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Electoral Insight – 2004 General Election

Electoral Insight – January 2005

Bill C-24: Replacing the Market with the State?

Ian Stewart
Professor, Department of Political Science, Acadia University


Until recently, the governing party in Ottawa has typically enjoyed generous funding from corporate Canada. Such a circumstance may have been considered democratically unconscionable by many, but governments have been disinclined to tamper with a financing regime from which they have undeniably profited. In the first half of 2003, however, the Chrétien government pushed Bill C-24 through both houses of Parliament. The Canada Elections Act was thus amended to, among other things, cap trade union and corporate contributions to riding associations and candidates at one thousand dollars, provide for more generous reimbursement of election expenses to parties and candidates, and extend regulatory control over leadership conventions, nomination contests and riding associations. Most important, for the purposes of this article, is that any political party receiving more than 2% of the national popular vote (or more than 5% in those constituencies it contested) would be entitled to allowances from the public treasury equivalent to $1.75 per year for every vote received in the preceding general election. This article will focus upon some of the implications of this formula; for at least some parties, this particular form of state subsidy will not dramatically alter the relative distribution of resources previously allocated by the market.

Using public monies to support political parties is not a revolutionary idea, either in Canada or abroad. As far back as the mid-1960s, the House of Commons Committee on Election Expenses (dubbed the Barbeau Committee) noted that some countries subsidized particular activities of parties (transportation in Japan, broadcast time and mailings in Britain and France, nomination conventions in Norway), Footnote 1 while other jurisdictions (West Germany, Sweden, Puerto Rico) provided parties with unconditional subsidies based on the votes or seats won in the preceding election. Footnote 2 The Barbeau Committee regarded the latter approach as debilitating to party organizations and recommended against its adoption in Canada. Twenty-five years later, the Royal Commission on Electoral Reform and Party Financing (Lortie Commission) moved only incrementally from this position. Although three provinces (Quebec in 1977, New Brunswick in 1978, and Prince Edward Island in 1983) had, in the interim, directed annual subsidies from the public treasury to eligible parties, Footnote 3 the Lortie Commission suggested only that registered parties receiving over 1% of the popular vote at a general election be entitled to a one-time reimbursement of 60 for each vote received (provided that amount did not exceed 50% of actual expenses incurred). Footnote 4 Even this relatively modest recommendation, like much of the Lortie Report, lay fallow for over a decade.

The debate over public subsidies

This circumstance changed abruptly in the spring of 2003. Developed in the midst of revelations about possible misuse of public funds on government advertising and the governing party's fractious leadership politics, Bill C-24 promised to revolutionize the financing of Canada's national parties. With respect to providing an annual subsidy to eligible parties, the government offered three specific justifications. First, if parties were to be denied their customary access to large corporate and union donations, the state should provide appropriate compensation for these lost revenues. Second, the government averred that replacing private with public dollars would lessen the likelihood that monied interests would exert undue influence over the policy-making process. Finally, a guaranteed quarterly allowance would free parties from the yoke of perpetual fundraising and permit them to engage in other, more socially beneficial, activities.

Needless to say, not everyone was impressed by these arguments. Spokespersons for smaller parties, for example, complained that the 2% popular vote requirement was certainly discriminatory and perhaps unconstitutional. As well, opposition MPs claimed that the bill obliged taxpayers to support parties with which they had little sympathy, that voters might, in protest, opt out of the electoral process entirely, that a heavy reliance on state funding would undercut the links between political parties and the sectors of society they purported to represent, and that basing the allowance on votes received at the preceding general elections was unfairly tilted against minor or fledgling political movements, and unfairly generous to national governments. One MP worried about Bill C-24 precipitating a "closed shop," Footnote 5 while another suggested that the legislation could more appropriately be labelled "the incumbent's protection act." Footnote 6

Previous patterns of party financing

Table 1
Ratio of Annual Revenue Share to Vote Share in Preceding Election (Non-election years only; major parties only)
  Liberal Progressive Conservative N.D.P. Bloc Québécois Reform/Alliance
2002 0.95 0.81 1.82 0.25 1.21
2001 0.96 2.05 1.86 0.26 0.59
2000
1999 1.11 0.80 1.71 0.35 0.94
1998 1.11 0.96 1.58 0.21 0.93
1997
1996 0.99 0.98 4.07 0.20 0.90
1995 0.83 0.90 4.63 0.32 0.60
1994 0.84 0.76 4.28 0.45 0.75
1993
1992 0.86 0.98 1.26
1991 0.73 0.97 1.49
1990 1.16 0.79 1.19
1989 0.69 1.12 1.23
1988
1987 0.89 0.73 1.88
1986 0.90 0.73 1.84
1985 0.68 0.93 1.67
1984
1983 0.54 1.41 1.36
1982 0.66 1.13 1.55
1981 0.66 1.12 1.58
1980
1979
1978 0.75 0.99 1.74
1977 0.84 0.84 1.80
1975/1976 0.76 0.84 2.02

These objections merit closer scrutiny. To what extent will state subsidies revolutionize the allocation of resources to registered Canadian political parties? Put differently, was the more market-based system of the past not implicitly shaped by the results of the previous federal election? Table 1, which displays non-election year ratios Footnote 7 derived from dividing a party's share of the major parties' annual revenues by their share of the major parties' votes in the preceding general election, provides an initial insight into the matter. Thus, a figure of 1.00 in Table 1 would indicate that a party was raising monies commensurate with its share of the popular vote in the preceding election. Since 1993, when the number of parties with seats in Parliament rose to five, three parties (the Liberals, the Progressive Conservatives, and Reform/Canadian Alliance) have gathered revenues that have been approximately proportionate to their popular vote totals from the previous election; in fact, their mean figures have been 0.97, 1.04 and 0.85 respectively. Going back to the 1970s and 1980s alters the revenue-to-vote relationships only marginally. Admittedly, the Liberal party was slower than their competitors to realize the monies that could be raised from direct-mail and telephone campaigns; thus, their mean revenue-to-vote ratio for the 1975–1992 period was only 0.78:1. The corresponding figure for the Progressive Conservatives, however, was an almost proportionate 0.97:1. In fact, it seems likely that even as far back as the period of the 1930s to the 1950s, revenues raised by the major parties closely tracked vote totals from the preceding general election. While he lacked hard data to prove it, K. Z. Paltiel argued that corporate contributors from this era "hedged their bets by distributing their gifts in a proportion of sixty to forty between the incumbent and opposition parties." Footnote 8 As it turns out, the ratio of government party votes to the principal opposition party's votes for the eight general elections held between 1930 and 1958 was 59:41. Footnote 9


Campaign signs in the electoral district of Ottawa–Orléans.

In light of this evidence, it is worth recalling that Alliance leader Stephen Harper repeatedly claimed that the Liberal Party of Canada was the "principal beneficiary" of Bill C-24; Footnote 10 more colourfully, Alliance backbencher John Williams alleged that the public subsidies would result in the "permanent entrenchment of Liberal hegemonic power." Footnote 11 Yet Table 1 suggests that the Liberals were already bringing in revenues roughly proportionate to the proposed public subsidies. Two caveats must be registered here. First, the analysis does not speak to whether, relative to their competitors, the share of pre-2004 Liberal revenues that would be disqualified under Bill C-24 is disproportionately high or disproportionately low. Footnote 12 Second, if state funding is particularly generous – and the $22 million in allowances, which the five major parties received in 2004 (in addition to their election rebates) is approximately 70% of their cumulative incomes for 2002 – then the Liberals may well end up enjoying a proportionate slice of a much larger revenue pie.


The public financing provisions of Bill C-24 have significantly benefited the Bloc Québécois and Green parties.

In some respects, it is the two outliers in Table 1 that are more interesting. On the one hand, there is the New Democratic Party, which in every non-election year since 1974 has enjoyed a revenue portion greater than their vote share from the preceding general election. Nevertheless, the New Democratic Party only advanced a few minor quibbles during the parliamentary debates over Bill C-24. As leader Alexa McDonough suggested before the Standing Senate Committee on Legal and Constitutional Affairs, her caucus members supported the principle of the legislation, and "in the main, support the substance of it." Footnote 13 At the other extreme is the Bloc Québécois: its revenue share has never even approached half of its vote share in the previous election. For this party, Bill C-24 promised to be a windfall, and their enthusiasm for the legislation was unconstrained. In the words of MP Antoine Dubé: "I am always pleased to rise to speak in this House, but today even more than usual, because this government bill is, in a way, almost a gift to us Quebeckers. It is truly an unexpected surprise." Footnote 14

The 2004 election and beyond

Did the public financing provisions of Bill C-24 have any influence on the recent federal election? As it turned out, none of the four major parties was financially constrained by the new regulatory regime. Realizing that certain donors would be effectively off-limits as of January 1, 2004, all parties ramped up their fundraising efforts in the fall of 2003. Having given the old system "a lucrative farewell squeeze," Footnote 15 the parties then turned to the new system for their designated allowances ($9.2 million to the Liberals, $8.5 million to the Conservatives, $2.4 million to the Bloc Québécois, and $1.9 million to the N.D.P.). And since the 2004 cheques were paid in a single lump sum, rather than in the quarterly instalments that will be sent in future years, all the parties were relatively flush entering the summer campaign. In this light, and given that C-24 provides some incentives for parties to increase their mobilization efforts even in constituencies where they are relatively uncompetitive, Footnote 16 it is not surprising that three parties spent near their expenditure limits, while the NDP spent just over two thirds of its limit. Footnote 17

Ultimately, the greatest impact of Bill C-24 on the 2004 election was felt in an unlikely place. In the 2000 general election, the Green Party ran 111 candidates and tallied 0.8% of the national popular vote. Far from creating a "closed shop," however, the provisions of Bill C-24 spurred the Greens to contest all 308 ridings in 2004, so as to reach more easily the 2% national threshold. Footnote 18 In fact, one Green candidate in New Brunswick concluded an appeal for voter support this way: "Under the Elections Act, any party receiving two per cent of the vote earns $1.75 per vote. Your vote can help establish the Green Party of Canada." Footnote 19 As it turns out, the Green Party secured 4.3% of the national popular vote in June and is now eligible to receive approximately one million dollars annually from the federal treasury. Jubilant party officials declared that they planned to use the money to establish provincial Green parties, Footnote 20 hire full-time staff, upgrade the party's Web site, and pay party leader Jim Harris a full-time salary. Footnote 21


Centre Block, Parliament Buildings, Ottawa

As the Greens' breakthrough makes clear, it is difficult to predict with certainty the manner in which both parties and voters will respond to the new regulatory environment created by Bill C-24. Perhaps parties, flush with public monies, will be less vigorous in pursuing the private donations that remain lawful. Perhaps voters, feeling in some sense that they have already "given at the office," will be less inclined to favour any solicitations which do come their way. Certainly, one veteran Liberal fundraiser has recently acknowledged that post-election fundraising "has been slower than we would have liked," while former Liberal party president Stephen LeDrew, who initially condemned Bill C-24 as "dumb as a bag of hammers," now opines that the legislation is "even sillier than I thought it was." Footnote 22 Yet should the state effectively displace the market as the source of political party revenues (at least in non-election years), it seems undeniable that the federal New Democratic Party, in particular, has much to lose. Recall that their share of revenues from private sources has consistently exceeded their share of the popular vote in the preceding general election. A pre-eminent state funding scheme based on the principles established in Bill C-24 would obviously prevent such an anomaly. Moreover, the legislation has already helped to establish a potentially dangerous competitor. After all, Green and New Democratic candidates troll in similar electoral waters, a circumstance which partly explains Jack Layton's eagerness last June to trumpet the fact that both Greenpeace and the Sierra Club had deemed his party's platform to be the most environmentally friendly. Footnote 23 Ultimately, the N.D.P. won only 19 seats in the last federal election. But in 16 other ridings (9 in British Columbia, 4 in Ontario, 2 in Saskatchewan, and 1 in the Northwest Territories), the combined total of Green and N.D.P. votes exceeded the winner's tally. Canadian political discourse over the past decade has been dominated by the concern to "Unite the Right." Perhaps Bill C-24 will precipitate a similar debate over over the next decade to "Unite the Left."

Notes

Footnote 1 Report of the Committee on Election Expenses (Ottawa: Queen's Printer, 1966), pp. 175–180.

Footnote 2 Report of the Committee on Election Expenses, pp. 203–222.

Footnote 3 Peter P. Constantinou, "Public Funding of Political Parties, Candidates and Elections in Canada," in F. Leslie Seidle, ed., Issues in Party and Election Finance in Canada, Vol. 5 of The Collected Research Studies, Royal Commission on Electoral Reform and Party Financing (Toronto: Dundurn Press, 1991), pp. 246–258.

Footnote 4 Royal Commission on Electoral Reform and Party Financing, Final Report, Vol. 3, Reforming Electoral Democracy: Proposed Legislation (Ottawa: Minister of Supply and Services Canada, 1991), pp. 154–156.

Footnote 5 Canada, Parliament, House of Commons, Debates of the House of Commons of Canada (Hansard), 37th Parliament, 2nd Session, Number 115, June 10, 2003, www.parl.gc.ca/common/Chamber_House_Debates_load.asp?Language=E&Parl=37&Ses=2&Dte=115_2003-06-10-E.

Footnote 6 Jim Brown, "Squabble over Party Funding Escalates," The Chronicle Herald [Halifax], June 7, 2003, p. B5.

Footnote 7 Table 1 focuses on non-election years because generous public subsidies were already a feature of political party financing during election years.

Footnote 8 K. Z. Paltiel, Political Party Financing in Canada (Toronto: McGraw-Hill, 1970), p. 10.

Footnote 9 Obviously, there is an arbitrary component to the selection of a particular panel of federal elections as representative of party financing from the 1930s to the 1950s. Confining our attention only to the six elections between 1930 and 1953 produces a government-opposition vote ratio of 60.4:39.6, while widening the panel to include contests on either end of the 1930–1958 period generates greater discrepancies from the 60:40 split.

Footnote 10 Canada, Parliament, House of Commons, Debates of the House of Commons of Canada (Hansard), 37th Parliament, 2nd Session, Number 057, February 11, 2003, www.parl.gc.ca/common/Chamber_House_Debates_load.asp?Language=E&Parl=37&Ses=2&Dte=057_2003-02-11-E.

Footnote 11 Canada, Parliament, House of Commons, Debates of the House of Commons of Canada (Hansard), 37th Parliament, 2nd Session, Number 062, February 18, 2003, www.parl.gc.ca/common/Chamber_House_Debates_load.asp?Language=E&Parl=37&Ses=2&Dte=062_2003-02-18-E.

Footnote 12 See, for example, "Does Money Still Talk?", Winnipeg Free Press, June 13, 2004, pp. B1–B2.

Footnote 13 Canada, Parliament, Senate, Standing Senate Committee on Legal and Constitutional Affairs, Proceedings of the Standing Senate Committee on Legal and Constitutional Affairs, Issue 13, June 17, 2003, www.parl.gc.ca/37/2/parlbus/ commbus/senate/Com-e/lega-e/13eva-e.htm?Language=E&Parl=37&Ses=2&comm_id=11.

Footnote 14 Canada, Parliament, House of Commons, Debates of the House of Commons of Canada (Hansard), 37th Parliament, 2nd Session, Number 058, February 12, 2003, www.parl.gc.ca/common/Chamber_House_Debates_load.asp? Language=E&Parl=37&Ses=2&Dte=058_2003-02-12-E.

Footnote 15 Hubert Bauch, "Parties Are Awash in Campaign Money," The Gazette [Montréal], May 25, 2004, p. A13.

Footnote 16 Arthur Drache, "Getting out the Vote Is Money in the Bank," The National Post, June 22, 2004, p. IN3.

Footnote 17 The election expenses reports of the registered political parties are available at www.elections.ca/content.asp?section=pol&document=index&dir=exp2004&lang=e&textonly=false.

Footnote 18 Jennifer Stewart, "Greens Get 3.3% of N.S. Votes," The Chronicle Herald [Halifax], June 30, 2004, p. C6.

Footnote 19 Karin Bach, "Every Vote Will Help Build Green Party," Saint John Telegraph-Journal, June 23, 2004, p. A8.

Footnote 20 Ruth Davenport, "Green Party Gains Votes, Will Shift Focus to Province," The Daily News [Halifax], June 29, 2004, p. 8.

Footnote 21 Amy Carmichael, "Two-per-cent Victory Looms for Greens," The Chronicle Herald [Halifax], June 28, 2004, p. A3.

Footnote 22 Joan Bryden, "New Law Hurt Grits' Financing," The Sunday Herald [Halifax], July 11, 2004, p. A1.

Footnote 23 See, for example, "NDP Greener than Greens on Issues, Environmentalists Say," The Daily News [Halifax], June 17, 2004, p. 11.


Note: 

The opinions expressed are those of the authors; they do not necessarily reflect those of the Chief Electoral Officer of Canada.