisions of the Electoral Act 1993 (which are excluded from the scope of the Issues Paper) also provide for these. They are classically procedural in nature. As a generalisation, there is a broad consensus among those with a technical and practical interest in electoral systems and the general public that these elements of procedural fairness or equitable treatment are desirable.

3.2.3 The opportunity for candidates and political parties to make their case, without undue interference from the State which is procedural or permissive in character, has been broadened so that “opportunity to makes one’s case” now has a substantive character. It is this “substantive” fairness or equity which is controversial. It is clear from the explanatory drafting in the Issues Paper regarding fairness and the presence of other principles that are procedural in nature that this controversial substantive fairness is what is intended.

3.2.4 ACT’s view is that rules covering the financial aspects of political competition which attempt any particular pattern of financial or other characteristics among political parties and candidates at any particular election will fail and must involve considerable erosion of the basic freedoms of New Zealand citizens.

3.2.5 There is no consensus about what advantage or characteristic constitutes an “unfair advantage.” Any attempt to focus on the wealth differences between candidates or parties raises issues about why the regulation should not handicap for other advantages or disadvantages. For example, whether a candidate is an incumbent Member of Parliament or not can result in considerable advantage at a particular election. The substantial indirect taxpayer support of political competition via Parliamentary Service Allocations, and some uncapped expenditure, can be a significant advantage at a particular election for a party or candidate.

3.2.6 It is not clear from a regulatory design perspective that differences in the wealth of political parties and candidates at a particular election can be used as a proxy for all other advantages and disadvantages that particular candidates and parties might have at any particular election. Most modern academic research and practical experience compiled in New Zealand and abroad suggests that there is a weak correlation between differences in wealth among candidates and parties and ultimate political success. Money is required for success in political competition, but not sufficient - nor is it necessarily the most important factor in political success. However, there is an established correlation between the rate of success of incumbents at elections and the significant regulation of the financial aspects of political competition.

3.2.7 While spending caps for both parties and candidates in the New Zealand context are traditionally justified on a substantive fairness or equity basis, the reality is that, in conjunction with the remaining regulatory controls over the financial aspects of political competition here, these rules operate in the opposite manner.

3.3 Principle 2 - Freedom of Expression

3.3.1 ACT notes that in the explanation of the freedom of expression the Issues Paper provides for a narrowing of this fundamental right by inserting the qualifier “unduly”, yet the substantive equity or fairness principle isn’t similarly qualified with the word “reasonably.” While the Issues Paper goes on to ask questions about both balance and conflict between principles, the clear prose of the Issues Paper has already promoted substantive fairness or equity above the fundamental freedom of expression.

3.3.2 ACT notes that the Issues Paper recites section 14 of the NZ Bill of Rights Act 1990, concerning protection of expression, and runs this together with section 5, the justifiable limitation provision. In terms of parliamentary elections, it could be argued strongly whether section 5 has any relevance because to subject the freedom of expression to a justifiable limitation implies that there can be too much “speech” or “expression” during an election campaign that needs regulating. Surely the opposite is true. It is ACT’s view that the Issues Paper’s approach downgrades the importance of the freedom of expression to, at best, the same level as substantive equity or fairness in terms of the distribution of wealth or other traits as between candidates and parties at a particular election. Or at worst, freedom of expression becomes subservient to substantive equity or fairness which is, in fact, a mere public policy choice - not a right under the NZ Bill of Rights Act 1990. It would be a controversial interpretation of section 12 of the NZ Bill of Rights Act 1990 for “genuine periodic elections” to only encompass the requirement for the same distribution of wealth or other attributes as between candidates and parties in any particular electoral contest. The better view is that section 12 of the Act simply recites the procedural understanding of fairness or equitable treatment as it is traditionally applied to electoral systems. The context of the section also supports this view.

3.3.3 ACT’s view is that if the Issue’s Paper is going to emphasise the section 5 justifiable limitation provision of the NZ Bill of Rights Act 1990 in any principle covering the freedom of expression, then, in outlining that any such limitations are justifiable in a free and democratic society, it must be shown that these limitations are rationally connected to an important objective and proportionate to that objective.

3.4 Principle 3 – Participation

3.4.1 This principle is so broadly crafted and explained that it is of little assistance in drafting legal rules covering the financial aspects of political competition. Much of the territory covered by this principle is covered by the procedural fairness notions that apply to electoral systems. It recites similar notions as does the freedom of expression (the freedom to impart necessarily involves the freedom to receive) in principle 2 and deploys the word “legitimacy” which is the rationale for principle 6.

3.4.2 The principles should assume that political parties (their members and party supporters) and candidates are participants in the electoral system, as are voters in capacities as voters and donors, and should more closely apply to the issue of the rules covering the financial aspects of political competition.

3.5 Principle 4 – Transparency

1. This principle is too broadly crafted to be of assistance. Transparency in the context of the rules covering the financial aspects of political competition usually means disclosure of candidate and party campaign income (including the identity of some individual donors) and campaign expenditure.

2. It would be more helpful to have principles that directly relate to the issue of disclosure that will apply in any rules covering the financial aspects of political competition.

3.6 Principle 5 – Accountability

3.6.1 Aside from the obvious issue about the broadness of this principle, the key issue regarding accountability and the regulation of the financial aspects of political competition, is that any scheme should not incentivise a forum shift away from Parliament and the ballot box to the Courts or other agencies of the Executive for the resolution of issues of political competition.

3.6.2 The key accountability mechanism in our system is political or electoral in nature and parliamentary focused. Overly intrusive Courts or agencies of the Executive (even those who are statutorily independent) that must enforce highly technical or ambiguously drafted rules, or those containing broad discretion, raise the risks that the electoral competition itself is eclipsed by legal disputes which become a proxy for that electoral competition, and serves to undermine accountability rather than enhance it..

3.7 Principle 6 – Legitimacy

3.7.1 This principle as drafted seems to be an amalgam of procedural fairness/Equal treatment (a subset of Principle 1), Participation (Principle 3), Transparency (Principle 4) and Accountability (Principle 5).

2. From the explanation, the goal seems to be to have a principle that promotes the development of a scheme for the regulation of the financial aspects of political competition that includes clear rules, which are easily understood by candidates, parties, enforcement agencies and the public. Clear, widely understood rules for the financial aspects of political competition contribute to the integrity of our electoral system.

3. As usually understood, electoral systems and the regulation of the financial aspects of political competition contribute to the legitimacy of the Parliament and the exercise of political power in the Parliamentary context. The adoption of a particular scheme to regulate the financial aspects of political competition should not involve self-conferring legitimacy.

3.8 “Are there other principles you think are also important?”

3.8.1 ACT would suggest the substitution of the Issues Paper Principles with the following. A campaign finance regime should encourage political competition:

1. By permitting and promoting the broadest possible freedom of expression by all candidates, political parties and New Zealanders alike. (See paragraph 3.2.2)

2. By ensuring that (as a whole) the scheme does not act as a barrier for new entrants to Parliament or advantage incumbents.

3. By not incentivising or disincentivising one form of lawful campaign activity over another.

4. By adopting clearly drafted rules that are not open to multiple interpretations, the exercise of judgement and confer only a minimum of discretion.

5. By adopting a ‘brightline approach’ with few exceptions between expenditure in furtherance of Parliamentary duties and expenditure covered by the campaign finance regime.

6. By recognising that issues of political competition are best resolved in the ballot box and between elections in Parliament and the public and not in the Courts or by agencies of the Executive.

A campaign finance regime should guard against corruption and the appearance of corruption in the exercise of public power by Members of Parliament and Ministers through:

7. Providing for the public disclosure of campaign-related items of income on a standard accounting basis with limited exceptions.

8. Providing for the public disclosure of campaign related items of expenditure on a standard accounting basis with limited exceptions.

9. Provide for the ongoing disclosure of the identity of those donors of value (excluding their personal effort) at a reasonable level that could be corrupting on the exercise of public power but for the fact of the disclosure.

3.8.2 It is ACT’s view that the above principles cover the twin objectives of promoting robust political competition and guarding against corruption or its appearance. These should be the key features of the design of a campaign finance regime in our democracy..

3.9 “Question 1.2

Are any of the Issues Paper principles more important than others? Do any of the principles conflict? If so, how do you think a balance can be achieved?”

3.9.1 See the above comments.

3.10 “Question 1.3

Should a statement of the Issues Paper principles be included in the new legislation?”

3.10.1 No. Any legislative drafting that required looking to the principles proposed in the Issue Paper for clarity would already be deficient. Nor is it quite clear what assistance either a Judge or an enforcement official might gain from the Issues Paper principles as they are hopelessly broad. Nor is it clear what assistance they are to either the Ministry of Justice or Parliament in producing a campaign finance regime. As an example, reference is often made to the principles of the Treaty of Waitangi but academics and commentators alike cannot agree what these are.

3.10.2 ACT would prefer a “black letter approach.” Each statutory provision should be clearly drafted. The meaning of each provision should be clear from the context or the particular section or part of the legislation, and not require any reference to a section containing a statement of principles.

4.0 Chapter 2 – Constituency candidate and political party funding - Private funding

4.1 “Question 2.1

Should direct anonymous donations be permitted to constituency candidates and/or political parties?” If so, is the current threshold appropriate?

1. Yes. The right to anonymously donate value (personal effort, goods, services or money) to either a candidate or political party is an important safety valve in a small and intimate society like New Zealand. Many recent New Zealanders come from States where they are not free to exercise fundamental rights and where they can face repression for involvement in politics. Other New Zealanders simply wish to retain their privacy because of employment, family or business circumstances. The opportunity to anonymously contribute is also a counterbalance to any group of political parties in Government who may have authoritarian tendencies. New Zealand witnessed this with the previous Government’s approach to electoral matters – which attempted the broadest ever permanent attempt at regulation of the freedom of expression in New Zealand’s history. There is little or no evidence that any part of the Executive branch of Government attempted much of a defence of these fundamental rights (already recognised by Parliament), preferring deference to the will of a simple majority in the current Parliament.

2. ACT’s view is that the express rationale for the disclosure of the identity of any donor to a candidate or a political party is that, but for the disclosure, the donation could be corrupting - or appear to corrupt - the exercise of public power. Parliament should determine the quantum of a donation that would be corrupting (or appear to be corrupting) the exercise of public power. The same amount should apply to both candidates and parties to avoid donation shifting between candidates and their party, and the threshold should be set high.

3. ACT does not favour the disclosure of the identity of donors to a candidate or a political party for reasons other than the corruption or the appearance of corruption. The more amorphous “right to know who influences our electoral system” or a generalised “transparency” notion is unhelpful. First, it is not clear that donors actually want any particular influence on our electoral system other than the desire to give to the political causes they believe in. And even if donations “influence our electoral system” is this “influence” more or less than donors of personal effort, party members or those New Zealanders who are the subject of quantitative and qualitative research (polling) by the political parties. There are a myriad of “influences” on our electoral system, and it’s not clear the donations of value should need a different disclosure regime from all the rest. The other amorphous justification is that disclosure “enhances confidence in our electoral system” – again a meaningless statement and not supported by evidence from the United States which has a low level individual donor disclosure regime and no discernable improvement in confidence. As a consequence, nor is there any credible evidence from the U.S. that their individual capping and disclosure regime has broadened financial participation in politics.

4. Any determination of a threshold for individual donor disclosure for the purposes of corruption (and the appearance) of public power must be arbitrary. Set too low and it incentivises donation splitting and ups the costs and inefficiencies of fundraising. Such inefficiencies favour wealthy individuals who can best afford to carry the cost of this inefficiency by accessing specialist knowledge and arranging their affairs. Likewise, it favours better organised parties and candidates who must spend more of their time finding and persuading donors as compared to finding and persuading voters. A low uniform level of donor identity disclosure pushes New Zealand legislators towards a perpetual campaigning model. It will, over time, see an increase in the net worth of individual candidates running for Parliament, as those who can by-pass the need to fundraise in small increments by contributing their personal wealth are advantaged.

5. Of course, set too high and public power could be exercised to individually prefer donors because of their status as donors.

6. Implicit in any discussion regarding the threshold for the disclosure of donor identity must be recognition of the fact that disclosing donor identity will generally have a chilling effect on the willingness of most donors to contribute. Disclosure for the purposes of the prevention of corruption (or its appearance), or for more general transparency reasons, is not costless in a small democracy.

7. ACT’s view is that one realistic mechanism is to select 25% or 30% of a Member of Parliament’s annual gross salary (part of the rationale for paying MP’s well is to avoid corruption). At or above this level, individual donors must either be individually identified or are (and must remain) anonymous to the Members of Parliament elected. The primary focus in dealing with anonymous donations above the individual donor disclosure threshold is the actual knowledge of Members of Parliament of the identity of anonymous donors above the identity disclosure threshold.

8. Political parties should have an ongoing obligation to disclose donations in a donation return and in the party election return. Members of Parliament likewise file a donation return for any donations received for their re-election on an annual basis. All candidates for Parliamentary electorates file a donation return to cover their election-related activities.

9. The clearest method of dealing with the actual knowledge of Members of Parliament could be for all candidates elected as Members of Parliament to attach to their electorate return (or if they are a list-only candidate, attach to the Party’s return) a declaration stating that they have no actual knowledge of the identity of any anonymous donor over the disclosure threshold who has contributed to their campaign or to their party’s campaign.

10. In both annual donation returns (Party and Member of Parliament), and Party campaign and Candidate electorate campaign returns, both known and unknown donors of money could be aggregated in bands.

11. The following table below sets out one possible disclosure regime for donations.

4.2 “Question 2.2

Should there continue to be a disclosure requirement for indirect anonymous donations (for example, through intermediaries such as trusts) to constituency candidates and/or to political parties?”

4.2.1 Much of this activity is driven by donor interests in remaining private, the fact that the current NZ$10,000 disclosure threshold is too low, the queasiness of political parties and candidates about accepting anonymous donations and the “policy orthodoxy” that anonymous donations are in of themselves corrupting and should be regulated out of our campaign finance regime. Intermediaries are, in short, a symptom of the problem not the problem itself. Further, the Electoral Finance Act introduced elements called “transmitters” and ‘contributors”, where the lines between such were blurred and the rules surrounding these terms were vague and easily manipulated. It is not always that good intentions result in good legislation.

4.3 “If so, is the current threshold ($1000) appropriate?”

4.3.1 See above comments.

4.4 “Question 2.3

Should the protected disclosure scheme for donations to political parties be retained?”

4.4.1 The problem is that the protected disclosure scheme for donations to political parties limits the donation level and requires disclosure to the State. Thus it isn’t truly anonymous. In this sense it undermines the constitutional value of the ability to donate anonymously. The scheme re-enforces the notion that anonymously contributing value is somehow illicit or less worthy than other contributions to our politics like voluntary effort.

4.5 “Question 2.4

Should the name and address of donors who donate above a certain threshold be disclosed (that is, made publicly available)”

4.5.1 Address disclosure is unnecessary for the statutory purposes if these are limited to the prevention of corruption in the exercise of public power.

4.6 “Question 2.5

Should the disclosure thresholds be left as they are? Raised or lowered? If so, to what level?”

4.6.1 See above comments.

4.7 “Question 2.6

Should the same disclosure threshold apply to donations made to constituency candidates, and to donations to political parties (including donations made through intermediaries, such as trusts)?”

4.7.1 Yes. See above comments.

8. “Question 2.7

Should the disclosure threshold for political parties (currently set at $10,000) be the same as the limit on anonymous donations (currently set at $1,000) to reflect the equivalent regime that exists for candidates?”

4.8.1 There should be one threshold for the disclosure of individual donor identity or the fact that a donor of a particular donation is anonymous to Members of Parliament. The same threshold should apply to both candidates and parties.

4.9 “Question 2.8

Should there be a limit on donations from a single source? If so, what should it be? Should it be inflation adjusted?”

4.9.1 No. See above comments about the economics of transaction costs and favouring high net worth individuals. This sort of regulation is easy to avoid, costly to enforce and spurns on the development of inefficient political advocacy by non-candidate and political party groups. This in turn produces a push for even more regulation.

4.10 “Question 2.9

Should there be a prohibition on donations from certain sources (for example, overseas individuals, or corporate, or unincorporated entities)?”

4.10.1 No. Such restrictions only empower specialist legal advisers and those who can afford to access them and to arrange their affairs accordingly. The regulation of “political income” should focus on candidates and political parties and what threshold is adopted for disclosure of donor identity rather than the legal or other status of donors.

4.11 “Question 2.10

Are the current limits on overseas donations appropriate?”

4.11.1 See above comments.

4.12 “Question 2.11

Should any other sources of donations be banned? If so, which ones?”

4.12.1 See above comments.

4.13 “Question 2.12

“Should legal entities (for example, companies, trade unions or special interest groups) be treated differently from individuals”?

4.13.1 No. See above comments.

14. “Question 2.13 - Public Funding

Should constituency candidates and political parties be solely reliant on private funding or should they receive additional public funding?”

4.14.1 Yes. There should not be taxpayer funding for political competition over and above that provided to Members of Parliament and political parties represented in Parliament. If that does occur, what will eventuate is an enlarged problem similar to that that ACT and other small parties encounter under the broadcasting allocations scheme, where funding is at support levels of some years prior to the election and proportionally advantages the large incumbent parties – stifling political competition.

4.15 “Question 2.14

If the public funding system in New Zealand is changed or increased, how do we make constituency candidates and political parties accountable for how they spend public money?”

4.15.1 See comments below.

4.16 “Question 2.15

If there are to be changes to the public funding of political parties, should public funding be restricted to parties that are represented in Parliament, or alternatively, should it continue to be available more broadly to a wider group of political parties?

4.16.1 There are currently two forms of taxpayer support for political competition. First, the support and resources provided to political parties represented in Parliament and individual Members of Parliament. This funding should be subject to a general disclosure regime, subject only to some narrow privacy issues, as the taxpayer has a general right to know what is done with public money. A standardised disclosure regime should apply for taxpayer funded activities during the regulated period. The second is the current authoritarian broadcasting allocation regime for television and radio time.

2. With Parliamentary funding, attempting to distinguish between those taxpayer funded activities that are purely public or parliamentary in nature and those things done for a more immediate political re-election advantage is impossible. In any case how well a Parliamentary political party or Member of Parliament fulfils their parliamentary duties is a matter of political competition and credibility – it goes to the heart of their re-electability.

3. The interim regime, adopted as a result of the Auditor General’s report into parliamentary funded political publications, adopts a narrow technical approach to “electioneering” (‘legalistic electioneering’) which allows parliamentary parties to largely continue using their considerable public funding for real world electioneering (policy research and development and opponent research, campaign-related travel and, most significantly, opinion polling). The Electoral Act 1993 helpfully facilitates this ‘real world electioneering’ by excluding these activities. In modern political campaigns, polling is a significant expense and is vital to the success of any campaign for re-election. Unless that polling is push-polling (which isn’t actually polling), New Zealand law holds that it is not either electioneering for the purposes of the use of parliamentary resources and nor is it for the purposes of the Electoral Act 1993.

4. In reality, much of what parliamentary parties do with their significant public resourcing is a mixture of campaign related activity and non-campaign related activity; it has dual purposes. Taxpayer-funded polling, for example, helps a parliamentary party gain re-election but it also helps that parliamentary party better understand the views of New Zealanders and reflect those views in the legislative and public policy choices it makes. Nor is the Auditor General’s approach of looking at Parliamentary- funded communications and forcing Parliamentarians to adopt suboptimal communications practices particularly helpful. Many campaign related communications look the way they do because they are the most effective way of communicating; the ‘look and feel’ is driven by general marketing advice. Forcing MP’s to adopt sub-optimal communications practices simply results in ineffective and expensive communications or more ineffective cheaper communications.

5. ACT’s approach is to accept that this public funding assists the political competition of political parties in Parliament and significantly advantages those parties as against parties not represented in Parliament. The best approach for the taxpayer is not to attempt to re-dress this imbalance financially but to simply accept that this is an advantage of incumbency and to adopt rules that allow maximum opportunity for non parliamentary parties to enter Parliament. Parliament should adopt a disclosure regime for its resources and in particular for the regulated period.

6. Parliament’s narrow legalistic definition of electioneering dealing with parliamentary-funded publications could be inserted into the rules covering the campaign finance which would have those publications only included in a Party or candidate election return should there be a breach of these rules. Other than that, a bright line should be drawn excluding parliamentary-funded activities if a comprehensive disclosure and budgetary control system is adopted by Parliament.

4.17 “Question 2.16

Do you have any suggestions to make about the appropriate level of funding?”

4.17.1 See above comments.

4.18 “Question 2.17

Are the rules sufficiently clear that Parliamentary Service funding cannot be used for election expenses? If not, what do you think would make the rules clearer?”

4.17.1 See above comments and note the legalistic unworldly way in which the current interim regime and the Electoral Act 1993 intersect to ensure that much of this spend is not technically electioneering.

4.19 “Question 2.18

If there is public funding, do you have any suggestions about the kind of model that might be suitable to adopt?”

1. The only public funding regime that should be considered is a per capita grant system (to be applied for) to assist with the compilation and filing of candidate and party returns of election campaign income and expenditure. Here the State has a legitimate interest in ensuring that these returns are a true reflection of what has occurred. Competent compliance lowers the risk of ongoing disputes around elections. There is a public interest in minimising such disputes and in certainty in elections to Parliament. If the returns are based on standard accounting principles, then the skill required to comply is broadly available and does not require specialised legal assistance.

2. ACT recognises that any such grant system would open Members of Parliament up to the accusation that they regularly impose regulatory burdens on others without compensation yet, when their own interests are involved, they want the taxpayer to contribute to the cost of their regulatory burden. This is, of course, an infinitely better position than the current situation, where taxpayers contribute to the broadcasting of political advertisements.

3. The only other area that ACT would support public funding is in the area of the election campaign political debates hosted by the broadcast media. Currently, New Zealand has an unsatisfactory situation as a result of in the case of Dunne v Canwest TV Works Ltd [2005] NZLR 577 where there is a non-compensated regulatory charge because hosting debates in a particular format on a broadcast medium is viewed as a public function.

4. If there is a public interest in broadcasting political debates with a particular format, then this public interest should be matched with public funding. Except for debates where there is a public contribution, all broadcasters should be free to programme political coverage as they see fit. This would contain the uncertainty flowing from the Dunne case and match public funding with a public function.

4.20 “Question 2.19 - Broadcast (Radio and Television) Advertising

Should there continue to be an allocation of public funding to allow political parties to advertise on radio and television? Should it decrease? Increase?

1. The regime should be dispensed with. ACT’s view of the current authoritarian broadcasting allocation regime is comprehensively set out in ACT’s most recent application for a broadcasting allocation in 2008. The most recent application echoes ACT’s consistent view that has been put before the Electoral Commission at each allocation round.

2. It is not clear in the age of a more diffuse media environment why there is a need to subsidise political advertising by political parties on television and radio. And even if there was a desire to subsidise it, why should it limit candidates, political parties, and other New Zealanders from engaging in political advertising using their own funds.

3. The current regime is designed to operate to the advantage of both Labour and National; it boosts the value of parliamentary incumbency (and the bigger the incumbent the more it gets); it is anti-competitive and it attacks the fundamental freedom of expression of parties, candidates and other New Zealanders.

4. The Electoral Commission is often required to engage in Orwellian language when describing the application of the formula it uses to determine an allocation. This approach is only partly bolstered by the Commission’s statutory interpretation. In essence, the Commission suggests that applying the statutory formula strictly should actually result in Labour and National gaining more than the average 60% – 70% of the total available allocation between them. But out of “fairness” (substantive fairness) a percentage of the allocations of both National and Labour flow back from the two old parties to the 18 others who applied. This is entirely unsatisfactory, and to the credit of the Electoral Commission it has repeatedly asked for the regime to be addressed.

4.21 “Question 2.20

Should there be a change in criteria if the current allocation process is retained?”

1. The current regime and its criteria/allocation formula are irredeemable. Any attempt to ensure substantive fairness or equity in this manner is by necessity arbitrary and irrational.

2. The only criteria for allocation that comes closest to a process- orientated fairness would be a per capita distribution from among those parties applying who are otherwise free to spend on broadcast media as they see fit.

4.22 “Question 2.21

If the allocation of public funding for radio and television is abolished, should there be a proportionate increase in political parties’ spending limits?”

4.22.1 See the comments below regarding spending caps.

4.23 “Question 2.22

Should the broadcast allocation be restricted to buying radio and television advertising or should political parties be able to use it for other purposes?”

4.23.1 This question leads to another question: why is the taxpayer subsidising broadcast advertising by political parties?. If Parliament insists on continuing this scheme with some modification, then ACT would favour the greatest possible freedom for political parties to use this subsidy as they see fit. This freedom would extend to the balance between television and radio, creative research and accounting for this spending and other election- related activities in the Party election income and expenditure return.

4.24 “Question 2.23

If political parties are given greater freedom to choose how to spend the broadcast allocation, should criteria for ‘approved’ spending be developed? If so, what spending do you consider should be approved?”

4.24.1 Other than the accounting for this spending and other election related activities in the Party election income and expenditure return, no additional approval system should be adopted. The major accountability mechanism affecting a party or candidate is a political one. Agencies of the Executive should not be micro- managing aspects of the campaigns of political parties.

4.25 “Question 2.24

Should political parties who receive a share of the broadcasting allocation of time and money be able to spend additional money on broadcasting advertising within their expenditure limits?”

4.25.1 Any subsidy regime should be decoupled from any attempts to limit or determine the type, method, amount of political advocacy done by candidates, parties and New Zealanders generally. Regarding the spending cap see the comments regarding spending caps below.

4.26 “Question 2.25

Should political parties that do not receive a share of the broadcasting allocation of time and money be able to spend their own money on broadcasting advertising?”

4.26.1 See comments at 4.24.1 above.

4.27. “Question 2.26

If political parties are allowed to spend their own money on broadcasting advertising, should restrictions apply?” If so, what restrictions?

4.27.1 Other than any spending cap, none.

4.28 “Question 2.27

Should parallel campaigners be able to campaign on radio and television?

4.28.1 While the Ministry of Justice has made progress in describing “parallel campaigners” (as opposed to “third party speech”), it isn’t much of an improvement. ACT prefers “non-candidate/non- party speech” as a more neutral, less value-laden descriptor. Cast in this manner, ACT’s position is that the regulation of candidates and party speech should not be extended to non-candidate and non-party speech. See the comments at 7.0 below.

4.29 “Question 2.28

Should restrictions on radio and television advertising by parallel campaigners be removed if there is a limit on spending?”

4.29.1 See the comments above.

4.30 “Question 2.29

Should Television New Zealand and Radio New Zealand National be required to provide free air time for political party broadcasts?”

4.30.1 No. They should not be treated any differently from any other broadcaster. See the comments at 4.19.3 and 4.19.4 above.

4.31 “Question 2.30

Should a minimum amount of time for free campaign advertising by political parties be mandated in legislation for the state broadcasters?”

4.31.1 No. This is a form of indirect taxpayer subsidisation. The first question is whether there is a public interest in political advertisements on radio and television; the focus should not be on the public (or otherwise) ownership of the broadcaster. This proposal also produces a ‘ghettoisation’ of such advertising and issues as to whether the audience for the broadcaster is a match for every political party.

4.32 “Question 2.31 - Connection Between Private Funding & Public Funding

If there is an increase or decrease in public funding, should there be a change to the current rules on private funding?”

4.32.1 The significant level of parliamentary funding provided to parties in Parliament should be explicitly recognised in the design of the campaign finance rules.

4.33 “Question 2.32

“Should the change to the donations regime in the Electoral Finance Act 2007 have resulted in changes to the public funding regime?

4.33.1 It is not clear what information this question seeks.

4.34 “Question 2.33

If there are more restrictions placed on private funding, should there be a change to the current rules on public funding?”

4.34.1 See above comments.

5.0 Chapter 3 – Campaign Spending - Spending Limits

5.1 “Question 3.1

Should there be limits on campaign spending for constituency candidates and political parties?

1. No. Spending caps are traditionally justified by notions of substantive fairness: ‘no candidate or party should be able to buy an election.’ This is nothing more than a dressed-up prejudice. It is not supported by modern academic evidence or practical experience in New Zealand or in other Anglo-American democracies.

2. In the New Zealand context, the spending caps are distorting political behaviour and are acting against the need for robust political competition. In the current system, parliamentary incumbents are on average advantaged.

3. As a guide to the inadequacy of the spending caps one only has to look at the taxpayer resources provided to Members of Parliament and parties in Parliament to gauge the extent Parliamentarians themselves value their incumbency.

4. ACT is the only Party to enter Parliament without the assistance of an existing Member of Parliament since the introduction of MMP. ACT has achieved this not once but twice. The real test of the inadequacy of the caps is to ask how much it would actually cost on average to enter Parliament via either an electorate or crossing the 5% threshold of total valid party votes cast, from scratch. In this light, it is ACT’s considered view that $20,000 for an electorate and $3.3million (the figure that National and Labour have including the value of their broadcasting allocations) for a party vote campaign is totally inadequate.

5. The majority of Members of Parliament know this. That is why they have been consistently expanding the public resourcing available to themselves and excluding significant new common types of campaign related activity (like polling) from the reach of the Electoral Act 1993 and are, by and large, happy to see the real value of the cap fall over time.

6. Regarding the other major argument for spending caps - that expenditure limits prevent a “political arms race” - this is not supported by evidence in New Zealand. All the spending caps have done, coupled with the narrow definition of electoral advertising, is simply shift significant and growing costs of political competition on to the taxpayer – the arms race is simply occurring outside the expenditure returns. Fundamentally, the error with the notion of preventing a political arms race is that political spending like all other spending in New Zealand is linked to our general prosperity. There is no objective level of spending which is inherently good beyond which candidates or party will be disproportionately more persuasive. Money like any resource can be wasted by candidates and political parties if there is a surfeit, and a candidate or party with scarce funding might spend to better effect. As a generalisation, as New Zealand gets wealthier we can and should expect candidates and political parties to on average spend more. Like many other services, voters will continue to expect improved advocacy from those parties they support or are interesting in supporting as their expectations rise with general prosperity. Also, spending caps imply that the public will be far too influenced if parties are able to spend what they like; this is an insult to the intelligence of the electorate.

7. ACT favours an all-expenditure approach to the return of candidate and party expenditure, rather than a focus on candidate or party advertisements. With parties, all expenditure within the regulated period could be deemed campaign expenditure, unless the party makes a case to exclude it. If spending caps are removed, a more general accounting approach could be adopted to both campaign income and expenditure. If a spending cap is retained then the caps would need to be dramatically increased to accommodate an “all in” approach to expenditure. General rules regarding apportionment between candidates and other candidates, candidates and party, candidate and others, party and another party and party and others would need to be drafted. Likewise apportionment between a thing done in part with the regulated period and either before or beyond it. Likewise apportionment rules concerning assets owned and used, assets used but leased, or some other right, and income generated in campaign trade or campaign trade with a donation component. Likewise candidate contributions to their own campaign, loans and retained savings by parties would need new rules. However, the pressure to define and handle these issues subtly by those completing the returns would be gone. And many of these issues require rules now anyway. The objective is a return of both income and expenditure that provides meaningful information about the real cost of a campaign and the recourses gathered to pay for it that can be complied with using standard accounting skills that are broadly available in society.

5.2 “Question 3.2

If there are campaign spending limits, should the current limit for constituency candidates ($20,000) and political parties (a maximum of $2.4 million, if all electorates are contested) be retained or adjusted”

1. Any figure is purely arbitrary. ACT would prefer a formula based approach say $1.50 x the census night population + an annual adjustment for inflation since census night and rounded up to the nearest full thousand dollars. At the next census (2011) the same formula applies and the figure is compared to the single largest Parliamentary Service allocation to a party in Parliament. If dividing that allocation by the census night population produces a figure that is greater than $1.50 per person, then the figure derived from dividing the largest single largest allocation by the census night population is adopted in substitution of the $1.50. A similar process but simpler process can be used for electorate candidates. The electorate with the largest population has that population multiplied by $1.50 with the result rounded to the nearest hundred dollars. This is then adopted as the expenditure cap for each electorate.

2. The advantage of a formula like this is that it is linked in to how the parliamentary parties actually value their own incumbency. The more resources they vote themselves the more spending caps rise to keep pace.

5.3 “Question 3.3

Should campaign spending limits be adjusted regularly in line with inflation? If not should spending limits be regularly reviewed? Who should have responsibility for the review (for example, a parliamentary committee or an independent body)?”

5.3.1 See above comments.

5.4 “Question 3.4 - Regulated Campaign Period – Commencement & Length

When should the regulated campaign spending period start?”

1. The regulated period should be, as now, 90 days out from polling day. It is a function of a moveable election day and involves the retrospective re-characterisation of expenditure. ACT does not consider fixing an election day or, alternatively, fixing a regulated period to be practical; both will incentivise political gaming. If the retrospective re-characterisation of expenditure is necessary, then it should be kept to a minimum period of time. At three months the traditional regulated period represents usually 10% of the term of each Parliament.

2. In the New Zealand context, what makes the regulated period significant is really the spending caps and, in conjunction with significant taxpayer resources provided to Members of Parliament, these caps provide significant advantages to parliamentary incumbents. If the distorting caps were removed, then the regulated period would be less of an issue.

3. If Parliament unwisely opts to retain a spending cap, then voluntary adoption by political parties and candidates of a longer regulated period could be provided for, so long as there is a boost to the spending cap in proportion to the extension of the time. At the moment Parties in Government might have an advantage because they have some advanced idea about the timing of an election. A system of voluntarily adoption of a longer regulated period by application early in election year might communicate something about the intentions of the major party in government regarding the approximate timing of an election.

4. The voluntary adoption of a longer regulated period in return for a larger spending cap eliminates the retrospective re- characterisation of expenditure and lowers the anti-competitive effect of spending caps.

5.5 “Question 3.5 - Spending Outside the Regulated Campaign Period

How long should the regulated campaign spending period be?”

5.5.1 See comments above.

5.6 “Question 3.6

If the length of the regulated campaign spending period is decreased or increased, should there be a corresponding decrease or increase in overall spending limits?”

5.6.1 See comments above.

6.0 Chapter 4 - Advertising

6.1 “Question 4.1 - Election Advertising - Scope

Should New Zealand retain its current approach to the regulation of election advertising, or should a revised definition of ‘advertising’ be adopted?”

1. No. It doesn’t significantly limit expenditure on political campaigning as much of this expenditure is not a party or candidate advertisement. The approach focuses on mediums and the law essentially determines some to be so persuasive by nature that they are separately rationed (television and radio). On the margins of the remainder of the mediums, specialist legal advice is needed to determine whether or not the communication is an election advertisement. When electoral authorities are arguing whether a party logo is voter persuasive, and must shy away from the obvious answer because of the practical effects of saying that political branding is like all other branding (it is intended to be persuasive), then the law lacks credibility. When disputes over returns arise, the current approach makes them expensive to resolve as so much is really a subjective judgement.

2. Subject to Parliament either abandoning the distorting spending caps (or substantially raising them to a more realistic level), ACT favours an all-expenses approach to the expense returns of both parties and candidates alike. An “all in” approach to expenditure of parties and candidates in the regulated period could be adopted especially if parties and candidates are permitted to voluntarily adopt a longer regulated period. The excluded expenditure would be a small subset of all the activities during the regulated period and both parties and candidates would have to make out a case to show that the excluded item either is a statutory exception (voluntary labour or parliamentary activities) or is otherwise remote from campaigning for election. This would mean that expenses returns would be completed using a standard accounting approach.

6.2 “Question 4.2

How should “election advertisement” be defined? Should it be broad or narrow? Should there be exceptions and if so, what should they be?”

6.2.1 See above comments.

6.3 “Question 4.3

Should rules on publication be media neutral, so that new communication technologies that are developed fall within them?”

6.3.1 ACT’s preferred approach avoids problems arising from technology.

6.4 “Question 4.4 - Public Disclosure of Names and Addresses on Advertising

Should there be a requirement for persons who publish an election advertisement to include their name and contact address?”

1. The current scheme applies to candidate and party advertisement and to non party and non candidate speech in some circumstances – any future approach should separate the requirements of candidates and parties and the requirements for others. There should not be any requirement to disclose a physical residential address if another street address is available. The test should be whether the contact information is meaningful. Regarding non candidate or party speech, the law should be more relaxed.

2. For candidates and parties, authorisation statements attempt two purposes: who actually did the thing and if it’s a candidate or party it will appear in the return of that candidate or party. In some circumstances the medium chosen mitigates against an authorisation statement. In such cases an authorisation statement could be lodged with the Electoral Commission or Chief Returning Officer by descriptor or by type and including a sample (if this is reasonable) if it is impractical to include an authorisation statement on the thing itself. This would satisfy the requirement to show whose return the thing will appear on.

6.5 “Question 4.5

If so, are the existing rules adequate, or should they be changed in some way?”

6.5.1 See above comments.

7.0 Chapter 5 – Parallel Campaigning - Regulation of Parallel Campaigners

7.1 “Question 5.1

Should there be any regulation of individuals and groups who participate in election campaigns but are not standing for election?”

1. The question hinges on the use of the word “participate” in this context. This expansive view of participation is actually unhelpful.

2. The question is to what extent non candidate and non party speech should be regulated thereby privileging both candidate and party speech.

3. ACT’s view is that this is actually a non-problem. To the extent that it is a problem in an Anglo-American democracy, it’s a problem entirely created by the regulation of candidates and political parties in the first place. Thus, rule-making creates the problem in the first place; those who advocate for the initial regulation then push for the regulation beyond candidates and political parties. Existing parliamentarians like spending time on non-candidate and non-party speech, and the great risk it poses to democracy, because existing laws lessen competition risks from other candidates and parties. Non-candidate and non-party speech, however, represents an unquantifiable risk to incumbent politicians. In a broader sense, any challenge to the array of existing parliamentary parties is likely to come from this form of speech. Aside from ACT, there is likely to be much ‘tut-tut ting’ about it from Parliamentary parties.

7.2 “Question 5.2

Should negative or attack advertising by parallel campaigners be regulated?”

1. There should be no regulation of non-candidate or non-party speech whether it be “negative”, “positive” or whatever. Non- candidates and non-parties should be free to express political ideas and preferences as candidates and parties as part of the fundamental rights they enjoy and have long enjoyed as New Zealanders. Removing the artificial distinction between “positive” and “negative” speech will make this non-candidate and non-party speech more natural and less contrived. (Also, see comments at paragraph 3.2.2).

2. To the extent that this non-problem needs to be addressed (aside from freeing up the regulation of political competition by candidates and parties), any concern about the interaction between candidates and parties and non-candidate and non-party speech could be addressed by non-consorting obligations on candidates and parties. The regulatory burden should not fall on those exercising non-candidate and non-party freedom of expression.

3. The rule could state that to the extent that a candidate or party has any more influence over any incident of non-candidate or non-party speech than any other member of the public, then a portion of value of that non-candidate and non-party speech should be represented in the return of either the candidate or the party. Candidates and parties could file a statement with the Electoral Commission and the Chief Electoral Officer outlining their intentions regarding non-candidate and non-party speech and the processes they will adopt to ensure that they will have either no influence over this speech (over and above that of any other New Zealander) or they do and a portion of it will be represented in their return.

7.3 “Question 5.3

Should there be restrictions placed on the people or groups who are allowed to engage in election campaigning?”

7.3.1 ACT’s view is that expression of a political view by non- candidates and non-parties during an election period - when political issues are of most interest to citizens - is not engaging in election campaigning, since non-candidates and non-parties cannot be elected to public office, and it is certainly not a justifiable limitation in terms of the NZ Bill of Rights Act 1990..

7.4 “Question 5.4

Should there be tighter rules around government department publications in the period before an election?”

7.4.1 With few exceptions, ACT views most Government advertising as a waste of taxpayers money, whether it occurs immediately prior to an election or at any other time. Advertising is used for the purpose of promotion of a brand and the government is not a brand.

7.5 “Question 5.5

Should there be any restrictions on election campaigning by persons or groups closely associated with a constituency candidate or political party?”

7.5.1 See above comments.

7.6 “Question 5.6 Identification of Parallel Campaigners

If parallel campaigners should be regulated, is disclosure of their name and address on advertising that they promote sufficient?”

7.6.1 If non candidate and non party speech is co-ordinated by either candidates or parties then a authorisation statement where appropriate (given the medium) could be required.

7.7 “Question 5.7

Alternatively, should individuals who spend over a certain amount be required to register on a public list?”

7.7.1 ACT’s view is that this would be an unreasonable, irrational and unnecessary regulation of the freedom of expression.

7.8 “Question 5.8

If there is to be a public list of parallel campaigners, who should be required to register? Should there be a monetary threshold for registration? If so, how much should the threshold be?”

7.8.1 See above comments.

7.9 “Question 5.9 - Spending by Parallel Campaigners

Should spending by parallel campaigners be limited?”

7.9.1 See above comments

7.10 “Question 5.10

If a spending limit is imposed, what do you think the limit should be?”

7.10.1 See above comments.

8.0 Chapter 6 – Monitoring and Compliance

8.1 “Question 6.1

Based on your answers to questions in previous chapters, do you have any views on how constituency candidates’ and political parties’ compliance with the electoral finance rules should be monitored and enforced?

1. ACT does not support prosecutorial discretion of electoral offences being shifted to any other agency of the Executive (independent or otherwise) and away from the NZ Police. The New Zealand Police are most experienced in exercising this discretion.

2. ACT does not support the creation of offences in relation to electoral finance matters where the Crown is only obliged to establish one element of the offence and the burden relating to the mental element (to show reasonable care and the like) of the offence is shifted onto the respondent. The Crown should be required to establish both elements of any offence. This ensures that only the most serious cases come before the Courts.

3. ACT would be prepared to look at the limited timeframe for an option of private prosecution of electoral offences (with the leave of a High Court judge) in any case where the NZ Police decline to prosecute.

4. ACT would consider requiring the first candidate on any party list to sign the party return - in addition to the party secretary. This ensures political and parliamentary accountability for the contents of these returns.

5. ACT recognises there is a sanctions problem for offences relating to party campaigns. Presently, individual Members of Parliament can ultimately lose their seats via either an electoral petition or conviction for electoral offences. No such options exist as against parties and, for practical purposes, cannot. This might be addressed by permitting the prosecution of political parties for electoral offences. However, this would require political parties to have a legal personality where currently most do not. This could be achieved by registration involving incorporation and thereby conferring legal personality. Whilst a successful prosecution of a party could only involve a fine, the primary accountability mechanism for such wrongdoing would actually be parliamentary and ultimately electoral.

9.0 Submission Details

9.1 Dr Michael Crozier’s contact details are as follows:

ACT New Zealand

Level 2, 309 Broadway,

PO Box 9209

Newmarket Auckland

Ph: 09 522 7464

Fax: 09523 0472