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Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs

Issue 6 - Evidence, September 8, 2006


OTTAWA, Friday, September 8, 2006

The Standing Senate Committee on Legal and Constitutional Affairs, to which was referred Bill C-2, providing for conflict of interest rules, restrictions on election financing and measures respecting administrative transparency, oversight and accountability, met this day at 9:05 a.m. to give consideration to the bill.

Senator Donald H. Oliver (Chairman) in the chair.

[English]

The Chairman: Honourable senators, I call this meeting of the Standing Senate Committee on Legal and Constitutional Affairs to order. I would like now to turn to Senator Stratton, who yesterday had a motion that he wanted to make and follow up on today.

Senator Stratton: Forgive me for digressing here. This should hopefully just take a couple of minutes. I wish to correct the record with respect to comments made by Mr. MacKinnon yesterday morning.

Just for the record, he quoted the Chief Electoral Officer, Mr. Kingsley, in a way that perhaps was not clear and I think we need to, if I may read into the record what Mr. Kingsley did say to the House of Commons committee.

Mr. MacKinnon essentially said that having the bill come into force in the middle of the year was against the wishes of the Chief Electoral Officer. Mr. MacKinnon stated:

I did hear Mr. Donison's presentation and I want to underline one thing that would contradict the philosophy that underlies having this bill come into the force in the middle of year, against the wishes of both the Chief Electoral Officer and most political parties.

Mr. Kingsley apparently never said such a thing. What he suggested is that there is a traditional six months coming- into-force delay for provisions surrounding returning officers. He stated:

Bill C-2 will transfer the authority for the appointment and termination of the returning officers from the Governor in Council to the Chief Electoral Officer. This is consistent with recommendations I had been making since I had become Chief Electoral Officer. The bill provides that this transfer will take place after royal assent on a day specified by the Governor in Council.

As I will be ready to implement this new authority well within the six-month period following royal assent, the committee may wish to consider the appropriateness of providing for the traditional Canada Elections Act formula for the coming into effect of these provisions; that is to say, six months after royal assent, unless the Chief Electoral Officer announces he is ready to implement them earlier, which I will.

The key phrase here is ``which I will.'' Mr. MacKinnon also said this yesterday morning when he was referring to election financing:

I refer specifically — and that brings me to my first recommendation on the bill — to the coming into force of this bill. We support Mr. Kingsley's intervention before the House committee; we support the Bloc Québécois in their recommendation that the coming into force of this bill not occur until January 1 of the year following Royal Assent.

We have a problem with this. By suggesting that Mr. Kingsley's remark in regard to the returning officer was also linked to election financing, that is what he was trying to link here, Mr. Kingsley was quite clear at Bill C-2 that nothing remarkable had to be changed over changes to election financing; in other words, it could come into effect much earlier, as he stated.

With that, Mr. Chairman, I have read that into the record and would have that accepted by the committee as having corrected the statement made by Mr. MacKinnon so that the case is quite clear that, in effect, the change to election financing does not take place six months after Royal Assent, but can take place immediately. With regard to returning officers, that would take place six months after.

Senator Day: Our chief critic on this particular subject matter has a comment and I may follow up after him.

Senator Zimmer: I just want to put on the record what I believe Mr. MacKinnon was saying, that being, that the bill's provision respecting contributions would come into effect on Royal Assent, which presupposes that there is no need or opportunity for Elections Canada to inform the public of the change. I believe he was also supporting the Bloc Québécois intervention when he stated:

We think that if you exclude partisan reasons in the tradition of the implementation of this type of measure the calendar year is normally the reference year.

I believe that is what he was trying to say.

Senator Day: The only other point that I might be able to add is that it is not nearly as clear as my colleague Senator Stratton has indicated. I do believe that Mr. MacKinnon was talking generally about all of the provisions of the proposed accountability act that relate to political parties and not just the financing aspect in that quote.

He starts that paragraph by saying:

We believe the accountability act, as it impacts on political parties and the political process, will not achieve stated aims.

He is talking about the global picture and not just, as was indicated earlier by Senator Stratton, the financing aspect of it.

The Chairman: Was that the Chief Electoral Officer or Mr. MacKinnon?

Senator Day: That is Mr. MacKinnon.

The Chairman: Senator Stratton was talking about what the Chief Electoral Officer stated and whether there were limits to what he indicated with respect to the timing.

Senator Day: The Chief Electoral Officer's quote was just read to you by Senator Zimmer. He is talking about political process and the importance of communication. His comments can be interpreted as saying that there should be time to communicate this after the act is passed.

The Chairman: I, for one, did not know that Senator Zimmer was giving a quote from the Chief Electoral Officer. If that is the case, would you mind reading that quote again, because I thought you were quoting Mr. MacKinnon? I thought you had said what I interpreted Mr. MacKinnon to be saying; I did not know you were quoting the Chief Electoral Officer, and that is important to understand.

Senator Stratton: Could you also state where the quote comes from, because we do not know where he was when he made this statement.

Senator Zimmer: I am not sure of that.

Senator Day: It comes from his appearance before the House of Commons.

Senator Zimmer: Mr. Chairman, when I say ``interpretation,'' those are actually Mr. Kingsley's words he was quoting. I just repeated it through his words. I will repeat it again, which is really his quote of Mr. Kingsley:

The bill's provisions respecting contributions would come into effect on royal assent, which presupposes that there is no need or opportunity for Elections Canada to inform the public of the change.

Those are really Mr. Kingsley's words, which Mr. MacKinnon repeated. Then he goes on to say, from the Bloc Québécois, again what Mr. Kingsley said:

We think that if you exclude partisan reasons, in the tradition of the implementation of this type of measure, the calendar year is normally the reference year.

The Chairman: Honourable senators, I thank you all for your clarification on that point.

I will now move to the order of business for today. We are meeting to continue our study of Bill C-2, providing for conflict of interest rules, restrictions on election financing and measures respecting administrative transparency, oversight and accountability.

This bill is more commonly known as the federal accountability bill. As senators, our witnesses and members of the public both here in this room and across Canada on television know, this bill reflects a central portion of the new government's agenda and is one of the most significant pieces of legislation brought before Parliament in recent years. I know that the committee will give the bill the extensive, careful and detailed study that it deserves.

The hearings commenced in June and this week the committee has been focusing on more precise aspects of the bill. Subjects that we will have covered this week include accountability generally, ethics and conflict of interest and political financing. Our hearings will continue in a few weeks on other important aspects of the bill.

Today we have with us two very distinguished experts on the issue of political financing.

[Translation]

Mr. Pierre F. Côté has vast public-sector experience in Quebec. He has worked in several departments and at the municipal level in the province. He has received several prestigious honorary distinctions and is active in his community. He was Quebec chief electoral officer from 1978 to 1997, and has almost 20 years of experience in that position. I know that his views and experience will be very useful to the committee.

[English]

We are also joined today by Mr. Aaron Freeman. Mr. Freeman has considerable experience as an observer of the parliamentary process and currently teaches law at the University of Ottawa. He has also been active in Democracy Watch. He has frequently written for publications such as The Hill Times and is the author of a book titled The Law of Government: The Legal Foundations of Canadian Democracy.

[Translation]

The committee would like to thank you for being here. I now give you the floor and then we will move on to a question and discussion period which will be, I know, very useful for committee members. You now have the floor, Mr. Côté.

Pierre F. Côté, former Chief Electoral Officer of Québec, as an individual: Thank you, Mr. Chairman. There are two main topics that I would like to address with you this morning about Bill C-2. First of all, I want to express my disagreement with Section 43 of the bill which repeals Section 404.1 of the Canada Elections Act, which allow corporations and unions to make financial contributions to one or several political parties.

I was the Chief Electoral Office of Quebec for 19 years; I retired in 1997. That did not prevent me from publicly stating that we should allow corporations, as opposed to individuals, to make financial contributions to the election process in Canada. I believe, in fact, that we would be fooling ourselves to think that one way or another people will not sidestep the prohibition in the bill. That is inevitable.

On November 25, 1999, during a symposium on ethics and conflicts of interests, under the auspices of the Centre d'étude Noël Mailloux en éthique et psychologie, I said that:

Financing by the public is no longer enough to meet the needs of political parties.

On April 9, 2005, in La Presse, I reiterated this opinion, which appeared to me to be even more relevant, given the experience gained in this area. In fact, financing by the public, or going door to door, is no longer enough to cover the increasingly high cost of election campaigns, especially the ever increasing cost of TV advertising.

Despite the scandals that have surfaced in this area, it is still today relatively simple to get around the Quebec Election Act. All that the head of a corporation, a lawyer's office or an engineering firm has to do, for example, is ask members of the board or senior managers to make the maximum contribution that a voter can make using his or her own means under Quebec legislation to the political party management supports, in other words $3,000. All management has to do after that is to reimburse these donations to all individuals who complied, willingly or even by force, with the request, by thinking of various accounting methods, such as creating fictitious defense accounts.

Obviously, proceeding that way is illegal. It is blatantly unethical. Nevertheless, it remains very difficult, even impossible in many circumstances, for the chief electoral officer to establish proof and subsequently obtain a court conviction. For legislation to be effective, we must be able to enforce it, otherwise it is meaningless. And it cannot simply just be an expression of good intentions. Bill C-2, which is based on the provisions of 1977 Quebec Elections Act, seems to want to repeat the same mistakes. I do not think it would be desirable to increase this financial contribution from the state to political parties — which is already rather high — without running the risk of affecting political parties' independence.

How, therefore, can we enable corporations and unions to make financial contributions to political parties without that being perceived as an attempt to buy influence?

In my view, the solution means considering these corporations and unions as corporate citizens, who have an interest in participating in the development of democracy.

In this regard, I see two ways of resolving this dilemma. The first would allow them to contribute a maximum amount that could, for example, be a multiple of the maximum amount allowed for individuals. That amount could be put into the Chief Electoral Officer's trust fund. It would then be his duty to distribute the amounts to the political parties on a prorated basis based on the number of votes obtained by them in the last general election.

The other way would be to allow them to freely contribute to the political parties of their choice, up to an authorized maximum amount.

In both cases, the contributions would be made public. That would eliminate any pressure that could be brought to bear on these corporations to encourage them to contribute more secretly. They will be able to say: ``No thank you, I have already contributed.''

Second, I would like to bring to your attention a section of the Canada Elections Act that was ignored in Bill C-2. I am referring to section 24 which deals with the appointment of returning officers for each electoral district. A bill like Bill C-2, with the stated objective of restoring some transparency to the Canadian electoral system, should put an end to this highly partisan exercise that might tarnish the credibility, even the objectiveness of local election administrators.

In that regard, the bill should follow Quebec's example and proceed by way of public competitions rather than by cabinet decisions. The aqct should also include provisions to mandate a jury selected by the Chief Electoral Officer to assess, among other things, how much good judgment the candidates who received the best marks on the written exam have. The person selected by the jury for the position in each of the 308 electoral districts in Canada should then be appointed for a ten-year term to ensure this person has the independence he or she needs to carry out the required duties.

[English]

The Chairman: Mr. Freeman, please proceed.

Aaron Freeman, Professor, University of Ottawa, Faculty of Law, as an individual: Honourable senators, I have been asked to focus my remarks on the electoral finance provisions in Bill C-2, which I am happy to address. I am also quite familiar with other parts of the bill, as well as important aspects that are absent from the bill which I think are significant.

With regard to election finance, Bill C-2 contains some important elements. First, the bill would reduce the individual donation limit from $5,000 to $1,000. Individuals would be allowed to donate $1,000 per year to a registered party and an additional $1,000 combined total to riding associations, nomination contestants and candidates in an election. Individuals may also donate an additional $1,000 to party leadership contestants.

Second, candidates and leadership and nomination contestants will only be able to self-finance their campaigns up to $2,000, down from the current $10,000.

Third, there will be a total ban on donations from corporations, unions and other associations rather than the current partial ban, which allows donations up to $1,000 to candidates and riding associations.

Fourth, the long-standing trust fund loophole will be tightened significantly. This is a major loophole in the current system that allows secret and unlimited donations that can cover a wide range of activities that can benefit candidates.

Fifth, instead of being named by the Governor-in-Council, chief returning officers will be named by an independent process established by the Chief Electoral Officer. I should note that this issue has long been a recommendation of the Chief Electoral Officer, all parties in opposition in the last Parliament and virtually every independent commentator. Few advanced democracies would allow those who administer elections to be named by the government of the day.

Other provisions include a ban on cash donations of more than $20, the extension of gift-giving rules to candidates and an increase in the statute of limitations on prosecuting election offences.

I will confine the remainder of my remarks to the first three provisions mentioned above on significantly reduced donation limits. We have already seen the democratizing effect of reducing the size of political donations. Before the 2003 reforms were brought in, there were no limits on the amount that could be given to parties and candidates. We had a situation where, according to the Chief Electoral Officer, 45 per cent of party revenues came from only 3 per cent of the donors.

A small number of wealthy donors creates a situation whereby parties and candidates have a dangerous level of reliance on those with the greatest stake in the political process. Research I conducted in 2002 showed that of the top 25 government contractors, two thirds were major donors to the governing party and the ratio of donations to that party versus all other parties combined was six to one. At the local riding level that ratio was actually thirty to one. There are similar patterns with regulated industries, such as banks and telecommunications, and research also shows a strong correlation between donors and companies that maintain a significant lobbying presence in Ottawa.

While none of this is direct proof of corruption in the political process, it is a strong indicator that when major donors give it is not simply out of a sense of civic duty, but with the expectation that they will get something in return. At the very least, we can safely say that donations buy access. One indicator of this is that most politicians readily admit that they will place a priority on returning calls from their major supporters. This is particularly a problem with ministers who wield the power of the executive in our system of government.

Reducing the limit to $1,000 liberates MPs from the pressures of giving high-end donors preferential treatment. Certainly $1,000 is a far cry from the six-figure sums that until just three years ago were routinely donated to political parties. Consider that we still have a situation where less than 1 per cent of Canadians are donating to political parties. There is ample room for parties to expand their fund-raising efforts that I think will be more successful as parties earn the trust of Canadians more generally.

I will touch on two areas where Bill C-2 can be improved, the first being to increase the free broadcast time allocated to parties. The cost of running for office has been rising for at least three decades and the largest component of that cost for parties is broadcast advertising, by far. With the reduction in the donation limits, political parties may simply have to learn how to do more with less, but measures can be put in place to help parties with that effort. The free broadcast time currently given to parties can be greatly increased, in terms of both the number of broadcast minutes provided and the number of broadcast outlets included in the regime.

The number one election expense, as I mentioned, is broadcast advertising. Requiring broadcasters to give parties space on the airwaves to air their election messages can greatly reduce party election expenditures. The second measure is to reduce disclosure delays. Bill C-2 does not address the lengthy periods between when donations are made and when they are disclosed. While the 2003 reforms went some distance in reducing these lag times, parties and candidates still do not have to report their donations before the vote takes place. With standardized computer software that can be supplied by the Chief Electoral Officer and that uploads automatically onto the Elections Canada website, there would no longer be a technical reason for not having pre-vote donations disclosed. A ban on donations in the last week of the campaign would give parties and candidates the time needed to get this information to Elections Canada and up on the website within two days before the vote.

I know that this session deals specifically with electoral finance, but some of the most serious weaknesses in Bill C- 2 involve what it does not deal with. The most significant of these is access to information. Perhaps there is no other area of democratic reform in Canada where there is more of a consensus on both the need for reform and the areas that reform should focus on. I would urge the committee to look closely at the recommendations of the Gomery commission, as well as academics such as Alasdair Roberts and successive reports going back two decades from the Information Commissioner of Canada.

Mr. Chairman and members of the committee, I hope you find these reflections useful. I would be happy to address your questions and otherwise help in any way I can.

The Chairman: Thank you both for two very excellent presentations. Your final remarks were about access to information. You probably do not know this, but when this committee meets again, it will be devoting a substantial period of time to that subject matter, along with issues of lobbying, whistle-blowing and so on. We are just getting into our hearings now and we have much further to go. Today we are dealing more with the matters discussed in your first three points and as discussed by Mr. Côté. Thank you for raising your concerns.

Senator Zimmer: Thank you for your appearance today, and the history and wisdom that you bring here with you.

For corporate donations, the limit currently is $1,000. You have gone the other way. You recommend $15,000. How did you arrive at that figure? There has been talk about going back to $5,000 but you have gone beyond that, up to $15,000. How did you come up with that recommendation?

[Translation]

Mr. Côté: An individual can currently contribute $1,000. But for a corporation, a business, a lawyer's office or an engineering firm, it would be, in my opinion, a multiple amount, which could be $5,000, $10,000 or $15,000 as a maximum that a business could contribute.

[English]

Senator Zimmer: You talked about ways of raising it. One was through a trust fund system and the second was through direct donations. I missed part of that process. On your second method, could you clarify the process of raising the funds and what process you are using to donate directly?

[Translation]

Mr. Côté: If it is put into a trust account held by the Chief Electoral Officer, the trust account has the advantage for a corporation of contributing to all political parties indifferently, because these amounts would be distributed on a prorated basis according to the votes received by each of the political parties.

If one does not agree with the first solution, the other option would be to enable a corporation, or a union, to contribute directly to a political party, but there again, up to a clearly fixed maximum amount.

In either case, what is important is that these contributions would have to be made public. That way, it would prevent attempts to obtain additional money from corporations indirectly. What is unfortunate in Quebec is that companies, corporations, easily sidestep the act. As I mentioned earlier, if you take 10 members of a board for example and ask them each to contribute $3,000 of their own money, but you are unable to prove it. We have already seen companies reimburse donors for their contributions.

[English]

Mr. Freeman: I am sorry to take up your time on the question, Senator Zimmer.

There are several elements of corporate, union and other organizations when they donate that should be explored. While corporations are legal persons, they are not human beings. This is the same for other organizations. There are two important elements of that. The first is that they are spending other peoples' money, in most cases. In the case of corporations, they are spending their shareholders' money, usually without their permission. In the case of unions, they are sharing their members' money. This is evidenced by the unions who donate to the New Democratic Party while their members tend to vote for other parties, and similarly with other organizations.

The second element to that is, because they are not human beings, they do not have the right to vote and should not have the right to vote. An extension of that, certainly not legally but philosophically, is that they should not have the right to try to influence the democratic process in other ways.

I understand the practical reason why some argue that corporations and unions should be allowed to donate, but I am not convinced that the practical reasons address a meaningful problem. I think there is some level of abuse in the Quebec and Manitoba systems, but I am not convinced that that level of abuse happens on a scale that is corrupting the political process to any significant degree.

With the donation limit low enough, I do not think that will happen. Again, from a practical and business perspective, it is just not worth the trouble. With the anti-avoidance provisions in place, I just do not think the abuse is significant. I have seen no evidence in the 25-year history of the Quebec law that this is happening on a scale that we need to really worry about.

The Chairman: In fairness, Mr. Côté should have an opportunity to respond to that because he raised the very interesting concept of corporate citizenship for trade unions. Mr. Côté, I would like to hear from you in response to Professor Freeman.

[Translation]

Mr. Côté: You must make a distinction between two things: contributions from an individual and contributions from a corporation, a business, or a union. In law, if I am not mistaken, at least in Quebec, when we talk about corporations, it is as opposed to an individual, and it refers to a company, a law or engineering firm, or anything that is not an individual and which acts as a group or an organization. Of course, the difficulty lies in the fact that contributions from individuals, are no longer enough to offset the rising costs of election campaigns, especially costs that always continue to go up, such as TV advertising, or the involvement of TV. The implication, as was suggested, that the public broadcaster provides more air time does not prevent political parties, in other areas of the country, from turning to private broadcasters to advertise their messages. But the cost of these messages is constantly rising. That is the main reason why people in Quebec have attempted to get around the act in the way I mentioned.

Of course, proceeding that way is neither ethical nor legal, but one must be practical and see that that is the way it is happening. We must try to find some solutions, and that is why I have made suggestions.

[English]

Senator Zimmer: If I could add to that, you hit on the point that I was going to raise with my second question, and that was what Mr. Côté said. That is the first time I have heard it in this way, and that is that they are corporate citizens. They are citizens. Mr. Freeman, to respond to your comment, I have had many companies right across the country email and write me and say, ``We do vote. We vote through the process of making a democratic contribution to the democratic process of this country through our company as a corporate citizen. By taking that away from us, we are not able or allowed to express that democratic right.'' There could be a certain government here in Ottawa whose ideas of fiscal responsibility they like, or another issue. Taking away that right takes away the democratic right of making a contribution to a government they want to run this country.

Though the two of you are sitting close together, there is quite a gap in the amounts of $15,000 versus $1,000.

Based on those comments, could you expand a little further on your rationale with the comments I just made as to why you would eliminate the $1,000 corporation donation?

Mr. Freeman: I should preface my answer by saying that I have tremendous respect for Mr. Côté, and I suspect we agree on a range of issues in the area of electoral financing as I have read all of his reports.

We do disagree on this issue, and we can speculate on where the roots of that disagreement come from. I think there must be a distinction drawn between a vote and an exercise of influence.

In the democratic process, we have certain rights that are inalienable human rights. One of them is the right to vote. That is the right that attaches only to human beings, philosophically and legally. There is nothing inherent in a business organization or another kind of incorporated or association entity that inherently attracts the important expressive and democratic participation elements of the right to vote. To try to extract what is a fundamental human right and apply it to an entity that does not contain the characteristics that attract that right is inappropriate.

Why is the figure of $1,000 suggested? There is no question that $1,000 and $15,000 are arbitrary figures in terms of an individual donation. I think the limit must be low enough such that it is affordable for a Canadian on an average household income. However, $1,000 is actually higher than that, but we must be practical. I also think it must be low enough to discourage the type of abuse that we have talked about in this committee and that Mr. Côté has referred to.

I believe we have to accept, and maybe this is where we diverge, that some level of abuse will take place. The key question for me is whether that level of abuse is at such a significant amount that we have to worry about it having a significant corrupting effect on Canadian democracy.

If the level is low enough, it is simply not worth it for companies to try to hide their donations through employees, members or executives. It may happen at a small level, but I am not convinced that it will happen at a significant level.

Senator Zimmer: Mr. Freeman, you made a comment that refers to a company or corporation, and there is the perception of influence. However, a voter can also influence. A voter can use the same analogy and say, ``I voted for you.'' Most times people do not relate to that. When they hear the word ``influence'' they think ``company.'' Voters can also use that parameter and say, ``I voted for your government, now here is what I want.''

We should always remember the fact that it can go both ways and not just one way.

Senator Stratton: This is an interesting discussion with two diverse opinions that seem to be taking place.

When we look at this aspect of electoral financing, Mr. Freeman hit the nail on the head when he said that democratization of the financing system is what is at the core of this bill. We must keep that in mind when we put things to each other in discussing this entire issue. That is what this is all about.

Then there is the issue of what happens with companies. They are losing their right to vote by contributing. I disagree with that.

I sat around the table as a partner in firms. Decisions would be made as to this guy would contribute to the New Democratic Party, that guy to the Liberals and that guy to the Conservatives. It was always that kind of discussion. That really has not changed. What has changed is the limit. For example, as a board we are sitting around a table discussing the upcoming election. People around the table as members of the board will say, ``I do not know about you guys, but I will contribute here.'' It may be a decision on the part of that group to say, ``We will make a collective decision to contribute to this party individually.'' Then they do so, up to $3,000 each. You are limiting the impact of that. They are still exercising the right as a corporate board or business to have that vote, but it is done through individual contributions.

I firmly believe that has not changed fundamentally. What we have done is put a limit on it, and that is appropriate. We cannot forget that. That is the impact this change will have. Therefore, I do not see a problem with boards or companies having the ability to make contributions.

With reference to the influence of getting around the electoral law by coercing employees to contribute, one can keep that private to a degree, but it will inevitably be revealed. An individual will say, ``Do you know what they just did to me?'' He will go to the media and say ``my board'' or ``my boss'' and you-know-what will hit the fan.

That will always happen. There will always be that cautionary note as to the influence that a boss can have on an individual because that individual can complain, and rightfully so.

I do not really buy into that argument. As Mr. Freeman has said, if you have this influence, it will be minimal because the contributions are lower. Therefore, the impact will be much less.

With the cost of running elections ever escalating, particularly in the media, we forget there is $1.79 per vote for each party. We forget that is now a significant contribution to political parties, to look after the issue of corporate donations, large donors or the ever-increasing costs of running an election. It is important to put that into perspective. Fundamentally, it is the essence of democratization of this process.

I would appreciate Mr. Côté's response to what I have ranted about, and Mr. Freeman could come back at me on this.

[Translation]

Mr. Côté: No, except to reiterate that it is basically a matter of principle. Should be allow a corporation — let's call it that — an organization, to contribute or not? The act stipulates that we must not allow that. However given our experience in Quebec with contributions, what we talked about earlier, coming from law or engineering firms or members of boards, we have heard evidence, but it has not been enough to enable us to take action because the money contributed to the political parties came from their own funds. It is extremely difficult to prove that the amounts contributed have be reimbursed.

That is what occurs in practice. I noted that in the evidence I heard doing the final years I was in my position. I realized that the main difficulty with the situation was building a case. It would take an army of officials to audit the accounts of all of those companies. That is practically impossible.

Given the principles and the reality of the situation, let us allow companies to contribute, but with very strict oversight, and above all, that these contributions are made public. That way, a company that will contribute will think twice. For example, if it contributes to one party rather than another, that will appear in the reports on funding as a contribution to a specific political party. That is the downside of the second solution I am proposing. The first is to contribute to everyone. No political party is targeted directly.

I know that what I am advocating runs counter to a very important principle. However, a bill cannot simply be a statement of principle, it must also be enforceable. We realize that it is difficult to find the offenders.

[English]

Mr. Freeman: I do not have a difficulty with the idea of having a general fund that corporations and other organizations would contribute into that would then be distributed on some kind of democratic formula to political parties.

The Chairman: That could be through the CEO, perhaps.

Mr. Freeman: Yes, it could be through the CEO or some other mechanism. The CEO would be the logical mechanism to do that.

However, I do not think that most corporations, unions and other organizations would donate to the fund. If you were to ask the vast majority of donors why they donated, it would be because they were approached by a party or a candidate. Many people in this room would have experience with that dynamic.

If I can illustrate some of the scenarios, let us take the first example, which was the old system before the 2003 reforms. No limits whatsoever were given. You had situations where multiple subsidiaries of companies were giving six-figure donations to political parties. You had a situation that we could not imagine under even the current system, let alone the system proposed by the federal accountability act. You would literally have to have 200 or 300 employees donating $1,000 each to see the kinds of numbers that we saw in 2002 and 2003. That is the first scenario.

The second scenario is if you had a limit of $1,000, let us suppose that you do have some level of abuse. We are sitting in that boardroom that Senator Stratton has described, and eight or 10 of us decide to make our donation. If eight or 10 of us are sharing information about how we will make our donations, there is no problem with that. We each donate $1,000, or $5,000 under the current situation, and there is no difficulty with that. We are donating as individuals and that is not an issue.

If we are actually donating on behalf of the firm, or if the firm is reimbursing us, that is where we get into difficulty under the act. That is what we are concerned about. The question is: Will that happen? I agree that unless we hire an army of bureaucrats we will not be able to nail all of the offenders who try to do this. How much money are we talking about here? If we manage to do that with 10 or 20 people, we are talking about $10,000 or $20,000. It is a significant sum, and I am not trying to exaggerate, but that is if the limit is $1,000. However, if the limit is $15,000, then you are now moving towards $300,000; that is significant. That is getting into the kind of environment we had back before the previous round of reforms. That takes us back through two rounds of reforms.

You have to look at the reality and what is likely to happen as a result of where you set the limit.

[Translation]

Senator Joyal: Mr. Côté, in your presentation, based on your more-than-20 years of experience enforcing the Act to govern the financing of political parties, you reached some conclusions. The retired judge, Jean Moisan, who last spring investigated allegations similar to the ones we are talking about here this morning — the participation of companies in financing political parties — reached conclusions similar to yours. Could you indicate, for the benefit of committee members, which conclusions from the report by Justice Moisan, tabled in June, appear to corroborate your understanding of how the Act to govern the financing of political parties has been used in Quebec for 20 years?

Mr. Côté: I must say that judge Moisan reached those conclusions after a meeting with me where I shared my point of view with him. He simply said that he agreed. In short, he basically took what I am proposing and above all he took note of the situation where people are rather happily and easily getting around the Elections Act and the Act to govern the financing of political parties in Quebec. What is somewhat discouraging in this situation is that it appears to be increasing rather than decreasing. So what can we do? What is the solution? It is not simple.

Senator Joyal: As you know, the previous bill which amended the Elections Act with regard to financing, Bill C-24, is very recent. In fact, it was only implemented during the last election campaign. Might I remind you that in essence this bill limited individual donations to $5,000 at the federal level and corporate donations to $1,000.

Since we have not yet learned everything that we might from this bill, would it not be better to focus on these reforms and to wait a few years to see, in practice, how it is enforced and whether or not it meets the objectives for which it was implemented? After that, we could make adjustments if necessary. It seems to me that we are currently accumulating all kinds of reforms for financing political parties without basing them on a practical assessment of what these still very recent changes might produced or aimed to achieve.

Mr. Côté: When the federal Elections Act was amended under the Chrétien government, it was basically to replicate the provincial act, and generally, to adopt the same provisions.

I am telling you about the problems we encounter. The Quebec aqct to govern the financing of political parties has existed for at least 30 years. It seems to me that it would be a shame for the federal government to repeat the same unfortunate mistakes. The Quebec act is not enforced properly. We should look at whether that is likely to occur in other provinces. That could extent throughout Canada. As you say, it might be better to experience it and see, over time, what kind of remedies would be required.

[English]

Senator Joyal: Mr. Freeman, you have studied electoral financing quite closely. Could you give us an outline of what other countries in the Western world — to circumscribe the reference — would have proposals as close as the ones we are contemplating now? Are there any democratic countries that have limits as stringent as those we are contemplating?

Mr. Freeman: Are you asking specifically in relation to the donation limits and no other element of electoral financing?

Senator Joyal: Yes.

Mr. Freeman: Probably the closest country to ours on the issue of limits — and this may surprise some people around the table — is the United States. There are very strict limitations comparable to ours on individual limits and corporate donation limits as well.

Senator Joyal: Can you give the amounts?

Mr. Freeman: I will get the actual amounts wrong. I believe they are in our book, but this is my nightmare scenario where someone asks me a question that is in the book and I cannot repeat it off the top of my head.

Depending on the donor and depending on who they are donating to, the amounts range between US$1,000 and US$5,000.

Senator Joyal: The way they are bypassing the limit is with so-called soft money, whereby a volunteer organization passes on the money through the candidates, which has been denounced overwhelmingly in a lot of studies.

I am looking at my friend Senator Segal, who has probably gone through all those books. I am especially thinking of one I read last summer whereby there is a parallel system of financing soft money that totally countervails the objective of the legislation.

Mr. Freeman: Soft money was essentially banned in the United States about two years ago in the latest round of federal reforms. There are other similar loopholes in place at the state level where money can be routed into the political system. There are also PACs, political action committees, of which we have all heard. This is something that is not nefarious in the United States. It is actually envisioned under the law and it is the mechanism for pooling donations. That is the main reason why we see the multi-billion dollar figures now for U.S. elections.

Incidentally, some of those mechanisms would be legal in Canada. We just have the good fortune not to have had inflicted upon us these strategies and tactics that parties and candidates use in the United States, so we should not be too high on our horse.

Senator Joyal: You mentioned that the limits are $5,000 and $1,000, which is similar to what Bill C-24 has established as limits. We in fact have corroboration for what Mr. Côté has mentioned, which is that when limits are established that are too stringent, the system reacts in one way or another to find a parallel way of financing the parties. The Americans have been inventive in trying to find all kinds of systems to bypass those objectives.

I do not mean that the law should not exist, per se. I am just saying that the law should be realistic in terms of what it can achieve. Only so much good can be achieved through legislation if there is not a common perception that at some point the law must take reality into account. A system whereby there are limits and a system whereby there is a reasonable way to approach corporate financing, such as the one Bill C-24 put in place, leads me to conclude that such a system maintains equilibrium. If we try to be ``over-virtuous,'' we would definitely have a reaction somewhere in the system. There could be one of two reactions at that time: We could conclude, as Mr. Côté has, that it is parallel, it is multiplying, but we do not intervene or we intervene only when there is a major scandal, and then we entertain the cynicism of voters, as Senator Stratton has mentioned; or we establish an army of civil servants to look after all the donations and scrutinize if the candidate is a board member of a big company, if this is his money, and scrutinize all the donations that come from influential people. We take the Canadian Who's Who and check where the money comes from.

In those two ways we do not meet the objectives. We create the worst of two evils.

[Translation]

It is a matter of balance. The Quebec aqct to govern the financing of political parties was adopted in a context similar to that one. You will recall that at the time, there were criticisms, scandals and accusations. The act went a long way to completely eliminating donations from organizations and corporations. As a result, it was through practice that the balance was reached. Other countries' experience corroborates what Mr. Côté is saying.

We should have a system that takes into account the political reality, which does not mean that we should not enforce the act as it currently exists in the context of Bill C-24. We should learn lessons from Bill C-24 before going any farther, because we risk creating a situation that is worse than what we currently have.

[English]

Mr. Freeman: I think that the United States is a horror show on election financing. It is nice to be working on these issues in Canada and not in the United States in that sense. However, it is impossible to draw a comparison and conclusions based on the American system, and there are a number of reasons. The amounts of money are of an order of magnitude that we do not experience in Canada. The stakes are not as high. More important, since 1974, we have very effectively reined in the costs of running for office through expense limits at the party level, the candidate level and, as of the last round of reforms, even at the nomination race level. I think that has had a significant effect in Canada in reducing the need to raise the huge amounts of money that have to be raised to run for politics south of the border.

That is probably the biggest element, but there are also specific legal differences. What I did not get to in my earlier remarks is that the limits in the United States are not per donor. They are per donor, but they are also per recipient, so you can donate to multiple recipients. That is where the amounts start ratcheting up. Most of the money in the U.S. system is legal money. Most of the money is not because people are breaching the limits. Since the closing of the soft money loophole, even the remaining loopholes at the state level do not compare to the amount of legal money that flows into the system. By placing the limit on the donor, which is far more appropriate, we are effectively reining in the costs of running for office.

The costs of running for office are high in Canada, nonetheless, particularly for a party. As I mentioned earlier, the major cost, by far, is broadcast advertising. If you are concerned with bringing that cost down, the way to do that is to provide much higher free broadcast time to parties. That would effectively bring the costs down further and justify further limitation of the expense limits of parties and assist the parties with any transition.

The parties, which complained loudly about the 2003 Bill C-24 reforms to which you referred, also complained that they would experience a revenue shortfall. Since then, what has happened is that all of the parties are in fact better off because of the public financing provisions, the annual subsidy that Senator Stratton mentioned, as well as the expense reimbursement and the tax credit that are applied to political donations and political expenses.

Senator Joyal: Might I have the reaction of Mr. Côté, Mr. Chairman?

[Translation]

Mr. Côté: Unless it was changed a few years ago, you must bear in mind that the United States has an absolutely incredible system. It is the system of the PACS (Political action committees). It is a rather incredible way of contributing indirectly. It is beyond understanding. As for the soft money that was referred to, it was in response to the limits imposed on presidential election campaigns in the United States. It is a very simple trick. Instead of giving to a candidate, a person gives to a political party in the United States. There are always a thousand ways to get around the law, and that is highly regrettable.

Admittedly, election campaigns are expensive. Even with sizable government contributions to assist political parties, they are expensive. Enough is enough. They have hit the ceiling with respect to what they can collect for a Canada-wide election campaign. The demand, the need will always be there on the part of the political parties. They need more money for their election campaigns. Virtue suggests going door to door. That is a good basic principle, and it has been used in Quebec, but we must acknowledge that the situation is different now.

Senator Segal: My question is for Mr. Côté and deals with transparency.

[English]

Someone who is an insider to a corporation who buys or sells shares has to make that disclosure quickly. He does not have 1.5 months or six months, he has to make his disclosure quickly.

[Translation]

If we had a more open system for transparency where a donation made or received were openly declared or posted on the chief electoral officer site within 48 hours, could that reduce the problem that you mentioned regarding people who in appearance give their own money but which is contributed another way. If, over a period of 48 hours, we see that all of the members of a board have made a donation, that will indicate something. That information will be of some value for voters before they vote. In your opinion, can that be of any assistance to us in this area of our work?

Mr. Côté: Possibly, but the consequence could be that people who would act that way on behalf of a corporation would hesitate to do so. What would be made public is their donation during the election campaign. That might be a problem for the election campaign.

Senator Segal: Your answer indicates that the problem is not the donation as such, but the fact that it is hidden for a significant amount of time, during the election campaign, when all voters should know why someone has supported one party or another. If we amend the act for greater clarity, would that reduce donations? Is the problem transparency?

Mr. Côté: You cannot have automatic transparency. As soon as a donation is made by an individual or a corporation, I have trouble seeing that. For example, if an election campaign last 30 days and largest donations are made on the 29th day, they will be made public 48 hours later. What good will that do? I do not think that is a good solution. There is also the issue of control over expenses exercised by the chief electoral officer over contributions received prior to been made public, before being published. I do not think that we can automatically make that public.

[English]

Senator Segal: Mr. Freeman, I wish to ask you about the issue of loans. So as to take it out of any contemporary partisan debate in this country, let us talk about the difficulty that transpired in the United Kingdom with respect to getting around certain requirements for disclosure by the Labour Party having had donations made to it, and I suppose the other party as well, from private sources, not banks but private sources, which did not have to be disclosed for a very long time, thereby keeping from the British elector any clear knowledge relative to from where those funds had come.

I know you have a view about some of the inadequacies of the legislation in the general regard of transparency. Do you have a view on the issue of loans? If you could give this committee advice about what to do about loans to strengthen this legislation, what would you recommend?

Mr. Freeman: First, I should say that in the debate around Bill C-24, one of the amendments that the House committee made, which was passed, was to reveal the terms of any loans to candidates. I think that was an important amendment that was made. We now do know the terms. If the terms are favourable beyond fair market value or fair market rates, then we know that.

The issue of loans is an important one. You can loan huge amounts to a candidate or to a party and in theory that loan must be paid back within a reporting period after the vote; that is problematic. However, what happens if it does not get paid back even within that period? That is probably the problem to which you are referring. The only way around it that I can see is to place a limit on loans. It is a loophole. It is something that the party should consider.

Senator Segal: I have one more question for both of our distinguished guests. It relates to the bureaucratization of our political parties and the political process. Like others around the table I am sure, I am a believer in the political party process. I do not always believe that my party is right all the time. Even when it is wrong, it is wrong for good reasons usually.

Having said that, I worry that while we are all around this table I think in the same spirit of trying to increase the integrity of the process, the openness, the candour and the public awareness of what is going on so voters can be well- informed. We are setting up a situation now where, within a reasonable period of time, some of our political parties will be far more dependent upon the public purse than they are on private, legal, small donations.

Take the Green Party, which is having a resurgence based on the formula, to Mr. Chrétien's everlasting credit — and I say this with great regard — that said you should get some public support based on how many votes you receive. Therefore, people in subsequent elections after he made that change could vote for the Green Party, understanding they might not win in their riding but that they were supporting that view in our political process by casting that ballot and that would generate $1.75 or $1.79 per annum for that party going forward.

If we look at the ultimate in this process, I suspect the German tradition, where there was tithing of corporations and where the parties are funded in a very direct way by the state, you can see that over a period of time the conditions under which political parties received funds — always in good faith, and never in any fashion that was supposed to be narrow, limited or unfair. We now have certain conditions that parties must meet to get public funding. It is only appropriate over time.

For example, the Charter of Rights could produce questions about whether one should be funding a political party that has no affirmative action problem so that women, people of colour or others can participate equally in their process. It is public funds. It is no less public funds than a vote by Parliament with respect to a department. Do you worry at any level that we will make our political parties into wholly owned subsidiaries of the Chief Electoral Officer over time? One of the miracles of our democracy is that a political party can form in 3,000 basements, made up of people who disapprove of everything the government of the day is doing and that the parties in Parliament are doing — which set the rules, by the way. If they want to organize for the purpose of changing the system, which our democracy is supposed to embrace, do you not worry that we are building a process, in the best of faith, that will make it continuously more difficult for new organizations like that without the status of having a pre-ordained presence to enter the system and fight for what they believe? At some level I worry about that and I would be interested in your more learned perspective on that.

Mr. Freeman: There are ongoing Charter challenges to the current system. The Longley case is challenging the system that excludes parties that receive less than 2 per cent of the vote nationally or 5 per cent of the vote in the ridings in which they run candidates. That case is currently being heard.

Yes, I do think that public subsidies are too high. However, I do not foresee the state exercising control over political parties. Your example of the Green Party is an important example. Sixty per cent of party revenues currently come from public funds, but I have not crunched the numbers on each individual party. However, I strongly suspect that no party takes in more than half of their revenues from donations. The annual subsidy that is based on the proportion of the vote that the party received in the previous election is a huge component of party revenues. It dwarfs the expense reimbursement and the tax credit that goes to donors. In my view it is too high and it is distributed on a formula that I do not think is as democratic as it could be. There are other international models that we could look at.

Senator Segal: I would be interested in Mr. Côté's response to this last question as well.

You expressed quite eloquently in your presentation your concern about corporations that made donations without the permission of their shareholders and trade unions that made donations in the previous regime without the permission of their members. Are you at all concerned about governments that choose, by whatever rational formula approved by the participant and recipient parties, to make donations to political parties without the express approval of the people of Canada whose money it is?

Mr. Freeman: You said very quickly ``through a formula.'' I am not a big defender of the public subsidy system, but to a certain extent I will defend it. The formula ensures that there is some notion of democracy in terms of how those funds are distributed. Yes, public funds, government funds, are going to certain parties with which I may disagree as a voter, but in essence my vote for a particular party directs the annual subsidy to that party equivalent to my vote. It started off at $1.75. Therefore, I think that the argument that government money is being directed to parties with which voters may disagree is a little bit of a subterfuge.

[Translation]

Mr. Côté: In our democratic system, we must absolutely preserve the independence of political parties. What I am telling you is based on Quebec's experience. The government's contribution, according to the formula that has just been mentioned by adding income tax returns, during certain periods of time, was close to 60 per cent.

If the solution is to ask the government to contribute more to funding political parties, the government will undoubtedly react as it normally does. Since it provides funding, it will want to see how the money is administered, and the government will want to stick its nose into the political parties. That must be avoided at all costs, because that would be the death of our democratic system as we know it today. Political parties must preserve their independence.

That is why there must be a fair balance between what is provided by government and what comes from private or other donations, otherwise we will be facing another problem.

[English]

The Chairman: Professor Freeman, in response to a question from Senator Segal about loans, you said that we are probably going to have to move to a system of putting a limit on loans. Were you talking about the amount or the number of loans?

Mr. Freeman: I believe that to a certain extent loans will have to be considered contributions. I do not see a way around that. In devising the limit and the law, you must accept the possibility that those loans do not get paid back and there may be no intention of paying them back. We recently had a situation in Canada with one of the smaller parties where an enormous loan was simply written off by the donor. This is the kind of thing that we need to be aware of and to guard against in the system.

Senator Milne: I always knew that Senator Segal was a red Tory, but I did not previously know that he was a closet Liberal.

Senator Segal: There is a huge distinction between the two which we can discuss later.

Senator Day: I wonder if we could have a clarification on that last point, which may save us some time.

If a loan becomes part of what you are advocating of a $1,000 limit per year, you are in effect eliminating loans.

Mr. Freeman: If the loan comes from a corporation, that is correct. I think that you will need special provisions dealing with loans. I may have misspoken when I said that they have to be considered as contributions. I do not mean that legally in the statute you have to consider them contributions, which in essence would eliminate them if they came from corporations. However, when thinking of loans you must think of them as contributions and think in terms of regulating them, because currently they are, in essence, unregulated.

Senator Day: That clarification is helpful.

[Translation]

Senator Chaput: My question deals with the reduction in individual donations, as determined in the bill that our committee is considering.

I believe that we must not only preserve the transparency and integrity of our democratic system, but that we must continue and always work towards enhancing transparency.

We have been told that Canada, with this bill, is moving away from standards established in the main democracies in the world. Will imposing reductions as radical as those, in your opinion, help improve the transparency and integrity of our political parties?

Should we not instead work on improving the audit and control process in order to ensure compliance?

Mr. Côté: The issue of transparency for financing is obviously fundamental. I am going to go a step farther. The suggestion to increase the number of officials, the number of comptrollers and the number of auditors appears to me to be an unworkable solution.

But by considerably reducing, as this bill does, the maximum amount of campaign contributions, will we not be putting ourselves in a situation where people will say we have to find money somewhere? We need it; we will have to find it somewhere —

With respect to financing for political parties, I have always thought that it is fine to have the most wonderful provisions, the clearest wording, the most transparency possible, there will always be some brilliant lawyer who will find a way to get around them, and above all some politicians. Because let us be realistic, politicians in an election campaign need money for their campaign. If we put them in a situation saying that donations are limited to no more than $1,000, if they need $3,000, what will the solution be? They will say ``figure it out, come up with the balance, find a way of getting around the act.''

That is very worrisome, I think. Legislation must be complied with. An act that is simply a statement of philosophical principles or guidelines will serve no purpose, except allow us to boast about having adopted such exceptional legislation, that cannot be found anywhere else in the world, but that we are not equipped to enforce it.

[English]

Mr. Freeman: I think that transparency is fundamental. It is critically important. For that reason, it is very important to have pre-vote donations disclosed through a reporting mechanism where you would disallow contributions for the last week of the campaign. That would give the parties and candidates the time, let us say four days, to turn in their donation lists to the Elections Canada website, which would be very simple if they simply kept, through software provided by the Chief Electoral Officer, the donations limit lists, which they already have up-to-date. We could then have that information two days before the vote.

Transparency alone does not address the other fundamental issue which enters into this debate, which is influence and perceived influence of political donations. Before the Bill C-24 reforms in 2003 we had six-figure donations going in to political parties. We had enormous donations going in to candidates. I would not say that that was a democratic situation, even though we knew who the donors were. It is very important to address both democratic objectives when you are engineering electoral law.

There is no question that parties will need to adjust to the new limits and they will need to adjust their fundraising efforts to the new limits. We can assist that to the extent we can by providing more free broadcast time. That directly impacts the parties' bottom line by reducing their need to spend money on their greatest expenditure, which is broadcast advertising. Incidentally, broadcast advertising is also distributed on a much more democratic formula than political donations tend to distribute themselves amongst the parties. That is an added benefit.

[Translation]

Senator Chaput: If that is the case, according to some research, we have been told that it is pointless to limit contributions during an election if we do not also impose spending limits. What do you think about a proposal to reduce election spending? If revenue is limited, should we not also limit spending?

Mr. Côté: In the Quebec act, there is a limit on election spending during an election campaign. I did not go through Bill C-2, but it seems to me that there is also a limit on spending during a campaign.

Senator Chaput: But it has not been adjusted. If we limit revenues, we do not adjust the limit that we have for spending, do we? Even if the act is amended to limit my donation, the person can still spend the same amount of money, can they not?

Mr. Côté: Yes.

[English]

Mr. Freeman: I am not sure if I understood the question correctly. It is my understanding that currently there are limits on expenditures for parties, candidates, nomination of contestants. The only thing we do not have limits on is leadership candidates, which we should, absolutely.

[Translation]

Senator Chaput: But at present, we are talking about limiting revenue, donations, but not about reducing spending. The bill does not deal with the issue of reducing expenditures.

Mr. Freeman: Reducing the limit?

Senator Chaput: Yes, the limits on expenditures.

[English]

Mr. Freeman: Are you are proposing that we reduce the expenditure limit of parties candidates?

Senator Chaput: What would you think of also doing that?

Mr. Freeman: Doing that simultaneously with the reduction in the donation limit on its own would probably be difficult for candidates and parties. Bill C-24 addressed the problem by dramatically increasing the public subsidy to the point where they were overcompensating for the donation limits and made the parties better off. There are other ways to do that. For parties, the best way to do that is through increasing the free broadcast provisions.

Senator Milne: Mr. Côté, your remarks about corporate donations today were underlined in advance yesterday by the small parties that appeared before us all day long, and they extended it to individual donations. Have you thought about the hardship they were talking about all day yesterday, every one of them, that the $1,000 limit imposes on small parties that do not meet the 2 per cent limits to receive a government grant?

[Translation]

Mr. Côté: That will always be a problem for small or newly created parties. It takes quite a few years for a new party to make itself known to the electorate, and to become eligible for campaign subsidies. There is no doubt that the current system favours well-established parties, parties that have been in existence for some time, but it will always be harder and take longer for a new party to claim its rightful place on the political landscape.

[English]

Senator Milne: This ties in with third-party advertising during a writ period. Some of these smaller parties were originally third parties but have reformed themselves to become registered political parties because of the problems with third-party advertising. What do you feel about these restrictions on third-party advertising?

[Translation]

Mr. Côté: Do you mean, in the bill? Are you speaking about the restrictions in the bill? I am not sure that I have understood your question.

[English]

Senator Milne: I am talking about restrictions on third-party advertising during writ periods. I am asking you for your views, sir.

The Chairman: Mr. Freeman is ready to respond, are you, Mr. Freeman?

Mr. Freeman: I am happy to respond. I was an intervenor in the Harper case on behalf of Democracy Watch. Democracy Watch was an intervenor in the Harper case. I should mention that I am not actually with Democracy Watch; I have been away from the organization for several years. I am speaking here on my own behalf.

The issue of third-party spending is not in the bill, it is in the Elections Act. It has a long, litigious history in Canada.

I am not aware of any smaller parties that have become smaller parties because of the third party provisions, but I do not intimately know all of the small parties. There are about a dozen of them.

Senator Milne: We had testimony yesterday from one group saying that this is why they had formed as a party.

Mr. Freeman: That is conceivable given the law around third parties and public subsidies, which is pushing them away from being third parties and public subsidies, probably drawing them toward being political parties.

I think third party spending limits are vitally important for a number of reasons. I would encourage the committee to look at the majority decision of the Supreme Court of Canada in the Harper decision. The fundamental issue is one of fairness. There must be a balance between the right of freedom of expression, the right of someone to express themselves in an election, and the right to express a point of view and have a meaningful outlet to express that point of view. On the other hand, there is an electoral fairness issue, of which there are several components. One is that you may have a situation, as is common in the United States, where multiple third parties run attack ads against parties or candidates, particularly a candidate. A candidate would not have the ability to respond to those attacks. If a candidate has any advertising budget at all, it is miniscule. The spending limit for most candidates is in the order of about $75,000 or $80,000, and most of that is taken up by other expenses.

You could easily have a situation where parties and candidates try to circumvent their expense limits by delivering their message through third parties if you do not have limits on third parties.

Senator Milne: Mr. Freeman, I liked your suggestions about increasing the free broadcast time for political parties because this is a major expense during an election. You also spoke about the weakness in this bill regarding the access to information, but we will be covering that issue later in our hearings.

However, your idea of ending donations to candidates one week before the election, I believe you said, is interesting but impractical. You say this would give plenty of time to campaigns so they can submit their records to Elections Canada. I have to ask you, sir, have you ever been involved in a campaign? Have you managed a campaign? Have you any idea of what it is like in the last week of an election campaign, either provincially or federally?

Mr. Freeman: I have a rough idea of what that is like, yes. I think it would definitely make a difference in how the agent of the party keeps his or her books. You would have to keep an up-to-date list of money that comes into the campaign, and it would have to be in a software system that would make it as easy as hitting the ``send'' button to send that list on to Elections Canada.

It is an added burden. I know the last week of a campaign is not the time you want to be doing this sort of thing, but they do it in the United States, interestingly enough, and in leadership campaigns.

There is not much hotter than a leadership campaign in terms of the pace of the campaign. In leadership campaigns in this country now, under Bill C-24, for each week of the campaign they have to submit their donations. They do not do the last week of the campaign, but they have to submit their list a week before the vote. We already do that in leadership campaigns. I do not see a reason why parties cannot do that given the resources that parties tend to have. At the candidate level, we would have to make it very easy because you are dealing with volunteers who are doing many other things in that kind of situation.

Senator Milne: During that last week of the election campaign, there is absolutely no way that you would have any time to do that sort of thing because you are trying to get people into the polls. This is very difficult in this day and age when you cannot find scutineers because they are all too busy working.

Have you ever had any experience in fundraising for a recognized political party, either provincially or federally?

Mr. Freeman: No.

Senator Milne: Have you ever been an official agent for a party?

Mr. Freeman: No.

Senator Milne: It is the official agent whose neck is on the block. They go to jail if they do not do the job properly.

Mr. Freeman: First, we are talking about a week before the vote; we are not talking about election day, which I understand is still a pretty hot time.

Senator Milne: It is the week before that is the hot time.

Mr. Freeman: The week before the vote the software would have to be as simple as hitting the ``send'' button which would deliver the list to Elections Canada, and Elections Canada would have to worry about getting it up on the website.

Senator Milne: It may be as simple as hitting the ``send'' button to you, sir, but that all has to be input into the computer in the first place.

Mr. Freeman: Yes, that is true.

Senator Cools: It is not that simple.

Senator Milne: To me, sir, your suggestion is ``pie in the sky.'' It is a lovely suggestion, but it is completely impractical on the ground. I like your other suggestions.

Senator Cools: I would like to thank the witnesses for appearing before us. I would also like to thank Mr. Côté for his millennia of experience that he brings to the table.

I have a couple of questions more for Mr. Freeman than for Mr. Côté. Political parties and elections, by their nature, are largely voluntary endeavours. My concern is that when people like yourself, and like Mr. Freeman or certain government individuals, speak reform, what they really do at every stage of the game is to complicate the process so much as to put it beyond the comprehension of many of the volunteers. This worries me because what you describe as such worthy reforms quite often are driving individual, ordinary Canadians out of participating in the political process. The day is long over when most candidates will just rely on volunteers to interpret all of these millions of rules and procedures. You are talking about campaigns immediately having to retain highly specialized, professional talent just to ensure that there are no mistakes in their interpretations.

One of the concerns I have is that the consequences of all of this activity, which is hashed up in the minds quite often of individuals, is the precise opposite of what is intended. In actual fact it is depriving ordinary Canadians of the ability to participate in process.

I am told that in the United States of America, for example, there is a situation where many candidates are having difficulty getting volunteers to work and are resorting to paid workers. You can respond to that — and I wish you would — but I have a couple of questions concerning what you said.

You use American language with ``inalienable rights.'' It is an American concept. Those words are not used in any of our constitutional documents. You talked about the right to vote. You talked about a corporation not being a human being with a right to vote, but corporations are legal persons. There is another inalienable right, in your language, which is the right to free association. Human beings can come together and form associations and incorporate them as a legal person. When you dismiss the notion of better treatment of corporations in law, I would say that you dismiss it on a false basis. A corporation embodies the right of free association among the subjects of the realm, so to speak.

I am working my way to my question. I do not accept what you have said about corporations, but you can respond to that.

The real question that I want to put to you is that you invoke, as many do, tremendous moral ground on cleaning up the elections process. There is no evidence, by the way, of widespread corruption in Canada in the electoral process. However, when you speak of ``cleaning up,'' when whoever it is decided to limit these donations to the amount, can you tell me what is the constitutional ground that the government stands on when it proceeds to limit, for example, peoples' donations to $1,000 or $5,000 or whatever when another inalienable right is the right to be able to dispose of your property as you see fit?

If I happen to like you, I can give you a lovely meal or a lovely gift. I am not talking here about limiting gifts for MPs or anything like that; I am talking about infringing on the rights of individuals to spend their money as they see fit in the causes that they hold dear.

I have heard a lot of discussion on the righteousness of the issues but very little on the constitutional basis on which governments are growing and growing like Topsy. All the recommendations that I hear never have to do with limiting government. They all have to do with limiting the rights of individuals — the same inalienable rights that you say you hold so dearly.

I have not paid that much attention to some of these issues, but I have this nagging concern that in all of your presentation, Mr. Freeman, I have not heard any limitations from you about governments and the limiting of governments' consistent, persistent and incessant intrusion into every aspect of individual life.

There are many individuals who do not like the fact, for example, that the Bloc Québécois is subsidized by public funds. You must admit that these provisions favour the larger established parties. What is your constitutional basis? You call it democracy and democratization. By the way, I did not know that you used to be with Democracy Watch. There is nothing democratic in the persistent and consistent infringement of the rights of individuals. Could you respond to that, please? It is quite a bit, I understand.

Mr. Freeman: I do not know if I will be able to address every point, but I have a few comments.

Senator Cools: That is all right.

Mr. Freeman: To depart from the previous point, I do not think I would support this measure. Certainly, in terms of assisting candidates at the local level to adhere to disclosure provisions, something that the committee could look at is additional support to hire someone with expertise in managing and filing disclosure obligations with Elections Canada.

The Chairman: Is that person called an official agent?

Mr. Freeman: It would likely end up being the official agent of the candidate. That is certainly the person with the legal obligation to do that.

To address the issue of the burden on candidates and parties, I would like to commend the job that the Chief Electoral Officer, Mr. Kingsley, has done over many years. His agency has done an excellent job in making the Elections Act understandable at the local level. The manuals and one-on-one assistance that his office provides is incredibly useful to candidates and makes it much easier to comply with the statute. There are other things that he could certainly do if you made those changes to the disclosure regime and I am sure he would be quite willing to do them.

It is true that the Elections Act has become much more complicated over the years since the first major reforms in 1974 to the electoral finances regime. Certainly, we have restricted peoples' freedoms. We have restricted the ability of parties and candidates to spend whatever they want. More recently, we have restricted the amounts that can be donated to parties and candidates.

Our voting system must be open and transparent, so there are all kinds of obligations on voters and on candidates. There is an expense associated with the system that the public must pay for. Yet I would not advocate rolling too many of those provisions back. They are all restrictions on individuals and they are all designed to make the system work better and more fairly and transparently.

You say that I used American language. That actually was not the language that I was drawing on; I was drawing on language of the UN Universal Declaration of Human Rights and other international provisions that spell out inalienable rights that are universal, such as the right to vote. You are right; freedom of expression and freedom of association are also inalienable human rights.

Senator Cools: Including use of your own personal property.

Mr. Freeman: That is a bit trickier. We do not have that one in the Charter and that one is actually up for much debate.

Senator Cools: It does not mean that it is not a right.

Mr. Freeman: That said, when we consider constitutional rights, there is a balancing that takes place, particularly under section 1 of the Constitution. There is no question, for example, that in the Harper case it was found that third party spending limits were an infringement on the freedom of expression. However, the court balanced that with other rights, such as electoral fairness and the right to vote.

The right to vote includes the right to an informed vote and the right to hear all points of view. If you have two people and they are in a shouting match, and one of them has a bull horn and one of them has laryngitis, one of them will be much more effective than the other.

Money plays the same role in an election. It allows you to speak more forcefully. We can get into the details of third party spending limits, but the idea there was to help level the playing field by ensuring that wealth did not become the primary determinant of which issues get play in an election and which voices get heard.

I think I am probably taking up a lot of time here.

The Chairman: Mr. Côté, did you wish to respond to the two questions?

Mr. Coté: No.

Senator Cools: I am not quarrelling with these sections, but the two fundamental questions remain: What is the widespread corruption that these measures are trying to avoid or correct — because it is not there; and, what are the limits to government? The Canada Elections Act is now, what, three inches thick? How many clauses, how many sections?

Mr. Freeman: There are 500 or so sections; I do not know.

Senator Cools: What are the limits? How many more laws? How many more clauses? Few individuals in our communities can understand the Canada Elections Act from beginning to end. For whose good, other than the lawyers', is all of this being created? Bill C-2 is not just about elections and it is unmanageable. It is more than 200 pages.

I am trying to find the balance when I hear people suggesting to let government continue to expand. Ordinary Canadians are simply little cogs in the wheels of government. When Mr. Trudeau set out to create the Elections Expenses Act, he had no expectations that this thing would keep growing. In addition to that, one of the accountants who worked on it were trying to keep a balance between the notion of charitable donations and political donations but that balance is now gone. Many of the recommendations in Bill C-2 seem to be coming from your side of the issues. I have run in elections and it was a difficult experience. The mischief is not there that these bills are trying to correct. The evils are not there.

The Chairman: Mr. Freeman, do you have something further to add?

Mr. Freeman: No.

Senator Cools: Why are we doing all of this? This is one of my philosophical preoccupations. The lawyers get up each morning and take a bottle of instant paper, instant ink and instant law and out pops 300-page bills. In the name of the Lord, I receive many phone calls and the average Canadian cannot understand and interpret most of these materials and, in today's community, they cannot afford lawyers to do it for them.

I ran into an ordinary person a couple of weeks ago who told me that her son was having a problem. The son earns $15 per hour and the lawyer is charging $250 per hour. Democracy Watch could look into that because hiring a lawyer is an expense that most Canadians can no longer afford. That is another thought. I am mixing the issues. The real point is that at some point we must look at the constitutional bases for producing many of these documents.

The Chairman: Honourable senators, we will move to the second round of questions.

Senator Zimmer: Mr. Freeman, I would ask you to comment on the following statement in relation to the United States and election spending. You stated in an article in The Globe and Mail on December 21, 2005, that spending in the States topped $2 billion. You compared that figure to spending in Canada and broke it down almost to a comparison of apples and oranges. If my grade 6 math is correct, if you would take the $18 million that the major parties spend — and I realize that two of them are probably not quite that level — add the smaller parties and then add in, you say, averaging $60,000 per candidate times 308 candidates, you arrive at a figure of $100 million. However, the American population is ten times greater than our population. They spend $2 billion and ours, in the same proportion, would be $1 billion. It gives an impression that they are way out of our league but when you do the math they spend about double what we spend. Do you have a comment on that?

Mr. Freeman: Yes. I am reluctant to compare the math between Canada and the United States because the two systems are totally different. Setting aside the exchange rate, I believe that your figures exceed the expense limits and not the actual amounts spent, by and large. Most candidates do not spend their limit and that is the bulk of the figure that you arrived at, not that I am criticizing your grade 6 math.

The key is that it is difficult to compare the two systems. There are many more players in the United States, a different set of stakes and, most importantly, a different regulatory regime. We limit expenses in Canada and by and large they do not limit expenses in the United States. The exception would be certain presidential candidates. There are matching funds for presidential candidates. The condition for receiving matching funds is that the candidates adhere to expense limits, although some candidates do not bother with the matching funds. In many cases they self-finance their campaigns and run on their own. Therefore it is difficult to compare the two systems. As well, American elections occur more frequently than Canadian elections because of the mid-term elections in Congress.

Senator Zimmer: Sometimes the numbers appear overwhelming and people have the wrong impression. Your comments are well taken, but the figures are not as far apart as they sometimes appear to be.

In concert with Senator Joyal's question, in politics as in law precedent is a good guide. I would refer to the testimony yesterday on some of the limits around the world and in Canada. It provides us with a good perspective and guide. Mr. MacKinnon testified before the Standing Senate Committee on Legal and Constitutional Affairs and said:

... western democracies and G8 countries...Australia...no contribution limits...New Zealand...no limits...Sweden no limits. The U.K. has no limits. I am using approximate Canadian dollars in all cases. In Japan, it is $145,150; Spain, $60,500; Italy, $14,600; Ireland $8,900; and the next lowest — the lowest other than Canada — is France at $6,500.

In Canada, the limit in Alberta is $15,000 with $30,000 in an election year. British Columbia has no limits. The limits in other provinces are: Ontario, $14,000; Quebec, $3,000; and New Brunswick $6,000, for corporations and individuals as per Richard Hatfield's legislation in 1982.

The limits given to the vast majority of those countries also permit business, corporations, associations and unions to contribute to political parties.

I wanted to put that in perspective again through a relationship to what is done in other countries around the world and across Canada. It could give us a better guide as to what we could do with Bill C-2. Do you have comments on that?

Mr. Freeman: It is instructive to look to other jurisdictions bearing in mind that the various jurisdictions are all over the map on this. For each country that you mentioned, I could come back with France, the United States and one half of Canadian jurisdictions that all have limits on donations. We could look at the Mexican system — a full system of public financing is provided to parties on a ratio of seventy to thirty, such that 70 per cent of the public financing mechanism is based on the proportion of the popular vote and 30 per cent is distributed equally amongst all of the registered parties.

There are almost as many systems as there are advanced democracies in this world. Certainly, we can draw on other countries' systems, but as well we must look at the Canadian situation, including some of the areas where we face constraints and others do not, and vice versa. The obvious comparison between Canada and the United States is our expense limits. The U.S. tried that but it was struck down by the U.S. Supreme Court. We do not have those restrictions in Canada because of the balancing the courts do between freedom of association and freedom of expression associated with the ability to spend lots of money on the causes you believe in. That is balanced with a right to electoral fairness. We do not have the constraints that the Americans have with their legislation, and that is a good thing.

Senator Zimmer: Mr. Côté, do you have any comments?

[Translation]

Mr. Côté: No, senator.

[English]

Senator Stratton: The Province of Manitoba has put severe limitations on contributions by corporations, et cetera, and individuals. The provincial Progressive Conservative Party was hit hard because it was largely reliant on large donors. However, since that change has taken place, the party has adjusted; it has changed its methods of fundraising and is now in the black. That is just one small example of what is happening here in Canada with restrictions. I think the same thing will happen with this bill, with the limitations put on individual contributions and the banning of unions and corporations. It will have the same effect on political parties.

Mr. Freeman, I am not absolutely familiar with the situation in Manitoba. I do know there are limitations. Have other provinces gone through that same experience?

Mr. Freeman: You may want to direct this question to Mr. Côté because the Manitoba system is similar to the Quebec system. There is a $3,000 limit on individual donations and a ban on corporate donations.

What the Manitoba system does not have is a system of public financing akin to the federal system. The example that you drew of the Conservative Party adjusting to the new regime — and it makes sense that parties will adjust to a new financing regime — is all the more interesting in that they did it without the public financing provisions that exist in the federal system.

Senator Joyal: Mr. Freeman, I am glad you raised the fact that in the American system the public matching financing is voluntary. If a candidate decides to submit to the control, he then gets a matching grant from the government. However, most of the candidates do not go that route; they go through the route of the free, open market. In the last presidential election and the one that is upcoming, candidates have said they did not and will not submit themselves to the system. The United States is probably one of the countries to which I would not look as a role model.

I believe your point in relation to better access to broadcasting was that considering the increasing costs of broadcasting during an election campaign, and since this bill does not contain any change to the present legislation that governs broadcasting, by reducing contributions during an election campaign we will exacerbate the pressure on candidates and political parties to look to alternative or compensatory routes of financing to address that issue if we do not amend the bill to include greater access to public broadcasting. Am I stating your view correctly?

Mr. Freeman: I am not sure what you mean by ``compensatory mechanisms.''

Senator Joyal: That is what Mr. Côté said. If the contribution is reduced to too low a degree, since there is a need to get money, people will search for an alternative, for compensation, if you will, to get enough money to pay for the increasing costs of an electoral campaign. That is what I mean by ``compensation.''

Mr. Freeman: If your suggestion is that parties and candidates will aim to circumvent the law and the legal requirements, I do not think that that is a necessity. The public subsidies are currently very generous. I know there are people who donate through businesses and organizations who would donate as individuals, so you must take some of that into account.

There is the party level and there is the candidate level. At the party level, there will probably be some reduction of revenues if they continue on their current fundraising strategies and completely fail to adjust to the new legislation. Quite simply, there are many donations that a party receives above $1,000 and there are obviously corporate and union donations as well.

While fundraising tends to be a little harder at the candidate level, I do not think the impact will be as severe. Particularly outside of the Toronto area, candidates tend not to receive many four-figure donations. They will get a few. Some of those will end up being — we do not like to use the terminology — split into multiple donations. That is inevitable to a certain degree, where one person in a couple would give a contribution. You may see a husband and a wife giving money.

The alternatives to illegal fundraising would be to do more with less or to change your fundraising strategies, absent, as you say, other subsidies, such as increasing the free broadcast provisions, which do not actually impact the public purse. These are public airwaves that we licence to broadcasters, and it would mean attaching a requirement to that licence.

[Translation]

Senator Joyal: Mr. Côté, if I do understand the Quebec Election Act, the provincial statute provides for the payment of expenses of party representatives who are at the polling stations on election day. Is that correct?

Mr. Côté: On election day, yes.

Senator Joyal: Obviously, one of the large election expenses for a candidate is the amount that must be paid to the polling station representatives. Should one not take into account that by reducing contributions to $1,000 without indexing them — which is not covered by the act either, but in practice — should there not be some type of compensation for part of the candidates' campaign expenses so that there would be less pressure on them to seek funding elsewhere within the system?

In Quebec, the costs of having party representatives are borne by the Chief Electoral Officer; how is that working out?

Mr. Côté: It has almost always worked that way. There was a time when it was challenged, when representatives could no longer be paid. The act was amended by changing the designation, but the process remained the same. The political party representatives seated at the table are paid. That is how it works in Quebec and if I understand correctly, that is what you would like to see at the federal level as well.

Senator Joyal: It seems to me that if contributions are limited to $1,000, then it becomes harder to raise more money and candidates will have to seek a larger number of individual contributions. Since a candidate needs to raise at least enough money to cover allowable expenses, would it not be advisable to reduce some of the current expenditures, the ones that the candidates must assume, so that the available funds might cover print or media advertising which, as you have mentioned, becomes more expensive from one year to the next while the fundraising capacity and budget restrictions make it ever more difficult to deal with these increases?

Mr. Côté: You are quite right, that would be a way to mitigate the effect of a drop in contributions. There is a belief — and I do not know if it is limited to Quebec — that it is easier and more expedient to attract donations from individuals.

It is not all that easy and it does not serve all purposes. It is a tough job and it requires a great deal of work by all political parties and all candidates. It is part of our system and there is nothing wrong with it, however, you can only ask volunteers to do so much. We rely heavily on volunteers, but there are never enough of them for an incumbent's fundraising campaign, for example. It is something that we cannot do without, but there are limits to what we can expect to receive free of charge.

Any reduction in the contribution limits will have a direct effect on the total revenue of political parties and of the candidates themselves.

There is something else to keep in mind with respect to the representatives. On Election Day, two officers are important: the deputy returning officer and the clerk. However, political party representatives are also essential for supervision and monitoring in order to avoid a repetition of some of the situations that were experienced a few years ago.

Generally speaking, the representatives are conscientious and respect the Chief Electoral Officer's guidelines. They are an important part of the process. Their role has to be well defined, and the government should compensate the representatives who work on Election Day.

[English]

The Chairman: Honourable senators, there are no further questions to put to these two witnesses at this time.

On behalf of the committee, Mr. Freeman and Mr. Côté, I would like to thank you very much for coming and sharing with us the benefit of your knowledge and experience over many years of studying these particular topics. It has been very useful to us and we deeply appreciate it.

Honourable senators, that brings us to the end of our deliberations for this week. There will be no deliberations next week, and so the matter will now be adjourned until Monday, September 18, at 9:00 in the morning.

The committee adjourned.


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