Claire Trevett: Spending gaps hint at use of loopholes

The gap between what political parties listed in their donations' returns for the election and what they spent indicates loopholes have been found to legally hide their donors.

The Green Party forced through changes to donations rules aimed at ridding the nation of hidden people and companies bankrolling the parties.

Gone were the secret trusts and big anonymous donations - the only part of the Electoral Finance Act to survive National's repeal of it.

Yet now that the first party returns under the new rules are out, it seems a rather hollow victory for the Greens.

Perversely, the effect has been that the public are now even less wise about the amounts being donated to political parties, who they are from and how they were made.

The changes kept the requirement for political parties to reveal donations of more than $10,000 - but they could no longer accept "anonymous" donations higher than $1000.

The names of people who gave more than $10,000 to a trust to pass on to the party also had to be disclosed publicly.

Stripped of anonymous donations and bulk sums of donations large and small which were made via a trust, National's return listed just $207,000 in donations of more than $10,000 - far less than the $1.8 million it declared in the previous election year of 2005. Labour declared $420,000, compared with $931,000 in 2005.

Yet both parties spent more than $2 million on their election campaigns.

Academics such as Otago University's Andrew Geddis are not surprised. He claims the changes to donations rules were made in such a hurry they left gaping loopholes.

The loopholes were there before - but removing other ways of hiding large donations heightened the temptation to actually use them.

Anyone wanting to donate but keep it quiet need only split up a donation in packets of just under $10,000 among members of their family to give. Mum, dad and three children can each give $9999 dollars and nobody need be any the wiser other than the recipient.

Similarly, those who have several companies at their disposal can donate in undisclosable amounts through those separate companies, as did the Vela brothers in donations to New Zealand First dating back to 1999.

Whether membership subscriptions have to be treated as donations is a grey area - and several parties allow members to choose their own subscription fee.

Mr Geddis believes "games" can also still be played with trusts, such as one trust taking in the large donations and then passing on donations in amounts below the disclosure level to other trusts to pass on to the party.

A suspicious person would say the current rules allow the parties to merrily - but legally - dodge the requirements while simultaneously trying to appear self-righteous about embracing them.

A more charitable interpretation would be that donations truly have fallen because donors were put off by the heightened disclosure and the uncertainty caused by the controversy over the Electoral Finance Act, exacerbated by the recession.

If it is the first, it could explain National's apparent contentment with the new donations regime and willingness to retain it when repealing the rest of the act.

But if party donations really were that miserly, it bodes ill for any attempts to knit up those loopholes. To do so could potentially choke the flow even more. On a practical level, it would also be extraordinarily difficult to do so by legislation.

One of the main topics in a review of electoral law now under way is whether there should be further limits on the size of donations, those able to make them, and whether their names should be revealed.

Mr Geddis believes the public will bay for more transparency. The Green Party will undoubtedly do so.