Steve Richards: Get rid of these big donors - they are stifling political parties and damaging democracy

It is not enough for leaders to switch from big donors to the taxpayer with no conditions attached
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At one end of the scale is the wealthy donor, sometimes only casually interested in the fate of the party that is about to become richer by a million pounds or more. At the other end are the local members, declining in numbers and increasingly eccentric in their willingness to remain active. One feeds off the other. The decline of parties has made leaders increasingly dependent on the big donors. The dependence has hastened the decline. Leaders know that time is spent more fruitfully with a wealthy donor than heading for Dudley on a wet Wednesday night to address a moribund local party.

I recall attending for the first time a meeting of my local Labour Party in the late 1970s. As a teenager I was excited by the prospect of taking part, moving a little closer to the unfolding drama at Westminster as the Callaghan government manoeuvred precariously to retain power. The meeting was held in the local chair's front room and was dominated by an elderly treasurer who spoke pompously and at length about the financial outlook. His focus did not extend beyond local matters. The fragile financial outlook for the British economy at the time had passed him by. He concluded after an hour or so by reporting on the outcome of Labour's Christmas bazaar held at a scout hall in East Finchley. I remember only the final two sentences delivered triumphantly and with no sense of irony. "This has been our most successful Xmas bazaar for many years. We managed to break even." This fund-raising event normally cost Labour money.

I have one other memory of party activity from this period. During the 1983 election I was a student living poorly in Hampstead, admittedly almost a contradiction in terms. The local party was packed with intense, well-meaning and in some cases famous actors. Once more seeking to be part of the national political drama, what with the entire future of the Labour Party being at stake, I went along ready to canvass voters. The only problem was that we did not meet a single voter. Local Hampstead members spent evenings role playing, acting out scenes in which canvassers met awkward voters. Members would swap roles, one evening playing a canvasser and the next, the awkward voter. It was great fun, and we celebrated at the end of the campaign with a big dinner after attending a packed meeting addressed by the leader, Michael Foot. Two days later the Conservatives won a landslide.

The worry is that I am recalling the final days of a golden age for political parties. They mattered then. Probably the Hampstead Labour Party could have single-handedly reversed the leadership's policy on state ownership if it had stopped playing charades. I am sure also that there were many splendid examples elsewhere of dynamic local activists that counter my narrow experiences. The Conservatives, too, had a mass membership. When they held a local Christmas bazaar, they tended to make a profit.

Now the parties are in a poorer state still, almost to the extent that there is an understated crisis of representation in British politics. National politicians cannot attack their own local members. Privately, though, some Cabinet ministers and senior Conservatives are scathing about the quality of their local members. The stifling mediocrity spreads outwards, undermining the potential for a revival in local government and having an impact also on the quality of candidates selected to stand for the Commons.

For New Labour, a decline in the importance of the party was not a cause for regret, but almost a central objective. During the 1970s and 1980s, the party had been the problem. Tony Blair turned to business leaders as a matter of expedient pride while the party was downgraded. Indeed, the party had become so peripheral that its pre-election general secretary was an unknown figure in his thirties, the chairman lay on a hospital bed recovering from major heart surgery while still retaining his post, and the treasurer did not know how money was being raised.

The Conservatives have always received generous anonymous donations. The sources of those hefty loans for the last election remain defiantly and suspiciously anonymous. As for previous campaigns, some anonymous Tory donors would probably fill a floor or two of Wandsworth prison if they could be traced.

I have written before that I understand why Blair took the money in advance of the last election: Labour was broke and had a campaign to contest. My view is a minority one, held as far as I can tell by around three other people. In other words, the perception of sleaze is out there and, if anything, will grow now that a police inquiry is under way. The police have greater powers to probe compared with a tame parliamentary committee. In terms of the frenzy in which politics is reported, the fact of an investigation will become a sensation whatever the outcome.

Now anxious leaders are united in fearful anguish. Within two weeks of the loans scandal arising, state funding and an elected House of Lords are on the agenda as a matter of urgency. That is quick work.

Still, though, there is a missing connection. It is not good enough for leaders to switch from big donors to the taxpayer with no conditions attached. The decline of political parties was part of the problem. Their revival must be part of the solution. The level of state funding should be linked to the level of membership in each party. As a bonus, this would prevent the extremist fringe parties from getting any money at all. More importantly, the leadership of parties would have an incentive to find ways of attracting members and keeping them.

A cap should accompany this on spending at elections. Parties waste far too much money on campaigns. They spend because they fear the other parties are spending even more. I became aware of how generously Labour was spending in the run-up to the 1997 election when I got a call from someone who declared with a flourish that he was the acting deputy head of the rebuttal unit. If all the parties are fighting under the same constraints, there is no need for acting deputy heads.

There is still an appetite for party politics. When Blair became leader in 1994, Labour's membership soared. Perhaps what followed might have been better for all concerned if Blair had been compelled to nurture the membership in order to attract decent levels of funding. Instead he had the seemingly more flexible option of getting money from a few big donors. The option does not seem so conveniently flexible now.

Britain needs vibrant parties attracting talented people who want to represent them at a national and a local level. This is the only way we are going to get them. Local Xmas bazaars might even make a profit before very long.