Limit donations
One of the most common responses to the charge that large donations to political parties buy influence is to say that the law should limit the amount any individual or organisation can give. Other countries, for example the USA and Canada, have such limits.
On the face of it this would be a direct response to recent criticism and concern. Indeed it can be argued that if the limit is set relatively low (what that may be is a pretty subjective judgement) then it would have the further benefit of obliging parties to search for more small donations and therefore engage more people.
Before anyone ticks this box in an automatic way four things must be thought through.
Financial effects of a cap on donations
The first is where this would leave the main parties financially. If you assume that existing donation patterns and sources continue, and that Trade Union affiliation fees are caught by any cap, the arithmetical consequence is a shortfall for the main parties in the following range:
Of course, these precise levels are not likely to occur because parties and donors will change their behaviour, but in ways that are difficult to predict. (A detailed analysis of the possible range of shortfalls is in Annex G.)
Risk of evasion or avoidance
The second is the risk of evasion or avoidance, such as channelling donations through others, for example, giving amounts up to the cap to friends to donate; or alternatively through funding other organisations which campaign in the interests of a particular party without giving it the funds directly.
Of course some of this risk can be dealt with by closing off obvious loopholes in law, although this adds to the complexity and bureaucratic weight of regulation.
Effect on the trade unions
The third is the consequence for the constitution of the Labour Party in which historically some trade unions and socialist societies are, by virtue of affiliation fees, corporate members.
It has been put to me with some force that a change in funding arrangements should not be constructed so that it forces a change in the way in which a political party chooses to organise itself.
Others argue, with equal force, that a major political party should have both the resilience and flexibility to sustain the constitution it wants despite new financing requirements.
Sustainability without public funding
The fourth is that it may not be sustainable to set a limit on donations without some increase in public funding if the financial health of parties, and not just the large ones, is to remain stable.
Page last updated: 19 October 2006