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Political Influence of Donations
06/11/2017
Political influence of donations

EDWARDS, Dr Belinda, Private capacity

Committee met at 09:29

CHAIR ( Senator Di Natale ): I declare open this hearing of the Senate Select Committee into the Political Influence of Donations. These are public proceedings, although the committee may determine to agree to a request to have evidence heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee and such action may be treated by the Senate as contempt. It is also a contempt to give false or misleading evidence. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer a witness may request that the answer be given in camera, and you can obviously request that at any time. Could I please remind all of you that you cannot divulge confidential, personal or identifying information when you speak. You have the opportunity to supplement your evidence with written information after today's proceedings. Dr Edwards, do you have an opening statement?

Dr Edwards : I do. Thanks for having me this morning and for the opportunity to contribute to this inquiry. I would like to begin by adding my voice to the chorus of my colleagues that Australia's political donations regime is broken, by outlining what my research has found about how badly the system is failing us. I would then like to briefly echo the now very familiar refrain about the law changes that are required, before moving to place more weight on the things that perhaps are unique or specific that I might like to add to this conversation.

Firstly, in regard to my research and what it has to tell us about how the current regime is failing us, research to be published in the next edition of the Australian Journal of Public Administration includes my analysis of the political donations data of the last 10 years. It turned up some findings that I found quite extraordinary when I first encountered them, the first being that as little as 13 per cent of the major parties' incomes is attributed to specific donors. Of their total income declared to the AEC, only 13 per cent is transparently attributed to donors. More than half of their income is entirely undisclosed and about a third falls into the grey area of 'other receipts'. From this, I think we can conclude that the vast bulk of the relationships occurring around political donations and political funding are in fact occurring entirely behind closed doors and out of public view. The risk of corruption and influence peddling in such opaque circumstances is extremely high.

The second finding of my analysis, which is perhaps most relevant to this inquiry, is that more than half of the payments that are occurring have strong indications of being paid for access rather than being paid to support a political cause. This is evident in donors giving to both sides, and increasing payments to those in power. This is evidence of donors paying for access where they believe their business interests are served and they are more likely to get government decision-making to go their way, if they have made payments, significant payments, to whoever is in power. I would point out that it is illegal for businesses to make such payments to political parties if they do not expect the payments to advance the interests of their shareholders. It should be unacceptable in a democracy that the ability to pay politicians is considered to be a determinant of getting favourable government decisions.

A third finding that has come up, not so much in this particular article but in other research I have conducted, is that one of the most concerning aspects of these payments for access is the payment to both major parties. The issue that causes me greatest concern is when we see we have an issue where there is a clear public policy case for an issue, there is clear community interest in it, and then we see the major parties close ranks and the issue is excluded from parliamentary consideration. It's watching those moments that are, for me, the greatest concern to our democracy.

My research paints a pretty unambiguous picture of an opaque political donations culture in which businesses are paying politicians because they believe it benefits their shareholders. This is clearly not a situation that serves the Australian people. There are a range of measures that have been recommended for more than a decade now to address these problems. The disclosure caps need to be reduced, the scope for payment splitting removed, there need to be timely disclosures, et cetera. I would add one further suggestion to this list of the usual recommendations—that is, that we should be making it illegal to give to both major parties. Companies should be forced to pick one horse to back. There should always be an opposing party who is unencumbered in challenging those interests.

Beyond that, we all know what to do. Joo Cheong Tham and George Williams have been cutting and pasting the same recommendations about what is global best practice into these inquiries for a decade. The challenge is having the political will to do it. Rather than simply repeat those same sets of concerns—I'm sure you're fully aware of Joo Cheong Tham's 10-point plan—I would reiterate my support for that.

I would also like to draw your attention to another set of issues that perhaps you haven't had brought to your attention. It concerns the encumbrance of the way in which the Australian Electoral Commission actually releases the data—I'm not sure how familiar you are with the databases. The way in which the information is made public serves to be a significant block to the effective transparency of the political donations regime. I'm sure you have explored it and you will be aware that the way the AEC releases the data is that they release literally thousands of lines of data that are unable to be sorted or aggregated in any meaningful way. This creates a string of transparency problems in terms of the ability of journalists, particularly, to be able to analyse that data and bring it to the attention of the public in any kind of meaningful way. This was highlighted by Charlie Pickering in an episode of The Weekly last year in which they invested considerable resources in seeking to explain to their audience what the political donations landscape was. What they ended up doing was making a joke in which they put an enormous stack of paper on the desk and said—I think that particular episode was all about Clive—'The reason that is the only story you've heard about is that nobody has the time to go through these thousands of pages of data.' Despite having made a considerable investment in staff time—and I think we saw several references on Four Corners—unless a media organisation is in a position to dedicate literally months of time to the analysis of this database, it is actually very difficult to tell any sort of meaningful stories about what the big picture is of how the political donations landscape is unfolding.

I would like to point out that I actually think this works to the disadvantage of the political class as well, that the emphasis on cherry-picking, the emphasis on going, 'Right, we're just going to go and find a couple of juicy bits here and there and talk about them in absolutely no context,' removes our ability to step back from the data and say, 'What are the big, structural, systemic things that are occurring that might actually be the subject of a much more productive public conversation instead of having circuses over very small payments and then complete lack of awareness around big structural issues.'

CHAIR: Dr Edwards, I'm conscious of time and I'm really keen to get the committee to ask questions, so I will just ask you if you don't mind concluding the opening statement and then we'll go to questions.

Dr Edwards : Okay. To make the AEC database more accessible, corporate donors need to be identified by their ABS industry numbers and they need to be identified by their electorates. The AEC needs to be releasing trend analyses of the make-up of the payments and of the different types of payments. The AEC also needs to be empowered to effectively enforce compliance with the payments regime. I will leave it there.

Senator KETTER: Thank you very much, Dr Edwards. It sounds like you're looking for some sort of Excel spreadsheet or something like that to be prepared so that it's then possible to more easily analyse data over a period of time so that we can track who is donating and how much, et cetera?

Dr Edwards : Yes. The Excel spreadsheets are provided, but we need a few extra columns to enable them to be sorted. We need columns that identify what industries the payments are coming from, and we need columns that identify which electorates they're coming from. It would be very useful if their donations were recorded by ABNs, because, with the AEC data at the moment, different abbreviations of company names mean they don't come up together and they're not aggregated. We need the database to be able to collate payments across jurisdictions and over years so that you can look at trends. All of these sorts of things would enable people to tell the big story, rather than just the little stories about political finance arrangements.

Senator KETTER: I note that you also support lowering the disclosure threshold to $1,000?

Dr Edwards : Absolutely. Going into the 2013-14 election, more than 50 per cent of Labor's income went entirely undisclosed and 66 per cent of LNP's income went entirely undisclosed.

CHAIR: Could you repeat those figures? What year?

Dr Edwards : The 2013 election. The year in which there was a change of government. More than 50 per cent of Labor's income went entirely undisclosed and 66 per cent of the LNP's income went entirely undisclosed. That suggests that the disclosure thresholds are much too high.

Senator KETTER: Too high, yes—sure. Do you have a view on anonymous donation limits, for disclosure purposes?

Dr Edwards : I think that certainly below $500 would be appropriate.

Senator KETTER: What about the issue of donation splitting, where you have donors splitting up their donations into multiple entities associated with a particular party?

Dr Edwards : Absolutely. We need a comprehensive regime that operates at both the federal and state levels. One of the things my research demonstrated was an enormous amount of money being shuffled within the parties between branches—so, that notion of money being directed to the jurisdictions with lower or different thresholds and then being redistributed around the parties' national structures is a really significant problem. We need a single national comprehensive regime. We need the parties to be required to aggregate the payments. At the moment, under the rules as they stand, somebody could give one of the major parties $10,000, five days a week, 52 weeks a year, and the major parties don't need to disclose those payments at all. It is up to the donor to do the aggregation, to disclose. If the donor doesn't do that, there is actually nothing to flag to the AEC that wrongdoing has occurred; there is no indication of where to even look.

CHAIR: I wasn't aware of that. It's just the responsibility of the donor, and the party has no responsibility?

Dr Edwards : No, the party is not required to aggregate. And as you are probably aware if you've looked at the enormity of the discrepancies between what the parties declare and what the donors declare, it is pretty clear that donors are laissez-faire about whether they put in their disclosures. So that seems like an enormous hole.

Senator KETTER: And you're supportive of continuous disclosure?

Dr Edwards : I think in this day and age, where the ATO can give me an app on my phone which says, 'Every time you get a taxi receipt, put it on your tax deductions,' there is absolutely no issue that we shouldn't have that.

Senator KETTER: Are there any issues or roadblocks that we need to consider in relation to that?

Dr Edwards : Not that I'm aware of.

Senator KETTER: Some of the submissions we received talked about the need to balance the freedom to express political opinions against the undue influence that donations can bring. And you're advocating transparency rather than donation caps. Is it fair to say that's your take on it?

Dr Edwards : No. I would support most of Joo-Cheong Tham's 10-point plan about the need for caps. The size of payments needs to be lower and 'one vote, one value' shouldn't be determined on income distribution. The clear prevalence of paying for access is clearly a very significant part of the political donations landscape. That needs to be balanced against the need for political expression. For corporate entities the notion that if these payments aren't delivering returns for their shareholders it is illegal for them to make them certainly brings into question whether they should in fact have a right to a political opinion in that way.

Senator KETTER: Your submission focuses on transparency issues as a vital area of reform. I'm not seeking to put words in your mouth, but that suggests to me that that your major focus is in this transparency type area.

Dr Edwards : That's been the particular focus of my most recent research. That doesn't mean I consider it the only issue of concern. I have to concede that I am a little disheartened knowing that my colleagues have in fact been making the same recommendations for a very long time. In that sense, it's reasonably clear what needs to be done. I think it's quite clear what solutions need to be put in place. The question is one of political will rather than there being ambiguity about global best practice in this space.

CHAIR: Do you have a view on what the cap should look like, at what threshold they should be set?

Dr Edwards : I don't have a view. I'm happy to let others who are more focused in that area answer that.

CHAIR: Do you think it should be applied more universally across corporations, other organisations, individuals? Do you think there needs to be consistency in terms of all of those groups captured by donation caps?

Dr Edwards : For organisations for whom the payments are illegal, if they're not advancing the interests of their shareholders these caps should very definitely apply. There are a variety of other groups whose interests in the broader shape and quality of the community are different. The notion of the good society is quite different from advocacy for the interests of your shareholders. I would be comfortable with the idea that different caps should apply to those that are maximising shareholder value.

Senator BROCKMAN: I have a question on this issue of the legality versus the illegality of being involved in the political system. Wouldn't a community outreach program that doesn't directly benefit the shareholders be illegal as well? I suspect that you're drawing a bit of a long bow there.

Dr Edwards : I would disagree. Corporates are pretty clear that they see a whole range of those outreach activities as associated with building the value of their brand.

Senator BROCKMAN: Couldn't you say that being a part of civil society and contributing to civil society is exactly the same?

Dr Edwards : We are often seeing these engagements as matters of paying for access. As part of the AEC disclosures, it would be very useful to have the donations linked to submissions to inquiries and also to pursue the policy that we see in the US of open diaries for ministers. We would then have some transparency around who paid what, who was seeking to advocate what in the political realm and the access that they received associated with those donations. But you might be right. For example, the gay marriage debate is something that a variety of corporate actors might seek to participate in as part of a broad social debate, but that's quite different from participating in discussions about how their industry should be regulated.

Senator BROCKMAN: So how do you think third party political actors should or shouldn't be regulated? It is a trend we've seen increasingly in Australia and certainly globally. In America we've seen it as a trend; even minor restrictions on political donations have led to a significant increase in the PACs and super PACs, effectively third-party actors, becoming the conduit for significant donations. Obviously, we've seen it in Australia with GetUp! And there are other vehicles on both sides of the political spectrum that engage in direct political campaigning. How would you see them being regulated?

Dr Edwards : We've been seeing the difficulties around how to regulate third parties as an excuse for not getting the major parties' houses in order. I think there are a range of complex challenges around how you deal with third parties. Using the difficulties around third parties for regulating the parties is a little bit like saying we're not going to do anything about sexual harassment unless we can be guaranteed we can stop the worst types of rape. In fact, changing the norms around how ordinary people participate in our political process day to day is a really important goal in itself. Even though it's true that the most determined wrongdoers will find other ways to influence the political system, the idea that you shouldn't be trying to do all that you can to change the moral norms around how the ordinary person engages is, I think, a wrong-headed argument.

Senator BROCKMAN: But I think you could make a pretty good argument that, in the US, the changes to restrict had unintended consequences and probably caused a worse outcome than the problem they sought to address in the first place.

Dr Edwards : I think that's questionable. We can look at issues around the scope for corruption at soft and hard levels. The low-level stuff around simply creating relationships and networks of favour is tied much more closely to donors—for example, donors who give to ministers. I've been quite shocked in my research at how many donors give specifically to the campaigns of the ministers who are making decisions in their portfolios. Anything that makes that relationship more at arm's length in any way has to be a good thing.

Senator GEORGIOU: We heard at the last hearing about lowering the threshold of donations to $1,000. What consequences would lowering the threshold to $1,000 have on the public perception?

Dr Edwards : I think there is extraordinary cynicism among the public at the moment—a sense that their leaders are able to be bought. I think reducing the thresholds in such a way would significantly improve the community's perception that people of all walks of life have a more equal voice in this place.

Senator GEORGIOU: You also mentioned in your opening statement that your fellow academic colleagues have been copying and pasting these recommendations for the past decade. Why do you think these recommendations haven't been implemented in 10 years? You also mentioned there was no political will to implement these recommendations. We've been hearing about donations to the major parties. Do you think there will be any political will to change the current scope? If they are benefitting from so much money—you just mentioned that ministers get direct donations to their portfolios—do you think there will ever be the political will to change?

Dr Edwards : Certainly, there needs to be significant pressure applied to the major parties to shift on this. The thing that almost always drives major reform in this space is large corruption scandals. There is a notion that we need a big scandal to force action. But I think there are also some misperceptions amongst the major parties. For example, the thresholds were initially raised by the Liberal Party when they perceived that Labor was at a financial advantage to them in this; they believed that Labor's support from the unions—they believed they were disproportionately disadvantaged by tighter rules. My evidence suggests that that's not the case. My evidence suggests that the numbers that had the Liberal Party so concerned when they brought in these changes were indicative of the fact that Labor was about to win power and they were having a significant surge in their income associated with payments for access. The Liberal Party achieved a similar surge when they were on the eve of taking power. Actually, for both sides, their base of true blue supporters is of a similar size and their incomes are pretty much doubled when they're about to win power. I think that in itself should be a cause for concern for everybody—the idea that whoever is in a position of dominance has then got twice the financial resources of anybody else.

CHAIR: Do you have any evidence of where donations are directly influencing outcomes? Obviously, there is a lot of indirect evidence, but do you have anything to suggest that it's more than that?

Dr Edwards : There are certainly numerous examples one comes across where one goes, 'Oh, here's the public policy argument and here's the community interest argument,' and then there is a very significant disconnect with what the political parties then choose to do.

CHAIR: On the basis of a donation? That's the question. What are the top three examples of where you think donations have directly influenced the decision made by a minister and that's inconsistent with where you think community sentiment is?

Dr Edwards : The one that leaps out most significantly to me is Village Roadshow. Is that what it's called? I would need to check.

CHAIR: You can take it on notice, but I would be interested—

Dr Edwards : I will take it on notice, but certainly it was around the intellectual property rules.

CHAIR: Can I suggest a bit of homework—to pick three of the most obvious examples where you think donations have directly influenced an outcome. I'd be interested to hear that from you. You mentioned that only 13 per cent of income of the major parties is from disclosed donations. Does that apply to both parties?

Dr Edwards : I said that 13 per cent is transparently attributed to donors. There is another 12 per cent or so that comes in as attributed through affiliated organisations. There is then a chunk that comes in through other receipts. Labor's other receipts are larger than the Liberal Party's. It varies a little bit from year to year, but certainly that was the—

CHAIR: What is the biggest source of the 'other receipts' category?

Dr Edwards : The 'other receipts' category looks exactly like a collection of political donations.

CHAIR: So do you feel that that is just 'donations' by another name?

Dr Edwards : Unfortunately it is probably about 80 per cent that. Then there are some other payments in the mix.

CHAIR: How can you say that? I am just interested in where that comes from.

Dr Edwards : That's my instinctive sense of it. Occasionally you get, for example, things like the moneys out of the Cormack Foundation, which are returns on shares. You get big property sales. You get the occasional thing which is a legitimate other receipt. That confuses the data and makes it difficult to work out the trends. It's actually the mixing of fundraising in with other receipts that actually makes those trends so difficult to unpick. But certainly previous research by other scholars has concluded that, for analytical purposes, most other receipts should be considered donations.

CHAIR: In that category, are we talking about the various associated entities of the major parties? Is that what is included in that?

Dr Edwards : A lot of the associated entities make declared donations. Others make payments into the 'other receipts' category. For example, the unions make payments into other receipts which are associated with affiliation dues et cetera.

CHAIR: What about things like progressive business or the Liberal version? Is that part of 'other'?

Dr Edwards : Most of those come in, actually, as donations through affiliated organisations.

CHAIR: So what else comes in the 'other' category?

Dr Edwards : It is worth flagging how rubbery the distinction is between what are counted as donations and other receipts for identical-looking payments—like there were three payments of $20,000 to the Liberal Party from Meriton Property Services declared as donations and then one that was declared as an other receipt. I think in one of the analyses—I'll take this on notice—there were about 74 discrepancies between things that the donators identified as being donations and the party identified as other receipts. But other receipts are usually, for the most part, payments in large round numbers from exactly the sorts of people you would expect to be making political donations.

CHAIR: Tell me: how do they get away with it?

Dr Edwards : They are not actually required under the act to distinguish between other receipts and donations. So it is not legally enforceable. The other thing is that the AEC has no capacity to actually enforce these things. As far as I'm aware, these things are not vigorously pursued at all.

CHAIR: So, if I'm company X, I could give a $20,000 payment as a donation and give another $20,000 payment which I consider to be a donation and the political party can put it into the 'other receipts' category?

Dr Edwards : Absolutely.

CHAIR: And there's no accountability for how that is done?

Dr Edwards : No, not that I'm aware of.

CHAIR: Why wouldn't political parties choose to put most of what they get in the form of donations in the 'other receipts' category?

Dr Edwards : They do choose to do that.

CHAIR: Is that why you're suggesting 13 per cent is coming from disclosed donations and that one-third category is largely from donations that should be included as part of the disclosed donations category?

Dr Edwards : Absolutely.

CHAIR: On the undisclosed donations, you said 50 per cent and 66 per cent for Labor and Liberal respectively. They are donations that are simply under the $13,500 threshold—it is an aggregation of those figures?

Dr Edwards : The amount is calculated from what they declare to be their total income less the money they provide receipts for. It's the money that's not explained, if you like. Because of the ease of donation splitting—in our system, a $100,000 donation is a big donation and it's entirely possible to just give to each of the different branches in such a way as to completely avoid any—

CHAIR: So that's just donation splitting, you suspect?

Dr Edwards : I'm sure it's a mix. I'm sure that there is a significant proportion of below-threshold donations.

CHAIR: Individual donations, yes.

Dr Edwards : But, given that we're talking about tens of millions of dollars going undisclosed, I think it's very likely that there's a significant proportion of donation splitting—

CHAIR: But you don't have a sense of what proportion of the total undisclosed might come from donations that are bigger than the disclosure threshold and just—

Dr Edwards : There's no way to tell.

CHAIR: Okay. That's all very helpful. I just want to finish off with your view on caps. We've spoken about how you support donation caps.

Dr Edwards : Yes.

CHAIR: To summarise, you support potentially differential caps, depending on the purpose of the organisation making the donation.

Dr Edwards : Yes.

CHAIR: Do you support spending caps or not? There are spending caps for political parties and then there are spending caps for other organisations.

Dr Edwards : Absolutely. I think that one has to look to the root of this problem, which is that people aren't raising money for fun; they're raising it because of the arms race to be able to pay for campaign funds. The only way that we can really systemically address this problem is to reduce the need to be raising as much money for campaigning.

Senator KETTER: Just going back to the level of disclosure, do you believe that lowering the disclosure threshold to $1,000 per donation will address, to a large extent, some of your concerns about the transparency of donations to the major political parties?

Dr Edwards : I think it will make a very significant difference, yes.

Senator KETTER: Thank you very much.

CHAIR: Thanks very much, Ms Edwards. I appreciate your time. I think we've given you a bit of homework. Our deadline for anything further that you need to provide to the committee is 23 November. We appreciate your contribution today.