Leadership Rules Need Changing
August 31st, 2011
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[Welcome, National Newswatch readers!]
The rules governing leadership fundraising in the Elections Act need changing, and fast. This is not a partisan question, as it could have an impact on any of the federal political parties within the next five years.
The current contribution regime for leadership contestants is amongst the worst-understood provisions of the Elections Act. Political actors, pundits and journalists alike get it wrong routinely, and I have even met MPs who voted in favour of the change who do not realize what the provision actually says.
Most people believe there is an annual contribution ceiling to leadership contestant, because that's what there is in every other case and it would just make common sense. But that's not what the law says, and I have to say: I believe the law is wrong-headed on this point.
Here's the relevant section of the Elections Act:
405. (1) No individual shall make contributions that exceed
- (a) $1,000 in total in any calendar year to a particular registered party;
- (a.1) $1,000 in total in any calendar year to the registered associations, nomination contestants and candidates of a particular registered party;
- (b) $1,000 in total to a candidate for a particular election who is not the candidate of a registered party; and
- (c) $1,000 in total to the leadership contestants in a particular leadership contest.
The amounts in s.405(1) are scaled up through an inflation adjustment, in increments of $100, with a base year of 2002, as per s.405.1. Thus any reference to $1,000 became $1,100 almost right away, and would now be $1,200 (though this is not being implemented until 2012, I'm told).
Note that contributions limits are set for an election candidate or nomination candidate for each calendar year, but candidates for a party leadership – where spending ceilings are likely to be much higher – must raise funds from contributors who can give the maximum only once per leadership contest. [Independent candidates for election to the Commons also face a per-event contribution ceiling.]
The drafting of the above sub-sections seems to make sense on the face of it, but in practice the law is an ass: allowing some candidates to game the system, on the one hand, and making it extremely difficult for honest candidates to cover their debts after the fact, on the other.
Think this doesn't apply to your party? Let me demonstrate:
- Cabinet minister X retires from public office and takes up a job at one of the big five banks. An exploratory committee for some future leadership campaign spends the next five years collecting pledges of $1100 from various friends and colleagues and traditional party donors. In due course, that party's leadership opens up, the pledges are collected, and suddenly it becomes extremely difficult for any other candidate to enter the race.
- A party is in its down cycle, and needs to attract new talent to renew itself. Unfortunately, an old warhorse has tapped the few remaining large contributors for the maximum donation, and newer entrants are effectively frozen out of the race because they can't hire the infrastructure to raise money from new small donors without already having seed money from larger donors.
- [Actually happened:] In the middle of a leadership contest, under a known set of rules, Parliament amends the Elections Act, dropping the contribution ceiling to one-fifth of its previous size. Unsuccessful candidates who had entered the race under the old set of rules, and budgeted accordingly, were suddenly unable to find a sufficient number of donors who hadn't already contributed the maximum to one of the perceived front-runners, in order to pay off their debts.
- An unsuccessful leadership candidate for one party, who is caught in such a squeeze, is approached by someone in another party to step down from his seat, with a promise that a new pool of contributors who support the second party will donate money to pay off his or her leadership debt.
In his report to Parliament on recommended changes to the Elections Act following the 2008 general election, the Chief Electoral Officer recommended that the "per-contest" limit be changed to an annual ceiling, in order to be consistent with the other entities he regulates (national parties, local riding associations, nomination candidates, and party candidates for election to the House of Commons).
I realize some people who understand the current provisions still support them, because they feel leadership contestants ought not to ring up such excessive expenditures in a vain pursuit of their party's leadership, and that such contests should be far more frugal. And, at one level, it's perhaps not hard to criticize a few individual campaigns for over-reaching. But consider: having a healthy ego is an occupational hazard of the practice of politics in the modern always-on age we live in, and we don't really want our leaders to be pessimistic and un-ambitious, do we?
A leadership campaign can be financed through:
- individual contributions, to the per-contest ceiling per contributor
- transfers from either the national party or a local riding association, so long as those transfers are offered on an equal basis to all candidates (see s.404.3(1) of the Act)
- loans, though those loans must be repaid from out of either (a) or (b)
Note that it cannot be financed by the individual candidate, nor can it be funded by the candidate's party or riding association to any greater extent than that offered to other leadership candidates.
Now, should Parliament not see fit to amend s.405(1)(c) to institute annual contribution limits rather than per-event contribution limits for leadership contests, a political party organizing a leadership race could still decide to enforce more restrictive contribution limits on its own candidates.
For example, a party could set a $600 contribution limit for each contestant, regardless of the contribution ceiling in the Elections Act, and/or any spending ceiling the party also decided to put in place. This would reassure unsuccessful candidates that they could still raise funds after the race to pay their vendors and properly dispose of their debts, and thus allow a leadership race to remain relatively open.
Political parties occupy a unique place in our democratic system. They are not direct agents of the state, but at the same time they are more than private social clubs. They are voluntary organizations that have become professionalized and partially regulated by law, and are the chief recruiters, vetters and providers of the candidates we must choose from amongst, when we cast our ballots at election time.
It is in the public interest that political parties be able to attract a wide range of potential candidates during a leadership race, and that viable candidates not be dissuaded from running for fear they will be unable to pay their debts later on, or be subjected to potentially corrosive pressures in order to do so.
Thus, I urge Parliament to consider amending s.405(1)(c) of the Elections Act, at the first opportunity, to change the leadership campaign contribution ceiling from a per-contest one into an annual one, and I also urge the various political parties who will be launching leadership contests over the coming months and years to set rules and spending limits that don't force candidates into impossible situations after the fact.
Of course, this raises the question of where the 2006 Liberal leadership candidates are at with their fundraising and debt repayments, and Glen McGregor of the Ottawa Citizen noted the other day that Stéphane Dion is continuing to hold fundraising events to pay down his debts.
In fact, most of the latest leadership candidates' returns have just been posted on the Elections Canada website, with the exception of Michael Ignatieff, Scott Brison and Bob Rae, who are all already out of debt and have filed final returns, and Stéphane Dion and Hedy Fry who both requested and were given 30-day filing extensions, as allowed under the judge's order.
The judge ordered that all candidates' debts be paid off by December 31, 2011 (with the exception of Ken Dryden, who has been given until June 30, 2012). After that they have a further 60 days to file their final returns, for which a further 30-day filing extension could also be granted.
Here are the latest figures (as of the candidates' June 30, 2011 returns, unless otherwise indicated).
- $354,120.78 - Ken DRYDEN – [reminder, he has a June 30, 2012 deadline to pay everything off, while the other candidates only have until December 31, 2011]
- $115,000.00 - Martha HALL FINDLEY
- $110,090.00 - Joe VOLPE
- $108,302.47 - Gerard KENNEDY
- $33,164.08 – Maurizio BEVILACQUA
- $77,500.00 – Hedy FRY – [as of Dec 31, 2010]
- $30,000.00 – Stéphane DION -
[as of Dec 31, 2010]UPDATE: return now available, figures remain the same
- $0 – Carolyn BENNETT
- $0 – Scott BRISON
- $0 – Michael IGNATIEFF
- $0 – Bob RAE
Note that a large chunk of Mr. Dryden's outstanding obligation is the result of unpaid claims totalling $129K (all but $5K in loan interest), and the one operating loan taken out by the campaign was a $300K loan from Mr. Dryden himself at an interest rate of 5.5%. Thus, he is in the unenviable position of legally having to raise money to pay himself back, or else he would be in violation of s.405(1)(c) if the loan becomes a deemed contribution and puts him over his contribution limit for the leadership contest. He's plugging away at it, but it's going slowly, and it was an $805K campaign that obtained just under 5% of the vote on the first ballot (238 delegates). In contrast, the three top candidates spent some $3M each.
Maurizio Bevilacqua appears to have most aggressively retired his debts since our last check-in, when he owed some $193K.
Note also that the government has several times tabled legislation seeking to further regulate who candidates and contestants may obtain loans from. We can probably expect to see a version of this legislation coming forward at some point in the current Parliament as well.