As well as potentially making the ALP guilty for actions committed by others, the campaign finance reform bill introduced into the NSW Parliament yesterday would, if passed, ban all donors who were not on the electoral roll for state, federal or local government elections. So unions, business, and all other associations and organisations would be banned from giving money that would support ‘electoral communication expenditure’ in NSW state elections.

I discussed this idea in my Democracy and Money paper, published in June. As with all the cascading campaign finance regulation, this attempt to tighten the law simply generates new anomalies.

Though this provision is partly aimed at the unions, the unions are better off than most third parties. What any laws restricting donations do is damage donor-reliant third parties compared to third parties that can self-finance their campaigns. So ironically the vested interests that campaign finance law was originally intended to curb – principally the unions and business – can use their own income to continue as before, within the restrictions imposed by the expenditure caps (which obviously would be significantly tightened for the unions if the bill passes). However the more public interest organisations that typically rely on donations would have their fundraising curbed by being denied organisational gifts (the 2010 Labor amendments had already restricted them to maximum $2,000 a year donations).

Another significant complication comes from the fact that most third parties have politics as only one of their activities, and even the entirely political third parties like GetUp! have NSW politics as only one of their activities (the law does not apply to federal campaigns). So the issue becomes how donations that might be subject to this law are identified.

Unlike Queensland, where the donor’s intention is critical, in NSW the law refers to the use to which the donation is put. But money is too fungible for this provision to be easily operationalised. An organisation could donate money to the third party for some other purpose, which then frees up resources that can be used for NSW politics. As long as the third party has sufficient individual donation or other non-donated income to cover their NSW political involvement, it’s hard to see how a successful prosecution could be launched.

Though this provision should be rejected entirely, limiting its application to political parties, where all donations can be assumed to be political, would be more practical than trying to extend it to third parties.