PX_PARTY_HDS:PX_PARTY_HDS 16/4/08 11:48 Page 1 Paying for the Party Myths and realities in British political finance Michael Pinto-Duschinsky edited by Roger Gough Policy Exchange is an independent think tank whose mission is to develop and promote new policy ideas which will foster a free society based on strong communities, personal freedom, limited government, national self-confidence and an enterprise culture. Registered charity no: 1096300. Policy Exchange is committed to an evidence-based approach to policy development. We work in partnership with aca- demics and other experts and commission major studies involving thorough empirical research of alternative policy out- comes. We believe that the policy experience of other countries offers important lessons for government in the UK. We also believe that government has much to learn from business and the voluntary sector. Tru, stees Charles Moore (Chairman of the Board), Theodore Agnew, Richard Briance, Camilla Cavendish, Robin Edwards, Richard Ehrman, Virginia Fraser, Lizzie Noel, George Robinson, Andrew Sells, Tim Steel, Alice Thomson, Rachel Whetstone PX_PARTY_HDS:PX_PARTY_HDS 16/4/08 11:48 Page 2 About the author Dr Michael Pinto-Duschinsky is senior Nations, the European Union, Council of research fellow at Brunel University and a Europe, Commonwealth Secretariat, the recognised worldwide authority on politi- British Foreign and Commonwealth cal finance. A former fellow of Merton Office and the Home Office. He was a College, Oxford, and Pembroke College, founder governor of the Westminster Oxford, he is president of the International Foundation for Democracy. In 2006-07 he Political Science Association’s research was the lead witness before the Committee committee on political finance and politi- on Standards in Public Life in its review of cal corruption and a board member of the the Electoral Commission. He writes in Washington-based International Foun - the press, in particular The Times and dation for Election Systems. He has Sunday Times, on topics such as political advised many governments and interna- finance, electoral organisation and elec- tional bodies, including the United toral fraud. © Policy Exchange 2008 Published by Policy Exchange, Clutha House, 10 Storey’s Gate, London SW1P 3AY www.policyexchange.org.uk ISBN: 978-1-906097-23-3 Printed by Heron, Dawson and Sawyer Designed by SoapBox, www.soapboxcommunications.co.uk 2 PX_PARTY_HDS:PX_PARTY_HDS 16/4/08 11:48 Page 3 Contents Acknowledgements 4 Foreword by David Butler 5 Executive Summary 6 1 Introduction 10 2 The ‘arms race’ myth 14 3 The growth of state funding of party politics 27 4 Policy implications 35 Appendix 1: Alternative measures of inflation 38 Appendix 2: Data on party spending 40 Appendix 3: A guide to information on local party finances 46 Appendix 4: Constituency party spending and MPs’ allowances, 2003 48 Abbreviations 61 References 61 www.policyexchange.org.uk • 3 PX_PARTY_HDS:PX_PARTY_HDS 16/4/08 11:48 Page 4 Acknowledgements It has been a pleasure to work with Roger College, Oxford), Richard Coates Gough of Policy Exchange, who managed (Gloucestershire County Council), the project, which had originally been sug- Jonathan Evans (LGAR), Professor Justin gested by his colleague Dean Godson. Fisher (Brunel University), Oonagh Gay Roger greatly improved and clarified the and Lucinda Maer (Parliament and draft. Tom Shakespeare, an intern at Policy Constitution Centre, House of Commons Exchange provided extensive assistance Library), Dr Declan Hall (University of and caught a major error. I am especially Birmingham), Liz Hamilton (secretary of grateful to them and to other members of SLARC), Professor Ron Johnston (Bristol Policy Exchange. University), Michelle Kneeshaw Research benefited from help from The (European Parliament, UK Office), Dr Electoral Commission, where Bob Posner Peter Lynch (University of Leicester), acted as the point of contact. Nigel Bliss Jeremy McIlwaine (Bodleian Library, (Liberal Democrat), Roy Kennedy and Oxford), Canon John Nightingale, Shelley Margaret Lynch (Labour), Sheridan Pinto-Duschinsky (Oxford University), Westlake, Dominique Brown and Marie Smith (National Statistics Customer Margaret Bird (Conservative) were among Contact Centre), Michael Steed, and the party officials who provided informa- Andrew Tyrie MP. tion or access to unpublished materials. Even more than usual, I must stress that I am also grateful for help from Richard the responsibility for errors is mine alone. Ashton (Conservative Political Officers’ Further information and corrections will Network), Dr David Butler (Nuffield be gratefully received. 4 PX_PARTY_HDS:PX_PARTY_HDS 16/4/08 11:48 Page 5 Foreword there has been only limited study about what the parties get for their money; they By David Butler have done little in the way of cost-benefit Emeritus Fellow, Nuffield College, Oxford analysis. The current increase in cynicism about This is an important work by an acknowl- politics and politicians has been accompa- edged expert. The subject of party finance nied by a sharp decline both in party mem- is high on the current political agenda and, bership and in party activism. The parties as Michael Pinto-Duschinsky shows in now lack the infrastructure to provide, either these pages, much of the argument is based from membership contributions or from on myth. Since his path-breaking British volunteer workers, the vital self-sufficiency Political Finance 1830-1980, the author of constituency campaigning, let alone a has been recognised as the best-informed subsidy for the ever-expanding central head- and most meticulous analyst of political quarters efforts. The new technologies of finance in Britain. The subject is a tangled media and advertising and electronic com- one, but Michael Pinto-Duschinsky has munications have added greatly to the cen- assembled here data which was not fully tralisation of campaigning. available for Sir Hayden Phillips in his The parties have turned increasingly to major effort to resolve current problems or the state and, as this study shows, in the for the extensive studies offered by the last thirty years they have in one way and Electoral Commission. I write as one who another drawn vastly increased subsidies in has spent a lifetime trying to intrude hard money and in kind, centrally and locally. facts into airy political arguments and I There are those who envisage an even more delight in the realism displayed in these extensive allocation of public funds to help pages. party activity and electioneering. And they For most of the twentieth century can cite many countries where this has Britain had remarkably cheap and remark- happened. But in the current climate ably clean elections. Once party finance politicians are right to fear the public reac- was a secret matter. Only the Labour party tion to any significant increase in the published accounts and these did not go amount of taxpayers’ money going directly into detail. It was not until the 1960s that to parties. the Conservatives began to reveal their It is to be hoped that the government total turnover and it was not until the does not move too hastily in this field. coming of the Electoral Commission in Before anything happens the powers that 2001 that national electoral expenditure be should absorb the data provided here by was capped and full accounting was Michael Pinto-Duschinsky and think imposed on all parties. It is notable that about its implications. www.policyexchange.org.uk • 5 PX_PARTY_HDS:PX_PARTY_HDS 16/4/08 11:48 Page 6 Executive Summary The case for urgent reform of Britain’s polit- al election and during the entire period ical finance laws, and for increased state since the previous general election; it funding of political parties, is generally based covers routine and campaign spending; on the premise that the expenditures of and it measures inflation by the Retail British political parties have rocketed. Prices Index (RPI). Compared with aver- Labour and the Conservatives – so the age earnings, Conservative Party spend- argument goes – have each attempted to ing in 2001-05 was half as much as in outspend each other in a manner reminis- 1966-70. (See Graph 1 and Table 12) cent of an ‘arms race’. State funding is need- Combined spending of the two main ed to prevent parties from falling vulnerable parties rose annually by 1.1 per cent dur- to questionable donors, courted by the par- ing the 35-year period from 1966-70 to ties in their desperation for ever-increasing 2001-05 if the RPI is used to measure sums of money. Moreover, there needs to be inflation. This was because the rise in a legal cap on all party spending, between Labour spending was greater than the fall elections as well as in election campaigns. in that of the Conservatives. However, if The extensive new research and docu- the Average Earnings Index (AEI) is used mentation in this study shows that the as the measure, combined Conservative reformers are proposing to cure a largely and Labour spending declined at an imaginary malady. Furthermore, the pro- annual rate of 1 per cent over this period posed medication could have a toxic effect Over the same period, the spending gap on Britain’s parties and democracy. between the two parties narrowed. In There is no ‘arms race’. Certainly, nation- 1966-70, the Conservative party’s spend- al election campaign costs grew sharply in ing was nearly three times as large as the 1980s and 1990s as the Labour Party Labour’s. By 2001-05 the Conservatives eroded the Conservatives’ historic advantage were less than a tenth ahead of Labour. in spending. But these costs have almost This small gap was attributable com- halved following legislation enacted in 2000. pletely to Labour’s weakness at the con- (See Graph 2) In addition, they represent stituency level only part of the picture. In the 2001-05 elec- With the decline in local activity and toral cycle, national election campaigns membership in both of the leading par- accounted for just 15 per cent of the total ties, spending by constituency parties fell spending of the two largest political parties.