Funding of Political Parties

Question 1

what is the issue surrounding funding?

Answer 1

In the UK there is resistance to the state funding of parties

Question 2

how are MPs paid in the UK?

Answer 2

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

Question 3

how are parties funded in the UK?

Answer 3

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

Question 4

arguments for state funding of political parties

Answer 4

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

Question 5

arguments against state funding of political parties

Answer 5

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

Question 6

what have large parties been accused of?

Answer 6

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

Question 7

who is the least well funded political party?

Answer 7

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

Question 8

how are the main parties mostly funded?

Answer 8

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

Question 9

Political Parties, Elections and Referendums Act (2000): why was it passed?

Answer 9

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

Question 10

Political Parties, Elections and Referendums Act (2000): what is included in the act?

Answer 10

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

Question 11

problems with the Political Parties, Elections and Referendums Act (2000)

Answer 11

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

Question 12

Political Parties and Elections Act (2009)

Answer 12

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

Question 13

CASE STUDY: Tony Blair and the Ecclestone Affair

Answer 13

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

Question 14

why is it difficult to find agreement on reform to party funding?

Answer 14

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

Question 15

potential funding reforms: the 2007 Phillips Report

Answer 15

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

Question 16

potential funding reforms: 2015

Answer 16

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

Question 17

examples of current state funding of political parties

Answer 17

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

Question 18

state funding of parties: PDGs

Answer 18

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

Question 19

PDGs (2015-16)

Answer 19

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

Question 20

state funding of parties: short money

Answer 20

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

Question 21

state funding of parties: Cranborne money

Answer 21

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

Question 22

controversies of party funding: unequal resources

Answer 22

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

Question 23

controversies of party funding: hidden and unaccountable form of political influence

Answer 23

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

Question 24

controversies of party funding: corruption

Answer 24

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

Question 25

CASE STUDY: cash for peerages scandal (2006)

Answer 25

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

Question 26

main sources for political party funding in the UK

Answer 26

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

Question 27

Labour Party funding sources (2016)

Answer 27

Trade union donations (45% of overall funds)

Individual or company donations (22% of overall funds)

Question 28

Conservative Party funding sources (2016)

Answer 28

Individual donations (58% of overall funds)

Company donations (32% of overall funds)

Question 29

CASE STUDY: Conservative Party overspending

Answer 29

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

Question 30

the changing basis of party funding: where does most funding come from today? how was this different before the 1990s?

Answer 30

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

Question 31

the changing basis of party funding: what had an adverse impact on party finances and led to a fall in revenues?

Answer 31

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

Question 32

the changing basis of party funding: what did the rise in private donations in the 1990s lead to?

Answer 32

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

Question 33

has the reformed system of funding worked?

loans for peerages

Answer 33

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

Question 34

has the reformed system of funding worked?

private donations

Answer 34

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

Question 35

controversies surrounding the PPEA 2009

Answer 35

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

Question 36

problems with further reform to party funding: increased state funding

Answer 36

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

Question 37

problems with further reform to party funding: disagreements about further restrictions

Answer 37

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

Question 39

imbalance in party funding: where is there an imbalance? where do the main parties receive their income?

Answer 39

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

Question 40

imbalance in party funding: what is the problem for smaller parties?

Answer 40

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

Question 41

imbalance in party funding: what do these figures illustrate?

Answer 41

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

Question 42

examples of the electoral commission monitoring the income of political parties and reporting examples of large donations

Answer 42

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

Question 43

issues surrounding private donations and trade union donations

Answer 43

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

Question 44

alternative funding structures and restrictions to party funding

Answer 44

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

Question 45

problems with short money

Answer 45

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

Question 46

why is full state funding unlikely to come about any time soon?

Answer 46

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

Question 47

what is the need for state funding?

Answer 47

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

Question 48

what is the other popular policy idea?

Answer 48

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

Question 49

what will state funding end or reduce?

arguments for UK parties receiving state funding

Answer 49

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

Question 50

what are the difficulties with state funding?

arguments against UK parties receiving state funding

Answer 50

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

Question 51

imbalance in party funding: total income of parties in 2015

Answer 51

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

Question 52

examples of state funding in other countries

Answer 52

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