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Party financing in the UK: Nice slogan, shame about the solution

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Professor Justin Fisher, Director of the Policy Unit and Professor of Political Science at Brunel University London examines the state of UK political party financing in this blog for UK in a Changing Europe – republished with permission...

A recent story in The Independent about party financing shows that donations to the Conservative Party since Boris Johnson became Prime Minister have disproportionately come from a few wealthy individuals. The story points out that 25% of the party’s declared donations – the declaration threshold being £7,500 – have come from just 10 individuals.

This, it is argued, presents a problem, as that the government may be beholden to a small group of wealthy, private interests; furthermore, the story coincided with revelations of a Conservative Party Advisory Board, where ministers can connect with its biggest donors. All this has prompted the familiar cry to ‘get big money out of politics.’

On the face of it, this is a powerful slogan. There are many downsides to a model of party financing skewed towards an apparent dependence on a small number of donors. There is obviously a risk that the policy preferences of donors may be favoured and that crudely, money may buy political influence.

Equally, even if the financial relationship is completely innocent, a party can find itself in difficulty if it becomes so dependent on income from a concentrated number of sources. Parties may enjoy the income when it arrives, but what happens if these donors stop giving?

The proposal to solve the problematic aspect of party financing is the introduction of caps on the size of donations. There is an appealing logic, here: apart from limiting the potential of wealthy donors to influence policy, such a move could also force parties to broaden their income base to include many smaller donors.

It could also reduce the financial inequalities between those parties that can attract wealthy donors (including trade unions) and those that routinely cannot.

The trouble is, if we cap donations, the money has to come from somewhere else, and the evidence over the years is that there is not an untapped pool of small donors waiting to rush in and help out with party financing.

When Labour was criticised for accepting two donations amounting to £6 million in the 2000s, the writer John O’Farrell observed wryly that it would take many, many karaoke events to raise such a sum, and in the meantime, the party had to be properly funded.

For sure, Labour has been very successful in recent years in raising money by significantly expanding its membership. But, ironically, one of the best things to happen to Labour financially was the leadership challenge to Jeremy Corbyn in 2016, which led to a rush of people paying to sign up as members or supporters so that they could vote in the subsequent leadership election.

Having regular and divisive leadership contests is not, however, a long-term business plan worth considering.

And even with the success of its growth in membership, Labour still has financial concentration problems of its own. For example, in the last quarter of 2019 (which included the general election), Labour attracted £8.3 million in declared donations, £4.6 million of which came from just one source – Unite. During the campaign itself, 61% of Labours declared cash donations were from Unite.

None of this necessarily means that changing party financing rules by introducing donation caps is a bad idea. But to introduce them, we have to accept two things.

First, that politics costs money and while it can be tempting to balk at the sums involved with some donations, the reality is that there is rarely too much money in politics – rather, there is frequently too little. Take the most recent set of party accounts (for the year ending 2020).

Like most organisations, Covid-19 took its toll, and all three main parties reported significant drops in fundraising income as a result of the cancellation of conferences.

The year after a general election also typically leads to a sharp drop in income – donors are usually much more likely to contribute just prior to a general election campaign, and less inclined to respond to requests to simply fund routine running costs.

Conservative central income in 2020 was at its lowest in real terms for nearly 20 years, for example. And all three main parties’ expenditure in 2020 exceeded their income – in the case of the Conservatives and Liberal Democrats by some margin – reversing a trend amongst all three apparent since the mid-2000s where they have generally managed to balance the books.

Parties are not generally awash with money, even with some of the large donations they receive.

The second thing one needs to accept is that if donation caps are introduced, the necessary income is unlikely to be made up by small donors. The culture for this form of giving simply does not exist in the United Kingdom.

And therefore, if we accept that the parties which are so crucial to our democracy are to survive, the most likely outcome is an expansion of public funding – precisely what was advocated by the last two major reviews of party financing in 2007 and 2011.

Yet politicians are frequently squeamish about any such ideas, fearing a backlash from voters. The last review published by the Committee of Standards in Public Life was effectively buried on the day of publication by politicians who could not bring themselves to advocate voters paying the equivalent of 50 pence per year, in order to deliver a cap on donations of £10,000.

So, getting ‘big money out of politics’ is a great slogan. But on its own, it’s a pretty poor solution to problems in party financing.

We can get ‘big money out of politics’ by capping donations, but only if we are also prepared to expand the level of public funding for political parties. That is a choice that can be made, but if we don’t want to make it, the reality is that stories such as the one in The Independent are unlikely to go away.

Selling influence is wrong under any circumstances. But parties needing to generate large donations simply to operate as organisations will only stop if we accept that the only really viable alternative to large donations is some expansion of public money for our political parties.

Reformers and politicians alike need to stop simplistic sloganeering and ask themselves whether they want to bite the bullet.