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Last Updated: Monday, 3 December 2007, 17:14 GMT
Q&A: Political party funding
With funding for political parties again under scrutiny - where do they get their money from and why should that be in need of reform?

Why is party political funding under scrutiny?

It has emerged that a property developer, David Abrahams made large donations to the Labour Party under the names of four associates, which he says was done to maintain his privacy. Labour's general secretary Peter Watt has resigned after admitting he knew about it, but did not think it was illegal. The Metropolitan Police are investigating.

Wasn't there another row about party funding recently?

Yes, the cash-for-honours allegations which sparked a lengthy police inquiry into claims that peerages were offered in return for loans to political parties. That inquiry ended with no charges being brought.

How are parties funded?

All parties receive membership subscriptions. But that is not enough to pay for modern campaigning - especially with the general decline in membership over recent decades. The Conservatives rely mainly on donations from individuals and companies. Labour also receives these, but a large chunk of its income comes from trade unions. Lib Dem coffers have also been boosted by large donations in recent years.

So, the UK doesn't have state funding for parties, then?

Actually, yes it does. Opposition parties receive money to pay for administration and other costs. Otherwise, the ruling party - with its access to the instruments of government, such as the civil service - would have an unfair advantage, it is argued. In the second quarter of 2006, the Tories were given 1.15m by the state and the Lib Dems got 456,000.

How open is the whole funding process?

Under rules drawn up by the current government, donations or loans worth 5,000 or more to national parties have to be declared, as well as those worth 2,000 or more to local associations.

Haven't there already been attempts to reform party funding?

Yes. A review was ordered into the issue at the height of the "cash for honours" furore which followed the revelations in 2006 about the loans. That inquiry, run by the former senior civil servant Sir Hayden Phillips, came up with proposals for reform a year later. But after 18 months of negotiations, talks on party funding broke down in October 2007, after the Conservatives and Labour failed to agree on setting limits on campaign spending and on donations.

What were the sticking points?

The Conservatives wanted a 50,000 cap on all donations from individuals and organisations - include trade union donations. But Labour said union funding should be treated as a series of small donations from individual members. Labour was also concerned about Tory donor Lord Ashcroft's funding of Tory candidates in marginal Labour or Lib Dem-held seats - The Conservatives said Lord Ashcroft's money went into a fund that was administered centrally by the party.

What will happen next?

Gordon Brown has said, in addition to immediate changes to Labour funding, he is determined to press on with urgent reform of party funding. He has said there will have to be changes to Labour's funding from trade unions - including changes to the political levy. He has said he is not proposing further public funding "at this stage". He said Sir Hayden's proposals offered a comprehensive framework for reform.

What had Sir Hayden proposed?

He recommended capping spending for political campaigns as well as capping individual donations - set, after a transitional period - at 50,000. This would include trade unions, but affiliation fees from members would be exempt, treated as individual donations. He also suggested increasing state funding by 25m a year, linked to public support. He also recommended cutting spending by the largest parties between elections.

And what did the parties want?

Labour wanted a small increase in state funding, stringent caps on spending and voluntary caps to be placed on donations by each party. The Tories called for a large increase in state funding for all parties with more than two Commons seats, a cap of 50,000 on all donations, and tax relief for donations. Tory leader David Cameron backs a cap on spending for general election campaigns, but not a year-by-year spending cap. The Lib Dems wanted limited state funding for parties, national caps on annual donations and a lower cap on general election spending.

So, are big changes definitely ahead?

Not necessarily. Before the latest row Sir Hayden had also proposed another option - "minimal change" to the current system. In his report he said UK politics has usually been "remarkably free of corruption and abuse". There was always little chance of any changes if the big parties did not agree. Gordon Brown has appealed for consensus but has said he will fight any "one-party deadlock" on the issue in order to "build greater confidence in the integrity of our political system". The Tories said he was trying to deflect attention from the row over Mr Abrahams' donations.

TOP 10 BIGGEST POLITICAL DONORS

Oct 2006-Sep 2007 (exc public funds and donations under 50,000)

Donor Status Recipient party Total donations
Lakshmi Mittal Individual Labour 2,000,000
Lord David Sainsbury Individual Labour 2,000,000
Amicus/Unite Trade union Labour 1,487,142
Joseph Rowntree Reform Trust Company Lib Dems 1,454,100
Bearwood Corp Servs Company Conservatives 1,243,497*
GMB Trade union Labour 1,233,500
Unison Trade union Labour 1,192,925
Mahmoud Khayami Individual Labour 820,000
Usdaw Trade union Labour 764,094
TGWU Trade union Labour 712,520
* Non-cash      



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