Thursday, July 09, 2015

We could resolve the electoral donations dilemma with a little digital thinking

One of the significant news stories in Australia this week is the revelation that Bill Shorten failed to correctly disclose a $40,000 electoral donation in a timely manner - breaching parliamentary requirements.

This is far from the first time a politician has done this, with repeated errors in declaring donations an ongoing issue for both major parties in Australian politics, and even affecting several minor parties and independents.

This has been called a crisis of trust, and one result has been calls for full public funding of elections - an approach that has been tried to some degree in a few other jurisdictions around the world.

Where full or near-full public funding has been attempted it has faced both legal controversies and difficulties in finding a formula that effectively funds established parties without closing the door on new electoral entrants or unfairly benefiting incumbent governments.

Australia already has partial public funding for elections, paid on a per vote basis. At the last election in September 2013 a total of $58.1 million was paid out, on the basis of $2.49 per first preference vote for candidates receiving at least 4% of the primary vote.

This 'flat rate' isn't necessarily a perfect solution either - it doesn't take into account the size of some of Australia's electorates (from Wentworth at 30 square km to Durack at 1,587,758 square km), or the significant differences in the number of voters per electorate (from 62,917 in Lingiari to Fraser with 143,564 voters). It is also open to manipulation by governments or major parties, as the amount per vote, or the threshold for payment, can be altered through legislation passed by a majority in both houses of parliament.

There's also other flaws with Australia's electoral donations laws, with donations often declared publicly through the Australian Electoral Commission 12 months or more after they are donated - often well after the election that the donors may be seeking to influence - leaving voters unable to consider the donations in the context of how they choose to vote.

Electoral donations are also often an area of contention for Australian state, territory and local governments, with varying laws in each jurisdiction, often modified by governments to suit their electoral needs. In particular NSW recently had over 10 Liberal MPs resign the party and several resign parliament due to irregularities as to who they received donations from, or roughly 25% of sitting members in their previous Liberal government.

There's also been cases of parties moving money between states or to and from their federal parties in order to evade stricter electoral declaration rules, and other kinds of shenanigans with the system between funds donated to individual politicians and to their parties.

It seems to me that a little digital thinking could resolve a large proportion of the issues with Australia's donation system, both ensuring donations are recorded and allocated appropriately and declared rapidly to the public.

Why not build a central donations website for collecting and declaring electoral donations for all parties.

The site, potentially called the Australian Electoral Donations System  (or AEDS for those who love acronyms), could provide a single electronic gateway for individuals of any political belief to donate funds from their bank account, credit card, paypal or other account to the candidate(s) and party(ies) of their choice. Every donation could be electronically transferred to the correct recipient and declared in real time as the electronic transfer occurs.

The AEDS could support both personal and corporate donations, including cash donations at events and gold coin donations, through becoming the official way of issuing tax receipts for all donations, making it unacceptable to simply hand candidates 'brown bags' of undeclared cash (a form of donation that is already illegal but hard to trace).

For easy event management, attendee management and an auction component could be built into the AEDS and a mobile app or web service used for recording donations (and attendance) at electoral events - mitigating the current issues with tracking and identifying donations through vehicles like Joe Hockey's 'North Shore Forum'.

It would become far easier for the public to see who has donated what to which parties - on a near-real-time basis, and the Australian Electoral Commission would be able to detect issues much faster - particularly where declared party income and expenditures don't match up. The AEDS may also help the Tax office to track the movement of funds and following up to verify that individuals and organisations are reporting their earnings and expenditures correctly, and even support police in identifying criminal activities linked to donations.

Done right this central donations website could even turn a profit - by taking a percentage of every donation towards its operating costs. Given that $10 million or more is given each year in donations to the federal parties (and that's only counting donations over the current $12,500 donation level), a 10% processing charge for using the AEDS could more than cover the ongoing costs of the service. This could be potentially a much lower charge when considering all the smaller donations (from $2 to $12,499) made at federal level and all of the donations to state and local politicians and parties.

The AEDS could be set-up as a start-up and run as an independent body - or even become a listed entity on the stock market (possibly expanding into offering similar electoral donations systems for other nations).

At worst case, the AEDS could be run under the auspices (or with board oversight) of the Australian Electoral Commission - though given their struggles to update their own technology I doubt the organisation has appropriate management to operate such a significant system.

Of course it would be a crazy entrepreneur to set up such a system without agreement and legislation by government, so the first step must be taken by parliament to recognise that the current electoral donation system is destroying trust and damaging the legitimacy of government - creating a strong perception, if not a reality, that our politicians are, if not for sale, at least for rent by the largest donors - be they corporations or organised crime.

Would our parliament countenance such a move?

I hope so. Removing the difficulty of managing electoral donations from parties, and the embarrassment politicians face when someone in their office forgets or incorrectly declares a donation, or they accidentally take money from an illegal donor, this type of independently-run electoral donation system would both make the lives of politicians easier and reduce their stress levels, while potentially lengthening their careers.

I've thought a great deal about how this system could work, and the problems it may face, so if anyone in government wants to discuss the idea further, drop me a line.

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