TI POLICY POSITION No. 01/2005 STANDARDS ON POLITICAL FUNDING AND FAVOURS The need to clean up political finance Corruption in political party and campaign consider the importance of vigilance by civil finance damages democracy because it society and the media and of internal political undermines elections and distorts political party and business controls. The development of competition. But the damage is not confined to the Standards reflects the importance of the the electoral process. The quality of issue to the Transparency International (TI) government is marred when subsequent movement and responds to the body of decisions by elected politicians are taken to knowledge built up by TI’s National Chapters. pay back those who funded their ascent to power, rather than for the benefit of the Transparency: cornerstone of regulation population as a whole. Equally, when a In order for any political finance regulation to be political party resorts to paying for votes rather implemented, there has to be a way of checking than focusing on the quality of its campaign parties’ and candidates’ finances. Transparency message, democracy suffers. of political finance, via disclosure, is therefore the Corruption in political finance erodes trust in the institutions of democracy, when scandal after scandal reveals politicians sharing the spoils of power with their financial KEY RECOMMENDATIONS backers. Transparency International's Global Corruption Barometer 2004 found that in 36 • Detailed disclosure by political parties and out of 62 countries polled, political parties candidates of assets, income and were considered to be the most corrupt expenditure institution, followed by parliaments. Faced with evidence that voters do care • Limits on the duration and cost of election about the ways in which electoral politics is campaigns, and on large private donations. financed, governments around the world have taken steps to regulate political party • Mechanisms to safeguard ethical standards and campaign financing. Many have in public life, including conflict of interest introduced disclosure laws, whereby parties laws. must publish details about who gave them money, how much, and what they used it for. • Adequately resourced, independent Others have banned certain types of oversight bodies. donations that are considered more prone to corruption, such as corporate donations. starting point of any regulatory framework. Another route taken by countries is to lessen Transparency also empowers voters to make the need for money by providing state informed choices on election day. subsidies, shortening campaigns, providing The importance of disclosure to the problem subsidised access to the media or curbing the of corruption in politics is reflected in international amounts parties may legally spend. law. The United Nations Convention against International IDEA has complied a detailed list Corruption calls on states to “enhance of regulations in 111 countries. transparency in the funding of candidates for While there is no model for how to regulate elected public office and, where applicable, the corruption in politics, some attempts have funding of political parties. The African Union been more successful than others. Convention goes a step further and is the only Transparency International's Standards on convention to have mandatory provisions on the Political Party Funding and Favours (in boxes, subject of political finance, requiring members to below) reflect best practice. The Standards go “incorporate the principle of transparency into further than external regulation, however, and funding of political parties”. The Council of Europe has also carried important work in this presentation of party balance sheets including field, and in 2003 issued guidelines for its invoices for money spent. members on political finance, which call for disclosure. Ensuring that business plays a positive role Despite this, surprisingly few countries Private interests must be prevented from have good disclosure laws. A study by USAID subverting the democratic process through the finds that of 118 countries studied, 28 have no purchase of control and favours. From the disclosure laws and only 15 require parties perspective of business, clear rules can help and candidates to disclose income and/or mitigate exposure to demands for bribes and expenditure accounts and disclose the identity subsequent reputational damage if quid pro quo of donors to political parties. donations or bribes are exposed; indeed the TI Political parties, candidates and Business Principles for Countering Bribery politicians should disclose assets, identify political contributions as one of the high- income and expenditure to an risk areas where bribery takes place. Donations independent agency. Such information should not be used to gain advantage in business should be presented in a timely transactions, whether made to parties, fashion, on an annual basis, but candidates, elected officials or third-party particularly before and after elections. organisations such as research institutes. It is It should list donors and the amount of worth mentioning that a significant failing of the their donations, including in kind OECD Anti-Bribery Convention, which proscribes contributions and loans, and should bribery of foreign public officials, is that it does also list destinations of expenditure. not prohibit bribery of foreign party officials. The information should be made Banning corporate money in political finance publicly available in a timely manner is one answer, but could be counterproductive if so that the public can take account of the result is to inhibit diversity of parties within a democracy, or drive donations under the table. it prior to elections. Where they are not banned, transparency and limits on donations are important. Levelling the playing field Companies should list all donations and publish The motivation behind efforts to regulate their policy on political donations (defined campaign finance has not only been to curb broadly, to include donations to parties, corruption, but also to promote fair competition candidates and third parties). They should not between political parties and to nurture make political donations in countries where they emerging parties. This is usually done through have no legal presence and, in line with a the provision of public funding, whether in movement toward enhanced shareholder direct subsidies, or via indirect subsidies such activism around the globe, listed companies as broadcasting time on public television should give very serious consideration to the stations, franking of campaign materials, use option of requiring shareholder approval for such of telephones or public office space and tax donations. relief on political donations. Donations to political parties, candidates Careful consideration should be given to and elected officials should not be a means the benefits of state funding of parties and to gain personal or policy favours or buy candidates and to the encouragement of access to politicians or civil servants. citizens' participation through small donations and membership fees. Parties, too, need rules for transparency Consideration should also be given to The aim of campaign finance regulations is not to limiting corporate and foreign support, as hamper the performance of political parties. well as large individual donations. Political parties matter. Representative To control the demand for political democracies cannot function without political financing, mechanisms such as spending parties and, in turn, political parties and candidates limits and subsidised access to the media to elected office need money to communicate their should be considered. platforms and policies to voters. This need for money has become more acute in recent decades The aim in all cases is to reduce the as election campaigns become more sophisticated comparative advantage of wealthy parties and and party membership wanes. Televised spots and stem the “arms race” for campaign funds. The costly opinion polls have to some degree replaced provision of public funding has additional door-to-door canvassing by party volunteers as the benefits in terms of transparency since method of choice for campaigning. The challenge disbursement is generally conditional on is therefore to limit the opportunities for corruption in political finance, while promoting political equality and recognising the demands upon continue to suffer scandals. One reason for this is political parties and candidates. that regulations are not adequately enforced, Any effort to curb corruption in campaign because oversight bodies are inadequately finance needs to directly engage with political equipped, laws are too complex and parties. If parties are not committed to clean cumbersome to be practicable, or there is a lack politics, regulation is unlikely to succeed. of political will to allow enforcement bodies to Political parties need to demonstrate willingness carry out their functions free from political to abide by external regulations. Not only are interference. (For more details see Policy Position clear and simple regulations more successfully # 02/2005, 'Political Finance Regulations'.) enforced than laws that are unclear or difficult to Oversight bodies must be adequately monitor, but they are easier for political parties resourced, and must be supported by an effective and candidates to comply with. Party judicial system. Oversight bodies must be able to representatives