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Clean money needed to restore trust in politics

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15 October 2002

date: Monday 14th October 2002
embargo: 00.01 Tuesday 15th October 2002

news from ippr

Clean money needed to restore trust in politics - ippr publishes report on state funding of political parties

Political parties face a stark choice between an increasing reliance on big donations - with the allegations of sleaze this brings - or a form of state funding which reconnects people to politics, according to the Institute for Public Policy Research (ippr).

Keeping it Clean - the way forward for state funding of political parties by Matt Cain and Matthew Taylor, published today (Tuesday 15th October), recommends a system of ‘Tax Relief Plus’ to revitalise local party activity, combined with a £5000 donation cap.

The report is the result of a six month research project which included commissioned papers and seminars, private meetings with experts and past and present party officials, focus groups and a visit to the US.

The report recommends:

· Lowering the general election spending cap with a yearly spending cap, reduced over time.
The general election cap should be reduced to £12m and remain under review by the Electoral Commission. A yearly spending cap should be introduced of £20m, being reduced over a period of five years to £15m. A £5,000 donation cap would ensure that people could see that influence is not being bought in a political party.

· Introducing state funding, based on activity level
State funding should be based on the activity level of a party. A system of 'Tax Relief Plus' would give a supplement to parties tapered to encourage small donations. Any new state funding would be voluntary, but only available in return for a cap on donations. However, all parties have to keep to the rules of transparency and spending limits.

· Extending the existing state ‘aid in kind’ to modern forms of communication
Applying existing principles, current forms of state aid - PPBs, freepost and other forms of free communication for parties - should be modernised and extended. For example, through a national hotline ‘0800 ELECTION’ paid for by the state, staffed by the main parties.

Matt Cain, ippr Researcher and co-author of the report said:
“Political parties have never been less popular. Fewer people identify with them, vote for them, or join them than ever before. This and the campaign ‘arms race’ between the major parties has led them to seek large donations from wealthy individuals. These lead to media rows which discredit the motives of the donor and the party. These rows only serve to increase the unpopularity of parties and to discredit politics. We recommend the introduction of a £5000 donation cap and a tighter cap on election spending.

“The Parties already get money for policy development and aid in kind through Party Political Broadcasts (PPBs), freepost at election times and the free hire of public buildings. State funding should be extended through a system of ‘Tax Relief Plus’. This would act as an incentive to encourage parties to recruit and retain members and small donors. For example, a maximum donation of £50 might attract £50 from the state while a £100 donation might gain a £80 top-up. This would reward small donations - perhaps up to £100.

“This inquiry was established in order to identify areas of cross party consensus for reform. Should our proposals gather consensus we hope the Electoral Commission’s more specific work will examine the details of a new funding regime.”

Notes to Editors:

Keeping it Clean - the way forward for state funding of political parties by Matt Cain and Matthew Taylor is available by post or email from the ippr media office (journalists only) or from Central Books 0845 458 9911.

Contacts:

Media enquiries:
Philip Taylor, Senior Media Officer 020 7470 6120 / 07753 719 289 / p.taylor@ippr.org.uk
Beatrice Stern, Media Officer 020 7470 6125 / 07971 851 145 / b.stern@ippr.org.uk

Other enquiries:
Matt Cain, ippr state funding of political parties Researcher 020 7470 6126 / 07764 747 858 / m.cain@ippr.org.uk

All ippr news releases can be found at www.ippr.org.uk

.Criticisms answered

Q: Isn’t a consensus on state funding unrealistic?
ippr set out to build a cross party consensus and we believe that we have found the points of agreement between key figures in all political parties. The Conservatives oppose ‘full state funding’ but many senior members have spoken out in favour of reform. However, Iain Duncan Smith has publicly advocated a system of tax relief. ippr also opposes full state funding and believes that it is for parties to decide whether they accept state funding or not. It should be noted that each major party receives a significant amount of income from the state already.

Q: Should taxpayers be forced to pay for parties they don’t support?
Taxpayers already contribute towards parties they don’t support. We can’t choose where we spend any other taxes and then pay for policies we may oppose. There are various forms of ‘tax choice giving’ where taxpayers could choose to give a proportion of their tax to a party. We don’t believe that this would have enough support to provide parties with the resources they need. In the US where a version of this scheme operates, it would have been bankrupted if George Bush had drawn on the fund in 2001.

Q: Parties are only failing to fund themselves because of their unpopularity. Isn’t it just like nationalising a failing industry?
Disengagement in politics is partly due to lack of trust. Capping donations will provide some reassurance that politicians are trustworthy. Basing state funding on activity levels will give parties incentives to strengthen grassroots and expand contact with supporters and the general public.

Q: Aren’t there more important things for the Government to fund?
Yes, but under our system the cost of state funding will be less than 0.001 per cent of government spending, or no more than £30 million a year. State funding would be a relatively small addition to the existing costs of democracy. If we want to encourage trust in politics, it is a small price to pay. State funding will be cheaper than the running costs of parliament.

Q: Why should the public fund the BNP and other extremist parties?
Taxpayers already do through the freepost at election times and some parties' PEBs. A cost of democracy is allowing the expression of views that many people find abhorrent. Anti-discrimination legislation may be more appropriate than restricting access state funding. Our qualitative research also suggested that this issues wasn't a major objection for the public who saw it as a cost of democracy.

Q: Won't state funding just exclude nationalists, smaller parties and independents?
We see no reason why smaller parties and independents should be excluded from this system. If they meet a qualifying target and decline large donations, they could be eligible for the system of Tax Relief Plus for their income.

Q: Won't your caps be overturned in court for infringing the Human Rights Act?
We believe not. The key legal ruling lost by the British government, is known as the Bowman judgement. The Society for the Prevention of Unborn Children with their Executive Director, Phyllis Bowman, took the government to court for restricting their ability to campaign during election times. Under the old legislation, third parties could not spend more than £5. The European Court ruled in favour of SPUC because £5 was considered such a low limit that it restricted free speech. However, when the Neill Committee recommended higher caps on the spending by third parties, and caps on party spending, it was confident that these would not be so low to restrict freedom of speech. Article 11 of the convention allows for any restrictions that may be necessary in a democratic society.

Q: Can't a family of four each give £5,000 each where one just gave £20,000 before?
This system, known as bundling, occurs elsewhere. However, tax rules could prevent it. A lower donation cap also makes bundling less effective.

Q: Won't all of the donations that would have gone to parties just go elsewhere?
No system of state funding can ever be water-tight just as tax systems are evaded. However, we believe the restrictions on third parties will make the system harder to break.

Q: Will we see the growth of Political Action Committees like the US?
Taken together, the RPA 1983 and the PPERA make PACs illegal. The Electoral Commission may want to recommend to parliament that the drafting of these particular Acts be brought together for legal clarity.

Q: If the Liberal Democrats get by on £1.5m why can't Labour and the Conservatives?
We believe that the Lib Democrats don't have enough resources to run an effective nationwide campaign or support a large number of MPs in Parliament. There are certain costs involved in maintaining a large organisation with some base in London. If all parties just spent less money then they would be less able to run comprehensive and professional organisations.

Q: Will state funding put the relationship between the Labour Party and trade unions at risk?
Not in itself. Removing the perception that money buys influence is important and will benefit Labour and the unions. Even with a donation cap, we believe that this historical relationship can continue.