Taxpayer may foot party election bills

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The Nolan committee on standards in public will be asked by Tony Blair, if Labour forms the next government, to report on state funding for political parties by the time of the next election.

Britain is the odd man out internationally in refusing to fund political campaigns through state aid. State funding for political campaigns is provided by the taxpayers to parties in the United States, Canada, France, Italy, Spain, Sweden, Germany and Australia.

Half the election expenses are reimbursed by the taxpayer in Canada. In Britain, if the parties received half of the sums spent in the 1992 general election campaign, the taxpayer would have to pay pounds 7m to the Conservatives, pounds 7m to the Labour Party and pounds 2m to the Liberal Democrats.

State funding would require parties to be defined in law for the first time, but that has been done in Canada and Australia and in the rest of the European Union.

Charter 88, the constitutional pressure group, said parties would have to be internally democratic and accountable to the same degree as other voluntary organisations that receive public money. "This might involve considerable change in the Conservative Party," it said.

State funding would present opportunities for fraud - there have been many scandals in Italy and Germany over tax privileges for donors to political parties but Charter 88 said that this was "not an argument against state funding".

Questions would be raised over which parties qualified for state funding - whether the taxpayer, for example, should fund the British National Party, or Sir James Goldsmith's Referendum Party - and about the extent to which parties should continue to receive private donations. Some countries have a limit to the sums the parties can spend, but there are loopholes allowing presidential candidates in the US to spend a fortune on electioneering.

The Labour leadership says it supports the disclosure of large donations, and in the long-term state funding, to clean up the "sleaze" in British politics. But state funding would also end Tory claims that Labour is in hock to the unions. It would allow Tony Blair to declare Labour's financial independence from the unions, while maintaining some links with them. However, the Tory Party is against calling on the taxpayer to foot the bill for election campaigns.

The Tories went more than pounds 17m into the red after the 1992 campaign. Corporate donations fell, but the party has slashed its overdraft by donations from businessmen, whose identities are being kept secret.

How the Tories have managed to get back into the black so quickly is one of the mysteries of the 1997 campaign.