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Last updated 22 Mar 2021
Most political parties receive income in the form of membership subscriptions. However, until the 1990s the lion’s share of Labour party funding came from fees paid by trade unions and other affiliated organisations, while the Conservative Party was said to be bankrolled by wealthy business interests.
Party finances have been adversely affected by the decline of political parties as mass-member organisations. The efforts by Neil Kinnock, John Smith and Tony Blair to reduce the influence of trade unions on the Labour Party also resulted in falling revenues. These developments led parties to court donations from wealthy individuals such as Bernie Ecclestone and Lord Sainsbury (Labour) and Sir Paul Getty and Stuart Wheeler (Conservatives – although Wheeler now funds UKIP).
The rise of large individual donations to political parties since the 1990s has led to the perception that one might be able to buy access or political influence – in much the same way that Mohamed Al Fayed claimed to have done with individual Conservative MPs such as Neil Hamilton in the closing years of John Major’s time in office. For example, some felt that Bernie Ecclestone’s £1 million donation to the Labour Party in 1997 may have resulted in the subsequent delay in the introduction in the ban on tobacco advertising in Formula 1 motor racing. This led to calls for regulation.
Attempts to regulate party funding included the 2000Political Parties, Elections and Referendum Act (PPERA) (2000), which put an overall limit on party spending in general election campaigns and required parties to declare all donations over £5,000 to the Electoral commission. The Political Parties and Elections Act (PPEA) built on this by giving the electoral commissions more powers for investigation and limiting donations over £7,500 to those who could prove they were UK residents for tax purposes.
Sir Hayden Phillps wrote a report in 2007 called Strengthening Democracy: Fair and Sustainable Funding of Political Parties (2007). It concluded that one way forward might be greater state funding for UK political parties – perhaps on a ‘pence-per-voter’ or ‘pence-per-member’ funding formula.
Arguments for state funding include that if parties were not funded by taxpayers, they would be funded by special interest groups. Also, State funding would allow politicians to focus on representing their constituents. Finally, it would also mean that parties such as the Liberal Democrats could finally compete on an equal financial footing
Arguments against state funding include the question of why should taxpayers bankroll parties that they may not support? Also, politicians could become isolated. It is good that interest groups are at the heart of government. There is also the acceptance parties will always have unequal resources, even if finances are tinkered with in this way.
Political parties do actually receive state funding anyway: This is particularly true of opposition parties, who receive funding in both the Commons and the Lords to help them fulfil their obligations as opposition to the Government.