Friday, 7 December 2007

State funding of political parties both wrong and dangerous

Following on from Geoffrey Payne’s article about state funding of political parties, I’ve written a rather vast fisking. So lengthy is it that is enables me to trim it down to form a new article all of its own about that most hideous, awful and self-serving of ideas: state-funding of political parties.

State funding of political parties simply ingrains existing power and privilege. It is the ultimate reward for incumbency. What is more, it is a classic subsidy, with all the negative effects that result. If a politician suggested that Morrisons should receive state funding because they have fewer customers than Sainsbury’s, Tesco and Asda they would be laughed out of The House. Yet these self-same politicians that object to subsidising private companies are far more enthusiastic about subsidising their own organisations. One might think that this exposed a conflict of interest!

If a political party can’t attract the necessary pounds to operate then it deserves to go to the wall. Surely the demise of failing parties is creative destruction, and a failure to attract donors and members a sign that the rot has set in to a failing party. What is more, it is extremely dangerous. Forty years ago Labour and the Tories competed to lard business with subsidies with the effect that they ruined our economy. Do we really want to do the same with out politics?

If it seems that all politicians are self-serving, then it is equally hard to shake the feeling that the Lib Dems support for this is related to the fact that they feel hard-done-by in the donation game. Yet ironically the evidence suggests that we do well as a party despite our relative poverty. The fact is that in 2005 the Labour and Conservative Parties spent £18m each on the election while the Lib Dems spent a paltry £4m, yet the votes that were cast for the Labour and Conservative Parties were only 8m each compared with 6m for the Lib Dems. That says to me that money has a lot less to do with results than people think.

In fact, I would go further. Our support for proportional representation is based on the fact that we get a lot of votes but not many seats. Our concern about funding marches uncomfortably next to this, because our argument for PR is based on the evidence disproving the suggestion that the other parties are gaining unfair advantage from their donors.

There is often an attempt to use the freedom of speech argument here, and it usually revolves around the BNP. High-minded as liberals are, we have always been willing to support the right of those with whom we disagree to voice their opinions and stand for office. But to go from that to state funding is grotesque. If the BNP have support then they should be able to survive on donations. If they cannot garner that funding, then their support is clearly (ballot) paper-thin. People may as well spoil their ballot paper or – if they really want a thug for a councillor – put up a candidate themselves (it is free, after all!).

Taxes should pay for public goods because they are the most efficient means of doing so. By comparison, individuals should pay for individual goods on a user-pays basis. While political parties are undoubtedly necessary and inevitable, that does not make them public goods in the economic meaning of the term. Rather, they are like the Church: it may save us all from damnation, but its funding should still come solely from the believers!

So there you have it: my usual critique. But just for fun I’m going to do that all-too-rare thing and propose an alternative. I should add that I came up with this on the back of a fag packet this afternoon (figuratively, of course, as I was in a public place at the time!) and I’m putting it up for comment and debate rather than tabling it as a policy motion. But here’s a thought:

How about all donations being channelled though the Electoral Commission so that all are anonymous. Of course one could say one will donate half a million quid in exchange for a peerage or a British passport or an exemption for my sport to continue to advertise tobacco, but as long as the party to whom one has made the promise receives more than half a million pounds in the year, they’ll never know whether one was telling the truth or lying through one’s back teeth to curry favour. So much for the power of patronage!


Joe Otten said...

I'm not convinced by the supermarket analogy. Voters not donors should be seen as a party's customers. While parties may not be strictly public goods, they are hardly private goods either.

The idea of anonymous donations is intriguing. There might have to be some system of delaying a random proportion of any large donations, so that a donation of say £50,000.42 can't be used as a signal from a donor. My guess is that it will never happen because it would cost the other parties a lot more than it would cost us.

Alex said...

Surely your supermarket analogy is the other way round? That parties with more support should receive state funding whilst those with much less should not? (Entrenching the current leaders)

Just playing with ideas, what happens if we say the only form of party funding is through party membership BUT also that the state will match the funds of each donation (or a fixed amount, it's not important).

The advantages of this to me is that it keeps party membership accessible for all and makes party funding a democratic source of funding. Likewise it does not subsidise failing parties as parties that lose members would lose state money. Would that a more acceptable use of state funding or does it still fall foul?

Tom Papworth said...


I think that political parties have two kinds of "customer": one for their message and one for their membership offer. I voted for the Lib Dems for years without joining (though I doubt there are many who join but do not vote for us). It's an analogy, however; the point is that state funding is still a subsidy that is based on a criteria other than individuals' choice as to how to distribute their resources.

With regards the big donation, I had assumed that the Electoral Commission would hand over all donations on a regular basis (e.g. 1st of every month) so that monies were amalgamated. Of course a rogue 42p would demonstrate that Otten had donated as promised, but if the Lib Dems received £50,000.42they would not know if Otten donated £50,000.42 or if he donated £1.42 and others donated £49,999 (or some other combination).


If the money is distributed based on previous success then it's even worse: it becomes an incumbency premium!

I'm not sure membership works because Lord Ashcroft can join and pay a membership fee of £1m, which is the same as joining for a token amount and donating £1m. And why should the state match it? It's just reinforcing existing power again.

How about this: instead of the state giving people a party-funding voucher, we just cut taxes for everybody and let them donate the extra to a political party if they wish. My guess is they'd rather buy consumables, and maybe that's the point!

Duncan Borrowman said...

I agree with you Tom... all of it...
Shock, horror.

Tom Papworth said...

Blimey! That doesn’t happen often :oD

Mark Wadsworth said...

Tom P, inspired by your Budget over at Jock's I have followed the trail back to here. The idea with anonymous donations is basically good, as long as El Comm don't start nicking money for their own purposes ...

Alex said...


Exactly! I wasn't sure if you were making that point with the analogy or if it was just close enough I could see it.

Ah, A crucial point I forgot to add was a FIXED membership fee preventing exactly what you describe. The state matching is so parties can afford to run solely off membership fees. We could even weight the state top-ups of smaller parties to help get them into the game, the idea being to remove the necessity for big donors whilst encouraging parties to reinvigorate and spread the grassroots of the party.

Alex said...

(Commits the deadly sin of double commenting)

Anomalous funding is an interesting idea but I think it’s flawed. It could be effective against those using donations in return for vanity or personal awards like peerages, but would be less effective against groups who hope to buy influence over law. When we consider US politics, interest groups don’t have power over officials because they donated last time, but because they might not donate next time and by withdrawing their support make re-election impossibility.

Whilst groups could of course be lying, it's not in their interest to: they want candidates who think they're indebted to them to win and can't take the risk that another group actually will spend money on a competing candidate. If any one group spends money, the rest have lost out, thus in any interesting variation of the prisoner's dilemma, it's likely that most would choose to really donate.

In fact anomalous systems would encourage corruption not discourage it. In these situations we've removed the one thing that could hold the corrupt politician to account: the paper trail connecting the group to the candidate. They'd love it!

But you used the back of the fag packet disclaimer, so I'll let you off there.