Political Party - Party Funding

Party Funding

Political parties are funded by contributions from

• party members and other individuals,

• organizations which share their political ideas or who stand to benefit from their activities or

• governmental public funding.

Political parties, still called factions by some, especially those in government, are lobbied vigorously by organizations, businesses and special interest groups such as trades unions. Money and gifts-in-kind to a party, or its leading members, may be offered as incentives. Such donations are the traditional source of funding for all right-of-centre cadre parties. Starting in the late 19th century these parties were opposed by the new founded left-of-centre workers' parties. They started a new party type, the mass membership party, and a new source of political fundraising, membership dues.

From the second half of the 20th century on parties which continued to rely on donations ran into mounting problems. Along with the increased scrutiny of donations there has been a long term contraction in party memberships in most western democracies which itself places more strains on funding. For example in the United Kingdom and Australia membership of the two main parties in 2006 is less than an 1/8 of what it was in 1950, despite significant increases in population over that period.

In some parties, such as the post-communist parties of France and Italy or the Sinn Féin party and the Socialist Party (Ireland), elected representatives of take only the average industrial wage from their salary as a representative or their entire earnings, while the rest goes into party coffers. Although these examples may be rare nowadays, "rent-seeking" continues to be a feature of many political parties around the world.

In the United Kingdom, it has been alleged that peerages have been awarded to contributors to party funds, the benefactors becoming members of the Upper House of Parliament and thus being in a position to participate in the legislative process. Famously, Lloyd George was found to have been selling peerages. To prevent such corruption in the future, Parliament passed the Honours (Prevention of Abuses) Act 1925 into law. Thus the outright sale of peerages and similar honours became a criminal act. However, some benefactors are alleged to have attempted to circumvent this by cloaking their contributions as loans, giving rise to the 'Cash for Peerages' scandal.

Such activities as well as assumed "influence peddling" have given rise to demands that the scale of donations should be capped. As the costs of electioneering escalate, so the demands made on party funds increase. In the UK some politicians are advocating that parties should be funded by the state; a proposition that promises to give rise to interesting debate in a country that was the first to regulate campaign expenses (in 1883)..

In many other democracies such subsidies for party activity (in general or just for campaign purposes) have been introduced decades ago. Public financing for parties and candidates (during election timess and beyond) has several permutations and is increasingly common. Germany, Sweden, Israel, Canada, Austria and Spain are cases in point, although Canada has removed its public funding for political parties as of 2010. More recently among others France, Japan, Mexico, the Netherlands and Poland have followed suit.

There are two broad categories of funding, direct, which entails a montetary transfer to a party, and indirect, which includes broadcast time on state media, use of the mail service or supplies. According to the Comparative Data from the ACE Electoral Knowledge Network, out of a sample of over 180 nations, 25% of nations provide no direct or indirect public funding, 58% provide direct public funding and 60% of nations provide indirect public funding. Some countries provide both direct and indirect public funding to political parties. Funding may be equal for all parties or depend on the results of previous campaigns or the number of candidates participating in an election. Frequently parties rely on a mix of private and public funding and are required to disclose their finances to the Election management body.

Funding can also be provided by foreign aid. International donors provide financing to political parties in developing countries as a means to promote democracy and good governance. Support can be purely financial or otherwise frequently is provided as capacity development activities including the development of party manifestos, party constitutions and campaigning skills. Developing links between ideologically linked parties is another common feature of international support for a party. Sometimes this can be perceived as directly supporting the political aims of political party, such as the support of the US government to the Georgian party behind the Rose Revolution. Other donors work on a more neutral basis, where multiple donors provide grants in countries accessible by all parties for various aims defined by the recipients. There have been calls by leading development think-tanks, such as the Overseas Development Institute, to increase support to political parties as part of developing the capacity to deal with the demands of donors to improve governance.