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The 2005 New Zealand election funding controversy occurred in the aftermath of the 2005 New Zealand general election.

Under New Zealand's political system, parties may only spend up to a certain amount on campaigning. They must raise the money, up to that limit, from their own sources. Other funds are available through Parliamentary Services to Members of Parliament for "parliamentary purposes", which may include advertising but not "electioneering material". Following the 2005 election, there was debate across the parliamentary political parties as most had breached election spending rules in some respect.

Election spending allegations

Labour

Labour and five other political parties were investigated for alleged breaches of election spending rules relating to the 2005 election. The Electoral Commission, the independent body charged with supervising compliance with campaign rules, referred the Labour Party to the police after finding that they had overspent by over $400,000. Labour's election campaign included the production, using Parliamentary Services funds, of a "pledge card" (pictured). The party had wanted to exclude the $446,000 it spent on the pledge cards from its campaign expenses, but the Electoral Commission ruled the pledge cards should be included. The police found that "there was insufficient evidence to indicate that an offence under s214b of the Electoral Act had been committed." While police considered "there was sufficient evidence to establish a prima facie case" of an offence under section 221 of the act (which requires a party secretary to authorise party advertising in writing), they decided not to lay a prosecution, preferring instead to warn Labour that similar future offences would risk prosecution, because it was not clear that the offence was intentional. They said a number of other parties had also used similar tactics and it would have been unfair to single Labour out.

National

National was left owing a number of broadcasters $100,000 after spending its broadcasting allowance without accounting for GST. National argued that "due to a misunderstanding between the Party and its advertising booking agency, the agency booked advertising for National on radio and television for the campaign totalling $900,000 excluding GST, instead of $900,000 including GST." Police were not able to attribute responsibility for the mistaken GST over-expenditure to either the NZ National Party or to the Party's media buying agency and did not charge either.

Labour has criticised the use by the National Party of trust funds to facilitate large anonymous donations, naming American multi-millionaire Julian Robertson as a contributor. Julian Robertson, a friend of Don Brash, had connections to the Republican Party in the US. However, National Party campaign manager Steven Joyce stated, "It is possible that made an anonymous donation. It is also possible that he may have given to one of the trusts that periodically makes donations to us but again I have no knowledge of that. They don't tell me who gives the money so I don't know.” Spending outside of campaign funding limits is permitted up to three months before election date.

Labour also criticised National leader Don Brash's use of the parliamentary leader's fund (also supplied through Parliamentary Services) to pay for his election strategist, Bryan Sinclair.

Auditor-General report

The Auditor-General investigated publicly funded party advertising for the 2005 election, with a preliminary finding that much of the spending was unlawful being leaked. A final report was released on 12 October 2006. It found that $1.17 million had been improperly spent, as follows:

• Labour Party: $768,000
• New Zealand First $150,400
• Green Party $80,900
• United Future $63,800
• Act $17,800
• National Party $11,300
• Maori Party $48

After a draft of the Auditor-General's report was leaked, the National Party repaid the amount that the report said was spent by it unlawfully. Labour strategist Pete Hodgson said on 13 September 2006 that his party would not be repaying any money, and the Government may introduce legislation to legalise the spending.

The Speaker's Office, which is responsible for the operation of Parliamentary Services, sought a legal opinion in response to the Auditor General's report. While she did not agree with the legal analysis of the Auditor General, the Speaker of the House, Margaret Wilson, recommended that legislation be passed to retrospectively validate expenditure, that parties should pay back their overspending not as a legal obligation but in order to maintain the confidence of parliament, the administrative processes of Parliamentary Services should be reviewed, and legislation be developed to clarify the law on expenditure.

The Labour Party announced immediately after the report was published that it would repay the money it owes. Helen Clark said "Labour strongly maintains that it spent its parliamentary budget within the rules as they were understood at the time, and in the same way as other parties have over a long period of time. Given the Auditor-General’s new ruling, however, Labour will refund the spending identified."

Minor parties

The Progressive Party was the only party found by the Auditor General not to have misspent parliamentary funding. Most other minor parties have either already repaid their misspent funding or agreed that they would do so. When the Auditor General's report was leaked, the Green Party promised to repay any money it was found to have spent unlawfully once the final report is released (an estimated $65,000) and the Maori Party repaid $53. New Zealand First, however, has not yet decided what action to take.

The Maori Party stated in September 2006 that during the election campaign, an anonymous donor offered them $250,000 on the condition that they backed a Labour-led government after the election. The offer was not accepted. Labour denied any knowledge of the offer, and both Labour and National suggested holding an inquiry into the offer. A spokesman for the Electoral Commission said the offer did not break any provisions of the Electoral Act, but Auckland University law professor Bill Hodge considered that it may fall within the Crimes Act definition of bribery and corruption.

Third party campaigning

The Exclusive Brethren campaigned against the Labour and Green Parties while providing assistance to the National Party during the 2005 election. Their assistance to National was through help with man-power, rather than direct donations. However the group had collected a "war-chest" of $1,200,000, from which they published anti-Green and anti-Labour pamphlets. . The Exclusive Brethren Church members had originally intended to support National in writing but modified the pamphlets after consulting with the Chief Electoral Officer and being informed this would count towards National's spending. The issue of Exclusive Brethren involvement has led to Labour calls for compulsory disclosure of large donations to political parties within altered campaign finance legislation.

Shortly before the 2005 election, anti-Labour and anti-Greens pamphlets were distributed to a large number of New Zealand mailboxes. Unlike party advertising, the pamphlets' origins were not explicit, and they criticised particularly Green party policy, claiming that the Greens' policies are “reminiscent…of communists” and they plan to "disarm our forces", terms which the Greens considered to be outright lies - inflammatory and misleading, as was much of the content of the pamphlet. Immediately after the election, the Greens stated that the “Exclusive Brethren pamphlet drop probably cost the party a seat”, and perhaps enough to have governed alone with Labour.

Soon after, it was revealed that members of the Exclusive Brethren Church had funded the pamphlet and members of the church had distributed them to most mailboxes in the country preceding the election including, it was alleged, after the legal deadline on election night. The National party and its leader Don Brash initially denied knowing about the pamphlets, but Brash later admitted that he had met with the Brethren three or four times during the campaign, where he was told "they planned to run some advertisements in the media, particularly around defence and health policies". Brash asserts that he and his staff advised the Brethren to check the legality of their advertising and that National had no control over its content. Brash also says that he did not recall their intention to issue anti-Green pamphlets, which explains why he didn't know who produced the pamphlets.

Nicky Hager's book, The Hollow Men: A Study in the Politics of Deception, was published in November 2006 after a interim injunction against the publication of Brash's private email correspondence was lifted at the request of Dr Brash's lawyer . Hagar claims that the National Party spent millions of dollars in its election campaign without breaching the legal spending cap. He points to several possible breaches of the election law by National, and asserts that the scope of the Auditor General's inquiry was "very limited” and did not include illegal third party advertising. According to Hager, evidence from undisclosed sources and the leaked e-mails point to a breach of section 221 of the Electoral Act. He further asserts that the book “Postcard From Home”, Brash’s Biography, was called a “significant marketing tool” by Brash, and that the National-produced “Fairtax postcards” were “exactly the same expense as Labour’s pledge card”. (Hager: pgs 240-241)

Otago University electoral law expert Andrew Geddis opinion was that National probably did not break the law, but that the party's actions "stank" and that the electoral system was like "panel beaters designing intersections". Former ACT Party leader Richard Prebble pointed to Labour also using the laws to enable third-party funding from unions, and stated; "It's a grey piece of law two major parties put together ... made deliberately with loopholes."

Darnton's lawsuit

On June 29, 2006, Bernard Darnton, leader of the Libertarianz, filed papers in the High Court suing Helen Clark for allegedly misappropriating public funds to pay for her "pledge cards" during the 2005 election. Some commentators have labelled the lawsuit a stunt, although it has received some media coverage as concern about the "pledge card" funding has grown. . Following the passage of the Labour party's validating retrospective legislation on 18 October 2006, Darnton's lawsuit almost certainly becomes defunct .

Accusations relating to earlier spending

The Labour government also allegedly used parliamentary funds to promote the Labour Party in the past. Before the 2005 campaign, public funds paid for bus billboards showing the Labour election phrase "You're better off with Labour" . However the Speaker ruled that this advertising promoted the national budget, not the Labour Party. Helen Clark claimed that similar advertising promoting the National Party before previous elections had not been subject to similar investigation, and asked what was different about this case. National responded that the rules had been clarified since the last election.

Political response

Corruption claims

Based on the draft Auditor General's report, the National Party accused Labour of corruption, with Don Brash claiming that "Helen Clark's Labour Government is quite simply the most corrupt government in New Zealand history." He later amended that to "most corrupt in the last 100 years". Parliamentary debate rapidly deteriorated into shouting matches, with minor parties threatening a walk-out.

ACT New Zealand leader Rodney Hide disagreed with the term "corruption" being applied to the spending. "The AG's report doesn't show corruption. If it did National would be corrupt too. They were found to have misspent 10k. They would be corrupt too – just not as successful! I could see it was going to get ugly once the Nats went down the tactic of consistently labeling Labour corrupt...I disagree with everything that Labour does – but they are not corrupt. Devious and cunning, yes. Not corrupt."

Sleaze allegations

In response to National calling Labour "corrupt", Labour ministers Trevor Mallard and David Benson-Pope made reference during Question Time to allegations Don Brash was having an affair with Business Roundtable vice chairwomen Diane Foreman. Rumours to that effect had been circulating for some time, however the allegations were not published by the media until National MP Brian Connell raised them in caucus and the ensuing debate was leaked to the media. The Independent Financial Review first published the allegations.

Investigate magazine then published a photograph with commentary implying that Clark's husband Peter Davis was gay. Other mainstream media outlets quickly republished the rumour. Clark and Davis emphatically denied the allegation. Antifeminist 'men’s rights' and antigay campaigner Chuck Bird said he provided the photo to Investigate in protest against Labour's election spending.

Soon after, and within a day of saying that personal abuse had no place in NZ politics, Clark described Don Brash, leader of the opposition, as a “cancerous” and “corrosive” presence in national affairs, a statement for which she was later criticised. In an interview the following day she gave the example of a cartoon on the Young Nationals' website which had been there since the election campaign, depicting her as Star Wars villain Darth Vader telling Luke Skywalker she is his “lesbian father”. Brash subsequently requested the image be taken down.

Told that the National Party had expressed sympathy for her, Miss Clark replied: "I have very, very prominent friends in New Zealand life who have rung me...saying they were simply amazed at the sort of people, seemingly reputable citizens, who were prepared to pass on baseless lies as if they were factual."

Clark also claimed that the Exclusive Brethren had hired a private detective to follow Mr Davis and herself. Within a week, private detective Wayne Idour admitted being hired by the sect “to dig dirt” on Labour MPs and described some of the things he had found out as “alarming”. He told the media that he would make these “alarming” discoveries public within a week. Nothing appeared.

Public response

Most political commentators believe that Helen Clark misjudged the public mood on the alleged spending, calling it "a beltway issue" - that is, of interest only to those who are involved the political process and not of interest to ordinary voters. However, a TVNZ Opinion Poll showed a 13% lead to National during the fallout , and for the first time media have reported dis-satisfaction with Helen Clark's leadership amongst the Labour Party Caucus. While Clark is almost certain to survive due to her previous strong leadership record, political opponents claim that Clark has been permanently damaged by the scandal.

Dominion Post commentator Chris Trotter wrote in the 20-Oct-06 Dominion Post that “Solicitor General Terence Arnold QC's "expansive" interpretation of the Parliamentary Services Act betrayed a woeful lack of knowledge about the way our political system operates:

His opinion characterised parliamentarians as glorified civil servants subject to executive oversight and prohibited from spending public funds on any form of political advocacy (which he appeared to regard as a private activity). In his version of parliamentary democracy, political parties are viewed as entities extraneous to Parliament and play no role in the day to day operations of government. Mr Brady went on to compound the anti democratic, effect of the solicitor general's opinion by confining his investigation into "unlawful" parliamentary expenditure to election advertising. It was this decision, another "cock up", which allowed the Opposition to set in motion a major political conspiracy...The auditor general's office and the news media had both become important adjuncts to the Opposition's campaign to destroy Labour's political reputation.

As officers of Parliament, the capacity of the Auditor-General and Solicitor-General to respond to criticism is limited. However, Jim Evans, Emeritus Professor of Law at Auckland University responded to the critics of the Auditor-General's report on a blog saying that "various attempts been made in recent weeks to obfuscate the issues surrounding the Auditor-General's report on advertising expenditure by political parties in the three months before the last general election"

Overhaul of election funding laws

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The government announced that, in light of the funding problems, they would look into changing the Electoral Act 1993 surrounding election funding. Following the release of the Auditor-General's report, the Appropriation (Parliamentary Expenditure Validation) Bill was moved through Parliament in two days under urgency, being passed on 18 October 2006.

References

1. "Election expenses and returns". Elections New Zealand. Retrieved 2006-10-25. {{cite web}}: Text "2005-08" ignored (help)
2. ^ Brady, Kevin (2006-10-12). "Advertising expenditure incurred by the Parliamentary Service in the three months before the 2005 General Election" (pdf). Office of the Auditor General. Retrieved 2006-10-18.
3. "Election expenses - Labour referred to police & parties slammed for lateness" (Press release). Elections New Zealand. 2006-02-09.
4. ^ Thomson, Ainsley (2006-03-18). "Labour escapes charges on pledge card but case found". New Zealand Herald. Retrieved 2006-10-18.
5. ^ "No prosecutions for electoral complaints" (Press release). New Zealand Police. 2006-03-17. Retrieved 2006-10-18.
6. "National Pushes Limits Of Campaign Spending". Retrieved 2006-09-28.
7. List, Kevin (2005-07-23). "Mallard Attacks National's Use Of Trust Funds". Scoop. Retrieved 2006-10-18.
8. "Election expenses and returns". Elections New Zealand. Retrieved 2006-10-25. {{cite web}}: Text "2005-08" ignored (help)
9. "Brash under fire for aide's pay". Retrieved 2006-10-21. "Brash's predictable fall from moral high ground". Retrieved 2006-10-21.
10. Oliver, Paula (2006-09-21). "We'll pay it back, pledge Greens". New Zealand Herald. Retrieved 2006-11-01.
11. "Speaker responds to Auditor General" (Press release). Office of the Speaker. 2006-10-13. Retrieved 2006-10-25.
12. "Labour to pay back election spending". New Zealand Herald. 2006-10-12. Retrieved 2006-10-18.
13. "Labour to refund funding" (Press release). New Zealand Labour Party. 2006-10-12. Retrieved 2006-10-18.
14. ^ "Parliament Passes Law Validating Election Misspend". Retrieved 2006-10-21.
15. "Maori Party don't know who offered $250,000". NZPA. 2006-09-29. Retrieved 2006-10-31.
16. "Brethren cost Nats win - Rich". Retrieved 2006-09-24.
17. Young, Audrey (2006-09-12). "Clark plans new law to block Brethren". New Zealand Herald. Retrieved 2006-10-13.
18. "Dirty tricks campaign: point-by-point rebuttal". Retrieved 2006-10-14.
19. "Greens welcome Brethren inquiry". Newstalk ZB. 2005-10-05. Retrieved 2006-10-21.
20. Brash, Don (Wednesday, 6 December 2006). "Don Brash Writes: Nicky Hager's book". Scoop: Independent News. Retrieved 2006-12-08. {{cite news}}: Check date values in: |date= (help)
21. NZPA, Brash email injunction lifted, NZ Herald, Friday November 24, 2006
22. "Hager Book: What's in the leaked Brash emails".
23. Chapple, Irene (26 November 2006). "Nats' actions stink - law expert". Fairfax New Zealand. Retrieved 2006-12-08.
24. Chapple, Irene (2006-09-10). "Top QC takes PM to court". Sunday Star Times. Retrieved 2006-10-25.
25. Letter to the Speaker of the House,Ken Shirley, 8 June 2005
26. "Speech to Zonta Club, Christchurch" (Press release). New Zealand National Party. 2006-08-07. Retrieved 2006-10-31.
27. Dick, Tim (2006-09-23). "Sects, lies, displays of hate". Sydney Morning Herald. Retrieved 2006-10-31.
28. Ng, Keith (2006-09-20). "Time for the little guys" (HTML). Public Address. Retrieved 2006-11-01.
29. van Beynen, Martin (2006-09-23). "Davis' trouble and strife". The Press. Retrieved 2006-10-17.
30. "Man who released Davis images says election spending the reason". NZPA. 2006-09-24. Retrieved 2006-10-17.
31. Young, Audrey (2006-09-21). "Nothing personal, but Brash is cancerous, says Clark". New Zealand Herald. Retrieved 2006-11-04.
32. "Brash orders Clark image taken off website". NZPA. 2006-09-21. Retrieved 2006-10-17.
33. Field, Michael (18 September 2006). "PM blasts rumour mongers and media". Fairfax New Zealand. Retrieved 2006-12-08.
34. Young, Audrey (2006-09-23). "Brethren spy hits back at Labour". APN. Retrieved 2006-10-17.
35. "Vast majority want parties to pay back unlawfully spent money". Retrieved 2006-10-23.
36. "One News Colmar Brunton Poll: Sept 2006". Retrieved 2006-10-23.
37. "Election spending row - Labour MPs told to pay Brady bill". Retrieved 2006-10-23.
38. Evans, Jim (2006-10-30). "In Praise of the Auditor-General". Public Address. Retrieved 2006-10-31.
39. "Election funding laws to be overhauled, Clark says". Retrieved 2006-10-21.
40. "Appropriation (Parliamentary Expenditure Validation) Bill" (pdf). 2006-10-18. Retrieved 2006-10-21.

• NZ Herald pledge card time line
• Hagar, Nicky. The Hollow Men : A study in the politics of deception; Craig Potton Publishing, Nelson, NZ; ISBN 1-877333-62-X; 2006

See also

• Campaign finance

• Current events
• New Zealand general election, 2005
• 2005 in New Zealand
• 2006 in New Zealand
• Politics of New Zealand
• New Zealand political scandals