The Review of the Funding of Political Parties
From Democracywiki
Central Lobby
In March 2006, in the aftermath of the cash for peerages scandal the Prime Minister asked Sir Hayden Phillips, a former civil servant, to conduct a review of the funding of political parties.
In particular:
- To examine the case for state funding of political parties including whether it should be enhanced in return for a cap on the size of donations;
- To consider the transparency of political parties' funding;
- And; to report to the Government by the end of December 2006 with recommendations for any changes in the current arrangements.
Sir Hayden Phillips will work closely with stakeholders including, especially, the political parties and the Electoral Commission. He has been asked to aim to produce recommendations which are as much as possible agreed between the political parties with a view to legislation as soon as Parliamentary time allows.
Statement from Sir Hayden
Commenting on the Prime Minister's comments on party funding, Sir Hayden Phillips said:
Reform of the party funding system is essential to maintain public trust in our democratic system. Yet it is vital that change is made in a way that does not seek to bring advantage to one particular party at the expense of another. That is why I worked hard to assist in creating a cross-party agreement on future reform.
The proposals I put to the three main parties in late August and published in late October were the result of many months of discussions with the parties themselves and four meetings of the inter-party talks process in the summer. They also reflected the recommendations I set out in March this year in a report welcomed by all the parties.
Yet while cross-party agreement on my proposals proved not to be possible, my view remains that, taken as a whole, they are both fair and balanced, and represent a significant improvement on the present situation.
I therefore welcome the Prime Minister's description of the proposals as a comprehensive framework for reform and I hope that they will stimulate an informed debate in the wider public interest. I remain hopeful that all the parties can come together behind the proposals.
Draft proposals published
When the inter-party talks broke down Sir Hayden published the draft proposals that were put to the parties in August.
Introduction
This new approach aims to restore public trust in the probity of party finances by setting a limit on the amount which any individual or organisation can donate to a political party. To enable political parties to continue to operate effectively under these new restrictions, there will also be new controls to limit the spending of political parties, and the possibility of additional public funding related to their success in collecting small donations and winning the support of voters at elections.
With the exception of the spending controls, the proposals are only intended to apply in the first instance to parties registered in Great Britain. The application and full extension of any agreement to Northern Ireland will be the subject of separate discussions between the Government and the Northern Ireland parties. Proposals for the funding of political parties
Donations
A1 There shall be a cap on donations and loans to all political parties that reach the threshold specified at A2.
A2 The cap shall apply to all parties registered in Great Britain with two or more elected representatives to Parliament, the Scottish Parliament, the National Assembly for Wales and the European Parliament. It shall apply to the party, its accounting units, and regulated donees.
A3 The final level of the cap will be £50,000.
A4 Commercial loans will be exempt from the cap provided they are made and declared in accordance with existing applicable law.
A5 Any amount donated over the limit will have to be returned to the donor, or forfeited if this is not possible.
A6 Affiliation fees paid by trade unions will be treated for the purposes of the cap as individual donations of the members, provided the conditions at A7-A10 are all met.
A7 The amounts paid by individuals into a union’s political fund as their contribution to the union’s affiliation fee, and the money paid by that union to a political party as its affiliation fee will be the same. This one-for-one link will be transparent and auditable.
A8 The following information will be provided on all union membership application forms:
- an explanation of what the political fund is and the union’s affiliation to a political party;
- an explanation of how much individual members contribute to the political fund and towards the union’s affiliation fee;
- an explanation of the trade union member’s right at any time to stop contributing to the political fund and the union’s affiliation fee and clear information about how they can do this; and
- an explanation of the fact that if a member stops contributing, their membership subscription will be reduced accordingly.
A9 Trade union members will be reminded annually of the amount they are contributing to the union’s affiliation fee and of their right to opt out of contributing to the political fund, including how they may do so.
A10 The requirements of transparency and choice set out here will be overseen by the Certification Officer acting in concert with the Electoral Commission, which will have the power to order affiliation fees to be repaid if they are not compliant with the requirements.
A11 Due to the increased transparency and choice for trade union members the ten-year review ballot on the existence of the political fund is no longer necessary and should be removed.
Spending controls
B1 All registered political parties will be subject to the spending controls.
B2 Spending controls will apply to the whole of a Westminster electoral cycle. The maximum limit for a full cycle will comprise a five-year running costs figure and a general election premium. In calculating the limit for parliaments which run for less than the maximum permitted cycle of 61 months, the running costs figure will be adjusted by the relevant fraction of 61 months depending on the actual life of the parliament, and the general election premium will be added back to calculate the enforceable limit.
B3 A single overall limit will apply to the expenditure of each party, including all its constituent organisations whether national, regional, local or other. It will be a matter for the party itself to decide how to disaggregate its spending within the overall limit between the years of the parliament and among the various organisations in the party.
B4 The expenditure of accounting units (equivalent to or larger than a Westminster constituency) with expenditure less than £40,000 (after transitional arrangements) in any given year will not count in that year towards the overall limit.
B5 Spending controls will cover all of a party’s spending except certain defined categories:
- contributions to party employees’ pension funds to make up for past shortfalls;
- interest on debt and repayments of debt;
- legal expenses;
- costs of compliance with electoral law;
- expenditure on trading activities and income generation;
- accounting units’ expenditure on social functions for members of the party, and intra-party transfers.
B6 Expenditure which under accounting standards would be classified as capital expenditure will be depreciated as usual in party accounts in accordance with accounting policies and with an appropriate asset life; only the depreciation figure would count towards the limit.
B7 The limit will be £150m for the full term of the next Parliament, including a general election premium of £20m.
B8 The limit will be the same for all parties putting forward candidates in at least 90% of constituencies at the general election at the end of the cycle. The limit would fall pro rata, in steps of 10%, for parties fielding fewer or no candidates, with a floor (to allow for fixed costs and to avoid over-regulation of smaller parties) set at 10% of the total limit.
B9 Existing controls on candidate spending under the Representation of the People Acts will continue, and will be tightened so as to bring the costs of direct mail targeted at a constituency and an apportionment of the costs of phone bank activity targeted at a constituency within the scope of reportable spending.
B10 The current limit for by-elections of £100,000 should be maintained.
Public funding
C1 Two new schemes for public funding of political parties will be introduced:
- A scheme designed to encourage parties to engage the active participation of the
electorate based on a form of matched funding; and
- A scheme based on public support, pence-per-vote, primarily designed to help provide
for financial stability following the introduction of a cap on donations.
C2 Only parties subject to the cap on donations will be eligible for these public funding schemes.
C3 A matched funding scheme will enable parties to receive £10 of public funding for each donation of £10 or more that they secure from any one person on the electoral register in any one year.
C4 The amount of money that can be paid out through this scheme will initially be capped at the equivalent of donations from 1 million individuals, that is, £10 million.
C5 The matched funding scheme will be primarily internet-based, with a paper-based alternative. Parties will set up their own internet schemes, adapting their current systems if they so wish. The Electoral Commission will be responsible for auditing the scheme and the release of money to the parties.
C6 Under the pence-per-vote scheme, parties will receive 40p each year for every vote cast for them in the most recent general election, and 20p for every vote cast for them in the most recent elections for the Scottish Parliament, National Assembly of Wales, and for the European Parliament. As voters in Scotland and Wales have two votes at the elections for their devolved administrations, one for a constituency representative and one for a regional representative, the parties will receive 10p per vote regardless of whether it is a vote for a constituency representative or a list representative, equivalent to 20p per voter.
C7 The Policy Development Grants currently received by the political parties will be abolished.
C8 Public funding will also be made available on a once-off basis to parties to assist them in meeting the costs of compliance with the new regulations. This funding will be distributed by the Electoral Commission following the precedent set in PPERA 2000, and will not exceed £1.5m in total.
Compliance
General
D1 The Electoral Commission should move towards a more investigative and tougher stance with the aim of ensuring integrity and public confidence in the system of party funding, and should take a pro-active approach to the investigation of apparent non-compliance.
D2 Legislation should where necessary provide the framework, including a graduated system of sanctions, for the Electoral Commission to become a more effective regulator.
D3 The Electoral Commission should issue advisory opinions where appropriate, and should seek to work with the parties at both national and local level to facilitate compliance with the law.
D4 Further anti-avoidance provisions should be developed in the course of the preparation of the legislation, and the Electoral Commission should regularly review their adequacy.
Donations
D5 Political parties subject to the cap on donations should be legally liable if they knowingly accept multiple donations from a single source exceeding the cap, whether in cash or in kind.
D6 The cap on donations will also apply to donations to or from regulated donees. It will be assumed under a principle of “safe harbour” that the national treasurer has accepted information about donation from regulated donees in good faith.
D7 The cap on donations will also apply to donations to third parties.
D8 Unincorporated associations donating to political parties should be required to identify the persons who make the decisions to donate money.
D9 The Electoral Commission’s donor database should ensure that donors are registered consistently and should include the total amount a donor gave to third parties or to political parties so that the donor’s total financial influence may be judged.
Spending
D10 There will be a general duty on the parties not to avoid the spending limit, and the Electoral Commission will have investigatory powers to audit compliance, identify avoidance of the provisions specified in the statute, and order expenditure returns to be restated if necessary.
D11 Annual accounts will continue to be filed with the Electoral Commission as they are now, and an additional annual return will be made reporting expenditure against the limit.
D12 The national registered treasurer will be responsible for compliance with the limit, and for ensuring that the central party has appropriate systems in place to monitor overall party spending, but it will be assumed under a principle of “safe harbour” that the national treasurer has accepted accounting units’ statements of accounts in good faith.
D13 A system of graduated penalties will be available, with the Electoral Commission required to ignore non-material breaches, and to discriminate on a range from self-declared inadvertent errors to large-scale or systematic evasion. The normal sanctions for errors, mis-declarations and small-scale or opportunistic avoidance would be financial penalties levied on the national party, which would then be free to determine whether it paid the penalties from central funds or passed them onto the accounting unit(s) responsible for the breach.
Criminal sanctions would be available for serious evasion and charges would have to be brought against the individual actually committing the offence.
Transitional arrangements and review
E1 The cap on donations will be reduced to £50,000 over a period of time to give the parties time to adjust to the new system. The cap will be set at £500,000 in 2009, £250,000 in 2010, £100,000 in 2011, and reduced to its final level of £50,000 from 1 January 2012. These dates are obviously subject to the Parliamentary timetable.
E2 The introduction of changes to the treatment of trade union affiliation fees will be phased in over time. Transitional arrangements will be developed in consultation with the trade unions and the regulatory authorities, with a view to implementing the changes as quickly as possible and in no event later than 1 January 2012.
E3 Spending controls will be introduced the day after the next general election, or from 1 January 2010, whichever is the later. The parties have agreed to continue discussions with a view to agreeing some measure of voluntary restraint on expenditure before the next election.
E4 To allow the accounting units and the central parties time to adapt and put in place the necessary systems and processes, the threshold of accounting unit expenditure above which it is counted against the overall party limit (see B4) will be set at £100,000 in its first year or part-year, then reduced in equal increments so as to reach its final level of £40,000 in 2012. E5 The matched funding scheme will be introduced on 1 January 2009, at the same time as the initial cap on donations.
E6 The pence-per-vote scheme will be introduced on 1 January 2012, when the cap has been reduced to its final level. Policy Development Grants will end at the same time.
E7 The Electoral Commission will report annually on progress with the implementation of the system introduced by the Act which brings this agreement into force. The effectiveness of the system will be reviewed in all its aspects, including its regulation, by a comprehensive independent review in seven years’ time reporting to all parties affected.
This review will specifically consider whether the candidate limits imposed by the Representation of the People Act continue to serve a useful purpose in the context of the new system of spending controls.
Inter-party talks suspended
 Our View Following Sir Hayden Phillips’ announcement that the cross-party talks on party funding which he has been chairing have been suspended, the Director of Unlock Democracy Peter Facey said: “If the parties cannot now reach agreement, there will be terrible long term consequences for the reputation and state of British politics. “We should be clear: the collapse of these talks will not mean an end to increases in public funding of political parties. Since Sir Hayden began work on this project, MPs voted themselves an additional £10,000 annual Communications Allowance. What they will mean is that grassroots politics will continue to decline and national politics will continue to be dominated by relatively few ’sugar daddies’. “On trade union donations, it is hard to see what the Conservatives object to in Sir Hayden’s draft proposals - the rules clearly state that donations from trade unions will only be exempt from the cap if they can be clearly linked to an individual and subject to an audit trail. The Conservative objection appears to rest on the idea that trade unionists should be capped more heavily than rich businessmen, which is manifestly not equitable. “While we do not agree with all the proposals, and in particular are disappointed by the lack of increased spending limits, we recognise Sir Hayden’s draft proposals as a sincere attempt to build cross-party agreement on a difficult issue. We call on the government to publish these proposals as a Bill and give Parliament a free vote on the matter. “By pulling out of these talks following the collapse of the police investigation into the alleged abuse of the honours system earlier this year, the message of the major parties to the public is clear: it is business as usual. This can only lead to greater cynicism and alienation from the political system. So much for Cameron’s and Brown’s competing claims to embody ‘new politics’. It is time for Parliament to try and get them out of this mess.” |
Talks between the three main political parties on measures to reform political party funding have been suspended, Sir Hayden Phillips, the Chairman of the Talks, announced on 30th October.
In announcing the suspension of the talks Sir Hayden said:
"The issue of how political parties are funded is one of considerable public importance, not just in terms of probity and propriety, but also in terms of helping to restore trust and confidence in the wider political system.
"In my report on party funding published in late March I set out the principles upon which I believed an agreement on future reform could be reached.
"On this basis, the three main parties agreed to enter into direct discussions with each other. These inter-party talks began in May under my chairmanship and there were four meetings held through the summer. In my view good progress was made.
"I said at the outset of these talks that I believed that a consensus between the parties on future reform was both desirable and possible. Yet despite progress on a number of issues, it became clear at the fifth session of talks held today that the parties would not be able to arrive at an agreement on an overall package of reform at present.
"I am now publishing the draft agreement that I put to the parties in late August. I hope that this will inform the current public debate.
"I wish to place on record my thanks to all of those who have assisted me in my work on party funding.
"I remain convinced that an agreement to reform party funding would be in the general public interest, and I hope that all possible efforts will be made to achieve some consensus on a comprehensive package of reform."
Inter-party talks start
Talks between the three main political parties to reach agreement on measures to reform political party funding begin on 15th May 2007 under the chairmanship of Sir Hayden Phillips.
The inter-party talks are being undertaken to resolve the outstanding issues from the Review of the Funding of Political Parties published by Sir Hayden in March. The process is scheduled to run until the end of June.
The party delegations will be led by
- Conservative Party: Francis Maude MP
- Labour Party: Jack Straw MP
- Liberal Democrat Party: David Heath MP
In announcing the start of the talks, Sir Hayden said:
In my report, "Strengthening Democracy: Fair and Sustainable Funding of Political Parties", I explained that the main parties are in broad agreement on a number of issues but had not yet reached agreement on two in particular - the nature of a cap on donations, and spending limits. I believed then that an agreement could be reached on these issues through direct talks between the parties.
I was therefore encouraged that in responding to my report the three main parties agreed to talk to each other in order to resolve the outstanding issues. Today's talks are the start of this new process.
Reaching agreement will, however, depend on the willingness of the parties to engage constructively with each other in order to find a common outcome. That will take some determination, and some compromise on all sides. But I do believe and I believe the parties share this view themselves that the prize of an agreed system of how political parties should be funded is both in their individual interests and in the wider interests of our democratic system.
I do not underestimate the task ahead. But there is a unique opportunity at this time, and I hope the parties seize it. I have committed to make myself available until then to do all I can to facilitate the process.
I am, of course, conscious that this process will involve only the three main parties represented in Westminster. I believe that this is the only practical way of reaching agreement on this issue. Yet I will remain in contact with the other parties and, where appropriate, seek their views on particular issues.
Review Publishes Report
Our View We welcome the proposals set out by Sir Hayden Phillips. Sir Hayden has struck a delicate balance, accepting the case for increased public funding for parties, but only as part of a package which includes increased restrictions on spending and donations. The details must now be thrashed out. Parties should resist the temptation to cherry pick from these proposals, or to abandon cross-party talks. Unlock Democracy and the Joseph Rowntree Reform Trust Ltd has published polling figures, suggesting that the public is open to persuasion on increased public funding of political parties, but only if a full package of measures is introduced, including caps on political donations and further restrictions on party expenditure. The poll, conducted by ICM, found that 50% agreed with the proposal that "to clean up British politics, political parties should agree to limits on the size of donations they can receive and the amount they can spend. In return they would receive limited support from public funds to help them pay their part in the political process. It is estimated that the annual cost of this would be the equivalent of £1 for each taxpayer." 42% disagreed. 67% agreed that "there should be limits on how much people and organisations can donate to parties," and 55% wanted the amount that political parties can spend nationally in a General Election campaign to be reduced. In terms of how the parties should thrash out the fine details of the Hayden Phillips proposals, the poll issues a clear warning to the Government. The public favours a cross-party approach by 6-1. If the Government were to push ahead with its own reforms, particularly if it omitted any part of Sir Hayden's more popular proposals such as caps on donations, the public would almost certainly be hostile to that approach. One thing is guaranteed: if this report ends up merely gathering dust on a shelf, we will be going through this all over again in 5 to 10 years time. |
The report explores where consensus has been reached between the parties and outlines the issues that will form the basis of the cross party talks. These are: limits on donations, limits on spending, changes in public funding of political parties and changes to the regulatory body.
Limits on donations
There is agreement between the parties that a cap on individual donations should be introduced (only one party consulted did not agree – UKIP) but the level and scope of these caps need to be discussed by direct talks between the parties. The report concludes that:
- The history, traditions and structure of the individual parties need to be taken into account when discussing caps on donations.
- New parties and those without elected representatives should not come within the scope of the donations limit until they secure a minimum of two representatives to the European parliament or Westminster, or to a devolved assembly or parliament.
- Parties should become legally liable if they knowingly accept multiple donations from a single source.
- The recommendations in this report also need to be applied to third party organisations who are involved with the political parties, and the ban on political advertising on TV and radio by third parties must remain.
Limits on spending
Sir Hayden acknowledges that a vigorous election is good for democracy and that we should not expect it to be cheap, but he argues that there needs to be a mechanism which helps to level the playing field to some extent. In the 2005 general election, the spending war between the Labour party and the Conservatives led to their combined expenditure rising to £90 million (as against £65 million in the 2001 election) which was beyond the reach of any other party. The report says that:
- The period over which spending should be limited is contentious and difficult to decide upon. Campaigning is an ongoing activity for political parties and elections are called on variable dates so it is difficult to place a cap on spending 365 days before an election is called when the parties involved do not know when the election will be.
- Putting a continuous cap on the expenditure of political parties should be looked at as an option.
- Both the Labour Party and the Conservatives should cut their spending by £20 million over the life of the next parliament.
- The geographical scope of spending limits needs to be discussed. Currently limits on campaign expenditure only cover national campaigns and although there is regulation on candidate spending, these only come into force after parliament has been dissolved. The concern that there is saturation spending in marginal constituencies needs to be addressed by looking at extending the limits on local campaigning.
Changes in public funding of political parties
An injection of public funds is needed if we are to maintain public confidence in our democracy and Sir Hayden points out that political parties deserve such funding because they are good for democracy. He supports this by explaining that the parties prepare robustly researched policies, consult widely and train people in the skills needed to be effective in public office. In the report:
- Sir Hayden estimates that the cost of public funding need not be above £20-25 million per annum.
- One option considered is to offer tax relief on donations to political parties, although this means that a person’s status as a taxpayer affects their ability to contribute.
- The report recommends directly linking the funds given to the number of votes received. Each eligible party should receive 50p for each vote cast at a general election and 25p for votes cast for them in devolved government elections and in elections for the European parliament.
- The report also recommends a matched funding scheme to encourage parties to recruit more supporters. Eligible parties should establish a registered subscriber scheme through which any voter could subscribe a minimum of £5 to support the party and the state would then match each subscription with £5.
Changes to the regulatory body
The Electoral Commission needs to change so that it becomes not only a regulatory body but also one able to offer advice and guidance to the parties. This means that:
- The Commission needs to support the introduction of new legislation with training and advice for the parties.
- Four Commissioners should be ex-MP’s who have recently served in the House of Commons so that their experience can be added to that of the Commission as a whole.
- There needs to be a more comprehensive graduated system of fines to penalise breaches of the rules – at present only severe punishments can be handed out.
- The Commission must be able to launch and run its own investigations to determine whether breaches have been committed.
Unlock Democracy publishes proposals on reforming the Labour-Union link
The cash for peerages scandal has once again brought the funding of political parties to the fore, but although there is a broad consensus that individual donations should be capped, one issue threatens to block any attempt at reform: the link between the Labour Party and the trade union movement. The Conservative Party argues that all donations from organisations and companies should be banned and that donations from individuals should be capped at £50,000. The Labour party is concerned that this is simply another mechanism to try to break its link with the trade unions. Unlock Democracy believes that trade unions should be able to act as brokers, collecting small donations on behalf of their members, and this paper outlines how that would work in practice.
Trade Unions and the funding of political parties
- Since the late 1980’s, trade unions have been required to ballot all their members every 10 years to decide whether the union should keep the political fund. There have now been three rounds of political ballots. They have all been passed with significant majorities but have been very expensive for trade unions to run and have done little, if anything, to give individual trade unionists influence over the way the fund is operated.
- Trade unions are treated differently from other membership organisations in terms of their political activities. No other membership organisations running political campaigns, even those that are affiliated to a political party, are regulated in this way.
- Two distinct issues have become entwined: a) that of trade unions carrying out political activities to raise awareness of their campaigns and further their members interests, and b) that of trade unions funding, supporting and campaigning for one particular political party.
The Issue – what does affiliation mean?
- The question of affiliation complicates the issue of caps - is a donation from an affiliated union a collection of small donations from its members or should it be seen as a corporate donation from an organisation seeking to buy influence?
- Unlock Democracy believes that in order for it to be seen as a collection of small individual donations collected by the union, there has to be active consent on the part of the individual member and they should have the choice of contributing to either an affiliated or a general political fund.
Unlock Democracy’s Proposal
Unlock Democracy is not seeking to undermine the relationship between trade unionists and the Labour Party. Affiliation is unique and in many respects reflects exactly the kind of local grass roots political activism, which we seek to encourage. Our criticism of the relationship rests solely with the degree of control over the political fund that the union executives and general sectaries have.
- Unlock Democracy believes that trade unions should be able to act as brokers for their members, collecting donations and passing them on to the affiliated party.
- The Union must also pass on the contact details to the certification officer of the affiliated party so that this can be audited and shown to be open and transparent.
- Individuals should have the clearly stated right to opt out of affiliation but this should not mean that they also have to opt out of contributing to the union’s political and campaigning activities.
How it would work in practice
- An individual decides to join union which is affiliated to a political party - they have 2 choices:
- 1. Pay the standard subscription rate which includes a contribution to the General Political Fund.
- Or
- 2. Pay the standard subscription rate + 50p per month, to become an affiliated member of the political party.
- The 50p affiliation fee would be given directly to the affiliated party with the contact details of the member. The report uses the figure of 50p because this would cover the national affiliation fee, but this figure would be left up to individual unions to decide.
- Each member should receive an annual reminder of their membership and if this was done the report concludes that there would be no need to continue with the political fund ballots.
Unlock Democracy publishes research on local party activity
Unlock Democracy surveyed local political party activists about their views on party funding and the level of activity within their local parties. The report found that there is:
- A clear consensus for reducing spending limits to £15 million, introducing a cap on individual donations at around £50,000 per year and tax relief on donations to political parties.
- Significant support for matched funding on donations and money-per-supporter schemes such as the Power Inquiry's "voter voucher" proposal.
- Overwhelming support for restricting public funds to parties that are internally democratic and open to anyone to join (this would exclude racist parties such as the BNP).
- Significant cross-party opposition to banning donations from trade unions (including nearly half of Conservative activists), but also strong cross-party consensus that individual union members should have more say over how their money is spent (including more than half of Labour activists).
Overall, the findings suggest that a cross-party consensus on reforming the way political parties is within reach.
Unlock Democracy submits evidence to Hayden Phillips Inquiry
This is a summary of the evidence Unlock Democracy submitted to the Hayden Phillips review. It addressed the question: What are the options for reform?
Thresholds for funding
- The eligibility for funding needs to be extended beyond parties at Westminster to parties which have representatives at devolved, national or European level.
- There needs to be a system whereby political parties have to conform to a basic standard of internal democracy and be open to all eligible voters, before they are allowed to register for state funding.
A Cap on Donations
- It would help to combat the perception of sleaze if there was a cap on donations but it would have to be considered whether this should extend to corporations and trade unions as well as individuals.
Corporate Donations
- In 1997, companies such as Vodafone, Dixons, P&O, Scottish and Newcastle and Tarmac donated a total of £300,000 to political parties. In 2001, they donated nothing. Large companies, particularly common household names, seem to have decided that donations to political parties are now more trouble than they are worth.
Trade Unions and Membership Organisations
- It is the right of trade unions to be politically active. We do not believe that party funding reform should be used to change the relationship between political parties and interested groups. Therefore we would allow trade unions and membership organisations in general, to act as “facilitators” between individual members and the political party.
- Too often the right to opt out of a political fund is not made known to individual trade unionists and the numbers of affiliated members is determined by the unions executives rather than the number of individuals who sign up to an affiliated political fund.
- The decision of the RMT in 2002 to reduce its contribution to the Labour party from over £90,000 to just over £20,000 without consulting its members, is a good illustration of the problem that the union executives and general sectaries have too much control over the political fund.
Spending Caps
- Currently, the National Campaign Limit is £20 million for the year in the run up to a general election, while constituency limits are around £10,000 depending on size and type. The constituency spending limits for individual candidates are not counted as part of the national limit of their political party.
- The Electoral Commission proposed reducing the national spending limit from £20m to £15m – or from £30,000 to around £23,000 per constituency – and increasing candidate-spending limits by a proportionate amount.
- We would however go further than the Electoral Commission and reduce the national spending limits to £10 million.
- In order to encourage parties to focus on local campaigning and activism rather than centralised campaigns, we support raising constituency spending limits by twenty per cent. We also believe that the time period for national and local expenditure should be standardised.
Block Grants
- It is accepted that political parties perform necessary roles to maintain the democratic system and as such, block grants are given to them by the state in the form of MP salaries, grants to support the parliamentary work of the opposition party and policy development grants.
- A simple expansion of the existing system would do nothing to promote engagement with politics or to alter the perception of sleaze because as it stands it encourages the idea that there are ‘good’ and ‘bad’ forms of politics. The state supports the ‘good’ functions such as policy development but not the ‘bad’ elements such as campaigning and actually engaging with voters. A healthy democracy requires both of these types of activity and only when we openly acknowledge this can we start to address the pervading anti-politics agenda.
Money for Votes
- This is where public funds are allocated to the parties on the basis of the number of votes won at a general election. It is a neatly simple system but it would do nothing to encourage wider participation in politics. It would strengthen the ‘winner takes all’ tendency in British electoral politics, it doesn’t take into account the increasing significance of tactical voting and it would also favour established parties who were able to field candidates in all constituencies. Nor would it do anything to address the centralisation in British politics as it offers no particular incentive for local campaigning.
Tax relief
- In 1998 the Committee on Standards in Public Life in its report on ‘The Funding of Political Parties’ concluded in favour of tax relief on donations up to £500 to political parties at the standard rate.
- One problem is that the poorer supporters of a party would lose out, as it would only apply to tax payers. The Electoral Commission proposed solving this problem by introducing matched funding for non-tax payers. In our view this system would be over complicated and we would prefer to see matched funding apply to all donations.
- Giving donations to political parties a similar status to those of charities would be useful because it would imply that as a society we regard political activity as a worthwhile public good.
Membership and matching donations
- This would give parties an incentive to recruit and retain members
- This could be done by offering to match funds for membership subscriptions and donations up to a maximum of say £100
- Combined with a ban on large donations, this would go some way towards ensuring that parties are accountable to their members and through them to the population as a whole but we recognise that whilst this option may have the effect of halting the decline in party membership, it is unlikely to produce a revival in party membership.
Registered supporters
- Rather than simply valuing money, why not value participation? Under a ‘Registered Supporters’ system, parties would receive a fixed sum such as £20 for every registered supporter.
- In return for accepting money, parties would have to ensure that individuals received certain privileges, although the degree to which these privileges equate to full membership privileges would be up to the party.
- If concern arose about the total amount a party was beginning to be able to raise, then Parliament or the Electoral Commission could decide to cap the total amount of money available to parties each year.
Campaign Expenditure Rebates
- Evidence suggests that where political parties are more active at a local level, turnout is higher. The New Politics Network's report General Election 2005: What the Voters Saw found a causal link between turnout and total contacts.
- Major political parties are well aware of this fact, and thus target their expenditure in constituencies where they are most likely to win thus disadvantaging small parties and ignoring ‘safe’ seats.
- We suggest offering rebates on expenditure to encourage greater levels of campaigning across the country and we support a system where candidates/agents should be able to reclaim up to 50% of the money declared in their election returns. This system is similar to the one which already operates in Canada
Extending Help in Kind
- The current system provides free air time and free delivery of election addresses. We support the extension of both systems, for example giving free air time on digital channels to target different audiences and the extension of the system to other forms of advertising such as billboards.
Doing it by themselves
- Political parties have to find new ways to engage and involve the electorate. By increasing public funding in the way we have proposed, we would be creating a framework whereby parties are encouraged to do more themselves and not to become ever more dependant on the state.
Objectives
Sir Hayden has set out 4 key objectives for the Review
1. To improve public confidence in party funding
The public needs to be reassured that the system of party funding is transparent, open and well-regulated. Many people are currently unaware how parties are funded, including that there is already some state funding for parties. Any system of party funding, especially if the public's money is involved, must be fully accountable. The Electoral Commission regulates the system on the public's behalf.
2. Parties should compete on the basis of policies and competence, not money
Sir Hayden wants to avoid an "arms race" on campaign expenditure. In 1998 the Neill Committee recommended a cap on the amount that political parties can spend at elections and this was introduced, and there are have been caps on what candidates can spend in existence for many years. It is now suggested that the expenditure allowed in an election year should be further reduced, and some think there should be a ceiling on expenditure in every year.
3. To contribute to greater democratic engagement
Sir Hayden wants to increase engagement with the democratic system in general, including with political parties, and the funding system may act to stimulate that engagement. It certainly should not inhibit it. Although the review is about funding, rather than democratic engagement, engaging citizens in the party political process should be a factor taken into consideration when weighing up different options for the party funding system.
4. To be as fair as is possible to all political parties and candidates
Fairness does not necessarily mean treating all parties or candidates equally. It also does not mean giving them all the same chance. In a democracy, the factor that differentiates parties should be popularity among voters. Those who give money to political parties should have no more influence over events than those who do not. Popularity will, of course, not remain constant. Sir Hayden wants the Review to avoid giving advantage to parties on the basis of any of the following:
- Whether a party is new or established
- The size of the party
- Whether the party is contesting seats in all of the UK or only part of it
- Whether the party is in government or not
- The wealth and influence of the party's supporters
