Home > Party funding > Where do political parties get their money from?

Where do political parties get their money from?

There are many different types of body that can give money to a political party – such as individuals, companies, trade unions, unincorporated associations and the state.

I’ve used the data from the Electoral Commission on political donations from 2001-2008 to produce the following charts, which show the value of the donations coming from each category of donor for each year. It looks only at recorded donations, and does not include other sources of income (commercial loans, income from commercial activities, etc).  I’ve also missed out the data for 2009 as the figures for the last quarter of that year have yet to come in.

The figures show how the three main parties rely on different types of donor and how the main sources of income have in some cases changed over the years.

The chart above confirms that the unions give more money to Labour than any other type of donor – and that this has been consistent over the last decade. It also shows how individuals are a substantial source of funds for Labour. While Labour’s attempts to win over the business community have often been commented on (and may account for many of the donations from individuals), the total for company donations to Labour rarely goes much above £1 million in a year.

The figures for the Conservatives show a major change. In the early noughties, the state gave more to the Party than any other type of donor. This has since changed, with individuals being the largest single category of donor and there has also been an increase in company donations. Unincorporated associations also gave over £1.7 million in 2006 and 2008.

The donation income for the Liberal Democrats has generally been much smaller, so the axis for the chart only goes up to £7m (half the figure in the charts for the other two parties). The figures show that public funds are a major source of income for the Liberal Democrats, although individual and company donations provide a significant proportion of their  income too.

The chart suggests that 2005 was a very good year for the Lib Dems for company donations. This was not the result of some concerted attempt to woo the city in that year. The spike in the chart is the result of donations of over £2.4 million from a single company, 5th Avenue Partners, in that year.  The Electoral Commission recently decided that  5th Avenue Partners were a  permissible donor and could lawfully give money to a political party. The figures indicate how the Lib Dems’ finances would have been affected had the Electoral Commission come to a different conclusion and ordered the return of those donations.

The charts do not say how many donors there were within in each category or show the size of donations received from each separate donor. So, while a party may get lots of money in the individual or company donor categories, it may simply be that one particular donor has given a lot of money. For example, the figures for 2005 show that the Lib Dems were strongly supported by one company, 5th Avenue Partners, rather than lots of companies. For this reason, the overall trends in donations do not suggest that a ‘money primary’ is taking place, where the number of donations are a proxy for public support. However, an indirect correlation may be found where parties attract large donations because they are doing well in the polls and getting favourable coverage.

The line between the types of donor is not watertight. For example, some companies tend to be associated with a particular individual. Most obviously Bearwood Corporate Services is associated with Lord Ashcroft, and 5th Avenue Partners with Michael Brown. In these circumstances, there may be little practical difference between a company donation and a donation from the individual behind the company.

The figures show how the reliance on each type of donor varies with each party. This means that any reforms on party funding that single out a particular type of donor may potentially impact on some parties more than others. For example, if individuals only were allowed to give money (as some have argued should be the case), it may lead to a shortfall for all the parties, but this would fall most heavily on Labour in so far as it cuts off trade union funds. Earlier this week, David Blunkett expressed a fear that this may happen should the Conservatives win the election – arguing, to use his words, that the Tories have an ‘absolutely clear strategy for buggering us after the next election.’ By contrast, if a very low cap is applied to donations from individuals, while allowing companies and pressure groups to give unlimited amounts, then the reform would potentially have greater impact on the Conservative Party.

Of course, none of this is set in stone. If certain types of donor were more restricted or regulated, it will not necessarily lead to a shortfall in funds. It may, instead, encourage the parties to adopt new methods of fundraising and seek out other sources of income.

The figures also show that Opposition parties rely on state funds.  The figures for public funds given above are conservative, as they do not include the various benefits in-kind received by the major parties through state assistance, such as party election broadcasts.

These points aside, there are important questions of principle about whether to regulate the different types of donor  (which I will look at in a forthcoming edited collection), but these stats at least show the practical issues and political interests that are at stake when reforming party funding.

UPDATE – 28/2/10 – The revised charts including the figures for 2009 can now be found here.

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