Tham, Joo-Cheong; Grove, David --- "Public Funding and Expenditure Refgulation of Australian Political Parties: Some Reflections" [2004] FedLawRw 19; (2004) 32 Federal Law Review 397

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Not so long ago, Australian electoral law was described as being in a Cinderella state, a neglected but promising field of inquiry.^[1] Some years down the track, it is clear that Australian electoral law is beginning to shed its Cinderella-status with scholars paying increasing attention to the legal regulation of elections.^[2]

In this burgeoning field, political finance laws assume critical importance. Indeed, it has been said that such laws probably pose 'perhaps the central issue facing electoral law'.^[3] Arguably for this reason, this aspect of Australian electoral law, more so than any other, has been the subject of sustained scholarship.^[4] It is even showing signs of maturing into a distinct area of electoral law.^[5]

The literature on Australian party finance laws, however, reveals several weaknesses. Such legal analysis is not adequately grounded in the funding and expenditure patterns of the political parties. This disconnection largely stems from a broader lack of attention to the parties' funding structures and spending practices.^[6] Moreover, discussion of Australian party finance laws has typically taken place without reference to comparable regimes in other countries.^[7] Specifically, there has not been any systematic comparative analysis of Australian party finance laws.

Even within this somewhat insular focus, the perspective of the literature is further narrowed by a disproportionate focus on the funding disclosure scheme.^[8] Other regulatory methods like political expenditure regulation^[9] and public funding^[10] have, as a result, been subject to inferior examination. This imbalance is all the more ironic given criticisms of the inherent limitations of funding disclosure schemes.^[11]

It is against this backdrop that this article reflects upon three possible methods for regulating Australian party finance at the national level:^[12] public funding of parties, campaign expenditure disclosure and limits.

These reflections are contextualised in two ways. First, they draw upon data revealing the funding and expenditure patterns of the main Australian political parties. Second, they are informed by a comparative analysis of the United Kingdom ('UK') party finance laws as it applies to national elections.^[13]

For various reasons, the UK regulatory regime provides good fodder for comparison. It has been recently transformed by the Political Parties, Elections and Referendums Act 2000 (UK) c 41 ('PPERA');^[14] a change that has been described by one commentator as 'the most comprehensive and radical overhaul of British party finance for over 100 years.'^[15] According to another, this Act has changed UK party finance laws from 'one of the most primitive regimes … in the developed world'^[16] to 'one of the most highly regulated in Europe.'^[17]

Moreover, the Australian and UK party finance laws share an intriguing mix of similarities and differences. The common lineage of the Australian and UK legal systems is, of course, obvious. This lineage is reflected in the fact that the (repealed) Australian candidate expenditure limits were imported from the UK.^[18] Further, at the level of principle, party finance laws in both countries aim to advance political equality.^[19]

At the same time, these countries diverge in various ways especially in terms of the regulatory measures employed. While parties in both countries are funded by the public purse, UK political parties receive such assistance entirely through hypothecated funding whereas Australian political parties, while assisted through a system of parliamentary entitlements, also receive subventions through electoral funding. Further, expenditure disclosure and limits form key planks of the UK regulatory regime while Australian party finance laws largely leave the parties' expenditure unregulated.

The article is set out in the following manner. The first part examines the funding and expenditure patterns of the main Australian political parties. The next three parts are devoted to considering the Australian experience with public funding, campaign expenditure disclosure and limits with the benefit of insights derived from the UK. The article concludes that there is an urgent need to review the system of publicly funding political parties in Australia due to the dangers the present system poses to Australia's democracy. It also argues that there is a strong case for reinstating expenditure disclosure and limits in Australia. The argument for reinstating expenditure disclosure largely rests on the community interest in knowing how the parties spend public monies. Expenditure limits, on the other hand, are justified because they can prevent corruption and undue influence as well as promote a level playing field between the parties.

II THE FUNDING AND CAMPAIGN EXPENDITURE OF AUSTRALIAN POLITICAL PARTIES

A The collection and analysis of the data

by examining the relevant information for the Australian Labor Party ('ALP'), the Liberal Party,^[20] the National Party, the Australian Democrats ('Democrats') and the Greens.^[21]

Data relating to campaign expenditure from the 1984 federal election to the 1996 federal election was easily culled from Australian Electoral Commission's ('AEC') reports and secondary sources. A different situation, however, applied to campaign expenditure for the 1998 and 2001 elections because parties were not obliged to disclose their campaign expenditure for these elections as such an obligation was repealed in 1998.^[22]

Even more considerable difficulties were encountered in collecting and analysing data relating to the parties' funding. As noted above, there has been very little analysis of the funding received by parties. More to the point, there has been no analysis of the funding received by the parties in the recent years. This lacuna gave rise to the need to undertake a fresh empirical investigation.

To this end, the parties' annual returns for the financial years 1999–2000 to 2001–02 were examined.^[23] This examination classified the income received by the parties according to various categories.^[24] It also aggregated the amounts for all three financial years.

The amounts were aggregated because the funding of Australian political parties fluctuates according to the electoral cycle. This fluctuation occurs because electoral funding is paid after every election and not annually. Moreover, the amount of donations received also fluctuates with significant increases in election years. Given these fluctuations, it would not be meaningful to focus on one year at a time. Aggregating the amounts over a three-year period which covers one electoral cycle (that is, dating after the 1998 federal election and ending after the 2001 election) gives a much better snapshot of the Australian political parties' funding structures.

Finally, it should be stressed that there are significant limitations to the data relating to 'donations'. These limitations which result in the understatement of the total amount of political contributions are discussed in the Appendix.

B Funding of the parties

Table 1 indicates that all the parties are significantly reliant on private funding with more than half of their budgets privately financed. The extent of such reliance varies with the ALP, Liberal Party and National Party heavily dependent on private monies. More than 80 per cent of their funding comes from this source. The Greens, on the other hand, are slightly less dependent with nearly three-quarters of its budget derived from private funding. The Democrats stand out with slightly over half of their funding from private sources.

Table 1 also demonstrates that electoral funding forms a significant part of the Democrats' and Greens' budgets. Such funding constitutes nearly 40 per cent of the Democrats' budget and nearly a quarter of the Greens'. In comparison, such funding stands at less than 15 per cent of the other parties' budgets.

Table 2 reveals that, in Australia, political donations are dominated by corporate donations. Such donations are the key source of donations for all parties except for the Greens. For these parties, such donations greatly outstrip other sources of donations. For example, the amount of corporate donations received by the Liberal Party was more than 18 times the amount of individual donations received. The ratio for the National Party stood slightly over 11.

It is obvious then that corporate donations have been normalised in Australia. While such normalisation is partly attitudinal in that it is constituted by a sanguine acceptance of corporate donations,^[25] the figures make clear that such acceptance is rooted in the funding patterns of the parties.

The normalisation of corporate donations in Australia possesses two striking features. First, the sharply increasing amount of corporate donations flowing to the parties means that such normalisation will become increasingly entrenched as time goes by. In the 1992–93 financial year, the amount of corporate donations going to the ALP, the Coalition and the Democrats stood at $6.6 million.^[26] For the financial years 1995–96 and 1997–98, the amount of corporate donations made to these parties as well as the Greens had increased to $29 million with an average of $9.7 million per year.^[27] For the financial years 1999, 2000–01 and 2002, this amount had increased by more than 70 per cent to $50.8 million with an average of $16.9 million per year.^[28]

Second, such normalisation brings in its wake the normalisation of large corporate donations. This development grows from the practice of large corporate donors hedging their bets by donating to several parties. For example, for the financial years 1995–96 and 1997–98, nine of the 10 top corporate donors gave to both the ALP and the Liberal Party with seven of them donating to both these parties and the National Party.^[29]

Trade union donations are unsurprisingly a key source of donations for the ALP. It also is a minor source of donations for the Democrats and the Greens with slightly over two per cent of their donations coming from trade unions.

Table 3 attempts to gauge how the amount of the parties' funding compares with their electoral support. In essence, the amount of total funding, private funding and electoral funding received by a party was divided by the number of first preference votes the party received in the 2001 federal election. Being derived on a vote-basis, these figures are not affected by the different levels of electoral support enjoyed by the parties and hence, give a much better picture as to their fund-raising abilities.

These figures reveal a dramatic funding inequality between the ALP, Liberal Party and National Party, on one hand, and the Democrats and the Greens, on the other. The former received more than $20 per 2001 election vote. The Democrats and Greens, however, receive around $10 per 2001 election vote. To illustrate: for each dollar per vote received by Democrats, nearly three dollars was received by ALP. And for each dollar per vote received by the Greens, the Liberal Party received nearly two dollars.

Table 3 indicates that this inequality is due largely to the different amounts of private money received by the parties. There is a clear correspondence between the pattern of private money received per vote and the pattern of total funding received per vote with both revealing a sharp cleavage between the ALP, the Liberal Party and the National Party, on one side, and the Greens and the Democrats, on the other. For example, for each dollar of private money received per vote by the Democrats, more than three dollars was received by the ALP. And for each dollar of private money received per vote by the Greens, the Liberal Party received two dollars.

An intriguing pattern, however, emerges in relation to the amount of electoral funding received per 2001 election vote with the Liberal Party and the Greens receiving a somewhat lesser amount per vote. The inferior funding received by the Greens can probably be attributed to the four per cent threshold which applies to federal electoral funding.^[30] The position of the Liberal Party is, however, rather mysterious.

Electoral funding has a limited levelling effect on the funding inequality between the parties. This effect also varies significantly according to the party. For example, the effect is quite substantial in relation to the Democrats. As an illustration, the ratio of private funding per vote for the ALP and the Democrats stands at 3.62. The corresponding ratio of total funding (which includes electoral funding) per vote is, however, 2.51. In contrast, the levelling effect is very modest in relation to the Greens. For example, the ratio of private funding per vote for the Liberal Party and the Greens is 2.19 whereas the corresponding ratio of total funding per vote was marginally less at 1.95. Such difference will largely be due to the inferior electoral funding that the Greens receive.^[31]

C Campaign expenditure of parties

Table 4 below indicates that, in nominal terms, campaign expenditure by the four main parties has been steadily climbing in the period between the 1987 and the 1996 federal elections with the 1993 federal election an anomalous exception.^[33] A similar trend exists with respect to political broadcasting expenditure.

To take into account inflation and the increasing number of voters, indices were derived for both campaign expenditure and political broadcasting expenditure. These indices were aimed at determining the amount of spending per voter measured in real terms. The formulae for these indices are as follows:

These indices for the 1987 federal election up to the 1996 federal election do not indicate any clear trend. In particular, there has not been any discernible pattern of increases in the campaign expenditure index. Indeed, the campaign expenditure index for the 1996 election is less than that for the 1987 election.

III PUBLIC FUNDING OF PARTIES
A Outline of funding schemes

1 Australia
(a) Electoral funding

In Australia, the federal electoral funding scheme operates in a simple manner. So long as parties and candidates poll at least four per cent of the first preference votes cast in a constituency, they are entitled to a certain sum for each first preference vote cast in their favour.^[35] This indexed sum stood at $1.79 for the 2001 federal election.^[36] Apart from proof of electoral support, this entitlement is unconditional. For instance, there is no present requirement for proof of electoral expenditure.^[37]

(b) Parliamentary entitlements

Australian political parties are indirectly provided public funding in various ways. Instances include compulsory voting which shifts the burden of getting the vote out from the parties to the state and the provision of the electoral roll free of charge to candidates.^[38]

What, arguably, is the most important source of indirect public funding is parliamentary entitlements^[39] simply because of the amount involved. In the 1999–2000 financial year, for instance, the cost of such entitlements amounted to $354 million.^[40] To get a sense of proportion, the parties' budgets for the three financial years of 1999, 2000–01 and 2002 was less than this amount and stood at approximately $248 million.^[41]

These entitlements are provided under the Parliamentary Entitlements Act 1990 (Cth) and determinations made under the Remuneration Tribunal Act 1973 (Cth). Collectively, these instruments provide for two tiers of entitlements. The first applies to all parliamentarians whereas the second tier provides parliamentary office-holders (including Ministers)^[42] with additional entitlements.

• allowances like the electorate allowance,^[43] the private vehicle allowance^[44] and the communication allowance;^[45]

The second tier generally provides parliamentary office-holders with more generous travel entitlements.^[48] It also entitles the leaders and deputy leaders of the Opposition in both the House of Representatives and the Senate as well as the leader of parties with more than five representatives to additional office accommodation.^[49]

It is clear that some of these entitlements cannot be used for party activity like campaigning. The entitlement to have certain medical expenses defrayed^[50] is a case in point. Further, there are other entitlements which are unlikely to be used for party purposes, for example, the travel allowance provided to retired parliamentarians.^[51]

On the other hand, many of these entitlements can, and will, be used for party activity. This is clearly the case with entitlements which have no restriction as to use. Specifically, the use of this type of entitlements for party purposes is not prohibited. Entitlements falling within this category include:

• the entitlement of members of the House of Representatives to have the costs of certain items of printing, including newsletters for distribution to constituents, covered up to $125,000 per year.^[53]

These entitlements would allow parliamentarians, for instance, to use fax machines and phones for the purpose of campaigning. Similarly, members of the House of Representatives could use their printing allowances to distribute newsletters to their constituents urging their re-election.

There are other entitlements which are subject to a nominal prohibition that they cannot be used for party purposes. The typical restriction which applies to these entitlements is that they can be used for 'parliamentary or electorate business (other than party business)'. This restriction applies, for example, to:

Despite this restriction, these entitlements are quite malleable and can fund many types of party activity. This malleability is due to the fact that the legislative instruments do not define either 'parliamentary or electorate business' or 'party business'. So it is that there is no statutory delineation between legitimate and illegitimate use. This is despite calls from bodies like the Australian National Audit Office for clearer definition and guidance.^[57]

More fundamentally, even if there were a definition of the relevant phrases, the inescapable fact is that there is an overlap between parliamentary or electorate business and party business. This overlap is nicely illustrated by the handbook on Members and Senators' Entitlements issued by the federal Ministerial and Parliamentary Services. Elaborating upon the distinction between parliamentary or electorate business and party business, this handbook states that:

This statement vividly demonstrates that a particular activity can be simultaneously characterised as parliamentary or electorate as well as party business.

2 United Kingdom

While there is no system of electoral funding in the United Kingdom, British political parties are funded by the public purse in several ways.

The Opposition parties are supported in the performance of their parliamentary duties through the 'Short' and 'Cranbourne' money. Such monies cannot be used for general party purposes and consist of three components. The first component comprises financial assistance calculated according to the number of seats and votes obtained in the previous general election. The other components are funding for the Opposition Leader's office and a travel fund for Opposition frontbenchers.^[59]

Less important sources of public funding include the policy development grants introduced by the PPERA. These grants which are capped at the modest amount of £2 million per annum^[60] were first made in 2002.^[61] Further, political parties are also indirectly subsidised in relation to their campaign expenditure with the Representation of People Act 1983 (UK) providing that each candidate is entitled to free postage for one communication to each constituent for each election.^[62] While not strictly speaking public funding, television and radio broadcasters provide qualifying political parties with free broadcast time. Such free airtime is of paramount importance in the context of a ban on political broadcasting.^[63]

The respective amounts of funding for the 2001 election year are provided below.

B Purposes of public funding

Electoral funding in Australia has two aims. It aims to facilitate fair elections through ensuring that 'different parties offering themselves for election have an equal opportunity to present their policies to the electorate.'^[66] Such equal opportunity or 'fair rivalry'^[67] between the parties is promoted by public funding which aims to ensure that the electoral contest is open to 'worthy parties and candidates [that] might not [otherwise] be able to afford the considerable sums necessary to make their policies known.'^[68]

Electoral funding also attempts to reduce candidates' and parties' reliance on private funding of campaigns through the subsidies provided. Reducing such reliance, it is hoped, would prevent '[a] serious imbalance in campaign funding'^[69] of the political parties.^[70]

Funding provided directly to parliamentarians as well as hypothecated funding like the UK policy development grants are, however, animated by separate concerns. In their different ways, they are aimed at enabling parliamentarians and the parties to effectively perform their functions. So it has been said of Australia's parliamentary entitlements that they 'enable [parliamentarians] to fulfil their parliamentary and electorate responsibilities'.^[71] Similarly, the Neill Committee justified its recommendation for policy development grants 'to enable the parties … to fulfil better what is, after all, one of their most vital functions (long-term policy development).'^[72]

C Questions concerning public funding

In the United Kingdom, public funding, or more accurately, the extension of public funding, is a live and controversial question. The Neill Committee, with the support of Labour and Conservative parties, opposed any significant extension of public funding. Its proposals were merely to introduce a modest scheme of policy development grants and one-off grants to assist political parties with the implementation of the PPERA.^[73]

The question of increased public funding has not, however, been foreclosed by the Neill Committee Report. Indeed, it is one of the key issues being reviewed by the United Kingdom Electoral Commission ('UK EC')^[74] with public opinion divided between those who support a significant increase in public funding and those who insist on more moderate extensions.^[75]

In contrast, a rather smug consensus exists in Australia, so much so that the bipartisan Joint Standing Committee on Electoral Matters could, in its report on the 2001 federal election, blithely state, without any elaboration, that the 'current public funding regime strikes an appropriate balance'.^[76] The emergence of this consensus is all the more dramatic considering that the Liberal Party vehemently opposed the introduction of electoral funding.^[77] Such opposition, however, is a thing of a past with the Liberal Party embracing the electoral funding scheme by actively promoting increases in such funding.^[78]

This consensus, however, belies serious problems with the Australian system of public funding. Such funding potentially inflates campaign expenditure. Moreover, it is ineffectual to reduce reliance on private funding and clearly exacerbates political inequality.

1 Inflating campaign expenditure

The available evidence indicates there has not been a clear trend towards increases in real spending per voter either with campaign expenditure generally or political broadcasting expenditure.^[79] Regardless, there is still a nagging question whether public funding fuels increases in campaign expenditure.

There is good reason to suspect this to be the case. There is, firstly, no natural limit to campaign expenditure or, more generally, to the parties' expenditure. The only real limit is the size of the parties' budgets. Thus, if the parties' budgets expand because of public funding, we should expect increases in campaign expenditure in the absence of other constraints like expenditure limits.^[80] In such circumstances, it would seem that electoral funding acts as 'an add-on that allows the competing political parties to spend more on advertising and other electoral purposes than they would otherwise choose to do.'^[81]

Furthermore, there is anecdotal evidence that broadcasters charge the parties an additional premium for political advertising.^[82] If this were true, public funding by boosting advertising rates would necessarily increase campaign expenditure.

There are good grounds then for suspecting that public funding inflates campaign expenditure. At the same time, it should be conceded that the above comments remain speculative. As it stands, the question of the effect of public funding on campaign expenditure is not one that yields a definitive answer with further investigation required.

2 Ineffectual to reduce reliance on private contributions

Since the electoral funding scheme was introduced in 1983, there has been very little evidence that the amount of donations to political parties has decreased.

On the contrary, the amount of corporate donations has sharply increased. This together with the parties' heavy reliance on corporate money means that corporate donations have been normalised.^[83] More than this, the imbalance in funding that was to be remedied by electoral funding is very much intact with inequalities in private funding explaining most of the financial inequality between the ALP and the Coalition parties, on one hand, and the Democrats and Greens on the other. It should be stressed that such inequality is not due to the different levels of electoral support enjoyed by the parties as the figures used were derived on a vote-basis.^[84]

It is hard then to escape the conclusion that electoral funding has failed abysmally in its aim to reduce the parties' reliance on private funding and, in particular, corporate donations. This, however, should not come as a surprise. The fact that electoral funding in Australia is not tied to any conditions or obligations relating to the receipt of private funding has always meant that this objective was largely rhetorical.

The vice of electoral funding might, in fact, go beyond ineffectiveness. If it were true that electoral funding inflates campaign expenditure, such funding would then perversely increase reliance on private funding as parties seek more donations to meet their perceived expenditure needs. So far from 'purifying' the political process by reducing the reliance of political parties on large donations and insulating them from the risk of corruption and undue influence,^[85] electoral funding in Australia might perversely be a corrupting element.

3 Exacerbating political inequality

Electoral funding does advance political equality by boosting the finances of the Democrats and, to a much lesser extent, the Greens.^[86] At the same time, it is clear that such funding along with parliamentary entitlements exacerbates political inequality in several respects.

Contrary to its rationale of facilitating open electoral contests, electoral funding through the four per cent threshold clearly discriminates against parties like the Greens which enjoy significant electoral support but fail to cross the threshold. This threshold explains, in part, why the Greens receive $2.73 of electoral funding per first preference vote secured in the 2001 federal election whereas all the other major parties receive more than three dollars per vote.^[87] In place of the four per cent threshold, there should be either a lower threshold^[88] or pro-rata public funding.^[89] Alternatively or in conjunction, there should be a threshold based on the nationwide support secured by a party.

Moreover, electoral funding is calculated on the basis of past electoral support. While this is probably the most equitable basis for calculating such funding, it does inevitably mean that established parties enjoy a financial advantage over newer parties.

Thirdly, and most seriously, parliamentary entitlements obviously confer an advantage to incumbent parliamentarians. Even among incumbent parliamentarians, this advantage is distributed inequitably with the ALP and the Liberal Party reaping a disproportionate benefit. This is because their parliamentary representation would be greater than their electoral support.

This can be explained by two features of Australia's electoral system. First, House of Representatives seats are single-member electorates whereas Senators are elected according to a proportional system.^[90] This favours the larger parties. For example, in the 2001 federal election, the Liberal Party and ALP respectively received 37.08 per cent and 37.84 per cent of the first preference votes while their share of the House of Representatives seats stood at 45.3 per cent and 43.3 per cent.^[91] Secondly, the number of House of Representatives members is constitutionally mandated to be twice the number of Senators.^[92]

While it is quite right that parliamentarians be properly supported in the discharge of their functions, the structural inequality of parliamentary entitlements and the amount of money that they are costing raise serious questions. As noted above, this amount far outstrips the parties' annual budgets.^[93] All in all, it is highly questionable whether the amount spent on parliamentary entitlements is justifiable.

Lastly, if public funding does, in fact, fuel campaign expenditure, such funding indirectly sets up a barrier against newcomers. Such newcomers will invariably be discouraged by the prohibitive costs of political campaigns.

These features of the Australian system of public funding, realise, to some extent, a fear voiced by UK opponents of increased state funding of political parties. This is the fear that state funding will ossify the existing party system by generously supporting existing parties while creating a '"vicious circle" for smaller parties which would be unable to receive funding because they had no representation and would be unable to field candidates because they lacked the necessary funding.'^[94]

Such ossification must be understood in the context of the normalisation of corporate donations to the major parties especially large corporate donations. Account should also be taken of the ALP's reliance on trade union funding. These funding patterns translate inequalities between the parties into inequalities between various sections of the public. The upshot is that the unequal effect of public funding enhances the political power of corporate donors especially large corporate donors and, to a much lesser extent, trade unions.

4 Concluding thoughts

Public funding, unlike private funding, does not carry the risk of corruption and undue influence by a donor. Public funding, however, poses its own dangers. These dangers arise from the nature of public funding of political parties in a parliamentary democracy — the amount and character of such funding is controlled by its primary recipients, the major political parties.

As a result of this control, there is clearly a risk that public funding is provided in a manner that serves the interests of the major political parties while undermining the health of Australia's democracy. The preceding discussion makes clear that this risk has been realised in various ways. The major political parties benefit from a system of electoral funding that imposes no conditions on the donations received by them. They also benefit from the way in which public funding ossifies the party system.

It is imperative then that public funding of political parties in Australia is reviewed. Closer attention needs to be paid to the purposes of public funding. Such an examination needs to produce a clearer understanding of the legitimate functions of parliamentarians and parties as well as the amounts needed to fund such functions.

In this, there are at least four key functions of political parties and parliamentarians. They play a representative function. A healthy party-system should represent the diverse strands of opinion existing in Australia. Such a system would offer genuine electoral choice in the sense that the party platforms cater to the different preferences of Australian voters. Parties also perform an ideological function in stimulating and generating ideas for Australian politics. The richness of ideas informing Australian politics will depend heavily on how vigorous the parties are in promoting new ideas and, in particular, the priority they place on policy development and research. Thirdly, parties perform a participation function in that they offer a vehicle for political participation through membership, meetings and promoting public discourse. Lastly, parties perform a governance function. This function largely relates to parties who succeed in having elected representatives. The party elected to government clearly performs a governance function. The same applies to other parliamentary parties, which participate in governance through the legislative process, scrutiny of the executive government and general public debate.

It might well be, upon reflection, that hypothecated funding like the Short and Cranbourne money is the preferable way of publicly funding Australian political parties.

IV CAMPAIGN EXPENDITURE DISCLOSURE SCHEMES

A Outline of regulation

In Australia, party finance law leaves the parties' campaign expenditure largely unregulated with parties only required to disclose the total amount of their expenditure in their annual returns.^[95] There is no obligation to specify any of the transactions that make up this amount in the annual returns. Neither is there a separate obligation on parties to disclose the amounts of their campaign expenditure. While such disclosure was required as part of the original funding and disclosure scheme, this requirement was repealed in 1998.^[96] Hence, parties did not have to disclose details of their campaign expenditure for the 1998 and 2001 federal elections.

This absence of regulation contrasts with the situation in the UK. Integral to its regime of expenditure limits is the obligation on parties to submit to the UK EC a return stating the details of the parties' campaign expenditure^[97] within six months of the date of the poll.^[98] For parties who spend more than £250 000 in campaign expenditure, such a return must be accompanied by an auditor's report.^[99] A treasurer of a party commits an offence if she/he, without reasonable excuse, fails to submit a return or submits an incomplete return.^[100] After the submission of these returns, the UK EC makes them available for public inspection as soon as is reasonably practicable.^[101]

This contrast between the Australian and UK regulatory frameworks raises the question whether the disclosure of expenditure should be reinstated in Australia.

B The disclosure of campaign expenditure should be reinstated

The repeal of the requirement on parties to disclose their campaign expenditure stemmed from a recommendation made by the Joint Standing Committee on Electoral Matters in its report on the 1996 election. This recommendation was made on the basis that annual returns and returns disclosing electoral expenditure involved 'unnecessary duplication'.^[102]

Whatever the merit of the argument when made, it does not hold now because only the total amount of expenditure needs to be stated in annual returns with the requirement to disclose specific transactions repealed in 1998.^[103] In other words, there is no way one could determine the amount a party has spent on campaign expenditure through perusing the disclosure returns.

But what is the argument for the disclosure of such expenditure? As stated by the Harders inquiry into the disclosure of electoral expenditure, it is:'in the public interest that electoral expenditure should be publicly disclosed … [because of] the interest of the people in being informed of the cost of elections'.^[104]

This public interest rests on various grounds. Campaign costs are being partly defrayed by the public purse through electoral funding and parliamentary entitlements. It is in the public's interest to know how such state assistance is being used. Also, if expenditure limits were reinstated in Australia, there would be a powerful argument for reinstating the disclosure of campaign expenditure as such limits could not work without such disclosure.

V CAMPAIGN EXPENDITURE LIMITS

A Outline of regulation

After decades in operation, Australian limits on the campaign expenditure of candidates were removed in 1980.^[105] As with the disclosure of campaign expenditure, this lacuna contrasts with the UK regulatory scheme which subjects parties to campaign expenditure limits through the PPERA.

At the heart of such limits is the statutory notion of 'campaign expenditure'. Expenditure incurred by or on behalf of a party is 'campaign expenditure' if:

• it is an expense that falls within one of the categories listed in Schedule 8 of the PPERA;^[106] and

The PPERA defines conduct 'for election purposes' broadly to mean conduct aimed at promoting or procuring electoral success for the party or directed at enhancing the standing of the party.^[108]

Parties are subject to 'campaign expenditure' limits for the period commencing a year before the date of the polls and ending on the date of the poll.^[109] In general, these limits vary according to the number of seats contested with each seat lifting the limit by £30 000. So, for example, if a party contests 30 seats, the limit is £900 000.^[110] These limits cannot, however, fall below certain minima.^[111] A treasurer or deputy treasurer of a party is guilty of an offence if she/he authorised expenditure to be incurred by or on behalf of the party and she/he knew or ought to have reasonably known that such expenditure would exceed the limit.^[112]

Like the requirement to disclose campaign expenditure in the UK, these limits throw up the question whether limits of this kind should be reinstated in Australia.

B Is there a case for reinstating expenditure limits in Australia?

In the debate leading up to the passage of the PPERA, two key arguments were put forth for imposing campaign expenditure limits on parties and candidates.

The first was the anti-corruption rationale.^[113] As applied to campaign expenditure limits, this rationale states that these limits, by containing increases in campaign expenditure, reduces the need for parties and candidates to seek larger donations; donations which carry the risk of corruption and undue influence.^[114] Otherwise, in the context of an 'arms race', '[t]he perceived need to match, if not exceed, spending by the other side … could lead a party to an unhealthy reliance on a handful of wealthy donors'.^[115]

The second argument was the equality or level playing field rationale.^[116] This argument contends that large-scale spending means elections can be bought. Fair electoral contests then demand the imposition of constraints on campaigning costs through campaign expenditure limits.^[117]

1 Anti-corruption rationale

As the above statements indicate, in the UK, expenditure limits were primarily seen as prophylactic: they were aimed at containing the costs of campaign expenditure and, by implication, the risk of corruption and undue influence in the context of an 'arms race' between UK political parties and candidates.

In Australia, however, the available evidence does not point to a steady increase in real spending per voter, let alone an 'arms race' between the parties.^[118] But does that mean there is no argument for containing the costs of campaign expenditure through expenditure limits? On the contrary, expenditure limits can still perform a prophylactic function even on the assumption that current levels of campaign expenditure are acceptable. By setting the limits at these levels, the limits ensure that such spending does not increase beyond this point. Otherwise, a future increase in real campaign expenditure would lead parties, in the absence of more generous public funding, to seek more and/or larger donations to meet such burgeoning costs.

This pressure will increase the risk of corruption and undue influence which comes with such donations. More specifically, with the normalisation of corporate donations in Australia, it can be expected that an increase in real campaign expenditure will mean an increase in the flow of corporate donations. As the flow of corporate money increases, undue influence increasingly becomes part of the political landscape because donations from commercial corporations are inherently a form of undue influence.

Such donations constitute undue influence because commercial corporations do not have a legitimate claim to democratic representation. They do not have a direct claim to democratic representation as they are not citizens, the ultimate bearers of political power in a representative democracy.^[119] More than this, such corporations, unlike democratically-structured entities like trade unions,^[120] do not even have a derivative claim to political representation. This is because they are singularly undemocratic in their decision-making structure. Shareholder control must necessarily mean that power in a business is parcelled out according to the criterion of wealth.

Besides a prophylactic function, expenditure limits can also perform a remedial function. For instance, if present spending levels were judged to be excessive and to carry an inordinate risk of corruption and undue influence, expenditure limits could be aimed at decreasing the amount of real spending and, in turn, the risk of corruption and undue influence. The UK experience demonstrates that campaign expenditure limits can effectively perform such a function. In the 1997 national election, the main parties, the Labour Party, the Conservative Party and the Liberal Democrats, spent a total of £45.5 million.^[121] The 2001 national election, the first which was subject to the PPERA's national campaign expenditure limits, however, saw the parties' campaign expenditure sharply dropping to £25.1 million.^[122]

2 Equality or level playing field rationale

As the Neill Committee correctly pointed out, this argument usually asserts that 'campaign expenditure buys votes'.^[123] Such a straightforward relationship between expenditure and votes is, however, untenable. Citizens' voting decisions might be formed before the campaigns and remain impervious to campaign tactics. Moreover, demographic and class factors will also shape a voter's decision. Not surprisingly then there is a complex relationship between campaign expenditure and voter support^[124] or, put differently, between 'spending and electoral payoffs'.^[125] In Australia, for instance, the biggest spender on political broadcasting for the federal elections running from 1974 to 1996 only won half of these contests.^[126]

The complex relationship between campaign expenditure and voting decisions has given rise to the argument that campaign expenditure limits are unnecessary because money does not buy elections.^[127] At first blush, this argument is appealing in that money does not buy elections in the sense that campaign expenditure is clearly not decisive in determining electoral outcomes. But it is a very different thing to say that campaign expenditure has no or little positive impact. So long as we are able to confidently assert that campaign expenditure has positive, albeit limited, electoral impact, there is still a case for instituting such limits on the basis that they promote a level playing field.^[128] This case is all the stronger in light of the funding inequalities among the Australian political parties.^[129]

3 Other arguments against

There is the argument that expenditure limits are 'unenforceable'^[130] or 'unworkable'; arguments usually taken to be proven by Australia's experience with expenditure limits.^[131] Arguments based on 'unenforceability' or 'unworkability', however, typically suffer from vagueness. In Australia, such arguments as they relate to campaign expenditure limits appear to be proxy for two specific arguments. It is said that '[a]ny limits set would quickly become obsolete.'^[132] Moreover, these limits are seen to be overly susceptible to non-compliance.^[133]

The first argument can be quickly dispensed with. Any problem with obsolescence can be dealt with automatic indexation of limits together with periodic reviews. As to the question of non-compliance, it is useful at the outset to make some general observations concerning the challenges faced by the enforcement of party finance regulation.

All laws are vulnerable to non-compliance. Party finance regulation is no exception and the degree of compliance will depend on various factors. It will depend on the willingness of the parties to comply. This, in turn, will be shaped by their views of the legitimacy of the regulation and their self-interest in compliance. The latter cuts both ways. For example, breaching expenditure limits might secure the culpable party a competitive advantage through increased expenditure but this needs to be balanced against the risk of being found out and the resulting opprobrium.

The extent of compliance will also depend on methods available to the parties to evade their obligations. In this respect, the effectiveness of party finance laws invariably rubs up against the 'front organisation' problem. This problem arises when a party sets up entities which are legally separate from the party but can still be controlled by the party. Party finance laws will be undermined if parties channel their funds and expenditure to these entities and these entities fall outside the regulatory net or are subject to less demanding obligations.

A separate problem faced by party finance laws lies with third parties, that is, political actors which are not parties or sufficiently related to the political parties. The challenge posed by third parties is not that it provides a vehicle for parties to evade their obligations simply because third parties are, by definition, not appendages of the parties. Party finance laws that do not deal adequately with the 'third party' problem risk not evasion but irrelevance. For instance, if there were substantial third-party electoral activity, a regulatory framework centred upon parties and their associated entities would, in many ways, miss the mark by failing to regulate key political actors.

Compliance with party finance regulation will also clearly depend on the willingness and ability of the regulator, the AEC in the case of Australia, to enforce such regulation. Difficulties arise in this respect because of the AEC's institutional dependence on the main political parties, those it is supposed to regulate. Such dependence must clearly have an inhibiting effect upon the AEC's willingness to enforce party finance regulation.

This dependence is manifest in various ways. The AEC is dependent on the good will of the parties in conducting elections. The fact that the AEC is (rightly) under parliamentary supervision also means that it is dependent on the parties for the amount of its funding and is regularly subject to the scrutiny of various parliamentary committees.^[134]

The above circumstances demonstrate that party finance regulation will always face an enforcement gap. But to treat these circumstances as being fatal to any proposal to regulate party finance would be to give up on such regulation. By parity of reasoning, the fact that expenditure limits are, to some extent, unenforceable because of these circumstances should not be fatal to their introduction.

The key issue is whether there is something peculiar to such limits that make it particularly vulnerable to non-compliance. It is this that is hard to make out. While it is true that the Australian experience with expenditure limits was marked by non-compliance, the UK experience demonstrates that this does not necessarily have to be the case. Moreover, regulation of political expenditure would, on its face, seem easier to enforce than regulation of political funding because such expenditure is spent on visible activity like political broadcasting.^[135]

Lastly, it is said that expenditure limits constitute an unjustified interference with freedom of speech.^[136]

This argument must be taken seriously not only because it poses a question of principle but also because, in Australia, a statute which unjustifiably infringes freedom of political communication will be unconstitutional.^[137]

As the discussion below will demonstrate, the question of principle can, in fact, be usefully approached by applying the test for constitutionality. In short, the question of principle and that of constitutional validity can be approached in the same breath.

• it effectively burdens freedom of communication about government or political matters either in its terms, operation or effect; and

• it is not reasonably appropriate and adapted to serve a legitimate end.^[138]

With respect to the first criterion of invalidity, expenditure limits do not, on its face, burden freedom of political communication because their immediate impact is on the spending of money. In the final analysis, however, these limits do impose a tangible burden on such a freedom.^[139] This is because the lion share of such expenditure is spent on communicating political matters whether it be promoting the policy of the party or criticising other parties. This is especially the case with political broadcasting which has been found by the High Court to come within the scope of the protected communication.^[140]

It is important to note, however, that the weight of this burden will depend on the design of limits. The level at which the limit is pitched will be significant as the lower the level, the heavier its burden on the freedom of political communication. Similarly, the burden will depend on whether the limit is instituted through a simple prohibition like in the UK or as a condition on public funding.^[141] If the latter is adopted, the burden on freedom of political communication will be much less as parties can still choose not to receive public funding and hence, be exempt from campaign expenditure limits.

Given that campaign expenditure limits invariably impose, to a greater or lesser degree, a burden on the freedom of political communication, the critical question then is whether the instituted limit is reasonably appropriate and adapted to a legitimate aim. At the outset, it can be categorically said that expenditure limits do not necessarily fail this test of proportionality.^[142] There are clearly legitimate aims that can be invoked, namely, the anti-corruption^[143] and the equality or level playing field rationales. This issue then becomes whether the instituted limit is reasonably adapted to these aims. Again the design of the limit comes to the fore.

In conclusion, whether an expenditure limit is an unjustifiable interference with freedom of political speech and/or unconstitutional cannot be answered in advance. The answers to these questions will very much depend on the design of the limits.

VI CONCLUSION

This article has reflected upon three possible methods of regulating party finance in Australia: public funding, the disclosure of campaign expenditure and campaign expenditure limits. It has done so by reference to the funding and expenditure patterns of Australian political parties and a comparative analysis of the UK regulatory framework.

These reflections produce several conclusions. The present system of publicly funding political parties poses several dangers to Australia's democracy. It potentially inflates campaign expenditure. It is also ineffectual to reduce reliance on private contributions and, moreover, exacerbates political inequality. There is then an urgent need to review the Australian system of publicly funding political parties especially to properly link it with the legitimate functions of such parties.

There is also a compelling case for reinstating the expenditure limits and disclosure. The former should be reinstated because they will perform an anti-corruption function and promote a level playing field. However, there needs to be careful attention given to the design of such limits to ensure that they are constitutional and fulfil their purposes. As with the latter, reinstatement rests on the public interest in knowing how parties and parliamentarians are spending electoral funding and parliamentary entitlements. Moreover, if expenditure limits were reinstated, expenditure disclosure would necessarily have to be instituted as such limits could not work otherwise.

APPENDIX

A Definitions of categories used in analysis of Australian parties' annual returns

Corporate donations

Amounts declared in the annual returns to be 'donations' and received from an entity which was incorporated. An entity was generally treated as incorporated if its name ended with 'Pty Ltd' or 'Ltd'. Well-known companies whose names did not end in this manner were also treated as corporations, for example, ANZ Bank.

Electoral funding

Individual donations

Amounts declared in the annual returns to be 'donations' and received from a natural person.

Internal transfers

Public funding

Funding from all governmental bodies. This would include Electoral funding as well as payments from governmental bodies like the Australian Taxation Office.

Private funding

Total funding

Trade union donations

Amounts declared in the annual returns to be 'donations' and received from an organisation registered under the Workplace Relations Act 1996 (Cth) as a trade union. This included organisations whose names did not include the word 'union', for instance, Ansett Pilots Association.

B Limitations of 'donations' data

As the above section indicates, the figures relating to 'donations' were derived from specific amounts declared by the parties in the annual returns to be 'donations'. The phrase 'donations' is the annual returns' synonym for the statutory concept of a 'gift'.^[144] There are, however, serious limitations to such data;^[145] all of which will result in the actual amount of political contributions being understated.

Foremost, the designation of an amount as a 'donation' is by way of self-declaration with no penalty for deliberate or negligent declaration. Such voluntary self-declarations are inherently susceptible to errors and under-reporting.

Moreover, only details of receipts exceeding $1500 need to be declared^[146] so political contributions less than this amount, while incorporated into the total receipts declared by the parties, are not subject to the voluntary system of designation.

Even if accurately declared, the amounts classified by parties to be 'donations' will understate the amount of political contributions. They understate trade union contributions because the CEA excludes annual membership subscriptions from its definition of a 'gift'.^[147] It is very likely then that trade union affiliation fees to the ALP will not be declared as 'donations'. More generally, political contributions will be understated because the purchase of political access, for example, by corporations through so-called fund-raisers is probably not a 'gift' under the CEA.^[148] In the annual returns, trade union affiliation fees and the purchase of political access would generally be designated as 'other receipt' or 'unspecified'.

^[*] Joo-Cheong Tham is an Associate Lecturer at the School of Law, La Trobe University and David Grove is a LLB student at the same law school. David was responsible for calculating most of the data in Part II while Joo-Cheong was responsible for the remainder of the article. Thank you to Graeme Orr for helpful discussion of various aspects of this article. Thank you too to the anonymous referees for their useful comments. Research for this article was also assisted by a grant from the Faculty of Law and Management, La Trobe University. The usual disclaimers apply.

^[2] Such inquiry has clearly gained impetus from the Electoral Law Project co-ordinated by the Gilbert and Tobin Centre of Public Law, University of New South Wales (see <http://www.gtcentre.unsw.edu.au> ).

^[3] Graeme Orr, Bryan Mercurio and George Williams, 'Australian Electoral Law: A Stocktake' (2003) 2 Election Law Journal 383, 396 (emphasis in original).

^[4] See, eg, Teresa Somes, 'Political Parties and Financial Disclosure Laws' [1998] GriffLawRw 11; (1998) 7 Griffith Law Review 174; Keith Ewing, 'The Legal Regulation of Electoral Campaign Financing in Australia: A Preliminary Study' (1992) 22 University of Western Australian Law Review 239; Deborah Cass and Sonia Burrows, 'Commonwealth Regulation of Campaign Finance — Public Funding, Disclosure and Expenditure Limits' [2000] SydLawRw 23; (2000) 22 Sydney Law Review 477; Joo-Cheong Tham, 'Legal Regulation of Political Donations in Australia: Time for Change' in Glenn Patmore (ed), Labor Essays 2002: The Big Makeover: A New Australian Constitution (2001) 72; Graeme Orr, 'The Currency of Democracy: Campaign Finance Law in Australia' [2003] UNSWLawJl 1; (2003) 26 University of New South Wales Law Journal 1 and Joo-Cheong Tham, 'Campaign Finance Reform in Australia: Some Reasons for Reform' in Graeme Orr, Bryan Mercurio and George Williams (eds), Realising Democracy: Electoral Law in Australia (2003) 114.

^[5] On 22 January 2004, a workshop specifically devoted towards Australian political finance was organised by Graeme Orr through the Socio-Legal Research Centre, Griffith University.

^[6] Notable exceptions are Rolf Gerritsen, Election Funding Disclosure and Australian Politics: Debunking Some Myths (1995); Ian Ramsay, Geof Stapledon and Joel Vernon, Political Donations by Australian Companies (2000) (this report was subsequently published in (2001) 29 Federal Law Review 177) and Sally Young, 'Spot On: The Role of Political Advertising in Australia' (2002) 37 Australian Journal of Political Science 81. The New South Wales branch of the Australian Greens has also undertaken a study of donations to the New South Wales divisions of the major political parties (see Democracy4Sale, The Greens <http://www.democracy4sale.org> at 15 October 2004).

^[8] See, eg, Tham, 'Legal Regulation of Political Donations in Australia', above n 4.

^[10] See, however, David Tucker and Sally Young, 'Public Financing of Election Campaigns — A Solution or a Problem?' in Glenn Patmore (ed), Labor Essays 2002: The Big Makeover: A New Australian Constitution (2001) 60.

^[11] Tham, 'Legal Regulation of Political Donations in Australia', above n 4, 78–80.

^[12] This focus means that this article will not consider state regulation of party finance or regulation of state elections. For a useful summary of state regulation, see the Appendix in Orr, 'The Currency of Democracy', above n 4, 30–1.

^[13] This limitation means that this article will not consider UK regulation of European Union elections, regional elections and referendums.

^[14] For an excellent account, see K D Ewing, 'Transparency, Accountability and Equality: The Political Parties, Elections and Referendums Act 2000' [2001] Public Law 542. This Act largely implements the United Kingdom, Committee on Standards in Public Life, Fifth Report: The Funding of Political Parties in the United Kingdom, Cm 4057–I (1998) ('Neill Committee Report'). For a discussion of the report, see Lisa Klein, 'On the Brink of Reform: Political Party Funding in Britain' (1999) 31 Case Western Reserve Journal of International Law 1.

^[17] Ewing, 'Transparency, Accountability and Equality' above n 14, 542. For an excellent review of the development of British electoral law, see Keith Ewing, 'Electoral Reform in the United Kingdom' in Graeme Orr, Bryan Mercurio and George Williams (eds), Realising Democracy: Electoral Law in Australia (2003) ch 3.

^[19] See Tham, 'Campaign Finance Reform in Australia' above n 4, 119–20, 122 and Ewing, 'Electoral Reform in the United Kingdom' above n 17, 27–8. For the purposes of campaign finance law, see Keith Ewing, The Funding of Political Parties in Britain (1987) 175–8 and K D Ewing, Money, Politics and Law: A Study of Electoral Campaign Finance Reform in Canada (1992) ch 2.

^[20] The Northern Territory Country Liberal Party was treated, for the purpose of this article, as part of the Liberal Party.

^[21] For the purpose of this article, all parties going by the name 'Green' or some permutation of this word were treated as part of the 'Greens'.

^[23] The returns of both the federal and state branches of the parties were examined.

^[25] Tham, 'Legal Regulation of Political Donations in Australia', above n 4, 79–80 and Tham, 'Campaign Finance Reform in Australia', above n 4, 123–4. See also Joo-Cheong Tham, The Normalisation of Corporate Contributions to Political Parties: A Threat to Democracy (2003) Democratic Audit of Australia <http://democratic.audit.anu.edu.au> at 15 October 2004.

^[28] Figures calculated from annual returns for the financial years 1999, 2000–01, 2002.

^[34] The campaign expenditure data for the 1987, 1990, 1993 and 1996 elections were respectively found in AEC, Election Funding and Financial Disclosure Report: Elections 1987 (1988) 50; AEC, Election Funding and Financial Disclosure Report: Elections 1990 (1991) 38; AEC, Election Funding and Financial Disclosure Report: Election 1993 (1995) 52–3; AEC, Election Funding and Financial Disclosure Report: Elections 1996 (1997) 7, 29–32. The political broadcasting data for the 1987, 1990, 1993 and 1996 elections were respectively found in AEC, Election Funding and Financial Disclosure Report: Elections 1987 (1988) 52; AEC, Election Funding and Financial Disclosure Report: Elections 1990 (1991) 64; AEC, Election Funding and Financial Disclosure Report: Election 1993 (1995) 122; AEC, Election Funding and Financial Disclosure Report: Elections 1996 (1997) 29–33. The votes cast for the 1987, 1990, 1993 and 1996 federal elections were respectively 9 233 000 (AEC, Election Statistics 1987: Full Distribution of Preferences: House of Representatives (1988) 77); 10 222 927 (figure calculated from Joint Standing Committee on Electoral Matters, Parliament of Australia, 1990 Federal Election (1990) 1–2); 10 674 805 and 11 294 479 (Joint Standing Committee on Electoral Matters, Parliament of Australia, Report of the Inquiry into the Conduct of the 1998 Federal Election and Matters Related Thereto (2000) 2). The figures for the Average Weekly Total Earnings for 1987, 1990, 1993 and 1996 were respectively $381.30; $464.80 (Australian Bureau of Statistics, Average Weekly Earnings Australia, 1941–90 (1992) 6); $512.80 (Australian Bureau of Statistics, Average Weekly Earnings, States and Australia (1993) and $564 (Australian Bureau of Statistics, Year Book Australia 2003: Average Weekly Earnings (2003)).

^[35] CEA ss 294, 297.

^[36] The figure is found at Australian Electoral Commission <http://www.aec.gov.au/_content/how /funding_payments/2001_payments.htm> at 4 December 2002. For the section providing for indexation, see CEA s 321.

^[37] Prior to 1995, the federal election funding scheme operated as a reimbursement scheme hence, required proof of electoral expenditure. This feature of the scheme was abolished by Commonwealth Electoral Amendment Act 1995 (Cth).

^[38] Joint Select Committee on Electoral Reform, Parliament of Australia First Report (1983) 145–7 [9.3].

^[39] For a brief discussion of these entitlements, see Sally Young, 'Killing Competition: Restricting Access to Political Communication Channels in Australia' (2003) 75 AQ: Journal of Contemporary Analysis 9, 9–11.

^[40] Australian National Audit Office, Parliamentarian Entitlements: 1999–2000 (2001) paras 2–3.

^[41] Calculated from Table 1. Further research is, however, required to determine the amounts that are received by the various parties because there is no readily accessible information indicating how much each party receives of parliamentary entitlements. Collecting such information is complicated by the fact that the use of such entitlements varies according to each parliamentarian: ibid, para 39.

^[42] See definition of 'parliamentary office-holders' at Parliamentary Entitlements Act 1990 (Cth) s 3.

^[43] Remuneration Tribunal Determination 2003/14 (consolidated) para 1.

^[44] Ibid para 4.

^[45] Ibid para 10.4.

^[46] Parliamentary Entitlements Act 1990 (Cth) sch 1, pt 1, item 7 and Remuneration Tribunal Determination 2003/14 (consolidated) para 9.

^[47] Parliamentary Entitlements Act 1990 (Cth) sch 1, pt 1, items 8–9 and Remuneration Tribunal Determination 2003/14 (consolidated) para 2 (scheduled commercial transport); para 3 (car transport); para 5 (provision of vehicle); para 6 (charter transport) and para 9 (overseas study trips).

^[48] See Parliamentary Entitlements Act 1990 (Cth) sch 1, pt 2.

^[49] Parliamentary Entitlements Act 1990 (Cth) sch 1, pt 2, item 5.

^[50] Parliamentary Entitlements Act 1990 (Cth) sch 1, pt 1, item 9(1)(d).

^[51] Remuneration Tribunal Determination 2003/14 (consolidated) para 8.

^[52] Parliamentary Entitlements Act 1990 (Cth) sch 1, pt 1, item 7 and Remuneration Tribunal Determination 2003/14 (consolidated) para 9.

^[53] Parliamentary Entitlements Regulations 1997 (Cth) reg 3. A much more limited allowance is provided to Senators with their entitlement limited to 10 reams of paper per month: at reg 3A(2)–(3).

^[54] Parliamentary Entitlements Act 1990 (Cth) sch 1, pt 1, item 3.

^[55] Remuneration Tribunal Determination 2003/14 (consolidated) para 10.4.

^[56] Ibid para 2 (scheduled commercial transport); para 3 (car transport); para 4 (private vehicle allowance) and para 5 (provision of vehicle).

^[57] Australian National Audit Office, above n 40, paras 2.61–2.68.

^[58] Commonwealth of Australia, Ministerial and Parliamentary Services, Senators and Members: Entitlements (2001) 30.

^[59] For a good description of the Short and Cranbourne money, see Neill Committee Report, above n 14, 100–1 and United Kingdom Electoral Commission, The Funding of Political Parties: Background Paper (2003) 13–4.

^[60] PPERA s 12.

^[61] Elections (Policy Development Grants Scheme) Order 2002 (SI 2002/224) (UK).

^[62] Representation of the People Act 1983 (UK) c 2, s 91(1).

^[63] With respect to commercial broadcasters, the ban on political advertising is governed by ss 321(2)–(3) of the Communications Act 2003 (UK) c 21. Such broadcasters are also required to provide free broadcast time through rules made by the Office of Communication: s 333. The British Broadcasting Commission does not run advertising and its duty to provide free political broadcasts is found in an agreement with the government, see generally United Kingdom Electoral Commission, Party Political Broadcasting (2003) and Ewing, The Funding of Political Parties in Britain above n 19, 93–5, 108–17.

^[64] The amount applies for 2002 given that that was first year such grants were disbursed.

^[65] See Ewing, The Funding of Political Parties in Britain, above n 19, 120 for amounts payable under the Short scheme for 1980–83.

^[66] Commonwealth, Parliamentary Debates, House of Representatives, 2 November 1983, 2215 (Kim Beazley, Minister for Aviation, Special Minister of State and Minister Assisting the Minister for Defence, Second Reading Speech to Commonwealth Electoral Legislation Amendment Bill 1983 (Cth)).

^[67] Ewing, The Funding of Political Parties in Britain, above n 19, 182.

^[68] Beazley, above n 66, 2215. This specific aim is long-standing. When introducing the original Commonwealth Electoral Bill, Senator O'Connor justified the need for the limits on electoral expenditure in this fashion:

If we wish to secure a true reflex of the opinions of the electors, we must have … a system which will not allow the choice of the electors to be handicapped for no other reason than the inability of a candidate to find the enormous amount of money required to enable him [sic] to compete with other candidates.

Commonwealth, Parliamentary Debates, Senate, 31 January 1902, 9542 (Senator O'Connor, Second Reading Speech).

^[69] Beazley, above n 66, 2213.

^[70] Ewing has also noted that equality of electoral opportunity requires that 'no candidate or party should be permitted to spend more than its rivals by a disproportionate amount': Ewing, Money, Politics and Law, above n 19, 18.

^[71] Commonwealth, Parliamentary Debates, House of Representatives, 8 May 1990, 68 (Mr Beddall, Minister for Small Business and Customs, Second Reading Speech to Parliamentary Entitlements Bill 1990 (Cth)).

^[72] Neill Committee Report, above n 14, 93. The committee also noted that campaigning was diverting the parties' attention from the task of policy development: at 93.

^[73] See Neill Committee Report, above n 14, ch 7. The Neill Committee's position is in sharp contrast with the Houghton Committee's view that comprehensive state funding should be introduced: United Kingdom, Report of the Committee on Financial Aid to Political Parties, Cmnd 6601 (1976).

^[74] United Kingdom Electoral Commission, The Funding of Political Parties: Issues Paper (2003).

^[75] See the views canvassed in United Kingdom Electoral Commission, The Funding of Political Parties: Background Paper above n 59, 9–11.

^[76] Joint Standing Committee on Electoral Matters, Parliament of Australia, The 2001 Federal Election: Report of the Inquiry into the Conduct of the 2001 Federal Election, and Matters Related Thereto (2003) 243.

^[77] Joint Select Committee on Electoral Reform, above n 38, 149–50 [9.11].

^[78] See, eg, the Liberal Party's support of the Electoral Amendment Bill (No 2) 1994 (Cth) which increased electoral funding by changing the funding rate for a Senate vote so that it equalled the funding rate for a House of Representatives vote: Australia, Parliamentary Debates, House of Representatives, 9 March 1995, 1951 (D Connolly). The Liberal Party has also advocated increases in electoral funding through a change in the method of calculating such funding. Instead of the present system of basing the amount on the number of first preference votes, the Liberal Party has recommended that the amount be based on the number of enrolled voters: Joint Standing Committee on Electoral Matters, Parliament of Australia, 1996 Federal Election: Report of the Inquiry into all Aspects of the Conduct of the 1996 Federal Election and Matters Related Thereto (1997) 104–5.

^[79] See text above Table 4.

^[80] Even with robust regulation of campaign expenditure, public funding is still likely to fuel the parties' expenditure in other areas, for example, through the employment of increased numbers of party staff members and more expensive party events like conferences.

^[81] Tucker and Young, above n 10, 67.

^[82] Stephen Mills, The New Machine Men: Polls and Persuasion in Australian Politics (1986) 189–90.

^[83] See above, text accompanying nn 25–9.

^[84] See above, text accompanying Table 3.

^[85] Arguments based on 'purification' have been made by UK proponents of increased state funding, see Neill Committee Report, above n 14, 90–1 and United Kingdom Electoral Commission, The Funding of Political Parties: Background Paper, above n 59, 20.

^[86] See above, text accompanying Table 3.

^[87] See above, text accompanying Table 3. Federal electoral funding is provided for votes gained in the House of Representatives and Senate so this discrepancy would also be due to the fact that the Greens do not contest many House of Representative seats.

^[88] For instance, a two per cent threshold used to apply in relation to the Australian Capital Territory funding and disclosure regime. This threshold, however, has been increased to four per cent: Electoral Act 1992 (ACT) s 208.

^[89] In instituting a lower threshold or pro-rata funding, it might be desirable to have different systems applying to the House of Representatives and the Senate.

^[90] CEA ss 273 (Senate) and 274 (House of Representatives).

^[91] Figures derived from Australian Electoral Commission <http://www.aec.gov.au/_content/when/past/2001/results/> at 28 January 2004.

^[92] Commonwealth Constitution s 24.

^[93] See above, text accompanying nn 40–1.

^[94] United Kingdom Electoral Commission, The Funding of Political Parties: Background Paper, above n 59, 22. See also Neill Committee Report, above n 14, 91–2. For similar sentiments, see Young, 'Killing Competition', above n 39.

^[95] CEA s 314AB(2)(b).

^[96] Electoral and Referendum Amendment Act 1998 (Cth). This requirement was also removed for the 1993 election but reinstated for the 1996 election, see respectively Commonwealth Electoral Amendment Act 1992 (Cth) and Commonwealth Electoral Amendment Act 1995 (Cth).

^[97] PPERA s 80.

^[98] PPERA s 82.

^[99] PPERA s 81.

^[100] PPERA s 82(4).

^[101] PPERA s 84.

^[102] Joint Standing Committee on Electoral Matters, 1996 Federal Election, above n 78, 102.

^[103] Electoral and Referendum Amendment Act 1998 (Cth).

^[104] Commonwealth of Australia, Inquiry into Disclosure of Electoral Expenditure (1981) 8-9 ('Harders Report').

^[105] See Cass and Burrows, above n 4, 484–5, 491.

^[106] Schedule 8 of the PPERA lists eight separate categories of expenses including 'party political broadcasts' and 'advertising of any nature (whatever the medium used)'.

^[107] PPERA s 72(2). It should be noted that a party's 'campaign expenditure' does not include any expenditure that must be reported as the election expenses of any candidate: at s 72. Candidates' election expenditure is regulated by the Representation of People Act 1983 (UK) c 2, see generally K D Ewing, 'Promoting Political Equality: Spending Limits in British Electoral Law' (2003) 2 Election Law Journal 499, 501–3.

^[108] PPERA s 72(4).

^[109] PPERA sch 9(3)(7).

^[110] PPERA sch 9(3)(2).

^[111] These minimum limits vary according to the nations of the United Kingdom. In relation to England, the minimum is £810 000. The minimum limits for Scotland and Wales stand respectively at £120 000 and £60 000: PPERA sch 9(3)(2)(b).

^[112] PPERA s 79(2). This provision is supported by strict regulation as to who can authorise the spending and payment of campaign expenditure: at ss 75–6.

^[113] Ewing, 'Promoting Political Equality', above n 107, 507.

^[114] Neill Committee Report, above n 14, 116–7.

^[115] United Kingdom, Parliamentary Debates, House of Commons, 10 January 2000, Column 36 (Jack Straw, Secretary of State for the Home Department).

^[116] Ewing, 'Promoting Political Equality', above n 107, 499, 507.

^[117] Neill Committee Report, above n 14, 116–7.

^[118] See above text accompanying Table 4.

^[119] As stated by Chief Justice Mason, 'the very concept of representative government and representative democracy signifies government by the people through their representatives' Australian Capital Television v Commonwealth [1992] HCA 45; (1992) 177 CLR 106, 137 (emphasis added).

^[120] This argument only holds when such organisations have democratic internal structures. Federally registered unions, for one, are legally obliged to have such structure: Workplace Relations Act 1996 (Cth) pt IX.

^[121] Neill Committee Report, above n 14, 36–8.

^[122] Electoral Commission (UK), Elections 2001: Campaign Spending (2002) 17.

^[123] Neill Committee Report, above n 14, 117.

^[124] See Young, 'Spot On: The Role of Political Advertising in Australia', above n 6, 89

^[125] Fisher, above n 15, 396.

^[126] Young, 'Spot On: The Role of Political Advertising in Australia', above n 6, 91.

^[127] Neill Committee Report, above n 14, 118.

^[128] Note Ewing's comment that fairness in elections goes beyond the question of resources and embraces the content of messages: Ewing, 'Promoting Political Equality', above n 107, 499.

^[129] See text above Table 3.

^[130] Joint Select Committee on Electoral Reform, above n 38, 172 [10.38].

^[131] Harders Report, above n 104, 13.

^[132] Joint Select Committee on Electoral Reform, above n 38, 172 [10.38].

^[133] Before they were repealed, the Australian expenditure limits were, in fact, subject to widespread non-compliance. For example, 433 out of 656 candidates for the 1977 federal elections did not file returns disclosing their expenditure: Harders Report, above n 104, 18.

^[134] The key supervisory committees are the Joint Standing Committee on Electoral Matters and the Estimates Committees.

^[135] Orr, 'The Currency of Democracy', above n 4, 25.

^[136] Neill Committee Report, above n 14, 118.

^[137] The vulnerability of expenditure limits to arguments based on political freedoms also exist in the UK but seems to be have been largely confined to third-party expenditure limits, see discussion of Bowman v United Kingdom (1998) 26 EHRR 1 in Ewing, 'Promoting Political Equality', above n 107, 505–7 and Andrew Geddis, 'Confronting the "Problem" of Third Party Expenditures in United Kingdom Election Law' (2001) 27 Brooklyn Journal of International Law 103, 116–25.

^[138] Lange v Australian Broadcasting Corporation [1997] HCA 25; (1997) 145 ALR 96, 112.

^[139] For a somewhat heroic attempt to argue that campaign expenditure is not a constitutionally recognised form of political communication, see Cass and Burrows, above n 4, 488.

^[140] See Australian Capital Television Pty Ltd v Commonwealth [1992] HCA 45; (1992) 177 CLR 106.

^[141] As proposed by Orr: see Orr, 'The Currency of Democracy', above n 4, 23. If this method were adopted, other measures would have to be implemented to bring third parties which do not receive public funding within regulatory regime.

^[142] See Cass and Burrows, above n 4, 489–90.

^[143] This rationale was accepted in Australian Capital Television Pty Ltd v Commonwealth [1992] HCA 45; (1992) 177 CLR 106.

^[144] CEA s 287.

^[145] For an excellent description of these limitations and other issues pertaining to the annual returns, see Sarah Miskin, Political Finance Disclosure: Party and Donor Annual Returns 2002–03, Parliamentary Library Research Note No. 49/2003–4 (2004).

^[146] CEA s 314AC(2).

^[147] CEA s 287.

^[148] See AEC, Submission to the Joint Standing Committee on Electoral Matters Inquiry into Electoral Funding and Disclosure (2000) para 8.4.

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Table 1
Party	Total receipts ($)	Private funding (% of total)	Public funding (% of total)	Electoral funding (% of total)
ALP	117, 273, 999	81.85	18.15	13.57
Liberal Party	95, 542, 648	83.61	16.39	14.57
National Party	21, 725, 957	84.89	15.11	11.43
Democrats	6, 667, 728	56.90	43.10	38.80
Greens	6, 495, 651	74.56	25.44	23.94
*Source:* Annual returns for financial years 1999–2000, 2000–2001, 2001–2002

Table 2
Party	Corporate donations (% of total funding)	Trade union donations (% of total funding)	Individual donations (% of total funding)
ALP	18.76	1.65	0.89
Liberal Party	27.56	Nil	1.47
National Party	9.45	Nil	0.83
Democrats	4.09	0.14	1.96
Greens	2.60	0.15	3.54
*Source:* Annual returns for financial years 1999–2000, 2000–2001, 2001–2002

Table 3
Party	First preference votes in 2001 election	Total funding ($) per vote	Private funding ($) per vote	Electoral funding ($) per vote
ALP	4, 341, 419	27.01	22.14	3.67
Liberal Party	4, 291, 033	22.27	18.62	3.25
National Party	643, 924	33.74	28.64	3.86
Democrats	620, 248	10.75	6.12	4.17
Greens	569, 075	11.41	8.51	2.73
*Source:* Annual returns for financial years 1999–2000, 2000–2001, 2001–2002^[32]

Table 4
Election	Total campaign expenditure ($ million)	Campaign expenditure index	Political broadcasting expenditure ($ million)	Political broadcasting expenditure index
1996	32.8	0.515	16. 5	0.259
1993	14.7	0.269	9.9	0.181
1990	31.5	0.663	11.2	0.236
1987	21.2	0.602	8.6	0.244
Source: AEC Funding and Disclosure reports^[34]

Table 5
Type of public funding	Actual/estimated value (£million) in 2001 election year
Short and Cranbourne money	7.6
Policy development grant	2.0^[64]
Free political broadcasting	84.0
Free postage	17.6
Total	111.2
Source: UK EC, The Funding of Political Parties: Background Paper (2003) 18.^[65]

Federal Law Review

Tham, Joo-Cheong; Grove, David --- "Public Funding and Expenditure Refgulation of Australian Political Parties: Some Reflections" [2004] FedLawRw 19; (2004) 32 Federal Law Review 397

PUBLIC FUNDING AND EXPENDITURE REGULATION OF AUSTRALIAN POLITICAL PARTIES: SOME REFLECTIONS

JOO-CHEONG THAM AND DAVID GROVE[*]

I INTRODUCTION

II THE FUNDING AND CAMPAIGN EXPENDITURE OF AUSTRALIAN POLITICAL PARTIES

A The collection and analysis of the data

B Funding of the parties

C Campaign expenditure of parties

III PUBLIC FUNDING OF PARTIESA Outline of funding schemes

1 Australia(a) Electoral funding

(b) Parliamentary entitlements

2 United Kingdom

Type of public funding

Total

B Purposes of public funding

C Questions concerning public funding

1 Inflating campaign expenditure

2 Ineffectual to reduce reliance on private contributions

3 Exacerbating political inequality

4 Concluding thoughts

IV CAMPAIGN EXPENDITURE DISCLOSURE SCHEMES

A Outline of regulation

B The disclosure of campaign expenditure should be reinstated

V CAMPAIGN EXPENDITURE LIMITS

A Outline of regulation

B Is there a case for reinstating expenditure limits in Australia?

1 Anti-corruption rationale

2 Equality or level playing field rationale

3 Other arguments against

VI CONCLUSION

APPENDIX

A Definitions of categories used in analysis of Australian parties' annual returns

Corporate donations

Electoral funding

Individual donations

Internal transfers

Public funding

Private funding

Total funding

Trade union donations

B Limitations of 'donations' data

JOO-CHEONG THAM AND DAVID GROVE^[*]

III PUBLIC FUNDING OF PARTIES
A Outline of funding schemes

1 Australia
(a) Electoral funding