The foreign donation ban isn't enough

Banning foreign donations is a splendid idea, writes IGPS researcher Pete McKenzie, but under this bill untraceable money will still be corrupting our political system.

The press release was triumphant. The justice minister, Andrew Little, announced that the government was banning foreign political donations, a move that would “protect New Zealand from foreign interference in our elections”.

This is a good thing. Across the Tasman, Australian politics has been roiled by allegations of Chinese interference. One donor, Huang Xiangmo, who had donated at least A$2.7m to both major parties, had his residency cancelled when his connections to Chinese Communist party-linked organisations were exposed. More recently Bond-esque revelations, including a Chinese defector, a dead businessman and a million-dollar donation, have emerged. Given that Australia is facing such a severe challenge to its democratic integrity, the attention Little is giving to this issue should be welcomed.

But attention does not translate to impact, and the proposed ban will have few tangible consequences. Since 2011, foreign donations to New Zealand’s political parties have amounted to a mere $105,194 (this doesn’t include foreign donations to candidates, which are harder to trace but which are unlikely to be significant). Total donations to parties over that same period amounted to more than $44m. Put simply, the foreign donations which New Zealand will soon ban are just 0.24% of the overall picture.

Even more worryingly, this ban will do very little to prevent donations from having a malign influence. The most obvious example of a foreign donor attempting to exert influence in New Zealand politics is from earlier this year, when new scrutiny was directed towards a controversial $150,000 donation by the Chinese racing mogul Lin Lang to the National party in 2017. Crucially that $150,000 donation was and will remain legal. Although Lang is Chinese, his donation was funnelled through his NZ-based company.

In other words, the newly announced ban will do almost nothing to prevent foreign donations affecting New Zealand politics.

This is backed up New Zealand’s intelligence services. Earlier this year the New Zealand security intelligence service director general, Rebecca Kitteridge, said: “We know that a foreign donation ban would not on its own be an effective way of mitigating the risks New Zealand candidates and MPs face ... A foreign actor could easily use a proxy to work around such a ban. We know that foreign states are adept at understanding and working around regulatory regimes.”

Foreign interference is a consequence of a bigger problem: a political system which relies on a constant and often untraceable flow of donations from rich individuals with personal agendas. So if Little really wants to safeguard New Zealand democracy, he needs to think bigger.

At the very least the disclosure thresholds for donations in New Zealand should be essentially eliminated. Whereas only donations to parties of over $15,000 (and donations to individual candidates of over $1,500) have to be disclosed, Little should consider requiring that all donations over $50 be disclosed to the public. That way if foreign governments do try to interfere in New Zealand politics through donations, we have a shot at tracking them.

Even better, Little should think about redesigning the system altogether. So long as we rely on rich donors to prop up our system, the potential for corruption and disruption will be ever present. Little ought to consider the recommendations of Max Rashbrooke, who suggests that we copy Canada’s ban on donations over a certain threshold (say $1,500) and make up the shortfall with public funding, or even follow the model of Seattle, which gives each of its residents a “democracy voucher” worth $200 which they can donate to a party of their choice.

The distinction between protecting New Zealand from foreign interference and preventing corruption domestically is artificial. To prevent either from occurring New Zealand will have to introduce some significant reforms. And unfortunately the new ban on foreign donations won’t do the trick.