The Modern British History Podcast
My personal interest in this comes from being a longstanding modern British history enthusiast, with an interest in UK domestic affairs over the recent past.
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The Modern British History Podcast
4. Party Finance - with Professor Justin Fisher
What if we told you that the often overlooked aspect of party finance plays a critical role in shaping British politics? As we dive into the historical landscape of political funding, our guest Justin Fisher from Brunel University brings his 35 years of expertise in political science to help us unravel the complexities and motivations behind political donations.
Throughout the episode, we examine the roles of trade unions, businesses, and individual contributions in shaping the political landscape and highlight the major differences between how the Conservative and Labour parties have been financed over the years. Furthermore, we tackle the subject of transparency in political finance and its implications on public trust.
In the final part of our conversation, we venture into the topic of greater state funding for political parties, weighing the pros and cons of such a model and how it could be implemented.
To learn more about Justin and his research you can find him at Professor Justin Fisher | Introduction | Brunel University London.
We hope you enjoy the podcast!
Welcome to the Modern British Political History podcast, so I'm excited about this one. We've got a guest speaking to us today, so we've got Justin Fisher from Brunel University. Justin, welcome to the podcast. Hello, delighted to join you. It'd be great if you could tell us a little bit about your research, justin.
Speaker 2:Ok, I'm a professor of political science at Brunel, and I've been working on party finance for many years. Indeed, my PhD was on why companies and trade unions made donations political parties. So I've been working on this area for about 35 years now. And in addition to that, i work on the electoral impact of campaigning at constituency level, which of course crosses over into questions of party finance and also about the regulation of elections and indeed of party finance. And I've done a lot of work on that, working with government, reviews of regulation and so on and so forth.
Speaker 1:Brilliant And I think it is going to be a really great topic, because that question of party finance which we're talking about today is a really important one, but it's sometimes not one that's as visible in the press. So it'd be great to get a sense from you of some of those underpinnings of the party political system which we have touched on a bit in other podcasts But we've never quite got into to party finance. So my first question for you was so, after World War II, how were parties typically financed, and can we spend a bit of time, maybe, on some of those different methods of finance? So presumably there's things like membership fees, donations from individuals, high net value individuals, often businesses, trade unions. Can we spend a little bit of time thinking about those methods of finance?
Speaker 2:Absolutely So. In some ways, the end of the Second World War is a nice break in terms of party finance, because what happens in the aftermath of the war in 1946 is that the new Labour government passes something called Trade Disputes and Trade Unions Act which, for the purposes of party finance, reversed something that was introduced in 1927 after the general strike, which meant that trade unions who wanted to contribute to politics via the political fund. The 1927 Act had led to a situation where trade unionists had to contract in, make a conscious decision to pay the money, and what the 1946 Act did was restore what's called contracting out, so that somebody paid the political fund by default unless they made a conscious decision not to do so. So this was quite an important piece of legislation and effectively began a period of broad consensus in political finance and broad stability which really lasted until the 1980s. So what we see in the period from the end of the Second World War until the 1980s is a broad consensus.
Speaker 2:That says, in effect, that companies will provide the bulk of income to the Conservative Party and trade unions, or at least those who affiliate to the Labour Party, will pay the bulk of the contributions to Labour, and that was a pattern that was common across many countries in Europe where the basis of the party system was one, at least originally, based on the social class divide. So the capital supported the party of the centre right and Labour, with a small supply of money for the party of the centre left, and although there were other forms of income that parties received, really until the 1980s, we're talking about the vast majority of that income coming from these sources. You do get variation around the time of elections, but by and large it was around 70% or 80% of the income for Labour was coming from trade unions, and a similar proportion, maybe slightly less, for the Conservatives.
Speaker 1:Talk about the Liberals, just to jump in there.
Speaker 2:Well, without wanting to be, I think what the Liberals told us are two things. Firstly, in that period, really, with the exception of the early 1970s, or actually most of the 70s, the Liberals as an electoral force are not terribly important. But it also reveals one of the inherent weaknesses with that system of party finance, namely that the bulk of the money was coming from institutional sources and those institutions were very unlikely to support a third party. So the Liberals occasionally got corporate donations, but very seldom, and the amount of money they generated was fairly haltry relative to the amount that the Conservatives and Labour parties were generating. So really, the interesting thing in many ways is that the story of party finance, to be honest, from the 1920s onwards until the 80s, is one of party finance for the Conservative and Labour parties.
Speaker 1:Yeah, makes a lot of sense. And my second question was about to what extent were there big differences between how the different parties were financed. So you've talked about the Conservatives mainly coming from business and Labour party finance mainly coming from trade unions. Were there any other differences in terms of how they received finance or who particularly they received it from?
Speaker 2:I mean, the major difference was which institutions were funding them. The Labour party would have some money from individual subscriptions, as would the Conservative party. We don't know precisely with the Conservative party because until the passing of the political parties, elections and referendums act passed in year 2000,. The Conservative party simply had a figure which was headed donations And that didn't distinguish between the two. They also received money from constituency associations. So one of the things that the Conservative party did was that if local associations had excess money or a particularly large number of members, they would be required a some money sent out, and indeed a number of local Conservative associations were very wealthy, owning properties and so on and so forth. So it was an important source of money in as much as the central policy couldn't do without it. But it wasn't nearly as important as the donations which, as far as we are aware, largely came from businesses, in the case of Labour Party, against some membership contributions, but really the bulk of it was coming from trade unions.
Speaker 1:And I want to start getting into why someone would donate, or an institution would donate, to a political party. And this gets us into also the question, i suppose, of what are the impacts on the party of having donations coming from different sources. Does that affect the politics at the end of it? But let's start with that question then, of what are the traditional reasons why someone would donate to a political party, and have these reasons changed over modern British history?
Speaker 2:The easiest way of thinking about this is to dip into the political science literature and think about what we call selective benefits and collective benefits, and what we mean by that. The alistarist is that a selected benefit is one where there is some returns for having made the donation. In other words, people who don't make the donations don't benefit from them. Collective benefits are ones that benefit people whether or not they make a contribution, and the easiest way to describe this is clean air. If, as a producer of pollution, i reduce my pollution, everybody benefits, regardless of whether or not they're taking part. So, in terms of the collective benefits, it's an important thing to stress that a lot of political activity via donations was driven by a sense of opposition to the other side. So one of the reasons that the Conservative Party started to receive donations from businesses back in the 1920s was a fear of socialism. So the business community those who were scared or had a fear of Labour governments or the march of socialism, remember, of course you've got the experience of the Russian Revolution and then the general strike started to make donations. That didn't mean that every business did at all, but there was a general view that Labour among some businesses, at least that Labour presented some sort of danger. Now, as time wore on and the apparent threat of revolution receded, it was still the case that many businesses regarded Labour as not being very good with the economy, and there was reasonably good reason for that, given the difficulties of the late 1960s, for example, with devaluation and so on. As far as businesses were concerned, there was a view that the Conservative Party was, in general, beneficial for free enterprise. It helped to fund the party that was most likely to defeat Labour, which was seen as being either dangerous in terms of the policies that they wanted to pursue or that they were less strong in terms of economic management than the Conservative Party. In the same vein, trade unions would give money. Really historical reasons, they saw themselves as supporting the party of Labour and also were opposed to many of the policies pursued by the Conservative Party, and that became particularly apparent when Mrs Thatcher became leader of the Conservatives, for example.
Speaker 2:One of the interesting things about the end of this period of consensus is, far from depoliticising trade unions, what Mrs Thatcher's government did was in many ways repoliticise them.
Speaker 2:There's an example which we can talk about later in more detail concerning the Trade Union Act 1984, which was seen as an attack on trade union funding of the Labour Party but in actual fact led to more unions having political funds rather than fewer.
Speaker 2:So there was this sense in which it was about opposition to the Conservatives but also, collectively, about supporting the Labour Party. So, in terms of selective benefits, i think these are rather more difficult to pin down. Certainly, with the Labour Party, any trade union that affiliated and paid money received selective benefits by representation through the Labour Party Conference, for example, through the block vote system. In the case of the Conservatives, i've no doubt that there were Conservatives or there were donors who thought that they might gain some advantage as a result, but these things are actually very hard to pin down. People often talk about honours, for example, but in order for that analysis to hold any water, you also need to demonstrate that those who were in a similar position economically, who didn't make any contribution, were less likely to have honours, rather than those people who were actively involved in politics.
Speaker 1:And presumably where that selective benefit was happening, there wasn't a willingness to advertise that that was going on very much within political parties.
Speaker 2:Interestingly, not as much as you would think. So one of the things that characterised quality finance, certainly up until the mid-80s, was the fact that a number of the companies who made donations were led by people who are strongly identified as being Conservative, and one of the things we saw was that people who themselves were very publicly Conservative The companies that they headed would be the ones making the donation. It's a fascinating topic in terms of how companies made decisions. X-porson is a leading Conservative and therefore X-Porson's company will make a donation, and there was, although there wasn't a strong business case for doing so, it was the sort of thing that got nodded through at board level. So what you found was that a lot of the businessmen and they were almost exclusively men whose companies were making donations they were quite, if you like, they weren't shy of making the point that they were themselves strong Conservative supporters, and what it certainly got them was access.
Speaker 2:So access through invitations to dinners and so on and so forth. Now, as I always say to my students, having access is not the same as being influential. The illustration I always give is that, as a member of the university, i have easy access to my vice-chancellor, but there's no guarantee that he will listen to any argument that I put forward, and so it's the same with business people. So in some ways, many of them were certainly in the work I did in the 80s speaking to business people whose companies made donations. They were very upfront about them the potential for access or at least the benefit from being visibly identified as a strong Conservative.
Speaker 1:Would you say that then people more lately have become slightly more squeamish or reserved in being as open about?
Speaker 2:Yeah, i think that's true. I think that's true for two reasons. The first is well, since the political policies, elections and referendums act of 2000, all donations have been transparent, in my as much as any donation originally over £5,000, now amended to £7,500, is declared on the Electoral Commission website, and so it's not a case of whether or not people choose to be open about their donations. But the second thing, and something I was alluding to earlier, is that one of the key things that changed really in the 80s was the move from the chairman of a company to a chief executive. I'm with the growth of the chief executive model. What that led to was an increasing questioning of the business value of making a donation.
Speaker 2:Now, once you throw transparency into the mix, that also means that there can be some difficulty if a decision is seen to benefit you and at the same token, quite legitimately, your company has made a donation.
Speaker 2:So in the early days of transparency, enron, for example, were called out in the press about a government policy that had benefited them And, by the way, they'd also made a donation, and of course the two things were almost certainly completely unrelated. The amount of money that Enron had given to the party in question was miniscule and the benefit of them benefited many companies, not just them. So it's a combination of transparency, the chief executive model, but also a third reason, and that is that in the 1980s what you saw in the United Kingdom was the development of the lobbying industry. Previously it hadn't existed to anything like the scale that we have today, and many businesses saw this as a much better way of being involved politically rather than making donations, because it's quite legitimate to make your point and try and get a change through lobbying and public affairs. It's arguably less legitimate to do that by making a donation.
Speaker 1:So this brings us, i think, towards that question about regulation that we're going to talk about. before getting up into legislation and government regulation, i wondered what was the state of internal regulation, self-regulation with political parties?
Speaker 2:It's fair to say that before 2000, the regulation of political finance was almost non-existent. There were three sets of regulation in place. The first was introduced in 1883, and this was the Corrupt and Illegal Practices Rackets Prevention Act, and what this introduced was the limits on candidate spending at general elections. And that legislation is in place today via the Representation of the People Act. So all candidates have a limit on how much they can spend. And second thing was what? since the Edwardian period, trade unions had been required, if they had a political fund, had been required to register the spending of that on that political fund with something called the Certification Office. A Certification Office I don't know if it's still in Victoria, but I visited it in the 1980s and they kept all the records of what trade union political funds had been spent on. It's important to remember that even amongst labor affiliates, all of the money didn't go to the Labour Party. it covered other political activity as well.
Speaker 2:The third piece of legislation was introduced in 1967, and this was through the Companies Act, which required declaration of donations over £50 to appear in company reports.
Speaker 2:If Fisher Enterprises donated £70 to the Conservative Party, we would need to put it in our annual report.
Speaker 2:Beyond that, political parties were not required to declare where their donations had come from and indeed during the 60s the Conservative Party didn't even issue accounts. for two years The Labour Party started voluntarily declaring donations in excess of £5,000, i think it was in the early 1990s but they were not legally obliged to do so and they only declared in their annual report. It wasn't anything like the 11th of declaration that's required now. So it was in many ways almost completely unregulated. There was no regulation on where donations could come from and indeed in the 1990s we learned the Conservative Party had been receiving donations from outside the United Kingdom. There was no declaration of those donations and indeed there was no limit on how much parties could spend at national level, nor was there any requirement to declare how much had been spent. There was also no body to oversee it. so hitherto the Home Office had looked after the candidate returns on their spending and, it has to be said, probably not very well.
Speaker 1:Is there a few examples maybe you could pick out of either particular elections or particular moments where the issue of party finance reared its head, as it were, and became more in the public consciousness? Absolutely.
Speaker 2:So if we look at the post-war period, really from the 1970s, we start to get periodic examinations of party finance.
Speaker 2:So in 1975, for example, we see the introduction of what's called short money. This is money for parliamentary opposition parties named after Ted Short who was leader of the Commons, and the reason this was introduced was it was a recognition that, whereas governing parties had the resources of the civil service at their disposal, opposition parties in parliament had no specific resources to help them challenge policy. So this was introduced in 1975. In 1976, there was something called the Houghton Committee, the Committee on Financial Aids Political Parties, which proposed some state subsidies as a means of halting what was perceived as the decline in parties' contribution to public life. However, Labour failed to implement the proposals in the dying years of that Labour government and the Conservative government was opposed to state subsidies and so it was effectively buried. Hansard looked at the financing of political parties in the early 80s and again proposed state aid, but the recommendations were rejected. So we can see the issue being raised periodically, but it was more to do with ensuring that parties were playing a full role in public life rather than any desire to equalise things. I suppose you could see that short money was a desire to try and even level up the playing field a little, but the proposals for state funding were rather less. What changed was something I've touched on already, and this was the Conservative government's series of legislation on trade unions. So the Conservative Party or the Conservative government, I should say passed three important pieces of legislation in respect of trade unions, and it was the third, the Trade Union Act 1984, which was a real spark to open the issue again, because what this piece of legislation did was require all unions' held political funds to reballot their members on the continuation of that fund, on reballot them every 10 years. Now, in fairness, it must be said that some of the unions that held political funds had not balloted their members since 1909, but with the option of contracting out or, for a period between 1927 and 1946, contracting in. Of course, any trade union member who opposed the political fund could excuse themselves for paying. Now, what happened was that this piece of legislation ostensibly about democratising trade unions, but was seen as an attempt to attack the basis of Labour's funding, rightly or wrongly, fairly or unfairly. What happened was that Labour trade unions held these ballots and all of the unions with political funds voted for them to continue and indeed more trade unions adopted political funds, in part because they wanted to ensure that they weren't reaching the law. But the end result was that, far from depoliticising trade unions, they actually repoliticised them. So this was a key thing of importance.
Speaker 2:Now, as we move to the 90s, we start to see The conservatives, perfectly legally, are starting to get money from foreign sources, from overseas, And this, although perfectly legal, calls the sort of legitimacy of the system into question. So the key election, if you like, is 1997, because we have both Labour's desire, if you like, to hit back against the perceived inequity of the 1984 Trade Union Act. We have revelations in the 90s about perfectly legal, that some might say questionable donations from overseas to the conservative party. And then, of course, after the 1997 general election, we have the case of the Formula One head, Bernie Eccleston, making a large donation to Labour at the time when Labour was considering the ban on tobacco advertising in sport. What results is?
Speaker 2:the Prime Minister at the time, Mr Blair, instructed the Committee on Standards in Public Life, established by John Major a few years previously, to examine the whole system of party finance And a combination of things really falls into place Labour's desire for there to be reform and a body proposing reform, because in the end the Committee on Standards in Public Life publishes 100 recommendations, a committee with a track record of producing reports on public ethics which are widely accepted. I think this is the big difference between them and previous one-off studies. The beauty of the Committee on Standards in Public Life was that it had been seen to get things right from the get-go and therefore when they made a recommendation about party finance it was more likely to be accepted, particularly as the governing party at the time, with a large majority, was in favour of some kind of reform. So 1997, I think, is probably the critical election, although you can hulk back to 79 in 83, with the sort of emboldened satchel government really wanting to democratise, as they saw it, trade unions.
Speaker 1:And this question about transparency is a really interesting one, I think, because there's usually a call for greater transparency, isn't there, And the assumption is that more transparency will create more trust, but it's not always 100% clear whether that's the case. For example, I mean with the NHS or with your doctor providing a service, there might actually not be a huge amount of transparency over a particular operation you're having. You might just trust it implicitly, and almost sometimes greater transparency might imply that you have less trust because you need it to be more transparent. So I wondered what you thought about that relationship between transparency and trust. Is it always the case that greater transparency has yielded greater trust in the system?
Speaker 2:I think you're absolutely right. Transparency can produce adverse results And we saw that when transparency was introduced around party funding. So the system we've had since the turn of the century is that every quarter, the Electoral Commission publishes its details And what that does, in effect, is provide the press with a ready-made story. Labour made this much this quarter and look how much X delivered. Now, nothing wrong with that at all. But what we were getting and I alluded to this with the Enron story earlier we were getting really quite spurious links generating stories. So there's a very famous one which I forget the newspaper had appeared in, where it said the donor in car speeding charge. So we had two bits of information Somebody had been caught speeding and they'd made a donation to Labour. Now the two were completely unrelated, but it made a nice story. So I think you're right.
Speaker 2:The transparency has its limits in terms of delivering trust. It also has its limits in terms of privacy. So there is a threshold over which donations aren't revealed publicly. Now, all thresholds are arbitrary, but the question is, are they at a reasonable level, so that if we were concerned about somebody trying to influence policy or gain advantage, what would be the level where we would think that might kick in. Now there is no right answer to that, but the original legislation decided that £5,000 was an appropriate level. It's now £7,500. Now, so many of your listeners I know that I don't have £7,500 down the back of the sofa to give up a political party but I think that on balance, that's right.
Speaker 2:We can see that probably worse when we compare that with the United States, where donations for as little as $200 are made publicly, with people's names and addresses being declared about those donations. In one sense, it's an extension of the secret ballot and I think there needs to be a point at which they're declared. Whether or not £7,000 is the right amount, i think it's open to question. On balance, i think it's probably right. But the purpose of transparency is not just trust for the public. Purpose of transparency is also about self-denial If you know that the fact that you've made a donation will be made public. In effect, it provides a break on behaviour If this is likely to generate bad press and many organisations, whether they're or individuals, want to avoid bad press it's not sensible to try and achieve something if you've made a donation that will ultimately be public. So I think it's very difficult to argue against transparency.
Speaker 2:The issue seems to me to be at the level at which that transparency occurs, and that would be the same about any aspect of public life, whether or not we're transparent about civil service conversations, whether or not, in the contemporary context, about what that message is between ministers. So transparency has its downsides, but on balance, it's a good system, both in terms of providing information, bearing in mind that most people don't look at that information but also, more importantly I think, leading to a sense of self-denial about people who make donations, not a guarantee of that. There was a large donation, a person who used to make large donations to the Conservative Party, who was very clear about what he wanted to do. But most of the time people will try and avoid saying I want this and I'm giving you money to do this, because it would just be seen as being crude. What for it is?
Speaker 1:So what extent has the decline in party membership over the second half of the 20th century which we've witnessed Has that or has that, impacted how political parties financed themselves? Have they had to look to other means?
Speaker 2:The honest side is probably it probably hasn't mattered as much as you think it might, and the reason for that was one of the big changes in the 90s. So I mentioned earlier about thinking about waves of party finance with the period from the war up until the 90s. It's often known as the modern period, and what from the 1990s onwards is what we might describe as the post-modern period. Now that's post-modern in the sense that it's a phase after the modern one, rather than being anything about aesthetic, something like that, because what we see in the 1990s is the reemergence of large donations made by individuals, ones that dwarf, in many cases, donations made by companies are made to both parties. We also see, really for the first time in any sustained way, labor beginning to be the recipient of corporate donations. So the impact of Blair on labor was obviously huge in terms of electoral success, but was also absolutely critical in terms of how labor was perceived by the business community. And so we start to see labor being the beneficiary of that And, as a result, the proportion that was raised by trade unions fell quite substantially.
Speaker 2:It was still the same amount in absolute terms, but the proportion fell.
Speaker 2:So in terms of members membership it didn't make a great deal of difference because parties were getting money from high value individuals.
Speaker 2:But also, critically, from the late 80s onwards, parties became much more entrepreneurial about raising income. They realized that party conferences were not just political events but effectively, enormous trade fairs, and so they became much more entrepreneurial about charging the appropriate level to organizations and businesses who wanted to have stands at those conferences. Here you have an event with very influential people attending and with, effectively, the chance of access to those people, and so they realized that organizations companies would probably pay rather more than they'd historically been doing to attend these events. Now, ironically, although this falls outside your time period, we do see one example where party members make a big difference, and that is in the Corbin period under Labour. Sorry, ironically, the challenge to Jeremy Corbyn's leadership in 2016 was one of the best things to happen to the party financially for some years, because, as a result of that, many people either joined the party as members or as the affiliates the supporters in order to vote, and this left the Labour Party in actually a very strong financial position after 2016.
Speaker 1:And in the 2000s we start to see the growth of some smaller parties, parties like UKIP, the Greens, the S&P. What about their models of funding?
Speaker 2:But those organisations have largely found money from individual donors. There was a very famous case in the case of the S&P that there was a couple who had enormous success on the lottery But as a result they made quite substantial donations to their party. The S&P, in many respects organised very successfully in raising money that way. One of their most high-profile supporters was prevented, however, from making donations to all colliery because of the requirements of the 2000s Act that you needed to be registered to vote in the UK in order to make a donation, and at the time he was resident in Spain, so he wasn't able to make a political donation. But most of those parties, for the most part raised money through membership dues or high-value individuals.
Speaker 1:And to complete the regulation story, if we haven't already So you mentioned, I think, a piece of regulation in 2000. From the period of 2000 to 2010, was there much change in the regulation?
Speaker 2:Two changes. The first was a sort of mopping unpack. In 2006, legislation was passed which meant that loans also needed to be declared. If you were a party and I loaned you money and you repaid it it In 2006, this wasn't declared, even though in some ways you might see this. If we were concerned about transparency, this might have been seen as a problem, and I think this was an oversight in the original legislation and that was tied up in 2006.
Speaker 2:There was, however, a major review of party funding ironically so soon after such a major piece of legislation in 2000, with a review that was conducted by Sir Hayden Phillips, and this was published in 2008. And the result was the Political Plans and Elections Act of 2009. Now, in actual fact, this rejected many of the recommendations of Phillips, but what it did do critically was extend the reporting requirements or the regulated period for election candidates in general elections. So beforehand, it had only been from dissolution to polling day. Now it was, in effect, from four months before polling day that the spending of candidates was regulated, and the Act also increased the reporting threshold of donations to seven or over £1000. But beyond that, it was a very limited Act and largely rejected many of the Phillips recommendations, which included date funding and included a cap on donations.
Speaker 1:So my final question is a larger one. In what you've said, you've talked about some of the press concerns around funding, but you've pointed out that sometimes they're unfounded. Why do you think it is an area where there tends to be quite a bit of squeamishness about party funding, isn't there? And it's a strange one, because obviously parties need to be funded in some way for democracy to work. But there's almost a sense I get that there's a feeling of any party funding could potentially be seen negatively. So I wonder why you thought that is.
Speaker 2:It's a fascinating point, i think the reporting around party funding and at least many discussions in the public domain are ones where reality takes a back seat. And so you say parties obviously need to be funded. You'd be amazed at how that's not even the starting point for many people's discussions. So parties need to be funded. But there is a general sense parties can operate on the kind of model which you might equate with the PTA group at a school, and in fact, of course, that's nowhere near the real picture. So parties operate throughout the electoral cycle, they have staff, they have many elections in which they fight.
Speaker 1:Just unpack that PTA model point. How would that work in practice?
Speaker 2:Well, it wouldn't. It's the idea that you can fund politics on the basis of a bring and buy sale and maybe a karaoke evening for members. It is a slightly ludicrous view of the world, but it's one ironically shared by right and left. Now, from the right perspective, there is a view that, if you might call a sort of a free market view that says if parties can't raise money to vision, money to operate, they should die, they should wither on the vine. And there is a sense to those arguments, there is a logic to those arguments. Certainly, from the left point of view, there's sometimes a kind of what I would describe as a hair shirt perspective on funding parties that suggests that it should all be done on the basis of voluntary contributions and so on and so forth.
Speaker 2:Public opinion is also very inconsistent on this matter. So the answer you get will depend on two key things. One, when the question is asked and when. Generally speaking, when there's heightened awareness of party funding or the width of some sort of scandal, support for state funding is usually high, and when there isn't, it's usually low, and when, at the same time, the question you ask makes a great deal of difference. So it is an important question, and I think I do understand why successive governments have failed to implement proposals to amend how we fund parties is partly because there is a general view and, i think, a completely unhealthy view that sees parties and politicians in a negative light.
Speaker 2:Governments and parties provide us all with collective benefits, and democracy costs money, but there's a sort of unhealthy view about politicians and parties that suggest they're in it for something else, which I think is wholly wrong.
Speaker 2:I think the other reason is that for any government, there are very few votes to be won in this, and it's the case with many other areas where you might have reform, so that reform might be something like the House of Lords, it might be something like the electoral system, it might be something like regional devolution, but these are not topics that in general, excite the electorate to break deal And in many ways, it's the sort of thing where you can end up worse off as a government pushing these things through. Now this is where I feel for governments, because they have to do lots of things, lots of things that are for the greater good, and my view is some reform of party finance would be for the greater good, but there are very few gains they will make out of it, other than being able to say we did that. And it's no coincidence that the biggest change we've seen occurred relatively early in the parliament of the first Labour government of 97 to 2001, when they had a huge majority.
Speaker 1:Yes, it does seem a vexed question, doesn't it? a party finance? It reminds me a little bit of MPs pay in that way that A it's very difficult one and B, as you said, it's not really a vote winner. One other model that sprung to mind, though, was could you have all parties simply be funded by the state, or given an allocated amount and have no additional funding? I immediately when I say that I can kind of think of the issues with that. I wouldn't. How would smaller parties get started?
Speaker 2:how the allocation work, but I just wondered if that's a model that has ever been considered It has not in this country, but it's a model that was introduced in central and eastern Europe in order to build stability in the policy system. Now, the downside of that is that, after now that some stability has developed, at least in most of those countries, the parties are now almost wholly dependent on state money. I think that's unhealthy. Now to go to your point about small parties, there are two questions about state funding, and it should be said that we've had state funding since 1912, when payments for MPs were first introduced, and we continue to have very limited state funding. But if we were talking about extensive state funding, there are two questions One, do we have it? And two, if we have it, what is the mode of allocation? And this is something that Hayden Phillips, i think, had a very ingenious approach, because the mode of allocation wasn't simply on the basis of Westminster elections, but also on other elections within the United Kingdom. So and at the time that also involved European election. Now, the key thing there is that at the devolved levels, but also at local levels, other parties come to the fore. So the Liberal Democrats, for example, and the Greens do a lot better at local government level than currently they do at national level And of course at the devolved level, to varying degrees, there are forms of proportional representation, so you don't get the kind of double whammy of winner takes all on the first pass to post and the funding that that that affects. Now that's not an argument for electoral reform, that's just saying that if you only base it on how many votes someone gets and you only base it on Westminster elections, then that's going to affect small parties disproportionately.
Speaker 2:Now personally I wouldn't be in favor of state funding to the exclusion of all other forms. It seems to me, that is, that having all of the state funding for parties or parties being funded entirely by state funding is undesirable because it removes any link between the parties and civil society. But I think what you can do is is is one of two things, or a combination of both. I think if you do have more extensive state funding that enables you to cap the size of any donation. The last thing stand. Anyone can give as much as they like. You know, from a free market perspective that's entirely justifiable. This is my pre-tax or my post-taxed income. I should be able to give it to whom, however much I want to whoever I choose. So there is an argument for not having caps, but I think caps can also go some way to reassuring people that somebody can't buy their way in.
Speaker 2:But what it also allows you to do, i think, is follow the Canadian example And the Canadian. What they did in Canada was remove the right of trade unions and companies to make donations at all, because their view was that only citizens have the vote, so only citizens should be able to make donations. Now, in order to do that, they had to increase state funding because unfortunately, however much we'd like to think the public would step in with contributions, they just don't do that. So state funding, more extensive state funding, was the only way they could do that. But this still allows for citizens to make donations to parties if they so choose, and that seems to me to be one route you could go down.
Speaker 2:But I don't think it will be healthy to have parties entirely funded by one source. But equally, i think the mode of allocation matters And I think if you do have more extensive state funding, you can make a stronger case for capping donations and you can make a stronger case for confining donations to those who have the ability to vote. Now you won't be surprised to hear there's opposition to that perspective, even trade unions, in fact, because they argue that they have a link with Labour as a collective one and they should be able to be involved in politics that way. But there are a number of options that could be pursued. I would be surprised if they are pursued, however.
Speaker 1:Fantastic Thanks, and very interesting about that citizen's model and sort of as an approach. So, yeah, very interesting stuff. One more thing I was going to say is that anything you think we've missed, justin, that you'd like to cover off on this topic of party finance before we finish up.
Speaker 2:Something that I've just written about, which is not unintended consequences, but unforeseen consequences. So in 2022, some of the piece of legislation was passed called the Elections Act, and the Elections Act most people will know it because it introduced voter ID. Amongst the many other things it introduced was the abolition of the limit on people living overseas and retaining the vote. Since Papyrus, if you were a British citizen living abroad, you could. You retained the vote in British elections for 15 years. Now, this was a conservative manifesto promise, and so they fulfilled their promise on that, but it seems to me that this throws up a problem, because what you effectively have is a situation that money from overseas can be donated to parties. Now, that possibility existed before the Elections Act, of course, for up to 15 years, but it was mitigated by the fact that relatively few people who lived overseas registered to vote, but that changed, not surprisingly, around the time of Brexit. So we went from a situation where only around 35,000 people registered to vote who were resident overseas to around 250,000. Now, with the extension of the franchise to anybody who lives abroad who's a British citizen, we are potentially looking at around 700,000 people who are now enfranchised, should they register, but more critically for this discussion 700,000 people who live abroad, who are not subject to the laws of the United Kingdom, who don't pay tax in the United Kingdom or probably don't pay tax in their resident country, but now are free to make donations to whichever party they like.
Speaker 2:Now this is a challenge for all democracies because, of course, you have a much more mobile population than you used to. But we have a potential situation where, if those individuals are high value individuals, a lot of the money that parties receive could plausibly come from overseas. So there is a question to think about there. I think it's very unlikely that the unlimited right to vote will be withdrawn. It's very difficult to go from infinity to zero, but at the same time, do we have a two tier system such that you need to be resident in the country in order to make a definition? That's a question for well, it's currently levelling up in communities We're overseeing the elections act to think about, but it strikes me that this is a potential, long foreseen circumstance.
Speaker 1:That's a great place to leave this one, i think, some nice food for thought for listeners. So I wanted to take a moment to say thanks so much, justin, for joining us. I've really enjoyed this one My pleasure I hope your listeners find it interesting.
