Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
JOINT STANDING COMMITTEE ON ELECTORAL MATTERS
25/07/2005
Conduct of the 2004 federal election and matters related thereto

CHAIR —I welcome our next witness. We have received a joint submission from you and Dr Graeme Orr, which has been numbered 160 and authorised for publication. Are there any corrections or amendments you would like to make?

Mr Tham —I would like to tender an article that I co-wrote with David Grove as a supplementary submission. I have copies to be circulated to the committee.

CHAIR —I have that here before me.

Mr MELHAM —Is that a supplementary submission?

CHAIR —It is an article that Mr Tham wishes to submit as an additional submission for our information and consideration.

Mr MELHAM —I move that we accept it as evidence, and I know there is an article in volume 32 of the Federal Law Review

CHAIR —I will take that as moved, Mr Melham. Is it seconded?

Senator FORSHAW —Yes.

CHAIR —There being no objection, it is so resolved. Are there no other corrections or amendments you wish to make, Mr Tham?

Mr Tham —No.

Mr DANBY —Could I ask who David Grove is? He has an asterisk to his name, but I cannot find the asterisk.

Mr Tham —David Grove is co-author of the article. Dr Graeme Orr is the person who co-wrote the submissions I have tendered to this committee. They are different persons.

Senator BRANDIS —There seem to be different documents from you and Dr Orr. Are we to understand that you adopt everything that Dr Orr says and Dr Orr adopts everything that you say?

Mr Tham —Very much so. The only caveat I would lodge to that is that we have tendered two submissions. One is co-written by Dr Orr and me and is on political funding, and I am more than happy to take questions on that submission. The other submission is on government advertising, and I will not speak to that submission today. If the committee has any questions—

CHAIR —That is not this one?

Mr Tham —No, that is not this one. I am happy to take any questions on government advertising on notice, consult with Dr Orr and tender the answers.

CHAIR —We will certainly take that into evidence—in fact, we have done so. We will not specifically question you on that as we have not had that before us for consideration. We have an allotment of time for you and a number of members and senators will be more than keen to question you. If we have any further questions, we will get back to you, but we will take that as a submission. We will move immediately to questions so that everyone has a good length of time and we can have a discussion similar to that which we had with the previous witnesses.

Senator MASON —I note that you said you would not answer questions relating to Dr Orr’s submission to the Senate Finance and Public Administration References Committee. In relation to the ALP’s proposal to review advertising after each election and dock public funding when parties in government are found to have misused advertising, my questions on notice to Dr Orr relate to how that would be policed. What would he do to police the expenditure by a government?

Regarding your comprehensive submission with Dr Orr to this committee, I have a couple of questions in relation to caps on political donations. You say that, in principle, you recommend limitations on political donations and that you want to ban corporate donations to political parties and candidates. You also say that you want to put caps on the amount any individual could donate in a financial year to a particular party or candidate, including a total annual cap on the amount donated. Two questions: firstly, upon what democratic principle do you believe you can justify that? Secondly, how practical is it to do that? How would you police it, and how practical is it?

Mr Tham —Let me address the first question. With respect to bans on corporate donations, we set out in our submission to argue that corporate political contributions are arguably a form of political undue influence. We say that because it really stems from the ambiguous status of commercial corporations in a capitalist democracy like Australia. On one hand, I think commercial corporations wield a lot of economic power necessary for economic growth, and therefore they rightly have the ear of politicians and political parties. On the other hand, they have no legitimate claim to democratic representation. The ultimate bearers of political power in a democracy are the citizens. This is made clear by sections 7 and 24 of the Constitution, which vest political power ultimately in the people of the Commonwealth. Neither do commercial corporations, unlike democratically organised institutions like trade unions, have a derivative claim to democratic representation. What we clearly have with commercial corporations is shareholder control, and shareholder control clearly means that internal decision-making power is parcelled out according to wealth. For all those reasons, we say that commercial corporations should not be able to secure political access and influence through the medium of money or political contributions.

Senator MASON —I think you used the word ‘derivative’—what do you mean by that? The entire Labor Party—it used to say the Labor Party; I hope I am not misrepresenting them—were in a sense the political arm of the labour movement.

Mr Tham —Again I am starting from first principles. If we start from a first principle that the citizens are the ultimate bearers of the political power, then we can say that they have a direct claim, clearly, but they can also have a derivative claim through democratically organised institutions. This is the qualitative difference between commercial corporations and trade unions. Registered trade unions are required by industrial statute to be democratically organised. So I would not treat commercial corporations and trade unions on the same footing with respect to political donations.

Senator MASON —Do you think that trade unions have always been organised democratically and would fit within the argument you have just given the committee?

Mr Tham —I am not making historical arguments. In the submission I have cited a provision of the Workplace Relations Act which requires trade unions to be democratically organised. For example, section 5(d) of schedule 1B or the Workplace Relations Act expressly states that one object of the schedule is to:

... provide for the democratic functioning and control of organisations.

You can see this cutting across various state industrial statutes. Section 238 and 240 of the New South Wales Industrial Relations Act provide for the same effect. So what we have as a matter of law is that commercial corporations are organised in a very different manner from trade unions.

Senator MASON —Do you have any overseas precedence to fortify your position? For example, you are arguing that we should have caps on the amount that individuals can donate in a financial year. Do you have any overseas precedence? I ask because I am wondering about the utility of that sort of law. You can see many ways around it, I am sure; you are a better lawyer than me. There are plenty of ways around that.

Mr Tham —If you look at the end of our submission on political donations, there is a table basically giving in summary form the regulation that pertains in New Zealand, the United—

Senator MASON —What page is that?

Mr Tham —It is the very last two pages. You can see, for example, the columns dealing with the Canadian regulations, which actually place caps on donations from corporations and trade unions. As I understand it—and I have not done any in-depth research—the American regulations also provide in some circumstances bans on contributions from trade unions and businesses or companies.

Senator MASON —You are not against public funding of elections, are you?

Mr Tham —I am not, in principle. It has to be properly designed and it must conform to the principle of political equality. That is the key with any form of public funding.

Senator MASON —You mentioned Canada and New Zealand; what is the experience of those jurisdictions in enforcing that law? I can think of some ways you could circumvent that law, and I am sure you can as well. Does it have any utility at all?

Mr Tham —This is a very important point. We have considered this in the last part of our submission, which deals with compliance and enforcement. Clearly, as you rightly pointed out, with any regulation proposed we have to consider whether it is going to be practicable and properly enforceable. The problem with the debate in this area is that what are seen to be inherent problems with enforcing this kind of regulation, and there are inherent problems with any form of regulation—

Senator MASON —I accept that.

Mr Tham —Those problems are being used to oppose particular regulatory proposals. What we say with the proposals we have put is that, yes, they are attended by these inherent problems of enforcement—we accept that—but that should not be fatal to these proposals.

Senator MASON —Good luck!

CHAIR —Senator Brandis has indicated he has a question on that topic.

Senator BRANDIS —I just wanted to pursue a bit further with you, if I may, the distinction you draw between corporate donations and donations from trade unions. You put them on a different footing.

Mr Tham —Yes, I do.

Senator BRANDIS —Can you explain a little more fully how you justify doing so?

Mr Tham —As I explained to Senator Mason, simply by virtue of the very different internal structures of these organisations.

Senator BRANDIS —I was a bit surprised by it, but I think I heard you say—and correct me if I am wrong—that trade unions are democratic and, by implication, corporations are not. Is that your view?

Mr Tham —As a matter of law, that is my view.

Senator BRANDIS —Are you familiar with the Corporations Act? Doesn’t that subject corporations to very exhaustive regulation in their organic structure, make the board subject to the general meeting and render decisions by the corporation the subject of determinations by a majority of the board?

Mr Tham —A majority of shareholders, yes, I agree, but a person—

Senator BRANDIS —Shareholders are members of the company, aren’t they?

Mr Tham —They are members of the company, but—

Mr MELHAM —There are different classes of shareholders—

Senator BRANDIS —Just as there can be different classes of members of trade unions.

Mr Tham —I disagree, Senator. I agree with the premise that they are controlled by a majority of shareholders, but a shareholder’s strength or influence over the decision-making power is determined by the value of the shares that they hold.

Senator BRANDIS —Have you ever met a trade union member who was out of sympathy with the labour movement’s point of view on an issue? How much power do you think he has in his trade union?

Mr Tham —The point I return to, and this is irrefutable as a matter of law, is that registered trade unions are required by law to be democratically organised.

Senator BRANDIS —I do not know why you say it is irrefutable, because it all depends on what you mean by democratic. It is irrefutable that they are required by law to be organised in a particular way. Whether you regard that as democratic is something we could argue about.

Mr Tham —For example, I return to the legislative provision that I mentioned to Senator Mason, which was passed when Peter Reith was industrial relations minister—

Senator BRANDIS —I do not think that has anything to do with it.

Mr Tham —It does in the sense that the provisions require trade unions to ‘provide for the democratic functioning and control of organisations’. As I mentioned earlier, this cuts across various state industrial statutes. If the Senator would like, I have notes on these various provisions and I am more than happy to prepare a supplementary submission—

Senator BRANDIS —That would be great.

Mr Tham —detailing all the provisions of industrial statutes that require trade unions to be organised on a democratic footing.

Senator BRANDIS —Leaving aside the analysis of the character of the statutes that govern trade unions as opposed to corporations, there is an asymmetry in their position in the sense that as a matter of practice—and you say this in your paper—corporations are large contributors to the Australian Labor Party, as they are to other major political parties. Trade unions are almost exclusively contributors to the Australian Labor Party—perhaps to a minor degree the Democrats and the Greens but hardly at all to the Liberal Party or the National Party. So there is an asymmetry there, isn’t there?

Mr Tham —I agree.

Senator BRANDIS —The Labor Party gets money from corporations and trade unions; the Liberal Party gets some of its money from corporations but none of its money from trade unions.

Mr Tham —I agree.

Senator BRANDIS —Given that trade unions, to simplify it, only donate to one side of politics, wouldn’t you agree that in the interests of transparency and balance the funds donated by trade unions, since they are imbalanced—they only go to one side of politics—if anything call for greater scrutiny than donations from corporations which go in roughly equal measure to both sides of politics?

Mr Tham —It is only an imbalance if you see them on equal footings.

Senator BRANDIS —It is an imbalance if you look at the source—the source being on the one hand trade unions, which only donate to one side of politics, and on the other hand corporations, which donate to both sides of politics. As a matter of commonsense, there is a lack of balance there, isn’t there?

Mr Tham —It does pose certain issues in terms of equality of arms, if you like, between the parties—

Senator BRANDIS —Yes, that is my point.

Mr Tham —I agree with that. At the same time, in my view it is quite profoundly wrong from democratic principles to treat contributions from trade unions and contributions from commercial corporations in the same manner.

Senator BRANDIS —Why? Because trade union contributions are in many cases extracted involuntarily from their members, whereas no corporate contributions are extracted involuntarily from their shareholders. Are you saying we should be much more suspicious and judgmental of trade union donations?

Mr Tham —Sorry, I did not follow.

Senator BRANDIS —It seems to follow from your logic, although you resist the conclusion, that it is less democratic—

0Mr Melham interjecting

Senator BRANDIS —So what? I am putting a proposition to him; of course I can do that.

Mr Tham —Sorry, Senator, I did not follow the last question.

Senator BRANDIS —What I am putting to you, Mr Tham, and please respond as you wish—

Senator FORSHAW —What he said was that donations from trade unions are undemocratic—

CHAIR —Senator Forshaw.

Senator BRANDIS —Senator Forshaw, I am perfectly capable of putting my own question in my own words.

CHAIR —Senator Brandis, please. Senator Forshaw, it is good to have you at this hearing, and I know you were not at the other hearings, but it will aid the witness in understanding the question if he is not interrupted by either side.

Senator BRANDIS —Mr Tham, you have suggested that there is a disparity in the way we can treat contributions from corporations and contributions from trade unions. What I have tried to point out is that in one respect, lack of balance, there is a disparity because trade union donations only go to one side of politics whereas corporate donations go to both sides of politics. I think you agreed with me that at one level there is a lack of balance. Do you agree with that?

Mr Tham —Lack of balance was not the phrase I used, but I agree that trade union money is largely channelled to the ALP.

Senator BRANDIS —In my state, Queensland, where the Labor Party is very powerful in state politics, a lot more corporate money goes to the Labor Party than it does to the non-Labor side of politics. Are you aware of that? That is certainly the case in my state and I suspect it is the case in other states as well. During state elections, where business decides that it has an interest in getting on well with the incumbent government and the government is well entrenched, the Labor Party gets most of the corporate money and all of the trade union money. Are you aware of that?

—I agree. I am not sure if it is a point we made in our submission, but it is a point that Dr Orr and I have made in an opinion piece in The Age today. A lot of corporate contributions are occurring through the purchase of access to and influence over the political process. Clearly, those who are more able to sell access and influence are the incumbents. That corresponds with your analysis—it could be the ALP government in particular states; it could be the coalition parties at a federal level.

Senator BRANDIS —You use two words in your submission to describe this vice, and I think you use them, if I may say so with respect, a bit loosely. You talk about ‘corruption’ and ‘undue’ influence’. Unless there was some sort of discernible bribe, there is not corruption, but I can understand why you might say undue influence. Don’t you think that the occasion of undue influence is much more acute where there are donations to only one side of politics, namely through trade unions, rather than to both sides of politics, namely through corporations? Is there more likely to be undue influence there?

Mr Tham —No, I do not agree with that. I use the concept of corruption as a narrower concept than undue influence. If you like, it refers to graft in the sense of brown paper bags and so forth.

Senator BRANDIS —Yes.

Mr Tham —We are clear on that. The broader concept of undue influence basically refers to influence on the political process which does not conform with the principle of political equality—for example, where people buy access to a minister or their chief of staff. And this occurs on both sides of politics—do not get me wrong. To understand whether undue influence occurs with trade unions we need to understand the nature or source of the contribution. Again, I come back to the fundamental point I made a few moments ago: all other things being equal, a contribution that comes from a business as opposed to a trade union should not be treated on the same footing.

Senator BRANDIS —I agree with that. I think that trade union contributions, because they are unbalanced, should be treated with much more circumspection and perhaps a bit more scepticism. You seem to be resisting that conclusion.

Mr Tham —No, I do not seem; I do resist that conclusion.

Senator BRANDIS —Pursuing this undue influence as you have described it—and let me make it perfectly clear before I put the question that I am not suggesting corruption—if you had a category of donor which only donates to one side of politics, and I do not know if you are familiar with the fact that the Australian Labor Party has recently changed its preselection rules back so that trade union officials or members have to constitute a minimum of 60 per cent—

Mr DANBY —That is the sort of rubbish that Glenn Milne is writing.

Senator BRANDIS —That is what has been reported in the press.

Mr DANBY —That has been reported by Glenn Milne and is highly inaccurate—

Senator BRANDIS —All right, Mr Danby, if that is disputed I withdraw it. Let me put a hypothetical case to you, Mr Tham. If it were the case that the very institutions—that is, trade unions—which donate to one side of politics only are also the very institutions which by constitutional provision have a substantial share in the preselection of parliamentary candidates for that very same political party, would that be a case of undue influence?

Mr Tham —Not in my view. I think the point to be made is that politics is inherently about sectional interests pursuing their goals and policies.

Senator BRANDIS —Is it? Do you think so? What about the national interest? Do you not think that some people who go into parliament are motivated by a sense of the national interest?

Mr Tham —Maybe I am using sectional interest in too broad a sense. We are talking about particular interest groups that decide to support a particular party that agrees with their views of the national interest and so on. For instance, if a country based organisation is supporting the National Party, I do not see any problems with that. I think that is part and parcel of a robust democracy. Likewise, in itself I do not see any problems with trade unions supporting one side of politics.

Senator BRANDIS —Neither do I; it is a free country. Of course they can support one side of politics. What I am interested in is criticising your critique.

Mr Tham —When I say I do not see any problems with it, I mean I do not see any problems with it from democratic principles.

Senator BRANDIS —One of the problems I have with your submission is that you come before us as a lawyer and you use legal expressions that have a particular signification to lawyers—like ‘undue influence’—but it is obvious from reading your submission and listening to you that you are using the expressions rhetorically and not technically. For example, a lawyer seeing that your submission mentions undue influence would ask themself, ‘What are the indicia of undue influence?’ One is a dangerous closeness in a relationship which enables the dominant party to overpower the weaker party. That is a pretty loose description of what an equity lawyer would call undue influence. I am speaking to you as a lawyer, not as a rhetorician or a public citizen. When you say ‘undue influence’, aren’t you more likely to find undue influence where one category of donor, trade unions, donates only to one side of politics, the left, and they themselves are one of the principal determinants as to who shall constitute the parliamentary members of that political party? Isn’t that undue influence?

Mr Tham —Not in my view.

Senator BRANDIS —I think you should revert to being a lawyer, Mr Tham. I have one last question: would you regard it as a violation of or dangerous to democratic values as you understand them—I will put the hypothetical to appease my Labor colleagues—if the rules of a particular trade union enabled that trade union to extract from its members compulsory moneys that would be donated to the Labor Party, irrespective of whether or not those members wished their money to go to one particular side of politics rather than the other? Would that be a violation of democratic principles, Mr Tham?

Mr Tham —Not necessarily in my view.

Senator BRANDIS —Not necessarily, but what about generally? I am sure that being a clever lawyer you could always dream up exceptions, but as a general proposition would that be a violation of democratic principles?

Mr Tham —Not necessarily. Again, to trace back my argument, the qualitative difference between trade unions and commercial corporations is that trade unions are required by law to be democratically organised—

Senator BRANDIS —As are corporations. I do not think you are a corporations lawyer, Mr Tham.

Mr Tham —Corporations, if you like, operate by virtue of a property franchise; that is inherently undemocratic.

Senator BRANDIS —Sorry, is that right? It is inherently undemocratic if, to become a member of a corporation, I have to have a few dollars to buy the smallest marketable parcel of shares. Is that inherently undemocratic in your view of democratic principles?

Mr Tham —We have switched focus, Senator. I was referring to how corporations are actually organised. I am not sure how the reference to a few dollars to buy shares fits into the scheme of things.

Senator BRANDIS —What it means is that anybody can become a member of a corporation if they have enough money to buy the smallest marketable parcel of shares—that is what it means.

Mr DANBY —The biggest players have the biggest—

Senator BRANDIS —Go on, Mr Tham. I am struggling to see why you think that is undemocratic but it is not necessarily undemocratic for a member of a trade union—

Senator FORSHAW —I raise a point of order, Chair: I think it would be appropriate if occasionally Senator Brandis allowed Mr Tham to complete an answer before he interjects again with his further critique of the submission. I have been listening now for some time—

Senator BRANDIS —That is not a point of order, Mr Chairman.

Senator FORSHAW —I do not think Mr Tham has actually got to answer a question before he has been interrupted.

CHAIR —That is not a point of order. Questions are being asked; they are being answered.

Senator FORSHAW —He is not being allowed to finish his answer.

CHAIR —Questions are being asked and they are being answered.

Senator FORSHAW —We will read the Hansard later.

CHAIR —Now that you are attending your first public hearing you will know that we have a free-flowing and robust questioning session—

Senator FORSHAW —That is a cheap shot! I have been a member of a number of joint committees of the parliament for a lot longer than you have, Chair—

Senator BRANDIS —And chaired them, Senator Forshaw, and you are a much more interventionist chairman than Mr Smith has been.

Senator FORSHAW —I would just like to hear Mr Tham answer a question.

—Senator Forshaw, I was pointing out a simple fact. Since you are concerned about interrupting people, I will now complete what I was about to say before I was interrupted. My point simply was this: in all of our hearings we allow extensive questioning and allow witnesses to answer in the time that they see fit. If the witness at any point has a problem with the questioning, I invite him to say he has a problem, but he is quite entitled to appear here and to be questioned. I am pointing out to you that that is how things have been conducted at all our public hearings to date. I am not criticising you for having had other engagements; I am saying that, as this is your first hearing, you are unfamiliar with that fact. Senator Brandis.

Senator BRANDIS —Thank you, Mr Chairman. Mr Tham—

Mr Tham —Can I actually respond to some of the earlier questions?

Senator BRANDIS —Please do, but—

Senator FORSHAW —But!

Senator BRANDIS —can you indicating what you are responding to?

CHAIR —Senator Forshaw, you are now the one interrupting. If Senator Brandis could ask his question again, we will allow the witness to answer it.

Senator BRANDIS —I would like to re-put the question, just to focus the witness’s attention. What I understood you to be saying, and correct me if I am wrong, is that corporations are not democratic because there is a property franchise, but that for trade unions to extract money compulsorily and involuntarily from their members to give to political parties for which the members may not wish to vote is not undemocratic. Is that what you are saying, or do you want to clarify your answer?

Mr Tham —The heart of my position is simply this: the overwhelming majority of people accept that one key democratic principle is that one person has one vote, and one vote has equal or similar value.

Senator BRANDIS —Yes.

Mr Tham —This is a principle that trade unions are required by law to abide by. For that very important reason, they are democratic. That does not preclude majoritarian decision making. In a particular situation of an organisation that adheres to one vote, one value where there is majoritarian decision making, and where a minority of members disagree with the vote, they still abide by the decision. So that is in response to your comment about whether I see it as undemocratic to have, if you like, a political levy being imposed involuntarily.

Senator BRANDIS —What do you think, Mr Tham? You have explained how, on majoritarian principles, it might be consistent with a particular view of democracy; I accept that, by the way. Do you think it is right that trade unions should be able to extract involuntarily from their members moneys from their pockets to donate to a particular political party when the member votes for the other side of politics?

Mr DANBY —A bit like taxation, isn’t it?

Senator BRANDIS —Do you think that is right, Mr Tham, that that should happen?

Mr Tham —I have no problem, on democratic principles, with it.

Senator BRANDIS —Sorry, let me get this straight: you think it is all right, when you have just defined democracy as one person having one vote, and each vote having roughly equivalent value or weight, that a person can, against their will, have their money taken from them to be donated to the party they are voting against? Do you think that is all right?

Mr Tham —But there is nothing—

Senator BRANDIS —No, do you think that is all right?

Mr MELHAM —Let him answer your question, Senator Brandis.

Senator BRANDIS —Well, it is a simple question: do you think that is all right?

Mr Tham —I have no problems with it from democratic principles. I mean—

Senator BRANDIS —Even though you say one vote, one value?

Senator FORSHAW —Let him finish his answer.

Senator BRANDIS —Why don’t you stop interrupting, Senator Forshaw?

Senator FORSHAW —You just interrupted the witness. He said three words in answer to your question. Instead of having a shot at me, let the gentleman answer a question for once!

Senator BRANDIS —I will let him answer the questions.

CHAIR —We will let him answer, Senator Forshaw.

Senator FORSHAW —He just interrupted him, and you heard it! You are going to lecture me and he interrupts him all the time!

CHAIR —Senator Forshaw, we will let the witness answer the question—

Senator FORSHAW —Well, I am sitting here listening.

CHAIR —and if you would like to answer a question, maybe you should go around the other side of the table and be a witness rather than answering yourself.

Senator FORSHAW —Mr Chairman, I am sitting here trying to listen to this gentleman’s answers, and the Hansard will prove this, and we will go back to it when we get the opportunity.

Senator BRANDIS —Senator Forshaw, we never had any problems where you were not showing up.

Senator FORSHAW —Mr Tham has been trying to answer questions and every time he gets halfway through a sentence, he gets interrupted by another question from Senator Brandis.

CHAIR —Senator Forshaw, what we are doing is allowing each person to answer questions. I do not plan to ask any. I know the deputy chair is seeking to ask some questions. He will be able to do that when Senator Brandis has finished his questions, because he is next on my list, provided that we have time. I am quite happy to undertake this discussion for as long as you want, but you have now wasted another three minutes. Senator Brandis has asked his question; I would ask the witness to answer it. He can answer it without interruption and we will move on to the next question.

Mr Tham —The point I was trying to make is that in any organisation that abides by a majoritarian democratic decision-making process, there will be decisions that a shifting minority will disagree with.

Senator BRANDIS —Yes, I accept that.

Mr Tham —I beg your pardon?

Senator BRANDIS —I accept that.

Mr Tham —If that is the case, I cannot see that it is wrong from a democratic principle point of view. If you are a union member and you have voluntarily agreed to be a member of the union that is democratically organised, and if there are particular decisions that you disagree with, all other things being equal, I cannot see why this is undemocratic.

Senator BRANDIS —Well, Mr Tham, taking your definition of democracy or parliamentary democracy, I assume, in the words you used before, that every person has a vote, and each vote has roughly or as nearly as possible equivalent value—that is what you said?

Mr Tham —Yes.

Senator BRANDIS —I am not putting words in your mouth. How can it not affect the value of a person’s vote if, against their wishes, as a result of a majoritarian decision, their money is paid to the other side of politics, the side they want to vote against, in order to help them? How can that not devalue their franchise?

Mr Tham —If I held that view then I would have to consistently hold the view that the fact that a large number of Australian citizens did not vote for the coalition parties, and the coalition parties have made decisions that are contrary to the wishes of that large portion of the Australian populace, was somehow undemocratic, and I do not hold that second view.

Senator BRANDIS —I am not asking you that. I am asking you about the compulsory extraction of money from people against their will for the purpose of making a donation. If everybody’s vote is meant to have equal value, which is what you say—fair enough—then how can it not devalue or depreciate the value of that vote if the only contribution they might make at an election is a contribution made against their wishes to a party which represents what they do not believe in?

Mr Tham —It does not follow, Senator. The principle that each vote has equal value means that, when it comes to office bearers of a trade union being elected, votes are given comparable value. That is how the principle is adhered to.

Senator BRANDIS —That is how the majoritarian principle is adhered to.

Mr Tham —That is right. As I expressly—

Senator BRANDIS —But I am not asking you about that. I am asking you about the way in which the application of that majoritarian principle to the domestic governance of a trade union might affect the weight of that trade union member’s vote in the general election.

CHAIR —We will make this the last question because we have four other questioners.

Senator BRANDIS —Do you understand the distinction?

Mr Tham —I understand it; I disagree.

Mr DANBY —I thank our witness for appearing. The last lot of questions leads very neatly, probably unintentionally, to my questions about the current $20 million expenditure of taxpayers’ money on government advertising for legislation not yet passed. You have made some criticisms in the Age today and in your submission to this committee; do you have any previous examples of the government spending $20 million of taxpayers’ money on legislation that has not been passed yet?

Mr Tham —To my knowledge, no.

Mr DANBY —You are opposed to political advertising of this nature, even if legislation has been passed—is that correct?

Mr Tham —I should say that government advertising is more Dr Orr’s area than mine.

Mr DANBY —Sure.

Mr Tham —I am quite wary of actually answering too many questions in this area without consulting Dr Orr.

CHAIR —Fair enough. Could I point out for the record that the witness did say at the start that the submission that is before us on government advertising is solely from Dr Orr and that, although you had a joint article today, you have pointed out that you would take questions on notice for him.

Mr Tham —That is right, yes.

CHAIR —So that offer still—

Mr Tham —Yes, I am happy to take that question on notice.

Mr DANBY —I suppose I should frame it in a general way, because this is the most recent example of this. Previously, we had the government expending public money on the TaxPack, for instance, and trying to send it to people via the Australian Electoral Commission. This was found to be in violation of the Australian Electoral Act, and therefore they had to shred 20 million TaxPacks which were planned to be illegally sent to people via their Electoral Commission addresses. What is your general view—what you wrote in the paper today—about government advertising—

CHAIR —Just for clarity, what were you talking about with respect to TaxPacks?

Mr DANBY —During the campaign involving the GST the government planned to send out millions of TaxPacks to people via the Australian Electoral Commission and eventually—

CHAIR —No, not TaxPacks, I do not think that is right.

Mr DANBY —Well, they were packs advocating the government’s taxation policies. These were forcibly withdrawn because it was found to be beyond the powers of the government. I want to ask you about—

CHAIR —I know what you mean now.

Mr DANBY —How do you view this advertising that we see on industrial relations today? How does it fit in with the democratic principles outlined in your submission and what is your attitude to the government doing these kinds of things, particularly in light of the kinds of comments and questions you were asked by Senator Brandis?

Mr Tham —I think I can speak for Dr Orr in my response. Our general view is that there is clearly a legitimate role for government advertising. When laws have been passed, for instance, and citizens need to be advised about the entitlements they might have or the process of applying for those entitlements, that form of advertising is legitimate and is a proper function of government.

CHAIR —By way of example, regarding the significant change to health policy last year that required the public to do certain things to access new benefits, like the Medicare safety net, you would agree that that advertising campaign was proper. You would agree that advertising for Defence recruits is proper. You would agree that the current advertising on what to do if there is some sort of terrorist alert is appropriate.

Mr Tham —We clearly accept the base reasons for advertising to be legitimate reasons from a democratic point of view, but there is also a question of extent. This moves into a very tricky area about what are considered to be partisan political issues, and there is no hard and fast definition. Clearly, some people might consider some of the issues that you mentioned to be partisan political issues. For that reason, there should be a lot of caution in spending money on government advertising involving those issues, even though at the base there might be some legitimate reason to prompt government advertising. Returning to your question, Mr Danby, our starting point is that we do see a legitimate role for government advertising in some circumstances. But what we have seen—again, this is not confined to this federal government; we have seen it in the past—is that government advertising has spiked close to election time. This is also the case with the Labor Party. This is egregious from a democratic point of view, because it clearly hands over a competitive advantage to the incumbent government, whichever party is incumbent at a particular point in time.

Mr DANBY —Can you answer now, or would you prefer to take on notice, the question of how you propose to handle this? Do we have to ask Dr Orr about Auditors-General looking at this?

Mr Tham —Yes, in terms of detail, it is something I will take on notice.

Mr DANBY —I have two specific questions on matters not to do with government advertising. I notice that you are very critical of members’ entitlements for communicating with constituents and areas like that, but at the same time—and I cannot find the specific reference; I read it late last night—you also advocate that individual members of parliament be given extra funding to communicate on the matching funding basis. Why are you critical of moneys given to members generally while you advocate the matching formula for individual members of parliament to receive moneys?

Mr Tham —I do not actually recall advocating that. Let me speak more generally: our strong view and a starting point for our submission is that political parties and parliamentarians play a very important role and they need to be adequately funded to perform that important role. It is not correct to say that we are opposed to parliamentary funding. We actually support proper funding of parliamentarians. The problem we have is with the current system of funding, where we see excessive amounts being devoted to parliamentary entitlements. It is not so easy that you get a sense from exact figures on the amount spent on parliamentary entitlements. As an example, in the recent Auditor’s report, it was stated that in 1999—

Mr DANBY —Sorry, what report?

CHAIR —The recent Auditor-General’s report?

Mr Tham —Yes, this appears in the text above footnote 65 on page 25 of our submission. The Australian National Audit Office report states that, for the 1999-2000 financial year, $354 million was spent on parliamentary entitlements. To get a sense of proportion, if you combine the total budgets for all the main parties—Greens, Democrats, Nationals, Liberals and ALP—for the three financial years from 1999-2000 to 2001-2002, the amount is even less than that $354 million. Over those three years the total budget for the main parties stood at only $248 million. While our starting point is that parliamentarians should be adequately funded as they perform very important functions, we say that the current system of funding of parliamentary entitlements is clearly excessive.

Mr DANBY —The very last question is: what is the political penalty you envisage in your recommendation on compliance and enforcement?

Mr Tham —Sorry, I did not catch that.

Mr DANBY —You say there is a political penalty in your recommendation on compliance and enforcement. What does that mean? What political penalty? Do they lose their seats; do people get fined—what?

Mr Tham —I suppose we are just referring to the opprobrium that comes with not complying with the law.

CHAIR —Senator Murray has some questions.

Senator MURRAY —I want to put my questions into two categories. In my view, reform in the political governance area, which is broadly what we are discussing here, falls into two categories: one is reform which tries to improve the principles which already exist in the electoral law; the other is changing the principles which exist in the electoral law. Let me deal with the first, which is improving what we have. Would you agree that it is a principle of funding and disclosure not only that the true identity of the donor be available but that the Australian Electoral Commission be able to check on that person or entity if there is any dispute?

Mr Tham —I agree.

Senator MURRAY —Therefore, wouldn’t you agree that it would be a proper principle with respect to overseas donations that overseas donations should be prohibited from entities but not from Australian citizens living overseas, simply because it is impossible for the Australian Electoral Commission to follow up on, for example, a foundation in Sweden or a corporation in the Philippines or the United States?

Mr Tham —There are two reasons for a ban or, if not, a very strict limit on overseas foreign donations—in our view, even though we did not address it in detail in the submission. One is the question of enforcement which you just mentioned, and we agree with that. The other one is the question of principle.

Coming back to the point I made at the start, if we accept that ultimately the legitimate bearers of political power in Australia are Australian citizens, it also follows as a matter of principle that we should take quite a hostile attitude towards, if you like, non-citizens being able to influence the political process through political donations.

Senator MURRAY —I particularly asked you, though, with respect to Australian citizens living overseas who, as you know, can voluntarily participate in our elections. You would have no objection to Australian citizens living overseas making donations in their individual capacity, would you?

Mr Tham —No objections, except for the question of enforcement, I suppose. I am just throwing this out; it is not something we are committed to: with respect to any donation from overseas, regardless of the source, it becomes very hard to police and it is very difficult to ascertain the identity of the donor. There might be some argument for a complete ban on contributions from overseas regardless of the source.

Senator MURRAY —Can you confirm that it is a common feature of electoral law internationally for donations from a foreign entity to be prohibited?

Mr Tham —Again, if I can refer the committee to the table that Dr Orr and I set out at the end of our submission, you will see that three comparable countries—and this confirms your view, Senator—New Zealand, United Kingdom and Canada, have a complete ban on foreign donations.

Senator MURRAY —Dealing with the same principle domestically, and referring to the existing act, you should be able to determine who lies behind a donation. Do you agree with my view that unless the beneficial owners of or the actual donors within trusts, foundations, clubs, fundraising dinners and so on, can be identified, those donations should not be allowable in law?

Mr Tham —Should not be allowable in law?

Senator MURRAY —Do you need me to repeat that?

Mr Tham —Yes, please.

Senator MURRAY —The principle in our existing law is that the donor should be able to be identified and checked on. If a donor cannot be identified, and the donation is from a trust, a foundation, a club or a fundraising dinner, for instance, my view is that that donation should not be allowable in law because you cannot find out who made it.

Mr Tham —I agree. In fact it is reflected in the ban on anonymous donations in the current law.

Senator MURRAY —Still with the issue of principles underpinning our current law, I return to the area raised by Senator Brandis. A principle in our law is that an organisation, be it a union, a corporation or a not-for-profit organisation, may make a donation. A principle in our general law is that, within an organisation, if a majority make the decision, that decision can prevail. Do you not think therefore the solution to the issues posed by Senator Brandis is simply that the donations policy of a union, or the donations policy of a corporation, should be approved by a majority of the members of a union voting at the annual meeting and, in respect of a corporation, by the majority of the shareholders voting at their annual meeting? Therefore you would have a fully authorised donations policy which the board or the management committee could then exercise.

Mr Tham —I think there is a lot of merit in that proposal, not just from an electoral law point of view in terms of the principles you mentioned but in terms of shareholder control in commercial corporations and also in terms of democratic control with respect to trade unions. I think there is a lot of merit in that proposal.

Senator MURRAY —Could you take this question on notice: when you reply to Senator Brandis’s questions, you said you were going to do an analysis. Would you just check for me that the Corporations Law does not mention the words ‘democracy’ or ‘democratic’ anywhere? As far as I know, it does not, so that would be useful.

My last set of questions refers to the second category, which is changing the principles under which our electoral law operates, and that is with respect to your proposals made in terms of caps. Caps are not a feature of our electoral law and, as far as I am aware, are not a feature of any of our state or territory electoral laws. There is considerable interest by all parties—and all parties as far as I know have thought about this matter—in the issue of caps, and you have put that in your submission. Can you confirm that caps are a common feature of the electoral laws internationally or in countries like ours, and can you just outline succinctly the benefits of caps on donations?

Mr Tham —The first thing I should say is that in fact there is an Australian precedent for caps on donations. The Victorian Electoral Act actually puts caps on donations from holders of gambling licences. In terms of overseas precedents, the main example is Canada, which is referred to on the very last page of the submission, where it refers to caps on contributions from corporations as well as trade unions.

CHAIR —Although we are running short of time, I am interested in this, as is Senator Murray. Do you have any knowledge of how long those caps have existed, and whether there has been a review of them and how they are seen to be operating in each of those countries? We met with a New Zealand committee recently which gave us a rundown of what occurred there, but it would be useful with respect to Canada when you answer Senator Murray’s questions.

Mr Tham —I will take that on notice.

CHAIR —Okay.

Mr Tham —We see several advantages to having caps. We propose caps of different forms. We propose caps on contributions from commercial corporations, and we propose caps more generally on any type of political contributions. With respect to the caps on contributions from commercial corporations, the key advantage in our view is that contributions from commercial corporations arguably are a form of undue influence from a democratic perspective. Caps will lessen that form of undue influence. One advantage of caps more generally, as opposed to caps on contributions from commercial corporations, is the fact that it removes a key source of corruption and undue influence because large donations are the ones that carry the most serious risk of corruption and undue influence.

The last advantage we see in having caps, and you will see this in the article that I tendered as a supplementary submission, is that there is a dramatic financial inequality amongst the parties. In that article we combined the budgets of the parties over three financial years, from 1999 to 2002, and we divided it by the number of first preference votes. What you see in terms of the measures that come out is that the ALP, the National Party and the Liberal Party have received more than double the amount of funding for first preference votes compared to the Democrats and the Greens. The article also shows that that dramatic financial inequality is explained by inequality in terms of private funding—and private in the sense of commercial corporations and trade unions. Another advantage of caps is that it will indirectly lessen the financial inequality between the parties and ensure a more level playing field.

Senator MURRAY —My last question on the second category of changing the principles of the act refers to undue influence, and follows on from your remarks earlier in response to a number of questions. You may or may not be familiar, as a lawyer specialising in your area, with section 4A of the tax act, which is a general anti-avoidance provision. Do you think that a general prohibition based on that broad approach in the electoral law, which essentially said that no strings attached should be applied to any donation, would be of assistance? In other words, anyone who made a donation intending as a result to have special access to a government or influence over a party or a policy would be subject to criminal sanction. Think of property developers and local government as an example, and then you will immediately understand what I mean.

Mr Tham —In principle I would support some kind of regulation like that. However, as that particular ban hinges upon, if you like, the state of mind of the person giving the money and the person receiving the money, in terms of undue influence, there might be quite serious difficulties in terms of enforcing that kind of ban.

Senator MURRAY —Which, of course, is its virtue, because it gives a proper defence or makes available a proper defence to those accused. Nevertheless, as a general prohibition, it directly confronts the issue of corruption, which is one category, and entails bribes, or undue influence, which is a more subtle form, if you like, of achieving the same outcome.

Mr Tham —I will have to give more thought to that.

Senator MURRAY —I wonder if you would do so on notice, and if in doing so you would perhaps consult with your colleagues in the university about the way in which the tax act anti-avoidance provisions operate and see if that sort of principle is transferable.

Mr Tham —Yes.

Senator FORSHAW —I have a quick question following your discussion with Senator Brandis and the question from Senator Murray regarding donations from, say, trade unions and corporations. I think you agreed with the proposition that this could be subject to a vote of the members of a union or the shareholders of a corporation. There is a register of members of a trade union, and they all get one vote. Generally the elections are run by the AEC, and that is fairly easy to organise, and it is transparent.

Senator BRANDIS —I am sure you have organised a few in your time, Senator Forshaw!

CHAIR —Senator Brandis, let Senator Forshaw ask his question uninterrupted.

Senator FORSHAW —All free and fair. Thank you, Chair. With respect to corporations, companies, unincorporated associations and so on, the situation is not that simple, if I can use that word. For instance, a large corporation could comprise shareholders who are other corporations, who are superannuation funds, who are overseas corporations. You have also drawn attention to the fact that it is not simply that each shareholder has one vote; a shareholder gets votes according to the number of shares. I am not suggesting that is undemocratic, but that is the nature of the structure of a corporation. There is also provision for proxy voting. I am putting to you that it is not really an equal situation—that a union could have a vote of its members to authorise a political donation. How do you deal with the myriad complex structures within corporations, many of whom make large donations to both political parties?

Mr Tham —I agree with your observations.

Senator FORSHAW —So it is not equal in that sense.

Ms PANOPOULOS —I am very interested in your perspective and your concept of justice. Could you direct me to any additional information that you have published, because I see on pages 51 and 52 of our documents that you have published in Realising Democracy, in Labor Essays 2002: the big makeover: a new Australian Constitution, and extensively on the web. Do you have any other publications that, in my private time, you can direct my attention to?

Mr Tham —I have tendered as a supplementary submission an article I co-wrote with David Grove in the Federal Law Review, which is not listed in the list of publications. Dr Orr and I had a piece in The Age today, basically drawing on the key points of our submission. There are probably quite a few more from Dr Orr and I. I can compile a list, if you like, Ms Panopoulos, and email it to you.

Ms PANOPOULOS —Yes, I would be very interested. My email is listed on the Parliament House web site. I was also quite interested in your loyalty to the concept of democracy within trade unions, because it strikes me that you went much further than many Labor members of parliament in defending the processes of trade unions. I note that you did say that the law requires trade unions to be democratic. The law also requires that people respect private property, do not wear balaclavas and storm into an office and smash it all up, but some trade union officials have done that. What I am saying is—

Mr DANBY —They went to jail.

Ms PANOPOULOS —Please don’t interrupt me. What I am saying is that just because the law says something does not mean it is always followed. You seem to have a textbook romantic view about democracy within a trade union, which is not like that of a government in collecting taxes, but it is a sectional interest. With you having published in Labor Essays, I am trying to ascertain ideologically, not legally, where you are coming from. I cannot really work that out, because your submission is not really a legal document. Are you, or have you been, a member or actively involved in any political organisations?

Mr Tham —No.

Mr DANBY —This isn’t the House Un-American Activities Committee, is it?

Ms PANOPOULOS —No, I am just interested because—

CHAIR —Deputy Chair, I think everyone should be entitled to ask their questions without interruption.

Mr DANBY —But that is a pretty extraordinary question.

Ms PANOPOULOS —No, it is not an extraordinary question because—

CHAIR —Excuse me, Ms Panopoulos; everyone should be entitled to ask their questions freely, and not according to questions which the deputy chair or other members—or I, for that matter, when you are asking questions—deem fit to vet. We could operate on that basis, but I do not think it would be good for the inquiry or for the robust public debate on electoral matters that we are all here arguing about and defending. I think it would be an irony if there was that sort of democratic censorship.

Ms PANOPOULOS —Thank you, Mr Chair.

CHAIR —We operate on the basis that, if anyone giving evidence does not understand the question or finds it offensive, they are free to raise it and they are protected by parliamentary privilege. So that is the basis we will operate on.

Ms PANOPOULOS —Thank you. I asked those questions because your submission is made presumably as a lawyer and as an expert on these matters, not just as a citizen who has walked in off the street. So I am ascertaining the veracity of your experience in commenting on these matters and your objectivity, because some of the claims you have made are quite extraordinary, and one could objectively say they come straight out of the Socialist Worker Online rather than from an academic of the ilk of Graeme Orr. I could understand why you would be very grateful to have your name attached to some of the publications of Dr Graeme Orr. Is there nothing anti-democratic you see in the processes of trade unions, in the way they operate?

Mr Tham —Say that again? Is there nothing—

Ms PANOPOULOS —Is there nothing anti-democratic in the processes of trade union organisations?

Mr Tham —Sorry, I—

Ms PANOPOULOS —Just a simple yes or no? Is there nothing? Is everything they do democratic?

Mr Tham —Sorry, I am struggling with the question. It is a double negative.

Ms PANOPOULOS —Is everything that Australian trade unions do democratic? It is quite simple.

Mr Tham —Of course not.

Ms PANOPOULOS —Of course not; thank you.

Mr Tham —Can I respond, Ms Panopoulos, because you did make some pointed comments about my academic credibility and my research. I am not a member of a political party, and whatever positions I have had and whatever arguments I have made are transparent. They are all in the public sphere. Whatever arguments I have made I have substantiated with either evidence or research. If you want to take me on regarding any specific arguments, you can do that, but I actually resent any attempt to cast doubt on my academic credibility just through broad-ranging comments.

Ms PANOPOULOS —You have asked me to follow that up with a particular instance. You refer in your submission, at page 41 of our documents, to the activity of incumbents maintaining databases used for partisan advantage. At page 5 of your submission you use a footnote of a particular newspaper article.

CHAIR —Since we have all turned to it, Ms Panopoulos, you might take us to the paragraph?

Ms PANOPOULOS —The paragraph begins, ‘Incumbents already’—

CHAIR —The first paragraph?

Ms PANOPOULOS —Yes. It is the end of that sentence. You say, ‘Incumbents already enjoy very significant advantages’—

Mr Tham —We seem to be on a different page. This is the submission on government advertising?

Ms PANOPOULOS —So you are not subject to this? You did not—

Mr Tham —I am happy to take the questions on notice, as I mentioned earlier. But I should add that if there are any specific arguments, in terms of how it has been substantiated or in terms of the evidence that you find in the submission on political funding, I am more than happy to answer questions.

CHAIR —So you will take the questions on notice, but you did not author that submission.

Ms PANOPOULOS —What I am particularly interested in is the comment made regarding state resources used to maintain databases used for partisan advantage. The reference to that is a footnote, which is a newspaper article, and it seems quite strange that an opinion in an article is used as evidence for a statement made here, particularly since one of the authors of that article had a very short-lived two months working in my office. I know exactly what he had access to and what he did not, so I find it very disturbing that investigations are not made by academics in this field to verify statements. Anyone can write an opinion piece, and any academic, it appears, these days can use that as evidence, which is quite a shame. I suggest that these are very serious matters in that allegations can be made in these submissions, and perhaps people should go back to using primary evidence, not relying on opinion and hearsay of others. So if you could pass that back—

Senator BRANDIS —Is this the phoney authenticity of the specious footnote you are concerned about?

CHAIR —Mr Melham has waited patiently.

Mr MELHAM —For what it is worth, it seems to be an inarguable fact that that is what sitting members of parliament do in terms of their databases. I refer to your article in the Federal Law Review, volume 32, which was tabled earlier. I am particularly interested in parliamentary entitlements, which you outline from page 406 through to 408. You quote from the Parliamentary Handbook as follows:

It is accepted practice that material concerned with the re-election of the member in his or her electorate may be included in a newsletter but not material concerned with the election or re-election of anyone else.

In the last parliament, the Special Minister of State basically extended our ability to use our communications allowance so that we can now produce how-to-votes which include a how-to-vote not just advocating our re-election but the re-election of senators in our own state. I am concerned about the way in which parliamentary entitlements have now been expanded to the stage where they give a huge advantage to incumbents who are seeking re-election. At the moment, you quite rightly point out that—

CHAIR —By that, Mr Melham, just for clarity, you mean incumbent members and senators individually?

Mr MELHAM —Well, individually, but there are different entitlements for senators than for members of the House of Representatives. For instance, the printing entitlement at the moment for members is $125,000; there is no rollover provision. The communications allowance has now been expanded so that it is the equivalent of a postage stamp per elector per year. My postage allowance has gone up from $28,000 to $42,000, and there are rollover provisions on that. I suppose my concern is that that comes on top of public funding and other private fundraising activities of individuals and political parties. Do you see an advantage in a provision that basically says that entitlements should cut out when an election is called—in other words, at the close of writs—so that there is not a political advantage to members who are seeking re-election? In other words, we go to a scheme that says, ‘Yes, you can use those entitlements for electoral and parliamentary business, but not the shameless use of them for re-election, for party political purposes.’ In effect, if I do my mathematics correctly, depending on the timing of an election, as a sitting member seeking re-election, I could use $200,000 of parliamentary entitlements to help in my re-election, which is an instant advantage in a 33-day campaign, on top of which comes public funding that was initially designed to cover that, and private funding.

Mr Tham —I will take that on notice, because I just have not given sufficient thought to that particular policy.

Mr MELHAM —No, that is okay. I am concerned at the way both sides of politics have expanded that aspect. There is no doubt that when Labor was in office it expanded the use of parliamentary entitlements. I have now been in the parliament for 15 years and I have seen its massive expansion, culminating in the last election with a direction from the Special Minister of State in effect saying that we could produce party how-to-votes for our electorate funded by the taxpayer, and that came within entitlements. So I would like you to address that, as well as the undue advantage that that might give to incumbents. In effect, I think it is along the lines of what your submission says at page 413 when it refers to public funding indirectly setting up barriers against newcomers, and state funding ossifying the existing party system by generally supporting existing parties.

CHAIR —Thank you very much. That concludes our questioning. We have run a little bit over time. It has been most worthwhile. I thank you for your evidence and for taking questions. Obviously, as an academic, you put out views, and forceful ones, and you are more than happy to defend them, which you have done today. That sometimes entails a bit of a robust exchange, but if you are an academic who is afraid of that, you would be in the wrong business. So thank you very much for coming.

Mr Tham —I believe in robust political democracy, so it is no problem at all. Thank you very much for inviting me to appear.

[12.05 pm]