More evidence of big donor culture shows urgent need for party funding reform

If we are to restore any degree of public trust in political parties and reduce the possibility of stories like the BIJ’s being repeated in the future there may be no alternative to public funding.

Stephen Crone is a research associate at Democratic Audit

The publication of research by the Bureau of Investigative Journalism (BIJ) yesterday, revealing that more than 50 per cent of the Conservative Party’s funding in 2010 came from the financial sector, was perfectly timed to steal the government’s thunder on banking regulation.

Coming on the day George Osborne announced the ‘Project Merlin’ deal, through which the banks agreed to lend a little more and, possibly, pay a little less in pay and bonuses, the headlines prompted by the research were highly embarrassing for the Tories.

Commentator after commentator highlighted the pointedly obvious conflict of interest: namely, between the responsibility of the Conservative-led coalition to objectively regulate the financial sector, and the fact that the Conservative Party is itself dependent on donations from those institutions and individuals which it is expected to regulate.

With media coverage quickly shifting to the details of ‘Project Merlin’, the implications of the BIJ findings for wider debates about reforming party political funding have received limited attention – despite the fact that these very issues are currently being considered, rather discreetly, by a Committee on Standards in Public Life inquiry.

The fact that parties rely on large donations to survive is, of course, not news to most; the media has been littered with stories of party funding scandals for years, and numerous academic studies have also explored the phenomenon of the ‘big donor culture’.

However, the BIJ’s exposé has thrust party funding back into the harsh light of public scrutiny once more, and will hopefully help to revive an issue which, at present, is in danger of slowly slipping off the political agenda.

The stubborn fact is that, without reform, deep-rooted public perceptions of undue donor influence are likely to persist – fuelled periodically by controversies about what individual donors may be expecting in return, be it a promise of honours or influence over policy.

Large donations will almost always attract suspicion, irrespective of their source. Such donations are made possible by the current legal framework, which places no limit on the amount that any individual or organisation can donate to a political party. It is for this reason that the Committee on Standards in Public Life is considering the merits of a donation cap, and may well come to recommend such a cap in its final report, which is due in the spring.

However, as Stuart Wilks-Heeg and myself highlighted in a Democratic Audit report in October last year, the level of any proposed cap is crucial and could have profound ramifications. Too high, and it will do nothing to relieve the public unease which has understandably built up around the issue of party funding; too low, and there is a risk of creating financially anaemic parties, thus necessitating the infusion of public funding on a significantly increased scale.

There is also the crucial question of whether trade union payments to the Labour Party should be treated as large institutional donations, or as the aggregation of hundreds of thousands of small sums of money paid by individual union members.

Without question, there are tough decisions to make. Many politicians recoil in horror at the mere mention of public funding for political parties, understandably fearful of the prospect of public backlash.

Yet the truth is that there may be no other realistic alternative to moving towards the goal of a low donation cap and greater public funding, if we are to restore any degree of public trust in political parties and reduce the possibility of stories like the BIJ’s being repeated in the future.

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