Canadians Come Clean

by Aaron Freeman

Multinational Monitor magazine, March 2003


The Canadian government has introduced sweeping legislation aimed at reducing the influence of money in politics.

The bill, introduced by the governing Liberal party in the federal House of Commons in February, would radically transform how elections are run. The rules would ban donations to parties from corporations, unions and other organizations, and cap donations from these sources at $1,000 (US$650) for individual candidates. Donations from individuals would be limited to $10,000 (US$6,500).

Prime Minister Jean Chretien himself introduced the legislation in the House of Commons on February 11, announcing it was "a bill that will change the way politics is done in this country, a bill that will address the perception that money talks, that big companies and big unions have too much influence on politics, a bill that will reduce cynicism about politics and politicians, a bill that is tough but fair."

To make up for the shortfall in party revenues, there are new public financing provisions, the most significant of which would provide parties with an annual subsidy of $1.50 per vote received in the previous election. Current measures, such as a partial reimbursement of election expenses for parties and a tax credit for donors, would also be increased. The cost to taxpayers of the new public financing measures is estimated at approximately US$25 million per year.

New disclosure requirements would close many of the loopholes in Canada's 29-year-old system for reporting donations. Donations that are currently outside the disclosure system-such as those to party leadership races (similar to the U.S. primary system), and local candidate nomination races - would be brought under the law.

Canada already has election spending limits for both candidates and parties, which will be maintained, although buried in the law is a provision increasing the party expense limit by 13 percent.

While the new law would help limit the influence of money in Canadian politics, key loopholes remain. Donors would still be allowed to funnel money to trust funds, a ubiquitous term covering accounts controlled by a candidate or a party. While the limits and disclosure obligations would apply to money that is moved from these funds to campaign coffers, the funds could continue to receive secret money that can be used for a candidate's personal benefit, such as for his or her retirement.

In addition, disclosure of political donations in Canada occurs just once a year, six months after the end of the year. As a result, it is usually impossible to know until long after a piece of legislation has passed whether donations were made by those with an interest in the legislation while it was being deliberated on by government officials.

The $10,000 individual donation limit is also seen by many as too high. Two Canadian provinces, Quebec and Manitoba, have complete bans on corporate and union donations, and a limit of $3,000 on all individual donations.

While the Ottawa-based citizens group Democracy Watch and other organizations have been pushing for the reforms contained in the law for many years, the prime minister's motives for introducing the bill this year is the subject of much speculation in Ottawa. Recent scandals involving Liberal Party donors receiving plum contracts have also led many to speculate that the prime minister does not want to leave a legacy tainted by these events. There are several police investigations underway, and if they reveal that misconduct has taken place in the awarding of these contracts, some say the prime minister will want to point to changes he has initiated to ensure a cleaner process.

"Contracts have been awarded in an irregular fashion to companies that give handsome sums to the Liberal Party," says Andrew McIntosh, an investigative journalist with the National Post who has broken several political corruption stories. "This bill is intended to make it look like Chretien is responding to the problem of the influence of corporate money in politics."

The bill comes as Chretien is in his last year of power, forced to step down after 10 years as prime minister by his party's own caucus, which by and large supports leadership contender and former finance minister Paul Martin. In the leadership race that is underway, Martin has been criticized for refusing to disclose many of his donors. Many view the legislative initiative as a way for the prime minister to focus attention on this aspect of his long-time rival's campaign.

"The appearance of this legislation at this time is too driven by internal Liberal politics and needs: the need of the Prime Minister to whitewash various scandals from his record before he retires; the need to deal with his leadership rival within the Liberal Party; and ... the need to deal with the bank debts of the Liberal Party itself," says Stephen Harper, leader of the opposition Canadian Alliance Party.

While the three other opposition parties agree with the principles of the proposed law, and plan to support it, Harper argues that taxpayers should not be forced to further subsidize political parties. "When the Liberal public relations rhetoric is set aside, the true nature of the bill is simply the replacement by the government of its addiction to large business and union donations with an addiction to taxpayer funding."

The prime minister will also have to contend with opposition within his own party. Liberal Party President Stephen LeDrew refers to the idea of banning corporate donors as "dumb as a bag of hammers," and some Liberal members of Parliament agree with this sentiment. But polls show strong public support for the corporate and union donation ban, and Chretien has announced that the vote on the bill will be a confidence vote, meaning that if it fails to pass, the government may fall. As a result, most Liberals are expected to vote in favor of it.

In the United States, the McCain-Feingold Bipartisan Campaign Reform Act, passed last year, bans all "soft money"-unregulated donations that provide a loophole similar to those that the Canadian reforms would address. However, some are challenging the bill in court, arguing it violates the U.S. Constitution's freedom-of-speech provisions. In Canada, however, constitutional protections are balanced differently by the courts, and freedom of speech is weighed against democratic rights such as electoral fairness. As a result, a legal challenge to the Canadian law would be very unlikely to succeed.

One of the biggest differences between the Canadian proposed law and existing U.S. Iegislation is in the public financing provisions, causing some U.S. reform advocates to take an interest in the Canadian initiative.

"This bill recognizes that running a democracy can't happen on the cheap, and that parties need money in order to educate voters and mount effective campaigns," says Susan Anderson, a senior program adviser with the Washington, D.C.-based Public Campaign. "By providing public funds while also limiting a political party's access to private funds, the parties may begin to listen again to their citizen constituents, not just their cash constituents."

The bill has been referred to a parliamentary committee, which will review and propose amendments before returning it to Parliament for final passage, expected in June.


Aaron Freeman is a founding director of Democracy Watch and a columnist with the Hill Times, Canada's parliamentary newspaper.

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