Some countries, like Sweden, rely very heavily on public funding of political parties within their democratic system. In Sweden, political parties rely on the state for up to 90% of their national funding. However, Britain has limited state funding of political parties in the form of Short Money and Cranborne money. So what is it and why does it exist?

What limits are placed on political funding in the UK?

Most western states allow the private funding of political parties. This because donating money is seen as an expression of political opinion. However, despite this, most states also have some limits on the private funding of political parties by individuals, groups and corporations at the heart of their party funding models in attempt to encourage transparency and lessen the risk of cronyism. For example:

Germany – Any individual or organisation donating over 10,000 Euros has to have it publicly declared.

France – Donation are capped at 7,500 Euros per year and only French citizens or residents can contribute to a political party.

In the UK, private funding of political parties is regulated by the Political Parties, Elections and Referendums Act (2000). This Act of Parliament established the Electoral Commission as an independent monitor and auditor of the UK political system. Under the law, UK political parties are only able to accept donations above £500 from ‘permissible donors’. These include individuals on the electoral register, companies, trade unions or other similar organisations.

In addition, the law capped spending for General Elections by any political party to £30,000 per constituency.

To make the system more transparent, donations over £7,500 to any political party had to be declared publicly.

The idea behind these law was that if people were forced to declare their donations, they would be more likely to moderate them. This has not worked, prior to the 2019 General Election the biggest individual donors to each party were:

Conservatives – Peter Hargreaves (Banker) £1 Million Pounds

Labour – Unite (Trade Union) £3 Million Pounds

Liberal Democrats – Noel Hayden (Businessman) £100,00 Pounds

Although there are spending limits per constituency, there is no overall limit on spending for General Elections. This means that significant amounts can be spent on advertising, which is increasingly important on social media.

What is Short Money and why does it exist?

Short Money was introduced in 1974 and is named after the then Leader of the House of Commons, Edward Short.

It allocates money to opposition parties depending on both the number of seats they hold in parliament and the number of votes that they the received at the last General Election. Short Money is available to any party that:

• Secured at least two seats.
• Secured one seat, but also received more than 150,000 votes nationally.

The sums paid are reviewed regularly. Currently, payments are:

• £18,407.21 for every seat won by a party at the last General Election.
• £36.76 for every 200 votes gained by a party.

Almost £202,313.04 is also available travel for claim as opposition travel expenses. The amount available for each party is in proportion to the formula above.

The Leader of the Opposition is given £857,596.87 to run their office.

In total, the amount of Short Money awarded in 2021/2022 was:

Notably, Sinn Fein are missing from this list. Despite having won 7 seats and 181,853 votes at the 2019 election, Sinn Fein currently receive no Short Money. This is because Sinn Fein follow a policy of abstentionism and do not take their seats in Parliament. Since 2006, MPs who do not swear the Oath of Allegiance of the Queen (and therefore cannot take their seats) can not be given Short Money. However, instead of Short Money Sinn Fein receive something called Representative Money. This has existed since 2006 and provides money for political parties who would otherwise receive Short Money but have chosen not to make up their seats. The purpose of this is to recognise that such elected officials have a duty to represent their constituents, even if they are abstentionist. In 2021/22 Sinn Fein received:

Main budget £162,265.31
Travel budget £4,021.01

What is Cranborne Money?

Cranborne Money (named after the former Leader of the House of Lords) was introduced in 1996. It is the Lords’ equivalent of Short Money. The sums of backbench money were set in 1996, but have risen in line with inflation. In 2021/22, financial reports show that the following was given:

Labour: £666,802
Liberal Democrats: £332,928
Cross Bench: £101,267

In addition to these amounts, the salaries of the Lords Leader of the Opposition and Opposition Chief Whip are also paid through public funds.

Why are Short Money and Cranborne Money important?

Both Short Money and Cranborne money are essential for the opposition parties in being able to carry out their functions in parliament. Although major parties like the Liberal Democrats and Labour are able to raise vast amounts of money, this money is required for the political campaigning. It is important to note that although General Elections may only happen every five years, there is a constant cycle of elections, normally every year, whether it be Local, National or, until recently, European. Therefore, Short Money is their main stream of funding for carrying out their parliamentary roles, including scrutinising the government.

What arguments are there for and against abolishing private financing of political parties?

There is an argument that private funding of political parties should be removed and instead replaced with solely public funding.

In 2007 a report commissioned by the Labour Government and led by Sir Hayden Phillips. The report recommended a number of changes including a hard-cap on donations to parties and firmer limits on spending. The report was meant to lead to inter-party talks on the issue of political financing but these quickly collapsed.

There are arguments on both sides of this issue.

Arguments in favour of public funding:

• Recent scandals over party finance, for example involving Lord Cruddas or the Owen Paterson lobbying scandal, are hugely detrimental to trust in Politics. Making a clear break between money and politics is essential.
• Public funding is the only way to end the reliance of political parties on wealth donors who inevitably often want something in return for their investment. The perception that people are investing in political parties for their own gain is always there – even if untrue – and this harms trust in Politics.
• Political Parties play a key role in a vibrant democracy. They recruit candidates for political office, develop policy and educate the public about political issues. These roles should be recognised from the public purse.
• If parties had public money there could be greater expectations placed on how they spent it. For example, there could be an expectation that parties use some of this money to improve diversity in Politics.
• It would allow political parties to move away from being beholden to a certain section of the nation. For example, Labour are currently beholden to the Trade Unions whereas the Conservatives are beholden to the support big business.
• Whereas in the 1950s political parties were mass membership organisations, today that is much less the case. Back in the 1950s membership subscriptions would provide huge income for parties but that is no longer the case. Public funding of parties would make their position more secure and with more predictability.
• If public funding were tied to the votes they receive in a certain constituency it would encourage them to campaign everywhere and not just focus on marginal constituencies. This would improve representation across the country.

Arguments against increased public funding:

• Whether publicly funded or not, political parties are always going to spend their money on things that will enhance their electoral prospects. Many of these things, like adverts that attack opponents, do not enhance democracy. Having public money going towards such activities is untenable.
• Citizens are likely to be highly objectionable to their taxes going towards funding political parties they fundamentally disagree with.
• Without reform of the the FPTP system any formula that sees funding linked to votes is just going to cement the dominance of the major parties in the political system.
• The major parties will design the framework for any public financing of political parties and will inevitably design that system to maximise their relative advantage.
• It will be impossible to limit the influence of wealthy individuals and businesses on politics and any attempt to do so will just be circumvented, even if illegally.
• If their party finances are secure through public financing parties may feel less impetus to recruit more members, therefore reducing participation in politics.
• Giving money to a political party is an inherent part of freedom of expression which is essential in a liberal democracy. Limiting financing of parties is akin to limiting free speech.

Article Summary

Britain has a hybrid of public financing of political parties and private financing. Public financing happens through mechanism like Short Money and Cranborne Money. However, these pale into insignificance compared to the funding from individuals, businesses and trade unions, particularly during election years.

Key Terms

Short Money – Money given to Opposition parties in the House of Commons to enable them to carry out their parliamentary roles.

Cranbourne Money – The equivalent of Short Money in the House of Lords.

Representative Money – The equivalent of Short Money but that which is given to parties that are abstentionist, like Sinn Fein.

Phillips Report – A report into public financing in 2007 that recommended both donations and spending limits. Nothing was done to take the report forward.