Party Funding Reform

Lord Wallace of Saltaire Excerpts

Thursday 3rd November 2016 Lords Chamber

Asked by

[Lord Wallace of Saltaire]

To ask Her Majesty’s Government what plans they have for further reform to party funding.

[Lord Wallace of Saltaire (LD)]

My Lords, party funding reform is rather like Lords reform: we come back to it every other year, or at least once every Parliament; we possibly get round to setting up a working group; the parties fail to agree; we go away and significant change is rarely made. I note that the last debate on the matter in this House came after the breakdown of cross-party talks in late 2013, and I wound up on behalf of the Government after the coalition parties had failed to come to an agreement between themselves.

The reasons for returning to the subject are very clear. The first is the funding of the referendum campaign, which had a number of troubling aspects. According to the report last month from Transparency International, more than half the total funding to both sides in the referendum campaign came from 10 sources, both individuals and corporations. Indeed, 95% of the funding came from as few as 100 donors. That is not exactly popular sovereignty or popular participation among the masses.

The absence of limits to cap individual donations is clearly becoming an acute problem in our democracy, and there have been other recent developments in the funding of politics. In the 2015 election, Conservative spending was far higher than that of any other party, and some of it was on the outside edge of current rules, as we can see from the number of Electoral Commission investigations at this time. The current situation builds in a structural advantage for the Conservative Party in access to finance and pushes other parties into chasing major donors, wherever they can find them, in order to compete. There has been a substantial increase in income from large donors. When writing about the resignation of the noble Lord, Lord Feldman, from the chairmanship of the Conservative Party, the Financial Times estimated that the Conservatives had raised £250 million under his chairmanship.

Then there is the question of more professional techniques—what the Russians call political technologies —which also cost a good deal more money: for example, computerised analyses using sophisticated search engines that allow personalised messages to be sent to assorted individual voters from central party organisations, and focus groups to refine messages. These techniques also mean that, within the parties, there is a shift in the balance of influence from local parties to the centre, which I think has caused a certain amount of discontent over the past few years in the Conservative Party, as well as in others. The competition among parties in this way means that there is a harder drive for funds. There has also been a rise in corporate donations to political parties, which the Transparency International report estimates as £125 million over the past decade.

We have also had the Trade Union Bill of 2015, on which a Lords committee reported in March. We still await the Government response to that, and perhaps the noble Baroness will be able to tell us something about that as she winds up the debate. I intend to leave further comment on that to my noble friend Lord Tyler, who was a member of the committee.

The continuing globalisation of wealth and the rise of the super-rich, living largely offshore, means there is concern in Britain and other countries about foreign donors and foreign donations—that is, from wealthy foreigners within the UK and from the British abroad, not on UK electoral register, who have been living in tax havens for a very long time. There is particular concern about the super-rich living in London from autocratic states such as Russia and the Gulf monarchies.

There are also concerns related to this House: honours for donors, from all parties. This is a recurring theme. Most famously, my father once met my party leader of many years ago, Lloyd George, so I can “almost” say that Lloyd George knew my father—there were several thousand other people in the room at the time, but never mind. More recently, I recall the investigations of 2006 and 2007. The Transparency International report identified that 28 Peers created over the past 10 years were created primarily for their donations to particular political parties—I stress that that relates not just to one party.

The popular and press assumption is that donations buy influence. They certainly buy access. The Conservative offer of special access for large donors in the Conservative Leaders Group, to which one pays apparently a £50,000 entry fee, is estimated to have brought in £5 million from 100 donors since January 2013. The attractions of this access are strongest when a party is in government, and build in a structural advantage for a party in government. Mr Cameron’s resignation Honours List has increased concern still further, but I stress again that all parties take part in this competition, partly because they have to.

Recent proposals from the Government to cut support for opposition parties by imposing cuts in Short Money and Cranborne Money have also raised issues about funding for democratic activities. There was a clear perception that the Conservatives were trying to bias the political rules in their favour, including those for party funding, which feeds into popular cynicism about politics. Then this August, we had a letter from the Chairman of the Committee on Standards in Public Life, to which I hope the noble Lord, Lord Bew, will refer in his speech.

We have seen the developments in the United States, where the extraordinary influence of the very rich on politics is becoming even greater, where congressional politics is distorted by the continual search for campaign funding, and where Donald Trump has funded a great deal of his own political rise. That does not yet happen in our politics, although in Richmond Park we have someone who has very substantially funded his own political rise. We have seen the aggressive political campaigning that the use of major funds allows in the United States, and we have seen the politics of fear in similar campaigns in this country. All this drives popular mistrust of politics as such as a plaything of the rich, as inherently corrupt and as excluding the voices of ordinary people. A Transparency International survey suggests that 76% of respondents think that rich people have undue influence on politics, and 28% think that all politicians are corrupt.

That raises some major issues. The funding of the Vote Leave campaign and the role of Arron Banks and the company he founded, Better for the Country Ltd—which appears not only to have given £2 million to Grassroots Out, but to have lent £6 million at a nil rate of interest to the Vote Leave campaign in three separate transactions—raise large questions about getting around current rules about party funding.

All parties pledged further reform in their 2015 manifestos and all have particular preferences to defend. We need to reopen cross-party talks and recognise that we need a serious intent to achieve at least some limited reforms to restore public confidence in participatory politics. We all know what happens if people do not feel they have a chance to engage in parliamentary politics—politics moves on to the streets. We have seen that once or twice in the last 15 years and it could easily happen again if there is a strong sense that politics in Britain has become dominated by money, and in particular money to the advantage of a particular party.

Francis Bacon said at the beginning of one of his best essays,

“Money is like Muck, not good except it be spread”.

That is a good democratic principle. We could agree that limits on corporate donations and trade union donations should have to be considered together. We could agree a cap on donations to start at £50,000 or even £100,000, and then gradually reduce it. We should at least consider making individual donations up to a certain level open to gift aid, comparable to charitable donations contributing to public life. We need to strengthen the policing role of the Electoral Commission in local as well as central spending, and in campaigning innovations. We need to police donations from outside the UK more carefully, and possibly from ex-pats—no representation without taxation. Our overall aim must be to reduce the impact of money on politics, to widen the pool of donors, and to encourage ordinary citizens to contribute and feel that they are making their own contribution to democratic life.