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Joint Standing Committee on Electoral Matters
20/02/2018
Conduct of the 2016 federal election and matters related thereto

DRUM, Dr Martin, Private capacity

Committee met at 09:43

CHAIR ( Senator Reynolds ): I now declare open this public hearing of the Joint Standing Committee on Electoral Matters inquiry into the conduct of the 2016 federal election and related matters. Today we are focusing on political donations. I welcome Dr Martin Drum. Although the committee does not require you to provide evidence under oath, I wish to advise that this is a formal proceeding of the parliament and the giving of false or misleading evidence is a serious matter and may be regarded as a contempt of the parliament. These proceedings are being broadcast and recorded by Hansard. They are public proceedings. The committee will consider a request to have evidence heard in private session. You should state the grounds on which you make that request, and we will consider it. I invite you to make an opening statement and then we will go to questions from the committee.

Dr Drum : Thank you for the opportunity. I will begin with some remarks in relation to the discussion paper that the committee has circulated. I concur with the problems identified in the discussion paper. Broadly speaking, the system is too complex at the moment and does need simplifying around political donations. The time lines in disclosure don't just cause a perception of a lack of transparency; they actively encourage transparency, at least at the point of the donation being made. Furthermore, despite the complaints of vested interests, there is definitely a need for regulation of electoral campaigners who currently fall outside the act. I might talk a little more about that in due course.

One of the points made by the discussion paper is around continuous campaigning. We now live with the reality that campaigning happens 24 hours a day, 365 days of the year. That is an important point to make. What that means is that the immediate context of donations, and the political influence that may be associated with them, needs to be realised; it may be forgotten if that disclosure doesn't take place in real time. Continuous campaigning also makes the regulation of third-party campaigners more important. That's because campaigners now seek to achieve political outcomes that are outside of set electoral periods. For instance, a tax could be dumped, there could be a leadership change, legislation could be voted down et cetera. So, for our democracy to function, the public needs to understand what actually drives political donations and the immediate context of them. So continuous campaigning makes political campaigners important, not just political parties.

Social media needs to be better understood. We do have a fair bit of research into social media's impact on voting behaviour, hence the social media strategies that political parties engage in. But we are still hearing a lot more. For instance, investigations into Russia's attempts to influence the US elections haven't unearthed a whole range of other methods that people can utilise on social media.

In simple terms, there does need to be a level playing field—people who are seeking to spend a substantial amount of money to influence public opinion should disclose their funding sources whether they are members of political parties or other organisations. I'm more interested in regulating activities than organisations, but there is a reality that, to some extent, we need to do both. Political parties are unique bodies; they seek to win office and, therefore, to influence public opinion. Occasionally, political parties are established for the purpose of enabling another political party to win office. All of these activities deserve scrutiny. Whilst political parties are a special category, I think there is a relevance in regulating all political campaigners to some degree.

In principle, I think the government's bill on foreign donations is moving in the right direction. I support its broad contention to capture further political campaigners but I do believe that there are amendments needed to make that bill work more effectively.

Mr GILES: Thank you for your submission and for your evidence today. I might start where you finished and try and unpack two propositions on this third-party regulation question. Firstly, if I have properly understood your evidence just now, you pointed to a distinction between those parties that seek to form government or seek to acquire formal political office and other actors. What do you think flows from the distinction between that and other issues based activism?

Dr Drum : A political party is formed for the sole purpose of acquiring representation, so it needs to be regulated on that basis. We have regulations around, for instance, the membership required for political parties. That wouldn't apply to third-party campaigners, so clearly there is a distinction there. On the other hand, I think anyone seeking to influence the political process, particularly through money, needs to be regulated to some degree. So I believe in regulating activities and there is also a need to regulate organisations.

I wouldn't regulate third-party campaigners in the same way as political parties and I don't think anyone is proposing for that to happen. We wouldn't assist that third-party organisation have a minimum number of members to operate; that would be absurd. We wouldn't insist that all members of a third-party organisation be on the electoral roll, for instance. We wouldn't insist on a whole range of things, but we are interested in the money that they spend, particularly direct money that they spend to try to influence public opinion. I think that's a fair and reasonable thing.

I think, though, that there is a need to better define political activity. Just employing someone in your organisation to work on, say, government media relations or social media strategies is not in itself a regulated activity. But certainly any money that you might pay for advertising that has a political element to it is political activity.

Mr GILES: On this definition question, is it your view that this is the sort of question that requires a deep examination and, through public consultation, perhaps a full regulatory impact statement?

Dr Drum : Yes, I think there is need for better consultation, and I think that's what we're seeing in public debate at the moment. A number of charities have come forward and expressed some concerns about the current bill. They're very reasonable. The government appears to believe that they're reasonable concerns. You might be with St Vincent de Paul and be seeking to campaign on better homelessness facilities. That's a political act, but to what degree does that need regulation? It might if you take out an advertising campaign on channels Seven, Nine or Ten. It probably wouldn't if you just employed someone for the purpose of raising the issue of homelessness.

Mr GILES: On that point, do you have any specific comments on the definition of 'political purpose' and 'political expenditure' that's set out in the bill?

Dr Drum : I think at the moment it's too broad. At the moment it just needs clarification. From what I can see, this appears to be a fairly common view that political activity needs to be better defined in the current bill. I think it needs to be more narrow, so it shouldn't capture all organisations that a third party undertakes, but it should certainly capture the expenditure of money for the clear purpose of influencing public opinion.

Mr GILES: Broadly, your submission points to your view that you are more concerned for transparency than for regulated caps on expenditure. Do you have any view, though, about a minimum level of expenditure on these sorts of activities, if we get the definition right, that would pull a third party into such a regime?

Dr Drum : I testified on this last time round, and I said somewhere in the order of $100,000. I think that the government bill captures that to some degree. It's just that political activity needs to be better defined. There's no obvious answer to this, but I think you need to step back and think about what's a substantial amount of money that an organisation seeks to put into a political activity. If you were just taking out a local advert in the newspaper, that's not a substantial amount of money. If you were actually running a significant political campaign and tipping six figures into it, that is a substantial amount of money that has the potential to influence voters. So that kind of activity would be regulated, in my view.

Mr GILES: Lastly, at the end you talk about the role that state based anticorruption commissions have played in dealing with some of the wider concerns that I think this bill is intended and directed towards. In your view, can we restore public confidence in politics at a federal level without a similar institutional arrangement nationally?

Dr Drum : I believe we do need a national anticorruption commission. In every jurisdiction where one has operated, it has unearthed significant activity, and this activity is not captured by existing bodies. We have seen it work quite effectively. It has caught activities that have been undertaken by all major parties and some minor parties as well. It's a difficult argument, but clearly there are probably activities that are not being seen because we don't have an anticorruption commission. That's a flimsy argument in and of itself, but I think what you can point to is the successful operations of existing anticorruption commissions.

Mr GILES: Thank you very much, Dr Drum.

Dr Drum : You're welcome.

Mr MORTON: Thank you, Dr Drum. Just to get some more meat on the bones in relation to your evidence, you've observed political campaigns over a long period of time. You talk about third parties and the need for there to be transparency and regulation in relation to their finances. Can you just make a comment in relation to the rise of third-party campaigns as you've observed it.

Dr Drum : I think they've become much more prevalent on the landscape, and I think that they will become more prevalent still. I know there has been some discussion in the public eye about GetUp!. I think there will be more conservative movements that seek to mirror the efforts of GetUp! as well. These are not activities restricted to any particular type of politics. I said this in my submission and I think this is an important point to put on the record: we should never discourage political participation. That is a very valid and worthwhile thing to do.

As Mr Giles has suggested, I'm mostly interested in transparency. You can engage politically, and you should engage politically, but if you are spending a significant amount of money then the public should know about it. They should know where that money is coming from.

Mr MORTON: Over time, is it your view that political campaigns are no longer restricted just to the formal election period but that political campaigns are something that occur through 365 days a year, throughout the term of a parliament?

Dr Drum : That is certainly the case, and the types of activities and the types of ways in which people will seek to manipulate public opinion are more complex. So it's not just about winning election campaigns. It's about the success or failure of specific measures.

Mr WATTS: I'll just pass you a document. This issue of political expenditure has been raised throughout our hearing, and I've got particular clauses which are causing great concern. No. 1 is the 2006 clause that was replaced in September last year by No. 2, and No. 3 is the new clause that came in in September and which has effect from March. We sorted out that confusion earlier in the hearing.

Clauses 2 and 3 are very similar; the words are just moved around in order. The AEC has given evidence that since 2006 expression of views by any means is in operation for 365 days a year. Is it your understanding that those three causes have the same effect, but the issue is still too broad? Or are you arguing that they don't have the same effect?

Dr Drum : Firstly, I will say that I'm not a lawyer, so I'm not going to offer a legal interpretation for one clause as opposed to another. Political expenditure is about the expenditure of money, it's not about the expression of views, in my view. Anyone can express a view in an unregulated fashion and they should have a right to do so—that's freedom of speech. It's about the expenditure of money in promoting that political view that is important.

Mr WATTS: Just to be clear on that—I think you and I are in agreement—for an organisation to fly someone to Canberra to talk about their organisation's concern about the issue is different to if that organisation spent $50,000 encouraging all Australians to contact their local MP and lobby about change on a particular issue of public policy?

Dr Drum : Yes. I'm not going to go into detail on any particular example, but I would agree with your interpretation. Essentially, organisations are always going to use human resources and promote issues, but if they're specifically spending their own money that they've raised on a campaign, that's different.

Mr WATTS: If we had a ban on foreign donations to political parties so we don't have foreign influence on Australian voters, is it your view, as the government has outlined in the bill, that all organisations should also have that same prohibition, where they can't receive foreign donations for the purpose of political expenditure?

Dr Drum : Yes, broadly speaking, I agree. It's the details that, obviously, I will need to look into further. There is definitely a need to ban foreign donations, but where that starts and stops is obviously where the complexity is. Broadly speaking, it should be that the same rules that apply to a political party or to a third-party organisation. Whatever we establish, it should be the same.

Mr MORTON: However, with the bill there's a blanket prohibition on foreign donations to political parties. The reason charities are mentioned in this bill is to provide them with an exemption to that so they can receive foreign donations for the purposes of their expenditure that isn't political expenditure. Do you think that exemption is fair though—that charities should still be able to accept foreign donations for the purposes of their non-political expenditure?

Dr Drum : They should. The complexity is how we actually go about structuring this. The money that you would donate towards a charity is not political in many cases, so it shouldn't qualify in the same way as the money you donate to a political party; however, we know that charities can engage politically, so it's about structuring it in a way that's simple and easy to understand, and easy to follow. Broadly speaking, if a third party organisation is engaging in significant political activity, then the same rules around foreign donation should apply.

Mr MORTON: What's the risk of not applying that? What's the risk of having higher transparency and greater regulation on political finance and disclosure for political parties but not for third parties that still engage in political campaigns? What are the risks there? Does the money still find a way? What are your concerns?

Dr Drum : I think the risk is fairly obvious. If you didn't regulate third party organisations at all, people would get around foreign donation laws, donate to third parties and disseminate their political views in that way. If you are a donator from a foreign government, say, and you're seeking to influence public opinion in Australia, you simply channel that money through a third party organisation and they spend that money on your behalf and advertise accordingly, for instance.

Mr MORTON: Finally, I share your view in wanting more people to be actively engaged in our democracy. I'd even be happy if more people were involved in the Labor Party or the Greens. I'd prefer them to be actively involved in the Liberal Party, however, but being involved in democracy is important, and that also includes donating to political parties. Currently, tax deductibility for donations to political parties is capped at $1,500 for individuals, but for those organisations that have tax-deductibility, gift recipient status, that still run campaigns designed to influence voters, there is no such cap of $1,500 for the tax deductibility. Should we be looking at that? If you can donate with no deductibility cap to an organisation running a political campaign that is a charity, should we look at removing the tax-deductibility cap on political parties to encourage active participation?

Dr Drum : You raise an interesting point. These things sound good in theory, but the difficulty with, say, a charity that engages in political activity is that we want people to still donate to charities. There's been some public commentary around this—we then have the difficulty of trying to distinguish between the political expenditure and the day-to-day expenditure, or service provision for people who are disadvantaged et cetera. The point you made is a very valid one, and it is certainly something we should investigate, but we've got to craft the legislation in a very careful way so that we don't make it impossible for charities to function by overregulating them.

Mr MORTON: So put aside making changes to charities' tax deductibility, what issues would there be with removing the cap on the tax deductibility of donations to political parties? Who does that hurt other than the Treasurer?

Dr Drum : It would hurt the Treasurer a little bit. We should be encouraging all the individuals and groups—it's fine for them to donate, and that's a form of political expression, so it should be encouraged. The extent to which we then give them a tax exemption is an interesting can of worms, so to speak, and something I would probably have to give more thought to.

Mr MORTON: If you could—please feel free to take that on notice.

Dr Drum : Yes, I will.

CHAIR: Dr Drum, I want to pick up one of your comments in your opening statement where you talk about activity versus organisation. This is something that I've been reflecting on as part of this inquiry, because, like in many, many laws, it gets fixed in time. In the eighties we defined the political actors at the time as political parties, associated entities and the very few third parties, and we still regulate according to a construct of an organisation and not, as you said, in terms of the activity that actually occurs in a campaign itself. So one of the things for me in particular is: how do we change the law so that it actually reflects the reality of campaigning on the ground today? It is not like in the 1980s or 1990s when political parties came together and battled during an election campaign on philosophy and party policies. It is now, as you said, 365 days a year, it's issue based and it's actually influencing people's voting intentions through issues. Some sides of politics are doing it more effectively than others. But that's the way it's played. How do you see that balance, and how can we start shaping the laws so that they reflect the reality and provide more of a level playing field? Because we're not trying to regulate an artificial construct of an organisation, but what's happening on the ground.

Dr Drum : There are two broad things. I think you regulate political parties as organisations, because they are different, as per my opening statement. Then, I think, the main focus after that is regulating activity. I might be an otherwise charitable organisation or I might be an interest group—I could be a chamber of commerce; it doesn't really matter—and my day-to-day operations are not political. But the campaigns that I then choose to engage in are political, they do influence public opinion and they do need to be regulated to some degree. And when I say 'regulation' I don't mean stopping them; I'm mostly interested in transparency. It's important that we have a very robust society and we have a robust public debate. When things are exposed, there's a whole range of ramifications that come with that. So transparency, I think, is the most important thing. If we have political activity, it's not about regulating organisations necessarily; it is about regulating the activity. If we know about it, then we can make public comment on it, we can scrutinise it and we can debate it. And, in many cases, whether it is an opposition or whether it is the media, that is done quite effectively. We cannot do it at the moment when there is up to 18 months where we wait for disclosure on political donations.

CHAIR: I don't think you will get disagreement from anybody here on the snail's pace of disclosure. Further on that, having a look at some of the actors, obviously the committee has talked at some length with and about GetUp!, who are a particularly effective form of third-party organisation. They are not a charity. They do not claim to be a charity. They are there to advocate on issues and advocate for or against candidates who support their issues. They put in the largest third-party returns. They are the largest third party. So, in terms of definition, for me, they don't fit into 'political party', 'third party' or 'associated entity' comfortably. They have all the characteristics of a political party except that they don't run their own candidates; they support or oppose other candidates. They're not the only organisation like that but they're, I guess, the highest profile. And obviously they get money from overseas and that comes into foreign donations area. But how do you see the emergence of these organisations and how do we put them on a level playing field?

Dr Drum : It's a very good question. I still think we have to treat political parties and associated entities differently. There is a danger, though, if we don’t regulate third parties at all that people who should be associated entities just act as third parties. So, like I said, there does need to be some regulation. The challenge, though, is, if we start to try and define a group like GetUp! as a distinct third party as opposed to charities, a lot of other organisations, future organisations, will try to mask the way they do things so that they appear as something else. So—

CHAIR: I just want to unpack that bit further. At the moment, we've got charities. GetUp! is not a charity. There is no suggestion that they are doing anything they shouldn't be doing, but, to me, GetUp and also a large number of charities are acting now as political action committees or super PACs even. They are doing exactly what the PACs and super PACs in the United States do, but they do it with charitable money. Last financial year, only seven of them put in a third party return. You may not have seen it, but we have already had evidence from individual charities and also from their peak bodies where they have admitted that many of their members should have put in third party returns but they weren't aware for over a decade that they had a strict liability requirement. It means that we have got a large number of highly funded domestic and overseas organisations who have moved out of the charitable space into the PAC space, but they are invisible.

Dr Drum : You raise an important point. The challenge is: where do we stop? Were do interest groups stop and were does a third party campaigning movement start? That is extraordinarily complex. There are a range of organisations that we have set up to advocate for certain interest groups. They are naturally going to engage in political activity. The Chamber of Commerce is a good example of that. They rightly advocate for businesses, but, because they advocate for businesses, they are inevitably going to campaign on behalf of businesses.

CHAIR: But they put in returns.

Dr Drum : I agree with you on that. I think there should be returns. That is why I am suggesting that we regulate activities more than we regulate organisations.

Mr MORTON: Just a clarification. Dr Drum, you have mentioned this a couple of times and you have qualified it —I just want to be very clear—and that is differences between political parties and associated entities with third parties. Previously, you have characterised that as differences in relation to assessment about their membership in order to register and whether or not their members need to be on the electoral roll. But your view is that in so far as their financial disclosure and transparency is concerned, it should be the same. Am I right in saying that?

Dr Drum : I think it should be similar.

Mr MORTON: Similar. Okay, that's fine. You said earlier that there should be differences, so I am just putting in context the fact that you were talking about non-financial transparency things.

Dr Drum : Yes. Can I just clarify that a little bit. If you are a political party then inevitably everything you are doing is political, and there is another big difference because political parties have public funding. So the things that you do are about expenditure of public money and they are inherently political. So they are a little bit different. Not everything that associated entities do is political. A lot of what they might do is political, but not everything is political. If you choose to regulate associated entities in one way and then you don't regulate third party organisations at all then people are encouraged to set themselves up as third party organisations. I would rather that people—

Mr MORTON: There needs to be a difference in regulations, but when it comes to financial disclosure and transparency the regulation needs to be similar.

Dr Drum : Yes. Essentially, the principal is: if I am spending money in order to influence or manipulate public opinion then the public has a right to know where that money is coming from.

CHAIR: You said that the foreign donations bill was heading in the right direction. What aspects of it do you think are spot on? You said some need amendment. Can you clarify a bit further what sections you would recommend that we ourselves look to recommend amendments.

Dr Drum : There are a couple of things. There are two main areas. One is political activity. We need to do a bit more work to define that. It is a complex area, so some form of consultation with people who will be affected by that legislation is going to be important. I know that has already taken place and I would expect that some amendments are coming out of that process. The second thing is the reporting onus on organisations, and that has attracted some concerns as well. There are aspects of that that I think are too onerous. For instance, whether or not someone is a member of a political party is neither here nor there, in my view. I could be a senior person with the Chamber of Commerce, St Vincent de Paul or GetUp! but that is not really the point. The point is the activities that organisation undertakes. It is not whether individuals are politically minded or not, in my view.

CHAIR: I don't mean to pick on GetUp!; it's just that they're the biggest of their new class. Would you say organisations like that should fall under 'associated entities' and then make it clearer who actually falls under 'third parties'? Of 55,000 charities, only seven put in third-party returns last financial year. From the evidence, clearly more should have, because they were engaging in very clear political activities. Would expanding the definition of 'associated entity' cover those people who are not quite political parties but are there to shape and influence issue based election campaigns?

Dr Drum : I wouldn't do that. The reason for that is that I think it's very difficult to work out where that starts and stops. People might be encouraged to change the mission of their organisation to escape being called an associate entity when in fact they're engaging in political activity. There are a range of organisations that would say: 'I want to influence public opinion, but I'm not necessarily a Liberal or a Labor or a Greens ally. I'm just interested in the issues.' I think that is a legitimate path to take. Say they're the Conservation Council. They will say, 'I'm interested in environmental issues.' Okay, that might end up favouring one political party—some of their commentary and campaigning. For them, they don't want to be an associated entity, because that starts moving them into a different purpose.

CHAIR: You raised the Conservation Council of WA, presumably. Let's unpack them a little further. As a peak body for conservation groups in Western Australia, they clearly have a legitimate environmental focus and concern, but they are also highly active political campaigners in their own right. So, whether it's campaigning against the last state government on Roe 8 or the Beelia Wetlands, they had a very active role. But it doesn't stop there. They also set up other campaigns—the Frack Free campaign, which didn't have 'Conservation Council of Western Australia', but it was fully funded by the Conservation Council of Western Australia, and they were at polling booths. So they had scorecards and they had campaign material. Ultimately, when these organisations campaign, I can't think of a single example where they haven't put out—a bit cute—how-to-vote cards with 1, 2, 3, 4, or smiley faces, or ticks and crosses or whatever else—

Mr BUCHHOLZ: Election material.

CHAIR: Election material. So they can't for a second claim that they are just a—

Mr BUCHHOLZ: How should they be treated differently to the union movement, which might be advocating for workers?

Dr Drum : I know what you're saying. I think it's a really interesting question. We don't have an easy answer. That's why I still think I'd rather regulate their activity. In other words, if you're expending money on political materials, that's political expenditure.

Mr BUCHHOLZ: Standing at a polling booth trying to influence a vote—

Dr Drum : Well, volunteers do that—that's the complexity around that.

CHAIR: Actually, it's a very good point.

Dr Drum : If you're paying someone to do that, then that's different.

Mr MORTON: But a T-shirt used to fit out your volunteers should be part of it.

Dr Drum : Well, that's political material.

CHAIR: Say you've got a union that pays for its members to come and work on polling booths here, which we've had now for several elections, state and federal. If a union is paying its members to come here and stand on polling booths, smaller parties—remember Palmer actually paid his staff to work on the polling booths. So you can't actually say they're all volunteers, because they're not anymore.

Dr Drum : I think it's an interesting point. Again, it comes to the complexity of what we're talking about. If you're a union employee, you may not have been specifically paid to work that day, but there might be an implicit expectation—

CHAIR: I can assure you they did not pay for their own accommodation and airfares.

Dr Drum : Okay. Like I said, I think we need to clarify political expenditure. But I would still believe that you regulate the activity rather than the organisation. It's too messy doing the organisation.

CHAIR: As I said, I think you'll get thunderous agreement from all of us on this—but the question, as you said, is: how do we come up with recommendations to achieve that? Dr Drum, thank you very much for your written submission and for coming here today. You've certainly provoked some further thought and highlighted some very challenging issues for us. It's always good to see you. Thank you very much.

Committee adjourned at 10:19