BBC On The Record - Broadcast: 13.10.02

Film: Paul Wilenius reports on the debate over state funding of political parties.

PAUL WILENIUS: The Labour Party may have new offices in London, but it's still got the same old problems. It needs money and lots of it. And so staff from these Old Queen Street offices are on the hunt for cash, wherever they can legally find it. The Labour Party is in its worst financial state ever - according to this confidential report here produced by party officials. Subscriptions from the party's dwindling membership are down and Tony Blair's been relying on big cash donations from rich supporters and the unions. But the controversy sparked off by such donations has forced Labour to seriously consider using more taxpayers' money to support political parties. In the past Labour and the trade unions were indeed brothers in arms. The unions helped to create the party and so Labour always knew where to get the cash to sustain it. However, this cosy relationship had a political downside, which eventually began to rip apart successive Labour governments. The image of the trade unions demanding favours in return for cash was deliberately whipped up by their Tory opponents. THERESA MAY MP: I think damage has been done to the Labour Party in the past, if you look back in to the '70s for example, by their relationship with the trade unions, and everybody knowing that the trade union funding to the Labour Party was driving that party's policy. WILENIUS: Although Labour is still knocking on the doors of the unions for money, it knows it comes with big political risks. MATTHEW TAYLOR: The unions I think have recognised that the position in which they say the money we give to the party is tied to policy outcomes is simply untenable. You know Tony Blair cannot be seen to be running a party that is influenced directly, by where its funding comes from, whether it's a rich individual or a trade union, so that finance policy link is untenable WILENIUS: Tony Blair actively tried to dispel that image by cosying up to big business and even before the 1997 election, Labour was welcomed by some of the biggest companies in Britain. And after his huge victory the party was able to take away big cheques from many of the nation's top boardrooms. But things began to take a turn for the worse when the government changed the rules over party funding, publishing the names of big supporters. Labour found it harder to get cash out of corporate donors. RUTH LEA: It's very hard to justify to your shareholders if you're giving political donations of more than five thousand pounds, under the current circumstances. Added to which, if you just get dragged in to the papers being accused of buying favours a bit sleazy you know, then that's not gong to help the company either and the shareholders could well say to the directors, why are you doing this, why are you giving money, if actually you may be damaging the business, so certainly, all the stuff that's been in the papers about buying favours has made it much, much harder for directors to justify political donations. WILENIUS: It's the damaging accusations of sleaze, which have really worried Labour. There was the one million pound gift to the party from Formula One's Bernie Ecclestone , and the hundred thousand pound donation from porn baron and Express publisher Richard Desmond, as well as the media storm over the Mittalgate affair. They left a nasty taste and critics claimed people were buying favours. MATTHEW TAYLOR: The public don't like high value donations from rich individuals to parties. That undermines confidence. The public assumes and maybe they are wrong about this, but they assume there's something fishy about that amount of money being given. The phrase they use to us in focus groups is, well people wouldn't give the money for nothing. THERESA MAY MP: Perhaps the best example of course for the Labour Party was the money they received from Bernie Ecclestone and the policy stance they then took on the issue of tobacco advertising at Formula One racing. So what we've seen with Labour is that some donations appear to have been linked to policy decisions by the government and that really is quite a different order of magnitude from an individual or a business giving a donation to a party they believe to be generally business friendly. WILENIUS: Labour knows only too well how damaging any suggestion of sleaze can be. They watched the Tories suffer appallingly over allegations of cash-for-questions, donations-for-favours and Knighthoods for big donors. The Conservative Party's credibility with the electorate evaporated. There are worries that this is fuelling voter disaffection with all politicians. TAYLOR: The big issue is the lack..... the loss of trust in the system as a whole and we see state funding as a way of helping to restore public trust and focus on the important parts of politics rather than having these distracting stories every few months, in which people's whole trust in the system is put in doubt by large donations. But it's also very important to emphasise that our current system of party funding is extremely unfair. WILENIUS: Any hopes of relying on income from party members are totally unrealistic. At a local branch meeting in London's Docklands members try to raise extra money through whip rounds and raffles. It's only a drop in the ocean when faced with a record deficit. A copy of the Labour Party budget seen by On The Record, admits it takes more money to service members than the party raises from their contributions. TAYLOR: It's vital for the public interest that political parties become stronger, particularly in the community level, recruit more members, undertake more activity locally, become more vibrant and more representative bodies locally. In the present system they can't do it, they can't do it because they can't afford to do it and because they can only spend money at the national level because there are much stricter limits than the local level, that's where their activity takes place. Under our proposals, parties should have every incentive to become active in their communities, more representative and that would actually renew politics. So there's a very big prize behind state funding. WILENIUS: So should the public pay? Matthew Taylor's Think Tank - the Institute for Public Policy Research - will unveil a report this week calling for political parties to be funded from the State. For every individual donations made to a political party the Exchequer would also contribute and to clean up politics there would be a five thousand pound cap or limit on donations for everyone. TONY BANKS MP: There's an obvious case for capping donations, otherwise it gives unfair advantage as it were to rich donors or to political parties that have got access to rich donors. I think you should cap individual donations and even if you have matching funds systems that involves Treasury paying over money, that should also be capped as well. MAGGIE JONES; I think it's unnecessary to have that sort of cap, the Labour Party has been at the forefront of introducing transparency and publicising the donations that are received, we're miles ahead of any of the other political parties and the work that we've done on that, and I think that's the issue, the issue has to be about transparency so that there can be no suggestion of underhand payments. WILENIUS: The unions feel it's their party and they can pay if they want to. However, it's not just the proposals to impose a strict limit on donations which have angered many in the Labour movement. Some Labour MPs would prefer to have the unions and members funding the party not the state. They feel it would go down badly with the voters and party members. TOM WATSON MP: Well it's very easy for the IPPR to put these proposals forward because of course they don't have to justify them to their constituents at fortnightly surgeries. But I don't support it, it wasn't a manifesto commitment of the Labour Party. Labour stood on a platform of investment and reform in the public sector, not to say to voters, I'm putting political parties first, schools and hospitals second. WILENIUS: This goes to the heart of the problem facing Tony Blair. State funding would mean he's no longer dependent on the unions, but they will not agree to such a move without a damaging fight. Although there are some MPs who feel it's possible to go down this route, without breaking the link between the unions and Labour. BANKS: I'm much in favour, totally in favour of maintaining the historic links between the Labour Party and the trade union movement, but it shouldn't be one that's just purely based on the ability of the unions to fund the Labour Party, because that again raises the big question mark about you know, if you're paying the piper are you calling the tune, and that creates tension, so my system would involve the unions themselves going to their own membership in order for their members to authorise their tax money to go to the Labour Party and I think that would help the unions in terms of their active involvement as well as the Labour Party. WILENIUS: Many in the Labour movement would applaud those sentiments. Yet there are worries that a part of the Labour leadership wants something different. That this is more about breaking the link with the unions, than just clearing the nine million pound deficit. JONES: I think there's a lot of suspicion about what the proposals are really intending to do, and there is suspicion that underlying this there is a desire to break the link between the unions and the party, and although that's not explicitly spelt out in the proposals, undoubtedly that is one of the consequences, that is the road that we believe that the logic of what they're saying would lead to. WATSON: There's no doubt about it that there are people at the centre of the party who would like to see an end to the link, to break that traditional route. I think if they want to do that, have the debate out in the open, don't try and do it through the back door. Well - it's a hackneyed phrase - but let's remember the union link did sustain the party through good times and bad, and there's a lot of trade unionists out there who do feel slightly threatened by the tone of the debate around state funding in Westminster and I think that's very sad. WILENIUS: This leaves party fundraisers with a major headache for almost everywhere they go to raise cash in the future, they will find it harder and harder to succeed. If Tony Blair moves towards state funding he has to get the money from here - the Treasury - and in turn that comes from the taxpayer. But will the voters be happy with giving up to twenty million pounds of their money every year to political parties to help fund their operations? Although there are some who feel that the public could eventually be persuaded, there are many others who fear it would spark off a vicious political backlash against the Government. WATSON: I think that the electorate will not put up with more Millbank spin doctors, more photo opportunities for Conservative politicians. We stood at the last election on a platform of investment and reform of the public sector. If we were to say schools and hospitals come after political parties it would simply be bonkers. WILENIUS: It's not just the unions and many Labour MPs who are against state funding of political parties. There is fierce opposition from the Conservative Party, who fear the voters just would not wear it . MAY: I think if the Labour Government were to propose state funding for political parties, it would go down with voters like a lead balloon, and I think voters would give them a very clear message that they want their tax-payers money to be spent on improving public services and not on funding the party political activities of the various political parties. WILENIUS: Some cynics believe that it would only take one more scandal like the Bernie Ecclestone affair to send Britain racing towards state funding. But others are convinced public resistance is so great that the party fundraisers will have to keep their begging bowls out for a long time yet.
NB. This transcript was typed from a transcription unit recording and not copied from an original script. Because of the possibility of mis-hearing and the difficulty, in some cases, of identifying individual speakers, the BBC cannot vouch for its accuracy.