The Cost of Democracy: Party Funding in Modern British Politics 
by K.D. Ewing.
Hart, 279 pp., £30, March 2007, 978 1 84113 716 2
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Men are dying daily to bring Western democracy to supposedly less advanced parts of the world. Its export is the chief cause of conflict between the developed and the developing world, in Asia, Africa and Latin America. But how healthy is that democracy? Most people assume that its requirements are met by a periodic visit to a polling booth, but dictators can arrange that. What if ever fewer people vote? What if prosperous modern citizens take the view that their lives are more or less fine, so why bother? In particular, why worry about other things democracy is supposed to entail, like free speech, executive scrutiny, judicial independence and membership of political associations, all in noticeable decline in modern Britain?

A Norwegian ‘millennium’ study went so far as to wonder whether Norway’s democracy, then a hundred years old, was likely to survive the 21st century in anything like its present shape. The authors pointed out that all systems of government evolve, and 20th-century democracy might well have served its purpose in reacting against 19th-century authoritarianism. It had proved expensive and flatulent, and the rolling coalitions brought about by proportional representation bored the electorate. In a globalised world, democracy might soon yield to something else, meritocratic oligarchy perhaps, or multinational bureaucracy.

At the heart of this debate lies that battered and now much tarnished institution, the political party. The decline of democracy is often expressed in terms of the decline in party membership and a related decline in election turnouts. Britain’s political parties are descendants of the political clubs of the 18th century and of the clash of interests and ideologies that steered the age of reform towards the universal franchise. Commentators from Burke to Tocqueville saw such associations as crucial to the democratic glue. They expressed a point of view and answered to the electorate for that point of view. They were thus more than a participative association; they were a running check on public administration. They were also a bridge between elector and elected across which both might pass back and forth.

Since the 1980s and the growth of a political consensus on taxation and welfare reform, British parties have lost their policy (and class) distinctiveness and become more like the electoral machines of their leaders, as is largely the case in America. Tony Blair’s celebrated ‘project’, guided by Philip Gould, dismantled the rambling institutions that formed the Labour coalition and turned Labour into whatever the leader wanted it to be, even, in Blair’s case, a continuance of Thatcherism. In disempowering county and city government, long the power base of the Tories’ electoral strength, Margaret Thatcher did likewise. She told her own party activists that they were not wanted and knocked from under her the support of local power and patronage that was the essence of a mass party. Thus, under leaders of both parties since 1979, the poor bloody infantry of politics has been left to atrophy.

The unspoken assumption of K.D. Ewing’s study of party funding is that this matters. Parties are essential conduits for accountable and representative democracy. They are crucial institutions through which citizens debate and put themselves forward to serve in government. No democracy does without parties. No leader can be elected or re-elected without their support and trust. The political party is the marketplace of political advancement. Yet who is to pay for it?

British party membership has plummeted by two thirds in the past quarter century to under a million today. Parties are no longer mass movements. Shrinking local associations, disappearing party agents (60 per cent fewer than three decades ago), hung councils under Whitehall control have all led in the same direction. Half the Tories’ annual conference platform used to be filled with the unknown faces of national association officials; not any more. At Labour conferences, motions binding the party leadership were voted by blocs of union delegates seated, often rowdily, in various parts of the hall. This has been swept away. Parties are no longer national coalitions of economic or regional interests. They are the leadership’s praetorian guard and cheerleaders.

The bulk of the finance that has poured into party bank balances over the years has come from donors, individual and collective, anticipating some benefit. For the best part of the 20th century, the trade unions wanted and received legal protection (until 1980, almost total immunity from legal restraint): a corrupt advantage defended by Ewing as allowing ‘for the formal representation of working people in the political system’. From the Second World War onwards, this interest, enshrined in the Labour Party constitution, distorted industrial and economic policy and wrecked one Labour government after another. This state of affairs Blair ruthlessly ended in 1994-96.

The Conservatives equally accepted donations from corporations and businessmen. Shareholders were ‘taxed’ of their dividends as union members were taxed of their political levy. Both these forms of political donation have since been curtailed by statute. Union members must contribute voluntarily and shareholders must formally approve political donations. But the top four unions still contribute more to Labour (roughly half its income from donations) than the entire corporate sector does to the Tories. The latter do better from large individual donors.

Ewing records but hardly analyses this evolution. He barely mentions the significance of Blair’s reform of the Labour Party, which sought to free it from union shackles but necessitated a search for new sources of funds from rich donors. Whether that has meant a corresponding increase in opportunities for corruption Ewing does not discuss, though it is surely a critical question. Nor does he discuss the uniquely British phenomenon of large sums being channelled into party coffers neither for love of party nor for hope of commercial gain but for the spurious boon of a knighthood or peerage. Since titles cost the state nothing, they must be the simplest way of subsidising political parties ever conceived. They do give the recipients voting rights in the House of Lords (for the time being), but they can hardly be said to corrupt the nation’s business.

Ewing is exhaustive in his coverage of recent attempts to cleanse ‘sleaze’ from the political process but maddeningly timid. He states as a fact that ‘there is no evidence of peerages and knighthoods being bought or sold in the post-Lloyd George era’ and ‘it is not suggested that there has been any corruption of any kind by way of donations to political parties in recent times.’ When Ewing turns to Labour’s 2005 election-loans-for-peerages fiasco – a clear conspiracy to evade the 2000 Political Parties, Elections and Referendums Act – he states that ‘each case appeared to reveal a series of badly timed coincidences.’ He even repeats Labour’s inverted negative, that giving the party money ‘should not of itself disadvantage anyone, whether personally or in terms of business activities’.

Does Ewing really think that the accountancy firms, Arthur Andersen and KPMG, gave such sterling service to Labour (£2.5m from KPMG) without thought of the billions of pounds in Treasury contracts that followed? As for the ‘fund-raising ethics committee’ set up after Bernie Ecclestone’s £1m donation to get Formula One cars (successfully) exempted from a ban on tobacco advertising, Ewing calls any criticism of it ‘unfortunate’ given that Lord Levy, the chief fund-raiser, was himself a member of the committee. This provided ‘reassurance that there was no question of cash for access’. The system, he says, proved to be ‘robustly independent’. This is nonsense. Indeed, if such naive exculpation were acceptable, why would the entire political community have accepted that there had to be a tightening of the rules? Ewing would have made a good member of Enron’s audit committee.

The truth is that any system of large corporate and private donations to political parties leaves them, and thus constitutional government, vulnerable to venality, pride, preferment and pecuniary advantage and pollutes the egalitarian purity of one-person-one-vote democracy. Hence the need for successive acts of parliament designed to prevent the sale of honours, to compel transparency of donations and limit campaign spending. Parties are, as Ewing says, part of the ‘informal constitutional infrastructure of the state’ and must be brought more under the benefaction of the state. (Would he say the same of the press?)

The book offers a good summary of how this might be done, drawing selectively on examples from abroad, notably Sweden, Germany and Canada, and from the series of great and good reports that have wrestled with the question. The recent flurry of activity to clean up both the honours system and party funding has undoubtedly led to a more open and regulated regime, both under the Electoral Commission and under the long inert honours scrutiny committee. Ewing surveys the measures to ensure donor transparency, donation caps, the banning of foreign donations, the control of election expenditure, free postage and airtime and the state subsidies for parliamentary offices already in place. He discusses various options for further reform and accepts the conventional wisdom (at least of the parties) that ‘the experience of every country suggests that there is an irresistible dynamic’ towards more state funding.

Ewing opts for a version of the 1976 Houghton proposals, whereby parties receive both ad hoc grants for specific purposes and a fixed sum per vote received at the previous election, in return for a cap on spending and on individual and corporate donations. This is a straight quid pro quo: subsidy in return for ending the potential for corruption.

Under such direct subsidy, parties would become arm’s-length state corporations, in time subject to the same disciplines as civil servants and legislators. Already parties in receipt of state funds must have their internal constitutions approved by government in Germany, Australia, Spain and Canada. With the growth of list systems under proportional representation (not discussed by Ewing) such regulation might seem necessary. But no electoral structure in which party bosses in effect decide who is elected is conducive to active local participation.

All moves towards greater state funding of political parties should be resisted. In America in 1976, the extreme ‘Buckley decision’ of the Supreme Court judged any regulation of campaign finance a breach of the First Amendment. It stipulated that in a democracy ‘it is not the government but the people – individually as citizens and candidates, and collectively as associations and political committees – who must retain control over the quantity and range of debate.’ Ronald Dworkin attacked this fundamentalism (in an essay of which Ewing seems unaware) as leading America away from voter equality towards the rule of money. ‘Democracy,’ he wrote, ‘is not a pedigree a nation earns by adopting some constitutional structure but an ideal towards which any would-be democracy must continually strive.’

Britain has regulation already and Ewing adduces scant evidence that corruption is so extensive and party funds so meagre as to negate parties as free-standing private associations. Press and parliamentary scrutiny offer a rough and ready check on favouritism in government patronage. As for influence over policy, the power of lobbying is far more potent than any pressure exerted through parties or MPs, as the casino, alcohol and defence industries have shown under Labour. The case for limiting very large donations is strong. But the present voluntary union donations to Labour have hardly influenced government employment policy. The most intense external pressure on policy (for instance, in the al-Yamamah contract) has come from MPs defending their constituents’ jobs. But is that corruption?

Parties should support themselves by their ability to mobilise mass support. Democracy requires them to recruit and retain the largest possible membership at the local level. There is no better token of this membership than the payment of dues. At present, the state already contributes a third of party income through ad hoc grants, while membership subscriptions make up a paltry 13 per cent of Labour’s income and just 6 per cent of the Tories’. For all the massive sums paid in hope of preferment to American presidential candidates, in the 2004 election 10 per cent of all US adults contributed something, and donations under $200 raised $206m.

People give money to politicians for a mixture of reasons. Everyone expects some quid pro quo, but that has been true since the dawn of democracy. Some want to see a particular person or cause advanced. Others want a place or status in local society, through political service, a council seat or appointment to a quango. Grander donors want grander things. Some are harmless, such as honours, some are contracts or jobs, but the grander the thing the greater, nowadays, the exposure. Corruption is best countered by exposure and exposure by media pluralism. Britain is not a very corrupt state but insofar as it is corrupt, the reason is the paucity of participants in public life, a paucity that state funding for political parties would encourage.

A party in receipt of state money loses its incentive to build its base. It reverts to being a club, another Westminster institution crammed with eager young workers looking for a seat, a think-tank job or a lobbying contract. Ewing himself seems to accept this, stating that ‘a large number of members or supporters making small donations would provide a secure income base for the parties which would relieve them of the need to seek large donations from wealthy individuals or corporations.’ Yet he does not carry the argument through. If parties operating as now regulated cannot afford large establishments and advertising budgets, that is their business: they should cut their costs. Blair’s response in 1994 to warnings that his modernising ideas would jeopardise union support was to go back to his constituency and recruit 2000 local members. As he said, it can be done.

Democracy remains the form of government most likely to deliver peace, stability and prosperity. Its health is therefore of universal concern. A political party that cannot persuade enough people to support its cause should not survive and should certainly not be propped up by the exchequer. Parties must direct their energy not to lobbying government for more cash – as they are furiously doing at present – but to re-engaging with the public. They should do this primarily through invigorating and empowering local government and thus reviving the web of patronage and power on which parties are based. It is this that revived French communal localism under the loi Deferre of 1982, even as central parties atrophied. The health of parties is central to the democratic process, but any hope of revival involves looking downwards to the people, not upwards to the state.

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Vol. 29 No. 19 · 4 October 2007

One can but admire the energy that Simon Jenkins displays rowing strongly as he does when deciding on the treatment best calculated to cure our ailing democracy (LRB, 20 September). But that energy rather goes to waste once you appreciate just how regressive Jenkins’s basic proposal is: that the political parties in this country set about ‘re-engaging with the public’. How they’re to do this he doesn’t so far as I can see tell us. More important, why on earth should they want to re-engage with the public when they are doing very nicely thank you without making any such noble attempt? The thought of starting to redistribute the political power that has become – no doubt unhealthily – so unshiftably entrenched in central government, is unlikely to cross the minds of such as our recently retired prime minister, his successor or the party that has proved so docile in following where the leader of the day requires that they go. Party high-ups may now and again pay lip-service to the kind of democracy Jenkins hankers after, whereby local political activities can generate some real input into the country’s governance but I for one don’t believe for a second that we’re going to see New Labour, or whatever other party may one day replace them, planning to turn back the clock.

As for what the best system could be for political parties to raise the money they need, Jenkins once again takes a line so impractical as to read like defeatism. Party budgets have increased enormously since the days when they survived happily, supposing there ever were such days, on the money they managed to winkle out of their members. If we went back to a system in which party income was raised by that method, annual dues would be onerous to say the least, and the vast majority of people I don’t doubt would be unwilling to pay them. ‘If parties operating as now regulated cannot afford large establishments and advertising budgets, that is their business: they should cut their costs.’ Thus Jenkins. To which one can only answer: Pardon me? The example quoted, of Tony Blair in 1994, newly become leader of his party, going back to his constituency and recruiting 2000 local members, in order to show that from now on New Labour wasn’t going to be in hock to the subsidies it received from the unions, won’t wash. That was an exceptional situation. The local members had the rare experience of finding that their MP was now their party’s leader, which was enough in itself to persuade them to cough up. How many of them remain members of the Labour Party today? And how many of them would have joined had they appreciated Blair’s big reason for wanting them to join?

We can all allow that Jenkins’s political heart is in the right place, but the therapy he asks for is way out of reach. And as for the best system of funding the parties, I found by the end of what he wrote that I agreed with the author of the book he was discussing, that the sensible thing is for them to be subsidised by the state. ‘A party in receipt of state money loses its incentive to build its base,’ according to Jenkins. Unable as I am to perceive any such incentive as existing in our current circumstances, we might as well cut our losses and accept that state funding would be a whole lot more predictable and transparent than the haphazard system we at present live under, with all its murky opportunities for corruption.

Neil Forster
London N1

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