We’ve had a week of negative reports about tax avoidance by wealthy individuals through Swiss HSBC accounts and large donations to the Tories by City of London and Mayfair people, particularly the latter in hedge funds. It raises several issues for the student of politics. Setting aside the question of the rules governing taxation and how they are enforced, we can look here at the funding of political parties and of politics more generally, the links between special interests and political parties, and that fine line between legitimate influence and corrupt influence through money. Do the wealthy and powerful have too much influence?
Arguments by left and right
So, the left argue, you donate to the Tories who build the ground on which you can grow your wealth and you can avoid being taxed on it through creative accounting. Meanwhile those same politicians screw the poor through cuts in benefits. It makes a good conspiracy story, a political party manipulated by the rich and powerful and supported by a mainly right wing press run by wealthy press barons. The right would say that in a free democracy wealthy people should be free to exercise influence on the political process just as much as anybody else, wealth is bringing in much-needed cash for politicians, wealth benefits the country, and there is nothing to stop wealthy individuals influencing the other side. See for example the relationship between Bernie Ecclestone, the then-boss of F1, and Tony Blair, or the Trades Union and Labour since the end of the 19th Century. Furthermore, as Lord Fink said, we all do tax avoidance.
Special interests and the democratic process
The idea that Parliament should represent “interests” goes back a long way, prior even to the reforms of Parliament in the 19th Century which swept away the excesses such as “rotten boroughs”. It is still today argued by many that a healthy democracy should facilitate the representation of a wide range of interests in addition to the individual-person voting process. Hence we have lobbying by business, unions, NGO’s, and economic and social “interest groups”. There is a debate about how extensive such lobbying should be and how open and public (eg. for criticisms, see this link). Recent legislation (2014) has attempted to secure a register of lobbyists, to limit certain activities by unions, and restrict charities and NGO campaigning in an election year, although it is thought to be inadequate in relation to access to ministers and some see the Act as a restriction on freedom of expression. The concern remains that we do not know just what influence on policy-making is brought to bear by powerful interests.
Parties are funded by private donation and by membership fees. Unions levy their members and donate sums to Labour. The Conservatives and Liberal Democrats rely on private donation, corporate donation being now severely curtailed. Similarly attempts at reform of funding to political parties have been attempted and here have so far been unsuccessful, although there are limits to donations shortly before an election. In the current 2015 campaign, the Tories have been able to considerably out-spend Labour, having, it is said, just secured legislation to raise the limit by 23%. UKIP has been able to have a presence in virtually every constituency in 2015, despite being a small party, as a result of big donations by a small number of people such as Paul Sykes and Stuart Wheeler. In fact it said that, with the last-mentioned, donations “come with strings attached”.
Parties lay themselves open to the charge of allowing wealthy individuals, or in the case of Labour powerful sectional interests, to buy influence. It was not unnoticed that certain donors gained peerages and a seat in the House of Lords after the last election, although organised labour were very unsuccessful in getting repeal of the ’80’s Thatcher anti-union laws after Labour were re-elected in 1997.
One solution has been to opt for taxpayer funding of parties along with strict spending limits, so that no particular group or individual can have undue influence. Limits on spending have been used in the US for many years, although with mixed success. The idea in the UK has so far not got off the starting blocks, despite support for it by the Committee on Standards in Public Life (2011). The idea has surfaced again in the 2015 election campaign, partly in reaction to the news that the Conservative Party has accumulated a “war chest” well in excess of what the Labour Party and others can manage.
Influence or corruption?
There can be a fine line between “legitimate” influence, such as representation of views in the ways others who are not say donors might seek a hearing, lobbying your MP, letters to politicians, meetings, etc., and influence which would not have been obtained unless money exchanged hands. Evidence of the latter is very small, and where it has become public there have been scandals, resignations and prosecutions. One example is the “Cash for questions” scandal that led to the resignation of MP’s Hamilton and Smith in 1994. There is generally a high standard set, as witnessed by a current anti-corruption drive. The problem has been if anything more evident in local government, as seen under T. Dan Smith in Newcastle in 1974, the “Poulson Affair”.
This does not stop the conspiracy theories however. Moreover we still have the concern that the rich and powerful are perceived as able to gain policy benefits from their support of certain parties, as also are organised labour. Parties are not operating on a level playing field and there is perhaps a case for creating a better balance.
Parties’ vulnerability to the influence of powerful people
A particular cause for concern is that as party membership shrinks, and thus fee income, parties are more dependent on donations, and thus “fat cat” donations by a small number of powerful individuals or a particularly large union like Len McKluskey’s Unite. If voter participation fell through diminished turnout, this would be all the more serious. Thus broad-based participation in the democratic process could then look as if it is being surrendered to manipulation by the powerful few.
We already have plenty of examples in Eastern Europe and Russia where “oligarchs” can do just this. That would, if it ever occurred, resemble a throw-back to the pre-1832 Reform Act era when aristocrats controlled the election and performance of their nominees in “rotten” boroughs which they in effect owned and where they controlled the vote. Thus we are very reliant on a strong political sophistication to be vigilant against the influence of un-elected and powerful individuals and entities.