Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Joint Standing Committee on Electoral Matters
09/08/2011
Funding of political parties and election campaigns

MILLS, Mr Stephen, Private capacity

CHAIR: I now welcome Mr Stephen Mills. Is there anything you would like to add about the capacity in which you appear before the committee?

Mr Mills : I am a lecturer in the Graduate School of Government at the University of Sydney. I am also undertaking doctoral research into Australian political parties in the Department of Government and International Relations at the university.

CHAIR: Although the committee does not require you to give evidence under oath, I should advise you that these hearings are legal proceedings of the parliament and that therefore have the same standing as proceedings in their respective houses. You have not made a submission to the inquiry. I understand that you made a submission to the green paper. Do you wish to make an opening statement in relation to the committee's terms of reference?

Mr Mills : Yes, please. Thank you for the invitation to appear before the committee. I applaud the committee for tackling this difficult and important work and I hope I can bring a useful perspective to the inquiries. I did make a submission to the green paper. I will not repeat the arguments I made in that paper but perhaps by summarising and updating them and clarifying them I can underline the relevance to the terms of reference of this committee, especially point (d) relating to the escalating cost of elections. Campaign costs are too high. They are so high that the major parties cannot pay their campaign bills with the funds that the taxpayers provide for that purpose. Parties continue to rely on private donors to perform this most public of duties, campaigning, with all of the consequent problems of lack of transparency and risks of undue influence.

The public funding system was introduced in the 1980s to provide parties with a clean and certain source of election campaign funds that would keep them out of the grip of potentially self-interested private donors. It has failed in that laudable ambition, as academic studies have demonstrated—as well as the green paper, which noted that public funding has simply become just another revenue stream for the political parties. My proposition is about revitalising the public funding system, putting it at the heart of campaign funding where it belongs and making it a key instrument in the effort to improve election campaigns by linking it, for the first time, to spending limits.

In essence, what I am proposing is that parties in receipt of public funding should be required to limit their campaign expenditure to a predetermined proportion of their expected public-funding receipts; that is, campaign spending limits should be made a condition of public funding. For example, if a party is thought likely to receive $20 million in public funding in the forthcoming election, based on the dollars per primary vote formula, then it would be advised by the Australian Electoral Commission well in advance of the campaign that it was required to limit its total electoral spending to, say, 100 per cent or more or less of that $20 million. Those amounts—in other words, the anticipated receipts and the permissible spending proportions—would of course be matters for careful consultation prior to decision.

A refinement of this proposal could cap specific types of campaign spending. In my submission I did focus on broadcast advertising because it is the largest single item of campaign expenditure and because cost increases are driven by commercial broadcasters in a not particularly transparent marketplace. So in this case the party would be advised that its spending on broadcast advertising would be capped at, say, 70 per cent of its anticipated $20 million. The AEC would administer this through a voucher system and reimburse broadcasters for campaign advertising they carry on behalf of the parties during the campaign.

The proposal is not designed as a ban on TV advertising. It is not designed to tell parties how to conduct their election campaigns. It is designed to impose a discipline on major party spending by bearing down on their supply of funds. The approach, I believe, is potentially a better and more effective way of capping spending than by imposing blanket or global caps a la the recent New South Wales election. That is because such caps are essentially set in light of demand-side factors—for example, the reported costs of campaigning—and they are complex to design and enforce, with plenty of scope for loopholes and ambiguity. With public funding, on the other hand, dollars follow votes, which is a powerful principle, and the spending caps process could be designed to give parties themselves an incentive to comply, mainly by discouraging overspending through punitive reductions in their public funding receipts. Downward pressure on campaign spending could be progressively increased by reducing the permissible spending proportion over several electoral cycles.

The strength of the proposal lies in the strength of the public funding system. The weakness, of course, lies in the fact that, like the public funding system, it does not cover third parties for whom I believe a separate process of registration and spending limits would be required.

I will conclude by noting that I have spoken only at the level of principle. There are clearly a lot of important implementation questions that would need to be tackled. I think that is common to any reform proposal in this area, so perhaps we can address those if you have any questions.

CHAIR: At the outset I will defer to Senator Ryan, who has indicated he has some questions.

Senator RYAN: I was not involved in the green paper inquiry so, in reference to what you said and reading this particular submission, I start from a different view. No-one has yet nailed to me the problem that exists here. I have to admit that I have to challenge the assumption that increased spending on election campaigns by participants is a bad thing, that increased sourcing of private donations is a bad thing, and that spending on campaigns outstrips the public contribution is a bad thing. When I think it was the Labor Party and the National Party made the deal in 1984 on public funding there were many on my side of politics that predicted some of these very problems. The response seems to be, 'That hasn't worked, so let's effectively start banning people from doing things.' If you introduce spending caps, you are banning people from spending more than a certain amount of money. If you are introducing donation caps, you are banning people from doing something that they otherwise might want to do. Where is the evidence to suggest what is identified by many people of your persuasion on this issue which is that further regulation is necessary? Where is the evidence that this is a problem?

Mr Mills : I certainly agree that we have to get clarity about what the problem is that we are trying to tackle. One of the aspects of this debate is that there are all sorts of potential targets and potential or alleged illnesses that need to be addressed. My starting point is that spending is too high. I am not saying that on any personal basis, I am saying that on the evidence which is provided including by the political parties themselves which consistently report stress at endeavouring to fund increasingly expensive election campaigns.

Senator RYAN: Mr Mills, I put to you that I always take with a grain of salt those who complain about how hard their job is because people are not conscripted into these roles in political parties. You said your starting point is that spending is too high. What I am trying to get at is why is it too high? Put the political parties to one side for a second. What are the aspects of it that are too high? What is the problem that it is causing?

Mr Mills : I suppose we have in place a system of public funding of election campaigns which predates your and my involvement in this debate. That system of public funding is, as I have put it in my opening comments, predicated on the desirability of a clean and certain source of funding for political parties. There was no specific effort in that legislation in the early 1980s to require that parties only use public funding for election campaigning and I am certainly not advocating that at this stage. But there was an assumption I believe that some form of public funding was desirable in order to relieve parties of the stress and risk of private funding.

Senator RYAN: Is it possible to say that, to be honest, it was an excuse used by people to raid the taxpayer? There were people at the time that predicted it would not reduce the pressure on fundraising and that all it would do was provide the revenue stream which the green paper alluded to. I do try to peel the onion to get to the nub of the situation here. It is also not possible that that was used as rhetoric by the proponents of the proposal to raid the taxpayer for their own purposes?

Mr Mills : I suppose I am not capable of thinking into the actual motivations—

Mr GRIFFIN: I suggest that there are differing points of view on the committee with respect to the, if you like, intention or principles around the question of public funding. That is just a given, Scott.

Senator RYAN: No, I am asking about this here because what I am trying to get to is this point that we seem to always look at the motivation of donors. We hear from witnesses quite often that someone that hands money to a political party is not just doing it out of the goodness of their hearts, they are trying to buy access or influence. Yet somehow when political parties go to the taxpayer and take tens of millions of dollars it is purely for altruistic purposes.

Mr GRIFFIN: I think the point behind the original purpose of the legislation and the argument at the time was that you try to, as much as possible, remove parties from a situation where not only actual but perceived conflicts of interest are produced as a result of the need to fund election campaigns. We can disagree on that.

Senator RYAN: I know and the truth is somewhere between the two, but I was not asking you.

Mr GRIFFIN: I know you were not, but I am a bit concerned about the number of times where we have had a situation where witnesses have in my view been badgered around the question.

Senator RYAN: Hang on, I am not badgering anyone, Alan.

CHAIR: Let's all relax—

Mrs BRONWYN BISHOP: Is this at the time when Mr Mills was working for Bob Hawke?

CHAIR: What an honourable thing.

Senator RYAN: I did not even know that.

CHAIR: This is the benefit of iPads. What is the inference of that?

Mrs BRONWYN BISHOP: I am responding to Alan.

Mr GRIFFIN: And I to her.

Mrs BRONWYN BISHOP: And it ties in with the question.

CHAIR: You talked about slurs earlier. It is a badge of honour. Mr Mills, please answer. Just get back in your boxes.

Mrs BRONWYN BISHOP: I did not say there—

CHAIR: There is no point in it. It was an attempt to slur. Mr Mills has come here as an academic. He has given decent evidence. He has given a submission to the committee. He deserves to be treated better.

Senator RYAN: Mr Mills, the only point I am trying to make is that I see a great deal of cynicism about political donations and the reasons for them, but I do not see a great deal of cynicism about taxpayers, public funding and political parties that have a direct interest in public funding. I actually think the truth is somewhere between the cynical point that I was raising and the point that Alan Griffin raised.

Mr Mills : I have got absolutely no concerns about the questions that you are asking and I think they are perfectly legitimate. I do make the point though that in my submission and in my comments here I have not really gone to motives of donors and I have not really gone to caps on donors, although that might be a complementary reform. To the extent that I have, I am concerned about the taxpayer as the public funder. Why is it that we have a system of public funding that is quite expensive but is not really achieving the goals that is was set up to achieve? It is certainly not relieving the parties of reliance on private funding. It is certainly not reducing the costs of election campaigns. Essentially what I am saying is: why don't we build on the existing scheme of public funding by adding a string, by putting in a condition of funding whereby, if you are a political party, if you are participating in our election system, if you are running candidates for our parliament, you are being funded and a condition of funding is that your spending will be limited to this amount?

Senator RYAN: I take that point. I accept that you had not made the same comment about political party donors. It is just that a number of others had. In summarising the proposal about TV advertising arrangements or restrictions on page 3 of your submission, you say, 'This would level the playing field for smaller parties'. That is one phrase you use. On page 6 of your submission we have got the more detailed description of the broadcasting capping and allocating arrangement. If we just look at New South Wales in the last 4½ years, it strikes me that any sort of system that is based on past performance at the ballot box—the most recent example being 2007 before this state election—would dramatically overstate the performance of one political party and dramatically understate the performance of two others, the coalition to a greater extent and the Greens to a lesser extent. Why is it the role of the state to actually create a level playing field for smaller parties? My view is that membership and money are partly a reflection of institutional existence, past performance, current performance and size of the organisation. Why is it the role of government or parliament to level the playing field? To level the playing field at the recent New South Wales state election would have understated the shift in public opinion that occurred over the previous four years.

Mr Mills : Generally governments do have roles in setting playing fields and so forth, but I will not go to the question of political philosophy. To go to the particular point, I think the New South Wales scheme differs from what I am talking about insofar as the public funding system has got this beautiful formula of dollars per primary vote. So it rewards parties financially for winning primary votes, not second preference votes. You could lower the threshold in the public funding system so that parties with two per cent of the vote rather than four per cent of the vote could be eligible for public funding and I think that would be a useful reform. Essentially the system is not rewarding any and all small parties and not making it an entirely level playing field for any and all parties. It is making a playing field which rewards parties for their capacity to win primary votes. I think that is a really sound principle. Nobody has ever attacked that.

Mrs BRONWYN BISHOP: How can we have a playing field analogy with umpteen teams on the field? It is really all about the size of the front row forwards, isn't it?

Mr Mills : I am from Melbourne, so I will have to—

Senator RYAN: Then the most important question is, which team do you support?

CHAIR: AFL has more players on the field, so—

Mrs BRONWYN BISHOP: But there are still only two teams. You do not have a third minor team running around doing interference, do you? I do not think the playing field analogy works for this.

CHAIR: Some people see it as a game.

Mrs BRONWYN BISHOP: But there are still only two teams in the game.

Senator RYAN: I take your point, Mr Mills. In terms of allocating broadcast time, I do not quite have it down to how the time would be allocated. Would it be based upon the most recent election?

Mr Mills : Yes, in part. There are two critical calculations. One is, what is the anticipated public funding for a party? I used the example of $20 million. I think that would be established by looking at prior voting trends, numbers of candidates running, opinion polls and so forth. In other words, you would get some estimate of what the likely dollar-per-vote performance of this party is going to be at the next election campaign. In terms of the allocation, if you were to go to an aggregate cap you would not need a specific broadcast allocation. If you were going to a particular broadcast approach you would first have to question whether we were dealing with parties only or third parties. As I said, public funding obviously does not deal with third parties; a separate system would be required for those. I do not mind that. Political parties are the ones which are putting up candidates for parliament and I think they are the ones who are entitled to receive public funding. You would have to come up with a proportional scheme. I do not think that—

Senator RYAN: This is my question. Is it based on past votes or that amalgam model you mentioned?

Mr Mills : An amalgam model. If the AEC, or whatever the authority, erred on the upside, I think that would be desirable. The point is—

Senator RYAN: Can I put a serious problem with that to you. You come up with an amount of time for political advertising. If I use the last state election in Victoria as a good example, every opinion poll until the day before polling day dramatically underestimated the final result. This is happening more and more often in state elections in particular, where you have later engagement of voters than you have had historically. Yet your model, if it were based on an amalgam of opinion polls—or, indeed, even if it were based on the last election results—could have changed that result. We advertise—and everyone says we advertise—because it can highlight issues that are more important to one campaign over the other: highlight negatives or whatever the case may be. Yet using your model that late swing—that last-minute, last 48-hour result in an incredibly narrow election that came down to fewer than 1,000 votes in two seats—even if it got it wrong five per cent of the time, could have made a difference to enough voters to change the result of the election. Don't you see that as a particular problem?

The second part of this is: if this decision is to be made by the AEC—and I have said this in the chamber over and over again—we could see the politicisation of the AEC, inadvertently, even though it is making its best endeavours. If it does make a bad decision and an election ends up in a hung parliament rather than one person winning by a couple of hundred votes, those agencies are going to come under much more pressure than they previously have. I do not think that is something we aspire to in this country because we have a very well regarded system.

Mr Mills : Those are both good points, certainly the Victorian example. The purpose of the design I am proposing is to reduce campaign spending, as I said in response to your earlier question.

Mrs BRONWYN BISHOP: Why is that desirable?

Mr Mills : As I said in response to Senator Ryan, that is the underpinning of the public funding system. The purpose is not to come up with an utterly precise formula. If there were some erring on the upside in establishing these entitlements, I think that would be appropriate in the early stages. On the question of the AEC, I think we all have the greatest respect for its performance in difficult circumstances. It is not any part of this proposal to politicise it, but it is certainly part of it to give it a much more difficult and central role. This is a tough job.

Senator RYAN: This is my point, Mr Mills. We have had this debate with the AEC over the table before and I think we can all agree that when you drag an agency from purely administration into policy making—the further we drag it into politically contentious decision making, particularly about the number of TV ads you might get—then inevitably you will drag it into a much more contestable and less administrative space. And that has consequences.

Mr Mills : You are talking about a cap as such rather than having the AEC arbitrate on how many ads you can have.

Senator RYAN: But, if you have a cap, who allocates who gets what within it? If you have a rationed amount of TV advertising, you have to ration who gets 45 per cent and who gets 42 per cent.

CHAIR: I am not a great fan of opinion polls as a basis for public funding. It seems to me that they can be an indicator, but my preference is always for the votes that parties achieve. Then you can draw on what you think you are going to get as a result of your vote and be able to use some of that.

Mrs BRONWYN BISHOP: And borrow on it.

CHAIR: Or borrow—whatever it is. That is the safest way. I take Senator Ryan's point: at the Victorian election the polls did not really reflect the ultimate result. Let me use New South Wales as an example.

Mr GRIFFIN: They were not that far off. I spent all that time looking at them!

CHAIR: I know you did. At the end of day, what I am interested in is the actual. For instance, you could use opinion polls in New South Wales to show the ALP's vote has collapsed. In the ALP's request for or allocation of funding for advertising for that election campaign, the polling could be used as a basis upon which it might draw money or be allocated money, but the final result is the one that determines its entitlement—and that is the actual voters. What are we going to go on? Newspoll, McNair, Essential, Roy Morgan, who has a history where there has been some question marks, or other organisations?

Mrs BRONWYN BISHOP: Excuse me, I will defend Roy Morgan. I think you ought to withdraw that.

CHAIR: I do not have to withdraw. Roy did a settlement on the Canberra by-election because he was involved in push polling. He was taken to court and he settled. I know all about Roy Morgan.

Mrs BRONWYN BISHOP: I am sorry, when people settle they do not—

CHAIR: He added the questions at the end of his poll, so do not start me on Roy Morgan. I know all about him.

Mrs BRONWYN BISHOP: I will start you—I will defend him.

CHAIR: I do not want to extend the debate. I just put on the record that I am more comfortable with actual votes as against opinion polls being the determining factor. That is all I am saying.

Mr Mills : And I think you would certainly need an amalgam. You would not just rely on the latest poll.

Senator RHIANNON: Thank you very much, Mr Mills. Regarding the broad approach that you have, you linked the condition of public funding to actual limits. Does that mean that, if a party did not agree to that, they could just spend as much as they wanted if they were getting lots and lots of donations in?

Mr Mills : I would not permit an opt-out. In other words, I would say that if you are a registered political party—

Senator RHIANNON: So part of the scheme is that everybody comes in?

Mr Mills : Everybody gets public funding according to this formula and that is it: you cannot opt out and do an Obama, as it were, and just rely solely on private funding. That said, I do emphasise that I am not ruling out private funding. I certainly see there being an ongoing role for parties to draw funds from donors, members and supporters, but the marginal utility of extra dollars would fall in a capped spending environment. So, once the public funding is providing the bulk—not all but the bulk—of funding, then you have—

CHAIR: Can I clarify: you cannot opt out under your system?

Mr Mills : I would say do not opt out.

CHAIR: You are not allowed to opt out like Obama did, who then went and got private funding?

Mr Mills : Correct.

Senator RHIANNON: You are not proposing to put in place any bans on donations but you consider that that would be implicit because there really would not be any point in parties doing a lot of fundraising because there is a limit.

Mr Mills : Yes, there would be less point. You might have private fundraising for administration as opposed to campaign purposes. I would certainly like to see the lower threshold on reporting and perhaps caps on donations, but I think this makes capping donations less of a stress point.

Senator RHIANNON: Considering there is often a blurring between costs on the administrative side of the party and costs on the electioneering side, if you did not have those caps in place so that the amount of private money coming into a political party was limited, you could see an increase in so-called administrative costs, which, at the end of the day, could well be assist the electioneering work of the party. Do you see that that could be a potential problem?

Mr Mills : I think there are all sorts of issues with party expenditure. The reality is that we are all in the dark because we do not have proper data on how, or if, parties spend their money, whether it is campaign or administration money. There used to be some data provided by the parties in the eighties and nineties, but we just do not get that information. We really do not know enough about party funding, and one of the desirable outcomes of this current inquiry is that parties might be required to be more carefully audited, perhaps, and more transparent about what they actually do spend their money on. I think it is a public matter.

Senator RHIANNON: Considering what we have seen in this trend over recent elections where the party that spends most money is most likely to win the election—and you see that very clearly—

CHAIR: Oh, come on, that is not right.

Senator RHIANNON: It is. There is a very clear trend there. When you break it down per party and by how much they spend by vote it really stands out. We have seen some of the questioning suggesting that there is no need to have these limits in place. I am wondering whether you see that there is a need, in terms of the democratic process, for linking the need for changes to the need to enhance our democracies. Do you see that there needs to be more limits here?

Mr Mills : My first point is that I certainly do not accept that the biggest spender wins. There have been examples where the biggest spender has lost, and that has been the case right through from the 1970s.

Senator RHIANNON: Isn't that infrequent though?

Mr Mills : It is infrequent. Party officials spend money because they believe it will help them win campaigns. It is just they cannot control the thing and they are always up against good opponents that sometimes outspend or out-campaign them.

Senator RHIANNON: I am happy to be corrected on that but, having looked at the trends mainly in New South Wales and federally, my recollection was that there was a clear correlation between spending and outcome.

Mr GRIFFIN: That is two jurisdictions out of a total of eight across the country that you have looked, so it is a rather small component of the overall. Drawing conclusions from that, which puts a widespread slur on the question on the operation of the democratic process, I think, is a bit rich.

Senator RYAN: I have heard a lot of evidence, to be fair, about how the current disclosure regime does not capture all the money. I think there are points there to see that, while correlation does not imply causality as the first point, the second point is that I agree that we do not capture all the current spending, because we capture receipts and donations. I think you could change a couple of those figures quite substantially depending on how you defined associated entities and activity by association.

Mr GRIFFIN: I do not think that the history shows that you can buy elections in a manner which is being suggested.

Senator RYAN: I agree.

Mr Mills : There are parties which recognise that they will not win therefore they do not spend.

CHAIR: In the ALP in 1996, one of the criticisms of the national secretary was that he did not open up the books.

Senator RYAN: If people do not think you are going to win you do not get the money to win.

Senator RHIANNON: From the New Zealand experience I understood that they ran into some problems with their legislation. Do you have you any more about the New Zealand experience? I did not think they just relied on polling.

Mr Mills : I am not the world's best expert on New Zealand. They do not just rely on polling. They have the amalgam model that we were talking about before where they include polling but only on top of a lot of pre-existing, hard voting data. Yes, they did run into some issues in the broadcast allocation cost, which I think Senator Ryan was referring to before. I do not have the full details on that and I believe that there have been some modifications made. Both Canada and New Zealand do have experience of a central authority administering public funding across the parties in a way that we do not. I think it is certainly worth expanding our public funding system through looking at those options.

Mr SOMLYAY: In public funding, assuming a level playing field, how do you put a value in the campaign on incumbency and all the things that come with it?

Mr Mills : The public funding system does not. Again, that is the beauty of it. We have a dollar per vote system which is blind to large or small party, blind to incumbent or opposition and blind to House of Representatives or Senate. It just says dollar per vote. It seems to me that there is a beauty in that which we should not dismiss.

CHAIR: Let me just qualify that. For the incumbents who recontest there are parliamentary entitlements that they can use and are using.

Mr SOMLYAY: And the executive.

CHAIR: Which is separate, obviously, from public funding.

Senator RHIANNON: It does give an advantage.

CHAIR: It does give an advantage.

Mr SOMLYAY: But the executive have far more facilities than the opposition or minor parties in any campaign. How do you balance out the conflict there?

Mr Mills : I heard Professor Williams on the subject of government advertising—which is another aspect of this question—and I would endorse his general comments here. The system is not a particularly pretty one at present where you have strong entitlements for government but also strong entitlements for incumbent MPs—which, in the academic literature, is referred to as the cartel party theory where parties are working together to secure state resources for their own benefit to the exclusion of those who are not incumbents.

CHAIR: One suggestion is that those entitlements should be severely restricted with the issue of the writs, so you are still able to do your job posting letters for constituency purposes but not for re-election purposes.

Mr Mills : Issue of the writs as opposed to the policy launch.

CHAIR: Yes.

Mr Mills : Which happens later and later and which is for that purpose.

Mr GRIFFIN: Would you agree that by far the largest component of cost in election campaigns in the last 30 years has been electronic advertising? That is overwhelmingly where money is spent.

Mr Mills : Yes.

Mr GRIFFIN: You would also agree that it is difficult to go into the question of the fine line between an incumbent and the resources they have to do their job and therefore to represent their constituency and provide them with the assistance they are required to provide—and that leads to some extent to what is called the 'incumbent effect'—and delving into that without interfering with people doing their jobs. If we come back to the advertising aspect, why would you not say, in terms of a capped approach, that there is a limit on expenditure which is set for any party—which is in excess of what public funding is, but not so dramatically so that it leads to a continuing arms race of fundraising—and then go off the actual figures people achieve at election time to establish their public funding component, as is now the case? Why wouldn't you work it through on that basis?

Mr Mills : Focusing on broadcast advertising—

Mr GRIFFIN: That is the key question here. When we talk about the arms race, that is where the arms race is. Essentially, parties raise funds and almost everything that is in excess of the base rate goes into that electronic budget.

Mr Mills : We tend to focus our concerns on the voracious desire of the political parties for more and more advertising, but let us not forget, as I mentioned in my opening comments, that political advertising is set by commercial broadcasters in a not very transparent marketplace. In other words, part of the driver of costs is, for non-partisan, non-political, quite commercial reasons, by profit-seeking companies. In other words, again we do not know much about that.

Mr GRIFFIN: My overall point is that, rather than get into a debate on specifics about how you might establish how much money is allocated to each party according to opinion polls, previous voting support or expectations of some amalgam which involves that plus other points to ascertain what funding they receive, why wouldn't you just say: 'There is a cap; you can spend up to X. The public funding you would receive post the event, which would relate to the support you actually received, would be under that to some degree.' It would allow some scope for people to fundraise, but it would also set an expectation on the question of how much that would be in order to achieve an outcome. It would avoid a situation, I think, where you face those questions about whether you make late decisions about where you spend your money, how much money you spend and would you therefore be influenced by things like what you expected might be your public funding capacity on that basis, as per the Victorian example. My point is that if you just said there is a limit, you can go to that limit and then the question of how much of that is reimbursed from the public purse will depend on the actual support you gain at that election, and you just leave it at that.

Mr Mills : I follow what you are saying. My question would be: how do you set the limit? What I am proposing here is that the limit is set by reference to the public funding likely receipts, so that funding has got this desirable votes-dollar formula. If you do not use that you have got to use something else.

Mr GRIFFIN: My point would be that you set an overall point for the current circumstances, given the nature of the cost of advertising and given the likely cost of a normal election campaign—whatever that means. You set a line, add 10 per cent on top and cut it there, and then it is a question of whether you can get to that point yourself.

Mr Mills : You could do that. You would then have to explain what the basis for that is. I suspect what has happened in New South Wales is that that is done largely on what I would refer to as demand-side factors—in other words, previous costs experienced or reported by parties—as opposed to the supply-side factor which I am talking about here with the use of the public funding formula. And over different electoral cycles you would want to be able to maintain downward pressure on overall expenditure or on broadcast expenditure. Again, you could probably do that more philosophically firmly by sheeting it back to public funding than by, as it were, an extraneous or secular process of just setting an arbitrary limit.

I can see the simplicity in what you are saying and I acknowledge the complexity in what I am saying in terms of working out what anticipated receipts would be and making the appropriate allocations, but there is merit in going through that hard work because of the strength of the foundations that you are building on—namely, the public funding formula.

Mr GRIFFIN: My worry is the question about how much you get into a reliance on previous voter support, which may have little relevance to what is occurring at the election you are contesting, and also the question of trying to predict what will happen in an electoral contest.

Mr Mills : Don't overstate it. Again, the beauty of public funding is that it is a finite pie, so if you overestimate one party's receipts you are, by definition, underestimating another party's receipts because the votes that party A is not getting are going to parties B, C and D. Over time, this finite pie is just going to be sliced up in a slightly different fashion according to the actual—

Mr GRIFFIN: My concern is the slicing up of that in the context of a future election will be impacted on the basis of a previous election result, which is not necessarily relevant to the election you are actually contesting.

Mr Mills : Yes.

Senator RHIANNON: Mr Mills, with your plan have you given any thought to new parties? It is becoming increasingly difficult for new political parties to break into the system and to establish themselves. Considering the way your system is structured, I feel that that could be a downside.

Mr Mills : Yes, it certainly is a downside, but the public funding system does not fund parties until they get four per cent of the vote. It does not say, 'Just set up a party and then you are automatically entitled to it.' It says, 'Set up a party, go out and win some votes, and then, if you get above the four per cent threshold'—and, as I have said, I think that could be a lower threshold—'then you get funded.' Senator, I think your party is an excellent example of a party which is growing through the public funding system; it is winning primary votes and therefore it is growing stronger.

Senator RHIANNON: Yes. I do think it is becoming harder for parties to come through, for various reasons. Thank you.

CHAIR: Thank you, Mr Mills, for your attendance here today. You will get a transcript of the evidence from today and if you need to make any corrections of fact please feel free to do so.

Mr Mills : Thank you very much.