Matt Nippert: $150,000 donation - Money in politics and why it matters

New Zealand Trade Minister Todd McClay meeting horse-racing mogul Lang Lin in July 2016 in Beijing. Lang's company subsequently donated $150,000 to the National Party. Photo / Supplied

The issue with the horse mogul and the trade minister is not whether the $150,000 donation to the National Party was legal - it was handled and disclosed entirely in accordance with current laws - but to what degree it shows our current legal framework governing donations is fit for purpose.

Setting aside the issue of whether ministers should be seen to involve themselves in political fund-raising, the scale of the donation from the Inner Mongolian Rider Horse Industry NZ in 2017 should alone be cause for a second look at how we presently handle these matters.

That donation was the single largest payment to the National Party over their last term of government. The only other larger donations to all parties in the 2014-2017 cycle were local and where the motivations for giving - and any possible conflicts - were either crystal clear (the vanity projects of Colin Craig and Gareth Morgan) or irrelevant (where a donor to the Greens had died and left a bequest in their will).

New Zealand is rightly proud of its democracy. Our nation has fair and free elections, a vibrant culture of opposition, orderly changes of power, and is regularly ranked among the least-corrupt countries on Earth. This should not be taken for granted.

Underpinning much of the above are our political parties, who on the whole are run by dedicated and principled people who are seeking to make the country a better place. Their efforts - across the spectrum - should be applauded. But they need funding to operate.

We are not at the wildly distorted level of United States politics (where upwards of US$500 million is said to be required to mount a credible campaign for president) but our party system requires funding which - unless parliament comes to an unlikely agreement on state support for political parties - inevitably introduces the vexed issue of political fundraising.

The obvious risks of conflict - from parties receiving money from vested interests, then having to set laws and regulations governing such interests - are generally dealt with through transparency and disclosure.

As much as those on the left are critical of the potential influence of industry donors like the Talleys, or those on the right look askance at union money flowing into party coffers, the motives of these organisations are widely understood and their membership are obviously part of our political ecosystem.

Where matters become murky is the case of donations from offshore where the origin of funds, and associated interests, are less clear. These are not academic concerns. Spy boss Rebecca Kitteridge made a rare appearance in Parliament earlier this year to say the issue was high on her agenda, and: "I can say we have seen activities by state actors that concern us."

Our present regime has a number of contortions which should be addressed. Parliament was quite clear it had concerns in this area when deciding to ban donations from foreign nationals over $1500. But there are no limits on donations from companies or other corporate entities, even where their ownership or control rests offshore.

Given New Zealand regularly tops World Bank rankings in being the easiest place in the world to set up a company, it is not difficult to see how this mechanism could be potentially abused.

This is not a loophole - the law was intentionally written this way - but it is worth weighing whether we should really be treating this as a feature of our electoral finance system rather than a bug. Resolving the issue is not straightforward, requiring either a potentially blunt hard-and-fast rule or a complicated test of control or ultimate ownership, and will run into vested interests of its own.

The justice select committee is presently considering this very issue, but there will be the temptation - given the committee is dominated by National and Labour MPs - to do nothing in order to keep the taps flowing. Both parties count corporate entities as major donors: National has traditionally raked in corporate donations, while Labour receives funding from the union movement.

Let us hope here they are able to elevate the interests of our democracy above those of their own coffers.