Verdict is out - now for the big shake-up

National's deputy leader, Gerry Brownlee, savages Labour in Parliament yesterday over its election spending. Picture / Mark Mitchell

A shake-up looms in the way election spending by political parties is scrutinised and for the rules governing MPs and parties after Auditor-General Kevin Brady's verdict on spending during last year's election campaign.

Mr Brady yesterday delivered his long-awaited final report into advertising spending by parties and MPs in the three months before the election.

He said almost $1.2 million of the money was spent unlawfully.

Here is what has happened, and what will happen next:

The Brady inquiry

Mr Brady became concerned before last year's election that taxpayers' money was being used by political parties and MPs for electioneering.

Among the items that caught his attention was Labour's $447,000 pledge card. In another case, a party held more than 70 public meetings in the 93 days before the election, and the frequency of the meetings increased as the election date drew nearer.

After receiving complaints from members of the public and some MPs, Mr Brady started an inquiry into all advertising paid for with public money by MPs and their parties in the three months before the election.

What Mr Brady found

Mr Brady has found that "significant breaches" worth $1.2 million occurred. In taking this view, he has stood firm against criticism from some party leaders and stuck with much of his draft view, leaked in August.

Mr Brady's finding is based on advice from the Solicitor-General, who cited the Speaker's Directions which ban spending taxpayers' money on "electioneering material".

Electioneering material is something intended to persuade a voter to favour a candidate or party in an election, and is not limited to material that expressly solicits votes.

Mr Brady said he adopted a "common-sense" approach to his inquiry, based on what he considered a reasonable member of the public would think from looking at an advertisement as a whole.

All parties except the Progressives broke the rules.

"I am concerned that I found a substantial amount of material that was contrary to the Speaker's Directions," Mr Brady says in his report.

"I was particularly disappointed to find that the Parliamentary Service paid for significant amounts of newspaper advertising by some parties in the last week before the election."

Unlawful items

Some advertisements for public meeting, promotional items such as flags, pens and carry bags, and newsletters were identified as unlawful.

In one case, a party bought 10,000 pens for $30,870. The pens carried the parliamentary crest but also an election slogan and party website address. Mr Brady said it was unclear what parliamentary purpose they could have had.

Several parties used their parliamentary funding to pay printing costs for brochures and letters giving election policies and commitments.

Two parties produced "more than one million such documents" each.

One was Labour's pledge card.

Several MPs published "report card" messages to their constituents on their achievements during the previous three-year term. Mr Brady said he approached such items with scepticism.

Criticisms

Mr Brady said the nature and extent of electioneering advertising expenditure channelled through the Parliamentary Service by MPs and parties was "disturbing".

He was concerned that the service did not satisfy itself that advertising proposed by MPs and parties was legitimate before the money was spent.

"It is the service's responsibility to ensure that expenditure is within the authority provided by Parliament. I do not accept that the authorisation of advertising expenditure by an MP or parliamentary party staff member absolves the service of this responsibility."

Mr Brady also responded to comments from politicians and the Parliamentary Service about his draft findings.

Labour's claim that the Auditor-General had "changed the rules after the event" was dismissed.

"I have not changed any rules. They are not my rules. I am simply interpreting them and applying the existing law."

He also dismissed a claim from two parties that their actions were based on the "conventions of the day".

Accepted conventions had "no standing" when considering whether public money had been spent lawfully.

Mr Brady made it clear that everyone should have known better.

He cited a report he presented before the election, and said he believed that would change the behaviour of MPs and parties.

"My discussions with them during the preparation of that report would have made it clear that past practices in a range of aspects of government and parliamentary publicity and advertising were unsatisfactory."

The Speaker's response

Speaker Margaret Wilson has accepted the Auditor-General's determination, but says she disagrees with the reasons behind it.

Her own report included a legal opinion on the meaning of "parliamentary purposes" and its application to MPs' advertising which differed from the Solicitor-General's opinion used by Mr Brady.

On the issue of the poor process and management by the Parliamentary Service, she said the organisation was "in a difficult position".

She also responded to Mr Brady's claim that he had warned parties to play by the rules before last year's election. She said his pre-election report did express concern and counsel caution but it "did not provide the new interpretation contained in the 2006 report".

Speaker's recommendations

Margaret Wilson recommended that unlawful spending by parties be validated by legislation to be introduced "as soon as possible".

Parties might choose to pay the money back to Parliamentary Service, she said, but without validating legislation the unlawfulness would remain.

She said paying the money back "must be considered seriously if public confidence in the Parliament is to be maintained".

She told parties to consider the Auditor-General's and her own report, and to tell her by next Thursday whether they intended to repay the unlawful expenditure.

The Speaker will seek the agreement of the Parliamentary Service Commission at its next meeting, on Wednesday, for an external review of the commission and the Parliamentary Service, which could have far-reaching consequences.

She also said it might be time to review whether the Speaker should have such a role as minister responsible for Parliamentary Service.

In the short-term, Margaret Wilson recommended that legislation be introduced to give clarity to the phrase "parliamentary purposes".

The fallout

Labour has succumbed and said it will pay back the money it spent unlawfully - about $800,000.

The party has been under heavy public pressure to take that course, but even though it has finally accepted that it must, there is still a feeling that it is doing so reluctantly.

Labour is arguing against the Auditor-General's finding, and has retained its view that it spent its parliamentary budget within the rules as they were understood at the time.

The fallout from the Auditor-General's report is set to be far-reaching.

Labour will now, in response, introduce changes to party funding and election spending rules.

It is determined to close down the growing stream of anonymous donations pouring into National's coffers, and a wide review of rules could go as far as state funding of political parties.

Third party campaigns, such as the one conducted by the Exclusive Brethren at last year's election, are also in Labour's sights.

Like the Greens, New Zealand First and United Future, Labour is facing a bill that is relatively large compared to its size.

MPs are likely to be asked to contribute money to the repayment, and fundraising activities are already starting.

New Zealand First, United Future and the Greens will now come under pressure, as they are the only other parties which haven't yet repaid money identified by Mr Brady as being unlawfully spent.

The validating legislation will be introduced next week.


WHERE THEY STAND

ACT

* Owes $20,114 and is paying it back.
* Unlikely to support validating law.
* "MPs have to abide by the Auditor-General's findings and pay the money back." Rodney Hide

GREEN PARTY

* Owes $87,192 and not yet fully committed to repaying it all.
* Opposes validating law, but may abstain on vote.
* "The party will pay back any money that is ultimately found to have been outside the rules. At this early stage it is still unclear whether there will be any legal challenge to the report." Metiria Turei

LABOUR

* Owes $824,524 and will pay it all back.
* Wants validating law.
* "Labour strongly maintains that it spent its parliamentary budget within the rules as they were understood at the time ... Refunding the money is one step in a series of responses which need to be taken to ensure public confidence in the political process." Helen Clark

MAORI PARTY

* Owes $54 and has repaid it.
* Won't support validating law.
* "We are relieved the Prime Minister has announced Labour will refund the money." Tariana Turia

NATIONAL

* Owes $11,912 and has repaid it.
* Would support validating law if it was "technical" only and not designed to enable any party not to repay the money. "Labour has been caught red-handed with its fingers in the till. National is deeply saddened that it has taken more than a year for Helen Clark to reluctantly do the right thing." Don Brash

NZ FIRST

* Owes $157,934 and is contesting the bulk of the debt. Threatening legal challenge.
* Supports validating law.
* "NZ First can and will repay parliamentary funds if the Auditor- General can convince the party of what it did wrong ... parts of the report appear contradictory and Chapman Tripp's independent legal opinion also casts doubt over the report's legal sustainability." Winston Peters

PROGRESSIVE COALITION

* Owes nothing. Supports validating law.
* "For the parties to pay it back would be the best possible outcome." Leader Jim Anderton

UNITED FUTURE

* Owes $71,867 and only committed to repaying $4965. Hasn't decided whether to support validating law.
* "We agree with Madam Speaker's comment that parties thought they were acting lawfully ... we will report our views as directed and within the timeframe stated."

* The figures include GST

- Compiled by Ruth Berry