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!

Labour Party in panic over party funding plans

Sir Hayden Phillips’s second interim report on party funding has been leaked to the BBC, and it contains bad news for Labour.

Sir Hayden appears to be leaning towards capping donations at £500,000, and reducing that cap over four years to just £50,000. This would be hard for the Labour Party, as it has less high income donors than the Conservatives, who have been calling for a £50,000 cap for this very reason. How it would leave the Liberal Democrats is known only to Cowley Street insiders.

However, it is in the following section that Sir Hayden strikes at the heart of the Labour Party. With impeccable logic and no sense of the political ramifications involved, the former Permanent Secretary at the Lord Chancellor’s Department has declared that “I see no reason why donations from trades unions should be exempt from the cap”. This, and another suggestion that trades union members should be allowed to opt out of donating part of their subscription to the Labour Party, could deal a fatal blow to Labour.

Labour has traditionally relied heavily on trades union donations. If these are now capped at £50,000 it will cripple them financially at a time when they are £23.4 million in debt. More importantly, it will break the unhealthy grip that trades unions have over Labour Party policymaking, effectively freeing the party once-and-for-all from the rent seeking of these particular special interest groups.

If proof of the significance of this were needed, it was provided by John McDonnell MP, so far the only Labour member to announce his candidacy for the leadership (his slogan: “Another world is possible” – and he should know, as he must be living on one if he expects to receive anything other than a drubbing).

McDonnell claimed that the party would react with “fury” to this independent review, and that there would be “uproar” at the next National Executive Committee meeting. According to McDonnell, trades union donations are the “cleanest money in politics”, and at a time of Labour sleaze should be welcomed. Presumably, he thinks cash-for-favours is somehow better than cash-for-peerages.

While there are important liberal questions about limiting how individuals dispense with their money, this is probably a good policy. Individuals will still be able to finance their own campaigns that support particular issues and so guide the decisions of electors but their power over elected officials will be greatly reduced. Even if Labour can survive the financial pain these proposals will cause them, Sir Hayden will have provided a great service to democracy.

Faint praise from The Economist

The Economist gave faint praise to the Liberal Democrats in its article on party funding this week.

Describing the loans parties had taken out, it said "Labour owes £23.4m, a sum that exceeds... its spending... in last year's election campaign. The Conservatives have piled up even more debt, worth £35.3m... The Liberal Democrats are in the happier position of owing only £1.1m."

Sadly, the dire state of the two main parties' funding suggests that the chances are growing of their using their power to oblige the taxpayer to provide them with cash directly. They will argue that to save politics from the grubby world of donations and loans, and the influence they buy, parties should in future receive direct funding from taxpayers.

One cannot help but wonder, as our venal leaders feather their own nests, whether what the parties really need to save them from sleaze and corruption is a some honour - and not the kind that gets doled out in return for a loan.

Labour Party’s centralising tendency comes home to roost

Neil Woollcott has posted an article about a Labour Party proposal that its councillors contribute towards paying off part of its massive £23.4m debt. According to Woollcott, the media are “causing a big stir” about this and he expects Liberal Democrat bloggers to do the same.

Before we all jump onto our high horses about his, I think we should bear in mind that it is largely an internal Labour Party matter. If they want to ask their Councillors to contribute to a fund, it is up to them. If they want to oblige those holding the Labour whip to do so, that is a decision for them, and potential councillors and voters can judge them accordingly.

In my experience, those who run for office and especially those who hold public office tend already to be very generous with their time and their money - both to the local community and to their party.

What is sad about this proposal is that it is a typical example of cack-handed Labour Party centralisation that will probably cause more harm than good. For one thing, those who currently give generously may now limit themselves to donating only the prescribed amount. Perhaps more importantly, how those funds are used will be decided by Labour Party central office staff rather than by the individuals themselves.

This should be no surprise; Labour is a party that is committed to centralisation and does not trust individuals - even individual members, it seems - to dispose of resources as they see fit. It is, however, sad that local members’ generosity is to be replaced by a system that smacks of the very centralised tax-and-spend approach that has proved so ineffective in Government. Fortunately, this time it can only harm the Labour Party and not the country.

Electoral Commission report on donations and loans to political parties casts a shadow over Labour and the Conservatives

The latest figures from the Electoral Commission on the loans and donations received by Britain's political parties provide fascinating reading. Sadly, reporting on them has been less enlightening.

Indeed, there is something rather disingenuous about the BBC’s claim that “the main political parties owe a total of £60m in loans”.

£58.7m of this is owed by just two parties, The Conservatives and Labour.

As Labour admits struggling to pay its loans, it’s claim that “political parties should live within their means” sounds hollow. Labour has been living well beyond its means for some time, with the 2005 general election a lesson in how to finance the present by borrowing from the future. While it may be an exaggeration to suggest that it would not have won the 2005 election without the tens of millions of pounds of debt it ran up, it is undoubtedly true that its majority would have been far more precarious had it not chosen to mortgage its future in an effort to win a third term.

The issue of loans raises serious questions about the credibility of the financial arrangements of political parties. The Conservatives appear not to have declared loans on the grounds that they were made “on commercial terms” despite those loans being at preferential rates, below bank lending rates. The Labour party’s “cash-for-honours” scandal continues to cast the shadow of sleaze over the Government. By comparison, the Liberal Democrat’s outstanding loans could be cleared by a £15 donation by each member; it is unlikely that Cowley Street will be on the market in the near future.

LOANS OUTSTANDING
Conservatives: £35.3m
Labour: £23.4m
Lib Dems: £1.1m
SNP: £525, 393
Plaid Cymru: £352,000
Respect: £34, 878
UKIP: £19,200
Source: BBC Online

Meanwhile, donations to the major parties seem to eerily reflect the parliamentary landscape, with the Labour Party receiving slightly more than the Conservatives while the Lib Dems received approximately a fifth as much as Labour. On the other hand, a couple of the minor parties have received significant donations that belie both their small size and their supposedly-socialist roots. Both the Green Party and the Co-Operative Party have received large donations that should help them pursue their radical socialist agendas.

DONATIONS
Conservatives: £2,867,019
Labour: £3,227,340
Lib Dems: £629,903
SNP: £52,430
Plaid: £12,250
Co-operative Party: £142,036
Ukip: £17,913
Green Party: £138,396
Scottish Greens: £31,373
Source: BBC Online