To make up for lost revenue, political parties and MPs in Parliament would receive significantly more public funding. Finally, parties and candidates will be restricted in how much they can spend on election campaigns.

Replacing political donations may sound good in theory, but what it comes down to is who gets the money – and how much they get.

The Australia Institute has research coming on what we think the risks and opportunities are of Premier Malinauskas’ sweeping changes to how South Australian elections are conducted.

In the meantime, here are the questions we would ask of any political finance reform:

How is public money being spent? Is it being divided up fairly?

Under the proposed South Australian laws, there would be three major sources of public funding:

• About $4 per vote a party or candidate wins at each state election, provided the party or candidate wins above 4% of the vote.
  • “Operational funding” of about $100,000 per member of Parliament per year, but no more than $1.4 million per year however large a political party is.
  • Only half of this funding has to be spent on administration – the rest can go into the next election campaign.
• Independent MPs only get $30,000 per year, but can put the entire amount towards their next election campaign.
• An advance payment for new candidates and newly registered political parties, of about $5,000 per candidate.

Between per-vote funding and diverted operational funding, Labor and Liberal will have about $6 million each to spend on their election campaigns. Their candidates and parliamentarians will save time and party resources that would otherwise be spent fundraising.

On the other hand, the $5,000 per candidate for independent challengers and new parties looks pretty limited.

Is public money being spent wisely?

Distributing operational funding to parties based on how many sitting MPs they have is something also done in NSW, but at least in NSW the money is restricted to administrative purposes. In the proposed South Australian changes, half of this money could be banked for election purposes.

It is not clear – either in NSW or South Australia – why political parties are so costly to administer, especially since parties are still able to collect membership fees. And why would a party get more expensive to administer the more members of Parliament it has?

Funding per sitting MP also creates a skewed power dynamic in smaller parties, where a single MP can mean the difference between a party being able to employ staff or not. The MP can threaten to switch parties or sit as an independent to have an outsized influence on the party administration.

If there is a case for subsidising political parties, why not do so based on how many South Australians sign up to join a party and turn up to its meetings and conferences? That would come closer to reflecting true public support and the actual costs of party administration.

Do the changes illuminate how money and power really work?

Australia has relatively good disclosure of political donations – except at the federal level, where even a donation of $15,000 does not need to be disclosed. The handling of other payments to parties, like levies from members of Parliament and “membership fees” for companies to get access to ministers and shadow ministers, is more patchy.

The proposed changes to South Australian laws would broaden the definition of a donation to make sure that more of these payments to parties are captured.

However, political parties would still be much more secretive than other institutions that are mostly or entirely publicly funded, like art galleries and museums. Why not make detailed annual reports, governance standards and privacy and whistleblower policies a condition of public funding?

Do limits on campaign spending reflect electoral reality?

Under the proposed South Australian laws, no candidate can spend more than $100,000 on their election campaign. Is that fair for all candidates?

• An incumbent MP has the benefit of name recognition and a high profile and their publicly-funded electoral allowance (between $17,000 and $54,000 per year), some of which may be spent on communications. A challenger has to spend more money to “catch up” to the incumbent.
• A candidate for a major party benefits from the party’s statewide campaign and its Legislative Council campaign.

Australia Institute research for NSW and Victoria suggests that between major parties “piling in” (spending less in safe seats to leave more “cap” for target seats) and incumbency advantages, a fair cap for an independent challenger might be several times higher than the fair cap for a party MP.

Do limits on private funding of elections stop new entrants from contesting power?

Australians are rightly appalled by corporate interests buying access to ministers and shadow ministers, and the conflict of interest that arises when the tobacco, fossil fuel, consulting and gambling industries make large donations to governments and oppositions.

But, perversely, restrictions on political donations can end up helping the parties of government and make it less likely that their decisions are challenged. That is because established parties and parliamentarians have access to public funding, while new parties and independent candidates depend on private funding to run their campaigns.

Under the proposed South Australian laws, established parties and sitting MPs are banned from accepting political donations but get generous public funding to make up the difference. New parties and candidates are banned from receiving any donation above $2,700 – forcing them to spend more time than ever fundraising.

The laws also seemingly neglect existing parties without sitting MPs – who neither get the new generous public funding or the carve out for new parties.

The next steps

Premier Malinauskas has proposed a dramatic change to how elections are funded in South Australia. If the South Australian Government can find a way to ban donations while also ensuring a fair electoral contest, the laws will be a model for the rest of the country. However, the draft bill as it stands seems to lift the fundraising load off of the major parties, but give only scraps to new entrants – whose spending will now be dramatically curtailed.