Wed Oct 25

Pratt reports show urgent need for political funding law reform

Written by: Joo-Cheong Tham, Professor, Melbourne Law School, The University of Melbourne

In the DC movie Justice League, Flash asks Bruce Wayne aka Batman, “What are your superpowers again?^[1]” to which Wayne replies, “I am rich.”

In tawdry fashion, life has imitated art with Visy chair Anthony Pratt reportedly boasting that “being rich is my superpower ^[2]”.

The expose by Nine media has provided compelling insights into how big business influences politics. It also shows the urgent need to reform political funding laws.

The power of big business

The expose suggests a concerted effort by Pratt to cultivate relationships of political influence through three strategies:

large political contributions regularly making him the top political donor
lobbying including through meetings with ministers ^[3] and their advisers, and holding fundraisers at his mansion, Raheen
employing former senior political leaders such as Tony Abbott and Paul Keating.

This is a familiar playbook for other businesses, particularly those in high-regulation sectors ^[4] (including mining companies ^[5]).

No apparent quid pro quo, so does it matter?

There is, however, no smoking gun linking the use of Pratt’s wealth to direct favours, and there is no suggestion of any illegality.

Is there then no problem with corruption?

In McCloy v New South Wales ^[7], the High Court emphasised how there can still be corruption in the absence of quid pro corruption. Specifically:

“clientelism” corruption, which “concerns the danger that officeholders will decide issues not on the merits or the desires of their constituencies, but according to the wishes of those who have made large financial contributions valued by the officeholder”
war-chest corruption, where “the power of money may […] pose a threat to the electoral process itself”.

As the Pratt case demonstrates, what we should be concerned about is the risk of clientelism corruption. The goal of Pratt’s various efforts appears to be relationships of reciprocity, where his business interests receive a favourable hearing.

The risk of clientelism corruption is of course not unique to Pratt. It is present with other large contributors ^[8] to major political parties, including businesses and unions.

It is also an issue for Climate 200, which is the dominant source of funding ^[9] for the Teal MPs. Nearly a third ^[10] of Climate 200’s funding comes from three individuals ^[11].

Climate 200 is the dominant source of funding for the Teal MPs. Lukas Coch/AAP

In all these cases, the risk of clientelism corruption is linked to war-chest corruption, as it is the demand for campaign spending ^[12] that drives the need for political contributions.

An “arms race” inevitably ensues with big spending ^[13] from political players such as Clive Palmer ^[14] and mining companies (which helped oust Kevin Rudd as prime minister through a multi-million-dollar advertising campaign ^[15]).

A once-in-a-generation reform opportunity

There is now a meaningful opportunity to address the corruption risks of political funding.

The Albanese Labor government has committed ^[16] to reforming federal political finance laws based on a report by the Commonwealth Joint Standing Committee on Electoral Matters.

This report has recommended ^[17]:

strengthening disclosure obligations through “real-time” disclosure and reducing the disclosure threshold to $1,000
caps on political donations
caps on expenditure
administrative funding (to assist with compliance with new laws)
increased public funding
additional resources for the Australian Electoral Commission.

This is the first time in more than three decades that a federal government has committed to wholesale reform of political finance laws. The last time was in 1991, when a ban on political advertising was found to be unconstitutional ^[18].

As electoral law expert Graeme Orr has pointed out ^[19], there is now an opportunity for “lasting reform”.

If effectively designed (and there is much devil in the detail), the measures the government has committed to will go a long way to addressing the corrupting risks of political funding.

Caps on political contributions will directly limit large contributions. Caps on political spending are aimed at reducing demand for political contributions as well as addressing the unfairness resulting from escalating campaign spending.

Lobbying reform is essential

The government’s reform agenda left out one crucial area: the regulation of lobbying.

Teal MP Kate Chaney ^[21] and independent senator David Pocock ^[22] have called for greater transparency of lobbying through a legislative scheme.

Ministers and their advisers ought to be required to disclose whom they met with and why (including through the publication of ministerial diaries).

Integrity and fairness

Will political finance reform address corruption but exacerbate unfairness by entrenching the power of the major parties?

Some argue it will ^[23], with the government said to be working on “a bipartisan deal designed to thwart independents ^[24]”.

But opposing changes to political finance laws not only squanders this rare reform opportunity, but represents a triumph for those who use big money to unduly influence politics.

A more nuanced approach is necessary to secure, in Teal MP Monique Ryan’s words ^[25], “(r)oot and branch reform of political campaign funding to ensure fairness and a level playing field for all candidates”.

“Partisan lockups of the democratic process ^[26]” are a genuine risk, as the major parties have the power to determine electoral rules. But risks are not inevitabilities.

The path forward is not to reject any change to political finance laws, but to ensure these changes promote fairness – including to independent and new candidates.

Pratt’s dealings have highlighted the potentially corrosive role of big money in Australian politics. A silver lining might be that it gives greater impetus to long-overdue reform of federal political finance laws.