Cash flow crunch leaves political parties $7m short and Nepean candidate in limbo

The cash flow crunch caused by the High Court’s decision to turf out campaign finance laws show there’s more than seven million reasons for the Allan government and Liberal-led Opposition to restore public funding for political parties and candidates in Victoria.

However, the major parties have been warned that any attempt to stitch up a deal which bakes in their funding advantage over minor parties and independents will land them back in court.

Victorian Electoral Commission figures published before this month’s High Court decision, which abolished the state’s system of donation caps, disclosure requirements and public funding for election campaigns, show that Labor and the Coalition were entitled to a combined $24.3 million in electoral funding for the current, four-year parliamentary term.

The funding was available to all political parties or independent candidates which received four per cent or more of the vote at the 2022 state election.

The major parties were separately entitled to $17.6 million in administrative funding, which can be used to pay for policy development and political staff, bringing to $41.8 million the amount of taxpayer support for their political activities.

Of this money, $7.2 million was still outstanding on the morning of April 13, when the High Court upheld a challenge by independent candidates Paul Hopper and Melissa Lowe to the constitutional validity of the state’s electoral laws. The final instalment was due to be paid on April 28.

The VEC has informed recipients of public funding that, due to the court decision, it has no means of paying them the money they are owed. A funding register published by the VEC has been removed from public view and replaced with a statement from the electoral regulator.

“As the High Court of Australia has declared that Part 12 of Victoria’s Electoral Act 2002 is invalid … the VEC does not have a mechanism to make political funding payments, take compliance actions related to Part 12, or regulate and publish political donations,” the statement reads.

The decision has thrown into uncertainty campaign financing for Saturday’s byelection in the seat of Nepean, where eight candidates are running in the absence of any state-based rules about the source or disclosure of donations or provisions for public funding.

Former ABC journalist Tracee Hutchison, who chose to run as an independent without any financial support from Climate 200, deposited $40,000 of her own savings into a Rosebud Community Bank account to pay for campaign T-shirts, corflutes, flyers and advertising.

When she began her campaign, as long as she secured more than 4 per cent of the primary vote she was entitled to recoup $7.46 in public funding for every vote she received. As the Electoral Act currently stands, there is no provision for her to get any of this money.

“We are still awaiting advice from the VEC,” she said. “It is a pretty risky strategy to put in your own money, but that’s how deeply I care about this place and getting a different outcome.”

High-level talks have begun between the government and opposition over how to repair the state’s campaign finance framework ahead of the November 28 general election.

Premier Jacinta Allan, who has promised to “immediately move” to draft remedial legislation, is personally involved in the discussions. She says the new laws will apply retrospectively from the date of the High Court judgment.

The government is separately talking to the Greens, who supported the passage of the 2018 legislation which established the previous regime but have since called for reform to make the laws fair for smaller parties and independents.

“We won’t support anything that is just another major party stitch-up where Labor and the Liberals rig the rules to suit themselves and lock out independents and minor parties,” Greens leader Ellen Sandell said.

Public law expert Will Partlett, an associate professor at the Melbourne Law School and fellow with the Centre for Public Integrity, urged the government to seek independent legal advice and a broader range of views before pushing through any legislative fix.

“The major parties might think that once again they can do an exclusive deal between themselves to increase their chances of staying in power. The High Court has told them they cannot do that,” he said.

“If the new changes once again favour the major parties, the government runs the risk – just seven months out from the [general] election – of the High Court again finding what they have legislated to be illegal.”

Simon Holmes a Court, the co-convener of the Climate 200 group which helped fund Hopper and Lowe’s legal challenge, expressed scepticism about the government’s likely response. “If the very first thing they do is write massive cheques from the taxpayer to themselves, they’ve learned the wrong lesson,” he said.

Hopper and Lowe’s High Court case centred on the special treatment Victoria’s laws extended to the major parties. While Victoria, until this decision, imposed a $4970 cap on donations from any single source across a four-year electoral cycle, its scheme included an exemption for donations made by nominated entities – legacy investment funds established to support the Liberal, National and Labor parties.

The government’s own counsel, Solicitor-General Alistair Pound, conceded during the hearing that part of the scheme favoured the major parties for no justifiable reason.

The day after the High Court decision, Labor Party state secretary Steve Staikos wrote to MPs cautioning them to “continue to uphold high standards of integrity and transparency” in their fundraising activities. He instructed them not to accept donations from non-citizens living overseas and to maintain accurate records of all donations accepted.

“In anticipation of new legislation responding to the High Court’s decision, the maintenance of complete donor details and records will best position us to comply with any new requirements,” Staikos said.

Similar instructions were issued by Liberal Party state secretary Alyson Hannam.

“We will work with the government to ensure that Victoria has transparent electoral laws that promote the freedom of everyday people to contribute to democracy,” she said.

“In the meantime, Victorian law does not require you to disclose any donation. However, the government is considering its legislative response, and this donation may be required to be disclosed at a future time.”

Hannam reminded all MPs and candidates not to accept foreign donations and that under federal law, all payments to the party of more than $17,300 must be disclosed to the Australian Electoral Commission.

Start the day with a summary of the day’s most important and interesting stories, analysis and insights. Sign up for our Morning Edition newsletter.