party political funding

These revision notes cover the issue of how Britain's main political parties are funded. The creation of the Electoral Commission has changed the ground-rules for political funding in the UK. Is there a case for the introduction of some form of state funding of parties? How would this change the political process?

The different political parties in the British system raise their funds in a variety of different ways due to their differing ties with various individuals and bodies. In the ever changing world of politics the nature of funding has also adjusted and changed with the times and the parties so traditional areas of funding may no longer be so lucrative as new ones for the different parties.

Main Sources of Funding

The Conservative party has traditionally relied on its local constituency associations for a large amount of its funding. Car boot sales, fairs, raffles and other events run by its ever-ageing membership have provided finance for the party. Membership fees of course provide some money and when the party had more members this would have brought in a large amount of funds. In 1953 for instance there were 2.8 million members and in 1979 there were about 1.5 million members.

Nowadays the Conservatives rely very heavily on business and private donations. Companies have given money to the Tories in large amounts particularly when they have been in government. This has somewhat lessened due to them being in opposition. Private donations to the Conservative party have been in the press recently due to the enormous £5 million donated by the millionaire Stuart Wheeler. Following this donation money has flowed freely into the Tory coffers with more, smaller, private donations increasing substantially. The prospect of selling Conservative central office to pay for the election is no longer an issue. The Tories have in the past had problems with foreign donations with men like Asil Nadir causing substantial embarrassment following his £440,000 donation to the party and then fleeing the country after accusations of fraud.

The Neill report has set a limit on party spending during an election campaign of £15 million, which may actually protect the Tory party from themselves who regardless of how much money they receive during an election campaign, always seem to overspend. Following the 1992 election they had a debt of £19 million. The Conservatives also receive state funding as the opposition party to provide an effective counter to the government though it is arguable how any amount of money could actually help in the current Parliament against a government with a majority of 179.

Labour's funding is different to that of the Tories both currently and traditionally. Traditionally the party's tie with the Trade Unions extended into party funding also as even as recently as 1988 71% of the party's income has come from the unions. However as the importance of the unions has decreased (their share of the electoral college vote has gone down) so has their contribution to the party. Nowadays the Trade Unions give around 30% of the total party income.

40% of New Labour's funding comes from member's applications and small donations. This is a substantial amount and is in part due to the membership being made up of 64 % salariat in comparison to the conservatives with only 55% of members in that band. The Labour Party website explains that "we believe that political giving is a natural part of political life, and its members certainly do that.

There is also a smaller group of donators to the Labour party though they provide a more substantial amount in relation to their size. 20% of the party income comes from donations over £1000. There is a '1000 club' being formed at the moment of 1000 donators who will give £1000 or more a year to the Labour party. Many big donations have been received. There has been a recent suggestion of an increase in cash for positions by the Labour party. Lord Sainsbury according to Andrew Rawnsley "who contributed some of his grocery millions to the party funds became Minister of Science." Also Greg Dyke who gave much money to the Labour party was made Director General of the BBC. The recent "cash for whigs" scandal came close to bringing down the Lord Chancellor.

The most damaging scandal was the Eccelstone affair and his £1 million donation which preceded an announcement that Formula One would be exempt from the ban on smoking advertising in sport. Following its discovery it was reported by the Observer that Tony Blair's "government had price-tagged its principles at £1 million." Other big money donors include the publisher Lord Hamlyn who gave £2 million to the Labour party. Another 10% of the party's income comes from commercial activities.

The Liberal Democrats have a relatively small income in comparison to the other parties, only £2.7 million in 1999. In 1997 the party received £3.8 million; £2.5 million of that was in donations and £1.3 million was in subscriptions to the party. The average income of Liberal Democrat members is higher than either Conservative or Labour but the party is limited by its small number of members.

Some parties have a single benefactor. The UK Independence party for instance was backed and run by James Goldsmith at the last election who pumped £20 million of his own money into the campaign but failed to win a single seat, in spite of spending such an enormous amount of money.

The different methods of raising funds depends on the party and their circumstances. Historical ties are having to be broken for the sake of attracting big money from elsewhere.

The Arguments for and Against States Funding of Political Parties

This country has a system of funding parties which already involves an element of state funding. The Conservative party, bearing in mind their slump in outside donations following the 1997 election has been very grateful for the reported "£3 million in state funding" according to the Chairman for Conservative Democracy. Money is also given to other minority parties in Westminster as the state wishes to see an effective opposition which will strengthen democracy in Britain.

In America there already is a substantial amount of state funding of Presidential campaigns. In the latest election only some months ago phemomenal amounts of money were being spent by the different candidates. Indeed, by the end of 1999 George W. Bush had already been given $64,784,085 by the state to fight his campaign. The overall aim of state funding has been to stop corruption in election finance. Therefore a restriction of $1000 individual donation to any campaign by each citizen was implemented and a top amount of $25,000 annually to a party. In 1996 the candidates were restricted to spending £12,000,000 on their campaigns and the two main candidates given $62,000,000 to the parties for national conventions and such other political events.

However there is the problem that their system encounters in so called "soft money" which was originally intended to fund grassroots revival drives and "get out the vote" campaigns locally. This has not always been the case sadly as it has acted as a loophole for substantial donations to parties and has been abused. In 1996 $264,000,000 was raised in "soft money" which was used essentially for campaigning. Of course, no-one in suggesting that there should be state funding would be looking at such figures as the levels of spending are no where near the same in the British political system.

Those in favour of state funding in Britain have suggested that it would have crucial, beneficial effects on the current political atmosphere and perception of politicians and their corruptibility. With state funding of parties there could be no financial scandals or issues of buying off governments with donations. The Ecclestone affair damaged the Labour party. With public funding that £1 million donation would arguably have been unnecessary and would not have caused so many problems. The current reliance on big donors would be severed and with it a substantial voter perception that politicians are corrupt.

The Guardian reported recently that the Conservative party's finances had "an atmosphere of sleaze and an odour of corruption." Not only would this mean that donors could not influence policy but also that the worry about donations being linked to honours or even contracts with the government would end naturally. Bogdanor reported that due to the Neill report's recommendation that large donations be revealed "will no doubt embarrass many donors and may have the effect of curtailing their contributions." Such a fact backs up the claim that parties can at present "be bought" by rich donors. In a democratic state this is absolutely unacceptable breach of the freedom of the parties should be subject to their sources of finance. In a liberal democracy one's freedom of expression and ideas should not be impinged upon by your financier.

This suggestion is closely linked to the fact that as funding from traditional sources goes down and yet demand for better and as Martin Linton MP explains, "more sophisticated policy research" increases we are in danger of living in a "slum democracy." Such a situation would lead to parties becoming substandard and unable to adequately run either themselves or the country. The giving of state funding would have two effects therefore. Firstly it would stop this downward slide towards poor quality parties and candidates and secondly it would demonstrate also that parties are crucial for Britain as a democratic country. The Tories will have had significant troubles recently as they have been running their campaign on the back of an overdraft and with this hanging over a party their spending on policy advice will go down as they pay off their debts simply to stop further debt. This takes the party's eye off the crucial matter of providing effective opposition to the government.

Another argument for state funding is the fact that in a country where the voting system is already stacked against minority parties it is unfair that the funding of parties mirrors this. The Liberal Democrats who at the last election had just over half as much of the vote as the Conservatives raised over 10 times less than them at the last election (£42.5m-£3.8m). Supporters of state funding argue that this is a deeply unfair democratic deficit, one of many in our system and something that should be put right. For any new parties attempting to break into the British system it is almost impossible as it is very difficult to do so without substantial funding. Of course it must be remembered that the UKIP had £20 million spent on it in 1997 and won no seats at all. This is a reminder that any money spent must be spent wisely and in conjunction with a successful style of campaigning.

A system which involves state funding is one employed in the USA and Germany by which the state will match private donations. This means that the donator in giving to their chosen party knows that their money will be partially or wholly matched by the state. The party will be encouraged to really go on funding drives and hopefully increase public awareness about politics at the same time while knowing that they will benefit from all money given which the state will match.

There are also arguments against state funding. One of the major ones is in relation to the perception of the citizen over funding parties which she or he may not actually agree with. The idea of contribution to a party with ideals that are not ones, it has been suggested, is an idea which the average voter will find unacceptable. One could hardly see many members of ethnic minorities happy about funding the campaign of the British National Party for instance!

There is also a suggestion that if one does not give to a political party one would not expect the taxes that one has paid to the state to then be given over to a party for its campaign, something that one may have little interest in. Of course it could be said that it would increase interest in politics as more people would feel that they had a vested interest in it as their taxes were going directly to fund parties. Another argument against state funding in this vein is that the state should be funding the crucial areas that have always been the focus of public expenditure and not give to parties. Bogdanor however suggests that this argument is invalid as the amount required could easily be only around "£30 million" which in relation to the rest of public expenditure is minimal.

Those who are against state funding suggest that contrary to those in favour a system of state funding could in fact make it more difficult to break in to the British political system particularly if funding was decided on the party's performance at the last election. The belief is that while the current major parties will still have significant funds the smaller ones could be squeezed out of the system.

The introduction of state funding would, it has been argued would mean that parties might no longer make such strenuous efforts to raise money at the grassroots level, depending on the system introduced. Under some systems the need for fund raising would be nullified and therefore one of the most important local party member activities would be stopped. This would discourage membership of political parties and therefore reduce the amount of political participation by normal citizens and cause the political process to become further alien to the electorate and perhaps reduce turnout further. This would also reduce the power of the members of parties as there is a sense in which, instead of being crucial to parties, they would become expendable and power would be centralised even further at the top of the party.

The vital role of MPs is to represent their constituents and the vital role of the government is to represent the nation. If money came from the state there is a danger that political parties in this country would become like European "cartel parties" which use state funding to advance their own ends and not represent the people who voted them in. even if this was not the case, it could well become the public perception of the situation and further alienate the public from the political process.

The Neill report looked in great detail at this whole issue and decided to recommend certain proposals. The committee suggested that there should be tax relief on donations of up to £500 which would encourage individual members to donate and to thus take a part in the political process outside of voting. Another recommendation of the committee was to match funds in relation to the number of party members. It should be remembered that between 1946 and 1951 the Conservatives raised their membership from 250,000 to 2.8 million and thus raised £10 million in small amounts. This would encourage parties to increase membership and get more people involved directly in the political process. However the suggestion is that parties would prefer to "concentrate their efforts on cultivating a few very rich people rather than being democratically accountable to a large number of members," suggests John Stratford, Chairman of the Campaign for Conservative Democracy. It is perhaps for this reason that Labour rejected this particular aspect of the Neill Report.

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party political funding

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