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Campaign Finance Legislation
Examining Canada’s past and present election expenses legislation.

In the 1960s, television would forever change the nature of election campaigns. When the charismatic and presentable John F. Kennedy Jr. defeated Richard Nixon in the 1961 US presidential election, many attributed Kennedy’s victory to his ability to connect with the vast American television audience, attributing Kennedy’s success to his performance in the first televised leaders’ debate.

This changed the very nature of elections, ushering in an era of “mass politics” (in the US, Canada, and beyond) that introduced television spots, advertising, opinion polling, and direct mail marketing (among other initiatives) to the campaign process. These methods, however, proved to be costly endeavours, and put smaller political parties at a disadvantage when it came to reaching voters.

In Canada, third parties such as the New Democratic Party protested that they did not have access to the seemingly bottomless pools of corporate donations possessed by its national cousins at the time, the Liberal Party of Canada and the Progressive Conservative Party. At the same time, however, the NDP was criticized for reflecting the position of major labour unions in its policies, one of that party’s sources of financial support.

1964: The Barbeau Committee

In 1964, to address concerns about fairness, Lester Pearson’s Liberal government appoints an Advisory Committee to Study the Curtailment of Election Expenses, known as the Barbeau Committee, to recommend legislation regarding election expenses.

The Barbeau Committee report, released in 1966, recommends:

• "No group or bodies other than registered parties and nominated candidates be permitted to purchase radio and television time, or to use paid advertising in newspapers, periodicals, or direct mailing, posters or billboards in support of, or opposition to, any party or candidate, from the date of the issuance of the election writ until the day after polling day."
• The Committee does not advocate the prohibition of indirect expenditures or issue-based advocacy, because it feels this prohibition will "stifle the actions of such groups in their day-to-day activities."

The Committee considers the impact of such restrictions on political freedom, but feels that “without such restrictions any efforts to limit and control election expenditure would come to nothing.”

1974: The Election Expenses Act

However, in the immediate aftermath, the Barbeau Committee’s recommendations go unheeded. The Canadian government does not take concrete steps to regulate election expenses until 1974, when Parliament passes the Election Expenses Act.

This legislation is a product of the minority government situation that characterized the day. Requiring the support of another party to shepherd Bills through the House, the Trudeau Liberals acquiesce to New Democratic demands; the NDP makes its support conditional on the passage of legislation limiting campaign spending.

This is the first major attempt to regulate party finance in Canada. The legislation focuses primarily on spending, rather than donations, stipulating how much money political parties and candidates can spend, rather than regulating where the money comes from.

The Election Expenses Act has four major objectives:

• To curtail runaway spending during election campaigns.
• To introduce a measure of financial equivalency among candidates and political parties.
• To allow both political parties and candidates to meet some of their financial needs through public funds.
• To increase public confidence in the political system by making the mechanisms of political party financing more transparent.

The Act includes the following basic features:

• Spending limits are placed on national parties and candidates during campaigns.
• The number of electors in a riding determines the total amount an individual candidate can spend.
• The 1974 spending limit is set at $1.00 per each of the first 15,000 voters, 50 cents for the next 10,000 electors, and 25 cents for each elector over 25,000.

Additionally, the Act stipulates that any candidate receiving at least 15 percent of the vote is able to claim expenses, including his/her deposit and, in larger ridings, his or her travel costs.

To encourage private donations, the Election Expenses Act introduces tax credits for donations to political parties. The credits are applied on a sliding scale, from 75 percent (on the first $100 donated) to a maximum credit of $550.

Parties are required to disclose the source of any donation over $100.

Parties are also required to file an annual financial report with the Chief Electoral Officer revealing the source of funds and how the funds have been spent.

The Election Expenses Act has had a number of important effects:

• Shifts fundraising away from the corporate sector toward individual donations.
• Allows the NDP to compete on a relatively equal footing.
• Puts a number of party activities (such as local associations, leadership contests and nomination contests) under state regulation.

Between 1974 and 2004 a number of amendments strengthen the framework of the Election Expenses Act, but also make provisions more generous by increasing the limits for tax receipts, and indexing contribution limits according to inflation.

1989-1992: Royal Commission on Electoral Reform and Party Financing

The Royal Commission on Electoral Reform and Party Financing is convened in 1989, headed by Chairman Pierre Lortie (the Commission is normally referred to as the “Lortie Commission”).

Chairman Lortie reports to the House of Commons in 1992. With respect to party finance, Lortie recommends several changes to promote fairness in electoral competition, and also to encourage greater participation by women and other underrepresented members of Canadian society.

Lortie’s recommendations include:

• Limit spending by nomination contestants.
• Provide tax credits for contributions to nomination contestants.
• Provide tax deductions for extra expenses incurred by some groups of candidates, including women and persons with disabilities.
• Broaden the scope of the Election Expenses Act to include leadership contests and constituency associations.

2003: Bill C-24 & Reforming the System

On January 29, 2003, the Chrétien Liberal government introduces Bill C-24, An Act to Amend the Canada Elections Act and the Income Tax Act. Bill C-24 is passed and receives Royal Assent in June 2003.

The legislation covers four basic areas:

• Political donations.
• Public financing of political parties (and other areas of the political system).
• Political party leadership campaigns and nomination battles.
• Constituency associations.

Political Donations

Bill C-24 effectively bans political donations from corporations and unions (with minor exceptions), and limits contributions by individuals.

Under this legislation, corporations, associations, and trade unions are prohibited from making financial donations to registered political parties and leadership contestants. The legislation stipulates, however, that they may contribute an annual total of $1,000 to candidates, electoral district associations, and nomination contestants.

In addition, individuals (with the exception of a bequest) are not permitted to contribute more than $5,000 annually to registered parties, candidates, nomination contestants, or constituency associations. However, this legislation does permit individuals to also make a separate contribution of up to $5,000 to a leadership contestant of a registered party.

Public Financing

 To compensate for the loss of corporate and union donations, Bill C-24 significantly increases the amount of public financing available to political parties. Registered parties receive public funding from the income tax system (since individuals receive tax credits for donations) and from the partial reimbursing of election expenses.

Bill C-24:

• Amends the Income Tax Act to increase the tax credits individuals receive for political donations. Donations up to $400 are eligible for a 75 percent tax credit. However, for any donations of $1,275 or greater, individuals can only receive a maximum tax credit of $650.
• Increases the amount reimbursed to parties for election expenses from 22.5 percent to 50 percent.
• Decreases the percentage of votes candidates need to qualify for a partial reimbursement of election expenses, from 15 percent to 10 percent.
• Provides registered parties with an annual allowance based on the number of votes they received in the last election. To qualify, parties need to have received either 2 percent of the total votes cast nationally, or 5 percent of the votes in ridings where the party ran candidates. Qualifying parties receive $1.75 (indexed by the inflation rate) for each vote they received, based on the results of the most recent election.

Now that Bill C-24 is in effect, analysts estimate that between 80 and 90 percent of Canada’s political party financing is provided by public tax money.

Political Party Leadership Campaigns and Nomination Battles

In the areas of political party leadership campaigns and nomination battles, the legislation requires that leadership candidates provide financial reports covering both the amounts and sources of donations received during the campaign period. A candidate must submit this information to the Chief Electoral Officer every four weeks, from the time s/he becomes a leadership candidate until the leadership convention is held.

Bill C-24 also sets spending limits for nomination contestants, with a cap at 50 percent of the total amount that the candidate from the same riding was permitted to spend during the previous election period.

The Bill also requires that nomination contestants who receive donations of $500 or higher, or have expenses of $500 or higher, provide a report of their donations and expenses to the Chief Electoral Officer.

Constituency Associations

Bill C-24 requires that all national political party constituency associations register with Elections Canada. The Bill also limits a registered party’s constituency associations (called “electoral district associations”) to one per constituency; further, it prohibits non-registered constituency associations from accepting contributions or providing funds to a candidate, registered party, leadership contestant, or nomination contestant. Finally, Bill C-24 compels constituency associations to submit an Annual Report to the Chief Electoral Officer.

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Financing Party Politics in Canada

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