Joseph Rowntree Reform Trust – Written evidence (TUP0025)
1.1. The Joseph Rowntree Reform Trust Limited (JRRT), founded in 1904 by the Liberal, Quaker philanthropist, Joseph Rowntree, is a tax-paying company. It is therefore free to give grants for political and campaigning purposes, and to promote democratic reform and constitutional change. The Trust aims to correct imbalances of power, strengthening the hand of individuals, groups and organisations who are striving for reform. Since the Trust remains one of the very few sources of funds in the UK which can do this, it reserves its support predominantly for those projects which are ineligible for charitable funding. It rarely funds projects outside the UK, directing most of its resources towards campaigning activity in this country.
1.2. The Trust welcomes the establishment of this House of Lords Select Committee as a mechanism both to arrest the government’s attempts to reform party finance for one party only, and as a catalyst to break the deadlock on agreeing a comprehensive package of urgently-needed party funding reform. The Joseph Rowntree Reform Trust Ltd is in a unique position to contribute to this debate, as both a substantial donor to one political party and an organisation with a long-standing interest in party funding reform.
1.3. During the last four Parliaments, from 1997 to 2015, JRRT donated £8.4m[1] to the Liberal Democrat party. Over many decades, successive Boards of Directors have believed in the importance of strengthening the one political party that has most consistently promoted democratic reform and defended civil liberties in Britain – causes that are at the very heart of the Trust’s purpose. The Trust also supported the ‘Yes’ campaign in the AV referendum in the sum of just over £1m.
1.4. Additionally, JRRT has funded research and campaign activity aimed at promoting the reform of funding arrangements for political parties including:
1.5. Members of the Trust’s Board gave oral evidence to the 2004 Electoral Commission inquiry, and to the Committee on Standards in Public Life inquiry in 2010. This written evidence seeks to summarise and update the position put to those inquiries.
Response to Questions and Issues
2.1. The Committee on Standards in Public Life’s 2011 report spells out in detail the dominance of trade union funding in the Labour Party’s income. A substantial majority of this funding comes from affiliation fees. As the report spells out, its recommendation to move – in the context of a donation cap – to an opt-in system ‘would be likely to have a significant impact on payments to the Labour Party.’[2] The Government’s claim that the Trade Union Bill ‘is not about party funding’[3] therefore stands in stark contradistinction to the advice of the independent committee, instituted by government, to advise on these issues. It is patently absurd.
2.2. JRRT believes that the effective resourcing of political parties is essential for a healthy democracy. However, the current arrangements entrench a very considerable disparity of income between the two larger parties and all other political players. JRRT has long advocated reform, in the round, to create a more even playing field and to remove both the reality and the corrosive perception that influence in and access to the political process may be bought.
2.3. It is absolutely clear to JRRT that clauses 10 and 11 of the Trade Union Bill do have an impact on party political finance and, taken without any of the other recommendations of the Committee on Standards in Public Life (CSPL), make the political playing field more uneven not less.
Consistent principles for reform
3.1. In considering the evidential basis for claims that measures relating to party funding traditionally proceed only with the agreement of all parties, it may be helpful for the Committee to look at Stuart Wilks-Heeg’s synthesis of this history in our report Funding Political Parties: a pathway to reform[4]. We reproduce here what he calls “remarkably consistent” guiding principles for reform, and refer back to them as we address the Committee’s call for evidence:
A remarkably consistent set of principles for party funding reform has been advocated in past reviews and academic research. The broad consensus is that reform should seek to:
1. Establish fairness: by promoting equality of opportunity within the party system, and respecting human rights obligations (e.g., freedoms of expression and association).
2. Respect the diversity of parties: taking into account the histories, traditions and cultures of the parties, their respective constitutional arrangements and support bases.
3. Promote public engagement in politics: by deriving party funds from as broad a base as possible, with resources directed to reversing the decline in public engagement with party politics, particularly at the local level.
4. Restore public confidence: by minimising the potential, and the perception, that political influence, electoral success or honours can be bought.
5. Achieve sustainability: by effectively resourcing parties to undertake the roles demanded of them; by reducing the pressures on parties to compete to spend more; and by enabling parties to adjust financially when moving between government and opposition.
Sources: Derived from: K.D. Ewing, The Cost of Democracy, (London: Hart, 2007); Electoral Commission, The Funding of Political Parties: report and recommendations (London: The Electoral Commission, 2004); H. Phillips, Strengthening Democracy: Fair and Sustainable Funding of Political Parties, (London: HMSO, 2007).
Fairness and Respect for Diversity – the need for a balanced package
3.2. It is clear that the Committee on Standards in Public Life (CSPL) had the first and second principles of fairness and respect for diversity of parties in mind in 2011. Its report is at pains to make clear that while ‘the history of opting in and out has considerable political resonance’ and would therefore be ‘controversial’[5], ‘the proposal is not an isolated one. It is an essential part of a reform package intended to promote integrity in an important part of our democracy.’[6]
3.3. As has been rehearsed in debates on the Bill, the Committee was also insistent that ‘it is important that proposals are regarded as a package. Failure to resist the temptation to implement some parts, while rejecting others, would upset the balance we have sought to achieve.’[7] In the view of JRRT, the Bill as it stands plainly upsets that balance, and gives into the temptation anticipated by the CSPL.
Fairness and Sustainability - the need for careful transitional arrangements
3.4. The Trade Union Bill as it stands not only breaches the principle of fairness by bringing in party funding reform for just one party, but does so over an exceedingly short period, thereby breaching the principle of sustainability.
3.5. Both Hayden Phillips and the CSPL suggested that reforms to party finance should be phased in over a period 3-5 years. In Funding Political Parties in Great Britain: a pathway to reform, Stuart Wilks-Heeg goes further, arguing that donation caps (the essential balance to any change to trade union funding of the Labour Party) should be staggered across two, or even three parliamentary cycles. The cross-party draft Bill, published by Lord Tyler, Andrew Tyrie MP and Alan Whitehead MP in 2013, sought to phase in the arrangements recommended by the CSPL over a period of ten years. In their draft Bill, this tapered approach was common to both the donation cap and the reforms to trade union political funds.
3.6. Specifically, under those draft proposals, unions would have moved to the kind of arrangement now proposed by the government in a four stage process:
3.7. Such a tapered approach, alongside a gradually decreasing donation cap, would be welcomed by JRRT.
Fairness and Public Confidence: the case for a donation cap
3.8. It has been acknowledged in all previous negotiations that a prerequisite for reform to trade union donations through political funds, is a cap on individual and corporate donations: The legal requirement to disclose all significant donations brought in by the Political Parties, Elections and Referendums Act 2000 (PPERA) was a very welcome step. However, the published figures show substantial dependence of political parties on large donations from wealthy individuals and this undermines public confidence in the political system (Dr Wilks-Heeg’s fourth principle). A donation cap is therefore an end in itself as well as vital part of a fair balanced package of reform (Dr Wilks-Heeg’s first principle).
3.9. The perception problems caused by large donations are illustrated by the JRRT’s State of the Nation polls, carried out at regular intervals since 1991, which have consistently found significant public concern about how money may affect electoral outcomes, and about the possibility of the integrity of the democratic process being compromised by the reliance of the parties on large donations. The 2014 State of the Nation poll[9], for example, included two relevant findings:
3.10. Although JRRT is itself a substantial donor and would be affected by any cap, the Trust believes that such a cap is essential to restore public confidence in our democratic system, and strongly urges that one should be introduced over a phased period with a clearly defined end-point and an eventual cap of no more than £10,000.
Promoting public engagement
3.11. As is noted in Funding Political Parties in the UK: a Pathway to Reform, “It is often assumed that the reliance on big donations has arisen from a steep decline in party membership. It is true that parties once had far more members than they do now; one in 11 electors were party members in the 1950s, now the figure is closer to one in 100. But even at the zenith of party membership, ordinary members were never the principal source of income for parties – especially during election campaigns.”
3.12. There is however, a clear link between this grassroots decline and the growth in dependence on large donors. Put simply, under the current arrangements it is logical and cost-effective for parties to pursue a small number of large donors, rather than invest the time necessary to source money from the grassroots. Grassroots engagement is crucial for a strong, vibrant democracy. In order to meet this challenge, as set out on Dr Wilks-Heeg’s third principle – promoting public engagement – greater structural support needs to be considered through funding arrangements for political parties. Accordingly, the Trust would welcome efforts to complement small donations from ‘registered supporters’ of all political parties with a modest matching contribution, as recommended by Hayden Phillips.
Public funding
3.13. JRRT believes that there is a strong case for reviewing current arrangements for public funding of political parties and if necessary re-allocating and increasing them in line with principles such as those set out by Dr Wilks-Heeg, in order to institute a pence-per-vote scheme of the kind recommended by the CSPL.
3.14. The Funding Democracy: Breaking the Deadlock draft Bill illustrated ways in which existing public spending on freepost election addresses for European and Westminster parliamentary elections could be re-allocated, by placing all candidates’ mailings together in a booklet. Based on the 2009 European Parliamentary elections and the 2010 General Election, this would have yielded a saving of £47.5m over six years.[10] Recent parliamentary answers suggest the total public spend on mailings at the 2014 and 2015 European and Westminster elections was approximately £109m. By grouping these mailings together at each election, a saving could be yielded which could in turn make up for the loss in parties’ income brought about by a donation cap.
3.15. The 2014 State of the Nation poll found that 42% of respondents agreed that “Political parties with significant public support should be provided with public funds to reduce their dependency on donations from wealthy individuals, trade unions and businesses.” Only 29% were against. Support for public funding was lower in 2014 than in our previous poll in 2010, when 56% supported this reform[11], though that is surely a symptom of the pressures on public spending over the preceding four years.
3.16. There is a sense in which continuing failure by the parties to implement a comprehensive package of reform contributes – through scandal after scandal – to public disaffection with the political system, and in turn decreases public willingness to see parties properly and equitably funded. This is a vicious cycle, the breaking of which will require leadership from all political parties.
3.17. The same 2014 poll found that 58% agree that “if there is to be a system of state funding for political parties it should be targeted to support local activity by parties”.[12] A number of possible schemes to achieve this have been proposed. One that we believe is particularly worth further examination was proposed by the Power Inquiry in 2006[13]. Among the recommendations in its final report, Power to the People, was a voucher scheme to support local activity by parties:
Spending limits – levels and operations
3.18. Political parties only raise money in order to spend it. JRRT therefore continues to support the CSPL’s recommendation that national spending limits should be reduced, in order to restrain the arms race of donations and spending that exists between parties. However, this implementation of this recommendation on its own will be insufficient to avoid the capacity of wealthy parties significantly to influence the outcome of elections with large sums of money. Since the introduction of the national limits in PPERA, all parties have begun to target ostensibly ‘national’ spending at marginal constituencies, thereby breaching many times over the spirit of traditional constituency spending limits.
3.19. As Parliament revisits party funding reform this abuse of ‘national spending’ needs to be examined and a formula agreed for how much of the national limit can be spent in any one constituency. We note that the previous government found a mechanism to link national spending limits with constituencies where it concerns spending by non-party campaigners, in the Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Act 2014. If it is possible to do this for campaigners in the third sector, it ought to be possible for political parties too.
4.1. The United Kingdom urgently needs comprehensive reform of party political finance arrangements. This need not take years’ more deliberation, since the principles of a comprehensive package have been set out, through cross-party efforts, first by Hayden Phillips and then, compellingly, by the Committee on Standards in Public Life. The Funding Democracy: Breaking the deadlock cross-party draft Bill makes an important contribution on the subject of phasing. Its proposals should be a guide to Ministers in fulfilling their aspiration to change the relationship between trade union members and the beneficiaries of political funds, and those proposals can clearly only be phased in alongside a donation cap.
4.2. The Select Committee’s call for evidence astutely refers to the impact the passage of the Bill’s provisions – in isolation – are likely to have on the prospect for agreement on a comprehensive reform of political party funding. This goes to the heart of the principle of sustainability. Having taken a longstanding interest in party political finance reform, JRRT believes that legislating to alter, at a stroke, the relationship between trade union members and the Labour Party, with no balancing provisions to cap individual donations and no phased introduction of a public finance scheme of the kind proposed by CSPL, would be a counterproductive backward step. It will correctly be viewed as a nakedly partisan attempt to tilt the political system in the interests of the governing party, in breach of all previous understandings about the need to proceed with such reforms on the basis of consensus.
4.3. We urge the Select Committee to be bold in recommending that these clauses be removed from the Trade Union Bill, and a new Bill introduced to legislate for the full package of reform proposed by the Committee on Standards in Public Life.
On behalf of the board of the Joseph Rowntree Reform Trust Ltd
[1] This figure represents grants committed during these years, though grants are made in quarterly instalments, so some payments may fall outside this period. All are declared to the Electoral Commission by the recipients, and – in the spirit of openness – we also, on a voluntary basis, send the Commission an annual list of recipients of political grants. Expenditure is also shown in our audited accounts at Companies House.
[2] Committee on Standards in Public Life, Political Party Finance: ending the big donor culture, (London: TSO, 2011) p. 67
[3] HL Deb, 11 Jan 2016, col. 126
[4] S. Wilks-Heeg and S. Crone, Funding Political Parties in Great Britain: a pathway to reform (Democratic Audit, 2010), p. 17
[5] Committee on Standards in Public Life, Political Party Finance: ending the big donor culture, (London: TSO, 2011) p. 9
[6] Committee on Standards in Public Life, Political Party Finance: ending the big donor culture, (London: TSO, 2011) p. 67 (emphasis added)
[7] Committee on Standards in Public Life, Political Party Finance: ending the big donor culture, (London: TSO, 2011) p. 89
[8] A. Tyrie, A. Whitehead and P. Tyler, Funding Democracy: Breaking the Deadlock, 2013, pp. 9-10
[9] Full details of all of the Trust’s polls are available on our website at http://www.jrrt.org.uk/publications and can be made available to the Committee.
[10] A. Tyrie, A. Whitehead and P. Tyler, Funding Democracy: Breaking the Deadlock, 2013, p. 4
[11] JRRT State of the Nation poll, conducted by ICM, February 2010
[12] JRRT State of the Nation poll, conducted by Ipsos/MORI, September 2014
[13] The Power Inquiry was the centenary project of the Joseph Rowntree Reform Trust Ltd and the Joseph Rowntree Charitable Trust. Its report is available on the JRRT website.