I would like to thank the committee for inviting me to appear before you today. With me is Mr. Jack Siegel, legal counsel for the Liberal Party and a long time Liberal member.
I won't be offering much in terms of an opinion on the bill, as the Liberal members of the committee are much better equipped to do that than I, but I would like to share a few thoughts on what some of the consequences, intended or otherwise, might be if this legislation is adopted.
Section 405.5, as drafted, prohibits the making of loans or guarantees to registered parties, registered associations, candidates, leadership contestants, and nomination contestants, except where the lender is a financial institution or where the lender or guarantor is a qualified individual who is limited to a $1,000 loan or guarantee—$1,000 adjusted for inflation. In other words, the only permissible loans over $1,000 are to be made by financial institutions, but those institutions are prohibited from getting a guarantee in excess of $1,000. This leaves open the rather substantial question of how to secure such a loan. We would suggest—and Mr. Siegel has confirmed this with counsel for one of the major banks—that it would be all but impossible for a candidate to get such a loan unless he or she can obtain several $1,000 guarantees that the lender is prepared to accept.
We feel that this is completely unworkable in an election period. Each member of the committee will know that on the day an election writ is issued, you want to spend money. You want to buy signs, you want to print literature, and you want to rent a campaign office for which, at the very least, a deposit is going to be required up front. That's more than $1,000, and you will need it right away. There's an exception in the bill, so you can actually lend your own campaign $2,000, but that's still not going to be enough.
If the bank will even consider a loan at all, you will need to collect $1,000 guarantees. But keep in mind that each $1,000 guarantor is then prohibited from making a contribution to the campaign, over and above that guarantee. See proposed subsection 405.5(4), specifically the passage starting with the word “However”.
So you turn to your riding association. It can transfer money to the campaign, after all, in order to pay these expenses. But one had better look first at Elections Canada's information sheet 5. It says at paragraph 19:
A registered association may transfer goods and services and funds other than trust funds to any candidate endorsed by the party with which the association is affiliated and whose nomination has been confirmed by the returning officer.
So the riding association cannot transfer funds to your campaign until your nomination has been confirmed by the returning officer. On the day the writ is issued, there is rarely a returning office that has opened. Even if you can submit papers on that day, the returning officer must validate the nomination papers, including checking 100 signatures against a list of electors. So you have no money available to transfer from the association.
Proposed subsection 405.5(5) provides for loans from registered associations to candidates, but Elections Canada seems consistently to interpret “candidate” in the financial context as someone whose nomination papers have been confirmed. So again, there appears to be a built-in delay.
Your only means of obtaining money right from the beginning of the campaign, then, is by direct contributions to your official agent from qualified contributors. But according to Canada Revenue Agency income tax information circular IC75-2R7,
Official agents can only issue such receipts for monetary contributions received in a certain period. This is the period that starts with the day on which the candidate's nomination has been confirmed by the returning officer, and ends on the day that is 30 days after polling day.
So those contributions will not qualify for a tax receipt until the papers are confirmed. It seems very unlikely that most donors would make these contributions and give up the tax credit.
All partisanship aside, we do not think this works. Candidates do not typically file their papers at the very beginning of a writ period. After all, in a minimum five-week campaign, they have until the Monday that is three weeks before election day to file. It is certainly the experience in our party that an awful lot of candidates do not file until close to the deadline. In the absence of loans—and we ask the rhetorical question of whether an extension of credit might constitute a loan within the meaning of the bill—the necessary money to operate a campaign at the local level may simply be unobtainable for the first two weeks of a campaign.
And then, please consider the registered parties. The loan guarantee problem is not an issue, since the chief agents of most major parties guarantee campaign loans secured against the rebates that the parties will ultimately receive. And the rebate money goes to and flows from the chief agent of the party. Three of the four parliamentary parties represented here have chief agents that are corporations. They cannot issue guarantees under this proposed legislation. But surely each have good lawyers who can structure the loan security so that it is not a guarantee.
But wouldn't that amount to doing indirectly what you cannot do directly? If so, then could that be a violation of section 405.2 of the act?
Again, all partisanship aside, we are left to wonder if this was really the government's intent and would encourage a careful scrutiny of this section of the bill.
With regard to proposed section 405.7, realistically, the bill is about bank loans over $1,000. We do not know of any financial institution that loans money in the absence of a binding agreement to pay. So although section 405.7 resembles several other provisions already in the act, it appears that the 18-month deeming of a loan to be a contribution will never apply to such loans.
I'm sure that the Liberal members of the committee will be offering other amendments, but there's one that I'd like to suggest to members of the committee for their consideration. In terms of potential amendments, every limit on contributions currently found in the Elections Act is an annual contribution except one, and that's to leadership contestants.
The Liberal Party is perhaps the only one of all of the parties represented here that has run a successful leadership campaign under the rules, but we can assume that all of the other parties will eventually follow suit.
If it is no longer possible for the leadership candidates in Canada to take out a loan, then the solution would be to amend the provisions in the act that relate to contributions made to the leadership so as to harmonize them with the other provisions relating to contribution limits. In other words, there should be an annual limit instead of a limit that would apply to the duration of a party's leadership campaign.
By allowing leadership contestants to raise money ahead of a campaign so that they don't have to borrow to start their campaigns and so they can regularize their contributions for a post-campaign clean-up of their debts, if any, the loan provision may be less important.
I hope the committee will consider this suggestion. And I understand that a text of the necessary amendment will be provided by Liberal members of the committee at the appropriate time.
Thank you very much.
