Political parties have never been less popular. Fewer people identify with them, vote for them or join them than ever before. These long-term problems have created difficulties for parties in raising funds. This, and the race to spend more during election campaigns, has led the major parties to seek large donations from wealthy individuals. However, new transparency in the sources of party income has created controversy. Many large donations have been accompanied by media rows, which discredit the motives of the donor and the party, only increasing their unpopularity. One solution to parties financial difficulties would be for the taxpayer to fund them. But surely a policy of state funding, its critics argue, would be like nationalising a failing industry?
Progressives have to make a principled as well as a pragmatic case for fair funding. Parties cannot be left to go bankrupt. They play the central role in our democratic system. Public policy has already gone some way to recognising this: parties get money for policy development and aid in kind through party political broadcasts, freepost at elections and the free hire of public buildings. The three main parties have also requested money for training candidates and e-democracy work. Further earmarked funds for publicly acceptable party activities would be a tempting soft option. However, it would also create the need for complex rules and even more complex ways of circumventing them.
Political parties should be for the many, not the few. However, this will not appear to be the case while they are funded by an elite. As one Labour source told IPPR, it is a disaster for social democrats to appear to be in the pockets of the rich. In addition to concerns about propriety, equity between parties is important. Large donations will always favour parties that are pro-business and those in, or on the verge of, power. It would be easy for Labour to forget how difficult it was to raise funds in the 1980s. A donation cap should be set at a level where the public can see that such a sum could not buy influence or leave politicians beholden to their funders. This would also help restore some trust in the political process.
A £5,000 donation cap would leave Labour with a shortfall on current spending in the region of £10 million per annum. Bearing down on excessive party spending offers part of the solution. The 2000 Political Parties, Elections and Referendums Act introduced the principle of national spending caps, ending the spending arms race of 1997. Caps on income and expenditure can help secure equity between parties.
In the context of spending caps and caps on donations, state funding for parties can be publicly acceptable. For state funding to work, it needs to be linked to a party s activity level. A new principle should be established: parties are given an incentive to recruit and retain members and small donors. The democratic argument for mass membership parties has been won.
But it is getting harder to deliver this practically. Many activities that parties undertake don t pay. Partly in recognition of this, Labour has again raised its reduced-rate membership fee. A system of Tax Relief Plus , which rewards the donor and the party, will create the necessary incentives to enable parties to retain large memberships. A donation of £50 might attract £50 from the state while a £100 donation might gain a £80 top-up. This would reward small more than larger donations.
Existing free communication channels for parties (political broadcasts, freepost for election addresses) should be modernised. For example, a national call-centre 0800 ELECTION could see voters pressing one to speak to Conservative volunteers, two for Labour and so on. An interactive element on digital TV could enable voters to compare parties health policies. Parties would still be giving the information to voters but the state would be providing modern platforms for both the voters and the parties.
State funding may not be as unpopular as many suggest. IPPR s qualitative research highlighted a number of points which undermine traditional opposition to state funding. The public fails to distinguish between the different costs of politics paying for parliament, MPs salaries or government advertising. Many think they already pay for parties. The popularity of banning large donations and further caps on expenditure could minimise fears over taxpayers funding party profligacy. There is some support for encouraging parties to raise small donations.
State funding can be a progressive democratic policy. It is understandable for the Prime Minister to assert that there needs to be a cross-party consensus for state funding. It would be divisive if one party is seen to be benefiting unfairly from any new system. But with every new party funding controversy the case for fair funding gets stronger.