Scandal warning over party funding

A 15-month inquiry had proposed a £10,000 cap on donations to parties in a bid to end “cash for influence” scandals and corruption allegations. The proposals also included plans to pay for the cap by imposing a £23m-a-year taxpayer subsidy.

However, the Tories, Labour and the Liberal Democrats came together to rule out asking voters to make up some of the resulting shortfall in the present economic climate – even if the change was delayed until 2015.

The Tories and Labour remain bitterly divided over the same elements which have stymied several previous reform efforts, including the cap and tougher rules for trade unions. The continued stand-off sparked a warning from the Committee on Standards in Public Life, which drew up the proposals, that it must not take another major scandal to spark change.

Chairman Sir Christopher Kelly accused politicians of failing to consider the proposals properly and said the strict cap and extra state funding was “the only way” to clean up the system.

“The issue of party funding cannot be shelved until the next scandal brings it to the fore. All three main parties now depend on large donations from a very small number of rich individuals or organisations for the funds necessary for their survival.

This cannot be healthy for democracy,” he said – refusing to rule out the possibility that corrupt practices had continued.

All three main parties committed to reform in their 2010 General Election manifestos after negotiations led by Sir Hayden Phillips failed to find consensus and broke up.

Under the latest proposals, no party with at least two MPs or members of devolved assemblies would be allowed to accept more than £10,000 a year from any individual or organisation.

Part of that shortfall would be met by curbing spending – including a 15 per cent cut in election campaign limits – with most of the rest coming from a taxpayer fund based on vote share.

Parties affected by the cap would get extra state funding of about £3 per vote secured in General Elections and £1.50 for each vote in devolved and European elections. They could also benefit from a tax break on donations under £1,000 similar to the “Gift Aid” system operated for charities.

The cap is far lower than the £50,000 wanted by the Tories, but that was dismissed in the report as “much too high” to convince the public the prospect for corruption had been dealt with.

Labour’s key concern is that trade unions, which provide the vast bulk of their income, would also be subject to the cap under the new system.

Only if individual members “opted in” to their fees being passed to Labour would unions be allowed to use that cash for party funding, the committee suggested.

The Prime Minister’s official spokesman said the report was “a useful input” into the party funding debate and pledged to continue cross-party talks based on its principles.

But the state funding element was met with a volley of dissent from across Whitehall.

A spokesman for Deputy Prime Minister Nick Clegg said the case “cannot be made” for extra state funding “when budgets are being squeezed and economic recovery remains the highest priority” but said the coalition Government “remained committed” to reforming the system.

Shadow Cabinet Office Minister Michael Dugher said Labour was committed to ending the donations “arms race” but had “concerns” over the proposals regarding union contributions.