POLITICAL PARTY FUNDING IV - THE GLOBAL PICTURE

Introduction

The issue of how political parties are funded is a controversial and divisive issue in any democracy. There is a delicate balance between ensuring accountability and transparency and allowing political parties to be adequately resourced to carry out their mandate of representing citizens. There is no universally agreed on system of regulating the funding of political parties or campaigns. There are a range of strategies that reflect individual electoral systems as well as the domestic appetite for transparency and equality. There are however common issues in how parties are funded and regulated that can be identified and used to create a framework of comparison between countries.

Analysis

The three main focal points in terms of how parties are funded are:

• disclosure regulations and restrictions on funding and spending;
• direct public subsidies; and
• indirect public subsidies- particularly free political party broadcasts.

The degree to which they are in place is seen as indicative of whether a country has a laissez-faire or heavily regulated system- or more likely, somewhere in between.   There are differing views on why such regulations are necessary. The two main reasons are:

• to promote transparency in terms of the financial influence that donors have on political parties;and
• the need to level the playing field in order to stop well funded political parties becoming overly dominant.

The balance of the motivations explain the extent and type of regulation.

There are just over 100 countries rated by Freedom House as “free” or “partly free”, and it is among these that political party finance laws can be studied[i]. The dataset looks at the broad existence of laws and policies and not the specific nature or implementation of them, but offers an insight into the basic systems of control that are in place to govern party financing.

The main forms of regulation are disclosure requirements and funding and spending limits or bans, while subsidies are divided between direct and indirect subsidies, the latter usually taking the form of free media airtime. Perhaps the most crucial element given the current debates around proposed changes to the South African system is that of disclosure laws. Disclosure laws differ greatly globally, but around 62% of countries have them in some form[ii]. However, they can be limited in terms of what need actually be disclosed, and by some estimates only 32% of countries require parties to disclose the names of donors. Reporting laws in most countries require only aggregate numbers to be disclosed[iii] . Additionally, 17% of countries have disclosure laws where financial information is collected but not publically released.

Contribution limits or outright bans as well as spending or time limits are also employed in parts of the world and are seen as much more stringent ways of controlling party spending. They are less common, with only 28% of countries having contribution limits and 41% having any form of campaign spending limit[iv]. Bans on foreign donations are slightly more frequent, with 49% of countries employing them[v][vi][vii].

The way in which parties are subsidised is the counterweight to their regulation. There has been an increase in state funding for political parties over the course of the past few decades. 60% of countries now have direct public funding. An even greater proportion, around 80%, has access to free public television broadcasts for candidates or other indirect forms of funding[viii]. 

Differences in the degree to political party activities are funded by political parties are great, but on average grants from the state make up one-third of all party funding, with parties left to raise the remainder from private donors[ix]. Public funding for political parties has largely been driven by the belief that it will foster greater transparency, although there is little evidence to show that this is the case. Conversely, it does not seem to have had the feared effect of dissuading parties from actively recruiting members and promoting party structures.

Political party funding systems can be explained by political history and the electoral system used.  In this regard the division is between the United Kingdom and other countries with a constituency-based system, and Continental Europe, where most countries have proportional electoral systems. This has seen a division where British influenced countries are likely to have less public funding as well as less regulation of party funding, while the opposite is true for Continental European systems[x]. Of the ten largest Commonwealth nations, all but one use a predominantly Westminster based, first-past-the-post, system for elections and the majority have either no direct public funding of parties or a very limited system. Canada and the United Kingdom itself are the exceptions. South Africa’s position in this is complicated however, since it used to have a constituency system, but is now the only one of the large Commonwealth nations that has adopted proportional representation.  Of the ten largest European democracies excluding the UK, all countries apart from France employ proportional electoral systems while all have finance disclosure laws and only Ukraine does not have direct political party funding.

The combination of regulations and subsidies is what defines the political party regulation system. South Africa, with no disclosure laws around private funding but with both direct and indirect public funding, has a similar regulatory system to a number of medium sized countries, particularly in Eastern and Central Europe and South America, Croatia, Paraguay and Uruguay being amongst the more notable examples.   However, all of the ten largest democracies on earth have greater disclosure laws to go along with their varying levels of public funding.

There has been an increase in the subsidisation of political parties in recent years with countries moving increasingly towards having either direct or indirect state subsidisation of political parties[xi]. The growth in regulations has been less swift however and most countries still lack disclosure laws which requires public donor identification or limits on spending and donation. These are likely to be contentious issues as South Africa looks to reform its party funding system and address transparency and accountability concerns.

Conclusion

Political party funding globally is regulated by both regulations and subsidies. The combination of these two defines the effectiveness and purpose of the system in combating the two main challenges of transparency and equal opportunity. A global increase in public funding has not necessarily produced the desired effects, and the majority of countries have most of their political funding from private donors. However, most have disclosure regulations in the form of disclosure requirements, limits on funding from particular sources and overall funding and spending caps.

Rafael Friedman
Researcher
rafael@hsf.org.za

Sources

1. http://www.ncsl.org/research/elections-and-campaigns/campaign-finance-an-overview.aspx
2. https://dataverse.harvard.edu/dataset.xhtml?persistentId=doi:10.7910/DVN/UO9ABD
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11. http://www.oecd.org/gov/ethics/financing-democracy-framework-document.pdf
12. http://www.wfd.org/wp-content/uploads/2016/07/Ukraine-Cost-of-Politics.pdf
13. Jon Pierre, Lars Svasand and Anders Widfieldt “State Subsidies to Political Parties: Confronting Rhetoric with Reality” (West European Politics)

[i] https://freedomhouse.org/report/freedom-world-2016/table-scores