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How to reform political finance across Canada democratically

The following op-ed by Democracy Watch co-founder Duff Conacher, was published in the Hill Times on April 11, 2016 and on on April 14, 2016.

Some recent commentary on reforming political finance across Canada has unfortunately included incomplete proposals that won’t stop big money from corrupting Canadian politics.

The most questionable claim by some commentators is that the federal law is the best model. While the federal government banned corporate and union donations in 2007, its $3,050 annual donation limit for individuals ($1,525 to a party and the same amount to its riding associations) is much more than any average person can afford – given that the average annual income in Canada is only about $40,000.

As a result, wealthy people can still use money as an unethical way to influence federal parties and politicians, especially since they can hedge their bets by giving the $3,050 amount to more than one party. That high donation limit also facilitates businesses, unions and other organizations getting around the ban by funneling donations through their executives – 10 executives giving the maximum adds up to a $30,500 donation.

Some have proposed that requiring donors to identify their employer would stop this funneling. However, donors would claim they were not forced by their organization to give the money, and no one would be able to prove otherwise, or they would funnel donations through their family members further hiding the source of the money.

Quebec learned this the hard way, as few have been charged in its corruption scandal even though an Elections Quebec audit found $12.8 million in likely funneled donations from 2006-2011. To stop the corruption, in 2013 Quebec lowered its individual donation limit to $100 annually, and required donations to be verified by Elections Quebec before being transferred to parties and candidates.

Some party leaders and other politicians, and some commentators, claim political parties wouldn’t have the money they need to operate under the Quebec limit. They conveniently fail to mention other elements of Quebec’s world-leading system.

Quebec also has $1.50 per-vote annual funding for political parties (as do four other provinces, and so did the federal level before the Harper Conservatives eliminated it) and public funding that matches the first $200,000 raised by a political party, and $20,000 raised by an election candidate. These amounts close the gap left by ending undemocratic large donations from wealthy interests.

Some commentators argue against the per-vote subsidy – even though it most closely upholds the key democratic principle of one-person, one-vote – by making the absurd claim that it forces voters to give money to parties they don’t support. Actually, the $1-2 amount comes from the taxes everyone pays and goes only to the party each person supports (and only if they vote).

Matching funds raised is also more democratic than other options as a party or candidate needs the support of many voters in order to access significant funds, and the matching helps equalize the funding available to all.

True, the per-vote subsidy should not be too high – no party should receive more than one-half of its annual funding from it to ensure the parties can’t unjustifiably prosper by baiting voters with false promises to boost their support during an election.

Many commentators also ignore the fact that the current voting system and other subsidies shift a lot of taxpayer money in undemocratic directions. For example, in the 2011 federal election the Conservatives received 24 MPs more than they deserved (they received 39.6 percent of the vote, but 54 percent of the MPs). Each of those MPs received about $440,000 annually in salary and for their offices, so the Conservatives received an undemocratic subsidy of $10.5 million every year until the 2015 election. Now the Liberals are receiving roughly the same amount as an unfair subsidy.

As well, the average individual donation to each federal party is only $100-250 yet people who donate up to $400 receive a 75% tax deduction. Even worse, wealthy people who can afford to donate between $1,275 and the maximum donation allowed of $1,525 receive the huge subsidy of almost half that total ($650) as a tax deduction. These taxpayer-funded subsidies add up to more than $20 million annually for all parties.

Compared to these subsidies, it is much more democratic to have a combination of a base amount from a per-vote subsidy for parties, only individuals allowed to donate only a small amount (verified by the election watchdog agency), and matching public funding. Such a system also ensures only parties that continue to appeal to voters in between elections will prosper financially.

Some parties and candidates will continue to claim they need more money to reach and engage with voters even though there is little evidence to back their claims, especially given the relatively low-cost, broad reach of email and social media.

If anything, the reimbursement of half their election expenses that federal parties and candidates receive for obtaining a very low percentage of the vote should be reduced. Federal parties are given 50% of their election expenses if the party receives 2% or more of the national vote (or 5% or more of the vote in any riding), and election candidates get back 60% of their expenses if they receive 10% or more of their riding vote. These subsidies total about 60% of the total amount spent by all parties and candidates each election (about $30 million alone for an average federal election).

Six out of 10 provinces have similar party and candidate election expense subsidies, while two provinces only subsidize candidates – only B.C. and Alberta and the three territories don’t provide them.

Other key changes needed to stop big money include limiting loans as strictly as donations. Currently, financial institutions (and in some jurisdictions also businesses, unions and individuals) can loan unlimited amounts to parties and candidates.

Spending on advertising by third party interest groups must be limited leading up to election day – only the federal government, B.C., Manitoba, New Brunswick, Nova Scotia and Quebec currently have such limits – and each third party should have to prove that its members (or, in the case of a business, shareholders) approved the spending.

Election and ethics watchdogs must be required to do regular audits, including of politicians’ bank accounts, to ensure everyone follows all the rules. Disclosure of all donations and gifts of money, property, services and volunteer labour given to any party, riding association, politician, nomination race, election or party leadership candidate, including the identity of the donor’s employer, and board and executive affiliations (and the identity of organizers of any fundraising event);

Finally, to ensure fair issue debates in between elections, we should start with requiring disclosure of how much any individual or interest group spends on each issue campaign, and their funding sources. If that reveals a huge disparity in funding, and funding sources, then donations to issue campaigns, or at least paid campaign ads, should also be limited.

These changes won’t stop bribery but they will discourage it by making it more clearly illegal, and by increasing the chances of getting caught. Until all Canadian jurisdictions (federal, provincial, territorial and municipal) make these changes, big money will continue to dominate, and corrupt, our politics.