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Party funding: buoyant, broken or bust?

The funding of political parties in the UK has been a source of controversy for decades, and during the 2010 Parliament the issue continued to defy resolution. Press allegations of improper behaviour, a rising dependence on large donations from fewer sources, declining party membership and a widespread public concern about the influence of big money in politics, all provide an impetus for change. But achieving cross-party agreement on reform of party funding could continue to be challenging in this Parliament.

How is party funding regulated?

Until the passage of the Political Parties, Elections and Referendums Act 2000, party funding in the UK was largely unregulated.

The Act, which created the Electoral Commission, remains the principal legal framework governing party funding. It introduced a ban on donations from those not on the UK electoral roll; set limits on the amount that could be spent on parliamentary election campaigns; and required all donations above £500 to be declared, and all those above £7,500 to be entered onto a public register.

Loans to parties became regulated from 2006 onwards.

Chart: Donations received by political parties

The value of donations received by political parties is driven by the electoral cycle: total annual value of donations received, selected political parties, 2001–14, £ million.

Chart showing funding for the Labour party, Conservatives, Liberal Democrats, UKIP and Green Party from 2001 to 2014 in £ millions

Influence and integrity

The public therefore know, to an extent, where parties' money comes from, and how dependent they are on large donations from individuals and organisations.

However, transparency as to the identity of large donors has not dispelled widespread suspicion that money can buy influence. In a poll conducted for an inquiry into party finance by the Committee on Standards in Public Life, 81% of the public thought that donations over £100,000 were given in either in the hope of receiving special favours in return, or to gain access to those taking decisions.

Nor, according to the Committee's report, published in 2011, were the public's concerns necessarily ill-founded: it argued that the current arrangements "lack integrity, in that if not corrupt they are plainly corruptible".

Efforts to reform

The previous Government committed to "pursue a detailed agreement on limiting donations and reforming party funding in order to remove big money from politics". This led to an inquiry and the 2011 report from the Committee on Standards in Public Life.

The report recommended a cap on individual donations (including those from trades unions whose members had not specifically opted in to paying an affiliation fee) of £10,000 per year; reductions in campaign expenditure limits; but a £23 million per year increase in the public subsidy to parties during a Parliament, based partly on the votes they received at a General Election.

Unsurprisingly, an increase in public funding was immediately rejected by the Government at a time of budget cuts. In 2013 the Deputy Prime Minister told the House that, despite seven meetings between the three largest parties, an agreement on party funding would not be possible in that Parliament.

Some change has happened since; the regulation of third-party campaigners (people and organisations who are not standing for election, but try to influence voters' choice) was changed in 2014, while Labour decided to require trade union members to opt in to paying affiliation fees to the party.

But the main parties all acknowledge in their 2015 manifestos that the party funding system remains in need of reform.

Party Lines

  • Conservatives: will seek agreement on a comprehensive package of party funding reform
  • Greens: introduce a system of state funding
  • Labour: committed to reform party funding and would cap donations
  • Liberal Democrats: wide reforms to party funding and would cap donation at £10,000 per person per year

Current Briefing Papers

The Key Issues articles were published in May 2015. However, the Commons Library producesnew briefings as topics evolve.

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