All this week on The Spinoff, a series of articles examine the crisis in our electoral funding rules. How did we get here? How might we fix it? Here Liam Hehir sets out how a donations regime of compulsory anonymity might actually work. 

For the last little while, I’ve talked to anyone willing to listen about the idea of compulsory anonymity for political donations. The basic concept is to funnel all political contributions through a process that makes it impossible for political parties to know who their donors are. The goal is to reconcile the privacy interests of donors with the legitimate right of the public to assurance their democracy is not for sale.

If you want to understand the thinking behind the idea, you can read about the broad concept – which originated with Yale law professors Ian Ayres and Bruce Ackerman – in my original piece on the subject here. In this piece, I’ll explain how it could actually work.

We already have a voluntary version of this

The basic architecture for a system of compulsory anonymity already exists in New Zealand.

Many people are unaware of this, but you can make an anonymous donation to a political party of more than $1,500 if you run it through the Electoral Commission. It takes your contribution, lumps it together and pays the total to the party at regular intervals without disclosing where the money came from or how it was made up.

There is an individual limit of $46,822.50 per party per election cycle and it is an offence to “tip off” parties to your contribution.

But for true anonymity, some changes are needed

The problem is that tipping off can be pretty hard to detect, let alone prosecute. There are all sorts of ways that donors could surreptitiously let parties know about their donation in ways that could never really be proven to any kind of legal standard. For anonymity to be any kind of fix, therefore, a different approach is needed to ensure it can be maintained.

Advocates for compulsory anonymity often turn to the secret ballot for inspiration. After all, I can promise a candidate my vote and I can tell them that I’ve delivered on the promise. I can shout it from the rooftops if I want to. But there’s almost no way they can verify it.

This is a useful framework for thinking about how the “donation booth” could work. Instead of banning people from declaring their support, we could make it impossible to determine if they’re telling the truth. Instead of fighting human nature, we can put it to work.

So, drawing on the work of Ayers, Ackerman and others, a system of compulsory anonymity might look something like this…

There should be a cooling-off period

An immediate and understandable objection to the idea that anonymity could ever be sustained is the possibility of donors just showing party officials copies of a receipt or bank statements. All that would then be required for a party to verify a donation took place would checking that the total funds received were larger than the donation shown. They could then have reasonable certainty that the donation took place.

But not if there was a twenty working day “cooling-off” period before a donation is added to the balance of the amount available to the party. Within this timeframe, any donor could request a refund for part or all of their donation and have it returned to them with no questions asked (and to whatever verified bank account they nominated). Implemented the right way, this would render any receipt, bank statement or other confirmation of outward payment insufficient to prove that a donation actually occurred.

The balance available would be randomised

So what if somebody promised to donate a very specific amount to a party – say $15,003.25 – to signal that the donation had been made? Assuming most donations are made in round figures, a distinctive individual amount could function as a signature for the individual donor. It wouldn’t tip the party off to the precise size of the donation, of course, but it would be something.

This possibility could be headed off by the Electoral Commission randomising the balance available to parties at any given time. The degree of randomisation would not have to be great for the mechanism to have the desired effect. For example, the Electoral Commission could, when reporting to a party, advise that the balance available is some random dollar amount that represents between 97% and 100% of the funds received.

That would make it all but impossible for donors to “sign” their donation by means of its amount.

Workarounds would have to be banned

Parties could still generate funds through sources other than donations. Subscriptions, interest on accumulated funds or property investments could all continue to provide income to political parties. But there should be strong controls on their “trading” activities.

Political parties would be prohibited from selling goods and services for prices higher than their market value. If a party wanted to hold a fundraising luncheon, for instance, it will be prohibited from charging more than the cost of the meal. If a party wanted to sell a piece of art, it would be required to do so for no more than it could demonstrate it paid for the work in the first place.

It’s imperfect, but it would be better than what we have now

Compulsory anonymity is a solution that will fully satisfy few people. For some, nothing short of full public financing with no private donations at all is acceptable. For those of a more libertarian mindset, any restriction on the right of people to support the causes they want is tyranny, pure and simple.

It’s also true that compulsory anonymity is no cure for the inequality that arises from private donations being made people of unequal means. It can be assumed that some larger donations would be deterred by anonymity, but to what degree cannot really be known. Not all reforms can all fix all problems.

Between the extremes of licence and control, however, there is almost always a middle way. If we deliberately and effectively obscure from political parties just who is funding them, the result should be a decrease in the risk of corruption. At the same time, the imposition on freedom of speech is minimal compared to alternative reforms.

Let’s not make the perfect the enemy of the good. Keep politicians in the dark about who pays for their campaigns. That way, nobody can own them.