Labour: Police at the Front Door, the Bailiffs at the Back...

Francis Maude has this evening given a speech to POLITEIA about political party funding. He uses a very good line: "The Labour Party are currently trying to use Sir Hayden Phillips' review of party funding to rescue from their current dire plight, where they have the police at the front door and the bailiff at the back."

I'm going to quote the press released version of his remarks in full because I think this is such an important issue. Conservatives should be looking to shrink the role of the State, not increase it. Francis is right to say that the Conservatives will walk away unless the Labour Party concedes the point on union donations, but he should go further. He should make clear that the Conservatives will not take any further State funding, beyond that which they already receive in 'Short Money' to fund Opposition activities. This is what he told POLITEIA this evening...

"Democracy needs vigorous political parties. And parties, like charities, need money. But party funding cannot go on as it is. Last year, we set out a coherent package of proposals to clean up the way we fund our party politics. Many of the proposals would work against our partisan interests, but we took the view that they were nonetheless in the public interest. One of those proposals was the suggestion - controversial to many - that there might be an increase in state funding. But let me say this. There should be not a penny more state funding without a single, comprehensive cap on donations - including companies, the unions and individuals. The public will be highly cynical if political parties award themselves lump-sum handouts without fundamental reform.

Any additional state funding should be there to assist and encourage parties to re-engage with the electorate, for example, through tax relief on small donations and a matched funding scheme for those who do not pay tax. State funding must not reduce the dependence of parties upon their own activists for fundraising. Nor must it be allowed to increase the distance between the parties and the electorate.

The Labour Party are currently trying to use Sir Hayden Phillips' review of party funding to rescue from their current dire plight, where they have the police at the front door and the bailiff at the back. Sir Hayden was asked by the Prime Minister to examine ways to restore public confidence in politics by changes to the way parties are funded. Labour have come up with a clever wheeze whereby by its own dominant funder, the trade union movement, would remain unaffected by any checks or caps, while opposition parties would face stringent caps on what they could spend either nationally or locally. This is a recipe for a one party state.

After all the party in Government benefits in myriad ways from the simple fact of being in Government. Hundreds of taxpayer-funded special advisers and Government press officers are at the beck and call of Government ministers. And today sitting MPs, most of whom by definition belong to the Government party, enjoy generous taxpayer-funded allowances which can be used to employ staff, run websites and distribute leaflets to their constituents. So to impose a rigid annual cap on party spending, whether locally or nationally, would be to entrench a huge advantage in favour of an incumbent Government. No opposition party could ever agree to that, and no Government party should ever contemplate it.

Let's be quite clear: the reason party funding needs reform is nothing to do with how much is spent. It is all about the concern that a large donor can buy political influence or patronage. That can be addressed by the simple measure of a cap on donations. Both the Liberal Democrats and the Conservatives have proposed a cap of £50,000 a year. We think this is a level at which no one will seriously fear that a party is subject to undue influence. This would cause us some financial pain, but we are willing to undergo that in order to win back the public's trust in the political process.

Labour by contrast have entered a resounding veto on any such cap. They maintain that the trade unions are a special case. Well, in one sense they are. The proportion of Labour's funding provided by a handful of trade union leaders is around 70%. And there is nothing remotely covert about what is given in return. It is all there to be seen. To pay for the 2005 election campaign, Labour reached a deal with the unions called the Warwick Agreement. The unions stumped up £12 million to fund Labour's election campaign. And in return, there was £10 million of taxpayers' money for the Union Modernisation Fund, extra rights for strikers, and a deal which means civil servants still get to retire earlier than those in the private sector.

This has all the hallmarks of a straightforward commercial transaction. It is precisely this kind of trade - cash for policy, or in the case of the Union Modernisation Fund union cash in return for taxpayers' cash - that has eroded public confidence in the integrity of the political process. Reform of party funding that failed to remedy this would be shockingly cynical and a terrible wasted opportunity.

There would be a further democratic penalty if local expenditure caps of the type being promoted by Labour were to be introduced. Such caps would be the enemy of what we all say we want to encourage, the engagement of local people in local politics. Restrictions on how many leaflets councillors and candidates could deliver would be deeply counter-productive to local political engagement. If a local party managed to persuade twenty thousand local electors to donate £5 a head towards local campaigning outside of election periods, there would be a universal cheer. This would be seen as exactly the right kind of political reinvigoration. Yet local spending caps would prevent this.

And there is a further penalty. Who would want to be a local party treasurer, with the threat of going to jail if a leaflet isn't reported? Who will carry out the detailed and complex compliance work in areas where there isn't a professional agent or organiser? What exactly would count as a campaign expense outside election time? Should a letter from a councillor to local residents be deemed political expenditure?

We recognise that there is concern that single donors might have disproportionate influence on local parties. This can be addressed simply and effectively by a cap on donations, perhaps with a lower cap for donations at a local level. We must ensure that political parties are the champions of the people, and not be absorbed into the fabric of the state or smothered by state regulation."