Political donations and influence: do you really need to pay to influence government policy?

It’s that time of year again – when the previous financial year’s political donations are published by the Federal Electoral Commission, and the media, academia and some sections of the political class get themselves in a tizz about the amount of money given to political parties, the influence it buys, the need for caps on donations, and (my favourite chestnut) the need for more transparency in political donations (as though the publication of the names of individuals and organisations making donations is not transparent enough).

It all comes down to two assumptions by the critics of private political donations. The first is that individuals and corporations only make donations to gain political access and wield influence over policy. The second is that by giving money you can in fact influence policy outcomes when the party you donate to achieves power. Both are assumptions and not borne out by empirical evidence. Even if donors assume that giving money to political parties buys them access and influence, this is not necessarily the case. Indeed, many donors have been sadly disappointed that after giving money to a political party (or even to several political parties, which many donors do) that they have not been able to influence policy at all. Remember Chinese billionaire Huang Xiangmo’s very public request after his visa was cancelled that Australia’s political parties return the $2.7 million he had given them? He obviously felt he had not got a return on his investment.

The fact is many individuals and organisations donate money to a candidate or party that they are ideologically aligned with to help it get into or retain office. For example, and not surprisingly, Clive Palmer’s company Mineralogy donated nearly $6 million to his own Clive Palmer’s United Australia Party in 2019-20. Palmer also gave $75,000 to the Nationals because he, again not surprisingly, is ideologically close to them or at least closer to the Nationals than to any of the other parties. Pratt Holdings gave around $1.5 million, mainly to the Liberal Party but it also threw some small change (by Pratt Holdings’ standards) at the Labor Party when it looked like the ALP might win the 2019 election. Pratt Holdings has long been a mainstay supporter of the Liberals. (Some might think Pratt Holding donations to the Liberal Party "bought" Prime Minister Morrison and President Donald Trump's visit to the Pratt Paper plant in Ohio in September 2019, but it is conceivable that regardless of the donation PM Morrison would have wanted to visit this plant by an Australian in the US.) The ALP’s funding primarily comes from unions – again organisations that are ideologically aligned with the party they have chosen to donate to.

Those calling for reform of the system should be required to produce evidence of how the current “lack of transparency”, or the size of donations, corrupt the political process. We should not change the system because of assumptions that political donations must in some way undermine our democracy. But let us leave that debate to the philosophers, academics and general chattering class. Instead, lets turn to the question of whether a company needs to donate money to a political candidate or party to gain access or to influence policy.

My simple dictum: don’t donate to political parties if you want something back

Unlike many other lobbyists I have long told my clients that it is not necessary to make a political donation to gain access or to influence the policy debate. In fact, I have gone further and advised them against doing so. Period.

Firstly, it is not necessary to make a financial donation to a party per se. And it is certainly not necessary to make a substantial monetary contribution. If you are a leader in your industry or you can demonstrate something of value to raise with a minister or other politician, you should be able to obtain a meeting. On some occasions it might be necessary to purchase a ticket to attend a speech by a minister or other leading politician to make a connection or give moral support. While such events might be organised as political fund-raisers by the political party concerned, they are not costly and do not constitute major political donations. The costs of tickets are often under reportable thresholds – and if the cost of an event is above the reportable threshold, it is best avoided.

Secondly, as donating money does not guarantee a return on investment, as Mr Huang discovered, anyone looking to influence policy needs to consider what is really required to effect change. In fact, I have long held the view that donating money to a candidate or political party can be detrimental to your cause because a minister will be “keen to be seen to be clean”. For this reason I have cautioned many clients against making political donations if they are trying to change policy, legislation, regulation or win a government contract. For example, if two companies are bidding for a government contract, a minister might be less inclined to give it to the company that has made a big donation to their party to avoid a perception of favouristism or, worse, of corruption. If you are trying to influence a decision that would be beneficial to your company or industry it is advisable to eschew making donations to the party of government.

More important than political donations are strong arguments backed up by data that bear out your case. In my experience, no amount of political donations will influence policy if your arguments are weak and lacking in evidence, because, at the end of the day, politicians and bureaucrats need to demonstrate good reasons for their decisions.

In short, put away your cheque book and, instead, do your homework.