Proposed election law could hurt cash-strapped candidates

The government's proposed election law rewrite would open the door to modest self-funded start-up reserves, while simultaneously making it far more onerous to take out loans once the race is underway.

Tougher lending rules may make it harder for political hopefuls with no track record to access campaign funds

A spokesperson for Minister of State for Democratic Reform Pierre Poilievre said a move to allow small, self-funded start-up campaign spending reserves was made in response to concerns over the effect of cracking down on loans. (Fred Chartrand/The Canadian Press)

The government's proposed election law rewrite would open the door to modest self-funded start-up reserves, while simultaneously making it far more onerous to take out loans once the race is underway.

The change to political financing rules may pique the Liberals' interest, with lingering leadership campaign debts continuing to haunt some of the party’s also-rans.

Under the new bill, future leadership contestants would be able to donate up to $25,000 of their own money to their own campaigns, with no obligation for repayment.

A similar exemption would be extended to election candidates, albeit with a considerably lower cap of $5,000.

There's a catch, however — one that even Conservative MPs worried would hurt prospective candidates.

Those same political hopefuls would no longer be able to lend themselves money, or borrow it from a friend, family member or supporter.

Would have to rely on banks

Instead, they would have to convince a bank, credit union or other financial institution as defined in the federal Bank Act to extend a loan — and they wouldn't even be able to guarantee it themselves.

Instead, they would have to round up multiple co-signers, as each would only be permitted to guarantee up to the maximum individual contribution, which would be $1,500 under the new bill.

A similar provision in an earlier bill that dealt specifically with political loans — the now-defunct C-21 — raised a red flag for the procedure and house affairs committee in 2012 — and not just from the opposition side of the table.

At the time, Conservative MP Tom Lukiwksi worried that narrowing the lending options for candidates and leadership contestants could reduce access to funds for candidates initially deemed non-viable by the banks.

He pointed to the recent experience of New Democrat candidates in Quebec during the last election as an example of the inherent unpredictability of politics.

"It seems to me that the nature of the unexpected, and the nature of the volatility of the system, may mean that inevitably, as we restrict access, we can wind up, once again, privileging those who have parties with established records," Lukiwski told his colleagues.

"That is a very grave concern."

When you borrow money, he noted, "it's with the expectation that the things you do with the money will actually cause you to win. There may be other seats where people would actually have lost because they couldn't have access to a competitive financial environment."

'Un-level playing field'

New Democrat MP Pat Martin voiced similar fears at a subsequent meeting.

"We're not creating a level playing field by [doing] this," he worried.

"In fact, some people might be able to get a reasonable rate of interest at a bank because of their party's reputation, while somebody else is going to be down at the Money Mart or at a loan shark with a ridiculous rate to borrow that loan."

In their efforts to "take big money out of politics," he suggested, "we might in fact be creating an un-level playing field that will diminish the fabric of our democracy by limiting the number of types of people who can take part."

A spokesperson for Pierre Poilievre, minister of state for democratic reform, confirmed the move to allow a certain amount of leeway for candidates to pay their own way is a response to "some of the criticism emanating from the Procedure and House Affairs Committee" during its study on an earlier version of the political loans bill, the now defunct C-21.

"The restrictions [in the previous bill] would not have allowed candidates to access the money they need to start up their campaigns," Gabrielle Renaud-Mattey told CBC News.

'Actually worsens' situation

But will the move to allow candidates and leadership hopefuls to foot the bill for a shoestring starter campaign be sufficient to win the support of the opposition?

So far, it doesn't seem to have mollified New Democrat MP Craig Scott, who sat on the committee when it studied C-21.

The attempted fix could make the situation worse, Scott says, by implicitly giving a leg-up to candidates who can afford to kick in thousands of dollars to get their campaigns off the ground — a point that he and his party tried to drive home in 2012.

"The direction that we were going on that was to say there needed to be the ability to take out larger loans, not that individual candidates or leadership contestants be able to donate more," he told CBC News.

"It has to be system where you can get a loan based on your own collateral, or through other people guaranteeing it. It doesn't solve any problems when you turn it into contributions. That actually worsens it."

During hearings on the political loans bill, he recalls, "the banks were all but shouting that this is not something that is going to be profitable or easy to give loans on, because chasing people down for $1,200 guarantee chunks is going to drag down the profitability. So either you're going to have much higher interest rates, or they're only going to be giving loans where it's easy" — like, for example, where the party or riding association will guarantee it, which would be an option for candidates under the new rules.

"Which party is more likely to have surplus cash to show the bank to say, you know, we can spend the $22 million, but we have extra cash and we can guarantee all these extra candidates?"

As yet, there's no word on whether the banks will be making a repeat appearance at committee. When contacted by CBC News, a spokeswoman for the Canadian Bankers Association pointed to their 2012 submission on the earlier bill.


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