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Volume 6 – Number 3 – August 2010Special Issue: Funding DemocracyThe Electoral (Finance Reform andAdvance Voting) Amendment BillAndrew Geddis 3Financing Political Parties in theUnited KingdomJacob Rowbottom 8Contemporary Issues in CanadianPolitical Finance RegulationColin Feasby 14Public Money and Electioneering:A View from Across the TasmanGraeme Orr 21Regulating Political Contributions:Another View from Across the TasmanJoo-Cheong Tham 26The Future State Project: Meetingthe Challenges of the 21st CenturyDerek Gill, Stephanie Pride, Helen Gilbert,Richard Norman and Alec Mladenovic 31Income Inequality and theEconomy of IdeasDavid Bromell 40Ethnic Mobility: Is it Important forResearch and Policy Analysis?Paul Brown, Paul Callister, Kristie Carterand Ralf Engler 45


Volume 6 – Number 3 – August 2010Policy Quarterly (PQ) is targeted at readersin the public sector, including politicians andtheir staff, public servants and a wide variety ofprofessions, together with others interested inpublic issues. Its length and style are intendedto make the journal accessible to busy readers.The journal welcomes contributions ofabout 4,000 words, written on any topicrelating to public policy and management.Articles submitted will be reviewed bymembers of the journal’s Editorial Board and/orby selected reviewers, depending on the topic.Although issues will not usually have singlethemes, special issues may be published fromtime to time on specific or general themes,perhaps to mark a significant event. In suchcases, and on other occasions, contributionsmay be invited from particular people.Subscriptions: The journal is available in PDFformat on the IPS website: www.vuw.ac.nz/ips/pq. Readers who wish to receive it by emailshould register as PQ subscribersips@vuw.ac.nz. This service is free.For all subscription and membership enquiriesplease e-mail ips@vuw.ac.nz or post toInstitute of Policy Studies, P.O. Box 600,Wellington.Electronic Access: The IPS directs interestedindividuals to its website: www.vuw.ac.nz/ips/index.aspx where details of the Institute’spublications and upcoming events can befound.Permission: In the interest of promoting debateand wider dissemination, the IPS encouragesuse of all or part of the papers appearing inPQ, where there is no element of commercialgain. Appropriate acknowledgement of bothauthor and source should be made in allcases. The IPS retains copyright. Please directrequests for permission to reprint articles fromthis publication to editor-ips@vuw.ac.nz.Guest Editor: Andrew GeddisEditor: Jonathan BostonEditorial Board: David Bromell, Paul Callister,Valentina Dinica, Michael Di Francesco, MikeMcGinnis and Jim VeitchISSN: 1176 - 8797 (Print)ISSN: 1176 - 4325 (Online)Volume 6, Number 3 – August 2010Design & Layout: Aleck YeeProduction: Alltex DesignEditorialNoteMoney—where it comes from, how it is gained, and theuses to which it is put—matters a lot in politics. Noserious electoral campaign, be it in a constituency ornationwide, can run without it. But at the same time, therole money plays in a democratic polity raises numerousconcerns about potential corruption, unequal influence,and debasement of our political culture. These conflictingpolicy considerations, to say nothing of the self-interest ofthose politicians who ultimately resolve them, mean thatany decision over how to regulate campaign financing willbe controversial.It is against this backdrop that parliament’s speciallyconvened Electoral Legislation Committee currently isconsidering the Electoral (Finance Reform and AdvanceVoting) Bill. This legislative proposal is but the latestchapter in a story stretching back to the 2005 electionand the now-infamous Exclusive Brethren intervention inthat campaign. Concerns regarding that group’s activitieshelped spawn the Electoral Finance Act 2007, which the2008 election campaign revealed to be critically flawedin application. Following this law’s near-universallysupported repeal in early 2009, the National Governmentembarked upon a lengthy process of public consultationover possible replacement legislation. Parliament now hasto decide what to do with the fruits of that consultationprocess.However, while the issue of campaign finance has aparticular history in New Zealand, we are hardly unique inhaving to grapple with the problems it raises. Every otherdemocratic society has had to confront it and decide onits regulatory response. In May of this year, the Universityof Otago Law Faculty and the Institute of Policy Studiesjointly hosted a symposium at which the experiences ofthree comparator nations could be considered. The aimwas not to uncover a perfect answer to New Zealand’sproblems; such an answer (if one is even available) mustgrow out of and accommodate our own particular circumstances.However, the papers presented on that occasion,which are reproduced in this issue of Policy Quarterly,may aid us in choosing what regulatory options are, or arenot, suitable for our conditions.One of those comparators, Australia, traditionally hasadopted a more laissez faire attitude to the raising andspending of money by electoral contestants than has NewZealand. However, Graeme Orr describes how Australia’spolitical actors show increasing interest in following NewZealand’s example and placing limits on the spending ofcandidates, political parties and ‘third parties’ (which arenow termed ‘parallel campaigners’ in the New Zealandcontext). He also explains how the Australian taxpayercurrently provides significant support to the campaignsof individual candidates and their political parties, bothdirectly and through funding for parliamentary andgovernment communications.Joo-Cheong Tham describes the constraints thatAustralia applies to the fundraising practices of itspolitical actors. Interestingly, he suggests that Australia’scomparatively tight rules on disclosing the identity oflarge donors to political parties are no longer adequateto remove the suspicion of quid-pro-quo dealings, andthat there are some moves towards placing caps on howmuch donors may give. Should such moves bear fruit, theywould leapfrog Australia ahead of New Zealand in termsof the amount of prescriptive control applied to thoseengaged in electoral activities.Looking beyond our trans-Tasman neighbours, theUnited Kingdom instituted quite extensive controls onelectoral spending in 2000. Jacob Rowbottom explainssome of the features of that regulatory framework anddraws attention to where they may have lessons for thechanges proposed for New Zealand in the present Bill.Finally, Canada has perhaps the most comprehensiveand restrictive regulations on the use of money inelectoral campaigns to be found amongst developeddemocracies. Colin Feasby, whose earlier writings provedvery influential in the Canadian Supreme Court’s decisionthat these measures pass constitutional muster,outlines just how tight a reign the law applies to electoralfundraising and spending. Whether New Zealand would beready to adopt a similarly intensive regulatory approachis debateable.Overall, the primary lesson that we can learn fromthese other nations’ attempts to control the use of moneyfor electoral purposes is that every regulatory choicecreates consequences, and that those consequences thendemand further regulatory choices. This is not necessarilyto say that regulation is futile, or that less law is betterthan more. After all, a decision not to impose legal controlson campaign financing is a regulatory decision in andof itself. Furthermore, every developed democracy hassome form of legal control on the use of money for politicalpurposes, even if only to prohibit the outright purchaseand sale of votes or governmental offices.The question, then, is not whether to regulate or notto regulate campaign finance in New Zealand. Instead, itis what particular mix of prescriptive legal controls andlaissez faire lassitude will best meet the various policyconcerns that arise in New Zealand’s particular politicaland cultural environment. That is a question on whichthere will be many differing opinions. It is hoped that thefive articles on this topic in Policy Quarterly can helpprovide fuel for the resulting discussion.This issue of Policy Quarterly also includes threearticles on three very different issues. First, Derek Gill andfour colleagues summarize the findings of a recent IPSproject, funded via the Emerging Issues Programme, onthe subject of “The Future State”. The project investigatedthe challenges that New Zealand’s public sector is likely toexperience over coming decades and their implications forour system of public management.Second, David Bromell assesses the findings of arecent book that has attracted considerable attention internationally.The publication, by epidemiologists RichardWilkinson and Kate Pickett, argues that countries withunequal income distributions perform less well on a rangeof educational, health and social indicators than countrieswith more equal income distributions. The reasons forthis and the policy implications for New Zealand (whichhas a relatively high level of inequality) are both worthpondering.Finally, Paul Brown, Paul Callister, Kristie Carter andRalf Engler explore the issues surrounding ethnic mobility.Recent studies in New Zealand indicate that a small butimportant level of ethnic mobility is occurring in officialdata collections and other surveys. The authors arguethat such mobility needs to be better understood by bothresearchers and policy makers. The article concludesby considering some emerging ideas for handling ethnicmobility when undertaking policy analysis.Jonathan Boston and Andrew GeddisPage 2 – Policy Quarterly – Volume 6, Issue 3 – August 2010


Andrew GeddisThe Electoral(Finance Reform and Advance Voting)Amendment BillWhile debates over what role money should play in electoralpolitics – a topic New Zealand follows the United States incalling ‘campaign finance’ – have occurred spasmodically inthis country, it has received an unprecedented amount ofattention since 2005. Although this article is not intended tobe a general history of thetopic (see instead Geddis,2010b), some contextualbackground nevertheless isimportant to understandingthe current proposals forreform contained in theElectoral (Finance Reformand Advance Voting)Amendment Bill.Andrew Geddis is an Associate Professor at theFaculty of Law, University of Otago. In 2008, thethen Labour-led Government appointed him tochair an expert panel on electoral administrationand political party funding.The 2005 election not only was closelyfought and unusually bitter in its tone,but it also saw a number of noveldevelopments in terms of campaignfinancing. For one thing, both Labour andNational spent very close to the maximumelection expenses permitted by law – thefirst time both the major parties had doneso. (Indeed, Labour probably exceededthe permitted limit when the costs ofa parliamentary-funded pledge cardare included in its total, while Nationalexceeded its broadcast allocation by failingto account for GST in its total spend, butno one suffered any legal consequences forthose breaches.) For another, the sourcesof each party’s campaign funds cameunder some scrutiny, as a large amountof ‘anonymous’ and ‘trust-funnelled’money poured into their coffers. Finally,the decision of several members of theExclusive Brethren religious sect tofund a very expensive nationwide leafletcampaign against the Labour and Greenparties represented an unprecedentedlevel of ‘parallel campaigner’ activity. 1Following Labour’s narrow victory inthat contest, it felt the need to reform theregulation of campaign finance to addresswhat it saw to be problems exposed duringthe campaign. The result was the ElectoralFinance Act 2007 (EFA). This legislation’sprimary effect was to impose limits onthe election-related advertising spendingof parallel campaigners, as well as torequire them to register and make somedisclosure of their funding sources. It alsopurported to increase the transparency ofdonations to political parties by closingsome of the more egregious loopholes inthe disclosure rules.This legislation attracted a large amountof criticism, both of its substantive contentand of the process by which it was conceivedand enacted (Geddis, 2008). In particular,the rules governing parallel campaignerswere attacked for being overly restrictive,confusing in application, and full ofunintended consequences. The impositionof restrictions on private spending onelection advertising, while publicly fundedPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 3


The Electoral (Finance Reform and Advance Voting) Amendment Billparliamentary entitlements still could beused freely for election-related purposes,also attracted criticism. Likewise, the factthat the legislation was drawn up withoutpublic or full cross-party consultation, andthen passed into law on a bare majoritybasis following a party line vote, drewaccusations of partisan intent that areundesirable in the context of electoral law.Given the vitriol that the National Partypoured upon the EFA during its passagethrough the House and subsequently, therepeal of much of the legislation’s contentfollowing its victory in 2008 was entirelypredictable. 2 What was surprising, perhaps,was that all the other parties in parliament(with the exception of the Greens) joinedNational in supporting repeal. While thismove indicated widespread acceptancethat this legislation had not worked wellin application, it did not answer thequestion of what rules instead ought to beadopted.Learning from Labour’s previouserrors, the government established a twostagepublic consultation process to guideit on this issue. 3 That consultation processspawned a set of recommendations fromthe minister of justice to Cabinet, whichthen agreed to a series of legislativeproposals (Cabinet, 2009). Those legislativeproposals have come before the Housein the form of the Electoral (FinanceReform and Advance Voting) AmendmentBill, presently under scrutiny by a speciallyconstituted, all-party Electoral LegislationCommittee.The bill’s approach to reformThe bill does not propose very muchchange to existing law. This fact may belargely attributed to the government’soverall approach to the issue: creatinglaw ‘based on broad consensus so thatthe public can have confidence in theoutcome of parliamentary elections andthat the rules are enduring and consistentacross general elections’ (Ministry ofJustice, 2009, para 4). Because there isfundamental disagreement as to what arethe ‘right’ campaign finance rules for thiscountry, an approach which effectivelysays ‘all (or nearly all) must first agree forany change to occur’ necessarily will havea strong status quo bias. That said, thisconservative reform approach probablywas required politically because of theNational Party’s trenchant criticism of... one of the reasons given for not revisitingthese rules is that it would subject the wholeregulatory scheme to scrutiny under theNew Zealand Bill of Rights Act 1990 – scrutinythat it probably would fail ...the EFA’s passage in the face of significantopposition from other parliamentaryparties.However, a consequence of thisapproach is that some issues remaincompletely untouched, despite posingsome pretty major problems. Forexample, the regulation of broadcastelection advertising will not be changed(Geddis, 2003). Political parties still mayspend only as much on television andradio advertisements as the ElectoralCommission gives to them pre-electionthrough the broadcast allocation. Parallelcampaigners will remain barred fromairing overtly partisan messages in thebroadcast media. Rather worryingly, oneof the reasons given for not revisitingthese rules is that it would subject thewhole regulatory scheme to scrutinyunder the New Zealand Bill of Rights Act1990 – scrutiny that it probably would fail(Ministry of Justice, 2009, para 82).Nevertheless, the bill obviouslycontains some amendments to the currentlaw. The following is not intended to bea complete discussion of the proposedreforms. Rather, it outlines the broadintent of a number of the more notableaspects of the bill, as well as indicating somepotential shortcomings that will need tobe addressed by the Electoral LegislationCommittee. It also serves as a backgroundfor the following articles, whichprovide some international perspective onNew Zealand’s proposed changes.Changes to the regulated periodPerhaps the most important proposedchange is one that was incorporated intothe bill at a very late stage, certainly after itwas signed off by Cabinet late last year. Asit stands, the bill changes the definition ofthe ‘regulated period’ from the traditionalthree months before polling day. Thisdefinition matters, as the legal constraintson campaign spending by candidates andparties apply only during this period, soif it is shortened (or lengthened), thenthose constraints become less (or more)intensive. The bill instead defines theregulated period as beginning the day after‘default day’, with this date falling threemonths before the latest possible date anelection could be held by law. However,if the prime minister announces theelection date before default day, then theregulated period starts the day after thatannouncement; unless the announcementis made more than three months beforepolling day, in which case it starts threemonths prior to the latter date.The intent of this change is to avoidhaving a regulated period that appliesretrospectively (as New Zealand electionsoften take place with less than threemonths advance notice). While politicalparties and their candidates may beable to manage the risks associated withretrospective regulation, the imposition ofnew rules on parallel campaigners duringthe regulated period (see below), as wellas the possible future harmonisationof parliamentary funding rules withprivate campaign finance law (see below),increases concerns over this matter.However, the desirability of theprecise form of the proposed change isquestionable. For one thing, determiningthe latest possible date on which anelection can be held is not straightforward,as it depends in part upon administrativerequirements such as leaving time forthe return and count of special votesand holding judicial recounts. Moresignificantly, the change has the potential toPage 4 – Policy Quarterly – Volume 6, Issue 3 – August 2010


significantly shorten the regulated period,especially where the prime minister callsan early election. This step could give theincumbent party a significant advantage,as only it will know when the regulatedperiod will commence – thus enabling itto spend significant amounts just beforethat date without these counting towardsthe party’s limited ‘election expenses’. Itshould also be noted that shortening theregulated period, especially in a way thatmay benefit the incumbent party, wasnot a proposal which gained widespreadsupport during the public consultationpreceding this bill.There seems no easy solution to theproblem of avoiding retrospectivitywhilst also negating any possible partisanadvantage. However, one possibleresponse would be to fix the election datein law as being (say) the third Saturday inNovember, with the regulated period tocommence three months (or 90 days, tobe neater) prior to this date. To deal withthe problem of a required early election– such as where the government losesthe confidence of the House – this datecould be altered only by a resolution ofthe House. In other words, the power todecide the election date should be takenfrom the hands of the prime minister andplaced with parliament.Changes to the definition of ‘electionadvertisements’The bill contains a new definition of whatconstitutes an ‘election advertisement’(and hence the sorts of communicationsthat fall under regulatory control if theyare ‘promoted’ within the regulatedperiod). The definition has the followingimportant features:• it covers ‘an advertisement in anymedium’, as opposed to the currentdefinition which applies only topublication in traditional, print-basedmedia such as newspapers, billboardsand handbills;• it covers both ‘express advocacy’ (i.e.messages that explicitly call for a votefor or against a named candidate orparty) and ‘fake-issue advocacy’ (i.e.messages that call on voters to vote foror against an issue closely connectedwith an unnamed party or candidate).Interestingly, this definition is verysimilar to the one contained in the EFA.It may capture a slightly narrower rangeof expressive forms – only applying to‘advertisements’, rather than to ‘any formof words or graphics’ – but the same typesof messages are covered. However, thefreedom of expression concerns involvedwith that earlier legislation are not assharp in the context of this bill. For onething, the proposed regulation of electionadvertising by parallel campaigners isless extensive under this bill (see below).For another, the Electoral Commissionis under a duty to provide advice as towhether a particular communicationconstitutes an election advertisement, withreliance on that advice then providing adefence against any future prosecution(see below). Consequently, the ElectoralCommission will, on a case-by-case basis,resolve much of the uncertainty regardinghow the provision is to apply.Having said that, although thedefinition of election advertising excludesa range of messages from its ambit (suchas news reportage and commentary),there is no exception for communicationsinternal to a group or company as existedunder the EFA. Therefore, election-relatedmessages from a union’s executive or acompany’s directors to their members orshareholders could be deemed electionadvertisements, and thus fall within theregulatory reach of the bill. It is questionablewhether such a limit (albeit mild)upon freedom of association is justified:what pressing and substantial interestis there in regulating how members of avoluntary group communicate amongstthemselves about an upcoming election?Changes to the regulation of parallelcampaignersThe EFA’s controversial imposition oflimits on how much individuals or groupsnot directly contesting the election couldspend on election advertising make thisthe bill’s most contentious issue. In earlierproposal documents, the governmentappeared open to reintroducing spendinglimits, albeit at a far higher level than underthe previous legislation. However, thatoption was rejected by Cabinet, with ‘noconsensus’ and ‘strong opposition’ cited asthe reason (Ministry of Justice, 2009, para77). Instead, the bill simply requires any‘promoter’ of an election advertisementwho intends to spend more than $12,000on election advertising during the... transparency will only work if registrationactually reveals who is behind the advertising.Consequently, the definition of ‘promoter’ and thedetails that such persons (be they natural or legal)must provide to the Electoral Commission becomevery important.regulated period to first register with theElectoral Commission. There will be nolimit on what such promoters can spendon election advertising, no requirementto disclose what they spend on electionadvertising and no requirement to disclosewhere their funding comes from.The idea is that a central register ofbig-spending parallel campaigners willimprove transparency, by providing ‘acentral point where [their details] …could be readily accessed by the public andthe media’ (Ministry of Justice, 2009, para75). Individual election advertisementsfrom such sources will also have to carrythe name and contact details of theirpromoter. However, transparency will onlywork if registration actually reveals whois behind the advertising. Consequently,the definition of ‘promoter’ and thedetails that such persons (be they naturalor legal) must provide to the ElectoralCommission become very important.The bill’s present definition is not clearPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 5


The Electoral (Finance Reform and Advance Voting) Amendment Billas to exactly who qualifies as a promoter,especially where an election advertisementis produced and paid for by a group ratherthan an individual. This issue will needclearing up if registration and labelling isto achieve its desired goal.The bill’s relatively relaxed regulation ofparallel campaigners must also be viewedin the light of the ongoing regulationof political parties. As discussed below,the existing spending limits on politicalparties’ election advertising will beretained. And, as noted earlier, at both the2005 and 2008 elections this limit actuallyconstrained the National and Labourparties’ activities, in that each spent asmuch on election advertising as the lawpermitted. Consequently, if the largestparties literally cannot spend any moreon advertising, there will be an incentiveto farm out advertising spending toindividuals or groups not subject to limits.Note also that there is nothing in present(or the proposed) law to stop politicalparty officials coordinating a parallelcampaigner’s advertising campaign withtheir own. Consequently, there is goodreason to expect more such spending fromparallel campaigners in future elections,whether genuinely independent or linkedto parties and their candidates.Finally, existing law requires parallelcampaigners who wish to campaign for apolitical party or candidate to obtain thatparty or candidate’s written permission,giving them an effective veto over suchmessages. 4 Election advertisements thatoppose a political party or candidate donot require such authorisation. The billretains this distinction regarding howeach form of electoral speech is treated.This is a disappointing move, as it requiresparallel campaigners to run predominantlynegative advertising campaigns at electiontime.Changes to the limits on political party andcandidate election spendingAs intimated earlier, this issue largelyremains untouched. Spending limitswill continue to apply only to the costsassociated with election advertising (thusexcluding campaign activities like travel,opinion polling, hiring consultants andthe like) undertaken within the regulatedperiod. These limits will be inflationindexed, but only back to the 2008Regulating private campaign financing withouttaking into account the extensive state subsidiesprovided to parliamentary parties and their membersof parliament to enable them to do their jobs asrepresentatives gives incumbents an undesirableadvantage.election. 5 It is only in the last couple ofelection cycles that the limits on partieshave had more than notional application,while there is little evidence that thespending limit on individual candidates isstifling competition in electorate contests.However, as noted above, the fact that thelimits impose a real constraint on parties’and candidates’ advertising activities doesgenerate incentives to redirect spendinginto less regulated areas, such as by parallelcampaigners.Changes to election expenses apportionmentThe bill contains a number of provisionswhich set out how election expensesrelated to advertising that promotes both acandidate and his or her political party getapportioned between the two campaigns.These provisions are motivated by aHigh Court decision in an electionpetition brought in the wake of the 2005election. 6 That decision interpreted andapplied the existing apportionment rulesin a way that differed from the advicegiven to candidates by the chief electoralofficer before polling day. The bill seeksto avoid future confusion by largelycodifying the court’s decision, ensuringthat the legislative language and judicialunderstanding clearly match.Changes to the disclosure of donations topolitical partiesThe current rule that the identitiesonly of individual donors giving morethan NZ$10,000 to political partiesor NZ$1,000 to individual candidatesmust be disclosed to the public willnot change. However, parties will haveto release additional information, interms of the amount of donations theyannually receive within fiscal bands: lessthan $1,000; $1,000–$5,000; $5,000–$10,000. This innovation provides auseful extra measure of transparency andfurther illustrates how political partiesincreasingly are becoming recognisedas quasi-public organisations (Geddis,2009). Furthermore, the bill contains an‘associated persons’ test to further tightenloopholes in existing disclosure law byrequiring donations from related partiesto be bundled together and disclosedonce they exceed $10,000. However, theefficacy of this measure is undermined byallowing the political party’s secretary todescribe the bundled donations howeverhe or she chooses, so all the public mayget to see is that some group of entitiescalled ‘Associated Donors’ gave the partya certain sum of money the previous year.Furthermore, missing from thebill is any definition of what actuallyconstitutes a donation. For example, if aunion expressly agrees to spend money onadvertising in support of a party, is thata ‘donation’? Equally, if a political partycharges money to meet with a minister,does that meeting have a value all of its ownor is it a ‘donation’? These questions willarise, and without a legislative indicationof the answer they will be resolved by theElectoral Commission (and eventually thecourts).Changes to the use of parliamentary fundingThis is an overdue move, albeit one thatis largely phrased in terms of ‘more workwill be done in this area’ (Ministry ofJustice, 2009, para 95). Regulating privatecampaign financing without taking intoaccount the extensive state subsidiesPage 6 – Policy Quarterly – Volume 6, Issue 3 – August 2010


provided to parliamentary parties and theirmembers of parliament to enable themto do their jobs as representatives givesincumbents an undesirable advantage.It is encouraging that the governmentappears serious about harmonising therules that apply to these two forms ofpolitical funding.Changes to the responsibilities of theElectoral CommissionThe bill will require the newly restructuredElectoral Commission to provideadvisory rulings to parties, candidates andthe public as to whether a particular messageconstitutes an ‘election advertisement’.Furthermore, the government intendsthat good faith reliance on this advicewill provide a defence against any futureprosecution for breaching electoral law(Ministry of Justice, 2009, para 92). Inother words, the commission’s word onthe matter will be final, at least as far as anindividual inquirer is concerned.The reason for this innovation is thatbecause campaign finance regulationcontains grey areas of application andgenerates political incentives to accuserivals of breaching the rules, it is desirableto allow the administrative agency to issueimmediate rulings that can be relied on.The courts can still review the ‘correctness’of any ruling as a matter of law, but theimmediate recipients can be sure thatthey will not suffer later consequences forrelying on a ‘wrong’ bit of advice. This willpermit the election campaign to proceedin certain waters, rather than causingparticipants to trim their sails for fear ofgetting caught in an unexpected judicialgale.However, it is questionable whether thebill as written will achieve these objectives.At present, it appears to be assumed thatreliance on the commission’s advicemeans that a person cannot subsequentlybe found to have ‘wilfully’ contravenedvarious prohibitions in the bill, hencecannot be found guilty of an offence thatrequires this mens rea. Whether the courtsnecessarily would take the same view ofthe matter is debatable. Furthermore,good faith reliance upon the commission’sadvice as to whether a particular messageis an election advertisement should be acomplete defence against any allegationin any election petition that a candidatecommitted a ‘corrupt practice’ by spendingmore than the statutory maximum onelection expenses. At present the bill doesnot explicitly state that this is the case.Finally, the bill requires that thecommission treat as confidential anyproposed advertising messages on whichit is asked to advise, as well as any adviceit gives, until after the election processis completed. This is undesirable, asit will hamper the development of apublicly available set of rulings from thecommission that may guide other electoralparticipants. More preferable would bea requirement that any person seekingadvice inform the commission when theyintend to publish the advertising message,with the commission only under aconfidentiality obligation until that pointin time.Issues for the futureWhile the bill makes a number ofchanges of varying significance toNew Zealand’s legal control of campaignfinancing, it does not dramaticallyalter that regulatory framework’s basicstructure. For that reason, the bill can bedescribed as a conservatively reformistmeasure. However, while this regulatoryapproach may draw some of venomfrom the debate around the bill, it doesmean that a number of issues remainopen for future debate. In particular, thevexed issue of election advertising via thebroadcast media and the way in whichthe broadcast allocation rations accessamongst the political parties still requiresattention. The shift to digital broadcastingand the growth of the internet mean thatthe Broadcasting Act 1989 as a whole isbecoming outdated (Geddis, 2010a), whilethe specific measures designed to prevent‘unfair’ access to the airwaves create a proincumbentbias that cannot be justifiedin an MMP environment (Geddis, 2003).Consequently, it can be confidentlypredicted that the bill currently beforethe House will not be the final word oncampaign financing in New Zealand.1 In this article I will use the government’s currently preferredterm ‘parallel campaigner’ in place of the previously used‘third party’. Either term refers to the election-relatedactivities of individuals or groups interested in affecting theoutcome of, but not directly contesting, the vote themselves.2 In point of fact, the repeal was limited to those parts of thelegislation that imposed restrictions on parallel campaigneractivities. The new rules governing the disclosure ofdonations to political parties were retained in effect.3 This consultation process is outlined at http://www.justice.govt.nz/policy-and-consultation/electoral/electoral-financereform/.4 If parties or candidates agree to allow the spending, theymust account for it as part of their own election expenses.5 The proposed limits on political parties are thus $1.015million + NZ$20,300 per electorate seat contested (to amaximum of NZ$2.436 million), while individual candidateshave a $20,300 limit on election expenses.6 Peters v Clarkson [2007] NZAR 610.ReferencesCabinet (2009) ‘Minute of decision: campaign finance reform package’,CAB Min (09) 45/10Geddis, A. (2003) ‘Reforming New Zealand’s election broadcast regime’,Public Law Review, 14, pp.164-82Geddis, A. (2008) ‘New Zealand’s Electoral Finance Act 2007 and itsdiscontents’, Public Law Review, 19, pp.215-33Geddis, A. (2009) ‘The legal status of political parties under MMP’,New Zealand Journal of Public and International Law, 7 (1)Geddis, A. (2010a) ‘Broadcast media, political speech and the “RupertMurdoch problem”’, in K. Ewing, J. Tham and J. Rowbottom (eds),The Funding of Political Parties, London: Routledge (forthcoming)Geddis, A. (2010b) ‘Debating election finance reform’, in R. Miller (ed.),New Zealand Government and Politics, 5th edition, Auckland: OxfordUniversity PressMinistry of Justice (2009) ‘Electoral finance reform package’, adviceattached to CAB Min (09) 45/10Policy Quarterly – Volume 6, Issue 3 – August 2010 – Page 7


Jacob RowbottomFinancingPolitical Partiesin the United KingdomShortly after the 2010 general election in the UnitedKingdom, the new Conservative/Liberal Democrat coalitiongovernment promised to reform the way British politicalparties are financed and ‘to remove big money from politics’.Such promises are not new, and in the last decade there hasbeen no shortage of legislative action on party funding.The problem has been that the laws failed to address someof the biggest concerns about money in politics, and thatthe political actors found strategies to avoid the controls.Looking at the UK approach, this article aims to give anoverview of the controls in place, while highlighting someof the main difficulties experienced. While the UK lawshave some differences compared with those proposedin New Zealand (particularly in relation to third-partyactivity), there is much common ground and the Britishexperience may offer some lessons and show some of thepitfalls in regulating political finance.Jacob Rowbottom is a university lecturer andAssistant Director of the Centre for Public Law,King’s College, University of Cambridge.Election finance in the UK has beenregulated since the Victorian era. Thecontrols on election spending havetheir roots in the Corrupt and IllegalPractices Act 1883, which was the firststatute to impose a limit on the amountthat candidates can spend during theircampaigns. That law attempted to combatproblems of bribing and treating voters bycapping the amounts spent. While subjectto amendment, this legal framework forregulating election spending remainedin place during the 20th century. Thesecontrols limited only spending in relationto specific candidates and did not capspending to promote the election of apolitical party generally.As election campaigns becameincreasingly centralised and focused onthe national party, the shortcomings of theframework became obvious. An indirectcontrol on spending by political parties atthe national level was, however, achievedthrough the regulation of the broadcastmedia, which prohibited paid advertisingfor political messages. Denying politicalparties the option of spending money ontelevision advertisements, often a majorexpense in other jurisdictions, helped torestrain the cost of elections.The regulatory framework was subjectto a major overhaul in the PoliticalParties, Elections and Referendums Act2000 (PPERA). This legislation sought toaddress concerns about an ‘arms race’ ofeconomic resources between the majorpolitical parties and the dependence onlarge donors. The PPERA introducedspending limits for political parties inthe campaign period, which were addedPage 8 – Policy Quarterly – Volume 6, Issue 3 – August 2010


to the existing restrictions on candidatespending. It also brought about greatertransparency by requiring the disclosureof donations to political parties andregistered third parties above a certainthreshold. At the time of writing, theBritish framework for regulating politicalfinance includes:• limits on electoral expenditures duringthe campaign period by candidates,political parties and third parties;• disclosure of donations above aspecified amount to parties, candidatesand registered third parties;• a ban on all political advertising in thebroadcast media.Even with these measures in place,the PPERA has not ended the concernsabout party funding in the UK. The lastdecade has seen numerous scandals andcontroversies surrounding donations topolitical parties. Most notable has been the‘loans for peerages’ controversy, in which itwas alleged that donations and loans to theLabour Party had secured nominations forhonours. Other controversies have focusedon allegations that donations securedgovernment contracts and of donationsbeing channelled through intermediariesto avoid the transparency rules. Evenwhere the donors have been cleared ofany wrongdoing after investigation, suchepisodes have fuelled speculation and ledto further calls for reform of the partyfunding laws.The continuing controversy need notbe seen as a failure of existing laws, but asa sign of some success. Making the parties’sources of income more transparent willoften generate suspicion that a donorreceived a political favour in return for thecontribution. The legislative framework isalso complex and detailed, which meansthere are now more rules for politicians tofall foul of and consequently controversiesare more likely to arise. For example,media attention often focuses on whethera donation was properly disclosed tothe Electoral Commission or whether apermissible donor made the donation.Prior to the PPERA, politicians were underno legal duty to disclose donations andallegations about the sources of fundingrelied simply on political argument ratherthan on a specific legal provision. That thePPERA has resulted in a proliferation ofIn the 2010 generalelection, the maximumamount that could bespent by a politicalparty contesting all632 seats in Great Britainwas £18.96 million.party funding scandals is unsurprising,and may be a sign that it has raisedethical standards and expectations ratherthan reflecting a decline in politicians’integrity.If the New Zealand reform proposalsare enacted, the British experience suggeststhat the controversies and concerns willcontinue for as long as parties rely onprivate sources of funding. Reforms arelikely to be followed by calls for morereform. This is not, however, an argumentfor inaction. Public ignorance would haveavoided the scandals and speculation overthe last decade, but the democratic processwould have been worse off for it. Withthis background in mind, the remainderof this article will look at some of specificdifficulties that have arisen in the Britishsystem. To do this, the various types ofregulation will be discussed in turn.Spending limitsThe UK has two tiers of spending control.The first tier applies to spending bycandidates and the second tier to politicalparties. The spending limits for politicalparties are in place for the 12 months priorto a general election, and four monthsprior to elections for devolved assembliesand the European Parliament. In the caseof general elections this obviously createssome uncertainty, as the date of the electionis normally announced weeks prior to thepolling day. This currently gives the partyin government an advantage (given itspower to dissolve parliament), as it willbe able to plan its finances knowing theelection date in advance. By contrast,opposition parties lack this advanceknowledge and may therefore be caughtoff-guard by a snap election. An oppositionparty that mistakenly anticipates anelection being called on a particular daymay also deplete its resources campaigningfor an election that is not called. Thenew coalition government’s proposal forfixed-term parliaments in the UK should,however, address these concerns.The overall limit on party spendingvaries according to the number of seatsbeing contested. In the 2010 generalelection, the maximum amount that couldbe spent by a political party contesting all632 seats in Great Britain was £18.96 million.The cap has been subject to criticism fromsome quarters on the grounds that it is settoo high and still allows for an arms racebetween parties. Consequently, some havecalled for the maximum expenditure limitto be reduced to £15 million. Another lineof criticism is that the limits apply onlyin the year prior to an election. While a12-month regulated period seems lengthy,calls have been made to extend thecontrols and impose annual caps on partyspending outside election years. Thiswould curtail pre-election spending byparties which can arguably have a greaterlong-term impact on voters.The second tier of spending controls isimposed on the candidates, who are limitedto spending £7,150 plus an additional 7 or5 pence for each person on the electoralroll in the constituency. The limits oncandidate election expenses are applicablefor a shorter period of time, namely fromthe dissolution of parliament, leaving acampaign period of roughly four weeks.The dual tiers of regulation createdsome complexity and led to a number ofdifficulties (Rowbottom, 2010, pp.117-212).First, the line between candidate and partyspending is difficult to draw, as activitiesto support a party can benefit candidatesand vice versa. It can therefore be unclearunder which set of spending limits anitem of campaign expenditure should fall,and campaigners are advised to consultthe Electoral Commission for guidance.Secondly, the short duration of theregulated period for candidate spendingprovided an incentive for higher spendingto take place in key constituencies priorto the dissolution of parliament. ThePolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 9


Financing Political Parties in the United Kingdomsignificance of this trend is underlinedby research from political scientistshighlighting the importance of localactivity to electoral outcomes (Johnstonand Pattie, 2010). To address the concernthat large sums were being channelled tomarginal constituencies shortly before anelection was called, a new set of spendinglimits was enacted in 2009 to cap candidatespending in the months prior to thedissolution of parliament (the so-called‘long campaign’). 1Third-party spending limitsThe controls on political party spendingwould be undermined if third partiescould spend without restraint. To preventpolitical money being channelled to groupsother than the formal political parties,spending limits are applied to third-partycampaigns. Like the party spending limits,there is a two-tier system, with one set oflimits on campaigning in support of theparty and another on campaigning for aparticular candidate.Third parties that wish to spend over£10,000 in England or over £5,000 inScotland, Wales or Northern Ireland on‘election material’ during a regulatedcampaign period must register with theElectoral Commission. Spending byregistered third parties in the 12 monthsbefore a general election is cappedat £793,500 in England, £108,000 forScotland, £60,000 in Wales and £27,000in Northern Ireland. Two or more thirdparties working together in a campaigncannot aggregate their spending limits,and the spending by all the third partieson a co-ordinated campaign would counttowards the expenditure limit of each.For the third-party controls, ‘electionmaterial’ is defined as material ‘whichcan reasonably be regarded as intended’to ‘promote or procure the electoralsuccess’ or ‘enhance the standing’ in anelection of a political party, or of partiesand candidates who ‘advocate (or donot advocate) particular policies’. Thepromotion of a party’s electoral successor standing also includes ‘prejudicing theelectoral prospects at the election of otherparties or candidates’ or ‘prejudicing thestanding with the electorate of otherparties or candidates’ (PPERA, s.85). Asa result, the provision covers negativecampaigning by candidates. To count as‘election material’, a publication neednot expressly refer to a political party orcandidate (s.85(4)). Guidance publishedby the Electoral Commission statesthat material campaigning on a policywhich happens to be associated with onepolitical party counts as ‘election material’,as does material ‘publicising the names ofcandidates who have a particular view onan issue such as hunting or education’(Electoral Commission, 2010, para 2.5).Consequently, there is no ‘magic words’requirement to distinguish electoralexpression from ordinary politicalspeech. The controls do not apply tocommunications to members within anWhile it may have beenthought that caps onpolitical party spendingwould encourage moresums to be channelled toindependent bodies, theexperience so far showsthat this has not been asignificant problem.organisation, ‘provided that the materialrelates to an issue within the aims orobjectives of the organisation’ (ElectoralCommission, 2010, para 3.8). A unionsending material to its members assessinga party’s industrial relations policy wouldnot therefore fall within the controls.In relation to expenditures in supportof a particular candidate, third parties canspend only £500 in the formal campaignperiod (beginning with the dissolution ofparliament) (Representation of the PeopleAct 1983, s.75). An earlier version of thelaw had limited third-party expendituresto £5, but was found to violate the rightto freedom of expression under article 10of the European Convention on HumanRights in 1999. 2In addition to the spending controls,registered third parties (i.e. those goingover the £5,000 or £10,000 spendingthreshold) have to disclose donationsreceived of over £7,500 from a singlesource that are made to pay for the electionmaterial. Donations to a third party thatgo into general funds and are not to beused for campaigning do not have to bedisclosed. One question is how easilycan that line be drawn? The third partiesdo not have to make donations out of asegregated political fund, so it may notalways be clear which donations have beengiven to cover the cost of election material.As of June 2010, only 21 donations to thirdparties have been disclosed to the ElectoralCommission since 2001. The transparencyregime therefore sheds a small amount oflight on who bankrolls the third parties.Currently, there are only 32 registeredthird parties, consisting largely of pressuregroups and trade unions. At the 2005general election, 25 registered thirdparties submitted returns for electoralexpenditures, of which two spent over£100,000 (the trade union Unison spent£682,115 and the Rural Action Group spent£550,370). The total amount spent by allregistered third parties in 2005 totalled £1.7million. While it may have been thoughtthat caps on political party spending wouldencourage more sums to be channelled toindependent bodies, the experience so farshows that this has not been a significantproblem. One explanation may be thatthe caps on party spending are sufficientlygenerous that such strategies are notnecessary. Alternatively, it may be thatmuch political spending by third partiesdoes not count as ‘election material’ andthereby falls outside the controls.There is much independent activitythat appears to take place outside thethird-party controls, three examplesof which will be given here. The first ispolitical campaigning by newspapers andbroadcasters, which are exempt from thecontrols. While broadcasters are subject tolegal regulation requiring news and politicsto be covered with ‘due impartiality’,newspapers are free to engage in partisanadvocacy. In Britain there is a long historyPage 10 – Policy Quarterly – Volume 6, Issue 3 – August 2010


of the national press having partisanattachments and seeking to influenceelections. The press thereby occupies aprivileged position, which allows it to useits resources to influence an election in away that would not be permitted of anyother organisation.The second example is policy work bythink tanks, which can play an influentialrole in election campaigns and in politicaldebate more generally. The think tanksare independent entities, but clearlyhave political effects by promotingparticular issues and producing researchthat may support a party’s stance andlend it some credibility from seeminglyindependent experts. For example, theInstitute of Public Policy Research is aregistered charity, but is often seen as atesting ground for Labour Party ideas.The Taxpayers’ Alliance, a charity whichcampaigns for lower public spendingand taxation, has become increasinglyinfluential in Britain and receives muchmedia attention. While maintaining itsindependence, it is often associated in thepress with the Conservative Party.Although think tanks are not formallyexempt from electoral finance controls,much of what they produce will not countas ‘election material’ and thereby fallsoutside the ambit of regulation. In suchcircumstances the think tank does nothave to disclose donations received. Thismeans that think tanks can provide anideal location for political funds where thedonor does not want his or her identityto be disclosed. In one recent lobbyingscandal, a former minister advised anundercover journalist posing as a lobbyistto donate money to a think tank as away of securing access to ministers, butwithout attracting public attention.A third example is political activityon the internet, which is an increasinglyimportant way that third parties caninfluence an election campaign. Whileoutside the formal party organisation,many political blogs and websiteshave a party allegiance. Most notably,ConservativesHome is a website aiming toprovide a forum for grassroots members,founded by Tim Montgomery, a formerConservative Party aide, and in 2009 LordAshcroft (a leading party donor) boughta majority stake in the site. LabourList isa forum for Labour Party activists whichis funded through donations, sponsorshipand advertisements. Similarly, LeftFoot Forward provides a forum for‘progressives’. According to the website itis non-partisan, but the title of the blogsuggests where its loyalties lie and it waslaunched with help from the Labour Partymembers’ organisation Progress and fromsome Labour Party donors.In addition to this, many leadingindividual bloggers have links withthe political parties. The websites arenot, however, covered by the sameexemption that applies to broadcastersAt the time of the PPERA’senactment it was thoughta donation cap would betoo great an interferencewith the freedom of partiesor donors, and that thespending caps wouldcurtail the demand formoney in any event.and newspapers. Consequently, some ofthe spending by these websites that areengaged in electoral campaigning couldpotentially come within the third-partyspending limits. It is not clear whetherthe various online campaigners will spendenough on election material to requireregistration. However, those larger sitesthat employ one or more people full timecould well meet the threshold.DonationsDonations above a certain thresholdto the political parties, registered thirdparties and other regulated bodies have tobe disclosed to the Electoral Commission(PPERA, s.62). 3 For donations to acentral political party, the threshold is£7,500. Donations must be made bya ‘permissible donor’, which includescompanies, unincorporated associationsand trade unions, as well as individualson the electoral register (s.54). The 2000Act provides that where there is an agencyrelationship, in which one person receivesmoney to be passed on as a donation tothe party, the identity of the originalsource of funds must be disclosed. Theregister of donors to political partiesand third parties can be accessed on theElectoral Commission website and aimsto promote transparency by revealingthe sources of income. By making suchinformation public, the hope is that dealsbetween donors and politicians will bediscouraged, given the threat of adversepublicity.The regulation of donations has,however, faced a number of difficultieswhere devices can be used to evadethe spirit if not the letter of the law.First, and most notably, in the ‘cashfor honours’ scandal individuals gavefunds to political parties as loans, not asdonations. Under the original terms of thePPERA, commercial loans did not haveto be disclosed. Much debate at the timeconcerned whether the loans given by theindividuals were really on commercialterms. However, the law has since beenamended so that commercial loans alsohave to be disclosed (PPERA, part IVA).A second area of controversy concernsdonations given by institutions. Companiesthat carry on business in the UKand unincorporated associations whoseactivities are based in the UK can donatemoney to a political party (PPERA, s.54). 4In the absence of an agency agreement, thecompany or unincorporated associationis recorded as the donor. This means thatwhile an individual who is not on theelectoral register cannot make a donation,a UK-based company owned by thatindividual can give money. Institutionscan also undermine the transparencyrequirements, as it may not be known whoor which interests are behind the companyor association making the donation. Thisproblem was to some extent addressedby a requirement that an unincorporatedassociation disclose donations it receivesof over £7,500. 5 However, concerns abouttransparency still arise in relation toPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 11


Financing Political Parties in the United Kingdomcompanies, which do not have to disclosetheir sources of income.The UK does not impose a limit onthe amounts that can be donated to apolitical party. At the time of the PPERA’senactment it was thought a donation capwould be too great an interference with thefreedom of parties or donors, and that thespending caps would curtail the demandfor money in any event. This relaxedapproach to donations did not last andthe absence of a donation limit has beenthe cause of much controversy in the lastdecade. Individuals have made a numberof very large donations, some in excessof £1 million. Institutions have also madelarge donations. For example, in 2005 thecompany 5th Avenue Partners gave £2.4million to the Liberal Democrats; between2003 and 2009 Lord Ashcroft’s companyBearwood Corporate Services donatedover £5 million to the Conservative Party;and between 2007 and 2009 the tradeunion Unite donated over £11 million tothe Labour Party.The major political parties arecommitted to some reform of donations,at least to the extent of consideringwhether a cap should be imposed. Yetif such a cap is introduced there will bedifficult questions about the level at whichit should be set, how it should apply toinstitutions, and how the techniquesof evasion can be avoided. These issuesof detail and design are likely to be themain barriers to an agreement on reformamong the parties and have been the mainsticking points in previous negotiations.BroadcastingAll broadcasters, both publicly andprivately owned, are required to coverpolitics and current affairs with ‘dueimpartiality’ (Geddis, 2010). A stricterset of rules applies in the context of anelection, where the broadcasters have togo to greater lengths to treat parties andcandidates fairly. Political advertising inthe broadcast media is prohibited. The banis broader than its New Zealand equivalentand prohibits advertisements ‘directedtowards a political end’, and by anybody‘whose objects are wholly or mainly of apolitical nature’ (Communications Act2003, s.321). Consequently, it applies toall political groups and not just partiesand candidates, and it applies to politicalmessages generally, as opposed to justelectoral messages.The ban has come under criticism froma number of academic commentators, inparticular in the light of two rulings fromthe European Court of Human Rightswhich found similar bans in Switzerlandand Norway to be in violation of the rightto freedom of expression under article 10of the European Convention. 6 However, in2008 the House of Lords declined to declarethe ban incompatible with the EuropeanConvention. 7 Unlike the StrasbourgWhile regulations are anecessary and importantpart of a fair process, onelesson from the UK is thatthere are limits to whatsuch legal controls canachieve.Court, the House of Lords found a ban tobe a proportionate measure to protect theintegrity of the electoral process. Whileupholding the legislation, two of the lordsexpressed a willingness to consider futurechallenges to the application of the ban,for example where it has a discriminatoryeffect. This might arguably arise wherethe ban prevents a political group, suchas an environmental organisation, fromadvertising in response to a commercialadvertisement by an oil company.Aside from the ban, political parties areentitled to free time on the public servicebroadcasters. In a general election, atleast one broadcast is allocated to partiescontesting one sixth or more of the seatsup for election. While this allows partieswith no MPs to access the mass media,the larger political parties are normallyallocated more slots on television andthere have been (albeit unsuccessful) legalcomplaints that the smaller parties aretreated unfairly.The televised debates between theleaders of the three main political parties,held for the first time in 2010, added a newdimension to the issue. The debates provedto be the most high profile campaign‘event’ and played a central role in givingthe Liberal Democrats greater exposure.Unsurprisingly, the smaller parties arguedthat the broadcasters’ inclusion of theleaders of only the Labour, Conservativeand Liberal Democrat parties was a breachof the impartiality obligations. However,when faced with that argument, a Scottishcourt declined to issue an injunctionrestraining the broadcast of the thirdleaders’ debate a week before the election. 8This type of issue is one faced whenevera subsidy, in this case media access, is tobe allocated among political speakersand raises difficult questions about theappropriate threshold for inclusion.Parliamentary fundingThe central issue with parliamentaryfunding in the last year has been theexpenses scandal, in which the DailyTelegraph published leaked details ofthe expenses claimed by MPs. Followingthis, the system for allowances has beenreformed and a number of MPs have beenfound to be in breach of the rules andhave made repayments. A small numberhave also faced criminal prosecution.Possibly the biggest effect has been thepolitical backlash, with a large number ofMPs standing down at the 2010 election.While the expenses scandal focused onallegations that MPs had gained personallythrough the expenses, there have also beenconcerns about parliamentary funds beingchannelled to political parties.One way parliamentary funds can endup in a party treasury is by the allowance foran MP’s office being used to rent space fromthe party headquarters in the constituency.In November 2009, the Committee onStandards in Public Life concluded thatsuch a practice should not be prohibited, asthere was little evidence of abuse. Instead,such arrangements are now subject to anaudit by a qualified independent assessorto ensure the market rate for the premisesis not exceeded. 10 While this ensures thatpublic funds are not misused, the practicePage 12 – Policy Quarterly – Volume 6, Issue 3 – August 2010


does give the party with a sitting MP aregular source of income.A second route is through theuse of parliamentary allowances forcommunications to voters. MPs haveallowances for informing constituents andreplying to messages. The rules providethat such allowances are not to be usedfor partisan purposes. For example, partylogos and slogans should not be used inmaterial funded through the allowances.However, the line between an MPinforming constituents of his or her workand the use of such resources to persuadeor promote his or her re-election is adifficult one to draw. Political referenceswill sometimes be necessary to explain aparticular stance to a constituent, and eventhose communications that merely raisethe MP’s profile potentially contribute toa re-election campaign. 11Third, there is a practice known as‘tithing’, in which MPs and councillorsare asked to contribute a percentage oftheir salary to their political party. Thisis not an improper use of public funds,as it is merely a donation coming fromthe representative’s salary (albeit that itis demanded by the party as a conditionof membership). However, like the useof communications allowances, thisapproach means that parties that arealready in power attract further resources,which help them stay in power. Thedanger is that such practices can reinforcethe status quo.These issues are connected with amuch broader issue about the advantagesenjoyed by incumbents. There are manyrules stating that government property andresources should not be used for ‘politicalpurposes’, yet it is difficult to define justwhat these are. For example, inevitablysome partisan points will be made at aministerial press conference. Similarly,the use of civil servants in developinggovernment policies will provide anadvantage when defending those policiesin the electoral arena. It is likely thatincumbents will also receive greater mediaattention in the coverage of politicalevents. The benefits of being in office arethus very hard to regulate through anystrict rules. While it is important to policethe system to avoid clear abuses, a fairprocess may also require that oppositionparties and those not elected receive somesupport to offset some of the advantagesof incumbency. 12ConclusionThe controls on political donations andparty expenditures in Britain have not yetbeen in force for a decade, but have beensubject to regular revision. Part of thisrelates to the complexity and technicalnature of election regulations. Unforeseenproblems inevitably emerge once a newframework is in place and loopholesneed to be closed. The complexity is nothelped by the new framework havingbeen superimposed on the longstandingcandidate expenditure limits that wereintroduced in the Victorian era. However,the calls for reform are not just due todifficulties in design, but are also basedon policy considerations. These includedemands to cap donations to parties andto extend the spending limits to cap partyexpenditures on an annual basis. Thesedemands have largely been fuelled bythe numerous scandals, which have oftencome to light as a result of the increasedtransparency in the UK’s politicalfunding.While regulations are a necessaryand important part of a fair process,one lesson from the UK is that there arelimits to what such legal controls canachieve. The law is targeted at electoralactivities, which are just one part ofpolitical process. Even with these rules inplace, considerable power still lies withthose who control the infrastructure ofpolitical communications, such as themass media and the think tanks, whichprovide a channel for economic resourcesto influence politics outside the legalregulations. All the main political partiespromised reform in their 2010 electionmanifestos and the new government mayhave the political capital to push througha new set of reforms, just as Labour didin its early years. Yet even if it does, it isunlikely that the issue will go away.1 Spending by individual candidates in the five months priorto the dissolution of parliament is now limited to £25,000,with an additional sum for each person on the electoral rollin the constituency. The long campaign limits come intoeffect after the parliament has been sitting for four years andseven months. If an election is called much earlier, then thepre-campaign limits do not apply.2 Bowman v UK (1998), 26 EHRR 1. See also R v Holding[2005], EWCA Crim 3185.3 This includes a series of smaller donations given over thesame year, the aggregate of which exceeds the threshold.4 Companies must be registered under the Companies Act2006 and incorporated in the EU.5 If the association is to make donations of over £25,000 in ayear.6 VgT Verein gegen Tierfabriken v Switzerland (2002), 34EHRR 4 and TV Vest As & Rogaland Pensjonistparti vNorway (2008), 48 EHRR 120.7 R (on the application of Animal Defenders International)v Secretary of State for Culture, Media and Sport [2008]UKHL 15.8 Scottish National Party [2010], CSOH 56. However,compare Houston v BBC [1995], SC 433.9 See the 12th report of the Committee on Standards inPublic Life, MPs’ Expenses and Allowances (2009, Cm7724) at [7.14-15], finding that this issue requires furtherinvestigation before any further steps are taken.10 Independent Parliamentary Standards Authority, The MPs’Expenses Scheme (2010, HC 501) at [9.7].11 For discussion of the difficulties, see House of CommonsStandards and Privileges Committee, Use of Pre-paidEnvelopes and Official Stationery (HC 1211 2008).12 For example, opposition parties in parliament receive Shortand Cranborne money, which recognises that some publicfunds should be allocated to offset some of the advantages ofincumbency.ReferencesElectoral Commission (2010) Non-Party Campaigners: guidance onexpenditure and donations for elections in 2010, London: ElectoralCommissionGeddis, A. (2010) ‘Broadcast media, political speech and the “RupertMurdoch problem”’, in K. Ewing, J. Tham and J. Rowbottom (eds),The Funding of Political Parties, London: Routledge (forthcoming)Johnston, R. and C. Pattie (2010) ‘Local parties, local money and localcampaigns: regulations issues’, in K. Ewing, J. Rowbottom and J.Tham (eds), The Funding of Political Parties, London: Routledge(forthcoming)Rowbottom, J. (2010) Democracy Distorted, Cambridge: CambridgeUniversity PressPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 13


Colin FeasbyContemporary Issuesin Canadian PoliticalFinanceRegulationIntroductionCanada shares with New Zealand a heritage of Britishconstitutional traditions and the Westminster form ofparliamentary government. These common origins makecomparative study of the two countries’ experiencesregulating political finance inviting. Canada and NewZealand, however, differ in important ways which have hadsignificant impacts on the regulation of political finance. Thisarticle outlines the Canadian political finance regime andidentifies some contemporary issues that may be of interestto observers from New Zealand.The article begins with a brief reviewof the Canadian context, including theelectoral system and political financeregulation. Part two concerns the Canadianconstitution and its impact on politicalfinance regulation. The development ofpolitical finance jurisprudence in Canadathrough disputes involving third-partyspending limits and the differentialtreatment of small political parties arediscussed. The third section considersthe impact of amendments to the CanadaElections Act 2000 (CEA) in 2003 and2006 that introduced contribution limitsand quarterly allowances for politicalparties. Lastly the article discusses waysin which political spending may escaperegulation in Canada.Colin Feasby is a partner in the Calgary office of Osler, Hoskin & Harcourt LLP. He has writtenextensively on issues of campaign finance regulation in Canada.The Canadian context 1The Canadian electoral systemCanada is a federation comprised often provinces and three territories.The federal parliament is a bicamerallegislature comprised of an elected Houseof Commons and an appointed Senate.The provincial and territorial assembliesare unicameral and comprise electedrepresentatives. All elections to the federalHouse of Commons and provinciallegislatures follow the traditionalWestminster form: the candidate receivingthe most votes in each electoral district iselected.Canada is a large country with diversegeography, economy and culture. Themost obvious example of this diversity isthe majority French-speaking province ofQuebec. Throughout much of Canada’shistory, regional and linguistic-culturaldifferences were brokered through twolarge centrist political parties, the LiberalParty and the Progressive ConservativeParty. During the second half of the20th century a smaller, left-leaning partyaffiliated with organised labour, the NewDemocratic Party (NDP), also consistentlyelected a small number of representativesto the House of Commons.Canada’s longstanding party systembroke down in the late 1980s and early1990s. The breakdown translated into afractured House of Commons followingthe 1993 federal election. The BlocQuébécois (BQ), a separatist party, tookmost of the seats in Quebec in the 1993Page 14 – Policy Quarterly – Volume 6, Issue 3 – August 2010


federal election and formed the officialopposition. The Reform Party, a populistand ideologically conservative partybased in Western Canada, came third inthe election. The NDP finished fourthand the formerly governing ProgressiveConservative Party was reduced to asmall rump in fifth place. This fivepartysystem has now become a fourpartysystem as a result of the mergerof the Reform Party and the ProgressiveConservative Party. Once again there aretwo large parties: the Liberal Party andthe Conservative Party. However, in theperiod since 2004 neither has been ableto form a majority government. TheLiberals and then the Conservatives haveruled in minority governments withoutany formal coalition with the NDP or theBQ. The result has been frequent electionsand more aggressive partisan tactics thanCanadians have been accustomed to overthe past century.Framework of political finance regulationThe CEA political finance regime isbased on election expense controls anddisclosure. However, political party andcandidate expenses are regulated onlyduring an election period. An ‘electionperiod’ is defined by the CEA as being‘the period beginning with the issue ofthe writ and ending on polling day’. Anexpense includes ‘any cost incurred, ornon-monetary contribution received, bya registered party or candidate ... used todirectly promote or oppose a registeredparty, its leader, or candidate duringan election’. Outside an election periodthere are no limits on the expendituresof political parties and candidates. Theelection expense limits for politicalparties and candidates are determinedby a statutory formula that is adjustedannually for inflation. Candidates andpolitical parties must file financial returnswith the chief electoral officer followingan election.Contributions to political parties,candidates and electoral districtassociations have been regulated byway of mandatory disclosure since1974. Contributions are defined by theCEA broadly to include monetary andnon-monetary contributions and also acandidate’s own funds used for electionexpenses. The regulation of contributionscaptures money transferred from theprivate domain to the political domain.A transfer of money between entitieswithin the political domain – candidates,electoral district associations andregistered political parties – is not a‘contribution’. Contributions may not bemade indirectly to conceal the identity ofthe contributor. The name and addressof all individuals making contributionsof over $200 must be disclosed by thecandidate or political party receiving thecontribution.The existing contribution disclosureapproach was reinforced by theintroduction of contribution limitsin amendments to the CEA in 2003. 2Contributions by corporations andtrade unions were prohibited, subjectto a limited exception for contributionsof up to $1,000 to candidates andconstituency associations. Individualcontributions were limited to $5,000adjusted annually for inflation to ‘eachregistered political party and its registeredassociations, nomination contestants,and candidates’. Further amendments tothe CEA contained in the 2006 FederalAccountability Act reduced individualcontribution limits to $1,000 (adjustedannually for inflation) and extinguishedthe right of corporations and trade unionsto contribute even $1,000 to candidatesand constituency associations. 3There are three forms of publicfunding in the Canadian political financeregime: tax deductions for contributors;reimbursement of election expenses forcandidates and political parties; andpolitical party allowances. 4 A candidatewho receives 10% of the vote is entitledto be reimbursed 60% of his or herelection expenses. A political party whichreceives 2% of the national popular voteor at least 5% of the votes in the electoraldistricts in which it endorsed candidatesis entitled to be reimbursed 50% of itselection expenses. Political parties whichqualify for reimbursement of electionexpenses also qualify for a quarterlyallowance determined by the number ofvotes cast for the party in the last generalelection.The Canadian constitution andpolitical financeCharter reviewPolitical finance regulation exists inthe shadow of the Canadian Charter ofRights and Freedoms. 5 The charter is aconstitutional bill of rights which sets outThere are three forms of public funding in the Canadianpolitical finance regime: tax deductions for contributors;reimbursement of election expenses for candidates andpolitical parties; and political party allowances.rights that limit the power of the state.Laws that contravene the charter maybe declared to be invalid and of no forceor effect. As a result, courts play a handin shaping political finance regulationthrough case law. The implicit threat oflitigation also shapes choices made byparliament in regulating political finance.Political finance regulation engages threemain aspects of the charter: freedom ofexpression (s.2(b)), the right to vote (s.3)and the right to equality (s.15).The first element of charter analysis isconsideration of whether the challengedlegislative provision violates a protectedright. The plaintiff bears the burden ofestablishing that a charter right has beeninfringed. The charter, unlike the US Billof Rights, contains an explicit limitingprinciple. Section 1 of the charter providesthat rights guaranteed are subject ‘tosuch reasonable limits prescribed bylaw as can be demonstrably justified ina free and democratic society’. 6 Once aPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 15


Contemporary Issues in Canadian Political Finance Regulationplaintiff proves the violation of a right,the state bears the burden of provingthat the limit on the right is reasonableand justified. The justification test iscomprised of two main aspects. First,the court must determine whether thelegislation addresses a pressing andsubstantial objective. Second, the courtmust determine whether legislativemeans are proportional to the objective.The second part of the test considers:(1) whether the means and objectiveare rationally connected; (2) whetherthe means minimally impair the rightin question; and (3) the salutary anddeleterious effects of the legislation. 7Most charter challenges to politicalfinance regulation have taken place at themargins of the political finance regime.There have been repeated challengesto the regulation of third-party (or‘parallel campaigner’) spending and tothe preferential treatment of politicalparties and candidates in respect ofpublic funding. The core elements ofthe political finance regime that applyto the major political parties have notbeen challenged. Indeed, the courts haveproceeded on the implicit assumptionthat financial disclosure and spendinglimits on candidates and political partiesare constitutional.Third partiesThird-party expenditures were firstregulated in 1974 and have been a sourceof controversy ever since. After beingdeclared unconstitutional in the mid-1990s, third-party spending limits wereadopted again in amendments to theCEA in 2000. The third-party spendinglimits were promptly challenged byStephen Harper, now Canada’s primeminister, who was the leader of theconservative interest group the NationalCitizens’ Coalition (Geddis, 2004; Feasby,2005). Harper asserted that third-partyspending limits violated section 2(b) ofthe charter by unreasonably infringingupon freedom of expression.The third-party spending limitsapplied to communications whichWhen third-party spending limits were adopted in2000, third parties were also required to file a returnwith Elections Canada disclosing details of theircontributions and expenditures.‘promote or oppose the election of oneor more candidates in a given electoraldistrict, including by (a) naming them;(b) showing their likeness; (c) identifyingthem by their respective politicalaffiliations; or (d) taking a position onan issue with which they are particularlyassociated’. Harper contended that thelimits were either vague or overly broadand, as a result, unduly infringed uponfreedom of expression. He further assertedthat there was no evidence to supportthe government’s claim that third-partyspending was a threat to the integrity ofelections. The financial limits, Harperalso contended, were unreasonably lowand did not permit effective campaigning.The spending limits permit third partiesto spend $3,000 per electoral district to amaximum of $150,000 nationally.The Supreme Court of Canadaaccepted that the purpose of third-partyspending limits was to promote equalityand that this purpose was pressing andsubstantial. The court dismissed the claimthat there was no evidence to support theexistence of a pressing and substantialobjective, holding that parliament hadacted based on a reasoned apprehensionof harm and that a relaxed evidentialstandard applied given the importanceof the objective. It went on to rejectHarper’s argument that the third-partylimits were vague or overly broad. Thecourt acknowledged the breadth of therestrictions, but found that such breadthwas justifiable in the circumstances.The court split over whether thelimits in question were too low. Themajority deferred to parliament andaccepted that the limits allowed for amodest informational campaign. Theminority concluded that ‘the limitsimposed on citizens amount to a virtualban on their participation in politicaldebate during the election period’. 8 Thedisagreement between the minority andthe majority stemmed, in part, fromthe poor evidential record before thecourt. A challenge to British Columbia’srestrictions on third-party spending,which are nearly identical to the federallimits, has been heard by the BC SupremeCourt and is pending before the BC CourtTable 1: Third-party expenditures in the 2000, 2004, 2006 and 2008 generalelections 10Number of registered third partiesExpenditure levels 2000 2004 2006 2008No return 0 4 7 4$0.00 6 12 7 3$0.01–$4,999.99 30 31 44 32$5,000.00–$9,999.99 8 4 2 4$10,000.00–$24,999.99 2 4 5 7$25,000.00–$49,999.99 1 3 8 5$50,000.00–$99,999.99 1 4 5 4$100,000.00 and over 2 1 2 5Total number 50 63 80 64Total expenditures $573,854.20 $720,227.93 $1,067,680.75 $1,430,579.14Average expenditure $11,477.08 $12,207.25 $14,625.76 $23,842.99Page 16 – Policy Quarterly – Volume 6, Issue 3 – August 2010


of Appeal. 9 This case offers the possibilityof revisiting the debate over the type ofcampaigns that can be conducted withinthe third-party limits with the benefit ofa more complete evidential record whichincludes expert testimony.When third-party spending limitswere adopted in 2000, third partieswere also required to file a return withElections Canada disclosing details oftheir contributions and expenditures. Anyfuture litigation over third-party spendinglimits will benefit from the data that hasbeen gathered by Elections Canada fromthird-party election expense returns.Table 1 indicates that third-party spendingis increasing; however, it is also clear thatthird-party spending remains negligiblewhen compared to political party andcandidate spending. For example, theConservative Party together with itscandidates spent $37,235,930 in the 2006federal election. Furthermore, few thirdparties spend the maximum allowedunder the limits, which suggests that therewould be little risk in raising them.Small political partiesThe Canadian political finance systememploys a series of thresholds, outlinedabove, to ensure that public funding flowsonly to ‘serious’ candidates and politicalparties. Prior to 2003 political parties wererequired to field 50 candidates to becomea ‘registered political party’ with ElectionsCanada. Registered political partiesreceive a number of benefits, includingcandidate–political party affiliationidentified on the ballot and the right toissue tax receipts to donors. The abilityto issue tax receipts enhances politicalparties’ fundraising capacity, as donors aremore likely to contribute if they receive abenefit in return in the form of reducedtaxes.Miguel Figueroa, leader of theCanadian Communist Party, challengedthe 50-candidate threshold on thegrounds that it violated the right to voteand to run for office protected by section3 of the charter. 11 Figueroa contendedthat the threshold created a systemicbias against small political parties andin favour of large political parties. Thesystemic bias prevented small partiesfrom communicating their messages tovoters and playing a meaningful role inthe electoral process. The governmentresponse was that the 50-candidatethreshold and the systemic bias in favourof large parties was justified becauseregulations should enhance the abilityto communicate of those parties whichhave a reasonable chance of forming thegovernment.The majority of the Supreme Courtof Canada disagreed. The court held thatPrior to 2003 political parties were required to field 50candidates to become a ‘registered political party’ withElections Canada.‘participation in the electoral processhas an intrinsic value independent ofits impact upon the actual outcome ofelections’. 12 Justice Iacobucci went onto observe that ‘the ability of a politicalparty to make a valuable contributionto the electoral process is not dependenton its capacity to offer the electoratea genuine “government option”’. 13 Thecourt concluded that ‘legislation thatexacerbates a pre-existing disparity in thecapacity of the various political parties tocommunicate their positions to the generalpublic is inconsistent with s.3’. 14 As a result,the court held that the 50-candidatethreshold was unconstitutional.Case law following Figueroa has beendivided. The Ontario Court of Appealheard a challenge to the thresholds politicalparties must meet to qualify for electionexpense reimbursement and allowances. 15The small political parties that broughtthe challenge took the position that theSupreme Court’s decision in Figueroameant that thresholds to qualify forpublic funding must be unconstitutional.The Ontario Court of Appeal agreedthat the thresholds violated section 3 ofthe charter, but held that infringementwas justified because thresholds wererequired to maintain public confidencein the electoral process. At about thesame time, the Ontario Superior Court ofJustice reached a contrary result, findinga threshold for the refund of candidatedeposits in Ontario’s Election Act to beunconstitutional. 16 The court appliedFigueroa and concluded that the benefitof the threshold was ‘overcome by thedeleterious effects of diminishing thecapacity of [small] political parties topresent their ideas and opinions’. 17 TheSupreme Court of Canada may have toonce again consider the rights of smallpolitical parties in order to give clearguidance to the lower courts.Public funding and contribution limitsPrior to the 1993 breakdown of theduopoly that controlled Canadian politicsfor most of the 20th century, the LiberalParty and Progressive Conservative Partyraised similar amounts of political funds.Both parties were dependent on corporatedonations. The NDP, by contrast, receivedfewer corporate contributions and insteadrelied upon financial support from tradeunions. The financial equilibrium betweenthe Liberal Party and the ProgressiveConservative Party, together with thesimilar sources of funding, meant thatthere was little partisan advantage to begained from changing the fundraisingrules.The Liberal Party dominatedfundraising in the fragmented partysystem that lasted from 1993 to 2000. TheLiberal Party was particularly successful atraising corporate funds, as it was the onlypolitical party that could plausibly form thegovernment. During the 1993–2000 periodthe populist and ideologically conservativeReform Party established an effectivegrassroots fundraising system. After 2000,the Reform Party’s heirs, the CanadianAlliance, and, later, the Conservative Partybuilt upon this fundraising foundation byadopting direct and targeted advertisingand other strategies imported from theUnited States to maximise the number ofcontributors and contributions.Contribution limits were adopted byPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 17


Contemporary Issues in Canadian Political Finance Regulationthe governing Liberal Party in 2003 aspart of an effort to rehabilitate the party’simage following the ‘sponsorship scandal’,in which advertising agencies associatedwith the Liberal Party were used asconduits for government sponsorshipof events in Quebec. Even though therewas no proof that any of the sponsorshipfunds returned to the Liberal Partythrough political contributions, politicalfinance reform including contributionswas expedient in the circumstances.The contribution limits had greatereffect on the Liberal Party than on theConservative Party (Flanagan and Coletto,2010). The effects of contribution limitswere not lost on the Conservative Partywhen it took power after the election in2006. One of the reforms it implementedin its Federal Accountability Act 2006 wasa reduction in individual contributionlimits to $1,000 and a prohibition oncorporate and union contributions.Table 2 shows the persistent fundraisingadvantage enjoyed by the ConservativeParty since contribution limits wentinto effect at the beginning of 2004. TheLiberal Party has identified the need todevelop a more grassroots approach tofundraising, but has been unable to matchthe success of the Conservative Party. Asthe contribution limit system enters itsTable 2: Contributions to major political parties 2004–09seventh year, the Conservative Party retainsa comfortable fundraising advantage overthe Liberal Party and, indeed, over all ofthe opposition parties combined.Some prominent Liberals, includingLiberal Party president Stephen LeDrew,foresaw that contribution limits woulddamage the Liberal Party’s dominantfinancial position. LeDrew decried thereforms as ‘dumber than a bag of hammers’(Gray, 2006). To mitigate the anticipatedimpact of the contribution limits, publicfunding of political parties throughallowances paid quarterly was introduced.Funding is determined according to a pervote rate based on votes received by eachpolitical party in the prior election. Theper vote funding amount was set at a levelthat was intended to replace the fundsthat would be lost by political parties byreason of the contribution limits.The allowances mitigated the lossof corporate contributions and largecontributions from individuals lost by theLiberal Party. For the Conservative Party,which lost comparatively little as a resultof the contribution limits, the allowanceswere mostly additional funding ratherthan replacement funding. Success inprivate fundraising together with publicfunding has resulted in the ConservativeParty having far greater financial resourcesParty 2004 2005 2006 2007 2008 2009* 18BQ $858,746 $734,729 $529,513 $429,971 $713,085 $621,126Cons. $10,949,559 $17,847,451 $18,641,306 $16,983,630 $21,179,483 $17,707,846Lib. $4,719,388 $8,344,162 $9,063,126.36 $4,471,903 $5,811,492 $9,564,677NDP $5,194,170 $5,120,827 $3,972,762.57 $3,959,451 $5,412,940 $4,035,492*2009 data based on quarterly returns, as not all annual returns have been posted by Elections Canada.Table 3: Annual allowances paid to major political parties 2004–09Party 2004 2005 2006 2007 2008 2009BQ $2,733,868 $3,064,864 $2,950,984 $2,953,218 $3,017,092 $2,742,215Con. $7,913,512 $7,331,172 $9,388,357 $10,218,123 $10,439,132 $10,351,071Lib. $9,141,408 $9,087,333 $8,572,965 $8,517,049 $8,701,263 $7,219,593NDP $2,883,919 $3,879,817 $4,611,140 $4,923,795 $5,030,293 $4,998,192Table 4: Political party spending limits in recent electionsParty 2004 2006 2008BQ $4,591,747.38 $4,676,676.52 $5,066,811.35Con. $17,593,925.32 $18,278,278.64 $19,999,230.62Lib. $17,593,925.32 $18,278,278.64 $20,014,302.76NDP $17,593,925.32 $18,278,278.64 $20,063,430.10than any political party had prior to theadoption of contribution limits andallowances. Table 3 shows the annualallowances paid to political parties since2004.The Conservative Party’s financialadvantage has had an impact on theconduct of politics since 2006. Since 2006the Conservative Party has governed twiceas a minority government. The fundingadvantage enjoyed by the party hasallowed it to govern with more authoritythan normal in a minority situation. Theopposition parties have been reluctant tobring down these minority governmentsbecause the Conservative Party has beenthe only political party that has had thefinancial wherewithal to comfortably fightan election. As a result, there have beeninstances where opposition parties havethreatened to bring down the governmentonly to relent and compromise, in partbecause of financial considerations.The Conservative Party also provokeda crisis over the budget in 2008 bythreatening to eliminate the quarterlyallowances paid to political parties.The removal of public funding woulddamage the opposition parties morethan the Conservative Party. The threatto funding was one of the few things thathas galvanised the opposition partiesand caused them to make a convincingthreat to defeat the government. TheConservative Party withdrew its proposal.Spending limitsSpending outside election periodsCanadian political parties have alwaysspent some money in the days and weeksimmediately prior to the election period.Until recently, however, parties did not haveenough money to engage in significantpre-writ electioneering. As discussedin the previous part of this article, allof this changed in 2004. Since then, theConservative Party has had the financialresources to engage in extensive pre-writelectioneering. This is demonstrated by acomparison of Conservative Party incomefrom contributions and allowances set outin Tables 2 and 3 with spending limits inrecent elections set out in Table 4. Whencomparing the tables, it should be notedthat political parties are reimbursed 50%of their election expenditures.Page 18 – Policy Quarterly – Volume 6, Issue 3 – August 2010


The competitive partisan dynamiccreated by three successive minoritygovernments, together with the financialdisparity between the parties has resultedin expanded use of political advertising.The Conservative Party has not beencontent to merely ramp up its electioncampaign in the weeks and monthsimmediately prior to the election period;it has also engaged in strategic advertisingcampaigns when no election campaignwas imminent. The most famous exampleswere the negative advertisements aimed atStephane Dion when he became leader ofthe Liberal Party in 2006 and at MichaelIgnatieff after he became leader of theLiberal Party in late 2008.The Conservative Party’s use ofadvertising to influence political imagesand debates outside election periodsand increased use of pre-writ electionadvertising has forced the other politicalparties to respond in kind. Despite theircomparatively weak financial positions,both the Liberal Party and NDP haveengaged in advertising to compete withand respond to the Conservative Party. Theinability of the Liberal Party to compete inan advertising arms race provoked DennisDawson, a Liberal senator, to introduce abill in the Senate to control some pre-writelection spending by political parties. Thebill would include within the definitionof ‘election expense’ any cost ‘incurredin the three month period prior to theelection period’. The bill, being a privatemember’s bill originating in the Senate,stands little chance of becoming law andis best understood as a protest againstthe effects of Conservative Party financialdominance.An interesting twist on pre-writregulation of expenditures is found inBritish Columbia’s Election Act. The 2005provincial election in British Columbiawas marked by increases in third-partyspending. As a result, BC adopted thirdpartyspending limits which mirrored thefederal limits but extended into the 60-day period before the call of an election.The third-party limits were challengedby the BC Teachers Federation. 19 TheBC government attempted to justify theextension of the third-party limits intothe pre-writ period on the grounds thatit was necessary to stop third partiesfrom circumventing spending limitsthat apply to the election period. TheBC Supreme Court did not find thisposition compelling. The court heldthat regulation of third-party spendingoutside the election period could not bejustified as it was not proximate enoughto an election and, as a result, did notpose as great a threat to the integrity ofan election. The court further held thatthe extension of third-party limits outsidethe election period was problematicbecause it prevented full participation inpublic debate while the legislature was insession.Expenditure limit arbitrageA second way in which the ConservativeParty has used its financial advantage iswhat I have termed ‘expenditure limitarbitrage’. Under the Canadian politicalfinance system, political party spendinglimits are separate from candidatespending limits. The major political partiestypically spend close to the maximumpermitted. However, candidates of themajor political parties in uncompetitivedistricts often do not spend the maximumallowed. The unused spending capacity ofcandidates represents an opportunity fora political party with more funds than itcan use under its spending limits becausethere are no limits on transfers of fundsbetween political parties and affiliatedcandidates.The method devised by the ConservativeParty to exploit the unused spendingcapacity of candidates was described bythe Federal Court in Campbell v. Canada(Chief Electoral Officer) in the followingterms:The evidence shows that the Party didin fact finance candidates’ contributionsusing the following scheme:first, the Fund issued an invoice tothe official agent. Simultaneously,the official agent completed a wiretransfer form instructing the sameamount indicated in the invoice tobe transferred from the campaign tothe Fund. This wire transfer form wassigned and sent back to the Fund, whofilled in any missing information. TheFund then prepared a second wiretransfer, directing the same amountof money to be transferred from theFund to the candidate. Finally, after thetransfer from the Fund was completed,the wire transfer form completed bythe official agent was sent to the bankto have the money paid right back.Advertisements that promote a political partynecessarily provide a benefit to a candidate affiliatedwith that political party whether or not the candidate’sname is used.Indeed, during the 2006 election, theFund transferred some 1.2 milliondollars to the 67 local campaignsparticipating in the RMB program. Thetotality of this amount was returnedto the Fund by way of these ‘in andout’ transfers with each participatingcandidates. 20An investigation as to whether theConservative Party exceeded its spendinglimit is ongoing, but no charges have beenlaid. The ‘in and out’ transactions, however,came under judicial scrutiny in Campbellas a result of Elections Canada’s denial ofelection expense reimbursement claimssubmitted by candidates who participatedin the ‘in and out’ transactions. Despitethese concerns, it is hard to concludethat arbitrage between political partyand candidate spending limits is illegal.Advertisements that promote a politicalparty necessarily provide a benefit to acandidate affiliated with that politicalparty whether or not the candidate’sname is used. Indeed, to insist upon thedirect promotion of a candidate wouldbe inconsistent with the broad approachused to defining ‘election advertising’ inthe CEA.The Federal Court in Campbell wasnot asked to determine whether thePolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 19


Contemporary Issues in Canadian Political Finance RegulationConservative Party exceeded its spendinglimits. Moreover, the court overturnedthe chief electoral officer’s decisionto deny candidates’ election expensereimbursement claims. Based on thisdecision, it appears that if ElectionsCanada concludes that ‘in and out’transactions should be stopped, anamendment to the CEA will be required.ConclusionPolitical finance has become increasinglyimportant to the practice of politics inCanada in recent years. More money isavailable to participants in the politicalprocess as a result of increased publicfunding and it is being deployed in moreaggressive and creative ways than in thepast. At the same time, political financehas become increasingly subject tojudicial scrutiny. Small political partiesand third parties have launched repeatedconstitutional challenges to the politicalfinance regime and Elections Canada hastaken more enforcement actions. TheCanadian political finance landscape,though more contested and dynamicthan that found in Australia, the UnitedKingdom or New Zealand, remainsquiescent compared to the United States.The Canadian experience is acautionary tale for New Zealand as itembarks on reform of its political financeregime. The Canadian reforms of 2003and 2006 show that ostensibly neutralchanges to a political finance regime canhave a significant impact on the practice ofpolitics and the balance between politicalparties. Canadian politics today exist in astate of persistent quasi-campaign. Thiscondition is a result of recurring minoritygovernments, but it is also facilitated andexacerbated by increased public fundingand the imbalance in funding amongstthe major political parties. New Zealandshould be cautious before adopting anychanges to its political finance legislation.In particular, even in the absence of anyconstitutional standards, the differentialimpact of legislation on political partiesshould be considered.1 Parts of this section are adapted from Feasby, 2010. For amore detailed discussion, see Feasby, 2007.2 An Act to amend the CEA and the Income Tax Act (politicalfinancing), SC 2003, c.19.3 SC 2006, c.9.4 The reservation and allocation of free and discounted timefor political broadcasts is akin to political funding. However,political broadcasting is beyond the scope of this article.For a discussion of the history of the regulation of politicalbroadcasting in Canada see LaCalamita, 1984. For adiscussion of constitutional issues related to the regulation ofpolitical broadcasting, see Feasby, 2006.5 Part I of the Constitution Act 1982, being schedule B to theCanada Act 1982 (UK), 1982, c.11 (the ‘Charter’).6 This aspect of the charter resembles the EuropeanConvention for the Protection of Human Rights andFundamental Freedoms (4 November 1950), 213 UNTS221. The New Zealand Bill of Rights Act 1990, s.5 alsocontains a justified limitations provision that was explicitlymodeled on the Canadian charter.7 R. v Oakes, [1986] 1 SCR 153 and Dagenais v CanadianBroadcasting Corporation, [1994] 3 SCR 835.8 Harper v Canada (Attorney General), [2004] 1 SCR 827 at[35] per McLachlin CJ.9 British Columbia Teachers’ Federation v British Columbia(Attorney General), 2009 BCSC 436.10 The data for 2000 is compromised by the fact that midcampaignan injunction was issued by the Alberta Courtof Queen’s Bench suspending the rules applicable to thirdparties and then reinstated by the Supreme Court of Canada.‘Average expenditure’ figures do not include third parties withno return filed.11 Figueroa v Canada (Attorney General), [2003] 1 SCR 912.12 Ibid. at [29].13 Ibid. at [39].14 Ibid. at [54].15 Longley v Canada (Attorney General) (2007), 288 D.L.R.(4th) 599 (Ont. C.A.).16 DeJong v Ontario (Attorney General) (2007), 287 D.L.R.(4th) 90 (Ont. Sup. Ct.).17 Ibid. at [79].18 2009 data based on quarterly returns as not all annualreturns have been posted by Elections Canada.19 British Columbia Teachers’ Federation v. British Columbia(Attorney General), 2009 BCSC 436.20 Campbell v Canada (Chief Electoral Officer), 2010 FC 43at[38]-[39].ReferencesFeasby, C. (2005) ‘Freedom of expression and the law of the democraticprocess’, Supreme Court Law Review (2d), 29Feasby, C. (2006) ‘The Supreme Court of Canada’s political theory andthe constitutionality of the political finance regime’, in K. Ewingand S. Issacharoff (eds), Party Funding and Campaign Financing inInternational Perspective, Oxford: Hart PublishingFeasby, C. (2007) ‘Constitutional questions about Canada’s new politicalfinance regime’, Osgoode Hall Law Journal, 45 (513), pp.519-21Feasby, C. (2010) ‘Canadian political finance regulation andjurisprudence’, in K. Ewing, J. Tham and J. Rowbottom (eds), TheFunding of Political Parties, London: Routledge (forthcoming)Flanagan, T. and D. Coletto (2010) ‘Replacing allowances for Canada’spolitical parties?’, University of Calgary SPP briefing papers, pp.3-4,http://www.policyschool.ucalgary.ca/publicationsGeddis, A. (2004) ‘Liberté, egalité, argent: third party election spendingand the charter’, Alberta Law Review, 42Gray, J. (2006) ‘Reality check’, CBC News Online, 13 JuneLaCalamita, J. (1984) ‘The equitable campaign: party politicalbroadcasting regulation in Canada’, Osgoode Hall Law Journal, 22Page 20 – Policy Quarterly – Volume 6, Issue 3 – August 2010


Graeme OrrPublic Money and ElectioneeringA View fromAcross theTasmanIntroductionThis article compares some key aspects of political financeregulation in Australia and New Zealand. It centres on publicmoney and electioneering expenditure. These are treated inthree sections: expenditure limits; incumbency benefits, suchas government advertising and parliamentary entitlements;and direct public funding of electioneering. A comparisonpaper by Joo-Cheong Tham explores private money inpolitics, in particular donations and their disclosure.With one significant exception – publicfunding – Australia’s approach to politicalfinance has been decidedly laissez-faire(see Orr, 2010; Tham, 2010). This is clearby comparison with New Zealand, Canadaand the United Kingdom. Australia andNew Zealand may be separated by just2,000 kilometres of the Tasman Sea but, inregulatory terms, New Zealand lies closeto Britain and Australia lies closer to theUnited States.Graeme Orr is an Associate Professor at theUniversity of Queensland Law School, Brisbane,Australia.That said, Australia might be catchingup on international developments. Forthe past couple of years, concerns withaccountability, corruptibility and the costof electoral politics have driven severalinquiries and elicited cross-party supportfor significant reform. There is somebipartisan support for both contributionand expenditure limits. The trajectory ofAustralian debate is thus towards moreregulation, at a time when New Zealandis turning the other way, particularlyas regards third parties. At the time ofwriting, however (May 2010), Australia isyet to see any comprehensive reform bills.Expenditure limitsNew Zealand has, for some time imposedlimits on election year expenditure. Onlyin the last two years has Australia begun toseriously consider capping expenditure.The only jurisdiction in Australia thatcaps campaign expenditure currently isTasmania’s upper house (in practice acap on candidate spending, as the houseis the only Westminster-style chamber toremain dominated by independents).The belated emergence of interest inexpenditure caps in Australia is born ofa widespread and multi-partisan feelingthat Australian political finance needssignificant reform. The feeling is strongestin New South Wales, where local andstate-level corruption and undue donorinfluence are particularly pronounced.In March a multi-party committeerecommended:• capping expenditure by partiesand candidates, the party cap to bebased on seats contested. The capmight apply from the beginning ofeach election year. In comparison,New Zealand is proposing to reduceits regulated period to a maximum of90 days prior to the poll.• capping third-party expenditure,at a figure ‘significantly lower’ thanthe party cap. In comparison, NewZealand is abolishing its cap on thirdpartyor ‘parallel’ campaigns. (NSWParliament, 2010, recommendations19–22)Policy Quarterly – Volume 6, Issue 3 – August 2010 – Page 21


Public Money and Electioneering A View from Across the TasmanThe New South Wales committee didnot suggest a figure for the expenditurecaps, or define their scope except to givetwo principles:• electioneering, but not administrationcosts, should be covered;• public funding levels, governmentadvertising and third-party activitiesshould be taken into account.The New South Wales ElectoralCommission stuck out its neck andproposed more detail, in particular thatthird-party, or lobby, groups be capped atthe equivalent of NZ$260,000 per electionyear, with only New South Wales electorsor New South Wales organisations beingentitled to electioneer.These caps were proposed in tandemwith a tight annual limit on donations,of about NZ$2,600 per annum from anyelector to any party or its candidates.Corporations and organisations wouldnot be permitted to donate; but theycould (a) join parties or (b) affiliate,like trade unions, but with their feescorralled for administrative and notelectioneering purposes. The committeerecommended increasing public fundingto compensate, but opposed any move to‘full public funding’ (NSW Parliament,2010, recommendations 28–29).The recommendations were heavilyinfluenced by the Canadian system,discussed by Colin Feasby in this issue.Attention to New Zealand experiencewas less apparent. Whilst the sensitivityof restricting third-party restrictions wasacknowledged in a recommendationfor wide-ranging consultation prior tolegislative drafting, the New South Walescommittee nonetheless recommendedconsideration of mandatory registration,auditing and disclosure for third-partycampaigns. In contrast, having repealedthe Election Finance Act 2007 as too heavyhanded,the New Zealand Cabinet decidedto favour ‘lighter touch’ regulation of thirdparty(or ‘parallel campaigner’) campaigns(New Zealand Cabinet, 2009, p.2). Underits Electoral (Finance Reform and AdvanceVoting) Bill, electioneering campaignsof over NZ$12,000 would still requireNotoriously, in 2005 the New Zealand auditor-generalidentified ‘widespread’ electioneering abuses of MPsupport, leadership and party funds. All but one partywas implicated, and over NZ$1.17m was involved.registration. Unlike parties and candidates,however, third parties will no longer faceexpenditure caps, let alone an obligationto submit expenditure or donation returns(New Zealand Cabinet, 2009).Nor has Australia confronted thequestion of what to include in anexpenditure cap. At present, Australiandefinitions of ‘electoral matter’ or‘political expenditure’ are quite broad.They cover anything ‘intended orlikely to affect voting in an election’,or ‘the public expression of views onan issue in an election’. 1 But these weredesigned to trigger disclosure of theauthors and funders of political speech.Narrower definitions may be requiredfor restrictions on expenditure on – andhence the quantum of – such speech.Indeed, even the 2007 Act sought to avoidcapturing pure issue advertising in its net(Geddis, 2008, pp.220-1). Of course, thedistinction between issue advertising andadvertising promoting or denigrating aparticular party is a slippery one. It maybe cleaner to simply bite the bullet andrestrict all political campaigning duringthe election period.Designing expenditure caps inAustralia will be bedevilled by twofactors. One is constitutional. TheHigh Court, in the ACTV case in 1992, 2discovered an implied freedom ofpolitical communication. At the suitof a television company, it used thatimplied freedom to strike down a UnitedKingdom/New Zealand-style system ofbanning campaign broadcasts in favourof free air-time. Expenditure limitsneed not be unconstitutional, however,provided they are proportionate tolegitimate ends such as electoral equalityand political integrity.A second complication, whichNew Zealand legislators do not face,is Australia’s federal system. It is onething for a state or national parliamentto legislate caps, but political issues andmoney are fluid and cross-jurisdictional.Legislators can force their parties to keepseparate campaign accounts, but onceregulation extends beyond the narrowand formal election campaign period theproblem of regulating political money ina federation becomes more complex, andideally requires uniform laws.Incumbency benefits: parliamentaryallowances and government advertisingParliamentary entitlements are numerous,intricate, 3 and subject to perennialtinkering. Concern in Australia lies chieflyin two types: electorate allowances, andprinting and communication allowances.Electorate allowances of betweenNZ$40,000 and $60,000pa are paidwithout strings attached. Federal MPs canuse them to top up their base salary anddefray expenses. Or, like salary, they arefree to plough them into electioneering.There are calls for separate accounting ofelectorate allowances and to ensure thatthey are not used for electioneering. 4Other, non-salary allowances aresizeable: amounting to about NZ$210.6min 2008–09 (or just over NZ$930,000per federal MP). Of these, printing andcommunication entitlements permitMPs to address their electorates throughdirect mail and newsletters. There hasbeen an ongoing tug of war over theirquantum and use. Formerly uncapped,these allowances drew the ire of theauditor-general in 2001. A choice exampleof the problem involved Bob Horne, aLabor MHR in a marginal seat, spendingabout NZ$284,000 on printing allowancealone, six times the average of other MPs.Dubbed ‘Bob-the-Printer’, he still lost hisseat (Tham and Young, 2006, p.55).Page 22 – Policy Quarterly – Volume 6, Issue 3 – August 2010


The Howard government subsequentlyintroduced caps. But these weregenerous in size and scope. The printingallowance still exceeded NZ$195,000 perannum in 2006. 5 Close to half could besquirrelled away and rolled over, say intoan election year, and special ministers ofstate ruled that it could be used for pureelectioneering in the form of how-tovoteand postal vote material. Unlike inNew Zealand, there has not even been anexplicit rule against such moneys beingused for ‘electioneering’. Unsurprisingly,the auditor-general recently foundthat nearly three-quarters of MPs’communications were likely to be outsidethe notional purpose of ‘constituencyservice’ (Auditor-General for Australia,2009–10, p.17).This is not to say that New Zealand hashad best practice. Notoriously, in 2005 theNew Zealand auditor-general identified‘widespread’ electioneering abusesof MP support, leadership and partyfunds. All but one party was implicated,and over NZ$1.17m was involved. TheParliamentary Service Act 2000 definitioncurrently only forbids parliamentaryfunds being used to explicitly seek votersupport. This creates a loophole for bothnegative and issue advertising usingparliamentary entitlements. The ElectoralAct 1993 definition of ‘election advertising’,capping private expenditure, is broader.The New Zealand Cabinet has endorseda proposal to harmonise the definitionsby adopting the broader definition forparliamentary material, but only duringthe regulated election campaign period(New Zealand Cabinet, 2009, appendix 2).This restriction is only a partial solution.Yet it is tighter than anything yet proposedin Australia. Australia in many regards isin catch-up mode with New Zealand. Ittook until mid-2009 to adopt the NewZealand practice of pre-screening MPs’material.In both countries, the departmentoverseeing parliamentary entitlements(New Zealand Parliamentary Services andthe Australian Department of Finance)has faced criticism for a lack of rigorousscrutiny. 6 Parliamentarians argue thatthey act in good faith, on conventionalbeliefs about proper usage. In otherwords, everyone makes hay when thesystem lacks clear rules and accountability.The convention is one of a double effect:electoral benefit is fine, provided it isincidental to material that is otherwisedirected to constituency business. But inAustralia particularly, the convention isbelied around election time by a ‘surge’in use of allowances leading up to eachelection; and by leaflets that mirror party(especially attack) advertising. 7 Rules haveeven had to be devised to prevent MPsin safe seats – and senators who do littlepersonal campaigning – from using theirallowances to prop up other campaigns.While New Zealand lacks an upper house,a similar problem must arise if partylistMP allowances are used in a targetedway to assist colleagues in marginalconstituencies.An Australian special minister ofstate independent committee is due toreport on parliamentary entitlements.This should build on decisions made inmid-2009 to rein in crasser aspects ofsystem – by confining printing allowancesto ‘parliamentary or electorate business’and not ‘party business or electioneering’,including capping postal vote applicationsto 50% of the electorate and not allowingincumbents to print how-to-vote materialwith parliamentary funds. The problem,as with government advertising, is howto restrain incumbency benefit withoutstrangling legitimate information andcommunication. Government advertisingis the bigger concern in Australia,however, for two reasons (Orr, 2006).One is the sheer size of the campaigns:the High Court effectively ruled that thesize is up to the executive and campaignscan even promote government bills priorto parliamentary consideration. 8 AroundNZ$195m was spent on media costs alonefor the WorkChoices industrial relationscampaign, in which the conservativegovernment dramatically outbid itstrade union opponents. The other isthat government advertising benefitsonly the governing party. 9 (Governmentsalready benefit from a lion’s share of[Australian] Federal parties receive money for votesreceived, paid in a lump sum after each election. Eachvote, in 2010, will be worth about NZ$3, or NZ$6 perelector given the twin House and Senate ballots. Smallparties miss out in races where they don’t meet a 4%threshold.corporate donations, especially under anuncapped donations system, since bigdonations tend to favour the party inpower (at least until the writing is on thewall – see McMenamin, 2008).) At leastparliamentary entitlements are cappedand spread across all parliamentaryparties.A repeated refrain about both governmentadvertising and parliamentaryentitlements in Australia is the absenceof principles-based legislation definingand restricting their use. Instead, looseguidelines and bureaucratic discretiongovern both types of expenditure. Anyreal oversight is falling, periodically andpost-hoc, to the auditor-general. Since2007, for instance, the Australian auditorgeneralhas been involved in both vettinggovernment advertising campaigns priorto their approval and auditing selectcampaigns after the event (Hawke, 2010).Yet that vetting role is being taken away.Public electoral fundingSince the early 1980s, Australia has hadpublic funding of elections. 10 Federalparties receive money for votes received,paid in a lump sum after each election.Each vote, in 2010, will be worth aboutNZ$3, or NZ$6 per elector given the twinHouse and Senate ballots. Small partiesPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 23


Public Money and Electioneering A View from Across the Tasmanmiss out in races where they don’t meet a4% threshold. The payments come withoutstrings attached, and although they rarelycover the full cost of electioneering in anuncapped ‘arms race’ they are predictableand significant. The 2007 Australianelection generated the equivalent of about$NZ60m in public funding. In contrast, the2008 New Zealand electoral broadcastingallocation (the only direct electioneeringfunding) was just $NZ3.2m.New Zealand – like the UnitedKingdom – lacks either a neat or adeveloped approach to public funding.There may be good reasons for this,such as the belief that parties are privateassociations, not quasi-state actors. Thisbelief has two pragmatic manifestations.There is a fear that public funding mightincite taxpayer cynicism, and a longertermconcern that parties might lose sightof their grassroots.Certainly, party membership isparlous in Australia, but that trend iscommon internationally. But unrestrainedcorporate donations are the greatestdanger to parties’ responsiveness to theirbases. Any taxpayer opposition to publicfunding appears to be short-term, andcounterbalanced by the fact that themoney comes without strings attached.The New Zealand Royal Commissionon the Electoral System recommendedAustralian-style public funding. Its benefitis its simplicity. A single payment ismade per electoral cycle, and democraticprinciple underlies paying per votereceived. The 4% threshold may needlowering to take MMP into account. Whilstparties can use the funding for whateverpurpose they wish, the effect is electoralreimbursement. Such public fundingexplicitly recognises that electioneering isa public necessity or good, and accepts thatelections are party-centred. It bypasses theproblem with parliamentary entitlementsof separating legitimate from illegitimatetypes of communication and advertising.But that problem is far fromeliminated. Public funding, far frombeing a magic bullet, has not restraineddemand for political money in Australia.On the contrary, the arms-race in the... [the] Australian experience shows that tight, evenlegislated controls and vetting of materials is neededto prevent MPs misusing parliamentary allowancesfor partisan purposes. In this and other egalitarianmeasures ... Australia lags behind New Zealand inretaining a laissez-faire bias.absence of expenditure limits has createda ‘have your cake and eat it too’ mentality.Generous parliamentary allowances weremisused and needlessly expanded. Thecurrent Labor government’s more chasteapproach to government advertising andprinting allowances has helped. But suchtempering is likely to be temporary, unlesslegislation is introduced to reinforce it.ConclusionA common lament is that we get thebest democracy money can buy. Thatis cynical, given there is no guaranteed,let alone linear, relationship betweenmoney spent and political outcomes. Evenlarge-scale political expenditure can beof little avail: witness the WorkChoicesgovernment advertising and the fate of‘Bob the Printer’. Nonetheless, all elsebeing equal, money matters. And themore the merrier: no political campaignwould prefer fewer resources to more.As politics becomes even more leadercentred,it is now common for new leadersto be introduced with an advertising blitz– an example of the ‘permanent campaign’where parties spend money on a dailybasis on confidential market research.In the United States, a perennialproblem is the size of the war chests neededto unseat an incumbent. This contributesto a sense that politics is closed to all butinsiders and the individually wealthyand well-connected. Perversely, the oldmechanism to wrestle power away frominsiders in the form of party bosses – theprimary election – only magnifies the warchestproblem.In Westminster systems the war-chestproblem may be less acute, but only bya matter of degree. It is also manifesteddifferently. Unlike in the United States, theproblem is not one of candidate finances,but party finances. And the problem isnot just of private money leveraging andentrenching power, but also of publicmoneys reinforcing incumbency.Australian politicians currently appearkeen on increasing public funding andlimiting donations, two measures not onthe New Zealand radar. Cynics will notethat enthusiasm for this has coincidedwith a decline in corporate donationsduring the global financial crisis; buta general weariness with fund-raisingand carpet-bagging predates that crisis.While Australian campaign finance lawhas been less interventionist than in itscommon law-cousins, when Australiaregulates it tends to do so with a statistbias. In particular, parties will have littlestomach for imposing expenditure capson themselves but not third parties.Libertarians in New Zealand would lookaskance at this approach: third-partyexpenditure caps in Australia could indeedbe dangerous without governmentsaccepting real restrictions on governmentadvertising, especially in election years.In the meantime, public funding isthe only area where Australian practiceis more developed than New Zealand’s.Direct public funding to defray electionexpenses may be a cleaner and more honestmethod than what Geddis has labelled‘backdoor’ support through a convolutedset of parliamentary service funds(Geddis, 2008, p.218). However, Australianexperience shows that tight, even legislatedcontrols and vetting of materials is neededto prevent MPs misusing parliamentaryallowances for partisan purposes. In thisPage 24 – Policy Quarterly – Volume 6, Issue 3 – August 2010


and other egalitarian measures – notablycapping party expenditures – Australia lagsbehind New Zealand in retaining a laissezfairebias. That libertarian bias is eroding,however, and there is momentum, acrossthe Australian spectrum, for strongerregulation, possibly on the Canadianmodel of limiting donations andexpenditures. Australians are consideringthis trajectory at the same time as NewZealand is pulling back from its high pointof interventionism, under the short-livedElection Finance Act 2007.1 Commonwealth Electoral Act 1918, s4 (‘electoral matter’),s314AEB (‘political expenditure’).2 Australian Capital Television v Commonwealth (1992), 177CLR 106.3 Recently described as ‘difficult to understand and manage’and ‘complex and overdue for reform’: see Auditor-Generalfor Australia, 2009–10, pp.15, 17.4 For example, former Senator Murray’s submission to theCommittee for the Review of Parliamentary entitlements,p.11, http://www.finance.gov.au/parliamentary-services.docs/Mr_Andrew_Murray.pdf.5 Australian MPs currently serve electorates with over twicethe enrolment of those represented by New Zealandconstituency MPs.6 The Australian auditor-general described the Departmentof Finance as adopting ‘a relatively gentle approach toentitlements administration’ (Auditor-General for Australia,2009–10, p.16).7 The Australian auditor-general shows expenditure increasingfrom two to five times in election years over non-electionyears, as war chests are squirrelled away then spent.(Auditor-General for Australia, 2009–10, p.30; appendix 4.)8 Combet v Commonwealth (2005), 221 ALR 621.9 This need not necessarily be the case. Queensland nowallows the Opposition leader to access funds for policyadvertising (Department of Premier and Cabinet, 2002,section 4.5).10 First for New South Wales elections (1981), then nationalelections (1983). Four smaller jurisdictions still lack publicfunding (Western Australia, South Australia, Tasmania andthe Northern Territory).ReferencesAuditor-General for Australia (2009–10) Administration ofParliamentarians’ Entitlements by the Department of Finance andDeregulation, report 3, Canberra: ANAODepartment of Premier and Cabinet (2002) The Queensland OppositionHandbook, 2nd editionGeddis, A. (2008) ‘New Zealand’s Electoral Finance Act 2007 and itsdiscontents’, Public Law Review, 19, pp.215-35Hawke, A. (2010) Independent Review of Government AdvertisingArrangements, report to special minister of state, 26 FebruaryMcMenamin, I. (2008) ‘Business, politics and money in Australia: testingeconomic, political and ideological explanations’, Australian Journal ofPolitical Science, 43, pp.377-405New South Wales Parliament, Joint Standing Committee on ElectoralMatters (2010) Public Funding of Election Campaigns, report 2/54,Sydney: The CommitteeNew Zealand Cabinet (2009) CAB Min (09) 45/10Orr, G. (2006) ‘Government advertising: Parliament and political equality’,Papers on Parliament, 46, pp.1-16Orr, G. (2010) The Law of Politics, Annandale: Federation PressTham, J. (2010) Money and Politics: the democracy we can’t afford,Sydney: University of New South Wales PressTham, J. and S. Young (2006) Political Finance in Australia: a skewedand secret system, Canberra: Democratic Audit of AustraliaRecent ResearchThe influenceof foreignassets andliabilities onreal interestratesby Dennis Rose(IPS WP 10/09 June 2010)“Essential”workersin the dairyindustryby Paul Callister andRupert Tipples(IPS WP 10/10 July 2010)The impact onte reo Mäori oftrans-Tasmanmigrationby Paul Hamer(IPS WP 10/11 July 2010)To download these and other IPS working papers go tohttp://ips.ac.nz/publications/publications/list/7Policy Quarterly – Volume 6, Issue 3 – August 2010 – Page 25


Joo-Cheong ThamRegulating Political ContributionsAnother Viewfrom Across theTasmanThis article compares the Australian and New Zealandelectoral finance regimes, with a particular focus on politicalcontributions. Three specific areas are examined: disclosureof contributions; limits on contributions; and regulatingthe sale of access and influence. This examination isunderpinned by what I see as the key purposes of democraticpolitical finance regimes (Tham, 2010, ch.1):• protecting the integrity ofrepresentative government, an aimwhich encompasses the prevention ofcorruption;• promoting fairness in politics,especially in elections;• supporting parties to discharge theirfunctions;• respecting political freedoms, inparticular freedom of politicalexpression and freedom of politicalassociation.Dr Joo-Cheong Tham is a Senior Lecturer atMelbourne Law School, Melbourne, Australia.Disclosure of contributionsThe key principle underlying disclosureschemes is transparency of electoralfinancing. Such transparency is requiredto protect the integrity of representativegovernment in three ways. It aids informedvoting, thereby buttressing the integrityof electoral processes. Moreover, it is acrucial tool for preventing corruption.Further, such transparency is in itselfnecessary to protect public confidencein representative government. Besidesthese broader rationales, transparency ofpolitical funding is also necessary to ensurethe effectiveness of specific regulatorymeasures. For instance, contributionlimits can only work effectively ifaccompanied by adequate disclosure ofpolitical contributions.In Australia, a mix of federal, state andterritory schemes governs the disclosureof political contributions. Here I willfocus on the federal scheme, which isfound in the Commonwealth ElectoralAct 1918 (Cth). Under this Act, registeredpolitical parties and their ‘associatedentities’ 1 are obliged to submit annualdisclosure returns. Virtually identicaldisclosure requirements apply to each.The returns are required to be in a formapproved by the Australian ElectoralCommission (AEC) and must disclosethe total amount received, paid or owedby, or on behalf of, the registered politicalparty or associated entity for the financialyear. In addition to disclosing these totals,registered political parties and associatedentities are required to make furtherdisclosure if they have received from, orowe, a particular person or organisationa sum exceeding an indexed threshold.In 2009–10 the indexed threshold stoodat AUD$11,200 (or around NZ$13,250).In calculating whether this sum has beenreached for payments made to the party(or associated entity), amounts below theindexed threshold can be disregarded.Consequently, cumulative donations thatexceed the threshold can be disregardedunless one or more of these donationsPage 26 – Policy Quarterly – Volume 6, Issue 3 – August 2010


exceed the threshold. Once the indexedthreshold has been reached, however,registered political parties and associatedentities must disclose certain particulars,namely the amount of the sum or debtand the name and address of the person(or organisation) who paid or is owedthe sum.Persons who donate to a registeredpolitical party an amount exceeding theindexed threshold in any particular yearare also subject to annual disclosureobligations in that they must lodge astatement disclosing all such gifts to theAEC and itemise those exceeding theindexed threshold; they are also obligedto itemise gifts exceeding the indexedthreshold that were used to make thegifts to the political party. Further, thirdparties that have spent more than theindexed threshold in a financial year onpolitical expenditure must disclose to theAEC details of gifts received exceedingthe indexed threshold that were used forsuch spending.Candidates and groups of candidatesare required, after every election, toprovide to the AEC a statement disclosingdetails of gifts received during the periodbetween elections if they exceeded theindexed threshold. Persons who havedonated amounts exceeding the indexedthreshold to candidates (and groups ofcandidates) must also disclose details ofsuch gifts to the AEC after the relevantelection.This scheme is, as Graeme Orrcharacterised it, ‘lackadaisical’ (Orr,2007). First, there is the high disclosurethreshold of AUD$11,200 (in NewZealand, the threshold is NZ$10,000).This has the effect of shroudingconsiderable portions of the parties’income in secrecy. According toCommonwealth Parliamentary Libraryresearch, the previous disclosurethreshold of $1,500 or more resultedin nearly three-quarters – 74.7% – ofdeclared total receipts being itemisedover the period spanning from the 1998–99 financial year to the 2004–05 financialyear. A threshold of $10,000 applied tothe same data lowers this figure to 64.1%(Miskin and Barber, 2006). Updatingthe research of the CommonwealthParliamentary Library, the Joint StandingCommittee on Electoral Matters foundthat under the $10,300 threshold (whichapplied in 2006–07), only 52.6% of theincome of the Australian Labor (ALP)and Coalition parties was itemised forthat year (Joint Standing Committeeon Electoral Matters, 2008, p.33) Onthese calculations, we have a remarkablesituation where the source of nearly halfof the income of the major parties isunknown.Lack of transparencyin relation to thefunding of third parties(and their parallelcampaigns) corrupts theelectoral processes asit undermines informedvoting decisions.Second, there is the high threshold foranonymous contributions: AUD$11,200(in New Zealand, it is NZ$1,000).This is the result of the Electoral andReferendum Amendment (ElectoralIntegrity and Other Measures) Act 2006(Cth), which lifted the cap on allowableindividual anonymous donations from$1,000 to $10,000 (and indexed this cap toinflation). Such a high threshold seriouslyrisks compromising transparency. It isless about public disclosure of donationsand loans and more about records keptby parties: it will mean that partiescan legally accept larger sums withoutrecording details of the donor. Thispotentially renders the whole notion ofdisclosure thresholds meaningless.A further limitation of the federaldisclosure scheme is the lack of timeliness.The AEC has observed in relation tofederal annual returns that ‘[t]his formof … reporting and release can result indelays that can discount the relevanceof making the information public’(Australian Electoral Commission, 2000,para 2.10). Specifically, the dated natureof the returns means that voters do nothave access to the relevant informationwhen determining their voting choices.For example, in late September 2004British Lord Michael Ashcroft donated $1million to the federal Liberal Party, barelya fortnight before the October 2004federal election. Citizens casting theirvotes in that election were completelyunaware of this contribution and onlyfound out more than 15 months later, on1 February 2005 when the AEC releasedthe disclosure returns. Here, there ismuch to be said for the New Zealandrequirement to disclose any donationexceeding NZ$20,000 within 10 workingdays of its receipt. 2Are there elements of the Australianfederal disclosure scheme that mightprovide lessons for New Zealand? Onearea is perhaps worth mentioning. Thisconcerns the disclosure obligations ofthird parties. All four principles of ademocratic political finance regime areimplicated here. Lack of transparency inrelation to the funding of third parties(and their parallel campaigns) corruptsthe electoral processes as it underminesinformed voting decisions. There isalso a question of fairness in politics,specifically fairness between politicalparties and third parties: subjectingpolitical parties to disclosure obligationswhile leaving third parties exemptpotentially provides the latter with anunfair advantage. This unfair advantagefurther risks undermining the abilityof political parties to discharge theirfunctions, in particular their electoralfunction of providing choice andcompetition to voters. The danger hereis that political parties focus more onfending off the attacks of third partiesthan on competing amongst themselves.And, finally, the principle of respectfor political freedoms clearly applies asdisclosure obligations on third partieswill mean greater regulation of politicalcampaigning.Presently, the federal scheme providesfor greater transparency in relation to thefinancing of third parties by subjectingthese groups to disclosure obligations,a measure that is not contained in thecurrent New Zealand Electoral (FinancePolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 27


Regulating Political Contributions: Another View from Across the TasmanReform and Advance Voting) AmendmentBill. On the other hand, the Australianscheme does not require third partieswhich spend beyond a certain amount toregister with the AEC, a measure that isin the bill. In my view, both registrationand disclosure obligations should apply.Concerns about the impact on politicalfreedoms can be addressed throughproperly tailored provisions.Limits on contributionsHere the position in Australia is verysimilar to New Zealand in that thereare very few limits on contributions tocandidates, their parties or other electoralactors. Indeed, there are fewer limitsthan in New Zealand. Whereas NewZealand bans foreign donations exceedingNZ$1,000, 3 there is no such ban inAustralia except in Queensland. The onlyother source restriction is a New SouthWales ban on political donations fromproperty developers. The only restrictionas to the amount of political funding isthat which applies under the Victoria’sElectoral Act. This legislation prohibitsholders of casino and gambling licencesand their related companies from makingpolitical donations exceeding $50,000 in afinancial year to each registered politicalparty.In Australia, greater restrictions onpolitical contributions have growingsupport across the political spectrum.Former New South Wales premier MorrisIemma has even advanced the radicalproposal of completely banning politicalcontributions in favour of a system ofcomplete public funding. Followingclosely, his predecessor Bob Carr hasadvocated banning political contributionsfrom organisations like trade unionsand companies and allowing only thosemade by individuals. Former leader of thefederal opposition Malcolm Turnbull andthe New South Wales Greens have similarpositions. Queensland premier AnnaBligh has also called for a national cap ofpolitical donations exceeding $1,000 andhas signalled that Queensland will act toimplement such a cap by July 2010 if thereis no movement on the federal front. Ina bipartisan report, the New South WalesLegislative Council Select Committeeon Electoral and Political Party Funding(NSW Select Committee) recommendedthat there be a ban on all politicaldonations except those by individuals.Contributions by individuals are furtherto be limited to $1,000 for each politicalparty per annum (and $1,000 for eachindependent candidate per electoral cycle)(NSW Select Committee, 2008, p.105).There are compelling argumentsfor a limit on contributions such asthose recommended by the NSW SelectCommittee. Such limits will clearly actas a preventive measure in relation tocorruption: as the amount of moneycontributed by an individual increases,... contribution limitsare likely to mean thatparties will spend moretime fundraising; they willneed to persuade moreindividuals to part withtheir money, a developmentthat is likely to detract fromthe performance of theirdemocratic functions ...so does the risk of corruption. Therefore,bans on large contributions can directlydeter corruption (and also obviate the needfor selective bans on property developersand holders of gambling licences). On arelated point, such limits will promotefairness in politics as they prevent thewealthy from using their money to securea disproportionate influence on thepolitical process. The result is to promotethe fair value of political freedomsdespite limiting the formal freedom tocontribute. 4 Further, by requiring partiesto secure the support of a large base ofsmall contributors, such limits are likelyto enhance their participatory function.Significant objections to contributionlimits do, however, need to be addressed(Ewing, 2007, pp.227-30). First andforemost, instituting such limits bythemselves will leave the parties seriouslyunderfunded given that the majorAustralian political parties are presentlyheavily reliant on large contributions. In thecontext of party government, jeopardisingthe existence of the parties must meanplacing the system of government atrisk. It is also unclear what impact thecontribution limits will have on fairnessamongst the parties. Further, contributionlimits are likely to mean that parties willspend more time fundraising; they willneed to persuade more individuals to partwith their money, a development that islikely to detract from the performance oftheir democratic functions (apart from theparticipatory function). This will intensifyespecially if the ‘arms race’ between themajor Australian parties continues.These objections are, however, notinsurmountable. It is, firstly, imperativethat contribution limits be adopted aspart of a broader package of reform. Oneof the central difficulties with the positionof those who advocate contribution limitsas the principal, or even the only, reformmeasure is that they do not fully deal withthe potential adverse impact of such limits.To ameliorate such impact, there needs tobe a reconfiguration of public fundingof parties and candidates, including asignificant increase in such funding tomake up for the shortfall resulting fromlimits on contributions. Such fundingshould provide for sustainable parties,redress any inequities that arise fromcontribution limits and also lessen the riskof parties devoting an undue amount oftime to fundraising. Further, contributionlimits must be accompanied by electionspending limits. The latter limits willstaunch the demand that fuels the parties’aggressive fundraising activities.A vexed issue concerns the impactof such limits on trade union affiliationfees. My view is that membership fees(within limits) should be exempted fromany contribution limits. As the NSWSelect Committee correctly recognised,‘membership of political parties is animportant means for individuals toparticipate in the political process’ (NSWSelect Committee, 2008, p.113). Specifically,Page 28 – Policy Quarterly – Volume 6, Issue 3 – August 2010


it involves participation within politicalparties, thereby directly enhancing theparticipatory function of parties. Whilstcontribution limits permit membershipfees below the limits, an exemptiongoes beyond such permissiveness byencouraging party membership. Second,the exemption for membership fees shouldextend to organisational membershipfees, including trade union affiliation fees.A ban on organisational membership feeswill give rise to anomalies, is misdirectedat ‘trade union bosses’ and constitutes anunjustified limitation on freedom of partyassociation (Tham, 2010, ch.4).Dealing with the sale of access and influenceThe sale of access and influence isendemic amongst the major Australianparties. Here are some examples. TheVictorian ALP’s Progressive Businesshas been described as ‘one of the mostefficient money-making operationsin the country’ (Bachelard, 2007). Itswebsite states that its ‘express purpose[is] building dialogue and understandingbetween the business community andgovernment’. It currently offers to twotypes of membership, corporate andsmall business, priced at $1,550 and $990per annum respectively, entitling thecompany to a set number of breakfast andtwilight ministerial briefings. The 2009annual Progressive Business dinner, forexample, witnessed Latrobe Fertilisers, acompany vigorously advocating the use ofGippsland coal mines for the productionof fertiliser, paying $10,000 to the ALPso that its chairman, Allan Blood, couldsit at the side of Victorian premier JohnBrumby and, in Blood’s words, ‘ben[d] hisear’(Millar and Austin, 2009). The LiberalParty has a fundraising organisationthat goes by the name of the 500 Club.According to its website, membership ofthe 500 Club will provide ‘a tailored seriesof informal, more personally styled, earlyevening events’, thus ‘adding a new level ofvalue for … Club members’.Party meetings are also a favouredvenue for selling influence. At the2007 federal ALP conference, majorcompanies, including NAB, Westpacand Telstra, engaged a high-price escortservice: at $7,000 per person, theirrepresentatives were accompanied byfederal ALP frontbenchers for the span ofthe conference. Tables at the conferencedinner were also sold for up to $15,000for the privilege of sitting next to shadowministers (Grattan and Murphy, 2007).At the 2007 Liberal Party federal council,federal ministers auctioned off their timeto the tune of thousands of dollars: aharbour cruise with Tony Abbott, thenhealth minister, fetched $10,000, while anight at the opera with Helen Coonan,then minister for communications,information technology and the arts,picked up a princely sum of $12,000.This activity took place under the counciltheme of ‘Doing what’s right for Australia’(Schubert, 2007).... the experience of othercountries can often castlight on how the roleof money in politics isvariously addressed andregulated.These practices are emphatic instancesof what Michael Walzer characterises as a‘blocked exchange’, where money is used tobuy political power (Walzer, 1983, p.100).They constitute a form of corruption. Itis uncontroversial that public officialsincluding elected officials are to act inthe public interest. A central part of thisduty is to decide matters on their merits.The purchase of access and influence,however, creates a conflict betweenthe public duty of deciding matters onmerits and the financial interests of theparty or candidate, resulting in somepublic officials giving undue weight tothe interests of their financiers. This iscorruption through undue influence(Lowenstein, 1989, pp.323-29).That the bargains struck in the saleof access and influence are not overtor explicit makes little difference to thequestion of corruption through undueinfluence: the structure of incentivesfacing parties and their leaders once acontribution is received remains thesame, with their judgment improperlyskewed towards the interests of theirfinanciers (Beitz, 1984, p.137). With theseincentives, there is a double injury to thedemocratic process: wealthy donors areunfairly privileged, while the interests ofordinary citizens become sidelined. Suchinjury highlights how the sale of accessand influence is not only corrupt becauseit undermines merit-based decisionmaking but is also unfair: contributors areillegitimately empowered in the politicalprocess, while others are illegitimatelydisempowered.What, then, should be done as a matterof regulation? Limits on contributions, ofcourse, provide one way forward. Thereare also other measures that could be moreeffective. For example, there could be aban on ministers and parliamentariansattending fundraising events, a measurethat has been adopted by Queenslandpremier Anna Bligh. The sale of accessand influence can also be tackled throughgreater transparency in relation to lobbying(which is what these occasions amountto). There should an obligation to publish,at regular intervals, specific informationon the meetings between lobbyists andgovernment representatives, including thename of the lobbyist/s, dates of contact,meeting attendees and a summary ofissues discussed. This has been therecommendation of a New South Walesparliamentary committee and the NewSouth Wales Independent CommissionAgainst Corruption, as well as by variousBritish committees on standards in publiclife (New South Wales Legislative CouncilGeneral Purpose Standing Committee,p.60; NSW ICAC, p.101; Committee onStandards in Public Life, 2000, p.36, 2008,p.4; Committee on Standards in PublicLife, 2000, p.36, 2008, p.4).ConclusionEwing and Issacharoff have identifieda (non-exhaustive) list of factors thatdetermine the choice of regulatory methodPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 29


Regulating Political Contributions: Another View from Across the Tasmanin the area of political finance. Thesefactors relate to history, geography, classstructures, constitutional systems, partysystems, electoral systems and ideologicaltraditions (Ewing and Issacharoff, 2006,pp.6-7). If we take such complexityseriously – and we should – it is obviousthat questions as to whether any country,including New Zealand, should adoptparticular regulatory measures are onlyproperly answered by an in-depth inquiryinto its specific circumstances and cannot(and should not) be read off comparisons(including the one essayed in this article).We should abandon the misconceivednotion that there is an international ‘bestpractice’, or that there is a continuum onwhich we can locate regulatory models as‘strong’ or ‘weak’.To make these points is not, however,to advocate a parochial stance closed off tooverseas example; the experience of othercountries can often cast light on howthe role of money in politics is variouslyaddressed and regulated. The aim is not todeprecate the importance of comparativeanalysis but rather to point to its limits:it broadens our horizons by gesturing towhat is possible, but often says very littleas to what is desirable.1 ‘Associated entities’ of political parties are defined in theCommonwealth Electoral Act 1918, s.287. Essentially theterms covers individuals or groups controlled by or operatingfor the benefit of a political party, as well as individualmembers of or those with voting rights in a party.2 Queensland recently has adopted a similar requirement thatpolitical parties disclose gifts of $100,000 or more within14 days.3 The Electoral (Finance Reform and Advance Voting)Amendment Bill proposes amending this cap to make itclear it applies to each foreign donor, not to each particulardonation.4 John Rawls has referred to restrictions on contributions as apossible means for ensuring fair value of political liberties:see Rawls, 1996, pp.357-8 and 2001, p.149.ReferencesAustralian Electoral Commission (2000), Submission to the Joint StandingCommittee on Electoral Matters Inquiry into Electoral Funding andDisclosure, http://www.aph.gov.au/house/committee/em/f_d/subseven.pdfBachelard, M. (2007) ‘Taking their toll’, The Age, 14 May, p.9Beitz, C. (1984) ‘Political Finance in the United States: a survey ofresearch’, Ethics, 95 (1)Committee on Standards in Public Life (2000), Standards in Public Life:first report of the Committee on Standards in Public Life: volume 1Committee on Standards in Public Life (2008), Reinforcing Standards:sixth report of the Committee on Standards in Public LifeEwing, K. and S. Issacharoff (2006) ‘Introduction’, in K. Ewing andS. Issacharoff (eds), Party Funding and Campaign Financing inInternational Perspective, Oxford: Hart PublishingEwing, K. (2007) The Cost of Democracy: party funding in modern Britishpolitics, Oxford: Hart PublishingGrattan, M. and K. Murphy (2007) ‘Hope in the hearts of Labor faithful’,The Age, 27 April, p.1Joint Standing Committee on Electoral Matters (2008) Advisory Reporton the Commonwealth Electoral Amendment (Political Donations andOther Measures) Bill 2008Lowenstein, D. (1989) ‘On campaign finance reform: the root of all evil isdeeply rooted’, Hofstra Law Review, 18Millar, R. and P. Austin (2009) ‘$10 000 to sit next to Brumby’, The Age,3 November, p.1Miskin, S. and Barber, G. (2006) Political Finance Disclosure underCurrent and Proposed Thresholds, Parliamentary Library Research NoteNo 27/2006New South Wales Independent Committee against Corruption (NSW ICAC),Report on Investigation into Planning Decisions Relating to the OrangeGrove CentreNew South Wales Legislative Council General Purpose StandingCommittee, Badgerys Creek Land Dealings and Planning DecisionsNew South Wales Select Committee on Electoral and Political PartyFunding (2008), Electoral and Political Party Funding in New SouthWales, http://parliament.nsw.gov.au/Prod/parlment/committee.nsf/0/1CA6D5A89FABD975CA25746D00063640Orr, G. (2007) ‘Political disclosure regulation in Australia: lackadaisicallaw’, Election Law Journal, 6 (1)Rawls, J. (1996) Political Liberalism, New York: Columbia University PressRawls, J. (2001) in E. Kelly (ed.) Justice as Fairness: a restatement,Cambridge, MA: Belknap PressSchubert, M. (2007) ‘Party hopes party won’t end so soon’, The Age, 4June, p.6Tham, J. (2010) Money and Politics: the democracy we can’t afford,Sydney: University of New South Wales PressWalzer, M. (1983) Spheres of Justice: a defense of pluralism and equality,New York: Basic BooksPage 30 – Policy Quarterly – Volume 6, Issue 3 – August 2010


Derek Gill, Stephanie Pride,Helen Gilbert, Richard Normanand Alec MladenovicThe FutureState ProjectMeeting theChallengesof the 21stCenturyDerek Gill is a Senior Fellow, Institute ofPolicy Studies, School of Government, VictoriaUniversity of Wellington.Stephanie Pride is a Strategic Foresightconsultant.Helen Gilbert is an independent consultant.Richard Norman is Senior Lecturer, HRManagement and Industrial Relations at theVictoria Management School, Victoria Universityof Wellington.Alec Mladenovic is a Research Assistantat the Institute of Policy Studies, School ofGovernment, Victoria University of Wellington.IntroductionPowerful global forces will reshape the context for NewZealand over the next few decades. They include increasinginternational connectedness, geopolitical power shifts, rapidtechnological developments, demographic changes, climatechange, growing resource scarcity and changing values.Some of these changes have been in train for several decades;others have come to the fore more recently. Together they arecreating a world that is fast-paced, heterogeneous, complexand unpredictable. Within this context, New Zealand alsofaces some policy choices that are both unique and significant– for example, concerning the recently extended exclusiveeconomic zone, and the completion of the Treaty of Waitangiclaims settlement process.The world we have made, as a result ofthe level of thinking we have done thusfar, creates problems we cannot solve atthe same level of thinking at which wecreated them.Albert EinsteinPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 31


The Future State Project: Meeting the Challenges of the 21st CenturyWhile New Zealand was well served by itspublic management system in the latter partof the 20th century, the evidence suggeststhat the system is less well designed for thechallenges of the 21st century.The current New Zealand publicmanagement system, designed forstable and predictable conditions, hasserved the country well over the last 20years, but may not provide the optimalplatform for the challenges and ways ofworking demanded by the 21st century.Recognising this imperative, in July 2009the steering committee of the EmergingIssues Programme (EIP) 1 commissionedthe Institute of Policy Studies (IPS) toundertake an exploratory study known asthe Future State Project. This project hadthree primary objectives:• to identify major public policy issuesof relevance to New Zealand over thenext two decades;• to consider the current public managementsystem 2 and its capacity toperform in a much more dynamicworld and an increasingly complexpolicy environment; and• to identify related research projectswhich could be pursued by the IPSunder the EIP.As a result of the exploratory study, inDecember 2009 the EIP steering committeeapproved five new research projects to beundertaken by the IPS during 2010–12.Three of those projects are related topublic management issues. The othertwo are concerned with specific policyissues: New Zealand’s ocean governance,and potential issues for Crown-Mäorirelations after 2014, when the settlementof historical Treaty of Waitangi claims isexpected to be completed.This article discusses the findings ofthe Future State Project and outlines theprogramme of research arising from it. 3 Weturn first to the project’s methodology.MethodologyIn commissioning the Future StateProject, the EIP steering committee askedthe IPS to look beyond the immediateissues confronting policy makers (e.g.the consequences of the global financialcrisis, including the tightening fiscalposition) and identify the next generationof longer-term issues likely to affectNew Zealand. The project was to beexploratory: to capture and synthesiseexisting knowledge and information.Original policy analysis of the publicmanagement system of the kind carriedout by Schick (1996) or the AdvisoryGroup on the Review of the Centre (2001)was not part of the terms of reference. Thescope of the project was also limited to themain institutions of central government(that is, public service departments andother non-trading entities, includingstatutory Crown entities). 4 Although localgovernment was not part of the project(as the formal management frameworkunder which it operates is different fromthe public management system in centralgovernment), almost all of the issuesidentified for central government areequally relevant to local government.In order to identify future policyissues, the IPS commissioned overviewpapers from various experts on sevenareas relevant to policy making andthe public sector. These covered NewZealand’s evolving social structure anddemography, technological developments,the economic context, environmentalimplications, political and geo-politicalconsiderations, and public managementissues. The experts were asked to providea stock-take of the current state ofknowledge in their specialist areas onlikely global and national developmentsover the next 20 years, drawing uponrecent futures work in New Zealand andoverseas. Several structured discussionsbuilding on these papers ensured thatcross-cutting themes and possibilitieswere adequately explored. In addition tothe expert academic contributions, theproject team captured tacit and emergentknowledge from a range of participants,including Mäori, business leaders, olderpeople and younger people, migrants,rural dwellers and regional public sectormanagers.The public management system: a need forchangeThe current New Zealand publicmanagement system is largely the legacyof major state sector reforms in themid-1980s. These reforms, bold andground-breaking at the time, replacedthe unified, lifetime career service andmonolithic sector-based departmentswith the apparatus of the ‘new publicmanagement’, including management byobjectives. With minor modifications,that public management model is still inplace today. Those developments helpedto lift the performance of the state sectorto a level that consistently earned highinternational ratings. According to Bostonand Eichbaum (2007, p.136), the benefitsof the reforms included:greater productive efficiency (especiallyin the commercial parts of the publicsector), improvements in the quality ofcertain services (e.g. the time taken toprocess applications for passports andwelfare benefits has been drasticallyreduced), better expenditure control,better management of departmentalbudgets, greater managerial accountability,and major improvements inthe quality of information available topolicy makers.While New Zealand was well servedby its public management system inthe latter part of the 20th century, theevidence suggests that the system is lesswell designed for the challenges of the 21stcentury. Globally and locally, populationsand their priorities and values are morediverse and issues are more interconnected.Page 32 – Policy Quarterly – Volume 6, Issue 3 – August 2010


This makes gaining and maintainingconsensus on policy directions over thelong haul more difficult. For many ofthe challenges (e.g. water managementand governance; growing obesity levels),there are no simple answers or widelyagreed and proven solutions and in someareas (e.g. climate change) even problemdefinitions are contested. At the sametime, the public expects increased speed,accessibility, customisation, transparencyand user engagement 5 in public services. Ifthe public sector is to respond effectively,the public management system will needto support a broader range of approachesand practices than currently.Challenges and required responsesThe Future State Project identified fourkey challenges for public policy developmentover the coming decades:• affordability, which requires the abilityto achieve step change in policy designand delivery;• more complex problems, involvingmany players, which require thecapability for leadership of issues, codesignand co-production; 6• a more diverse and differentiatedpopulation which requires thecapability for differentiated responses;and• a world of faster, less-predictablechange which requires the capabilityfor constant scanning and learning theway forward. 7AffordabilityCompounding the immediate fiscalpressures generated by the global recessionduring 2008–09, New Zealand, like manyother countries, faces significant longertermpressures on both the demand for,and the cost of, publicly-funded services.These will exacerbate the government’sfiscal difficulties. The cost pressureswill arise because government servicesare generally labour-intensive and, inparticular, are high users of skilled labour,and the cost of which is likely to continueto rise. On the demand side, the ageingpopulation will provide the key driver.Responding to these challenges simply by‘doing more with less’ will not be sufficient– the gap is too large for efficiencies aloneto bridge.Step changeThe public policy challenge is to develop thestep changes in policy design and deliverythat change trajectories – e.g. reducingfrailty levels in an ageing population,increasing levels of educational success,and stepping up the productivity ladder –so that the underlying drivers of spendingare reduced.Take, for example, spending on lawand order (e.g. prisons, police and courts):public expenditure relative to nominalgross domestic product increased from0.5% in 1971/72 to 1.1% in 1988/89, to1.6% in 2009/10. The number of peoplein prison or on probation has relentlesslyincreased while the overall level of crimehas been ‘dropping or stable’ since 1997.New Zealand now has the fourth highestincarceration rate in the OECD after theUnited States, Mexico and the CzechRepublic. A relatively small percentage ofthe population generates most criminalactivity. Achieving a step change wouldrequire responses at two levels. First,breaking out of the cycles of dysfunctionamong a relatively small number of familieswill require changes in how servicesare delivered by a range of governmentand non-government organisations, bothinside and outside the law-and-ordersector. Secondly, at the policy level it willrequire replacing a ‘race to the bottom’ –political parties competing to be ‘toughon crime’ – with a more durable policybargain about a responsible approach tosentencing policy driven less by a focus onpunishment.Complex ‘multi-actor’ policy problemsrequiring co-production and leadershipComplex ‘multi-actor’ policy problemsMany of the policy outcomes that willbe front-of-mind for government (e.g.reducing obesity levels in the generalpopulation) cannot be achieved with theprovision of public services alone butwill require the active contribution ofcitizens, businesses and other actors (coproduction).For some complex issues (e.g.breaking cycles of dysfunction mentionedpreviously), no one actor, includinggovernment, has all the knowledge or theability to effect change independently.In the past, government doing thingsfor or to citizens may have been sufficient.Achieving outcomes in the face of 21stcenturychallenges will depend on theactions of many players and will thereforeincreasingly require governments todo things with citizens (or even enablecitizens to do things for themselves).Bourgon et al. (2009, p.11) have describedthis challenge as follows:This context also pushes governmentsbeyond hierarchy as a broad dispersionof responsibilities in society and thecoordination of complex operationsconstitute the trademark of governmentactivities. It challenges governmentsto experiment beyond directservice delivery with indirect meansof delivery. It pushes governmentsbeyond the provision of services tocitizens as an increasing numberof public policy issues require theactive contribution of citizens increating common public goods. Itpushes governments beyond bordersof the traditional concept of the statetowards a dynamic open system whereorganizations, services and usersinteract.Co-production and co-designGovernment will need to go beyond a‘delivery of services’ model to an approachthat encompasses co-production andAchieving outcomes in the face of 21stcenturychallenges will depend on theactions of many players and will thereforeincreasingly require governments to dothings with citizensPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 33


The Future State Project: Meeting the Challenges of the 21st CenturyNew technologies are being developedand implemented more quickly than ever,creating what is possible faster thanlegislative and regulatory processes canrespond to.co-design. Co-design harnesses theknowledge and creativity of citizensand staff in identifying problems andgenerating and implementing solutions– it offers the opportunity to uncoverthe real barriers to, and accelerants of,progress.Leading not controllingThe government currently works withcitizens and businesses, but often invery restricted ways. For example, underexisting models of consultation, oneparty (government) often determinesthe timeframe, ambit of discussion,range of options to be discussed, processto be used and use to which the fruits ofconsultation are put. If, in the future, thegovernment requires the co-operationand contribution of New Zealanders inorder to achieve results, public agenciesmay need to cede control in some areas(e.g. timeframes, processes used, etc.) inorder to harness the contributions needed.If government organisations are to solveproblems jointly with communities andbusiness groups, the public sector willneed to better understand how differentgroups experience the world, developmore trusting relationships and take onadditional roles (moderator, facilitator,enabler, partner, listener and leader).Leading but not controlling willincreasingly require public employees toengage with the public in different ways.Public employees will need a range of‘soft’ skills to build trust and negotiaterelationships, help with sense-making,and ‘nudge’ the way towards solutions.Developing the way forward will ofteninvolve constructing shared goals, ashared sense of what performance is andagreed frames for evaluating what works.Trustful behaviour is needed to motivateand maintain this exchange.Current processes for policydevelopment, service design and servicedelivery do not necessarily allow for workingin these less controlling, more deeplyengaged ways with groups, communitiesand businesses, so they will need to beadjusted or augmented (see the discussionbelow regarding the upcoming IPS projecton reframing the practice of policy).Diverse society and differentiated responsesDiverse societyAs is the case for many other countries,New Zealand’s population is changingand becoming more diverse. Thisdiversity is increasing across a variety ofdimensions, including ethnicity, familystructures, geographical mobility andsexual orientation. At the same time,expectations of public services areincreasing as information technologybecomes harnessed to real-time, tailoredservice provision in the private sector(e.g. Amazon’s personalised customerrecommendations). The ‘one size fits all’Fordist state prevalent in the 20th century(Dunleavy et al., 2006) will no longersuffice to meet expectations or necessarilyprovide the most effective outcomesin the 21st century. Heterogeneity isthe new ‘normal’ and it is demandingdifferentiated responses.Differentiated responsesThe challenge for public services is tomove to differentiated responses as thenorm rather than the exception and towork in more diverse ways as a matterof course. Some of the approaches andpractices that may be useful are discussedbelow.As noted, one approach to dealingwith diversity is enabling citizens toengage in co-design and co-productionto create initiatives and solutionstailored to the needs of a particularcommunity or sector. Another approachis to recognise and introduce alternativemodels of service delivery and harnessthe full range of choices in relation tothe funding mechanism, the nature andmix of providers, and client selection andchoice to get the best fit for the citizensinvolved and the outcomes sought.Other options include making moreuse of information technology to developa more profound understanding of thecitizenry and its needs. The private sectorhas developed ‘business intelligencesystems’. These use sophisticated dataminingand risk-screening techniquesto understand user experience andbehaviour. The information is thenused to match customers’ preferencesto existing products and shape thedevelopment of new products. In thepublic sector, these technologies couldbe used to improve both government’sunderstanding of clients at risk of poorlife outcomes and the development anddesign of individualised interventions.Information and Computer Technologycan be harnessed to improvedifferentiated responses at an individualclient or case level as well as at a systemand service level. Expert decision toolshave the potential to transform policy,service design and service delivery byharnessing the richness of the datathat is available and the increasinglypowerful tools for interrogating it. Thesecan be used to support professionaldecisions with real-time, relevant, onthe-spotinformation. The extent oftransformation will depend crucially onhow ‘professionals’ and some professionsrespond to the use of these tools.Fast, unpredictable change and scanning,and learning the way forwardThe picture of the world that emergedfrom the Future State scan is onecharacterised by fast-paced change,growing complexity, and unpredictability.New technologies are being developedand implemented more quickly thanever, creating what is possible faster thanPage 34 – Policy Quarterly – Volume 6, Issue 3 – August 2010


legislative and regulatory processes canrespond to. In addition, the challengesalready discussed here are increasing theunpredictability and rapidity of change.For example, more diverse populationsand denser global interconnections arecontributing to a more unpredictableworld.In the midst of this speed, complexity,uncertainty and unpredictability, governmentsstill need to make decisions and act.However, the public management systemthat supports those decision-makingprocesses has been predicated on relativelystable, predictable conditions. Existingprocesses, therefore, need to be supplementedby approaches more suited to sense-makingunder uncertainty, for example via scanningand learning the way forward.ScanningWorking under uncertainty requiresconstant attention to what is emergent,scanning widely, noticing nascent changeand imagining how it could unfold. Inparticular, it means listening to the ‘noise’in order to pick out the important signals.Organisations can use the insights thatarise from scanning to detect adverseconditions, guide policy, shape strategyand explore the need for new productsand services. Scanning helps to provide agreater ability to anticipate future changes.To quote Bourgon (2009, p.9):Countries with the best ability toanticipate and to take correctiveactions will have significantcomparative advantage. They will bestbe able to innovate, adapt and prosperin unforeseen circumstances and theywill be better able to shift the course ofevents in their favour.Some countries, such as Singapore,Britain and Finland, have establishedentities or programmes dedicated toscanning the future.Learning the way forwardResponding to complex problems, wherethe exact problem and the solution are notknown in advance, requires different ways ofworking based on learning the way forward.Current service design is a response to theproblem of moving planned policy to thenext stage of implementation. This is basedFigure 1: Sense-makingSource: Kurtz and Snowden, 2003, pp.462-83on the view that the problem and solutionare known in advance. Learning the wayforward is required in the ‘complex’ (topleft) quadrant in Figure 1 above, whichinvolves acting, sensing and learning andthen responding.The private sector has developedtechniques that involve learning theway forward which go beyond ‘agiledevelopment’. This approach wasdeveloped for situations where theproblem is known but the solution is not.The ‘build to learn’ approach (Ries, 2009)starts with small batches of ‘minimumviable product’ and then works iterativelywith real user experience. This requiressystems that are set up to allow fastiterations and minimise the total timethrough each micro-development loop.It also requires quick response times tofix problems for customers, as well asmonitoring the metrics that stakeholderscare about. This in turn creates an abilityto tell ‘good’ change from ‘bad’ changeand to reverse ‘bad’ change early.21st-century public managementapproachesThe previous section has surveyed theadditional responses required in the faceof 21st-century challenges for government.They include the capacity to:• generate step change;• engage in co-production and codesign;• work in trustful ways;• cede control and provide leadership;• use multiple approaches;• provide differentiated responses;• scan; and• learn the way forward.A public management system fit forthe 21st-century needs to support all theseapproaches whilst preserving existingsystem strengths.The public management system: supporting21st-century responses – key areas forchangeNew Zealand has a first-class publicmanagement system but one that wasdesigned for the conditions of the late 20thcentury. The preceding section outlinedsome major 21st-century challenges andthe the responses needed. The Future StateProject identified two overarching systemadjustments that will be required if thepublic sector is to respond appropriately:• a move towards greater systemcoherence to support a whole-ofgovernmentfocus; and• a move towards applying andintegrating a wider range of systemvalues in order to support a broaderrange of responses.Moving towards a whole-of-government focusFrom a focus on public organisations ...A major formula of the New Zealand publicmanagement reforms in the late 1980s was tosubdivide conglomerate departments intosingle-purpose organisations with clear rolesPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 35


The Future State Project: Meeting the Challenges of the 21st CenturyNew Zealand’s public management systemwas historically based on clan and hierarchy,as were most traditional, career-for-lifepublic services. The reforms of the 1980sand 1990s used market values to reshapestructures and systems and increasefreedom to innovate.and accountabilities and to shift the locus ofcontrol for output delivery to chief executivesand boards of public organisations. Thisprinciple achieved strong focus on knownand knowable problems.Recent initiatives by central agencieshave focused on further improvingthe performance of individual publicorganisations. Good reasons exist for thisemphasis on improving the efficiencyof public organisations. There is nodirect counterpart in the non-marketor core public sector to the signals ofcompetitive product markets or thediscipline provided by the market forcorporate control through the threat oftakeovers in private sector organisations.The core public sector needs comparablemechanisms to identify poor performersand raise performance, and the centralagencies’ initiatives, such as the StateServices Commission-led PerformanceImprovement Framework (State ServicesComission, 2010), can make a usefulcontribution by helping to lift bottomlineorganisational performance andrealise additional efficiency gains. A focuson organisational performance alone,however, is unlikely to generate the stepchange in capability required. Challengessuch as achieving trajectory changes inlaw-and-order spending described earlierneed systems that support and driveholistic, all-of-government responses.… to a focus on organisations and systemperformanceOne of the drawbacks of single-purposeorganisations with clear roles andaccountabilities has been the developmentof tunnel vision by them and theestablishment of barriers to tacklingcomplex problems that require crosscuttingsolutions.A model that has emphasisedspecialisation and pre-specified accountabilitiesstruggles to respond to newissues that demand systems thinking,interconnected responses and innovation.The challenge is to both continue to focuson bottom-line organisational efficiencyand increase the focus on the top line,thereby harnessing the components of thepublic sector to act coherently to addressidentified problems. In this rebalancing,a greater focus will be needed onunderstanding, managing and assessingwhole-of-system performance.The boundaries in the New Zealandsystem start at the top, with a remarkablyfragmented structure of ministerialportfolios. Fewer and wider ministerialportfolios would simplify accountabilitiesand reduce the barriers to collaboration oncross-cutting issues. Similarly, requiringministers to be formally accountable to thepublic for articulated desired outcomesfor their portfolio, in the same way thatbureaucrats are accountable for deliveringoutputs, would strike a better balancebetween outputs and outcomes. Otherpossibilities are to strengthen a collectivesenior leadership cadre as a counterbalanceto the vertical accountabilities anddominance of individual chief executives,and a re-launching of efforts to use circuitbreakermethods. 8Other jurisdictions have systems thatpromote greater shared accountabilityin relation to negotiated outcomes andmeasure system progress in terms ofmovement towards outcomes. For instance,in Western Australia, senior leaders in publicorganisations are assigned responsibilityfor integrating the value chains aroundparticular outcome areas. This could beaugmented by the Canadian approachwhere senior staff members are assigned a‘champion role’ for cross-cutting functionssuch as evaluation and learning.Formal changes to the system alone willnot, however, be sufficient to generate thestep change in system coherence needed.Working across organisational boundaries,for example, is not currently precludedby the current New Zealand publicmanagement model, but nor is it enabledor encouraged by the system settings.Earlier IPS research under the EIP (i.e. the2008 project Better Connected Services forKiwis) found that working collaborativelyacross the public sector requires a specificset of skills and dispositions. Hard-systemfactors, such as structures, appropriations,differences in pay terms and conditions,and formal mandates, were less importantthan soft-system factors, such as a sense ofurgency (a burning platform), leadership(public entrepreneurs, guardian angelsand fellow travellers), learning by doing,and working from an outside-in clientperspective. Respecting and valuing theworld views, competencies, knowledgeand contribution of those from differentteams, agencies and sectors is a baselinesetting for learning together about whatwill work. It is linked to a whole-of-systemand solutions-focused approach, wherethe agendas and interests of individualcontributors are subsumed within theendeavour of problem solving. Thissuggests that the nature of the changes tothe public management system to support21st-century public services may needto be different from the changes of thelate 1980s. Rather than major alterationsto the ‘hardware’ of the architectureof government (e.g. organisationalstructures), the majority of the changeswill need to be subtle and multifacetedmodifications to the ‘software’ of themental models used in the public sector.Supporting a broader range of responsesFrom a few default modes ...New Zealand’s public managementsystem was historically based on clanand hierarchy, as were most traditional,Page 36 – Policy Quarterly – Volume 6, Issue 3 – August 2010


career-for-life public services (Figure 2below). The reforms of the 1980s and1990s used market values to reshapestructures and systems and increasefreedom to innovate. During the pastdecade this has been overlaid with adifferent form of hierarchical control,driven by the desire to minimise risk. Asa result, the current system relies heavilyon a limited range of values associatedwith market and hierarchical quadrants.Yet these limits are not readily apparent tothose who work with or in the systems ona day-to-day basis. Instead, these ‘default’modes merely appear as the normal andnatural way of conducting the business ofthe public service. If New Zealand’s publicmanagement system is considered interms of the competing values frameworkdeveloped by Cameron et al. (2006), itbecomes apparent that it is predicated onand supports values in the bottom twoquadrants (see Figure 2).The Future State Project indicatesthat effective responses to 21st-centurychallenges will require collaboration,trust, agility, creativity and innovation:values associated with ‘clan’ and ‘network’quadrants. The skills needed to operate inthese ways are currently underdevelopedcompared to the skills needed to operatein ‘hierarchy’ and ‘market’ modes, andwill thus need to be augmented. Whatis not required is a simple shift from anoperating style based on the values of the‘hierarchy’ and ‘market’ quadrants to onebased on those of the ‘clan’ and ‘network’quadrants. Rather, the challenge is to buildnew strengths and capabilities so that amore integrated approach can be applied.The work of the public sector is alreadymultifaceted, and an increasingly diversepopulation and more complex challengeswill call for increasingly differentiatedresponses to achieving outcomes. Hence,the public management system will need tosupport multiple modes and approaches,drawing on values from all four quadrantsof the competing values framework.… to matching style to contextLooking ahead, agencies collectivelywill need to apply a range of modelsand approaches to issues and have theknowledge and skills to adopt the bestcombination in each case to generateFigure 2: Competing values frameworkSource: Cameron et al., 2006, p.66productive solutions. This will be amore sophisticated response, involvinga conscious choice of modes, takinginto account the underlying valuesthey embody. Command and controlapproaches are not likely to be a goodchoice, especially where achieving desiredoutcomes depends on co-production.In the future, no one standard operatingprocedure will be fit for purpose, and thecapacity to make the right choices will becentral to the overall performance of thepublic sector.Current approaches to policydevelopment, for example, have mainlybeen developed to respond to ‘technical’problems solvable by ‘expert’ solutions.While suitable for simple or technicalproblems, that approach to policy makingwill not be sufficient for emergingchallenges that require not just a technicalfix but engagement, behaviour change orother kinds of co-contribution. In short,this ‘normal’ default mode for policydevelopment needs to be augmented by awider range of approaches. For example,where solutions to problems are notknown and new responses will need tobe developed, the role of a policy analystwould be transformed from top-downanalysis and prescription to acting asa broker and facilitator for bottom-uplearning. The public sector of the futurewill need to adopt new and multipleapproaches to service design and policy.Policy practices need to be reframed toaccommodate explicit choices abouta wider range of approaches to policy,service design and service delivery.As with the changes needed to generatea step change in system coherence, formalchanges to support a broader range ofresponses will need be made in tandemwith significant shifts in the ‘software’ ofthe mental models used in and about thepublic sector.Some responses to these challengesrequire greater shared understandingsamong politicians, public servants and thepublic as a basis for more durable policybargains. These ways of working shouldenrich rather than undermine democracy,although it may require subtle adjustmentin the nature of the interactions betweenministers and public officials. It will requirepublic officials to take a strong leadershiprole in articulating a shared vision, butthis must be done in a constitutionallyappropriate way. This in turn may triggera refinement of the role of ministers.Future researchThe findings from the Future StateProject led the EIP steering committeeto endorse five new research projects.These projects will be carried out by theIPS during 2010–12. Three of the projectsrelate to public management matters:directions for reforming the New Zealandpublic management model; reframing thePolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 37


The Future State Project: Meeting the Challenges of the 21st Centurypractice of policy; and citizen-centredalternative service delivery. 9 The other twoprojects are policy specific, dealing withNew Zealand’s ocean governance, andissues for Mäori–Crown relations after2014, when all historical claims againstthe Crown by Mäori are expected to havebeen settled. 10 While these two projectswill concentrate on policy, they are also‘live’ examples of challenges demandingnew types of responses from the publicmanagement system because of theircomplex nature, the unknown territory,Box 1. Ocean governance:the New Zealand dimensionThe focus of this two-year project startingin 2010 is to explore the policiesand institutional arrangements NewZealand needs to put in place to protect,manage and harness the resources ofits marine environment. Overall, marinegovernance remains sector-based andfragmented among a range of policies,programmes and agencies with marineresponsibilities. There are 18 mainstatutes, 14 agencies and six governmentstrategies for marine managementand planning (Vince and Hayward,2009). New Zealand has also signedover 13 international conventions withmarine implications, including the 1992Convention on Biological Diversity andthe United Nations Convention on theLaw of the Sea (Foster, 2003). Effectivethe number of stakeholders and diversityof interests involved.Direction for reforming the New Zealandpublic management modelThe aim of this 15-month project is toexplore more deeply some of the specificchallenges identified in the FutureState Project and consider the concreteimplications for the public managementsystem. The project will seek to examineissues such as:• the need to redefine the role ofocean governance is difficult for a rangeof reasons, including the dynamic andcomplex relationships and connectionsthat exist in coastal marine ecosystems,and the increasing human demand onthese ecosystems. Governance, however,is made more complicated by the fracturedframework of laws, regulations andpractices that exist at different governmentlevels. The mandates of variousagencies that implement and enforceexisting systems often conflict with eachother. No institutional framework existsfor establishing a common vision anda common set of objectives. What isneeded is a systems perspective thatfacilitates thinking about interactionsamong multiple biophysical and humandrivers and directs management attentionthat can reflect these interactions.Box 2. Post-Treaty settlements issuesThis IPS-led project is being undertakenas a joint venture with Te Kawa a Mäui(Mäori Studies) at Victoria Universityof Wellington, beginning in 2010 andlasting for up to two years. It aims toprovide the policy community and thewider public with a better understandingof emerging Crown–Mäori relations, andhelp inform the design of institutionsand policies that support the continuingdevelopment of a prosperous, cohesiveand fair society for Mäori and non-Mäori. In particular, the project seeks tobring together a diverse set of high-qualityanalyses which focus on a small setof topics that are considered of importancein the emerging Crown–Mäori relationship,and stimulate informed publicdebate around these issues. The projectwill be forward-looking in the sense thatits focus is not on the resolution of pastgrievances but on issues such as socialservice delivery, resource managementand constitutional arrangements, includingthe status of ongoing Mäori parliamentaryrepresentation and the Treaty ofWaitangi. The issues that will continueto arise in the Crown–Mäori relationshipare all large, complex and often very difficultconceptually and politically. In relationto many of them there are stronglyentrenched viewpoints, and in somecases there will be major difficulties infinding consensus.government departments from that ofisolated vertical silos to that of hubsresponsible for co-ordinating largenetworks of public and non-statesector entities;• the need to redirect the focus ofcentral agencies away from controllingindividual department performance toensuring co-ordination and coherencyin a new, whole-of-government modeof working; and• the consequential demand on thepublic management system for aworkable approach to whole-ofsystemperformance accountability.Ocean governanceOcean governance provides a clearillustration of an extremely complexpolicy area where a large number ofpublic sector and non-state actors havesubstantial conflicting interests anddifferent political agendas, and wherenew, systems-based ways of organising,working and monitoring within the publicmanagement system will be essential if asuccessful integrative approach to policydevelopment and implementation is to beformed (see Box 1).Reframing the practice of policyThis project, which is scheduled to startin 2011 and conclude in 2012, will examinethe challenges for policy development infast-paced, complex and unpredictableenvironments. Current approaches topolicy development are primarily designedto respond to ‘technical’ problems thatare solvable by ‘expert’ solutions. Thatapproach on its own will not be sufficientfor emerging challenges that requirenot just a technical fix but engagement,behaviour change or other sorts of cocontribution.Are techniques such as codesignand co-production viable responsesto better engagement and more effectiveoutcomes? If policy practices need to bereframed to include these modes, whatare the changes that need to be made topolicy processes, conventions and ways ofworking to enable this?Post-Treaty settlementsIn addition to the ocean governanceproject, the post-Treaty settlementsproject provides examples of the kinds ofPage 38 – Policy Quarterly – Volume 6, Issue 3 – August 2010


complex issues where a reframing of thecurrent policy practice could benefit theoutcomes achieved (see Box 2).Citizen-centred alternative service deliveryThis 12-month project, commencinglater in 2010, will consider the impactof population diversity on the effectivedelivery and implementation of publicservices. It will investigate the extent towhich customisation of services, such asin the health and welfare sectors, is neededto meet different needs, and alternativeoptions for service delivery. Customisationoptions may include the use of co-designand co-production approaches, alternativefunding mechanisms, various modes ofproduction, and tailoring the nature andmix of providers.ConclusionNew Zealand is part of an increasinglyfast-paced, heterogeneous, complex andunpredictable global environment. Howthis country responds will determine itsfuture prosperity and the well-being ofits citizens. The capability and capacityof New Zealand’s public sector will have asignificant bearing on our ability to adaptand flourish.The current public managementsystem, designed for relatively stableand predictable conditions, has servedNew Zealand well over the last 20 years.The evidence suggests, however, that itwill not provide the optimal platformfor addressing the challenges of the21st century. The Future State Projectidentified the need for a rebalancing ofpublic management settings to strengthenoverall system coherence. At the sametime, there is a need to broaden therange of policy and delivery approachessupported, whilst retaining current systemstrengths. In approving five new researchprojects, the EIP is seeking to contributeto a deeper understanding of how thepublic management system needs tochange in order to support a step changein performance.1 The EIP is an initiative established in 2006 between publicservice chief executives and the School of Government atVictoria University of Wellington to carry out research intosignificant policy and management issues relevant across arange of public service agencies.2 For the purposes of this article, the public managementsystem comprises the arrangements for governing a country,including the means by which policies are developedand implemented by public sector organisations and theprocesses for funding, managing and monitoring thoseorganisations.3 A more detailed account of the Future State Project iscontained in Gill et al. (2010).4 This recognises that New Zealand’s democracy is highlycentralised, with over 90% of public expenditure beingallocated through central government.5 ‘User engagement’ or ‘user generation’ refers to the activeinvolvement of users in defining and generating products andservices.6 ‘Co-design’ harnesses the knowledge of citizens and staff increating solutions. Co-production occurs where both publicorganisations and citizens/clients must perform tasks ifresults are to be achieved, such as revenue collection.7 Learning the way forward, discussed below in more detail, isa response to complex problems involving acting learning andthen responding.8 Circuit-breaker teams were developed in response to theReview of the Centre to address complex cross-cuttingissues (see Minister of State Services, 2004). Although theapproach showed initial promise, efforts were not sustainedand the initiative withered and died.9 These public management projects are being led by DerekGill, a senior fellow of the IPS. Any enquiries relating to theseprojects can be directed to him at: derek.gill@vuw.ac.nz.10 The project leader for the ocean governance project is DrMike McGinnis, a senior fellow of the IPS. For informationand other enquiries about the project, he can be contactedby email at: mike.mcginnis@vuw.ac.nz. The post-Treatysettlements project is being led by Associate Professor PaulCallister, who is Deputy-Director of the IPS. Enquiries aboutthe project can be sent to: paul.callister@vuw.ac.nz.ReferencesAdvisory Group on the Review of the Centre (2001) Report of the AdvisoryGroup on the Review of the Centre, Wellington: State ServicesCommissionBoston, J. and C. Eichbaum (2007) ‘State sector reform and renewalin New Zealand: lessons for governance’, in G.E. Caiden and T. Su(eds), The Repositioning of Public Governance: global experience andchallenges, Taipei: Best-Wise PublishingBourgon, J. (2009) ‘New governance and public administration: towards adynamic synthesis’, public lecture hosted by the Australian Departmentof the Prime Minister and Cabinet, Canberra, Australia, 24 FebruaryBourgon, J. et al. (2009) Literature Scan # 1: On the Need for a NewSynthesis of Public Administration, from A New Synthesis of PublicAdministration project, available at: http://www.ns6newsynthesis.com/documentsCameron K.S., R.E. Quinn, J. Degraff and A.V. Thakor (2006) CompetingValues Leadership: creating value in organizations, Cheltenham, UK:Edward Elgar PublishingDrucker, P. (1964) Managing for Results, New York: HarperDunleavy, P., H. Margetts, S. Bastow and J. Tinkler (2006) ‘New publicmanagement is dead: long live digital-era governance’, Journal ofPublic Administration Research and Theory, 16 (3), pp.467–94Eppel, E., D. Gill ,M. Lipps and B. Ryan (2008) Better Connected Servicesfor Kiwis, Wellington: Institute of Policy Studies, Victoria University ofWellingtonFoster, A. (2003) ‘New Zealand’s ocean policy’, Victoria University ofWellington Law Review, 34, pp.469–96Gill, D., S. Pride, H. Gilbert and R. Norman (2010) The Future State,working paper 10/08, Wellington: Institute of Policy Studies, VictoriaUniversity of WellingtonKurtz, C.F. and D.J. Snowden (2003) ‘The dynamics of strategy: sensemaking in a complex and complicated world’, IBM Systems Journal, 42(3), pp.462–83Maxwell, G. (2009) ‘Understanding and responding to criminal offending’,in G. Maxwell (ed.), Addressing the Causes of Offending: what is theevidence?, Wellington: Institute of Policy Studies, Victoria University ofWellingtonMinister of State Services (T. Mallard) (2004) ‘Practical guide to attackingproblems released’, media release, http://www.beehive.govt.nz/node/20364Ries, E. (2009) ‘Pivot, don’t jump to a new vision’, http://www.startuplessonslearned.com/2009/06/pivot-dont-jump-to-new-vision.html, accessed 28 April 2010Schick, A. (1996) The Spirit of Reform: managing the New Zealand statesector in a time of change, Wellington: State Services CommissionState Services Commission (2010) Performance Improvement Framework,http://www.ssc.govt.nz/display/document.asp?docid=7700, accessed2 JulyVince, J. and M. Hayward (2009) ‘New Zealand oceans governance:calming turbulent waters?’, Marine Policy, 33 (2), pp.412–18Policy Quarterly – Volume 6, Issue 3 – August 2010 – Page 39


David BromellIncomeInequalityand the Economyof IdeasGrowing unequalAmong OECD countries, New Zealand has moved fromhaving relatively low income inequality in the early 1980s tohaving above average inequality by the mid-2000s (OECD,2008). Research conducted by Bryan Perry (2009) at theMinistry of Social Development shows that in New Zealandin 2008 the percentile ratio of income inequality (equivaliseddisposable household income before deducting housingcosts) for P90 (top decile) to P10 (bottom decile) was 4.0,compared to 3.3 in 1984. The ratio for P80 (top quintile) toP20 (bottom quintile) for before-housing costs in 2008 was2.6, compared to 2.3 in 1984.Those ratios are calculated for householdincomes and over the population as awhole, in order to assess trends over timeand to provide internationally comparableDavid Bromell is a principal advisor in theMinistry of Social Development and a seniorassociate of the Institute of Policy Studies.This article is based on notes prepared for asymposium on economic inequality hosted bythe University of Otago on 9 June 2010.data. Of course, there are much greaterinequalities at the level of individualincome. The ratio for P80 to P20 forindividual incomes in New Zealand’sworking-age population (aged 18 to 64) in2009 was around 5.5.In the state sector the salary bands ofchief executives and the vice-chancellorsof universities are a matter of publicrecord (State Services Commission,2009). The ratio of the mid-point ofbottom to top salary bands in publicservice organisations is not 2.6 or 5.5 but,on average, approximately 11.0. Thingsare marginally less equal in the universitysector, where the ratio is, on average,approximately 13.0. In the private sector,I estimate that the ratio between the midpointof the average salary of a call centreoperator in New Zealand ($37,500) andthe value of the ‘compensation’ packagepaid to Paul Reynolds as chief executive ofTelecom in the year to 30 June 2009 (anestimated $7.2 million according to theNational Business Review (2009)) is 191.0. 1Even the least sceptical may wonderwhether one employee is capable ofproviding, on average, value for moneyfor one hour of work that is 11, 13 or 191times greater than that provided by afellow employee. 2I am personally inclined, moreover,to the idea that inequality damagesdemocracy. For New Zealand to beviable in a global economy, we needeffective democracy as well as efficientmarkets. As John Myles (2007, p.18) putsit: ‘Markets need democracy to makePage 40 – Policy Quarterly – Volume 6, Issue 3 – August 2010


market economies viable for people.’Marked income inequality risks damagingdemocracy to the extent that it creates twopublics: one preoccupied with makingends meet, the other with keeping andgrowing its wealth; whereas effectivedemocracy depends on a common publicin which citizens see themselves as ‘allin the same boat’ (Cunningham, 2007;Dewey, 1927).‘Equality is better for everyone’?Richard Wilkinson and Kate Pickett inThe Spirit Level: why equality is betterfor everyone (2010) present a significantbody of evidence that there is a strongassociation between social stratification,and specifically economic inequality, andhealth and social problems in developednations. The evidence they present suggeststhat ‘we are affected very differently bythe income differences within our ownsociety from the way we are affected bythe differences in average income betweenone rich society and another’ (Wilkinsonand Pickett, 2010, p.11, italics theirs). Infact, ‘when we make comparisons betweendifferent societies, we find that thesesocial problems have little or no relationto levels of average incomes in a society’(ibid.). They acknowledge that associationdoes not prove causality, and that even ifthere is a causal relationship, this doesnot tell us what is cause and what is effect(pp.190–6). Their book ‘simply points outthat if you increase the income and statusdifferences related to these [health andsocial] problems, then – unsurprisingly –the problems all become more common’(p.196).They assert, moreover, that the illhealth and social problems associatedwith income and status differences affectall members of an unequal society, notjust those at the bottom, although it maydisproportionately affect those who arerelatively least well off. 3 The solution theypropose (ibid., pp.238–9) to persistent andinterconnected social problems is neitherdiscrete and siloed interventions, nor‘joined-up’ services and programmes toaddress the symptoms of distress withinthe health, education, justice and welfaresectors. What is required is a concertedprogramme to address the cause of negativesocial outcomes by reducing economicinequality and social stratification andimproving social mobility at the bottom.As Runciman (2009) puts it, Wilkinsonand Pickett invite us to stop trying to joineverything up, and to start seeing how itall fits together.Turning a ‘big idea’ like that into publicpolicy comes, however, at a price. The costcan be cognitive, economic and political.Cognitive priceFirst, ideas come with a cognitive pricebecause claims as to truth, or value, if theymean anything at all, may at least partiallyexclude other claims to validity.For example, the late Brian Barry, aself-styled ‘democratic socialist’, proposed(1998, pp.22-4) that in order to avoid socialexclusion, nobody ought to have less thanhalf the median income, and only a fewought to have more than three times themedian income. That is, the ratio of thetop income to the bottom income in asociety ought not to exceed six to one.Median weekly income in New Zealandfor all people aged 15 years and over fromall sources (including for people withno source of income) in the June 2009quarter was $538 (Statistics New Zealand,2009). Barry’s proposal implies that noNew Zealander should have a gross weeklyincome of less than $270 ($14,000 perannum) or more than $1,600 ($84,000 perannum).If we think that Barry, and Wilkinsonand Pickett, are right, then we cannotconsistently maintain, at the same time,that in the absence of externalities andother sources of market failure a marketfree of policy intervention will allocateresources efficiently. Nor can we basepublic policy on the ‘trickle down’ notionthat if only the wealthy are able to earnmore and keep more of their wealth,they will have an incentive to workharder, invest more, take more risks anddrive economic development, which willeventually benefit those at the bottom.These ideas are mutually exclusive, at leastin part. (We would also have to let go ofsome of our operative thinking aboutmerit, risk, reward, ‘do it yourself’ and‘free loading’.)Even if ideas and ways of thinkingdo not logically exclude one another,partially or completely, they can crowdeach other out of thinking space andpublic discourse. For example, since thelate 1980s New Zealand’s population hasbecome significantly more ethnicallydiverse, due to higher Mäori and Pacificfertility rates, inter-ethnic partneringand parenting, and changing patterns ofmigration. New Zealand today has a moreethno-culturally diverse population thanWhen public discourse focuses on socialgroup identities, rather than on the commongood and the norms of mutual support thatunderpin redistribution within a welfarestate, political will to address economicinequality can be seriously compromised ...many other developed nations (Bromell,2008, pp.21–57). This diversity, togetherwith the Mäori resurgence and Treaty ofWaitangi settlements process since themid-1970s, has meant that public discoursefor over 30 years has been dominated by apolitics of identity rather than a politicsof social stratification, social mobility andeconomic equality. This ‘crowding out’ of apolitics of equality is regrettable, because,at least in the short run, immigrationand ethnic diversity tend to reduce socialsolidarity and social capital (Putnam,2007). When public discourse focuses onsocial group identities, rather than on thecommon good and the norms of mutualsupport that underpin redistributionPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 41


Income Inequality and the Economy of Ideaswithin a welfare state, political will toaddress economic inequality can beseriously compromised (Bromell, 2008,pp.295–9; 2009; cf. Banting, 2005; Bantingand Kymlicka, 2006).The cognitive, or at least rhetorical,price of a politics of equality is that wemay have to focus less on our differencesthan on what we have in common; lesson social group identities and specialrights than on our common identity, ourcommon needs, our common good.Economic priceSecondly, ideas come with an economicprice. This takes us to the core business ofpublic policy: the definition and analysisof problems; the identification of options;evidence-gathering about correlation,causation and ‘what works’; and thecalculation of cost-benefit and tradeoffs,who pays, risks and their mitigation,and contingency for unintendedconsequences.Wilkinson and Pickett emphasise thatwhat matters is the level of inequality wefinish up with, not the particular routethat gets us there (Wilkinson and Pickett,2010, pp.245–7). They nevertheless outlinetwo broad strategies: one using taxes andbenefits to redistribute income; the otherachieving narrower differences in grossmarket incomes before any redistribution.Both strategies come at a price.New Zealand is a small, geographicallyisolated country with an open economy,a highly mobile population and alimited talent pool, operating within acompetitive international labour market.Redistribution through tax and transfers,or a cap on higher salaries, run the riskthat a larger number of those with thedrive to get ahead will emigrate and taketheir capital, skills and entrepreneurialattitudes with them. As it is, around onemillion New Zealanders (about one infive) are currently living overseas.On the other hand, unlessaccompanied by greatly improved labourproductivity, raising gross incomes at thelower end by increasing minimum wagerates will drive up the price of goods andservices and make New Zealand exportsand tourism products less competitive.The issue is rather that government has notthought through its policy interventions as acoherent package that is explicitly designedto reduce social stratification and economicinequality and to promote social mobilityat the bottom.Raising benefit levels would have a fiscalimpact on the Crown accounts. It couldalso create a disincentive to employmentand independence, when there is strongevidence that the best route out of poverty,at least for the vast majority, is throughpaid work. Long-term work absence has,in general, a negative impact on health andwell-being (Royal Australasian College ofPhysicians, 2010).Reducing inequality within a societyin order to address the cause of healthand social problems could well be a goodidea. But talk is cheap unless practicableproposals are developed to implementthis ‘big idea’, with robust analysis of whowill pay and how, and of the price we, asa society, will put on equality, as on ourpresent levels of inequality.There is, in fact, a range of conceivableoptions that, in some combination orother, could reduce social stratificationand economic inequality:• public investment in the early years,and in health and education servicesgenerally, to enable upwards socialmobility at the bottom;• investment in state housing andincome-related rents;• economic and regulatory reform,immigration policy, and investmentin infrastructure, research anddevelopment, capital per worker, andeducation and training (includingsignificantly raising management skillsand performance), to improve labourproductivity and create a high-wageeconomy;• active labour market policies to movepeople off welfare and into sustainableemployment;• employment law which discouragesboth under- and over-employment;• redistributive policies implementedthrough tax and transfers;• policies to promote economicdemocracy and greater equality in grossincomes before taxes and transfers: forexample, the setting or raising of aminimum wage, the introduction of aguaranteed minimum income, and/ora ceiling on remuneration at the top, atleast in the state sector;• encouragement of collective bargainingof wages and terms and conditions ofemployment;• tax policies and social marketingto encourage volunteering andphilanthropy and otherwise supporta strong community and voluntarysector; and• investment in public broadcasting, andin institutions, urban design, publictransport and public space, so thatcitizens of all sorts can rub shoulders,encounter the reality of one another’slives, build social capital and socialcohesion and constitute a commonpublic.All these options come at a price andtheir cost-benefit needs to be calculatedwithin a fiscal context that determinescertain limits to and opportunities forwhat can be undertaken at any particularpoint in time. And in fact, none of thesehas been entirely absent from governmentpolicy during the period inequality hasgrown in New Zealand society. Theissue is rather that government has notthought through its policy interventionsas a coherent package that is explicitlydesigned to reduce social stratificationand economic inequality and to promotesocial mobility at the bottom. The focushas been rather on ‘baking a bigger cake’Page 42 – Policy Quarterly – Volume 6, Issue 3 – August 2010


and ‘the rising tide that lifts all boats’,with a great deal of public expenditureon programmes and services (whetherameliorative or merely palliative) torelieve the symptoms of social distress. 4Political priceThirdly, ideas, and especially big ideas,come with a political price.The job of democratically electedpoliticians is to develop, promote andvote for policies that express the will ofthe people they represent in Parliament.The 2005 and 2008 general electionswere contested, in significant part, overtax cuts. The National-led governmentelected in 2008 has delivered these, in arelatively even-handed manner, to generalapproval.The prime minister has made muchof the 2010 tax changes as being ‘fairer’(Key, 2010a). They are fair, if fairnessis construed as a roughly proportionalimpact across all income bands, ratherthan as a narrowing of the gap between richand poor. The Treasury has estimated theimpact of the tax changes as a percentageof average disposable household incomeacross all income bands as between 0.4and 0.7% (English, 2010b, p.9). The taxmeasures announced in the 2010 Budgetwill probably make no measurabledifference to income inequality in NewZealand. Indeed, in a pre-Budget warmupthe prime minister urged Kiwis not tobe jealous if the rich get more – ‘becausethe rich are crucial to the economy’ (Key,2010b).If Wilkinson and Pickett’s ‘big idea’ is toget any political traction in New Zealand,then the electorate will have to want, anddemand, a different kind of fairness, adifferent kind of future New Zealand.The New Zealand Listener recentlyhighlighted some findings of MasseyUniversity’s Department of Marketing’sInternational Social Survey Programme(New Zealand Listener, 2010). 5 Whenthe respondents were asked ‘Are incomedifferences in New Zealand too large?’,62% said yes, compared to 75% in 1999 and72% in 1992. When asked ‘Should peopleon higher incomes pay a larger share oftheir income in taxes than those on lowerincomes?’, 53% said yes, compared to 60%in 1999 and 71% in 1992. When asked‘Should the Government reduce incomedifferences between people?’, 40% said yescompared to 52% in 1992.A similar shift in values was evidencedin a 2010 UMR Research survey of 750people (ibid., p.15).6 To the statement‘Inequality continues because it benefitsthe rich and powerful’, 44% agreed,compared to 60% in 1992. To the statement‘Large income differences are necessaryfor New Zealand’s economic prosperity’,32% disagreed, compared to 60% in 1992.These findings are consistent with those ofthe New Zealand Election Study (http://www.nzes.org/) and give little hope thatthe electorate will demand a reduction inincome inequalities any time soon.A democratically-elected government,if it wishes to retain power, will implementpolicies that reflect its manifestocommitments and electoral mandate.To do otherwise, even from the highestof ethical motives, courts failure in thepolls. Wilkinson and Pickett concede that,in fact, ‘governments have usually notpursued more egalitarian policies untilthey thought their survival depended onit’ (Wilkinson and Pickett, 2010, p.241).A New Deal for the 21st century?Wilkinson and Pickett invite ‘a historicshift in the sources of human satisfactionfrom economic growth to a more sociablesociety’ (ibid., p.231). They suggest thatdeveloped nations are ‘close to the end ofwhat economic growth can do for us’ (p.5).They urge developed nations to trade offan economic growth path and materialconsumption against improvements inquality of life as measured by health,happiness, friendship and communitylife, and to do so in ways that areenvironmentally sustainable and that willboth mitigate against and adapt to climatechange.There seems to be little political willin New Zealand at present for such aNew Deal, and that is unlikely to changeunless an alternative vision of societycaptures the hearts and minds of NewZealanders. Short of a national crisis toshake things up (a major earthquake inthe capital? a volcanic eruption in theAuckland region?), building the case fora politics of equality will be a long-term... [Wilkinson and Pickett] urge developednations to trade off an economic growthpath and material consumption againstimprovements in quality of life as measuredby health, happiness, friendship andcommunity life,...task. Specifically, we need to improve ourunderstanding of:• when and in which respects inequalityis bad for almost everyone, and whenpoor outcomes exhibit strong socialgradation and why;• whether, in which respects and towhat extent the relationship betweeneconomic inequality and poor socialoutcomes is one of causation ratherthan correlation;• the relationships that prevail overtime between income inequality, skills,labour productivity, social capital andthe efficient operation of economicmarkets;• social mobility in New Zealand,particularly at the bottom and in termsof urbanisation and the geographicalclustering of disadvantage;• life-course and intergenerationalaccumulation and transmission ofadvantage and disadvantage; and• the dynamic relationships betweenethno-cultural homogeneity/diversity,social capital and attitudes to incomeinequality and redistribution.Policy Quarterly – Volume 6, Issue 3 – August 2010 – Page 43


Income Inequality and the Economy of IdeasAbove all, a politics of equality willrequire a great deal of public debate aboutthe kind of society we want to create hereand the price we are willing to pay, nowand in the future, to achieve it.1 See further Wilkinson and Pickett (2010, p.250) on the ratioof CEO pay to average worker pay.2 New Zealand responses to the International Social SurveyProgramme on perceived deserved incomes for a companychairperson relative to an unskilled factory worker havescarcely changed since 1992, with median values of 4.0 in1992 and 4.3 in 2009.3 Runciman (2009) points out that Wilkinson and Pickettfudge an important distinction between the claim that inmore equal societies almost everyone does better, andthe claim that everyone does better on average. Comparethe sub-titles of various editions of The Spirit Level: ‘whymore equal societies almost always do better’; ‘why greaterequality makes societies stronger’; ‘why equality is better foreveryone’.4 New Zealand currently spends close to $51 billion (72% ofcore Crown expenditure, or 25% of New Zealand’s nominalGDP) on social security and welfare, health, education, andlaw and order (English, 2010a).5 The New Zealand survey was conducted in 2009 by a mailsurvey of around 1,000 responses. Some questions were notasked in 1999. Margin of error of ±3% or less (at the 95%confidence level).6 Margin of error of ±3.6% (for a 50% figure at the 95%confidence level).ReferencesBanting, K. (2005) ‘The multicultural welfare state: internationalexperience and North American narratives’, Social Policy andAdministration, 39 (2), pp.98–115Banting, K. and W. Kymlicka (eds) (2006) Multiculturalism and theWelfare State: recognition and redistribution in contemporarydemocracies, Oxford and New York: Oxford University PressBarry, B. (1998) Social Exclusion, Social Isolation and the Distributionof Income, CASE paper 12, Centre for Analysis of Social Exclusion,London School of Economics, http://ideas.repec.org/p/cep/sticas/12.html, accessed May 2010Bromell, D. (2008) Ethnicity, Identity and Public Policy: criticalperspectives on multiculturalism, Wellington: Institute of PolicyStudies, Victoria University of WellingtonBromell, D. (2009) ‘Recognition, redistribution and democratic inclusion’,in R. Openshaw and E. Rata (eds), The Politics of Conformity in NewZealand, North Shore City: PearsonCunningham, F. (2007) ‘What’s wrong with inequality?’ in Why InequalityMatters, in 1,000 Words or Less, Toronto: Canadian Centre for PolicyAlternatives, http://www.policyalternatives.ca/publications/reports/whyinequality-matters-1000-words-or-less,accessed May 2010Dewey, J. (1927) The Public and its Problems, New York: H. HoltEnglish, B. (2010a) Budget 2010: key facts for taxpayers, Wellington:New Zealand Government, http://www.treasury.govt.nz/budget/2010/taxpayers/b10-taxpayers.pdf, accessed June 2010English, B. (2010b) Budget 2010: minister’s executive summary,Wellington: New Zealand Government, http://www.treasury.govt.nz/budget/2010/execsumm, accessed MayKey, J. (2010a) Budget 2010 about opportunity for Kiwis, prime minister’smedia statement, 20 May 2010, http://www.beehive.govt.nz/release/budget+2010+about+opportunity+kiwis, accessed MayKey, J. (2010b) quoted in ‘Budget gifts for the poor’, http://www.stuff.co.nz/ national/politics/3707735/Budget-gifts-for-the-rich, 18 MayMyles, J. (2007) ‘Income inequality and democracy’, in Why InequalityMatters, in 1,000 Words or Less, Toronto: Canadian Centre for PolicyAlternatives, http://www.policyalternatives.ca/publications/reports/whyinequality-matters-1000-words-or-less,accessed May 2010National Business Review (2009) ‘How Paul Reynolds’ pay stacks upagainst the competition’, 26 August, http://www.nbr.co.nz/article/howpaul-reynolds-pay-stacks-against-competition-109069,accessed May2010New Zealand Listener (2010) ‘All things being equal’, 1-7 May, pp.14-21.OECD (2008), Growing Unequal? Income distribution and poverty inOECD countries, country note: New Zealand, http://www.oecd.org/dataoecd/45/43/41527985.pdf, accessed May 2010Perry, B. (2009) Household Incomes in New Zealand: trends in indicatorsof inequality and hardship, 1982 to 2008, Wellington: Ministry ofSocial Development, http://www.msd.govt.nz/about-msd-and-our-work/publications-resources/monitoring/household-incomes/index.html,accessed May 2010Putnam, R. (2007) ‘E Pluribus Unum: diversity and community inthe twenty-first century’, the 2006 Johan Skytte Prize Lecture,Scandinavian Political Studies 30(2), pp.137–74Royal Australasian College of Physicians (2010) Realising theHealth Benefits of Work: A position statement, Sydney: RoyalAustralasian College of Physicians, http://www.racp.edu.au/index.cfm?objectid=84C0100F-E554-2865-DFEF6FEE0666A005,accessed June 2010Runciman, D. (2009) ‘How messy it all is’, review of The Spirit Level: whymore equal societies almost always do better, London Review of Books,31/20, 22 October, pp.3–6, http://www.lrb.co.uk/v31/n20/davidrunciman/how-messy-it-all-is,accessed June 2010State Services Commission (2009), Annual Report of the State ServicesCommission for the year ended 30 June 2009, Wellington: StateServices Commission, http://www.ssc.govt.nz/display/document.asp?NavID=272&DocID=7425, accessed May 2010Statistics New Zealand (2009), New Zealand Income Survey: June 2009quarter, Wellington: Statistics New Zealand, http://www.stats.govt.nz/browse_for_stats/work_income_and_spending/income/nzincomesurvey_hotpjun09qtr.aspx, accessed June 2010Wilkinson, R. and K. Pickett (2010) The Spirit Level: why equality is betterfor everyone, London: Penguin (first publ. 2009)Page 44 – Policy Quarterly – Volume 6, Issue 3 – August 2010


Paul Brown, Paul Callister, Kristie Carter and Ralf EnglerEthnic MobilityIs it Importantfor Researchand PolicyAnalysis?Paul Brown is a Principal Statistician atStatistics New Zealand. He has a long-standinginterest in the statistical measurement ofethnicity, having contributed to the developmentof New Zealand official statistics in this field overthe past three decades.Paul Callister is the Deputy Director of theInstitute of Policy Studies. He has had a longinterest in ethnic measurement and publicpolicy.Kristie Carter is Senior Research Fellow atthe Department of Public Health, Universityof Otago, Wellington. Kristie’s main researchinterests are around the ethnic and socioeconomicdeterminants of health and theimplications of epidemiological research onpolicy decision making. She is also interestedin psychological outcomes and longitudinal andepidemiological methods.Ralf Engler has been an analyst with theMinistry of Education for 6½ years, workingfirstly in the area of early childhood educationand teacher supply, and more recently intertiary education. His current focus is on theprogression of students from secondary school totertiary education.IntroductionPublic policy discussionsinvolving ethnicity oftenassume that people remainin fixed ethnic categories overtheir lifecycles. While NewZealand research carried outa decade ago had alreadyidentified ethnic mobilityin the census in relationto Mäori, the dramaticand somewhat unexpectedincrease in ‘New Zealander’-type responses in the 2006census provided a very highprofile example of peoplechanging their responses toethnicity questions. Researchinto the growth of NewZealander-type responsesin the census has focusedprimarily on whether theseare valid responses, howthey should be recorded andreported on, and how thesedecisions might affect theoverall usefulness of ethnicitydata. One question in thisresearch has been wherethese responses came from:that is, what these peoplerecorded in the previouscensus. Asking this questionexplicitly recognises thatpeople may not always recordthe same response in similarsurveys over time, or evenacross a range of surveys atany one point in time. Peoplemay be ethnically mobile, orat least appear to be mobile.Policy Quarterly – Volume 6, Issue 3 – August 2010 – Page 45


Ethnic Mobility Is it Important for Research and Policy Analysis?Internationally, there is much researchinterest in ethnic mobility. The literaturesuggests that there are three possiblesources of change in responses aboutethnic affiliation: unreliability inmeasurement; changes due to alterationsin ethnicity questions; and consciouschanges in ethnic affiliation (Carter etal., 2009). Conscious changes in ethnicitycan be over a lifetime, or there could... there are threepossible sourcesof change inrepsonses aboutethnic affiliation:unreliability inmeasurement;changes due toalterations inethnicity questions;and conciouschanges in ethnicaffiliation.be intergenerational mobility. Whenmore than one ethnic group can berecorded in surveys, as is the case in NewZealand, conscious changes may involvean alteration of ethnic identification(switching from one ethnicity to another),or the addition of an ethnic group to(complexification) or deletion of a groupfrom (simplification) a previous set ofidentifications. Hence ethnicity at anypoint in time is a complex social processthat needs more understanding.Switching groups can be the result ofchanging incentives, both positive andnegative. Reflecting a range of positiveincentives, the growth of American Irishin the United States was far faster thannatural population growth would predict(Hout and Goldstein, 1994), as has thegrowth of Native Americans (Light andLee, 1997; Eschbach, 1993). In relation tothe Irish, Waters (2000) observes that inthe 19th century Irish in the US were seenas a separate race from other Europeans.At this time, the stereotype of the Irishpopulation was of the group having highrates of crime, a lack of education andnegative family values. Waters suggests thatif population predictions had been madein the early 20th century, the anticipatedgrowth in the Irish population would havebeen very low. Yet such predictions wouldnot have taken into account the rise ineducation and income amongst Irish, aswell as a growth in the popularity of Irishculture helped by dance and music groupssuch as Riverdance gaining internationalprominence.In Canada, Guimond (2006) hasexplored ethnic mobility in relation tothe growth of Aboriginal populations.Between 1986 and 1996 the census countof the population with Aboriginal originwent from 711,000 to 1,102,000, with a largepart of this growth occurring between1986 and 1991. Guimond noted that thisfast growth could not be explained bynatural and migratory increases alone.He also noted that the exceptional growthof populations of Aboriginal origin seennationally occurred off Indian reservesand was particularly strong in urbanareas. Guimond speculates as to why thegrowth occurred, and points to a numberof important legislative and socialchanges which improved the profile andstatus of Aboriginal peoples. He goes onto note that understanding the sourceof ethnic mobility is important. Therewas a very strong rise in the number ofpost-secondary-educated graduates ofAboriginal origin, and he shows thatthis increase is in part explained by the‘arrival’, as a result of ethnic mobility, ofmore educated individuals, rather than bygreater school success among individualsalready identified as Aboriginal people in1986. As another example, Simpson andAkinwale (2007) show that in Trinidadthe count of young adult Africans grewrapidly after the successes of the BlackPower movement in the 1960s.Other forms of ethnic mobilitycan make understanding social changedifficult. An example is the effect ofintergenerational ethnic mobility onsocial mobility. In the US, Duncan andTrejo (2005) studied the progress ofMexican Americans. Controlling for otherfactors, they found that, on average, USbornMexican Americans who marriednon-ethnic Mexicans were substantiallymore educated and proficient in Englishlanguage than Mexican Americanswho married other Mexicans. Moreimportantly, the children of intermarriedMexican Americans were much less likelyto be identified as Mexican than werethe children of marriages where bothpartners were Mexican. The researchersconcluded that such selective ethnicmobility might bias observed measuresof intergenerational progress for MexicanAmericans.Three areas of research show thatthere is some degree of ethnic mobilityin New Zealand. These are the recentcensus mobility project undertakenby Statistics New Zealand to betterunderstand the growth in the ‘NewZealander’-type responses; a Universityof Otago, Wellington study of three wavesof the longitudinal Survey of Family,Income and Employment (SoFIE); and anumber of Ministry of Education studiesof transitions from school to tertiaryeducation. In this paper we begin bybriefly outlining the findings from thesethree areas of research. On the basisof these findings, as well as the broadinternational literature, we argue thatthe mobility taking place in New Zealandis important for both researchers andpolicy makers. Given this importance, weconclude by considering some emergingideas for handling ethnic mobility whenundertaking policy analysis.The census and the ‘New Zealander’responseStatistics New Zealand has monitoredinter-ethnic mobility between censusesover the past three decades. Understandingpatterns and trends in inter-ethnic mobilityhas contributed to the development of themodels used to produce demographicPage 46 – Policy Quarterly – Volume 6, Issue 3 – August 2010


estimates and projections of the size andcomposition of ethnic populations, as wellas aiding understanding of the dynamicsof ethnic identity. Inter-ethnic mobilitymonitoring has been based on researchstudies which have linked questionnairesof individuals between successive censusesin order to compare and analyse theconsistency of individual responses tothe ethnicity questions. The most recentstudy, comparing the 2001 and 2006censuses, also investigated the impact ofthe increased New Zealander response atthe 2006 census on inter-ethnic mobility(Brown and Gray, 2009).Over the past three decades, grossinter-ethnic mobility between the majorethnic categories has grown from around4% in 1976–81 to 9% in 1991–96. Then, in2001–06 it increased markedly to 20%.The growth trend is associated with anincrease in the reporting of multipleethnic identities over this period, whichhave increased from around 5% to 10%.However, the elevated result for 2001–06reflects also the increased level of NewZealander responses at the 2006 census.The 2001–06 study showed that 92% ofthe growth of New Zealander responsesat the 2006 census can be attributed topeople who at the 2001 census reportedthemselves as ‘New Zealand European’and not in any other ethnic group. Thisconfirmed what was the major driverof the apparent increase of the NewZealander population at the 2006 censusand the associated apparent decrease ofthe New Zealand European population.The 2001–06 study also showed thatthe increased New Zealander response inthe 2006 census also exerted an influenceon the Mäori, Pacific Island Peoplesand Asian groups, with net inter-ethnicmobility rates for these groups rangingbetween –1.0% and –2.0%. That is to say,there were net losses from these groupsto the New Zealander group. In contrast,these groups showed net gains from theNew Zealand European group, rangingbetween +0.5% and +4.2%. The NewZealand European influence on thesegroups was consistent with the previous1991–96 study (Coope and Piesse, 2000).While the impact of the 2006 NewZealander response on Mäori, PacificIsland Peoples and Asian was relativelysmall, it was nevertheless significantenough to feature in the governmentstatistician’s decision not to change theformat of the ethnicity question for the2011 census (Statistics New Zealand, 2009,p.iii). It should also be noted that the netflows result from considerably larger grossflows, as illustrated in the summary of thefour studies reported above.The strong growth of a ‘NewZealander’-type response createdchallenges for Statistics New Zealand, aswell as for researchers, as to how to presenthistoric census time series as well as howto undertake population projections. Interms of the latter challenge, a decisionwas made to provide an option to combineEuropean and New Zealander responses ina new category called ‘European or Other’(Statistics New Zealand, 2009, p.3).SoFIE and ethnic mobilityIn 2009, researchers from the University ofOtago, Wellington undertook exploratoryresearch aimed at identifying changes inself-identified ethnicity of individuals overthree years of a longitudinal survey, andhow this varied by certain demographicfactors. The researchers used data from2002 to 2005 from the longitudinal Surveyof Family, Income and Employmentrun by Statistics New Zealand (N =17,625) (Carter et al., 2009). Self-definedethnicity was recorded (independently)every year and participants could recordmultiple ethnicities. Ethnicity was codedto level 1: NZ European/ Päkehä, Mäori,Pacific, Asian and Other. Combinationsof ethnicity variables were also createdfrom the perspective of each of the level 1groups. Thus, from the Pacific perspectivea respondent could be sole Pacific,Pacific plus at least one other group, ornon-Pacific (any other ethnic group(s)excluding Pacific). A change in ethnicitywas defined as any change in the reportedethnic group(s) of an individual over thefirst three waves of SoFIE (i.e. from wave 1to 2; from wave 2 to 3).Overall, 8% of respondents changedethnicity at least once during the threewaves of the survey. In logistic regressionanalyses the strongest predictor of changingself-identified ethnicity was reportingMäori, Pacific and Asian ethnicity at wave1, as well as identifying with more than oneethnic group. In multivariable regressionanalyses it was found that individuals whochanged ethnicity were also more likely tobe younger, to be born overseas, to livein a family with children, to be in moredeprived groups and to have poorer selfratedhealth.This exploratory analysis showedsome fluidity around the concept of selfidentifiedethnicity.The strong growthof ‘New Zealander’-type responsecreated challengesfor Statistics NewZealand, as well asfor researchers, as tohow to present historiccensus time seriesas well as how toundertake populationprojections.Ministry of Education’s school–to–tertiarytransitions dataThere is much interest in the outcomesof students after they leave school. This‘transition period’ is of interest both togovernment policy makers and to tertiaryinstitutions which might enrol thesestudents in their courses. The Ministry ofEducation has combined several sourcesof data to compile a ‘transitions’ dataset to study and analyse the outcomes ofstudents before and after this transitionperiod. These sources of data includeschool achievement data from theNew Zealand Qualifications Authority(NZQA), and tertiary enrolment datafor students undertaking formal study,industry training and various targetedtraining schemes, sourced from theministry’s own data or from the TertiaryPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 47


Ethnic Mobility Is it Important for Research and Policy Analysis?Education Commission. In each of thesesources of data, information is recordedabout a student’s ethnicity.In the school achievement data andin formal tertiary enrolments, up to threeethnic responses are recorded. The datasources are linked using a unique studentidentification number, referred to as theNational Student Number (NSN). Usingthe NSN, the transitions data set providesstudent-level information about a student’sethnicity at school and in their tertiaryMore investigationof ethnic mobilitymay be carried outwith more wavesof SoFIE data, aswell as from futuredata collection andresults from theGrowing Up in NewZealand study andqualitative researchasking peopleabout their ethnicidentification.studies. Research reported on in 2008indicated that students’ ethnicity recordedin tertiary education can differ from thatrecorded at school (Baldwin, 2008). Insome exploratory research, Baldwinfound that 15% of students changed theirethnicity overall, but this figure was 18%for students who were identified as Mäoriin school but who identified as Mäori/European in the tertiary data. WhileBaldwin did not speculate on why this was,it was widely assumed that these changesconstituted some kind of error in the dataor collection process. As this paper makesclear, however, it is just as likely that thesechanges in ethnic identification representreal changes in people, all the more soconsidering the time of transition fromschool to tertiary education.Other data sourcesAny longitudinal study has the potentialto record ethnicity at more than one pointin time. The long-running ChristchurchHealth and Development Study hasenquired about respondents’ ethnicgroup affiliations more than once anddiscovered some mobility. However, theydo not consider this to be of importance,attributing it more to measurement errorthan real change (Fergusson, 2009). Morerecently initiated surveys, particularlythe Growing Up in New Zealand studywhich aims to track a birth cohort to age20, have the potential to ask about ethnicidentification of the parents and childmore than once over the life course.In addition to the Ministry ofEducation data, there are otheradministrative data sets which have morethan one recording of ethnic responses.One is in the health sector, where, whilethose engaging with the health system willin theory have a unique National HealthIndex number (NHI), basic demographicdetails, including ethnicity, can change aspeople have various contacts with healthproviders.Some possible ways to use ethnicity whenthere is ethnic mobilityAs discussed, ethnic mobility can beinherent in longitudinal data if ethnicityquestions are asked at more than onepoint in the survey, even when asked thesame way. One pragmatic response to the‘problem’ of changing ethnicity is to ignoreany change, choosing instead a singlepoint in time in the data capture series –perhaps the first response – and assumingthat this is the ‘correct’ one. But this seemsarbitrary and avoids social explanation.However, there are methods by whichethnic mobility can be reported and usedin analysis. Some recent education studieshave used a method of reporting ethnicitythat is able to incorporate the ethnicmobility seen in longitudinal data. Themethod, using never, ever and sole ethnicgroup categories, is described more fullyin Engler (2010a). However, using Mäorias an example, with this method the ‘never’group never has a Mäori ethnic response(either as a sole response or as part of dualor multiple ethnicity). The ‘ever’ grouphas a Mäori response in one or more ofthe surveys. For the ‘sole’ Mäori, this is theonly response in each survey. Like the ‘totalcounts’ ethnic measure for cross-sectionalethnic data, there is some overlap betweenthe ‘ever’ and ‘never’ groups betweendifferent ethnic groups. The never, everand sole ethnic has previously been usedonly for the Mäori ethnic group, andpredominately in health research. Whilethis method enables the reporting andanalysis of changing ethnicity, it alsoallows for the analysis of within-ethnicgroupvariation.Education data shows the effect ofusing such categories. When data onthe transition from school to tertiaryeducation is analysed using this methodof reporting ethnicity, insights areprovided that are not seen with methodsthat assume ethnic group homogeneity.For example, students with average orabove-average academic school results –who achieved NCEA level 3 and met theUniversity Entrance (UE) requirement–and who attended decile 1 or 2 schoolsare significantly less likely to go on tobachelor-level study than similar studentsfrom high- or mid-decile schools; but onlyif they are students from the sole-Pasifikaand Mäori ethnic groups (the effect isstronger for sole-Mäori) (Engler 2010a).These same students, once they enrol inbachelor-level qualifications at university,show lower likelihood of passing most oftheir first-year courses if they are sole-Pacific students (Engler, 2010b). In 2008the overall proportion of Mäori schoolleavers who met the UE requirementwas 43%. This, however, is comprised of54% of ever-Mäori students who met thisstandard, versus 29% of sole-Mäori. Alsoin 2008, 27% of Mäori students studiedat tertiary level 4 or above within twoyears of leaving school, compared with43% of students overall. The figure is 40%for ever-Mäori, while for sole-Mäori it is16%.These findings suggest particulardisadvantage faced by a ‘core’ group ofMäori and Pacific people. This supportscross-sectional data that has consistentlyshown a gradient of disadvantage,Page 48 – Policy Quarterly – Volume 6, Issue 3 – August 2010


Managing Mixed Financing of PrivatelyOwned Providers in the Public InterestBy Judith Smith, Nicholas Mays, Crispin Ovenden, JacquelineCumming, Janet McDonald and Jonathan BostonManaging Mixed Financing ofPrivately Owned Providers inthe Public Interest comparesthe financing of general practice(primary health care), long-termcare of older people, legal aid,and early childhood educationin New Zealand, Australia,and England. Each service ischaracterised by a different mixof public and private finance.The authors identify the criteriadeemed important whenassessing whether a particularmix of public and private financeproduces a service that meetspublic goals. These criteriaare then drawn together in anassessment framework that policymakers can use when deciding ontheir approach to mixed financing.The framework assesses mixedfinancing from the perspectives ofthe state, providers, and users.An Institute of Policy Studies publication by Judith Smith, Nicholas Mays, Crispin Ovenden, JacquelineCumming, Janet McDonald and Jonathan BostonPublication July 2010Format A5 paperback, pp 116ISBN 978-1-877347-39-9 Price $27 (including P&P within New Zealand)Place your order by email, phone, fax or mail to:Institute of Policy Studies, Victoria University of WellingtonEmail: ips@vuw.ac.nz Telephone +64 4 463 5307, Fax + 64 4 463 7413PO Box 600, Wellington, New ZealandAn invoice will be issued with your order.CLIMATE CHANGE AND MIGRATIONEdited by Bruce BursonMany South Pacific island states arevulnerable to the impacts of climatechange. Indeed, some are alreadyexperiencing population movementdue to environmental events andprocesses likely to be exacerbatedby future climate change. Yet othersare at risk of disappearing altogetherover the coming century and beyond.The potential for climate change togenerate population movement overthe coming decades, therefore, raisessubstantial domestic and internationalpolicy challenges. This edited volumeis the result of a conference held inWellington in July 2009 that examinedthese and related issues. Drawing ona range of perspectives, this volumeidentifies concepts, frameworks, andpossible policy responses to dealeffectively with what may becomeone of the greatest humanitarianchallenges of the 21st century.Bruce Burson is a human rightslawyer specialising in refugee andmigration law and policy. He wasthe principal conference organiseron behalf of the Institute of PolicyStudies.An Institute of Policy Studies publication by Bruce BursonPublication July 2010Format A5 Paperback, pp 184ISBN 978-1-877347-40-5 Price - $27 (including P&P within New Zealand)Place your order by email, phone, fax or mail toInstitute of Policy Studies, Victoria University of WellingtonEmail ips@vuw.ac.nz Telephone +64 4 463 5307 Fax +64 4 463 7413PO Box 600, Wellington, New ZealandAn invoice will be issued with your orderPolicy Quarterly – Volume 6, Issue 3 – August 2010 – Page 49


Ethnic Mobility Is it Important for Research and Policy Analysis?While we stillconsider currentethnic measuresused in officialstatistics tobe sufficientlyrobust for mostof the policy usesmade of themin New Zealand,the dynamicnature of ethnicidentity posessome problemsfor consistentstatisticalmeasurement ofethnicity.from sole Mäori and Pacific, throughcombinations of Mäori and Pacific,lessening for those who record Mäoriand/or Pacific and European responses,through to those being, on average, themost advantaged in the sole Europeangroup (Gould, 2000; Chapple, 1999, 2000;Chapple and Rea, 1998). However, thereasons for this gradient are not clear andKukutai (2003) suggests that social policymakers should not put too much weighton such cross-sectional gradients. Interms of Mäori outcomes, Kukutai arguesthat the key differences within the widerMäori ethnic group are between thosewho identify primarily as non-Mäori,when pushed into choosing one group,and all others. This is in contrast to theChapple (2000) focus on sole Mäori as theoutlier in social and economic outcomes.While still not telling us the cause ofdisadvantage, a benefit the longitudinaldata have over cross-sectional data isthat we have more than one recording ofpeople noting a ‘sole’ response, suggestingthat this may indicate a stronger primaryaffiliation.Further researchWe are only now beginning to understandthe level of ethnic mobility taking place inNew Zealand. More longitudinal researchis needed to further clarify the fluidity ofethnicity over time. More investigationof ethnic mobility may be carried outwith more waves of SoFIE data, as wellas from future data collection and resultsfrom the Growing Up in New Zealandstudy and qualitative research askingpeople about their ethnic identification.Such research is needed to explore a widerange of questions pertaining to how, whyand where people change their ethnicidentification.As yet, we remain uncertain as to whattypes of ethnic mobility are importantand why ethnic mobility occurs. Weneed to know more about what might beconsidered a major versus a minor ethniccategory change. For example, is a shiftfrom a European and Samoan responseto just a Samoan response of the sameimportance as a shift from Samoan onlyto European only?We also need to be cautious aboutadopting new ways of dealing withinconsistent ethnic responses acrosstime. While the ‘never’, ‘ever’ and ‘sole’categorisation is one potential method,we need to better understand its strengthsand weaknesses. As an example, in healthdata we may have a situation where thereare six recordings of ethnicity for a person,with five being ‘sole’ Mäori and one Mäoriand European. This person would bereported as being ‘ever’ Mäori. But wouldthis ‘ever’ Mäori be similar to a personwho had five recordings of Europeanonly and one of Mäori and European? Isthere some potential to weight responses;or is this a throwback to thinking aroundbeing ‘fractions’ of Mäori, with imposednotions of ‘blood’ and ‘dilution’ by racial/ethnic intermixing and negative orpositive connotations depending on whois making the judgment? Or does sucha change simply indicate errors in thedata? Further research would help clarifysome of these issues. This could includeresearch into the benefits and drawbacksof methods of self-prioritisation: that is,ways of allowing respondents themselvesto determine a potentially enduring ‘main’ethnicity.With some shifts we also need to beclearer as to whether we are seeing mobilityor instead what could be considered arelabelling. The ‘New Zealander’ responsemay be an example of this, where theold labels no longer seem appropriate tosome respondents. In all this research,it is especially important to understandhow young adults develop their ownself-identified ethnicity. Therefore, weneed to do more research in the youngergenerations (those aged 15–25). Someoverseas research suggests there may beless interest in national or ethnic identityamong this age group, especially the socalledmajority (Fenton, 2007).ConclusionWhile some within the researchcommunity have long been aware of ethnicmobility, the growth of the New Zealanderresponse in the 2006 census demonstratedto the wider public that ethnic responsescan change over time. Subsequent NewZealand studies of ethnic mobilityhighlight that it is important especiallyfor Mäori and Pacific people. While westill consider current ethnic measuresused in official statistics to be sufficientlyrobust for most of the policy uses made ofthem in New Zealand, the dynamic natureof ethnic identity poses some problemsfor consistent statistical measurementof ethnicity. As such, there needs to beongoing monitoring, investigation anddiscussion by researchers to progressunderstanding of ethnic identity dynamicsover lifecycles and over time. This isrequired not only to ensure measurementquality, but to broadly map the changingcultural fabric of New Zealand society,and in particular to identify more clearlywhere disadvantage lies.Page 50 – Policy Quarterly – Volume 6, Issue 3 – August 2010


AcknowledgementsThis paper emerged from a March 2010workshop jointly hosted by the Instituteof Policy Studies and the PopulationStudies Centre at Waikato University. Theaim of the forum was to share ideas aboutprocesses of ethnic identity construction,identification and change, in order toenhance the usage of ethnic data bypolicy makers and analysts. The ideasexpressed in this paper are those of theauthors and do not represent the viewsof their employers. The paper benefitedfrom some helpful comments by DavidPearson.SoFIE-Health is primarily fundedby the Health Research Council of NewZealand as part of the Health InequalitiesResearch Programme and funding fromthe Foundation for Research, Science andTechnology helped support the runningof the workshop.1 Using census data, Coope and Piesse (2000) foundexamples of ethnic mobility with, as an example, a 23%inflow and 6% outflow for the Mäori ethnic group in 1996compared to the 1991 group.2 http://www.growingup.co.nz/.ReferencesBaldwin, K. (2008) ‘Nominated ethnicity changes of students fromsecondary to tertiary education: secondary to tertiary transitions’,paper presented to the ‘Who Are We: ethnicity and identity’ seminar,Statistics New Zealand, 3 SeptemberBrown, P. and A. Gray (2009) ‘Inter-ethnic mobility between the 2001and 2006 Censuses: the statistical impact of the New Zealanderresponse’, in Statistics New Zealand, Final Report of a Review of theOfficial Ethnicity Standard 2009, Wellington: Statistics New Zealand,appendix 2Carter, K.N., M. Hayward, T. Blakely and C. Shaw (2009) ‘How muchand for whom does self-identified ethnicity change over time in NewZealand? Results from a longitudinal study’, Social Policy Journal ofNew Zealand, 36, pp.32–45Chapple, S. (1999) ‘Explaining patterns of disparity between Mäori andnon-Mäori employment chances’, Labour Market Bulletin, 1, pp.70–100Chapple, S. (2000) ‘Mäori socio-economic disparity’, Political Science, 52(2), pp.101–15Chapple, S. and D. Rea (1998) ‘Time series analysis of disparity betweenMäori and non-Mäori labour market outcomes’, Labour MarketBulletin, 1 and 2, pp.27–144Coope, P. and A. Piesse (2000) ‘1991–1996 inter-censal consistencystudy’, unpublished paper, Statistics New ZealandDuncan, B. and S.J. Trejo (2005) Ethnic Identification, Intermarriage, andUnmeasured Progress by Mexican Americans, NBER working paper11423Engler, R. (2010a) School Leavers’ Progression to Bachelors-level Study,Wellington: Ministry of EducationEngler, R. (2010b) Academic Performance of First-Year Bachelors Studentsat University, Wellington: Ministry of EducationEschbach, K. (1993) ‘Changing identification among American Indians andAlaska Natives’, Demography, 30 (4), pp.635–52Fenton, S. (2007) ‘Indifference towards national identity: what youngadults think about being English in Britain, Nations and Nationalism,13 (2), pp.321–39Fergusson, D. (2009) personal communicationGould, J.D. (2000) ‘Counting Mäori’, New Zealand Population Review, 26(2), pp.1–19Guimond, E. (2006) Ethnic Mobility and the Demographic Growth ofCanada’s Aboriginal Populations from 1986 to 1996: report on thedemographic situation in Canada 1998–1999, Statistics Canada,Demography DivisionHout, M. and J.R. Goldstein (1994) ‘How 4.5 million Irish immigrantsbecame 40 million Irish Americans: demographic and subjectiveaspects of the ethnic composition of white Americans’, AmericanSociological Review, 59 (1), pp.64–82Kukutai, T. (2003) The Dynamics of Ethnicity Reporting: Mäori in NewZealand, discussion paper prepared for Te Puni Kökiri, Wellington: TePuni KökiriLight, I. and C. Lee (1997) ‘And just who do you think you aren’t?’,Society, 34, pp.28–30Simpson, L. and B. Akinwale (2007) ‘Quantifying stability and change inethnic group’, Journal of Official Statistics, 23 (2), pp.185–208Statistics New Zealand (2009), Final Report of a Review of the OfficialEthnicity Standard 2009, Wellington: Statistics New ZealandWaters, M.C. (2000) ‘Immigration, intermarriage, and the challenges ofmeasuring racial/ethnic identities’, American Journal of Public Health,90 (11), pp.1735–7Policy Quarterly – Volume 6, Issue 3 – August 2010 – Page 51


Mining in the Conservation EstateLasting Lessons from the Schedule Four DebateMonday 23 August, Government Buildings lecture theatre oneEarlier this year the Government invited public submissions on whether to deleteabout 7,000 hectares of the conservation estate from Schedule 4 of the CrownMinerals Act, in order to allow mining. Following public submission, the Governmentannounced in July that the suggested deletions would not proceed, but that otherparts of the conservation estate would be actively targeted for mining development.The reopening of political debate on commercial development of conservation landsraises wider issues about the balance of development and conservation values. Thisone-day symposium will explore these issues.Programme8.45 am-10.30 am Policy, Legislation and ProceduresPhilip Woollaston, Minister of Conservation 1989-90,Origins of the legislation and policy relating to minerals inconservation areasTom Bennion, Wellington barrister and VictoriaUniversity lecturer in Environmental Studies, Comparingaccess provisions for mining and other activities10.45 am-12.15 pm Economic analysesCarolyn Van Leuven, Ministry of EconomicDevelopment, The analysis behind Government policyGeoff Bertram, Institute of Policy Studies, Mining in theNew Zealand Economy1.00 pm-2.30 pm International perspectives: Balancing EnvironmentalValues and ‘Development’Gundars Rudzitis, University of Idaho, Mining anddevelopment, theory and praxis: The United Statesexperience and beyondViktoria Kahui, University of Otago, Pressure from coastaloil drilling in Norway: lessons for the debate on mining inNew Zealand conservation estate2.45 pm-5.00 pm Lessons from the Schedule 4 Debate: Where Next?Chris Baker, Straterra, Don’t let a few facts get in the wayof a good protestQuentin Duthie, Royal Forest & Bird Protection Society ofNZ, The schedule four debate: valuing, protecting and sustainablymanaging natural resourcesKen Piddington, Institute of Policy Studies and formerParliamentary Commissioner for the Environment,Minerals: Assaying the MinefieldRegistrationInstitute of Policy StudiesVictoria University ofWellingtonPO Box 600WellingtonE: ips@vuw.ac.nzT: +64 4 463 5307For more details visitwww.ips.ac.nzThere is no cost forregistration

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