moved that Bill C-21, An Act to amend the Canada Elections Act (accountability with respect to political loans), be read the second time and referred to a committee.
Mr. Speaker, I am pleased to have this opportunity to continue with our democratic reform week and begin the debate on Bill C-21, the political loans accountability act. The bill is another one of our government's long-standing commitments and I am happy we are moving forward on it today.
As we have shown with previous bills, our government is pursuing a principled agenda to strengthen accountability and democracy in Canada. In this case, we are addressing the rules respecting loans to political entities.
Currently, there are no limits on loans that corporations, unions, or wealthy individuals can grant to political entities. It is unacceptable that the political loans regime does not meet the same standards of transparency, accountability and integrity expected of the average Canadian. Hard-working ordinary Canadians are expected to pay back loans under strict rules, whether it is for starting a business, going to school, or purchasing a home, and the same rigorous standards should also apply to politicians.
As it stands, there is a loophole in political financing legislation. We are addressing the loophole with this bill.
Our government, in its first bill in 2006, established strong standards for political contributions in the Federal Accountability Act. The act eliminated contributions by corporations and unions. It changed the rules to ensure that politicians would not be beholden to those with deep pockets and unions or corporations that give too much money. However, our law still allows those with deep pockets to lend too much money. The rules concerning political loans should be consistent with the rules for political contributions.
One major issue regarding the treatment of loans in the Canada Elections Act is the loophole in the current standards that fails to impose restrictions on the source and the amount of political loans in a way that is consistent with the rest of the rules for political financing.
A second important issue that our government seeks to address is the inconsistency in transparency requirements for political loans. As it stands, the inconsistencies on how political loans are treated unduly complicate the enforcement of the Canada Elections Act and do not provide for consistent transparency across the Canadian political finance regime.
This lack of rules may result in loans being used as de facto contributions. Clearly, it is a situation where politicians could be beholden to those who lend them large sums of money instead of being beholden to those who brought them into office with votes. This is unacceptable.
By limiting the amount of a loan a candidate or another individual can make to fund political activities, the political loans accountability act would increase integrity in the political loans process by ensuring that all candidates are on a level playing field, regardless of their personal wealth or their connections with elite interests.
The bill would also ensure that members of Parliament are accountable to their constituents first by removing the opportunity for undue influence by unions and corporations on elected representatives.
However, the bill would also ensure that parties, associations and candidates will continue to be able to secure sufficient financing for their electoral campaigns. Political entities will be able to borrow money from a wide range of financial institutions, including trust and loan companies, credit unions and insurers.
The bill is consistent with a recommendation from the Chief Electoral Officer of Canada. It reflects a legal approach to political loans already in place in several provinces, including Ontario, Quebec, Manitoba, Alberta, and Newfoundland and Labrador.
To fully highlight the practical benefit of our proposed measures, I would like to discuss some of them in more detail.
The Federal Accountability Act established fixed contribution limits for individuals and completely eliminated contributions from corporations, unions and associations.
Following the passage of our flagship Federal Accountability Act, the Standing Committee on Procedure and House Affairs asked the former chief electoral officer to prepare a report on political financing issues with recommendations respecting the use of loans.
The Chief Electoral Officer's report was submitted in January 2007 with respect to the existing rules on political loans. He acknowledged that:
While Parliament has imposed an extensive regime to control the source and extent of contributions, it has not done so with respect to that other source of funding constituted by loans.
The Chief Electoral Officer suggested that loans to political entities by lenders that were not in the business of lending ought to be restricted, because such loans granted at non-commercial rates at terms and conditions that were available to the general public and without expectation of repayment may lead to the perception of abuse and undue influence by those with the financial means to grant these loans.
To prevent such abuse or unfair influence by those wealthy entities with the ability to make large loans or any perception of it, the Chief Electoral Officer made the following recommendations: that the limit on loans be made by individuals should be to their contribution limit; that political entities may borrow money in excess of the contribution limit only from financial institutions; that all loans by financial institutions be at commercial rates of interest; and that a separate regime for the treatment and reporting of loans be established in the act.
In response to these recommendations, our government introduced the political loans accountability act, which had it been adopted would have regulated the use of loans by political entities to ensure full disclosure and greater accountability in the financing of political campaigns.
This legislation was passed by the House of Commons as Bill C-29 in 2008 and was awaiting second reading in the Senate when Parliament was dissolved for the 2008 election.
The legislation we are discussing today is substantively the same legislation as passed by the House in 2008 as Bill C-29. Our government worked collaboratively with opposition members to pass Bill C-29, which was awaiting second reading in the Senate when Parliament was dissolved.
Some changes have been incorporated from its original version. For example, the bill now would exclude from the annual contribution limit any portion of a loan that was repaid to the lender and any unused loan guarantees, as proposed by our government during the committee's study period.
It would require the Chief Electoral Officer to hear representations from affected interests before making a determination about a deemed contribution, as proposed by the opposition.
It would establish contribution limits for leadership contestants on a per calendar year basis rather than a per contest basis.
These amendments demonstrate that our government developed the political loans accountability act in a collaborative spirit with opposition parties throughout the process. Indeed, when the political loans accountability act was introduced, with the amendments above during the last Parliament, in 2010, there was widespread support in the House, including among the NDP, for the updated bill.
We think these incorporated changes make the bill even better. The act we are discussing today is the reintroduction of this updated legislation from the last Parliament.
Here are some of the important changes brought by our bill to Canada's political financing regime.
The bill would establish a uniform and transparent reporting regime for all loans to political parties, associations and candidates, including the mandatory disclosure of terms, such as interest rates and the identity of lenders and loan guarantors.
Unions and corporations would be banned from making loans to political parties, associations, candidates and contestants, consistent with their inability to make contributions as set out in the Federal Accountability Act.
Total loans, loan guarantees and contributions by individuals cannot exceed the annual contribution limit for individuals established under the Federal Accountability Act, which is currently $1,100 in 2011. Only financial institutions and other political entities can make loans beyond that amount. Loans from financial institutions must be at fair market rates of interest.
Rules for the treatment of unpaid loans will be tightened to ensure candidates cannot walk away from outstanding loans. Riding associations or parties will be held responsible for unpaid loans taken out by their candidates.
By prohibiting loans from unions and corporations and requiring that loans from financial institutions be granted at a market rate of interest, this bill would prevent corporations and unions from doing indirectly, through loans, what they are now prohibited from doing directly through contributions.
Together with the Federal Accountability Act, this measure will no doubt yield more fairness for electors. Politicians will now have to seek financial support from voters, not corporate entities or special interest groups. Politicians will be entirely accountable to voters as opposed to corporations or union interests.
Requiring a fair market rate of interest will allow all parties and candidates to be on an equal playing field by no longer allowing situations whereby favourable or entirely unknown terms of loans are granted without transparency. This change will also serve parliamentarians, riding associations and parties by protecting them from perceptions that they might be indebted to unions or corporate interests.
In addition, our government believes it is unfair that a candidate can walk away from his or her campaign debts. Everyday Canadians are expected to pay back their loans under strict rules, and the same should apply to politicians. This is why our bill proposes to transfer a candidate's unpaid loans to riding associations. This will ensure that the money borrow will be repaid.
Another important impact of the proposed bill will be to subject loans made by individuals to their contribution limits. This measure will prevent the current ability to bypass a contribution limit by lending large amounts of money without any expectation of ever being reimbursed. This measure will ensure greater accountability to citizens and enhanced transparency and integrity in our political financing regime.
The last, but not least of these changes that I want to discuss today is the increased transparency requirements for loans to all political entities. From now on, all loans will need to be recorded in writing and reported to Elections Canada. This change will increase transparency, especially in the case of candidates and nomination contestants who currently have only limited disclosure requirements. Putting in place effective transparency standards for candidates and nomination contestants will allow Canadians to know who is financing their campaigns and under what terms. I think these measures will find wide support in the House of Commons and among Canadians.
I would like to emphasize how the bill, in conjunction with the Federal Accountability Act, democratizes the political financing regime by focusing on grassroots voters. Wealthy individuals will be unable to bankroll their own campaigns by making large loans to themselves. Candidates will be unable to rely on a small number of wealthy contributors to finance their campaigns. They will instead need to seek support from those they wish to represent in the House of Commons.
Lending will not be limited to banks. Indeed, there will be a wide range of financial institutions still able to provide loans. What the bill does is preserve the important role for small community lenders and financing grassroots political campaigns, such as families, friends, supporters, credit unions and caisse populaires. By making political parties and candidates dependent on their supporters for financial support, parties and candidates now have a greater incentive to be responsive to the average Canadian.
What I hear from my constituents, and indeed many more Canadians across the country, is that they do not want to see parties and candidates using large loans from wealthy individuals, corporations, or unions to finance their campaigns. Large individual contributions are not permitted, so large individual loans should also not be permitted. Corporations and unions are not permitted to donate to federal political entities, so corporations and unions should be unable to loan large sums of money to political entities.
When our government was elected in 2006, we made the Federal Accountability Act our first priority, which among other things tightened the contribution limits to ensure corporate and union interests and wealthy individuals would not unduly influence politics.
With the introduction of the political loans accountability act, we are building on our flagship Federal Accountability Act by bringing greater transparency and integrity to political loans. The bill would strengthen Canada's political finance regime, already one of the strongest political finance regimes in the world. This is good news for Canadians and for the political process.
I encourage all parliamentarians to vote in favour of the bill.