Thursday, September 03, 2009

The effects of a party funding cap

The idea most commonly proposed around party funding reform is a donations cap. A £50,000 annual limit on donations from any individual or organisation was recommended by the Hayden Phillips review a while back. But there are plenty of disputed issues, not least whether trade union donations to Labour (or in theory any other party) should have the same limit applied or be treated as aggregates of many smaller individual donations, with the cap applying separately to these.

The Electoral Commission produced its latest set of donation figures last week, so I’ve taken a look at how either reform would have changed things. In the chart above, I show the actual donations (cash and non-cash) received by the three main parties over the year to June, as well as how the figures look if you cut out all donations from any given source above £50k, and how things would look if union donations were in effect exempt from this cap.

It’s no surprise that the Tories favour capping union donations: at present, they’re getting just under half the donations received by the three parties. With a blanket £50k cap, they’d go up to a massively dominant two-thirds. And it’s no surprise that Labour wants to keep its union funding.

My own view is that it’s reasonable for union party affiliation fees to be treated as aggregates of smaller donations as long as each individual member is explicitly giving a particular amount for this purpose, but for other contributions that are made by the union collectively to be treated as coming from a single donor. The result of this would put Labour’s funding somewhere between the second and third set of numbers in the chart.

If we assume that there will be no reforms before the election, that the Tories are very likely to win, and that they’ll take a self-interested view of funding reform, Labour and the unions will need to rethink their set-up if they are to retain significant financial links. What springs to mind is for union political activities to become much more devolved, with local/regional branches having their own political funds that they can allocate independently.


Liam Murray said...

Nice little piece of research.

You won't be surprised that I favour the cap with no exceptions but not because of the advantage it confers on the Tories - it just seems fair.

If, in law, you tried to fashion some sort of exemption for unions it would have to refer to any similarly collective endeavour - the CBI could operate some sort of affiliate scheme along similar lines which, at the end of the day, could bring the Tory donations back to the current level. There's no credible defence of aggregate donations to Labour from unions that wouldn't then apply to such a CBI scheme.

My preference (with a honest view to democratic legitimacy rather than any party advantage) is the £50k cap and Labour & the unions should now be thinking about reform that allows straight pass through for most of the funding that currently exists - that would reduce it a bit (I know a few Tory union members - Disraeli passed early union legislation you know!) but not many....

Tom Freeman said...

Yep, I love a nice bit of number-crunching.

Completely agree that an 'aggregate individual donations' approach would have broader applicability. I think the key condition would have to be that members had specifically given sums to their organisation for the purpose of being then passed on to the party under that organisation's umbrella. The reason members would do that would be that they wanted (a) to support that party and (b) to do so in a way that gives their organisation clout within that party.

(I don't think the CBI does party donations. I'm not sure there's an equivalent type of collective body at all that donates members' contributions, at least not on any significant scale. And the same principle wouldn't apply to large companies with many shareholders, unless we were talking about individual shareholders forgoing part of their dividend, say, to make a donation - which isn't how corporate donations work.)

Of course, under any set of reforms all the parties will alter their fundraising strategies accordingly...