Part 3: Assessing compliance with Parliament's authority

3.1
As noted in Part 1, I was concerned that some of the advertising expenditure incurred by the Service in the pre-election period may have been inappropriate, in that the advertising was for electioneering purposes. I considered it prudent to confirm my understanding of the parameters set by Parliament for such expenditure before proceeding further with my inquiry.

3.2
In this Part, I discuss:

• the legal advice I received from the then Solicitor-General on the scope of the appropriations for Party and Member Support, and the exercise of the Controller function in specific situations;
• the method that I used to determine whether the expenditure had been appropriately incurred; and
• responses from parliamentary parties and the Service.

Legal advice on the scope of the appropriations and the exercise of the Controller function

3.3
I received the Solicitor-General’s advice on 19 April 2006. Appendix 2 contains the advice in full, and the main points of the advice are summarised below.

3.4
The scope of the Party and Member Support appropriations is limited to expenses that are incurred for a parliamentary purpose. The Solicitor-General’s advice confirms that the most authoritative indication of what constitutes a parliamentary purpose is the definition of “parliamentary business” in the Speaker’s Directions¹ issued on 1 November 2003. These Directions were provided to every MP as an update to the Members’ Handbook of Services, and were published on the Internet.

3.5
The Solicitor-General also noted −

Clause 46 of the Speaker’s Directions … [provides] that a member is entitled to use “operational resources” for the purpose of undertaking parliamentary business. “Operational resources” are (in effect) defined by indicating what they do and do not include. “Operational resources” may be used for developing, researching, critiquing and communicating policy (cl 46(2)(b)) and for communicating with constituents and other communities of interest (cl 46(2)(c)) but may not be used for producing or distributing electioneering material (cl 46(3)(d)).

3.6
The distinction between parliamentary business and electioneering, and how the distinction should be understood and applied in practice, has been the central issue in my inquiry. The Solicitor-General points out that the “operational resources” provisions in the Speaker’s Directions illustrate that, although much parliamentary business is “political” in nature, electioneering activity falls into a different and, for funding purposes, distinct category.

3.7
The Members’ Handbook of Services and other guidelines issued by the Service express this in similar terms. Section 1.3 of the Members’ Handbook of Services provides guidance on what advertising may be incurred under the Party and Member Support appropriations and, as with the Speaker’s Directions, uses the phrase “parliamentary business” to list permissible activities. It expressly excludes activities that are:

• soliciting subscriptions or other financial support for a political party or a candidate at an election;
• party political, promotional, or electioneering material for the purpose of supporting the election of any person; and
• any work undertaken as a Minister of the Crown and Member of the Executive Council.

3.8
How the distinction is applied is critical – in particular, whether an electioneering purpose exists only if there is an explicit soliciting of funds or votes, or whether a broader approach, examining the overall intent of a publication or other activity, should apply.

3.9
In the Solicitor-General’s view, case law on the meaning of “election activity” under the Electoral Act 1993 is also relevant when determining the boundary between a parliamentary purpose and a purpose of an electioneering nature. His opinion refers to the following passage from the High Court judgment in Peters v Clarkson² −

The essence of these requirements [under section 213 of the Electoral Act] remains, we think, aptly captured in the passage in the Wairarapa case where the Court spoke of “words or sounds (perhaps images should be added) intended to persuade the voter …”

3.10
The Solicitor-General summarised his view on the scope of the relevant appropriations −

The appropriations for members’ communications and party and member support are administered by the Parliamentary Service for parliamentary purposes. Parliamentary purposes are elaborated through the Speaker’s Directions and reinforced by the Parliamentary Service Commission Guidelines and the Members’ Handbook. Advertising for parliamentary purposes clearly excludes advertising for electioneering purposes. Electioneering advertising is something that is intended to persuade a voter to favour a candidate or party in an election.

3.11
He also expressed the views that:

• It is not necessary for there to be an express soliciting of votes to establish an electioneering purpose. Rather, he said, the question is whether the advertisement as a whole would be likely to persuade a voter to vote in a particular way.
• No particular date determines whether material can be considered to be for an electioneering purpose in terms of the appropriations – although proximity to the Election is likely to be a relevant factor in particular instances (especially where there is no express solicitation of a vote).

3.12
I also sought legal advice on how my Controller responsibilities should be exercised in a case where an advertisement may have been authorised by an MP or party in their parliamentary capacity and/or partly for a parliamentary purpose, but where there was also evidence of a non-parliamentary purpose (such as an intention to persuade voters to vote in a particular way). The Solicitor-General considered three possible approaches but expressed his opinion as follows −

In the present context, I consider that the Auditor-General is entitled to take the view that expenses incurred for an electioneering purpose and reimbursed from appropriations are outside the scope of the appropriations, and are accordingly unlawful, even though some part of the expense-incurring activity may fall within the appropriation (i.e. have a legitimate parliamentary purpose). In essence, this requires the Auditor-General to apply the simple “in or out” test … this test provides a “bright line”, it has the advantage of being administratively workable, it limits opportunities for abuse and it provides a clear framework for audit purposes. It recognises that any significant reference to electioneering is likely to “taint” the remainder of a publication or other communication (i.e. infect it with an electioneering purpose).

3.13
In my view, the Solicitor-General’s interpretation is consistent with the Controller function under the Public Finance Act – namely, to consider whether expenditure has been incurred for a purpose that is within or outside the scope, amount, or period of an appropriation, and form a view on its appropriateness.

Establishing compliance with appropriations

3.14
I used a method with five elements to determine whether a particular advertisement was for a non-parliamentary purpose and, therefore, outside the appropriations.

3.15
The first element of the method was to consider whether the advertisement, although made in an official capacity, was of a ministerial rather than a parliamentary nature. This was necessary because expenses incurred by MPs in their capacities as Ministers of the Crown, or otherwise for a purpose related to the business of the Executive branch of government, are met not under Vote: Parliamentary Service but under Vote: Ministerial Services.

3.16
The second element of the method was to consider whether an advertisement expressly solicited votes, members, or funds for a political party. Such purposes clearly lie outside the scope of the Vote: Parliamentary Service appropriations.

3.17
The third element of the method was to consider whether the advertising as a whole had an electioneering purpose. The Solicitor-General’s advice emphasised the context-specific nature of this question. Factors that might indicate such a purpose were:

• references in the advertisement to the Election;
• references to an MP’s or party’s policy platform for the Election, or what they intend to do after the Election if elected or re-elected;
• references to a candidate who is not already an MP;
• formatting or branding of an advertisement in a manner similar to the party’s own election campaign material;
• the amount printed and the extent of its distribution, or the accessibility of the advertisement to voters at large; and
• the timing of the advertisement in relation to a party’s election policy announcements.

3.18
Only if an advertisement was incapable of being described as having an electioneering purpose would the fourth element of the method be applied, which was to consider whether there was a parliamentary purpose to the advertisement that would bring it within the scope of the relevant appropriation. Factors that might indicate a parliamentary purpose were:

• particular services to the public – for example, constituency clinics or public meetings for constituents about current issues;
• the MP’s role as an MP in making the advertisement – for example, as a constituency MP reporting on their activities as an MP, or communicating public issues of interest to the electorate generally or as a party spokesperson on a particular issue; and
• existing or proposed legislation, or existing government policies or actions – particularly legislation still before the House (which had yet to be dissolved), or where the policies or actions discussed were current in the pre-election period.

3.19
Finally, the fifth element of the method was to consider whether an advertisement that was solely for a parliamentary purpose satisfied the administrative requirements for such advertising as outlined in the Members’ Handbook of Services. The requirements are:

• Any advertising material must display the parliamentary crest or include the MP’s contact details.
• Party names must be in keeping with the names approved by the Electoral Commission.
• Where a party logo is displayed in an advertisement that also displays the parliamentary crest, the party logo should not be the dominant feature.

3.20
No single factor dictated whether particular advertising expenditure was within or outside the scope of the appropriations. Rather, I formed a view based on all the above factors, the advertising example itself, and the context in which the advertising occurred. Figure 1 shows the method I used to evaluate the advertising.

Figure 1
Method used to evaluate the appropriateness of pre-election advertising

Comments from parliamentary parties and the Service

3.21
I received a range of comments from parliamentary parties and the Service about the method I used to establish the appropriateness of expenditure. In summary, the main points were that:

• The method I used was “entirely different” from the approach used by the Service, which focuses not on the overall purpose of an advertisement but on whether the advertisement explicitly solicits votes, funds, or membership.
• I had “changed the rules” after the event.
• I had not clearly warned MPs that I would be watching their advertising expenditure in the lead-up to the Election.
• Legal considerations should not override the “conventions of the day”.
• The method I used appeared to have been chosen for administrative and audit ease.
• Expenditure across a number of years would be affected.

Method used “entirely different” from approach of the Service

3.22
The Service and some parliamentary parties disagreed with the method I used to establish whether parliamentary parties’ and MPs’ advertising expenditure was appropriately incurred.

3.23
The Service took exception to the “bright line” test as described by the Solicitor-General. The Service maintained that it was very difficult, if not impossible, to draw a line in the sand that separates any sort of promotional activity from what could be construed as business that is strictly parliamentary, except at the extremities.

3.24
The Service considers that the Members’ Handbook of Services excludes only “blatant” electioneering (that is, advertisements that explicitly solicit votes, membership, or funding), and that the approach it uses is more appropriate and workable than the method I used.

3.25
The Service and some parliamentary parties also questioned the relevance of the law generated under the Electoral Act to the Speaker’s Directions. Their contention was that the term “electioneering” had two different meanings:

• under the Electoral Act case law, electioneering means something that is intended to persuade a voter to favour a candidate or party in an election, and it is not necessary for advertising to explicitly solicit a vote for it to fall in this category; but
• under the Members’ Handbook of Services, electioneering means only the explicit soliciting of votes, membership, or funding.

3.26
I am not persuaded that the relevant passage of the Members’ Handbook of Services (see paragraph 3.7) will bear that interpretation of electioneering. Electoral Act case law, on the other hand, recognises that a person’s voting decisions can be influenced by information intended to persuade – not just by simple requests from parties for their vote. In my view, the Solicitor-General’s advice that the Electoral Act approach is relevant in the appropriation context is both sensible and reasonable.

3.27
As noted earlier, advertising for parliamentary purposes clearly excludes advertising for electioneering purposes. The appropriation framework and relevant guidance make this distinction clear. The Party and Member Support appropriations authorise expenditure for parliamentary purposes only. An advertisement paid for on the basis that it is for a parliamentary purpose therefore cannot lawfully have an electioneering purpose as well.

3.28
My approach recognises the political context of advertising by MPs and parliamentary parties: parliamentary business is a broad and, in some senses, indeterminate concept that inevitably overlaps with the conduct of party political business. But party political, promotional, or electioneering material designed to support a person’s election can be designed in ways other than by making explicit requests for votes. Such material cannot be properly paid for by the Service under the appropriations it administers.

3.29
I note too that, although the Members’ Handbook of Services provides guidance about funding entitlements, it does not have the same authority as the Speaker’s Directions and does not set the legal framework for expenditure under the appropriations. The Members’ Handbook of Services reflects the decisions of the Parliamentary Service Commission and the Speaker related to the funding entitlements available to MPs.

3.30
The advice I received from the Solicitor-General about the legal framework that sets the scope of the appropriations was clear:

• The scope is determined in the first instance by the Appropriation Acts of the relevant financial year.
• In addition, the appropriations can be read together with the Parliamentary Service Act 2000, which provides the framework within which the Service administers the funding under the applicable appropriations, and with any directions given by the Speaker in accordance with section 7(b) of that Act.
• The Speaker’s Directions issued on 1 November 2003 under section 7 of the Parliamentary Service Act provide further assistance, stating that operational resources cannot be used for producing or distributing electioneering material.

“Changing the rules” after the event

3.31
Some MPs and parliamentary parties have said that I have acted unfairly by “changing the rules” after the event. I have not changed any rules. They are not my rules. I am simply interpreting and applying the existing law.

3.32
In 2005, when I first closely looked at the issue, I thought it was clear that it was not permissible to use public money from the Party and Member Support appropriations for electioneering. When I undertook this inquiry I sought legal advice from the Solicitor-General. He confirmed my view.

3.33
I acknowledge that some MPs and parliamentary parties have said that they were unaware of the rules as I interpreted them, and that they relied on the guidance and practices of the Service over a number of years in approving similar expenditure.

Fair warning

3.34
Some MPs and parliamentary parties have said that I did not clearly warn them that I might examine their advertising expenditure in the lead-up to the Election, and that they thought nothing needed to change until after the Election.

3.35
I certainly considered that the regulatory framework governing government and parliamentary publicity and advertising needed to be reviewed, and that the right time to do that was after the Election. But regardless of that, MPs and parliamentary parties still needed to comply with the existing framework in the meantime.

3.36
I believed my 2005 Report would change the behaviour of MPs and parliamentary 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.

3.37
I deliberately decided to publish my 2005 Report before the Election to provide a clear signal to MPs and parliamentary parties about the need to be careful during the pre-election period. I drew attention to this issue in Part 6 of my 2005 Report, but did not see the need to emphasise the point. I thought it was clear. Although many aspects of government and parliamentary publicity and advertising can fairly be said to be unclear, I thought there was little doubt that it was not permissible to use public money from the Party and Member Support appropriations for electioneering. I expected MPs and parliamentary parties to be especially careful in that area.

“Conventions of the day”

3.38
Two parliamentary parties emphasised that their advertising decisions were based on the “conventions of the day”. One said that it had −

…made its advertising decisions based on the written rules of the day and accepted convention…

3.39
Another said −

[The method] does not seem sufficient reason to overturn the current practice and to declare unlawful the communications spending of all parties and members.

The issue arises as a technical problem now identified with an established practice, that all involved parties considered was lawful at the time.

3.40
Accepted conventions or practices have no standing when considering whether public money has been spent lawfully. Advertising expenditure incurred under the Party and Member Support appropriations is lawful only if the advertising is for a parliamentary purpose.

3.41
If the current conventions and practices allow advertising to take place for electioneering purposes, then those conventions and practices are inappropriate because they have permitted unlawful expenditure to occur.

Method chosen for administrative and audit ease

3.42
One parliamentary party took the view that −

[The Solicitor-General] chose this test over other, more flexible options, in part on the basis of its ease of administration as a framework for audit purposes…

3.43
The method I used was based on the relevant provisions of the Public Finance Act. In respect of how Party and Member Support resources can be used, “electioneering” and “parliamentary” purposes are mutually exclusive. The appropriation framework and relevant guidance make this distinction clear. The Party and Member Support appropriations authorise expenditure for parliamentary purposes only. An advertisement paid for on the basis that it is for a parliamentary purpose cannot lawfully have an electioneering purpose as well.

Expenditure across a number of years would be affected

3.44
One parliamentary party said the method I applied −

…casts into doubt the validity of the spending of many millions of dollars of appropriations over many years.

3.45
It is fair to say that I had concerns about a range of government and parliamentary advertising issues before 2005. The issues I identified appeared to indicate systemic problems with the administration of such expenditure. I decided, using my discretionary powers, that I would report my concerns about the systems, policies, and procedures for managing such expenditure to Parliament rather than inquire into the previous expenditure. My 2005 Report describes those concerns.

3.46
As noted in paragraph 1.16, I publicly stated my expectation that any publicly funded advertising by political parties that took place between the release of my 2005 Report and the Election had to be consistent with the existing rules. My 2005 Report also made it clear that the potential for indirect political benefit from advertising in the pre-election period required risk management by Ministers and chief executives (such as the Speaker and the General Manager of the Service). My current inquiry has therefore focused on the period between the presentation of my 2005 Report and the Election. At the time of my 2005 Report, I made the decision to focus on future expenditure rather than inquire into what had happened in the past. I have not changed that view.

1: The Speaker’s Directions are issued under section 7(a) and (b) of the Parliamentary Service Act 2000. For the periods discussed in this report, the applicable Speaker’s Directions were in the document “Travel, Accommodation, Attendance, and Communications Services Available to Members of Parliament” effective from 1 November 2003. Those Directions have since been replaced by the “Direction and Specifications for Travel, Accommodation, Attendance, and Communications Services Available to Members of Parliament” effective from 1 September 2006.

2: Peters v Clarkson (unreported, High Court, Tauranga, 15 December 2005, CIV-2005-470-719, Randerson, Goddard and Panckhurst JJ). The passage from the “Wairarapa” case that is cited with approval in the Court’s decision comes from Re Wairarapa Election Petition [1988] 2 NZLR 74.