Tuesday, March 21, 2006

Funding political parties

State funding of political parties creates far too many difficulties for good governance to be a good idea. Such a move would leave the funding of political parties dependent upon the government and, therefore, create powerful electoral incentives for the government to change the system to skew it towards advantaging their own side. While it might lead to fewer funding scandals they would be replaced by massive cynicism each time a government attempted to fine tune the funding formula and commentators saw unsavoury motivations behind the changes. These fears won't always be irrational, the recent problems with Labour pushing postal voting too fast and risking fraud in defiance of the Electoral Commission in order to shore up its Northern vote provide an important example of the sort of trouble we don't want to see in the funding process.

Caps, as supported by ConservativeHome, are just as problematic. Last time these were floated it was a Labour response to Lord Ashcroft's financing of the Conservative party, the new Conservative enthusiasm for them can be traced to the widening of the Conservative funding base following the election of David Cameron. The level of the cap provides the ability for governments to adjust the system in their favour and, therefore, creates the problems described above for state funding.

The solution to this crisis has to be more along the lines of the ad hoc Labour response. When there are crises due to poor information in industries like financial services the best regulatory response is not to restrict the risk or return of products (a cap) or to have the state step in and nationalise (state funding). A proper role for government in situations like this is for it to ensure regular accounting standards and open information. This is a crisis caused by a lack of open information; the proper response is to let the information flow and leave the judgement on whether a party's funding is proper to the electorate.


Serf said...

Best structured argument I have read yet. I agree with every word.

As long as the loans were declared, then no harm would have been done.

Anonymous said...

Quite agree.

I have some real qualms about limits on donating to political parties. If someone has earned their money and paid their taxes, I'm not convinced that the state should step in and tell them how to spend their money.

Dave Cole said...

First off, we already fund political parties. The political parties in Westminster maintain their own offices within the Palace of Westminster and are paid to staff them. The main opposition parties receive money from the state to compensate for the massive advantage given to the governing party of the civil service.

Don't even try to say that funding political parties creates problems for good governance. We already do it and the problems we have are from non-state funding.

The best solution, IMHO, would be to cap donations to different levels of party organisation (so that at ward level you could give £x, at constituency level £y, at regional level £z and so on).

However, there is a problem in that parties are finding it difficult, even with significant donations and loans, to stay solvent. Old Queen Street is mortgaged to the Co-Op, Smith Square is mortgaged and I don't care about the LibDems.

Unless funding from private individuals and organisations is increased, particularly to local parties rather than direct to the centre, I think we will need to consider greater state funding is necessary to maintain effective political organisations.

A solution, I think, would be, beyond the money we already give, to fund political parties in relation to the amount they raise themselves as donations in a given tax year. I don't know what the ratio would be, but let's take 10:1. If Labour raises £10m in FY06/07, then the state contributes £1m. This provides an amount of money that can be varied according to the needs of the times, means that if a party is failing it can fail, if a party is growing it can grow.

Moreover, all money given to political parties - from 1p up - should be declared and a complete statement of accounts should be made available. How much is going to Alistair Campbell-alikes, how much is going to advertisers, how much comes from unions, how much comes from business, how much comes from individuals and so on.

Obviously, the national and sub-national spending caps need to be maintained.

Would you allow issue ads, as take place in the US, over here?


Matthew Sinclair said...

The funding you are talking about, which happens currently, allows for the parties to play their part in parliamentary government. Changing this to pay for their campaigns is a serious change. While the line blurs at times ignoring that line is dangerous.

The only reason the problems we currently see are from non-state funding are that this is the funding that changes elections. Maintaining Westminster offices is an important spending item for hacks like you but makes far less of a difference to who is an MP after each election and, hence, the interests of MPs.

You're overestimating the difficulties with fundraising. The Tories are doing alright now (hence Cameron's enthusiasm for large donor caps) and Labour are only in a mess thanks to their long relationship with organised labour which they have become depedent upon... they deserve all they get.

Why cap spending? Welcome to the free market. The best funded campaign of recent years (the Referendum party) fizzled and burned.