Political Parties Funding Recent History - A Study by Artur Victoria

Parties seek more money from the taxpayer but there will always be tight constraints on this source of funding. The obvious source of big money is rich donors and corporations. But such donors are not usually motivated by generosity. They want to see a return. Political parties in a number of countries now accept large donations on the condition that the donor can be identified. Some have also banned donations from abroad. For officials who are tempted to evade rules on party funding the current punishments hardly act as disincentive. Yves Marie Doublet says, where there are controls on party finance the sanctions are usually toothless. In some countries punishments are as little as being banned from political office for two years.

Scandals erupted throughout Europe. The Elf Aquitaine affair spread from France to Germany when it was revealed President Mitterrand provided slush funds that were passed onto their allies at the Christian Democratic Union. The former German CDU Chancellor, Helmut Kohl, escaped prosecution in March 2001 although he accepted $1m in illegal political donations for the CDU when he was in office. Instead Kohl paid a fine of $142,000 admitting that he had broken the rules on the funding of political parties but rejected accusations that he accepted donations in return for political favors. For receiving dubious funds worth a total of DM12m the CDU was separately heavily fined some DM 18million. The scandal delivered a blow to Germany national self-image. No longer could it be seen as a country considered largely free of ingrained corruption.

In Britain, despite reforms during the mid 1990s, the Labor Government which came to power in 1997 has suffered repeated problems over political donations despite promises of transparency. As early as 1997 Labor faced allegations of sleaze after it was revealed that one major election donor had later managed to negotiate with the government an exception to a new law. Bernie Ecclestone, the millionaire head of Formula One Racing, had donated £1million to the party in the run up to the election. Then Ecclestone had also negotiated with the new government an exemption for Formula One Racing from the banning of tobacco advertising in sport. The Labor government argued that the two events were unrelated, though it subsequently returned the money. Labor continued to be dogged by allegations. The Hinduja Brothers, who run their international business mainly from London, have been accused of buying access to politicians with donations. The situation was exacerbated when members of the family were questioned by the Indian Police in connection with the Bofors guns for bribe

Parties seek more money from the taxpayer but there will always be tight constraints on this source of funding. The obvious source of big money is rich donors and corporations. But such donors are not usually motivated by generosity. They want to see a return. Political parties in a number of countries now accept large donations on the condition that the donor can be identified. Some have also banned donations from abroad. For officials who are tempted to evade rules on party funding the current punishments hardly act as disincentive. Yves Marie Doublet says, where there are controls on party finance the sanctions are usually toothless. In some countries punishments are as little as being banned from political office for two years.

In Dublin in March 2001 journalists watching from the street saw Liam Lawlor light a bonfire in his back garden to burn confidential financial documents. Mr Lawlor, a member of Ireland governing Fianna Fail party, had just spent a week in Mountjoy Prison for refusing to co-operate with the Flood Tribunal. The TD is alleged to be at the centre of a vast web of bribery and backhanders involving politicians, councilors, property developers, planners and accountants going back 20 years.

President Clinton pardon of sanction buster Marc Rich in the last moments of his administration also caused public and media outrage. Marc Rich wife Denise Rich had made large donations to Democratic Party funds and for the Clinton library project.

In the USA, concern has focused recently on campaign financing. "Effective political campaigns have always been fuelled by money as well as ideas. But in recent years, the cost of running for Congress and the Presidency has soared to record heights. For many candidates, raising money is no longer one important issues, it is the only issue," says John S Weston, Chairman of the Committee for Economic Development Research and Policy committee, introducing a statement calling for radical reform of campaign finance laws in the US. In this policy statement, the Trustees of CED makes a strong case for sweeping reforms that will restore trust and balance to the campaign finance system, while protecting the first amendment rights of candidates and contributors.

In the US the average candidate for Congress spends $3.8m on their campaign while the average House of Representatives candidate spends $500,000. Personal wealth is becoming a key requirement for effective candidacy. Of particular concern were 'soft money' donations that are exempted from the Federal Laws on political donations yet are beneficial to candidates. In 1998 the US national party committees raised $201m, a record for a midterm election: The Republicans raised 112% more than in 1994 and the Democrats 89% more. The parties use this money for such activities as party building, candidate-specific issue ads, and voter registration and turnout drives. Much of this money was raised from contributions from individuals or organizations that could afford $100,000 or more.

There are continuing attempts to reform the US system. In March 2001 the Senate began a debate on overhaul of the nation campaign finance laws, with critics likening the current system to a 'money laundering' operation that exchanges cash for influence, while its defenders argued that the prescribed cure would violate free-speech rights and endanger political parties.

Two Senators have proposed a bill to reform the US laws on political donations. At the core of the McCain-Feingold bill is a ban on unlimited 'soft money' contributions to political parties from corporations, unions and wealthy individuals. These donations have run from $100,000 upwards and have often been associated with pressure on politicians for favors in return.

But it is not all bad news. "Scandinavian countries seem to be doing the best, judging by their relative lack of scandals. Strong party loyalty? Parties make the decision on candidates for office and provide funding for campaigns? Enables countries such as Sweden to publicly finance parties and steer clear of scandal. Abuses are also no - existent in part because Scandinavian countries start with a high level of consensus on propriety and a low tolerance for corruption. These values carry over into the campaign finance. Yet Scandinavia and Canada almost prove to be the exceptions.

The Hinduja affair in London has cost one Cabinet Minister, Peter Mandelson, his job and damaged the reputation of another Minister, Keith Vaz.