Conclusions and recommendations
1. Party
funding and the maintenance of a system of parties that compete
fairly within the British polity is an issue of central political
importance. It is imperative that the Government take a considered
and measured view of any proposals for reform, and that reforms
command a wide consensus among political parties. Failure to undertake
reform, or the promulgating of reforms which are seen to be of
a partisan nature will serve only to alienate the public and damage
rather than revive political parties in the eyes of the electorate.
(Paragraph 13)
2. Decline
in party membership has altered the income profile of the main
political parties. However, more significantly, it has altered
campaigning strategies, led to a reduction in the number of local
activists and subsequently reduced the direct contact that parties
have with members of the public. (Paragraph 23)
3. Political
parties receive income from a variety of different sources. Despite
the introduction of a duty to produce accounts under PPERA, a
lack of common accounting practices makes it difficult to compile
a comprehensive account of the income profiles of the political
parties. The Government should ensure that the Electoral Commission
produce more digestible, thorough and transparent figures of both
the private and public sources of party income. (Paragraph 39)
4. The
current system of party financing in the UK is unstable and, unless
key issues are addressed, it is likely that these problems will
increase further. Not addressing the financial predicament of
the parties at this stage could lead to increased dependency on
large donations, ever increasing amounts of money being spent
between elections and the subsequent further erosion of public
confidence due to the increasing appearance of money buying power
and influence. (Paragraph 48)
5. We
believe that there are problems, both actual and perceived, with
the current arrangements for party funding in the UK. While parties
struggle with escalating costs and a reduction in the traditional
financial support base, public confidence is damaged by the fear
that donors may be able to buy political influence. While the
PPERA 2000 introduced closer regulation and some improved transparency,
it has not finally resolved problems with the system; if anything
increased transparency, by revealing the extent of and dependency
on donations from a few rich individuals, corporations and trade
unions, has increased the negative impact on public confidence.
(Paragraph 49)
6. We
agree with the Lord Chancellor that party funding is only one
issue that has an impact on public confidence, and resolving this
issue alone will not fully restore this confidence. However, if
handled well, the process could contribute to the restoration
of public confidence. If handled poorly, regardless of the merits
of any proposals for reform, public confidence and engagement
will be further undermined. (Paragraph 50)
7. While
we endorse a transparent system, transparency does not solve problems,
but draws attention to them. It also invites "sniping"
between opponents. It must be based on readily identifiable risks
so that audit functions have a clear overall purpose. (Paragraph
53)
8. We
welcome the changes and transparency that have come about as a
result of the PPERA. We agree with the basic principles of the
current system. We note that the system of regulation has largely
developed as a response to specific problems which have emerged,
and emphasise the need for constant review and flexibility in
what is a very fluid and dynamic environment. (Paragraph 54)
9. However,
we recognize that current reporting methods fail to provide adequate
transparency in the way accounts are presented by the Electoral
Commission. We urge the Electoral Commission and the Government
to work together to improve and strengthen these processes. (Paragraph
55)
10. There
needs to be a fine balancing act between regulation and providing
the parties with adequate resources to ensure compliance. It would
be counter-productive to increase further the financial burden
on the political parties by requiring them to re-direct resources
in order to assure compliance. (Paragraph 60)
11. We
acknowledge the difficulties with regulation, especially its application
at the local level. However, these obstacles should not prevent
the pursuit and development of a robust, transparent, workable
and enforceable regulatory framework. (Paragraph 61)
12. We
recommend change to the Electoral Commission to help it become
an effective watchdog with appropriate powers of enforcement.
We recommend that the provisions in PPERA should be changed to
allow a minority of Commissioners to be people with practical
past experience of politics from across the political spectrum.
(Paragraph 64)
13. Campaigning
is a core activity for political parties which provides information
and encourages participation and engagement. It is the means by
which political choices are presented to the voters. However,
we are concerned about the negative public perception of impersonal
and expensive campaigns and their potential impact on participation
and engagement should campaign costs continue to escalate. (Paragraph
71)
14. We
recommend that there should be a tighter cap on overall party
spending. This limit should be set by the Electoral Commission,
and should be determined as the result of an open debate about
the real cost of politics. (Paragraph 72)
15. Although
election spending at constituency level is subject to defined
limits, extensive spending can take place, including in marginal
constituencies outside these limits. Any change, even if designed
to encourage a more general shift from national to local campaigning
would still be subject to loopholes, and it is not clear whether
it would be administratively feasible to close these. (Paragraph
78)
16. We
see merit in the focus of campaigning being shifted from the national
to the local level. Whilst recognising that parties must take
control of spending, we recommend that there be a modest increase
in local spending limits, to be set by the Electoral Commission.
(Paragraph 79)
17. With
an increase in the frequency of elections within the United Kingdom,
the current definitions of campaign periods for spending regulation
periods are outdated, and allow a range of activities outside
of those periods, which, although within legal definitions, do
not reflect the spirit of the law. (Paragraph 87)
18. The
effects of any reform to address constant campaigning would be
far reaching and should only be considered in the context of an
agreed overall package of proposals, including limitations on
all sources of income and expenditure. (Paragraph 88)
19. Part
of this package would be a revision of the present arrangements
to enable the expenditure of all parties, both at local and national
level to be capped over a five year accounting period. During
this period parties would be allowed to spend their money as they
see fit, provided spending is within predetermined spending caps.
Any elections falling within the accounting period would continue
to be subject to their own spending caps within the laid down
accounting period, but would also be counted within the overall
five year cap. (Paragraph 89)
20. It
is essential that, both in perception and in reality, money cannot
buy undue influence, (or indeed, buy the election result) from
within or outside the party. Third party spending should therefore
be subject to a transparent and robust regulatory regime and should
be regulated within the same accounting period as that determined
for political parties so that current loopholes can be eradicated.
(Paragraph 92)
21. Any
extension of the existing arrangements for limiting spending (however
defined) would not be sufficient to address all the current concerns
about the funding of the political parties. It should be considered
as part of a broader set of proposals. (Paragraph 96)
22. Any
meaningful limit on donations from individuals, corporations and
trade unions would lead to a shortfall in funds, which would not
be addressed by a reduction in the current level of the cap in
spending alone. However, a donation limit would greatly increase
the incentive for parties to widen their support base to a larger
number of small donations, a development we would welcome. In
principle therefore, we agree that transparency of donations is
not enough, and the parties should take steps to agree voluntarily
to binding limitations on donations. However, such a limit should
only be considered within the broader context of a discussion
about alternative sources of funding, including state funding,
for political parties. (Paragraph 109)
23. This
issue is difficult to resolve, not least because of the present
disagreement about the status of trade union funding to the Labour
party. Any move to change the nature of party funding must not
stray into prescriptive devices to require political parties to
organise internally in ways that violate their democratic relationships
with other institutions. (Paragraph 110)
24. We
welcome the new provisions for the reporting of loans under the
Electoral Administration Act 2006. However, recent allegations
with regard to loans (be they substantiated or not) have had a
negative impact on public confidence in the political system.
In order to restore this confidence fully, we recommend that all
loans to political parties be made illegal, with the exception
of those from UK based financial institutions, at commercial rates.
(Paragraph 114)
25. Any
extension of state funding should offer the taxpayer visibly cleaner
and healthier politics; it should be accompanied by robust regulation
and be focused towards the local level. It should also seek to
maximise flexibility in determining funding for new parties, and
towards stimulating local activity. These aims should be kept
in mind when considering different methods of how any potential
system of the state funding of political parties is devised and
operated. (Paragraph 126)
26. While
we consider it is neither helpful or desirable to try to distinguish
between "good" and "bad" expenditure, we recognise
the need for further debate around the values and principles that
should govern state funding. (Paragraph 128)
27. We
agree that state funding should not be used as a tool to dictate
to parties how they should behave or organise. Neither should
such funding be simply applied to shore up such parties' existing
arrangements. However, while we are sympathetic to the argument
that any state funding should be directed towards the local regeneration
of parties, this would be difficult to monitor. (Paragraph 130)
28. Instead,
we are of the view that the means by which state funding is determined
and distributed should incentivise party activities. Matched funding
for membership fees should be introduced as a means of encouraging
recruitment, as well as the introduction of a fixed annual amount
of funding on the basis of votes cast at the previous election
to give greater incentives to parties to increase activity, and
thereby engagement and turnout, in seats other than marginals.
(Paragraph 131)
29. We
see positive benefits from allowing small donations to political
parties to benefit from tax relief, but we suggest that this should
be limited to £250 per donor per annum. We also recommend
that a 'matched funding scheme' for non-taxpayers should be set
up alongside it. (Paragraph 139)
30. We
recommend that any proposals for the reform of the system of party
funding should be based on the following key principles:
Any system of funding should be transparent,
and be subject to the full scrutiny of the regulating body, in
order to ensure sufficient public support and bolster public confidence
in the integrity of the political system.
It should be workable.
It should, as far as is practical, be fair between
existing parties and new entrants.
Every effort should be made to attract a consensus
among the major political parties.
It should be based on the principle that the
main purpose of political parties is to be a vehicle for public
activism and engagement, and should subsequently be focused on
making political parties fit for this purpose. (Paragraph 146)
31. As
radical a change may be a step to 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. (Paragraph 151)
32. 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.
(Paragraph 154)
33. 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. (Paragraph 155)
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