10 Nov 2023

What would happen if only voters - not unions or businesses - could donate to political parties?

7:05 am on 10 November 2023
Coins coloured to match political parties

Photo: RNZ

What would happen if there were lower limits on political donations and unions and companies were banned from giving?

During the election campaign, millions of dollars were raised and spent by political parties - but some got much more than others.

Since the start of 2021, the National Party secured at least $8.7 million in donations, almost seven times more than Labour's $1.3m. In the same period, people aligned with the property industry donated more than $2.5 million - almost all of it to National, ACT and NZ First.

Critics have raised concerns about the perception of - or potential for - conflicts of interest created by all of that money changing hands. Is there another way of regulating political donations?

In June, the Independent Electoral Review panel issued an interim report with a series of recommendations to tighten the rules.

The panel said there was a "low level of public trust" in the private funding of political parties. It had two key recommendations to address this:

  • Ban businesses and organisations like unions from donating.
  • Limit the amount a person can give to any one party to $30,000 in each electoral cycle.

The 2023 campaign would have looked quite different for almost every party if these two ideas were enforced.

Read more from RNZ's series on political donations:

Bye bye businesses, unions and big donors

The review panel's recommendation to ban businesses and organisations like unions from donating stems from its view that people who get to vote should be the ones funding political parties.

"That principle doesn't seem to flow through to how our parties and candidates get the resources they need to compete for elections," said panel member Andrew Geddis. "Our existing donation system allows for greater inequality at that point."

This is not a novel idea. Data from the International Institute for Democracy and Electoral Assistance shows at least 49 countries ban corporate donations and at least 45 ban union donations. These countries include the United States, Canada and Fiji.

Since 2021, organisations such as businesses and unions have donated $2.3m to parties here, more than half of that to National.

If donations from these organisations were banned, National would have had $1.3m less, cutting about 15 percent from its 2021 to 2023 declared donation total. The hardest hit though would be Labour, which had numerous donations from unions. It would have lost almost a quarter of its donations.

The single biggest corporate donor since 2021 was Rank Group, which is owned by Graeme Hart. It gave $354,000 split between National, ACT and New Zealand First. Private equity company Christopher & Banks, which gave $300,000 split between National and ACT would also be affected as would Labour's six union donors which gave a total of $320,000.

Blue bucket overflowing with gold coins overshadows a red bucket with fewer coins.

National attracted almost seven times more in donations than Labour from 2021 to 2023. Both would be heavily impacted by a proposed tightening of donation rules. Photo: RNZ

A $30k limit per person, per party, per election cycle

Wealthy individuals like Hart could get around a ban on corporate donations by simply donating in their own name. Hart did this in the most recent electoral cycle, giving $200,000 to ACT and $250,000 to National. Other individuals gave even more - Warren Lewis gave $500,000 to National. Dairy farmer turned property developer Trevor Farmer donated $480,000 split between National, ACT and NZ First.

But the panel says no one should be allowed to give more than $30,000 to any one party in an electoral cycle.

For the parties, NZ First would have lost the biggest proportion of its donations as a result of this rule - about 35 percent of its total. National would have lost the largest amount, more than $2.5m.

The Green Party would also be affected. Green MPs tithe a percentage of their salary to the party, in some cases this would exceed the $30,000 limit.

What would replace millions cut from donations?

Applying the review panel's two big recommendations to published donations between 2021 and 2023 suggests National would be hit the hardest with $3.8m gone from its total. However, the Labour Party would lose the greatest proportion - 56 percent of its total would be wiped.

NZ First would lose 49 percent, ACT 46 percent and National 44 percent. The Green Party donations would drop by 39 percent and Te Pāti Māori's by 20 percent.

The parties would need to replace these large amounts of revenue lost from some other source. The panel suggests a "modest" increase in state funding of political parties may be required.

Presently, parties receive a broadcasting allocation which can be put toward advertising on television, radio and online. The review panel says this should be replaced with a combination of per vote funding, base funding, and tax credits.

Per vote funding would be given to parties who received more than 1 percent of the party vote and would be applied on a sliding scale. Every vote up to the first 20 percent of the vote would get $2.80 and votes between 20 and 30 percent would get $1.40 cents. Votes over 30 percent would not get anything. Added to this would be $10,000 per party in base funding.

Tax credits are also proposed as a way to encourage more small donations. Donations to political parties are not tax deductible in the same way donations to charities are. The panel recommends changing this to allow a credit of 33 percent on donations up to $1000.

Where to from here?

New Zealand's approach to political donations is out of step with other countries, including the United States, the United Kingdom, Australia and Fiji, each of which place more restrictions on cash flowing into political parties.

Details of donors who give over a limit are published as PDF documents on the Electoral Commission website. But these are not in an easy to search format and it's tricky to make connections between individuals donating and companies they are also involved with donating.

Professor Andrew Geddis

Professor Andrew Geddis Photo: RNZ / Cole Eastham-Farrelly

"Trust and confidence is a very precious thing," said Geddis. "We've seen overseas examples where once that starts to be eroded it's very, very hard to get back."

The independent panel's recommendations have previously been ignored, however. In 2012, it reviewed the MMP voting system and recommended the 5 percent threshold for parties to be eligible for a seat in Parliament be reduced to 4 percent. Geddis said the government at the time didn't believe there was political consensus on that idea.

Will it be different this time?

"Our job is to produce a report with recommendations that are as well-reasoned, and well-supported by the evidence as we can. What happens to those ultimately is out of our hands," Geddis said.

The panel's final report will be given to the Justice Minister on 30 November. The minister will decide if or when the report is made public.

Victoria University senior researcher Max Rashbrooke has researched and written extensively about political donations. He's not holding out hope the recommendations will be implemented.

"To be blunt, I don't think a huge amount is going to change … National has signalled that it has no appetite whatsoever for better regulating donations."

National would also be hesitant about increased state funding for political parties.

"I think the only thing that would change that would be a really significant donation scandal, one that involved both major political parties."

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