5 The Way Ahead: What Principles Should
Govern Party Funding?
147. We began our inquiry at a time of great public
anxiety about issues related to the funding arrangements of political
parties within the UK. There is no doubt that the various events
which have occurred since March 2006, and the course of the debate
relating to the system of party funding since then, have damaged
public confidence in the financial operation of the major political
parties represented in Westminster. We are all agreed that there
are serious problems with the current system of party financing
which have to be addressed as a matter of urgency. Piecemeal reform
of the system is not a viable option; a radical approach is required
which will allow all of those who are active in party politics
to re-gain the trust of the wider public.
148. That approach must begin with the development
of an appropriate regulatory framework, which is a complex task.
Many of our witnesses emphasised the difficulty of ensuring that
regulation works. Furthermore, we are only too aware that political
parties in all countries, whether in government or in opposition,
will be tempted to stretch the rules to the limit and to find
loopholes within existing legislation and regulatory frameworks.
Modern political parties now support candidates in an ever wider
set of elections and an ever changing communications environment.
There is no proper or adequate alternative to close regulation
for political parties in the modern world. International experience,
for example that of Canada and Germany, shows that a formal regulatory
approach can be made to work.
149. We acknowledge that an increase in public funding
for political parties attracts public opposition, but we note
that when public opinion is sought about specific issues relating
to public finance for political activity the reaction is less
hostile. Given the expectations placed on the work of political
parties in relation to the greater range of elections which now
take place, we see no alternative to an increase in the range
of public funding available. If handled well, as part of a new
regulatory package, this could not only serve to enhance public
confidence, but would also be the only viable long term solution
to ensure that political parties are adequately funded to fulfil
their legitimate and important democratic functions.
150. Canada's experience suggests that it is possible
to win public confidence for very radical changes in the way party
finance is regulated and supported, and to do so without losing
the traditional links between institutions and parties even when
financial links are removed. The Canadian public, trade unions
and business have entered a world in which large individual, corporate
and institutional donations are precluded and state finance combines
with the encouragement of small individual donations to take their
place.[239]
151. As radical a change may be a step too far
for the United Kingdom to take at this stage, but if the public
are to see a benefit from greater state funding it will be because
they are convinced that it is the way to ensure that parties are
free from any appearance they are influenced by powerful paymasters.
Increased regulation of donations and of spending, combined with
wider availability of state funding, are justified if they open
up a clear route away from interest based funding along which
further steps can be taken if the benefits become more apparent.
Without this sense of direction voters may well conclude that
the parties are voting to give themselves more money without removing
dependence on their other paymasters.
152. The UK currently limits expenditure but does
not limit donations, while in the U.S.A, donations are capped
but spending is not. Both systems lead to significant problems.
In Canada, both income and expenditure are comprehensively capped
and regulated, and we were convinced by the strengths and benefits
of this model. In conclusion therefore, our report proposes a
package of reforms. These reform set out where we would like the
parties to be in the medium term future. Our aim is to strengthen
parties not to weaken them, and to make sure that parties are
not disadvantaged by the implementation of our proposals.
153. A cap on spending could result in a less onerous
fundraising burden for parties, as there would be a limit in the
amount they needed to raise. It would also serve to reduce the
amount of money that is currently in the system. There would,
however, still be public concern, not about the size of donations
but the source of donations as large donations would be a greater
proportion of a party's funds and would subsequently increase
concerns about wealthy donors, individual, corporate and union,
being able to buy political influence. The preferred solution
to this problem would be for the parties voluntarily to agree
a binding framework to limit all large donations.
This would encourage parties
to broaden their base, and pursue smaller donations from a larger
number of individuals. However, it is likely that a cap in donations
would result in reduced income for the parties. This shortfall
could be met by an increase in state funding, which would be subject
to a more transparent and robust regulatory framework. Not only
would this serve to address public concerns about undue influence,
it would at the same time provide an acceptable level of funding
to parties who meet specific eligibility criteria, to ensure that
they can operate effectively to fulfil their democratic functions.
154. We recommend that within a stronger and more
robust regulatory framework there be a package of changes to the
system of party funding to include: an overall cap on spending,
both at local and national level; greater transparency about the
sources of all elements of party funding; a voluntarily agreed
binding framework for the limiting of all large donations leading
to an increase in state funding for political parties. We agree
that the aim of reform should be to strengthen the political parties,
and that no party should be financially disadvantaged by any changes
that are introduced.
155. We acknowledge that all of the elements of
the package we propose cannot be achieved immediately. We therefore
recommend a two staged approach: a lower national cap on spending
alongside a voluntarily agreed binding framework for a limit on
donations should be pursued immediately. A combined matched funding
and tax relief scheme should also be introduced with immediate
effect in order to encourage small donations. The first stage
would give parties time to adjust before more radical changes,
including further extensions of state funding for political parties,
are introduced. This package would not only provide a stable route
for parties, but also a transparent and sustainable funding regime
which could also be acceptable to the public.
239 See text box on pages 38 and 39 Back
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