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Funding Local Political Parties in England and Wales: Donations and Constituency Campaigns

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Funding Local Political Parties in England and Wales: Donations and Constituency Campaigns Funding Local Political Parties in England and Wales: Donations and Constituency Campaigns Ron Johnston and Charles Pattie THIS PAPER HAS BEEN SUBMITTED FOR PUBLICATION Not to be cited without the authors’ permission Contact: Prof Ron Johnston School of Geographical Sciences University of Bristol University Rd Bristol BS8 1SS 0117 928 9116 [email protected] Funding Local Political Parties in England and Wales: Donations and Constituency Campaigns The funding of political parties is an issue of considerable contemporary concern in the UK. Although most attention has been paid to the situation regarding national parties, the new funding regime introduced in 2001 also applies to constituency parties, and some concerns have been raised regarding the limits on spending and expenditure there. Using data released by the Electoral Commission on all donations above a specified minimum to constituency parties, this paper looks at the pattern of donations over the period 2001-2005. It then analyses the impact of spending on the 2005 constituency campaigns, showing that for the Conservatives and Liberal Democrats substantial donations enhanced their vote-winning performances in seats where their candidates were challengers whereas for Labour substantial donations aided their performance in marginal seats that it was defending. Party political funding has become an issue of considerable public concern in the United Kingdom over the last decade, stimulated in particular by allegations of corruption of various types. This has generated a range of inquiries – some commissioned by the government, others by politically non-affiliated interest groups – into the nature of party funding. In turn, these have initiated debate about the desirability of certain actions – such as limits on both donations to and expenditure by political parties, as well as by other interest groups wishing to influence election results, and the desirability of public funding for political parties. As a result of these inquiries and debates, political action has been taken for the first time – other than on particular issues such as access to broadcast media, the ‘sale’ of peerages in return for donations to political parties, and the requirement for trades unions to hold ballots before establishing political funds – to regulate many major aspects of party political funding in the UK. This covers both donations (from whom, of what size, which should be declared and publicly documented, for example) and expenditure. Most attention has since been paid to the impact of these regulations – set out in the Political Parties, Elections and Referendums Act 2000 – on national political parties, which now have to be registered (under the Registration of Political Parties Act 1998). But the new regulations also change aspects of the law as it relates to candidates and parties operating at sub-national levels, including in the individual constituencies which return Members of Parliament. Large donations to local parties have to be declared to the Electoral Commission, for example, which makes the details public. After the 2005 general election, the availability of this information stimulated concern. For example, The Sunday Times (9 April, 2006, p.2) reported that two of the Labour party’s major donors nationally also contributed to the 2005 constituency campaign of Cabinet Minister Patricia Hewitt: Sir Ghulam Noon contributed £2,500, almost one-fifth of her total expenditure, and Lord Bhattacharyya also made a substantial donation. (According to the Electoral Commission database, he gave £2000 in April 2005.) More generally, the defeated Labour MP for The Wrekin (Peter 2 Bradley) suggested that ‘a campaign by three Tory donors to pump money into marginal seats led to Labour being outgunned financially by up to 10 times in some seats, prompting large swings that ousted MPs’ (The Sunday Times, 26 March 2006, p.5).1 He claimed that ‘Of the Tories’ 36 gains at the last election, 24 were funded by donations from at least one of the trio … [and that] in 20 of them, they got bigger swings than the national average’; this, he argued, is ‘buying seats’ – entirely within the rules set by the 2000 Act – and The Sunday Times suggested that the government ‘will now push for a cap on spending in each constituency, to stop money being poured into a handful of critical seats which could skew the next election’. An expenditure cap already exists, but it applies only to the campaign period after the election has been called; prior to that time there are no limits, and much can be done preparing for the campaign within the rules (as the Liberal Democrats have long done, though through voluntary labour rather than large expenditure: Cutts, 2006a, 2006b; Cutts and Shrayne, 2006). The concern expressed over that issue reflects wider public concern about various aspects of party funding. It is necessary for party operations, however, but a study undertaken by a pressure group Unlock Democracy found substantial differences between the main political parties in the financial health of their constituency parties, suggesting that as a consequence many ‘are now nearing critical condition’.2 But recent research conducted for the Electoral Commission found widespread cynicism among participants in a series of deliberative workshops regarding political parties and how they are funded.3 It was because of such cynicism and the particular concerns raised by the ‘cash for peerages’ issue that the Prime Minister asked Sir Hayden Phillips to undertake a review of the funding of political parties, with particular reference to the case for state funding of parties (perhaps as a consequence of a tighter cap on the size of donations) and to the transparency of party funding.4 His interim report outlines the various issues, including those relating to constituency parties.5 Given these concerns, in this paper we take advantage of the new reporting regulations to explore donations to local parties and their possible impact on the most recent general election result – in the context of the claims that the Conservatives were able substantially to outspend, and thereby defeat, the Labour party in a number of marginal seats. After outlining the current regulatory system, we analyse the total amount of money donated to local parties over a five-year period covering two general elections, with particular reference to its sources. We then look in more detail at the 2005 general election, to evaluate the arguments that large donations may have influenced the local campaigns and their outcomes. Party Funding Regulation in the UK The debates over political funding in the UK, as in a range of other countries, reflect changes in both the nature of political parties – especially the decline of mass memberships and the availability of free labour to undertake various campaigning and other activities – and the nature of political campaigns involving ever-more sophisticated use of the media. The latter have led parties to seek increased funding and, because of the volume of money ‘needed’ and the impossibility of raising this through members’ subscriptions and fund-raising activities, such support has 3 increasingly been solicited from wealthy individual donors (even where the party has access to some major alternative sources, such as trades unions for left-wing parties).6 Much of the public and political concern over these trends has concentrated on the potential – if not actual – influence that donors might have on party policies and actions, especially when in government: there are fears that donors are able to ‘buy influence’. This has attracted considerable attention in the United States, where attempts to limit donations to, and spending by, political parties and candidates along with interest groups have encountered the freedom of speech guaranteed in the country’s constitution (on which, for example, see Persily, 2006). The most recent attempt at such regulation – the Bipartisan Campaign Reform Act 2002 – was immediately challenged on those grounds, but sustained by the US Supreme Court’s decision in McConnell v FEC (540 US 93, 2003). That Act was particularly concerned with whether regulation of ‘soft money’ donations to parties rather than candidates (‘money that has an effect on federal elections but is not subject to federal contribution, expenditure or disclosure rules’: Briffault, 2006, 192) could be justified ‘by the governmental interest in preventing the corruption and the appearance of corruption’ (Briffault, 2006, 196). The Court agreed that it should, extending its earlier ruling regarding the regulation of funding involving donations to and expenditure by candidates in Buckley v Valeo (424 US 1 1976) that the prevention of both corruption and the appearance of corruption are ‘legitimate and compelling government interests … for restricting campaign finances’ (cited in Briffault, 2006, from FEC v National Conservative PAC, 470 US 1984, 496-497). The US arguments that ‘special access procured by money … is uniquely corrupt’ (Briffault, 2006, 203) are reflected in recent UK debates, as with the reference of the issue to the Committee on Standards in Public Life by John Major’s government in 1996 (Committee on Standards in Public Life, 1998), and establishment of the Phillips Review of the Funding of Political Parties by Tony Blair in 2006 following the claims that political donations – including secret loans – were being rewarded by nominations of some of the individuals concerned for honours (including peerages,
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