Political Party Accounts, Unaccounted For?

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Elaine Byrne 31 January 2014

An exchange between the Chair of the Standards in Public Office Commission recently the Minister for the Environment, Community and Local Government, Mr. Phil Hogan T.D., with regard to the draft guidelines on political finance largely went by unnoticed. Just as unnoticed were the implications of the far-reaching Electoral (Political Funding) Act 2012. 

The potential effect of the Minister’s decision not to implement the Standard Commission recommendations on party finance is that Fine Gael, and the state’s other political parties, are not obliged to provided a detailed set of accounts until 2016. The cynical might suggest the timing is thus convenient – after the 2016 election.

This is my submission to the Standards Commission, based on research conducted for the IDEA index of political financing, Global Integrity report and the European Commission report on corruption in Ireland. There’s a chapter in my corruption book on political donations in Ireland spanning 1980s-2000s. The submission distinguishes between donations to political parties and individuals from (a)corporations with government contracts, (b) corporations which are actively undergoing a tender process for the procurement of public funded contracts and (c) corporations which are government owned or partially government owned. It also examines multiple donations by the same individual, the role of third parties, the difficulties around accrual v cash receipts and the capacity of the Standards Commission.

Below is my Sunday Business Post column on the implications of the political finance.

The Standards in Public Office Commission recently concluded its public consultation on its draft guidelines for political parties on the publication of their financial accounts. This is one of the most significant developments relating to political finance in the history of the state, yet the only political parties to enter any submissions were Fine Gael and Fianna Fáil. Apparently the left has no opinion on how political parties are funded. No accountancy firm entertained any submission on the mechanics of annual political accounts, which is rather bizarre given the business that is about to come their way.

The corrosive effect of unregulated donations on democracy was documented in excruciating detail within the Beef, McCracken and Moriarty tribunals and, more recently, the Carrickmines chapter of the Mahon Tribunal. That a third of Fianna Fáil’s disclosed donations came from property and construction interests during the three election periods between 1997 and 2007, has allowed the perception of unorthodox influence within Irish political life to exist.

Under the new legislation, the maximum a politician or election candidate can now receive is €1,000 while donations to political parties will be capped at €2,500.

Neither Britain nor the US imposes any limits on political donations. The British Committee for Standards in Public Life has expressed admiration for the Irish donation system, but their attempts to reform funding rules for political parties were shelved earlier this year. That said, Ireland is one of the most generous countries when it comes to publicly funding political parties. The exchequer paid out almost €13 million in 2012 to pay the salaries of party staffers and other internal party functions such as political research. Democracy is dependent on a competitive party system and political parties need money to function.

From this month, all donations above the €200 threshold must be disclosed. Up to now, it was legitimate for political parties to not divulge details of donations under €5,078.

This led to a ludicrous situation in 2011. Despite a general election campaign, presidential election, two referendums and a bye-election, only €30,997 in donations was disclosed by all the parties combined. Fine Gael has not disclosed any donations above the threshold since 2001.

All political parties will be required to publish a standardised set of annual accounts from next year. These financial reports will have much more detail than that traditionally published in the party’s programmes at the Ard Fheiseanna each year. Income from membership, donations and donations in kind must be disclosed, as must liabilities to creditors and any outstanding debts.

A comprehensive picture of the financial health of Irish politics will be revealed to the public for the first time in 2014. Or so it seems on the surface.

I have some concerns about the guidelines and legislation, however.

The biggest worry is that it will never actually happen. Sections 86 and 89 of the 1997 Electoral Act contain a little-known clause which may well delay this from happening.

There is a time limit and only one man can stop the clock ticking on the implementation of transparency into how Irish politics is funded. Unless the Minister for Local Government, Phil Hogan, signs off on the draft guidelines before December 31 2013, then political parties do not have to file their 2015 accounts to the Standards Commission until June 2016. That’s three years and a general election away.

Secondly, the reforms on paper may be very different to what they are in practice. The intent of the donation law is to prevent any conflicts of interest arising out of the acceptance of donations. Corporate donations above €200 will only be accepted if the donor is registered with the Standards Commission. Corporate donations are not just those from companies but include trade unions and building societies as well. The donation must be accompanied by a statement confirming that it has been approved by the members, shareholders or trustees of the corporate donor. This will make it very difficult for corporate donors to give money to politics.

But there are always ways around everything. Big donations can still be split into lots of small donations, as long as a corporation or trade union is registered and discloses the donations. For example, going on the 2011 general election result, Fine Gael returned 76 seats. An individual or corporate donor under the legislation can still donate a maximum of €1,000 to each of the Fine Gael TDs and €2,500 to the party.

Under this formula, Fine Gael and its TDs could legitimately receive €78,500 per year from one donor. For Labour it would be €39,500, Fianna Fáil €22,500 and Sinn Féin €16,500.

This was exactly what the Mahon Tribunal warned of. A key recommendation was that ”an overall limit be placed on the amount which an individual may give” on the grounds that ”there is nothing to prevent an individual donor from giving a donation to each member of a political party and the political party itself”. Once registered and disclosed, there is nothing to stop an individual or corporate donor spreading a big donation across lots of smaller contributions. Successful businessmen are perfectly entitled to donate as individuals rather than under the umbrella of their companies. The same goes for prominent trade union officials.

The third worry is that the detail in the party accounts may be too vague. International best practice shows that there should be a threshold on the aggregate amount which corporations with government contracts, businesses tendering for such contracts or corporations which are partially or wholly owned by the government should give to a political party, electoral candidate or elected representative. Of the 43 European countries surveyed by the Institute for Democracy and Electoral Assistance, 30 have an outright ban on donations from corporations with government contracts and corporations which are government owned or partially government owned. Ireland does not.

There should be a sub-heading under ”donation” within the annual party accounts which records and identifies the aggregate donations of each of these entities.

The same should also apply to donations from individuals, corporate donors and third parties. So called ”third parties”– that are neither political parties nor candidates have often spent large funds to influence political discourse in Ireland. Declan Ganley’s Libertas think-tank is a much cited example. Yet during the Lisbon Treaty Referendum II campaign, pan-European political parties spent €364,000 advocating a yes or no vote.

The final concern is about capacity. In its submission, Fianna Fáil said it was concerned that the Standards Commission ”might lack the technical accounting and legal expertise to verse and review the financial statements of each political party”. In line with savings throughout the public sector, the Commission’s funding is 5.4 per cent less than what it was in 2008, despite it having major new responsibilities — regulating a lobbying register and monitoring political accounts.

The intent by the government is noble, but there is a danger that this worthy initiative has the potential to be undermined by these four loopholes.

The legislation is like having the best shoes that a tailor can make, but unless the shoelaces are tied probably, then the best shoes in the world won’t stop you tripping up in the long run. Let’s get this right for once and for all.

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