Taking ‘big-money’ out of UK politics

What the UK can learn from Canada’s experience of money and corruption in politics

Last week’s blog outlined what Canada could learn from the UK’s health system, this week’s is about what the UK could learn from Canada to take ‘big money’, corruption, and the perception that money can buy politicians in the UK.

Like the UK, Canada has had it share of funding scandals in politics at the central government level (e.g. Shawinigate and the Airbus Affair). Over ten years ago, the federal Liberal government took action to address real and perceived conflicts that related to large donations by individuals, businesses, and unions to politicians and parties. I believe that the time is well past for the UK to change its political funding system and Canada can serve as a potential model.

The Canadian Approach

Back in 2004, Canada banned business and union donations to politicians and political parties, enacted strict donation limits, and implemented a ‘per vote’ subsidy for federal parties. In 2015, the per-vote subsidy was eliminated and now parties need to raise funds by individual donations.

The hallmarks of Canada’s political funding system are:

Donations — Only individuals can donate to federal political parties or politicians, union and corporate donations are banned. An individual is limited to donating no more than $1,500 per party and $1,500 to a party’s local associations. With these limits, it is pretty hard to ‘buy’ influence of a politician or party as an individual, and pretty much impossible to purchase influence as a company or union (without of course, outright corruption, bribery, and breaking laws).

Tax-Credits — To encourage individuals to donate to political parties the federal government provides generous tax credit (e.g. refunds) on political party donations. For example, at the federal level, the first $300 in donations generates a 75% refund (meaning a $300 donation costs the donor just $75). While it can be argued that political donations should not get any better tax treatment than donations to charitable organizations, the extremely generous tax treatment does encourage individual political donations, again offsetting the perceived need for large union / corporate donations.

Vote Subsidy — When fist introduced, parties receiving at least 2% of a vote in the most recent general election or 5% in a particular voting district, received a publicly funded annual subsidy of $1.75/vote (indexed to inflation). The aim of the subsidy was to provide parties with stable funding based on electoral success and bridge the gap in party funding that occurred with the banning of large, corporate, and union donations. This per-vote subsidy was eliminated in 2015 by a Conservative government (partly as the Tories were much better at the time at raising money from donors than then other major parties).

Canada’s federal party funding is not perfect, for instance our federal MPs can continue to engage in paid activities once elected. Also, many of the provincial party funding regimes are ripe with corruption, just look at the recent shenanigans around the Ontario’s current Liberal Party. However, I believe that many problems with the UK’s political culture could be addressed through changes to party funding rules.

Here are just a few big issues with the UK’s political funding model:

Corporate and Union Donations — Currently companies, partnerships, association, unions etc. can make loans to and donate to political parties. This is in addition to loans and donations that can be accepted by UK registered electors. I believe that the ability for businesses and trade unions to donate to politicians gives the perception that they can ‘buy’ favour with politicians (in some cases I suspect they do buy the politician), which damages public trust in our democratic system.

No Donation Limits — Amazingly, there are no limits on individual, business, or union donations to parties and politicians. This lack of limits on donations is what I really think corrodes public trust in politics on the UK. How can a politician say that they are not influenced by the wishes of a donor who donates over £1m in just one quarter (e.g. Labour who received £1.8m from the trade union Unite in Q2 2015 the Conservatives who took in £1.5m in Q1 2014 from hedge fund manager Sir Michael Hintze)? I don’t believe that they can — that is the problem.

So what are the problems with business and trade union donations as well as unlimited donation limits?

Business Donations — Luckily businesses don’t have a vote in UK government elections (if you exclude the odd situation in votes in the City of London). What business donations in politics do is give businesses an effective ‘vote’ in parliament through the back door. Like I said before, could a party or an MP really walk away from millions in donations by voting against the wishes of a major donor? Some might say that businesses are impacted by politics, which is true, so why should they not get a say? Well I suggest that businesses already get a say in general elections, individuals, who are shareholders, get votes as do employees of businesses. When I vote, my vote is influenced by how the outcome could impact my employer, my industry, my investments etc., that is how the interests of business get reflected in elections, democratically, through people.

Union Donations — Like businesses, unions luckily don’t have a vote in the UK (if you exclude the odd way the Labour Party internal elections work). For many of the same reasons that businesses should not get ‘back door’ influence in politics, neither should unions. I believe the best way for unions, like businesses, to influence the outcome of elections is by having their members express their views at the ballot box. I think union donations have bring another challenge to party funding — many government services staffed by unionised public servants. How can a party, politician, or government reliant on funding from public sector unions truly be independent when negotiating with public sector unions… they can’t be. There have been several clear cases in Canadian provincial politics of public sector trade union backed parties agreeing to ‘sweet-heart’ deals with public sector unions, which I believe erodes public trust in politics just as much as private sector influence in politics.

Unlimited Donation Limits — This feature of the UK’s political funding system simply amazes me. It reminds me more of the USA’s ‘big money’ politics and all the absurdity that its brings. While one could argue, like in the USA, that individuals should be free to express themselves by donating hundreds of millions to a political party, I disagree. The foundation of modern democracies is one person one vote. Massive political donations create a situation where if I donate millions to a politician, my vote likely has much more influence on public policy than that of my poor neighbour, which is not right.

I think the UK needs to have a serious discussion on political funding. We need to take ‘big money’ out of politics to bring politics back to people and communities, away from trade unions and businesses. Luckily for the UK, there is a simple and tested model for political party funding that exists already that can be used as an example. The UK needs to look west to examine Canada’s system to see what works at the federal level and build on it to create a better system in the UK.

By bringing political funding back to voters, I believe that it will drive political parties to engage more with electors, respond to their needs, and improve the public’s perception of politics. Forcing parties to fund themselves by vacuuming up thousands of small individual donations should mean that they are more responsive to the needs to individuals, which can only be good for a healthy democracy.

A dual-national Canadian-Brit sharing his take on Canadian & UK affairs