The funding of parties and regulation

Political parties are already regulated

Some views put to us in the course of the Review so far reflect a belief that political parties are or should be on the whole unregulated bodies, like social or sports clubs. But that position has gradually been eroded:

The leader of the main opposition party has been paid out of public funds for 70 years;
candidates in elections get free mailshots; parties receive free broadcast time at election time;
parties have received money from public funds for representational activity for many years; and
Those parties represented in Westminster now receive grants for policy development as well.

Parties were recognised in statute and regulated in law by the Registration of Political Parties Act 1998 and the Political Parties, Elections and Referendums Act 2000. It is somewhat misleading, therefore, to continue to speak of parties as if they were entirely unregulated bodies. There is a public interest in the political parties. Healthy opposition is as essential to democracy as government.

The nature of party politics is changing

The number and nature of political parties have also changed. We have devolved administrations functioning in Scotland and Wales, and a latent devolved administration in Northern Ireland, as well as a plethora of different voting systems. The funding system needs to reflect the reality of this changed political situation and the needs of smaller parties, and enable entry to the political arena.

In recent elections we have seen the growth of smaller parties. In the 2005 general election parties and candidates other than the three main parties won more than 10% of the vote. In comparison, in 1979, the share of the vote was less than 6%, and in 1955 less than 2%.

The current financial health of political parties

Despite the existing contributions from public funds, the finances of most parties are fragile.

The Labour Party remains dependent on trade union affiliation fees (though not as much as 20 years ago), and the three main parties have had to rely increasingly on donations or loans from a small number of very rich individuals. After the recent controversies about these, that source may well dry up, possibly of its own accord, even without any new step to cap the amount individuals or organisations can give.

Is there a need to change the current system?

Nonetheless, in spite of these problems there is a case to be made for making little change to the present system. The simplest argument for this is that the parties have got into trouble by themselves and they should sort themselves out.

But this may miss the underlying challenge to party financing. It certainly misses out the public interest in financially healthy political parties, and what parties can do in the public interest.

A more sophisticated argument for avoiding major change now is that some of the problems which have arisen may be the result of the new regulatory regime of transparency:

donations, and now loans, have to be disclosed;
there is a limit to what parties can spend to campaign at elections; and
some public funding is available for defined purposes.

Change should be avoided, so the argument goes, as the problems that have arisen so far show in fact that the system is working.

This minimalist approach would leave people free to give what they want to parties, and it could involve some changes to the role of the regulator the Committee on Standards in Public Life is looking into that to help increase its effectiveness. But the problem about doing little or nothing is that it does not address the underlying fragility of party finances nor does it do anything about public confidence in parties.

Page last updated: 19 October 2006