Expert panel lashes NSW political donation regime

Banning political donations for NSW election campaigns is not in the publicinterest but the current regime has failed and must be overhauled urgently, an expert panel advising Premier Mike Baird has found.

The panel’s excoriating report revealed a political donations system riven with loopholes, weaknesses and corruption opportunities. However, the timing of the findings, set by the Baird government, means wholesale improvements will not be implemented until after the March election.

The panel, led by businesswoman Kerry Schott, found “systemic failures” in laws that govern electoral funding disclosure, spending, caps and bans. It called for an immediate review.

The archaic, paper-based system of delayed donation disclosures should be replaced by an online system where disclosures were made in real time, allowing meaningful scrutiny of potential relationships between donations and government decisions, the panel said.

It called for an end to the funnelling of political donations through a party’s head office, which allows donors seeking to promote a candidate to “hide” behind the party.

The cap on electoral spending by third parties such as unions and industry groups should be halved to $500,000, the panel said. The NRMA, the highest-spending third party at the 2011 election, spent about $400,000.

Critically, the panel found any improvements in NSW election funding laws could be undermined by weaker federal and interstate regimes. It called on Mr Baird to seek co-ordinated national reform.

The panel was formed in response to allegations of funding rorts aired at the Independent Commission Against Corruption, including that Liberal MPs sought to funnel illegal donations into their campaigns before the 2011 state election. It also followed earlier fraud and corruption findings against former Labor MPs.

The panel’s central task was to assess the feasibility and public interest of a fully taxpayer-funded electoral model, requiring a ban on political donations. Mr Baird and former opposition leader John Robertson both argued for such a system.

However, the panel said it would not be feasible for taxpayers to fund every prospective candidate, and a ban on political donations was likely to be deemed unconstitutional.

The panel also rejected a proposal by the Labor Party for an “opt-in/opt-out” model, whereby parties could refuse private donations in return for full taxpayer funding.

Some public funding is already provided to parties and candidates for election campaign expenses.

However, the panel found that parties were not properly accountable for how the money was spent, and party administrators appeared to take little responsibility for compliance. It said this should be overhauled, through better financial reporting and making candidates and senior party officials legally responsible for compliance.

The panel cast doubt on the NSW Electoral Commission’s regulatory bite, saying it focused on relatively low-level compliance issues, at the expense of investigation and enforcement.

The government has introduced some changes for next year’s state election, including increased penalties for non-compliance with electoral laws and tighter disclosure rules.

Mr Baird said the government would consider the report and respond before the March election. It is understood that most recommendations will be supported.

Acting Labor leader Linda Burney said Mr Baird had ruled out real reform before the election.

Greens MP John Kaye said the report showed political parties had treated donations and spending laws as optional and the NSW Electoral Commission had effectively turned a blind eye.

Making parties and officials responsible for the lawfulness of donations would help restore public confidence in state politics, he said.

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