Tougher donation limits and funding fixes would make future NZ elections fairer for all

Less than three months out from New Zealand’s 2023 election, large political donations have been making headlines. Donations to both the ACT Party and the National Party have significantly outpaced large-scale contributions to other political groups.

Should this be a cause for concern? Studies from overseas indicate those who raise the most money tend to win. And, based on our recent “Doughnation” research, donors know that too. Wealthy New Zealanders admitted to gaining access to the levers of power through political donations.

So do our current campaign finance rules do enough to protect a basic principle of democracy – that we should all be equal in the ballot box?

Not according to an interim report from the Independent Electoral Review, which warns New Zealand’s current electoral laws are still “not as fair as they could be”.

Its final report will be delivered to the government in November – too late to have an impact on the 2023 election.

But if we want future elections to be fairer, here’s what the report found needs to change.

How can we make future elections fairer?

The Independent Electoral Review’s interim recommendations include

• replacing the current broadcasting allocation with a “fairer and more effective form of state funding” for registered parties

• per-vote and base funding for registered political parties

• tax credits for donations up to NZ$1,000

• introducing an expanded Election Access Fund and a new fund to facilitate engagement with Māori communities.

Those changes are additional to several changes to political party finance implemented at the beginning of 2023, ahead of this year’s election.

What changed ahead of this election?

Changes included lowering the reporting threshold for large donations from $30,000 to $20,000 and new requirements around reporting donations above $1,500.

In the first six months of 2023, the main political parties have already received more than $4 million in donations over $20,000.

The National Party benefited the most from political donations, receiving $1,255,587 in large political donations, closely followed by ACT, which received $1,255,000. New Zealand First received $567,304, the Green Party received $496,260 and the Labour Party received $428,844.

These figures reflect the large donations that have to be disclosed within 10 days of receipt. We won’t know the sum total of small donations until well after the election.

How much do large donations sway elections?

Research suggests donations can help political parties win more votes, but that typically this only applies to the more established parties. And, while money matters in New Zealand, it’s not necessarily a straightforward relationship.

Recent data from the United States showed better-than-average fundraising is a strong predictor of better-than-average electoral success, concluding that “money still matters”.

Australia’s Grattan Institute found that over the past five federal elections there, the party with the biggest war chest tended to form government. And an analysis of general elections in France and the United Kingdom between 1993 and 2017 showed increased spending per voter improved candidates’ share of votes.

Read more: 'They're nice to me, I'm nice to them': new research sheds light on what motivates political party donors in New Zealand

New Zealand’s 2017 election also illustrated a strong relationship between money and votes. National received 44.45% of the votes after a $4,579,086 fundraising haul. Labour received 36.9% of the votes and received $1,611,073 in political donations.

But the 2020 election result suggests there are limitations to the relationship between funding and votes, particularly for the two main parties. In 2020, other factors clearly contributed to the electoral outcome. For example, Labour’s handling of the COVID-19 pandemic appears to have outweighed National’s fundraising advantage.

Some voters’ voices are louder than others

Even if political donations don’t always decide elections, it is fairly well established that money buys access. Work from the Grattan Institute shows that highly regulated industries – such as mining, transport, energy and property construction – provided the highest level of donations to Australian political parties, made the greatest number of commercial lobbying contacts, and had the most meetings with senior ministers.

Access is not the same as influence, of course. It is typically difficult to make a causal connection between donations and influence, except when political scandals occur.

However, research out of the US by Martin Gilens showed that politicians’ decisions do not represent the preferences of poorer or middle-class citizens. Rather, these decisions fall in line with the interests of the wealthiest – a situation that Gilens attributed at least in part to the influence of wealthy donors.

In New Zealand, the Independent Electoral Review’s interim report acknowledged the

risks to public confidence in the electoral system if some people have more access to, or can unduly influence, parties and candidates through political financing.

In a recent opinion piece, former ACT board member Robin Grieve defended political donors as not always being motivated by self-interest, giving an example of a donor wanting to help children in the care of Oranga Tamariki.

Read more: Over 300,000 New Zealanders owe more than they own – is this a problem?

While there may have been altruistic intent, the issue is still that the donation was made by a wealthy person to a political party with the stated objective of influencing legislation.

Is that fair? In our research exploring the motivations of wealthy donors, some agreed that it was unfair that they could donate while others could not, with one noting a

real problem with people who accumulate a lot of money supporting the systems that have allowed them to accumulate a lot of money.

Another commented that they did not think

that it is right that rich people can distort democracy.

Not everyone was concerned about this situation, with one donor telling us

the fact that some can promote their position more than others doesn’t worry me.

If acted on, the Independent Electoral Review’s recommendations for tighter donations controls and fairer funding for registered parties would help create significantly more transparency in New Zealand’s political donations system.

We believe a move away from a reliance on large individual donors would help increase public trust in the way political parties are funded. It also is likely to help level the playing field of access and potential influence in New Zealand politics.