Political fundraising in Canada – should we “follow the money”?

February 4, 2021

Zane Schwartz had just graduated from the University of Toronto’s Trinity College when Justin Trudeau’s Liberals swept into power in 2015. Before and since, Schwartz has demonstrated he is a force to be reckoned with as a Canadian investigative journalist. He has racked up a number of high profile awards with bylines and appearances on Canada’s most respected news sources. In 2017, the National Post named him a Michelle Lang Fellow, named for Calgary Herald writer Michelle Lang, killed in 2009 while covering the war in Afghanistan.  As part of this year-long Postmedia fellowship, Schwartz conceived of and delivered on a data journalism project that was called Follow the Money. Working with a team of Postmedia journalists and data analytics developers at Qlik, Schwartz was the driving force behind a never before assembled, accessible search tool for contributions at both the federal level and in every province and territory.

As someone who has spent a good portion of my career in the world of professional political fundraising, I find the project very interesting. Political fundraising is the bedrock of political life.  A candidate’s ability to generate funds is not just a win or lose prospect, it determines who runs at all. In fact, at the federal level a candidate cannot even register to run without identifying an “official agent” to report on anticipated expenses and contributions. Politics and money go together and for as long as people and money have existed, the extent to which one influences the other determines democracy’s fragile balance. Personally, I see political fundraising as an integral part of democracy.  The ability of candidates and parties to position, discuss and debate ideas requires potential voters to hear them, and that takes money. When it works well, winning elections should come down to whose ideas, values and approaches best resonate with the voting public.

Schwartz’s naming of this database “Follow the Money” is provocative, for this term itself is irrevocably tied to the darker side of political fundraising. Popularized by the 1976 film All the President’s Men, the term “Follow the Money” often refers to political decision-making that has been compromised in some way by those who can pay for it. The world has had a front row seat to the significant impact of financial influence over politics during the Trump presidency. On a smaller scale, Canada is by no means immune. We’ve had our own share of political fundraising scandals.  But I do believe that politicians of all stripes have made a significant effort over the years to limit the ways in which our democracy can be bought.

Political fundraising regulation is a relatively recent phenomenon in Canada. In 1974, six months before Pierre Elliott Trudeau secured a Liberal majority in the July election that year, Parliament signed the Election Expenses Act into law. Up until that point, political party fundraising was considered an “internal affair” and not subject to the scrutiny of law. At that time, a number of factors converged to change that position.  The country was undergoing significant social change. Minority governments were common and frequent elections drained funds. Elections had entered the age of television advertising and the influence of polling was dramatically increasing the costs of running a political campaign. Moreover, scandals like Watergate revealed the dangers of letting such activities run unchecked.

The Election Expenses Act represented the first time in Canada that the financial activities of political parties, candidates, third parties, and local electoral district associations alike became regulated. Limits on election expenses for both candidates and political parties were introduced, and the first forms of public funding through partial reimbursement of expenses and tax credits for contributions were established. This Act governed the practice of federal election fundraising for many years thereafter, only modestly broadening its scope to put limits on electoral district associations, nomination contestants and leadership contestants, then corporations and trade unions in 2004 and 2007 respectively. In fact, the first major changes to the Act only came about in 2014, forty years later.

In 2014, Stephen Harper was Prime Minister and the federal election, which would see the current Liberal administration take power, was more than a year away. Legislation passed in 2014 introduced a new set of rules on political financing. In brief, this new legislation increased contribution limits, raised spending limits, modified and standardized rules for loans, and imposed new transparency measures and limits on election advertising by third parties – persons or groups other than candidates, registered parties or electoral district associations of a registered party. Controversially, the per-vote subsidy was eliminated in 2015.

Between 1974 and 2015, all these changes to the Elections Expenses Act, had an impact on political fundraising strategy. For example, in 2004, the Conservative party’s long-standing ability to attract individual supporters became an advantage over the Liberal success securing contributions from corporations.  It will be interesting to see what impact, if any, we might attribute to the COVID-19 pandemic and limits on opportunities to convene with party loyalists and donors. But if the goal of election fundraising is truly to strike a balance between enabling informed voter choice and holding firm against undue financial influence, how well does our election expenses legislation help to protect Canada’s democratic system?

Using Schwartz’s Postmedia database “Follow the Money, here is what I see:

1) No public system is immune, but Canada’s Election Expenses legislation does its job. There are not many loopholes that can truly be exploited to “buy” significant political influence. At least not as it pertains to campaign fundraising.

2) The current legislation does however put a premium on how many people you can get to write a cheque, and how regularly. When Harper enshrined the small donation method into law as Prime Minister, Liberals were forced to play catch-up. When I worked for the Liberal Party of Canada, it was one of my main motivations for creating the flagship donation program, the Victory Fund. The goal was to build a database of donors give a minimum of $5 to a local riding and $5 to the National Office monthly, thereby not only increasing fundraising but also the number of individual supporters. Building and cultivating financial loyalty is the major job of today’s political fundraising teams.

3) Personality is everything and money tends to follow people, not necessarily parties.  A lot rides of the popularity of candidates. And the end of the day though, a party leader’s popularity (or lack thereof) very often determines how much a local candidate can raise. Canada’s Leadership Conventions reflect the power of these symbiotic relationships.

4) Election fundraising is critical, but money alone does not an election make. As you will see from a look at the “Follow the Money” database, Conservatives consistently raise more funds but don’t always win elections. Conversely, not enough money means you have little power to use as leverage, as is the case with the current federal NDP party. Election campaign fundraising remains a powerful tool of leadership.

5) Political parties borrow money to run elections and then plan to pay back based on the higher level of donations coming in during the writ. Also, the Act provides for up to a 50% refund on election expenses. Often, Parties will update their technology, hardware, and so on during a writ because of the hefty refund. Again, the problem for the NDP at the moment is that their last election expenses were greater than their donations and the 50% refund, which puts them in a difficult spot. Despite recent claims of having repaid all their debt, it may be hard for them to secure loans for another election, but we will only know the full extent of their financials when the annual reports are published at the end of June 2021.

In conclusion, I will say this: votes are major political currency, so manipulation, where it exists, is unlikely to be revealed through looking at national political fundraising alone. The practice of district boundary manipulation, paying for “access”, lobbying, and conduit contributions, while greatly curtailed by our laws, remain areas of potential weakness. The system that enables our democracy is always vulnerable; and only as strong as our vigilance, particularly in a country as “vast and rapidly changing” as Canada.