Coalition’s party funding cap plans would be bad for our democracy

Decimating the Labour party’s income would be bad for our democracy - Democratic Audit’s Stephen Crone looks at the coalition’s latest party funding cap plans.

Stephen Crone is a research associate at Democratic Audit

Figures published by the Guardian today suggest a £50,000 annual cap on donations to political parties – whether from individuals, companies, trade unions or elsewhere – would have led to the notional loss of 72 per cent of Labour party income over the past five and a half years.


This is a staggering figure, and appears all the more stark when compared to the 37 and 25 per cent of donation income which the Conservatives and Liberal Democrats would have forfeited over the same period, respectively.

Yet these are not findings which will come as any great surprise to many, given the Labour party’s well-publicised dependence on large trade unions donations. Indeed, research published in a Democratic Audit report of last year came to very similar conclusions as the Guardian – as have various other articles published in the recent past.

Instead, what is of real interest in today’s Guardian article is the information it purports to disclose from an anonymous source close to the Committee on Standards in Public Life – the body which began an official inquiry into party funding last autumn and is set to report at some point in October this year.

Little coverage has been given to the committee’s inquiry since it started, and little revealed of the recommendations which it is likely to make when it concludes.

However, based on the information revealed to the Guardian by its unnamed source, it would now appear the committee is at least seriously entertaining a package of measures which might not unreasonably be considered a ‘doomsday’ settlement for Labour, in which donations are capped at £50,000 across the board and there is no compensatory scheme of direct public funding.

The shortcomings of this approach – should the Committee recommend it – would be enormous.

Firstly, as Democratic Audit has previously argued on Left Foot Forward, an annual donation cap of £50,000 is highly unlikely to assuage public fears of a ‘big donor culture’.

Not only is it a sum which is completely beyond the means of the vast majority of people, but it is also high enough to be effectively circumvented by super-wealthy individual donors through the ‘bundling’ of donations from family members or businesses, while at the same time forcing parties reliant on large institutional donations – such as Labour – to face disabling financial hardship.

Secondly – and just as importantly – it would also arguably overlook the fact that, as Professor Keith Ewing argues in a new book published this week, trade union funding of political parties is exactly the model of broad-based, transparent and democratic funding which ought to be encouraged, not stifled.

Unless of course the Labour party is willing to happily assent to its own financial disablement, it is highly likely, moreover, that any such settlement will have to be achieved by abandoning the well-established convention that party funding reforms be achieved on the basis of cross-party agreement.

There have been suggestions in the press, earlier this year, that the coalition may be willing to countenance such an approach.

However, this would probably, again, be the wrong way to proceed for a government committed to ‘remove big money from politics’. An imposed settlement which devastates the Labour party financially would not only open the coalition partners to charges of cynical opportunism, but is also likely to prove unsustainable in the long-term.

As we show in a Democratic Audit briefing (pdf) published today, this contention is supported by evidence from Canada, where the fallout from non-consensual party funding reforms passed in 2003 is still evident today.

Based on experiences there, we conclude that while it would clearly be easier for the coalition government to pass far-reaching reform of party funding law without the agreement of its main political rivals, the major parties might be better off sticking to a policy of negotiated settlement – however frustrating such an approach may prove to be.

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36 Responses to “Coalition’s party funding cap plans would be bad for our democracy”

  1. Luke Pagliaro

    Coalition’s party funding cap plans would be bad for our democracy: http://t.co/kpBULyO writes @DemocraticAudit’s Stephen Crone

  2. William Slater

    Coalition’s party funding cap plans would be bad for our democracy: http://t.co/kpBULyO writes @DemocraticAudit’s Stephen Crone

  3. Shamik Das

    Coalition’s party funding cap plans would be bad for our democracy: http://t.co/kpBULyO writes @DemocraticAudit’s Stephen Crone

  4. Political Planet

    Coalition’s party funding cap plans would be bad for our democracy: Decimating the Labour party’s income would b… http://t.co/Bpy6gqI

  5. Stuart Wilks-Heeg

    Coalition’s party funding cap plans would be bad for our democracy: http://t.co/kpBULyO writes @DemocraticAudit’s Stephen Crone

  6. Democratic Audit

    Coalition’s party funding cap plans would be bad for our democracy: http://t.co/kpBULyO writes @DemocraticAudit’s Stephen Crone

  7. Bloody Democracy

    Coalition's party funding cap plans would be bad for our democracy http://t.co/BWlzJ2w

  8. Robert

    It would devastate Labour, since a large part of it’s donation comes from the Unions, I’m all for it, it will make Labour look more to it’s membership then to Unions, anyway the way it’s going Labour would;d only have two unions left.

  9. Panda

    Coalition’s party funding cap plans would be bad for our democracy: http://t.co/kpBULyO writes @DemocraticAudit’s Stephen Crone

  10. splem

    correct me if i’m wrong, but don’t union members have to EXPLICITLY approve party donations repeatedly to let the union give money? The 50K cap should apply to those individuals, who have have individually approved the use of that money, being spent by an executive they elected themselves.

    Not to mention it’s just garbage to treat a corporation of a dozen millionaires the same as a democratic organisation of millions of people. It beggars belief. The idea Scotland’s oil barons are entitled to just as much influence with the millions they can find down the sofa as the hard-earned contributions of thousands of their workers beggars belief.

    Madness.

  11. Jacob

    Unions should not be covered by the cap as it is a small contribution of all its members (which is optional), so it is not the union itself donating, but each individual union member, via his or her union, so rather than forcing large donors out of the system, it only serves to cripple one party.
    I’m not even sure why the unions bother though sometimes, as Blairism has dragged them far too far from backing the unions now, so perhaps this reform is a form of Karma punishment for forgetting where they came from

  12. Leon Wolfson

    Of course the government is willing to eviscerate the Labour party.

    They don’t CARE about your objections, they just justify it for them…

  13. nonny mouse

    >>exactly the model of broad-based, transparent and democratic funding which ought to be encouraged, not stifled.

    Many of the union members don’t even vote Labour. How is that democratic?

    I suggest that union members be balloted about where they want their money going. They could pick any party or no party if they don’t want to donate to anybody.

    Most of the money would still go to Labour, but at least it would have some legitimacy about it rather than a small number of union bosses donating money that is not theirs to give.

    If unions are to survive in the 21st Century then they need to spend their money to improve the lives of their members, not to play party politics. Gone are the days when Labour stood for the working class.

    These days Labour politicans live in 8 million pound mansions and use prison labour to decorate their houses. If you want to return the Labour party to representing the working class then make them sing for the money rather than channeling it through the union bosses.

    Making parties campaign directly to union members would do more for those members than making the Labour leader campaign for a couple of highly paid union bosses. It would make all parties listen to the needs of union members where now they are ignored.

    That, my friends, would be true democracy.

  14. Leon Wolfson

    Yes, of course, people choosing to send money to the Labour party need to be harassed until they stop, sock puppet mouse.

  15. splem

    >>I suggest that union members be balloted about where they want their money going. They could pick any party or no party if they don’t want to donate to anybody.

    YES. THAT’S THE POINT. THEY ALREADY ARE.

    And the union isn’t allowed to touch the donations of anybody who explicitly opts out.

    No corporation has to go through this to bung the Tories money. Bearwood Corporate Services is just a shell company Lord Caschcroft uses as a funnel.

    Unions are harassed by finance law like nobody else. This just the latest ridiculous, biased and partisan assault.

  16. Dave Citizen

    Looks like our democracy is headed for another bit of tinkering based on narrow party interests, just like the pathetic ‘AV referendum’ options put to the country by Cameron and co.

    I don’t doubt that party funding is in urgent need of reform but let’s do it based on independent advice and a clear remit to minimise anti democratic manipulation. Oh, and the best way to deal with the distortion of democracy by the super rich is to tackle extreme inequality – no one works hard enough to earn the millions these people misuse to extinguish democracy.

  17. nonny mouse

    Correct me if I am wrong, but aren’t union members are asked if they want to donate into a political fund (yes/no answer) and then the union bosses decide how to spend it?

    I am suggesting that a) they can pick any party and b) that it goes straight to the party.

    The benefit is that politicians from all parties would need to campaign to get the money and listen to the needs of the union members, not scratch the back of the union bosses. It would end the current system of the use and abuse of member money for union bosses to bribe the Labour party into giving safe seats to union bosses.

  18. nonny mouse

    >>Looks like our democracy is headed for another bit of tinkering based on narrow party interests, just like the pathetic ‘AV referendum’ options put to the country by Cameron and co.

    Actually, the AV referendum was in the Labour party mainfesto. It was backed by Ed Miliband (who wrote the manifesto) even if not by his MPs or party members.

  19. splem

    >>Correct me if I am wrong, but aren’t union members are asked if they want to donate into a political fund (yes/no answer) and then the union bosses decide how to spend it?

    There is a secret ballot to allow donations to even exist, then anyone who doesn’t want to gets to contract out, and it is spent by the elected officers they voted for.

    >>It would end the current system of the use and abuse of member money for union bosses to bribe the Labour party into giving safe seats to union bosses.

    Which doesn’t happen actually? Is Mark Serwotka a labour MP?

    But Lord Ashcroft is an expatriate millionaire who illegally funnels money to the Tories in shell corporations. He got in the Parliament of a country in which he doesn’t pay taxes and lied about it for a decade. Then the Tories made him DEPUTY CHAIRMAN. Half of tory donations to 2010 came from one industry alone – BANKERS. Half of that came from just ten millionaires.

    It says so much you want to “sort out” unions with ridiculously biased laws that already exist – and they have for two decades! The media have this laughable dinousaur bias against unions that’s just so completely out of date. Even BBC journalists use the word “bloc vote” like he knows what it means. It hasn’t existed for twenty years.

  20. splem

    @nonny mouse

    Sorry, to be a little more polite, yes, you’re correct. There is a yes/no ballot first. Then individual members are permitted to “contract out” and their dues can’t be used. Their representatives then make such donations.

    In Labour itself, the reps do nothing in the the leadership ballot that elected Ed. There is no block vote and the votes were cast by individual affiliated members

    The problem with the “Union muscle runs Labour” idea is that it seems like it should make sense, but it doesn’t actually happen in reality. After all, the Tories are bought by the banks and in return they get a party that will shield them from all responsibility for the bailout, and new reform and sabotages international tax agreements for them.

    But what do unions get from Labour? The RMT is so pissed off at sending them millions over the years and getting nothing for it they just gave up and disaffiliated. Thatcher’s anti-union laws on funding, striking, organising at all are untouched for over a decade. Labour have a massive temptation to rewrite the laws to favour unions – so massive it’s overwhelming. And yet they just bloody don’t. Why can’t the right admit that? The tories says “Red Ed” is bought by the unions. What did union money buy? The guy who came out against his biggest donor during the big strike this year.

    Unions have a huge role in Labour’s electoral fortunes both financially and in organisation. The fact that Labour politicians give them nothing in return tells us the Harriet Harmans of this world are either a) idealists who refuse to rewrite the laws to bias a massive special interest on whom they depend or b) in hock to anti union politics just as much. Labour politicians have always bit the hand from which they feed. They might even go along with this ridiculous proposal just to prove “their independent principles” and add another discriminatory law to the slate.

  21. Stephen W

    This is pretty feeble stuff. More power to Cameron’s elbow I say. If Trade Union members really are all enthusiastic Labour party supporters the Unions should have no difficulty encouraging them to donate individually up to the £50,000 limit. A limit on donations would knock some discipline into the parties. Force them to actually pay some more attention to their members and wider supporters. A good thing too, I say. If Labour are so convinced they could never get widespread public financial support then maybe they deserve to go under.

  22. Robert

    I have been in a Union since 1966 UCATT and then the GMB not once have I voted or been asked to vote on donations given by the Union to Labour. We did some years ago argue that the Union should disaffiliate from the Labour party, but a compromise which came from the leaders of the Union to back MP’s and not the party.

    I have voted on the parties levy but then again that just do we carry on or do we pay it to a charity.

    Labour are the party which state Union must have less power, less power then sadly find your own donations.

  23. Dave Citizen

    Well said Splem – the idea that, post Blair, the unions have some great power to dictate policy with Labour Governments is utter nonsense. Under New Labour it often seemed to me that the rich and powerful had got so rich they’d bought the Labour party as well – before anyone laughs, this is precisely the situation in the US.

  24. Leon Wolfson

    @12 – And for us non-Stalinists?

  25. paul barker

    The £50,000 figure is itself a compromise, most Libdems would prefer something like £5,000.
    I dont see the difficulty for Labour, why cant The unions simply give the money at a lower level, local or workplace branches say ?
    The proposed reform is partly missing the point, the real injustice of the present set-up is that Union members have to opt out, instead of opting in. Plus they have no choice over where the money goes, its Labour or nothing.

  26. Mr. Sensible

    I think this article is right in its stance towards union involvement; it is the type of democratic involvement we should be encouraging.

  27. Stephen W

    @15 – Excuse me?

  28. Leon Wolfson

    @18 – I was quite clear. I am not, myself, a one-party statist, so I was enquiring what those of us who felt like myself should do once the Tories have finished getting rid of other parties.

    It’s absolute nonsense to bundle up a donation from many people and call it from one person. As long as there are good records who the donators are, and Unions certainly have that.

    But as I said, logic and anything else has clearly taken second place with the Tories to ruthlessly stamping on other parties electoral chances.

  29. Democratic Audit

    UK party funding – a donation cap without state funding to compensate would be bad for democracy: http://t.co/OVWkmDp

  30. Democratic Audit

    Very impressed by Stephen Crone's blog post on party funding great stuff http://t.co/dT66PYe

  31. Peter Kenyon

    “@democraticaudit: UK party funding – a donation cap without state funding to compensate would be bad for democracy: http://t.co/DP3AGzT”Why

  32. lee

    Given that the ultimate source of the Labour donations is union members who, let us assume, broadly support the party and are happy for theor money to go there, it should be far easier for them to maintain funding at close to current levels than the tories, who draw from a far narrower pool of people.

    Of course, the £50k limit is far too high and is to the advantage of the tories. Personally, I’d have it set at a level deemed affordable to someone on the average wage. Let’s say £500 tops!

    If Labour (and the Unions) cannot rally Union members to donate as a bloc individuals (it’s collectivism, just different) then there’s clearly a failing with the party which means that, let us be honest, their current funding is out of line with the interests of those providing it.

    This would/should be an opportunity for Labour. If it’s seen as a threat then the problem lies inwards.

  33. Stephen W

    @18 I wouldn’t call, “and for us non-Stalinists?” clear. But okay, I get your point now. Let me repeat myself.

    If Trade Union members really are all enthusiastic Labour party supporters the Unions should have no difficulty encouraging them to donate individually up to the £50,000 limit.

    What is your argument against that statement?

  34. Leon Wolfson

    @21 – Your crusade for a single state society, as I said. I wasn’t using any sort of metaphor. It’s very clear what the Tories are doing via very specific gerrymandering, deliberately pushing Scotland away from the union and via social cleansing.

  35. Stephen W

    You are aware that I am a floating voter and not actually the incarnation of the Conservative Party right?

    Also last time I checked, only Labour will probably go under with these arrangements. The Conservatives, the Lib Dems, SNP, UKIP, Plaid, DUP, Greens, etc will all survive. Hardly a one party state.

  36. Stephen W

    Also, why should Labour go under? You keep not answering my question. If they really do have the support of millions of trade unionists why will they have any problem securing individual donations?

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