Party funding is a burning issue in the US, even after the election. Labour, if elected, will expand public funding for political parties in Britain. But in the meantime where are the parties getting the money to fight the most expensive election this century?by Martin Rosenbaum / February 20, 1997 / Leave a comment
Published in February 1997 issue of Prospect Magazine
The 1997 election campaign will be the most extravagant contest in real terms since the Corrupt and Illegal Practices Prevention Act in 1883 curtailed corruption and introduced limits on election expenditure. British campaigning may still be cheap compared to the US (where enormous sums are devoted to television advertising, which parties in Britain are not allowed to use), but its costs are rising. Spending in 1997 will not only exceed that of recent elections, it will also beat in real terms the most lavish Conservative efforts of the past in the 1929, 1935 and 1964 elections. And this ignores the millions to be spent by Sir James Goldsmith, the billionaire founder of the Referendum party. So how are the parties raising the money for this unpreced-ented level of expenditure?
The funding of the Conservative party is shrouded in secrecy. Conservative central office is exempt from the disclosure requirements of company law (unlike the Labour party), due to its peculiar legal status as the personal office of the party leader. Since 1993 more details of the party’s finances have been published annually, but the source of much income remains unknown.
What is clear is that the Conservatives are now much better placed to fight an expensive campaign than seemed likely in the wake of the last election. By the end of the 1992-93 financial year, they had run up an overdraft of over ?15m and a net current deficit of over ?19m. This was largely due to extravagant spending during 1987-91, exacer-bated by the demands of the 1992 campaign.
Since then the situation has improved thanks to staff cuts, tighter controls and a big increase in donations from individuals. As a result during 1993-96 the party achieved a cumulative revenue surplus of over ?11m.
By the end of the 1995-96 financial year the bank overdraft was down to ?2m, and since then it has been paid off altogether. While the primary cause is the recent surpluses, there is also an important secondary factor: central office has benefited from some very large interest free loans (which may become gifts) from cash rich local constituencies and party supporters, which it could set off against the overdraft. This has reduced the burden of interest payments, but it still leaves the party in debt. At the 1995-96 year end, interest free loans stood at ?8.6m. The net current deficit was ?7.5m.