Cash-free politics: Parties’ need for money is a constant source of friction and potential corruption - state funding is the answer


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It has been an unwritten rule of British politics that the party in power does not use the levers of government to cripple the Opposition financially. This is not a helpful convention, because it means that the highly unsatisfactory system under which political parties raise money hardly ever changes.

There have been exceptions. Ms Thatcher’s government passed legislation that compelled trade unions to ballot their members every 10 years on whether to continue to have a political fund. Without one, the union could not legally donate to the Labour Party. As it turned out, the law had no effect, as no union has been compelled to wind up its political fund.

The Labour government banned large anonymous political donations, and banned parties from taking money from foreign donors. That had more impact on the Conservatives than on any other party, but at least in theory it was a rule that applied equally to all parties.

The same cannot be said of the latest Conservative assault on Labour’s principal source of income. The Tories intend passing a law making the present system under which unions levy their members for contributions to the Labour party illegal. Currently, all members of unions affiliated to Labour are charged a political levy, unless they declare they do not want to pay it. In future, unions will only be allowed to levy those who have actually said that they do. They will “opt in”, rather than “opt out”.

No one knows exactly what this may cost Labour, but the fall in its income will certainly be measured in millions every year – in a political system in which the Conservatives received more in donations in the run-up to this year’s election than all the other parties together. The Conservatives already have the financial advantage. This will make it very much bigger.

It is not an intrinsically bad law. It is far from ideal that thousands on low incomes pay into the Labour Party via their union subs who have never been asked if they are happy to do so. But Labour has already acknowledged this. The review of party funding by Labour’s former general secretary, Ray Collins, had already recommended a change to party rules so that it would accept union money only if collected from those who had opted in. Labour’s voluntary plan will now be imposed by law.

Labour was going to allow itself five years to adjust to the fall in revenue, but the Government will have the power to deny Labour that period of grace and plunge it into serious financial difficulties, if it chooses. If so, the Tories can hardly complain if a future Labour government retaliates with a cap on the maximum amount rich individuals can donate to political parties, thereby knocking a large hole in Conservative funds.

The way to avoid these pointless problems is for the state to take over the funding of political parties. It is already happening by stealth, through the appointment of ministers’ special advisers on civil service salaries and the “Short money” allocated to opposition MPs. Politicians are fearful of taking state funding  further, because of the reaction from taxpayers, but there is no cheap way to run a working democracy. Someone must pay. The more parties rely on private sources, the more susceptible they are to being swayed by private interests. State funding may be contentious, but it is the one system under which parties can pay their way fairly under rules agreed by all.