Methods of Party Funding

Nowadays party funding is becoming an increasingly controversial topic. In this essay I will discuss the advantages and disadvantages of all the main types of party funding and how parties are affected. Firstly I will look at Membership fees as a method of funding and how effective it is as well as how fair it is on minority parties. After this I will look at personal donations including controversial issues surrounding party funding in recent years which is Cash for Honours. I will then take a brief look at the contribution that trade unions make towards the Labour party.

I shall then go on to discuss state funding and the report carried out by Sir Hayden Phillips on reforming party funding. Following on from the Sir Hayden Phillips report I will look at the proposals of reforms that have been set out. A major drawback from the perspective of the political parties towards gaining income through party membership is the continuously decreasing amount of membership within al of the major parties. It can also stunt the growth of any minority parties as they do not have the initial funding publicize their party and be taken seriously as a political party.

Advantages include that this comes at no cost of the state. It also means that the parties should be funded roughly according to popularity. Political parties are increasingly relying on the financial support of personal donors and the support of businesses. Although seen as controversial there are some definite advantages to this. The state does not have to pay for the parties. Political parties are separated from the same system and manage to keep a level of independence. It also has few of the major drawbacks associated with state funding.

However there are major disadvantages. It is hard to prevent corruption as shown in the 'Cash for Honours' scandal. The Cash for Honours scandal was revealed in May 2006. There were a series of long standing complaints to the police over allegations surrounding wealthy businessmen lending Labour large loans in exchange for peerages. No charges were made due to insufficient evidence however the reputation of political parties were badly damaged. There is also no transparency in what the parties spend this money on.

Parties which are relying on these donations or loans are becoming increasingly in debt. The Labour party has traditionally taken a lot of its income from Trade Unions. But there are major disadvantages. Due to this they are a political influence towards Labour. Labour has to please the Trade Unions in their views and objectives. They also have a say in who is elected as the next Labour leader as shown with the recent Labour party leader elecetion which was one by Ed Milliband who had lost on votes by the party's members but won due to the support of the Trade Union leaders.

There are many arguments both for and against using state funding and there is a certain amount of state funding anyway. An obvious disadvantage is that State funding would be very expensive to the tax payer. Tax payers would argue that they are paying for parties that they are against. It would be difficult for parties to agree a funding formula that is seen as acceptable for all parties. The ruling party could fix the state funding rules so that it suites them. If the funding was linked to votes it would be difficult for minority parties to take off.

There are examples within other countries such as Italy where state funding has increased corruption. On the other over hand parties would no longer be reliant on individuals and businesses for funding which means that they would not be under obligation to them. There would be more transparency with party funding. Parties could plan a long term future due to a steady amount of funding. Some people argue that it is fair and ethical to do use State funding. Most EU democracies have state funding of parties.

Due to the debt being faced by all three major political parties, Sir Hayden Phillips was asked by Blair to make a report on party funding and write up a set of proposals for reforming the system. He suggested a pay per vote scheme by which each party would receive a fixed amount per vote in the general election and a lesser some in the Local elections. He also proposed a new cap on personal donations made to the party. It seems to me that there are two main general methods of party funding and that is private donations and state funding.

I feel that party membership is a definite for of income for the parties but cannot be the sole method of funding. Also despite all the advantages of private donations I feel that they should be minimalized by placing a cap on the amount an individual can donate and this is due to the corruption and economic instability that they can bring. In other words I agree with the proposals suggested by Sir Hayden Phillips including state funding simply due to the stability that is needed in party funding.