Reforming Party Funding
Justin Fisher (Brunel University)
Background
• The development of party finance regulation
has been characterized by pragmatic evolution
• Prior to the Political Parties, Elections and
Referendums Act 2000 (PPERA), party funding
was remarkably unregulated
• The level of genuine scandal and corruption
surrounding British party finance has been
surprisingly low.
Trends in Party Income
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Mid-1990s to 2005, Labour was the wealthy party
At local level, Conservatives were still wealthier
Change in 2006 – back to the norm
Conservatives had a huge financial advantage in
the run-up to the 2010 election – between
October 2009 and March 2010, they raised over
£20m in declared donations
Sources of Central Income
• Labour’s reliance on trade union money has
grown substantially since 2007
• Conservative income increasingly from
individuals
• No real trend apparent for the Liberal
Democrats
The position pre-PPERA
• No declarations of donations required beyond details in
company reports (post-1967) and in trade union returns
to the Certification Office. No declaration of individual
donations.
• No limits on donation size
• No prohibition of foreign donations
• No limits on national spending
• State support modest, largely in-kind, and mainly
directed at elections
• No Electoral Commission
• Principal legislation was passed in 1883 and reflected
nineteenth century electoral norms
The position since PPERA
• Establishment of the Electoral Commission
• All donations over £5k (£7.5k) nationally and £1k (£1.5k)
locally declared via the Electoral Commission
• Loans declarable since 2006 (Electoral Administration Act)
• No limits on donation size
• Foreign donations banned
• National campaign limits set (£30k per contested constituency
= max of £18.96m in 2010)
• Campaign period for national campaigns set at 365 days
before election. Remains c.4 weeks locally for terms of less
than 5 years. For five year terms, effectively 4 months (Long
and Short Campaigns)
• Limited increase in direct state funding
Impact of PPERA
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Opportunity costs in campaign spending
More transparency – but more unease
More party regulation
Little impact in closing spending gap between
Lab/Cons and Lib Dems
Why another re-examination?
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Transparency arguably created more unease
Large contributions continued despite transparency
Failure to address the parties’ continuing financial needs
Heavy Conservative spending in marginal seats before
the regulated campaign period
• Reviews by think-tanks, the Electoral Commission and
Phillips
• Failure of all-party talks following Phillips review
• Limited scope of Political Parties and Elections Act 2009
Committee on Standards in Public
Life
• Began to review party finance again in 2010
• Due to report in 2011
• Broadly speaking the same issues as in the
Phillips review are being examined
Options for Reform
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Do Nothing – is there a genuine problem?
Caps on Contributions
Caps on Spending
Enhanced State Funding
Caps on Contributions - For
• The size of some contributions has consistently caused public
disquiet, thus potentially undermining public confidence
• Large contributions are undesirable because they may lead to
leverage within a party
• Large contributions upon which parties rely are problematic
since they may be withdrawn. Caps could encourage a
broader funding and supporter base.
• In an emerging multi-party system, parties that are not
traditional recipients of large corporate or trade union
contributions are disadvantaged
Caps on Contributions - Against
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Caps are an infringement upon liberty
Public disquiet is not a reason in itself to impose new rules
Limited evidence that large contributors enjoy leverage
Parties should not be hindered, just because they have
wealthier supporters
• Transparency is a sufficient safeguard
• Caps could threaten the internal structures of the Labour
party if applied to affiliation payments
• Enforcement – the water principle
Further Caps on Spending - For
• The is an apparent consensus amongst the parties to reduce
general election spending to at least £15m
• Will reduce the demand for income
• A common (and untested) view is that much election
expenditure is ‘wasted’
• Billboards (for no apparent reason) are singled out as a
particular waste
• Regulation at constituency level fails to capture significant
pre-campaign spending
Further Caps on Spending - Against
• Most central party spending is routine – normally 80% of
expenditure
• Parties fight a major set of elections in almost every year
• National spending cap already eroded by inflation to around £15m
• Contributions driven by the general election cycle - ability of parties
to stockpile resources for non-election years is limited
• Repercussions for political engagement - campaigns educate and
encourage political involvement
• Targeting of even more scarce resources will increase - more
alienation amongst voters in safe seats
• Would enfeeble parties in relation to unelected actors at elections
• Excessive regulation at constituency level would discourage
participation
Enhanced State Funding
• If contribution caps are introduced, parties
will need income from other sources.
• One alternative is to enhance state funding
• This could be through a block grant, or
through an incentive-based approach
State Funding - Against
• Citizens should not be forced to pay for parties of
whom they do not approve
• Market forces should apply – if parties cannot raise
sufficient income, they should downsize their
activities
• The public would be opposed, especially in the
current economic circumstances
State Funding - For
• State funding already exists
• The principle of paying for things of which we do not approve
already established with general taxation
• Public opinion is remarkably inconsistent on the issue
• The ‘free-market’ idea would be most likely to lead to parties
being replaced by organisations funded by rich benefactors
• Parties provide public goods (policy alternatives, stimulate
debate, ensure democracy is not the preserve of those who
can afford it), but there is a collective action problem in
relation to their funding
Conclusions
• None of these proposed reforms is a panacea
• None should be considered in isolation
• If contribution caps are introduced, then three
possible options arise: enhanced state funding, the
decline of parties, or an acceptance of clandestine
funding
• Public opinion is a poor guide to effective policy in
this area
• Will reform end the calls for further reform?