Scoop Feature: State Subsidies for Act

The scandal over the Act party’s electorate office funding shows that, ironically, Act has become dependent on the state to sell its minimum-state politics. Bryce Edwards argues that when Act started running out of money, the party buried its principles by turning to the state to run its political operations. But the scheme is not unique to Act, and such state resources are now the primary source of income for all the parties in Parliament.

The Auditor-General’s report on the Act party’s use of electorate office funding should not be the last word on the issue. The Act scandal has shown that although New Zealand does not have a direct system of state funding for political parties, Parliament effectively operates a lucrative backdoor funding system. Therefore money that is meant to be spent on non-partisan activity is used instead for basic electioneering, and the rules covering this are lax and murky.

It is now apparent that although Act’s out-of-Parliament funding of about $500,000 is supposed to be used by its MPs to service the electorate, this money has actually paid for political research and marketing. The deeper significance of this scandal is therefore that Act has been using taxpayer-funded resources for party political purposes because – like other parties – it can’t afford to fund these political functions itself.

For although Act is typically thought of as being the most well-resourced party in New Zealand, as the tide went out on ‘new right’ ideas so too did business support for Act, and the party has been struggling to raise money ever since.

The party organisation has been through financial dire straits, and in 1996 it had to slash its head office budget in half. Then in 2001 the head office operations were again severely cut back, with four out of the five staff positions axed. This was driven, no doubt, by the realisation that many of the political and organising functions of the head office could be shifted to the 20-odd taxpayer-funded staff in Parliament. The savings could then be used for Act’s surprisingly large $1.7 million election campaign in 2002.

To run their electorate operations, each year parliamentary parties are allocated the salaries for one staff member and $34,200 for each list MP to cover the cost of renting and operating an out-of-Parliament office. For Act this all amounted to over $500,000 in funding – and at least $200,000 of this was allocated to the Pipitea St electorate office which was supposed to be used to represent four Act MPs.

In Parliament the Act party has its hands on a bounty of taxpayer money. In addition to the party’s electorate office funding, it receives Parliamentary Service funding of about $1 million a year.

But Act is not unique in receiving these large state subsidies – the total parliamentary funding for all the parties amounts to about $13 million a year. In addition, each year the parties collectively receive about $28 million in other services such as travel, secretarial support, telecommunications, and library and computing resources.

Parties were originally allowed to hire staff under these budgets for supporting the MPs with their parliamentary work, yet these staff now do highly political work like promoting their parties rather than merely researching information for their MPs. Essentially, in marketing their political parties, many staff in Parliament work in state-funded party propaganda units.

Although this marketing activity is normally done surreptitiously, there was even one example in 2000 where Act advertised to employ a marketer in Parliament to promote the party.

The parliamentary budgets actually fund a whole host of party projects.

Sometimes this even includes researching or writing books for MPs. Researchers have also been known to participate in talkback radio, impersonating the public.

Many partisan publications are also produced from Parliament. For instance Richard Prebble’s weekly “Letter from Wellington” email might read like a party political broadcast, but it’s written and sent to 30,000 voters with taxpayer funds.

Party websites like Act’s are generally funded and managed from within Parliament too.

Postal privileges are also used for political purposes. Prebble once even used parliamentary letterhead and free postage to write to booksellers asking them to help promote one of his books. Staff are also involved in direct marketing – writing, printing and posting hundreds of thousands of direct mail letters to voters on a regular basis. Incredibly, even opinion polling is carried out from within Parliament.

Researchers and press secretaries also undertake many organisational tasks that would, in most countries, be performed by the extra-parliamentary head office. The tasks of organising party conferences, assembling election manifestos, and organising party members are all done by taxpayer-funded staff.

Outside Parliament, the MPs’ offices and their electorate agents are supposed to work not as party members, but to help constituents with whatever local problems or issues they have – much like a high-powered Citizens’ Advice Bureau. This arrangement is good for the public, but as Act has figured out, it’s not an effective vote-winning use of their state-provided funding, and the party would be better off using that money in more political tasks, as they do in Parliament.

The problem for all the parties is that these budgets are officially ring-fenced for helping constituents. However, as Act Chief of staff Christopher Milne has admitted, "We looked at the strait-jacket and said ‘Right, how can we use it to our best advantage?'” Their answer appears to have been to set up sham offices in both Wellington and Auckland and have Act’s “electorate agents” actually based in Parliament in Wellington or on the same premises as the Act head office in Auckland. There they work as researchers, marketers and party organisers. The electorate agent scheme is thus a huge state subsidy for the party.

That Prebble charged the Parliamentary Service very little or no rent for Act’s use of a room in his Pipitea St home didn’t save the taxpayers money, but merely meant that the party could use more of the $500,000 in electorate funding to pay for additional political staff.

What Act has in effect been doing is turning its various state funding entitlements into one large fund from which the party can spend as it likes. This is called “bulk funding”, which is a boon for the parties because it removes all the previous restrictions that were intended to stop the money being spent on blatantly party political activity.

One of the broader issues that this case highlights is that for all of the parties such state subsidies are now their principal source of income. Although these payments are supposed to be spent for policy research, office expenses, consultation with the public and so forth, much of the money is used for partisan political purposes, such as basic electioneering, and organising the party. But because all the parties drink from this trough, no party has any incentive to stop it occurring.

Ironically, Prebble used to be one of the biggest critics of parliamentary funding, proclaiming in 1997, “The whole system is designed by MPs to subsidise their campaigns”. This was obviously before Act had worked out the best way to utilise such state resources for itself. However, even since then Act has been quick to highlight the misuse of resources by other politicians as a way of pushing its perk-busting image.

Prebble even criticised the Alliance in 2001 for manipulating its parliamentary resources, saying, "It's part of Alliance philosophy – they have great difficulty distinguishing between public money and their own." But it now seems that Act has a similar difficulty. This latest episode shows that Act, too, values the lucrative state funding that, ironically, subsidises its “minimum-state” politics.

But this issue applies to all the parties in Parliament, and as the Auditor-General pointed out, the rules of funding need revision. The only problem is, the people likely to be doing the revising are the politicians themselves. It’s therefore time for a truly independent review of parliamentary funding.

* Bryce Edwards is writing a PhD about New Zealand political parties. Formerly he was employed in the parliamentary Office of Jim Anderton. Send any feedback to: bde12@it.canterbury.ac.nz

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