Futurelearning

A little creative accounting to fund politics

Victoria University of Wellington's Jack Vowles explains why taxpayer funding of parliamentary parties should continue, arguing we just need to think outside the box 

Two political commentators have recently called for a revival of mass membership political parties. They identify a political class no longer representative of New Zealand society at large, many of whom have known no other career than politics and therefore lack ‘real-world’ experience.

There is some truth in these allegations, although they are over-played. The claims are made in the context of recent concerns about anonymous donations to political parties and fears that donors may have privileged access to the political process. 

Matthew Hooton sees a revival of mass membership as providing a more democratic means of funding political parties and reducing parties’ tendencies towards extremism in the form of capture by a small band of activists or politicians. However, a large mass membership of Labour in 1984 did not prevent the capture of the parliamentary party by Roger Douglas and his allies. In the UK, membership in the British Labour Party has recovered significantly, but this has been associated with the party’s shift to the left. 

I am personally a big fan of mass membership parties. Yet the conditions under which they can survive and persist are no longer what they were in their heyday from the 1930s through to the 1950s, and again, in New Zealand’s case, in the 1980s. 

Systematic tracing of the process by which these changes rolled out is lacking. Bryce Edwards assumes a causal link between the professionalisation of political life and declining party membership. But even if one can be established, a correlation is not a cause. 

He advocates that taxpayer funding of political parties should be drastically curtailed. This, he thinks, would oblige parties to more actively seek members who would then provide their funding. This requires a huge leap of faith that without fresh incentives ordinary people would respond if parties come begging for funds or for members to become fund-raisers. Under current legislation, more likely the gap would be filled by business donors, most as now anonymous to the public but known by the parties receiving the funds. The current skew of party funding towards more business-friendly parties of the right would continue.

With less taxpayer support, parties would have fewer resources to conduct their affairs in Parliament and to communicate with the public, and the skew of funding advantage would almost certainly become bigger. 

Taxpayer funding of parliamentary parties should continue: we do not want to go back to a situation where, for example, the spouses of MPs were expected to run MP electorate offices.

Edwards contends that this would not matter, because there is no correlation between the funds generated and/or spent and party vote shares. Unpopular parties cannot make themselves appreciably more popular with lots of money and popular parties can do relatively well without much cash to spend. But this assumes that no other factors affect vote choices and that there is a simple linear relationship between money and votes – as if parties could effectively buy the votes directly. 

Huge amounts of money can be spent on advertising, but if no one wants the product it is unlikely to have much effect. However, compare two popular products with a big difference in their advertising budgets. On the margins, more advertising will almost certainly mean more sales. If two products are closely competing to be the biggest player, that margin could be decisive. For close elections between two major parties, all else equal, a funding imbalance can change the outcome. 

Effective and responsive political parties require funds. Our current funding model is broken. Taxpayer funding of parliamentary parties should continue: we do not want to go back to a situation where, for example, the spouses of MPs were expected to run MP electorate offices. Alternative proposals for funding parties’ other activities need to be considered. 

Full state funding is not the only option. 

Business funding could continue, but only through the Electoral Commission, and allocated between the parties according to a similar formula used to distribute broadcasting funds during campaigns. Business donations should be to support the political process, not given directly to particular parties. 

Individual contributions directly to political parties should be limited to a maximum of, say, $1000 a year and treated for tax purposes as a charitable donation, and perhaps matched by a taxpayer top-up. 

Parties would have incentives to seek money from small donors, but none at all to solicit it from businesses. Perhaps this might revive party memberships, but the appetite for such ‘high intensity’ political participation is lower now than in the past. 

Creative thinking is needed if we are to improve our system of party funding.

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