Public funding of political parties is not perfect, but it’s better than the alternative—a system in which rich donors and trade unions can buy influenceby Vernon Bogdanor / March 26, 2015 / Leave a comment
In an ideal democracy, political parties would be financed entirely by individual membership subscriptions. But no democracy achieves this ideal. Membership subscriptions are everywhere supplemented from one of three sources: large individual donations, institutional money—primarily from companies and trade unions—or public funding. Of these three alternatives, public funding is by far the least damaging.
In Britain, only a small proportion of party funds is raised from membership subscriptions. Traditionally, the two large parties were financed primarily by trade unions and companies. In the 1970s, trade union funding comprised 92 per cent of Labour’s central income, while the Conservatives drew at least 55 per cent of their central income from company donations. The funding arrangements of the parties replicated a long-gone class war.
Tony Blair wanted New Labour to be a party of the whole nation, not merely of the organised working class. In 1995, he declared, “Nobody believes in this day and age that the business of the Labour Party is to be the political arm of the trade union movement.” By 2005, he had reduced trade union funding to around 25 per cent of Labour’s central income.
But Labour, in consequence, came to rely, as have the Conservatives, on large individual donations. Between 2001 and 2010, over three-quarters of Labour’s donation income and over half of the Conservatives’ came from donations of more than £50,000.
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However, after 2000, when the parties were required to make public all donations over £5,000, many donors were deterred from giving. Therefore Labour began to solicit loans, which at that time did not need to be declared. Of 12 individuals who gave such loans to Labour before the 2005 general election, seven were recommended for peerages by Labour. Four were rejected as unsuitable by the House of Lords Appointments Commission. In 2010, Michael Farmer, a recent Conservative appointee to the Lords, told the Committee on Standards in Public Life, “You cannot get away from…