Parties to get more taxpayer subsidies

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Political parties will receive more funds from taxpayers following proposals published today by the independent Electoral Commission.

If Labour wins a third term, it will implement proposals to allow parties grants worth an extra £1m a year to help them develop policies, taking the total figure to £3m. But after an 18-month inquiry, the commission rejected calls for a much bigger handout to parties, saying this could make them more remote from the public.

Instead, the commission proposed tax relief on all political donations under £200 to encourage parties to broaden their financial support. The aim is to reduce dependency on the millionaire backers who have supported Labour and the Tories in recent years.

Under the plan, a gift of £250 would be worth £256, a party raising a £50 donation from 50,000 members would receive tax relief worth £705,000 and the same number of £100 donations would win tax relief of more than £1.4m. However, the Treasury may be reluctant to grant such a big subsidy to the parties.

Today's report stops short of imposing a cap on individual donations, a move opposed by Labour because it would threaten the party's traditional relationship with the trade unions. But the commission says that a £10,000 ceiling should be imposed if the Government opts for a "big bang" approach with a huge increase in state funding for the parties.

The commission warned: "If political parties were businesses some could be regarded as trading while insolvent."