Comment

State funding of parties is bad for democracy

The current scandal over the National Party’s donations has led to calls for greater state funding of political parties, but Dr Bryce Edwards argues that New Zealand would benefit from less, rather than more, state funding.

It is not commonly known that the vast bulk of the resources provided to political parties come from the state, via the backdoor of parliamentary funding. The parliamentary parties receive resources and services worth many millions of dollars per year that are intended to be used for carrying out legislative duties and serving constituents. In reality, much of this is used for partisan political purposes, electioneering, and organising their parties.

The latest annual report of the Parliamentary Service – just published – shows that the most recent “Party and Member Support” budgets for the parties totalled $122 million. Individual parliamentary budgets were as follows: National, $65.1m; Labour, $43.7m; New Zealand First, $6.2m; and the Greens, $5.8m. Amongst other things, these budgets pay for about 402 parliamentary staff working for the parties and their MPs. 

On top of these resources, there are plenty of other taxpayer-funded budgets such as travel ($4.6m) and communications ($3.4m). 

In theory, all of these budgets are for Parliamentary purposes, but in reality, they’re used for “the permanent campaign”, in which the politicians convert these resources into techniques designed to build their party vote. Out in the electorates, regional party organisers, previously paid for by the party organisation, have been replaced by electorate agents paid for by the Parliamentary Service. The electorate offices they work in are now de facto regional party headquarters. Mail-outs, glossy leaflets, and newspaper advertisements are also paid for by parliamentary funding.

Since the 1980s, party membership has plummeted – Labour has dropped from 100,000 in the mid-1980s to less than 10,000, and National has gone from a high of 250,000 down to perhaps as little as 20,000.

On top of all this, of course, the Electoral Commission also allocates broadcast advertising funding to all parties for general elections. In 2017, the Commission handed out $3.6m, the bulk of which went to Labour and National. 

We can therefore see that New Zealand already has a very generous system of political party state funding, albeit one that is mostly indirect, through the backdoor of Parliament. This state funding has already had a very strong impact on the parties. 

Undoubtedly, it has reduced the organic attachment of political parties to society. They no longer have to rely on party members for voluntary work and financial support. Because the parties have lucrative funding in Parliament, their leaders are not responsive to, or concerned with recruiting, ordinary members. Since the 1980s, party membership has plummeted – Labour has dropped from 100,000 in the mid-1980s to less than 10,000, and National has gone from a high of 250,000 down to perhaps as little as 20,000. The minor parties are also unable to sustain large memberships.

State funding has the effect of centralising power in the parties. It’s the leaders and their various paid professionals who are further empowered by the funding. The party office holders, members and activists have their relevance decreased. Even MPs have less power, as the leadership effectively controls the parliamentary resources. 

In becoming reliant on state funding, political parties are also prone to banding together to ensure its generous supply. The parties have largely designed the provision of state funding themselves and, through their control of the Parliamentary Service, they have controlled the regulation of this funding. 

By receiving state funding, the parties are also partially co-opted into the state, blurring the line between political parties as voluntary, representative structures and the state. Public subsidies have fostered the development of a “political class” in New Zealand politics made up of career professionals. 

The overall effect of the taxpayer-funded life-support system has been to consolidate the status quo in Parliament and prevent the entry of outside competitors. Witness the fact that the only new political party to be elected to Parliament since the introduction of MMP is the Act party. Every other new party – including the Greens, Alliance, New Zealand First, United Future, Progressives, Mana and the Māori Party – has been launched by at least one existing MP. No other new party has been able to compete with the millions of dollars of state-funded resources at the disposal of parliamentarians.

Labour and the Greens now say that increased state funding would restore confidence in the political system. However, whenever large systems of state funding have been introduced elsewhere in the world in response to political finance scandals, it has only led to increased problems.  

Furthermore, it seems likely that concerns over unlawful election spending will have had the opposite effect on public opinion, giving voters even greater reason to distrust parties and making them even less willing to see parliamentary parties handed further public subsidies. In fact, the most significant party finance scandals have actually involved the use of state funds rather than private financing. 

Rather than increasing this generous state subsidy, the political system would benefit from being freed from such patronage.

Many on the left favour state funding of political parties because of the misconception that money equals power and only wealthy parties can compete. But a number of examples from recent New Zealand political history refute this. New Zealand First and the Greens both obtain decent electoral results from relatively low campaign budgets, while the Act party has spent millions of business funds, only to end with almost zero support. Similarly, the plight of the Internet Party, the Conservatives, and The Opportunities Party show just how inadequate money is to ensure electoral success.

Although the massive backdoor state funding of parties in New Zealand has “solved” the financial problems that political parties have had in raising funds from the public and getting them to donate their time, it has also allowed the parties to avoid the deeper problems that afflict them. 

Rather than increasing this generous state subsidy, the political system would benefit from being freed from such patronage. Making parties seek their own resources – either money, or volunteer activism – would encourage them to reconnect with society. In particular, parties without substantial amounts of finance would be forced to develop alternative means of communication and persuasion – maybe even involving actual party members. Remember the old Alliance Party? They got 18 per cent of the vote in 1993 without any significant funding at all. Instead they mobilised thousands of activists and the public. 

This does not mean that major reform of political finance is not required. The rules around donations aren’t working adequately. However, it would be a mistake to see greater state funding as any sort of panacea. 

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