The disclosure by the Electoral Commission of donations to the political parties, which reached record levels in the quarter before the general election, has revived age old questions about party funding reform.

Of the £26.3 million-worth of gifts declared by 16 political parties in April, May and June, the Conservative Party received £12.3 million and Labour £10.9 million with the Liberal Democrats struggling to compete with £2 million. As ever, the Tories’ main source of donations was wealthy individuals whilst Labour received a mixture of funding from unions and individual donors.

Clearly something needs to be done about party funding. All three of the major parties have been caught up in funding scandals in recent years. But even when there is no outright scandal or suspicion of foul play it is contrary to democratic principle that wealthy individuals and organisations should hold such sway over the political process.

Two current news stories demonstrate why the current system is unsatisfactory:

• Labour is on the brink of bankruptcy with debts of £20 million, according to John Prescott. Even if the party sticks to the NEC’s deficit reduction plan, its debts may hamper its ability to compete in the Scottish, Welsh, European and local elections, and the general election in 2015. Whatever the colour of your political stripes, it does serious damage to the health of our democracy when the second largest party is constrained from competing on account of its finances.
• Donations to the Tories and the Lib Dems surged in the weeks following the election with Nick Clegg’s party receiving £1.5 million in gifts, almost as much as they‘d received during the three months prior to it. The reason for this remarkable spike in Lib Dem fortunes is so obvious it barely needs repeating: money follows power in the hope of gaining influence. Even when the corruption is not direct and tangible – a new law, a government contract, a peerage - it exists nonetheless in the way politicians anticipate the wishes of their paymasters and behave accordingly.     

What can be done?

All sorts of proposals have been made for capping donations, increasing transparency and introducing more state funding. Any political progress is notoriously slow as each of the parties will bitterly fight any reform they believe disadvantages them financially.

With near-permanent partisan warfare and angry accusations of self-interest, it’s easy to overlook the basic question of what it is we want a system of party funding to achieve. A central aim of a fair and democratic funding system, it seems to me, should be to ensure all citizens have equal access to the means to influence the political process.

Any funding regime in which private donations continue to dominate would not be acceptable, but a regime of state funding would need to increase the influence of citizens and not be designed in such a way that serves the entrenched interests of the main parties.   

And here I want to bring in a proposal that impressed me from Envisioning Real Utopias, a fascinating book I’m reading by political philosopher Erik Olin Wright which sets out ideas for the progressive reform of institutions on radically democratic and egalitarian lines.

To achieve the “egalitarian public financing of politics”, Wright develops an idea originally proposed by Bruce Ackerman in 2004 as a way of reforming campaign finance in the US in a manner which circumvents the strong constraints imposed by the Supreme Court in its ruling that financial contributions to political parties qualify as a form of “free speech”.

At the beginning of each year, every citizen would be given a special kind of debit card, which Ackerman calls a “patriot card”, but which Wright prefers to call a “democracy card”. Each card contains a set sum of money - equal for each citizen - which can be used exclusively to fund parties and candidates in electoral campaigns. However, any candidate or party accepting democracy card funds cannot accept funding from any other source (this prohibition is what makes the democracy card consistent with the Supreme Court’s ruling). In addition to the political incentive for parties and candidates to disavow private donations, there would be a financial incentive as democracy card funding would be set sufficiently high so as to swamp other sources of funding. Ackerman proposes $50 in the US. Translated into our currency and taking into account the smaller sums of money in our politics, this might reasonably be set at £2 per year in the UK. With just over 60 million people in the UK that would equal roughly £120 million a year spent on campaign funding (Update: It has been pointed out in the comments that the more appropriate figure to use here would be the number of people eligible to vote, and not the population of the UK as a whole, since it would make sense to restrict use of democracy cards to voters. With around 45 million eligible voters in the UK that would mean a maximum expenditure of £90 million a year). 

This may strike people as a lot and without doubt it would be difficult to argue the case for spending more money on politics when its practitioners in such disrepute, in part, for abusing public funds. But when you consider that this innovation would remove one of the principal sources of corruption in our politics (indeed, one of the reasons politicians are so distrusted in the first place) and enhance the influence of citizens over their representatives, it seems like a price worth paying.

The principle is similar to the “voter voucher” idea proposed for the UK in 2006 by the Power Inquiry that would have allowed voters to allocate £3 to parties of their choice at elections. The democracy card, however, allows money to be allocated over the year, and not just by ticking a box at elections, and therefore affords more control to voters over how the money is spent and encourages greater participation. As Wight suggests, the democracy card could even be permitted to fund other forms of political campaigning such as referenda, lobbying, or social movements helping to democratise other spheres of political life as well.

Of course, there would need to be additional rules governing how the money is spent and, as with any system, it would need to be adapted as unforeseen problems arise. But such a proposal has great potential to expand social control over the formal and informal institutions of democratic life and increase citizen participation. As Wright puts it:

The key thing is that a well-designed system of public financing would largely remove private money from the political process without ceding allocation over political finance to the state. It would thus deepen the political equality and efficacy of citizens. The state provides the funds, but citizens determine the allocations.

Unfortunately, it’s unlikely that the democracy card will get much of a look in in the coming debate on party funding. The Coalition Agreement makes the vague commitment “to pursue a detailed agreement on limiting donations and reforming party funding in order to remove big money from politics” with no mention of public funding. With the Labour party determined to protect their trade union funding from any reforms the Coalition propose and the Tories equally keen to protect their sources of private revenue it looks like there will be more protracted arguments with little progress towards a more democratic system of party funding.

So here’s another idea: set up a representative citizens’ assembly, selected at random, to debate and discuss how to improve the quality of representation by reforming party finance. As with the British Columbia citizens’ assembly, which considered electoral reform, the citizens would be free to deliberate on all the options, and choose the best of them to be put to the electorate in a referendum. 

In such a deliberative process, removed from partisan calculations, a lesser-known and more radical proposal for reforming party funding, such as the democracy card idea, might just win through.