Funding of Political Parties Flashcards
what is the issue surrounding funding?
In the UK there is resistance to the state funding of parties
how are MPs paid in the UK?
MPs are paid from general taxation (the basic annual salary in April 2017 with £76,000)
They are also allowed to claim expenses to cover the costs of running an office living in Westminster and their constituency and travelling between the two
how are parties funded in the UK?
Parties are funded a little by the state but mostly by voluntary subscriptions from their members, donations and fundraising events in the MPs’ constituencies
Short money = special state provision to support the opposition in parliament
arguments for state funding of political parties
Parties play an important role in representative democracy and so deserve public funding
Public funding would remove the huge difference in financial resources available to different sized parties, Which encourages equal financial footing and reduces the huge financial advantage that large parties have, giving smaller parties chances to progress
Parties such as the Liberal Democrats could compete on an equal financial footing because funding would be based entirely on membership or electoral performance
Would encourage public participation, engagement and recruitment to parties as it is their tax that is funding them
Would reduce the corrupt influence of private bankers, private donations and wealthy individuals on party policy And the idea that influence and power can be purchased
Would allow parties and politicians to focus solely on representing their constituents rather than courting potential donors
would end possibilities of hidden forms of influence through funding, party funding would be more transparent — If parties are not funded by taxpayers they will be funded by wealthy individuals and interest groups
arguments against state funding of political parties
Could lead to calls for greater state regulation, possibly reducing parties’ independence, parties will lose some of their independence and see themselves as being controlled by the state as state funding may lead to excessive party regulations
Could isolate parties from the wishes of voters as they no longer have to rely on them for subscriptions and donations, Parties could become isolated from real-world issues if they are not allowed to be funded or accessed by interest groups they could also become isolated from voters wishes as they are no longer reliant on their funding
There should not be more burden placed on the taxpayer, which is a reason why the 2007 report on funding reform failed and action was not taken
Taxpayers should not be expected to fund and bankroll parties that they oppose
Parties will still have unequal resources, Even if state funding is introduced because state funding will be based on membership past electoral performance et cetera And there will always be differences in membership levels And human and material resources
Will be difficult to know how to distribute funding — based on past performance which would retain the large party advantages or based on future aspirations which is vague and uncertain, there is also the issue of how much membership a party would need to qualify for funding
what have large parties been accused of?
Large parties have been accused of offering political honours such as a place in the House of Lords to their most generous benefactors
Funding is a controversial area due to suspicions that powerful people offering financial support can gain political influence in return
Decreases democracy and openness
Example = Tony Blair and the Ecclestone affair
who is the least well funded political party?
The Liberal Democrats are the least well funded party of the three main parties
And often criticise their opponents for being bankrolled by the wealthy
how are the main parties mostly funded?
Conservatives are mainly funded by businesses and corporations
Labour is mainly funded by trade unions
However during the new Labour years this was to some extent replaced by donations from wealthy individuals as labour became friendlier to the business community
Political Parties, Elections and Referendums Act (2000): why was it passed?
Passed by the Blair government to overcome the idea that party funding had become undemocratic
Aimed to regulate the funding of parties And sought to make parties less reliant on wealthy individual backers
However it did not put the funding issue to rest — the cash for peerages scandal (2006) in which several wealthy individuals who had loaned money to labour had been nominated for honours
Political Parties, Elections and Referendums Act (2000): what is included in the act?
The amount that a party could spend In general election campaigns was capped at £30,000 per constituency
People not on the UK electoral roll can no longer make donations, thus reducing foreign influence
all Donations over £5000 nationally or £1000 to a constituency party must be declared To the electoral commission
Donations over £7500 must be placed on an electoral register
Parties have to publish details of donations regularly (To increase transparency)
An independent electoral commission set up to supervise party spending on election campaigns — E.g. the Conservatives have been in trouble for overspending before
problems with the Political Parties, Elections and Referendums Act (2000)
It stressed transparency rather than any serious limits on the amounts being donated
State funding was rejected as a solution at the time and election spending controls were still extremely generous
Political Parties and Elections Act (2009)
Built upon the regulations established in the political parties elections and referendums act 2000
Imposed tighter regulations on spending by candidates in elections
Allowed the electoral commission to investigate cases and impose fines
Further restrictions on donations from non-UK residents
Reduced the thresholds for the declaration of donations
CASE STUDY: Tony Blair and the Ecclestone Affair
Within months of becoming prime minister in 1997 Blair faced criticism after Bernie Ecclestone the chief executive of Formula One donated £1 million to labour
There was then a delay in implementing a ban on tobacco advertising in Formula One, allegedly this was linked to the donation
It made it seem that influence over policy could be purchased and that large donations would be rewarded with favourable legislation
Blair was forced to justify himself in an interview and the money was later returned
why is it difficult to find agreement on reform to party funding?
It is very difficult to find agreement on reform to party funding because all parties are funded very differently
Difficult to find agreement on party funding as they all receive funding from various different areas so it’s hard to regulate everything fairly
As seen in the 2015 reforms to funding proposals
potential funding reforms: the 2007 Phillips Report
A report titled ‘Strengthening Democracy’ by a former civil servant named Sir Hayden Phillips proposed moving towards a system where parties are funded from taxpayers’ money
Concluded that one way forward might be greater state funding for UK political parties perhaps through some form of ‘pence per voter’ or ‘pence per member’ funding formula
Attempted to address the problem of private donations but no government has acted upon this report
Pressure to make public spending cuts under the coalition government meant it was not an appropriate time to place additional burden on the taxpayer
potential funding reforms: 2015
A suggestion supported by Labour and the Lib Dems was to impose limits on individual donations to parties
This was complicated as the Conservatives would be placed at a disadvantage and would lose the most as they are mostly funded by private donations so they proposed placing restrictions on trade union donations too
The 2016 trade union act obliges new trade union members to choose whether to opt in to making payments towards the political levy — Expected to result in a drop in funding received by Labour from the unions
examples of current state funding of political parties
there is already some state funding of parties in the UK…
- PDGs
- Short money
- Cranborne money
Parties also receive subsidies in respect of the television broadcasts and help with the postage costs during election campaigns
state funding of parties: PDGs
Policy Development Grants (PDGs) from the electoral commission can be used to hire policy advisors
£2 million is available for this purpose every year
Established under section 12 of the PPERA
Available not only to the main opposition parties But also to any party that has two or more sitting MPs taking the oath of allegiance
PDGs (2015-16)
Conservatives, Labour, LibDems and UKIP— Just over £359,000 each
Democratic Unionist party — just over £137,000
SNP — Just over £153,000
Plaid Cymru — Just over £132,000
state funding of parties: short money
Funds distributed to opposition parties to fund their Parliamentary work And administrative costs in order to improve democracy and political funding equality As well as provide for proper scrutiny of the government
Available to all opposition parties that win at least two seats OR a single seat while also securing over 150,000 votes nationally at a general election
Depends on how many seats and votes the party won at the previous election
In 2014 to 15 the Labour Party received over £6.6 million in short money which included over £700,000 to support the work of the leader of the opposition
state funding of parties: Cranborne money
Funds paid to opposition parties in the House of Lords to fund their Parliamentary work and Administrative costs and thereby provide for proper scrutiny of the government
In 2014 to 15 the Labour Party received over £550,000 in Cranborne money
controversies of party funding: unequal resources
major parties have a huge advantage and small parties are put at a huge disadvantage
current party funding promotes political inequality as large parties have access to more financial resources and so smaller parties don’t have an equal chance to progress
controversies of party funding: hidden and unaccountable form of political influence
Funding by large donors represents a hidden and unaccountable form of political influence
Parties are not allowed to change specific policies or propose legislation as a direct result of donations but…
Donors expect some kind of political return for their investment and this leads to the idea that political power and influence can be purchased
This might be true of trade unions and the Labour Party and business interests and the Conservatives
controversies of party funding: corruption
Funding can be corrupt And many aspects of funding may well verge on being corrupt
Donors sometimes receive honours from party leaders, such as peerages or knighthoods, in return for their generosity — This is known as ’cash for honours’
This also reinforces the idea that influence and power can be bought
example = cash for peerages scandal (2006)
it is difficult to prove But the suspicions are strong
The steady decline of party memberships has meant that parties are even more reliant upon donors which further opens up the possibility of corruption and the purchasing of political influence
CASE STUDY: cash for peerages scandal (2006)
Several wealthy individuals who had loaned money to the Labour Party had been nominated for honours
Escaped via a loophole as the law only regulated gifts not loans
Blair was interviewed by the police but no charges were brought although it did cast a shadow over his last months in office
It was later decided that loans would be subject to the same rules as donations and spending limits were revised in the run-up to the 2010 election
main sources for political party funding in the UK
Membership subscriptions
Fundraising events (festivals, dinners, conferences etc)
Donations from supporters
Loans from banks or wealthy individuals
Self financing by candidates
State funding — PDGs from the Electoral commission of up to £2 million per party, short money and Cranborne money
Labour Party funding sources (2016)
Trade union donations (45% of overall funds)
Individual or company donations (22% of overall funds)
Conservative Party funding sources (2016)
Individual donations (58% of overall funds)
Company donations (32% of overall funds)
CASE STUDY: Conservative Party overspending
the electoral commission found significant failures in election spending by the Conservatives and fined them £70,000 for overspending
They did not declare or accurately report more than £275,000 of campaign spending at three by-elections in 2014 and the 2015 general election
the changing basis of party funding: where does most funding come from today? how was this different before the 1990s?
Most political parties receive income in the form of membership subscriptions
However until the 1990s most of the 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
the changing basis of party funding: what had an adverse impact on party finances and led to a fall in revenues?
The decline of UK political parties as mass member organisations in the 1980s and 1990s had an adverse impact on party finances
Efforts to reduce the influence of trade unions within the Labour Party under Neil Kinnock John Smith and Tony Blair also resulted in falling revenues
Such developments lead parties to seek donations from wealthy individuals such as Bernie Ecclestone and Lord Sainsbury for labour and Sir Paul Getty and Stuart Wheeler for the Conservatives
the changing basis of party funding: what did the rise in private donations in the 1990s lead to?
The rise of large individual donations to political parties in the 1990s led to the perception that access or political influence could be bought
e.g. the Bernie Ecclestone affair
Such controversy inevitably leads to calls for regulation
has the reformed system of funding worked?
loans for peerages
Although the new regulations have made party funding more transparent there have been significant problems
like the attempts by parties to circumvent regulations of donations by encouraging supporters to offer the party long-term low interest ‘loans’ instead
It was this tactic and the inducement supposedly offered to secure such lines of credit that gave rise to the loans/cash for peerages scandal during labours time in office from 1997 to 2010
Although the police investigation into the scandal ultimately ended without any prosecutions the issue of party funding is still controversial as seen in the efforts to address the status of donors not registered as UK taxpayers under the PPEA 2009
has the reformed system of funding worked?
private donations
The main UK political parties still receive considerable sums in the form of donations at key points in the electoral cycle
It is also clear that the wealthy individual packages that the PPERA Sought to identify have not been put off by the prospect of losing their anonymity
Although the scale of donations to the main parties is obviously greatly reduced when there is no general election in prospect, the sums flowing into the parties coffers in such years are significant nonetheless
For example donations to UK parties in the first quarter of 2016 — All the parties combined received 568 donations totalling over £14 million with roughly £6 million of that going towards the Conservative party and £5 million towards labour
controversies surrounding the PPEA 2009
Many considered this measure to be aimed squarely at individuals such as the long-term Conservative party back up and party deputy chairman Lord Ashcroft whose tax status provoke debate and controversy until 2010 when he finally revealed that he did not pay UK tax on his overseas earnings
It is telling that even in 2015 when the Labour Party’s membership enjoyed an unprecedented upsurge, membership fees only accounted for 19% of the parties overall annual income
problems with further reform to party funding: increased state funding
While all parties appear to accept that big money in the form of donations should be removed from politics, few believe the voters enduring an extended period of austerity could easily be convinced of the need for greater state funding of political parties at taxpayers’ expense
problems with further reform to party funding: disagreements about further restrictions
While the Labour Party would be happy to impose tougher restrictions on individual donations, the Conservatives would only accept such an overt attack on their own income streams if similar restrictions were placed on labours trade union backers
So as labour is unwilling to lose trade union funding, they may shy away from pushing for further regulations on the funding received by the Conservative Party (individual donations)
Therefore further reform of party funding appears to have arrived at a natural impasse
imbalance in party funding: where is there an imbalance? where do the main parties receive their income?
It is immediately apparent that the larger parties have better access to funds than their smaller counterparts
While the Conservative party attract large donations from wealthy individuals and business companies labour receives generous contributions from trade unions
This amounted to about £11 million in 2014 to 15 which was nearly 60% of the parties total income — However this figure may well fall because the rules for union donations are changing essentially making it easier for individual union members to opt out of contributing to the party
imbalance in party funding: what is the problem for smaller parties?
Smaller parties have no such regular sources of income And much smaller memberships which is a disadvantage to them
Donors are less likely to give money to parties whose prospects of ever being in power are remote
those donors who do give to small parties are essentially acting out of idealism rather than any prospects of gaining influence
However this Further restricts the ability and prospects of smaller parties ever gaining significant influence in the House of Commons because they lack the funding to conduct high-profile campaigns and gain significant electoral support in the same way that the main parties can
imbalance in party funding: what do these figures illustrate?
These figures illustrate immediately the first issue that funding is hugely biased towards the two biggest parties
Smaller parties are also disadvantaged by the UK electoral system used at general elections meaning that this funding shortfall represents a double problem
The major parties are put at a huge advantage and conversely small parties are put at a great disadvantage especially when it comes to fighting elections
Current party funding therefore promotes political inequality
examples of the electoral commission monitoring the income of political parties and reporting examples of large donations
The electoral commission monitors the income of political parties in the UK and has reported examples of large donations to parties
Between 2015 and 2017 the Conservative party received over £11 million from prominent figures and companies in the financial sector
In the same period the Conservatives received £3.6 million from property companies
hedge fund proprietor Angus Fraser also donated over £1 million to the Conservative party
The Unite trade union gave over £600,000 to the Labour Party in early 2017 And UNISON the public service union donated over £300,000 to labour
issues surrounding private donations and trade union donations
Individual donations are not only seen as undemocratic forms of influence but often carry some other kind of controversy
Similarly trade union donations to Labour have been criticised on the grounds that members of unions are not given a clear enough choice as to whether their subscriptions should be sent in that way
It is also said that labour is unduly influenced by union leaders because so much of their income comes from them
alternative funding structures and restrictions to party funding
Most commentators and many politicians agree that the way in which parties are funded in the UK is undemocratic and is in need of reform
Although the problem is that there is no agreement about what to do but there are four basic types of solution
1) Impose restrictions on the size of individual donations to parties — This is broadly the system used in the USA, to be effective the cap would have to be relatively low
2) Impose tight restrictions on how parties are allowed to spend — This would make large-scale fundraising futile
3) Restrict donations to individuals — I.e. outlaw donations from businesses pressure groups and trade unions
4) Replace all funding with state grants for parties paid for out of general taxation — State funding remains the only solution that could create more equality in the system
problems with short money
Sure money is heavily biased towards large parties because it depends upon how many seats parties have won at previous elections
Since 2015 the Labour Party receives nearly £7 million in short money per year while the next biggest grant goes to the SNP with £1.2 million
UKIP refused over half £1 million in short money after winning 1 seat in 2015 as it suggested it was corrupt and designed to favour established parties
why is full state funding unlikely to come about any time soon?
Several political parties favour state funding Including both the Labour and Liberal Democrat parties
although neither have actually made firm proposals and there is little public appetite for it
Taxpayers are naturally reluctant to see their taxes being used to finance parties at a time when attitudes towards parties and politicians are at a low, Especially following the MPs expenses scandal
The problem has been a lack of political will and a fear that public opinion will not accept it
what is the need for state funding?
State funding remains the only solution that could create more equality in the system
As long as funding is determined by market forces it is likely that the large parties will be placed at a significant advantage
what is the other popular policy idea?
The other popular policy idea is to eliminate the abuses in the system
This involves full transparency limits on how much business and union donors can give and a breaking of any link between donations and the granting of honours
Action may well centre on a deal between Labour and Conservative in which Labour might sacrifice some of its trade union funding in return for caps on Business Donations
what will state funding end or reduce?
arguments for UK parties receiving state funding
State funding will end the opportunities for the corrupt use of donations and and the possibilities of hidden forms of influence through funding
It will reduce the huge financial advantage that large parties enjoy and give small parties the opportunity to make progress
It will improve democracy by ensuring wider participation from groups that have no ready source of funds
what are the difficulties with state funding?
arguments against UK parties receiving state funding
Taxpayers may object to funding what can be considered to be private organisations
It will be difficult to know how to distribute funding whether it should be based on past performance in which large parties will retain their advantage or on the basis of future aspirations which is vague
Parties may lose some of their independence and will see themselves as organs of the state and state funding may lead to excessive state regulation of parties
imbalance in party funding: total income of parties in 2015
total Income of parties reported in 2015
Labour £51.2 million
Conservatives £41.9 million
Liberal Democrats less than £10 million
SNP £6 million
UKIP £5.8 million
Green party £3 million
Plaid Cymru £700,000
examples of state funding in other countries
Of the 15 old EU states the UK stands alone with Luxembourg and not providing significant funding defined as more than 25% to political parties from state resources
Swedish political parties entered into a voluntary agreement in the 1970s to stop excepting private donations And public funding was introduced to allow parties to focus on long-term planning without being dependent on other contributions
Canada introduced state funding for parties so that a ban on company don’t nations could be introduced
A set amount for each vote means that small parties in Canada such as the Green party, which in a majoritarian electoral system has struggled to get its first seat in parliament, have still received $1.9 million reflecting their increasing level of popular support
In Germany state funds are distributed so they match funding for membership subscriptions this increases the incentive for parties to reach out and engage with citizens to gain more members and therefore more funding
