I agree 100% with Dan Hannan about state (ie: taxpayers) funding of parties.

To wit I wrote this piece for a recent publication:

This week has been one of those weeks where politicians all seem huddled together against everyone else. It’s them against the world, defending their own corner. To be more precise, this time, it’s the major parties who are all banding together rather than all politicians.

For those of you who have not been following the Labour Loan saga, I will explain the basics of what is going on. In the last few days, we have learned that Blair and his cronies had a slush fund for major donor loans. Because of a change in the rules that Labour brought about after they took power in 1997, it was significantly harder for the party to get huge donations. So, Lord Levy and some of the other members of the Blair’s inner-sanctum, have, we learn, asked their major donors to give loans instead of large gifts. These loans lack any resemblance to those that you and I might get from a bank. The loans were not made at commercial rates. It certainly appears that the loans were not meant to be repaid. As it is now becoming apparent, the loans were repaid in kind: all the donors-lenders were given peerages by Blair’s government. It is thanks to the sharp eyes of the ombudsman that these peerages were blocked for reasons of doubt of their worth.

In total, Labour received 14 million in loans from previously leading donors. Most interesting and controversial, even to Labour Party members, the Chairman of the leading bid winner in privitasations of logistics and backroom bureaucracy gave a tidy sum of 1million. When challenged on his donation the head of Capita claimed that he gave the money in a private capacity. His protests have been met with little understanding. He has since resigned his company position.

Two worrying developments have come out of this. We shall set aside the great irony that party who went on about Conservative sleaze is now in a far more serious situation with their own iniquities. The first unpleasant development is that the Labour Party is now adopting the we are all at it approach to the problem. In fact, what they have done is far worse that anything that occurred during the Tory years and has never happened in the Liberal Democrat party. More often than not both parties tend to have individual Members of Parliament suffering from sexual sleaze rather than financial. And so now both the Tories and the Lib-Dems are jumping on the bandwagon and making their knee backlash legislative proposals. David Cameron, leader of the Conservatives, has proposed a cap on donations and the introduction of taxpayers money into the funding of elections and political parties. In an attempt to gain traction against the Labour Party, he has suggested a cap of 50k for all donations, private or business. Apparently, he is aware that volunteering the names of all the party’s major donors, despite promising them secrecy, would have the affect of killing off all major donations.

Now at the first this cap might seem to be a good idea, especially to the more egalitarian of us. However, I would suggest that it is undemocratic and an unnecessary limit on political discourse. What the major parties really want is to use state funding partly as a way of reducing competition from their fringes. In many US states, Maine is an example, there would be a limit on state matching funds to a certain level of support: a percentage of the popular vote for instance. Politicians from the major parties will be tempted, as happened in Maine, to make the threshold high enough so very few other parties, will rise to that level. The result in Maine is that it has become increasingly a two-party state, with very few other parties receiving enough votes to become registered parties. This plan would be most useful to all three major parties in the UK in getting rid of nuisances on the fringes like UK Independence Party on the right, George Galloway’s RESPECT on the left (plus various other left parties in Scotland, Wales & England) and the rump of the old Liberal Party for the Liberal Democrats. Quite aside from the affront to democracy and the right of individuals to have parties that represent their views, there is the threat of making British politics far more boring. All of us who enjoy politics adore British elections for the collection of odd-ball parties that litter the ballot-paper whenever there is an election of any type. British political life would be far poorer without parties like the Monster Raving Loony Party and the Beer Party.

There is also the introduction of the strange principal of expecting every taxpayer to pay for every party to run their campaigns. Now there are many who would consider even any anxiety about real reform of the funding of political parties a bit hysterical. They would contend that the three major parties would not ever agree to one funding standard. For instance, the Liberal Democrats would insist on proportional representation for any deal, so there is nothing really to worry about. The trouble is that this attitude has been a danger over the years of the current Labour government. Many have believed this government would be unable to get various bills made into law including their recent victory reforming education (in the face of huge opposition from traditional Labour MPs) so at this point this sort of dangerous chat does worry those who are interested in maximum choice for the electorate.

Naturally, the real facts of the scandal are being used by several factions for their own ends. Some claim the entire row is part of the battle of Gordon Brown’s supporters trying to get rid of Tony Blair has soon as possible. The whistleblower, Jack Dromey, Labour’s treasurer, has been vilified by Tony Blair’s cronies for exposing the entire row. Ditto those who wish to reopen the debate on reform of the House of Lords to make it a fully elected chamber.

Now, the police are looking into the matter further muddying the waters for the general public. The Scots and Welsh Nationalists are trying to get the Labour Party charged under the peerage selling law last used to effect a conviction in 1920s after an agent for then Prime Minister Lloyd-George was jailed for two months for selling peerages via a menu out of an office in Whitehall.

We must not lose sight of the fact that politicians are trying to use this entire row as an excuse to limit their competition in elections. There is no evidence in countries in which party contributions are limited, that there is an increase in democratic openness. In fact, the reverse is the case. We must all make sure that the Labour Party suffers for their dishonesty, not the entire British election system.

Update: The TPA agrees against state funding of political parties.