The Pandora Papers reflect a political system in need of change

In an industry already known for murky deals, media manipulation, and corporate lobbying, the campaign finance arm of politics makes the rest of a politician’s work seem perfectly clean. This week, in a piece of devastating public-interest journalism, the International Consortium of Investigative Journalists were able to splash the private financial dealings of the world’s mega-rich, as well as former and current politicians. Where the corrupt dealings of political figures from all around the world were revealed, the most profound implications for the UK relate not to the finances of people, but political parties. Key Conservative Party donors, including Mohamed Amersi – a regular Tory donor who also personally funded Boris Johnson’s leadership campaign – have been exposed in bribery and corruption scandals.

So, what does it say that the British political system is bankrolled from such unsavoury and illegitimate sources?

The system for campaign finance in the UK is set up to encourage this sort of behaviour. In a zero-sum race to win votes, all political parties are forced to look for large donors. These donors often have their own agendas – take Lex Greensill, who essentially bought his way into number 10 – and rarely acquire their money in a completely legitimate way. No political party is exempt; whilst not the same as taking money from Russian billionaires, the influence of the unions is not without controversy in the Labour Party. Likewise, under the last Labour government, Tony Blair personally secured an exemption from a ban on advertising smoking for F1, just hours after meeting with major Labour donor and F1 tycoon Bernie Ecclestone.

More money spent by everyone doesn’t necessarily result in a better election

However, the impact always seems to be the greatest in the Conservative Party. Their natural support base, which includes very wealthy people and large businesses, are more capable of raising and directing dodgy money to them. So, not only does it tarnish the entire business of politics, our system of campaign finance also tilts the scales.

Something needs to change, but what can be done?

Firstly, we need to assess the purpose of campaign finance. Why do political parties even need so much money? There are legitimate reasons for political spending – from communicating their message to developing policy. None of these come cheap. However, how much money parties need and where it should come from is up for debate.

On the one hand, well-funded political parties are better able to dominate the media landscape, organise on the ground, and run events to communicate with voters. Since our choice of leaders is very important, it makes sense that elections should involve this sort of scrutiny. A quiet election in which even less of the public engages would be a bad thing. On the other, much spending by each political party merely neutralises the spending of others. Parties compete to bid up the price of online advertising, for example, during an election period. More money spent by everyone doesn’t necessarily result in a better election.

To phase out the need for donations from large institutions, we would need additional money either in small donations or from the state

A balance needs to be struck, then. UK political parties do need to be funded. However, the extent of this funding could probably be reduced somewhat, if there were adequate restrictions to prevent both sides from spending more.

Having established this, then, we also have to decide where that money should come from. Its current source – large donors, big business, and the unions – are not an ideal solution. It gives influence to the already powerful at the expense of the British public. The best alternative, state-funding of political parties, is common around the world. Indeed, in the UK opposition political parties receive so-called ‘Short Money’ to fund much of their day-to-day activities. Few major UK parties, however, can subsist on Short Money alone. If we wanted to phase out the influence of large donors, especially nefarious or murky ones, state funding would need to be dramatically scaled up. In particular, current state funding is not enough to meet the additional demands of an election campaign. To phase out the need for donations from large institutions, we would need additional money either in small donations or from the state.

Perhaps the next government will have a slightly less myopic and cynical view of British politics

The state should offer additional funding and support for UK political parties if there is a general election. This would reduce the extent to which the finances of the governing party affect the timing of an election – something which is a scourge on democracy – and also help to sever the ties between election victory and large donor support. However, there is the potential issue of entrenchment – if funds are allocated in line with the vote totals at the previous election, it could be hard for opposition political parties to topple the government and insurgent political parties to challenge the opposition.

As a result, as well as parties more unconditional funding at election time, the government could also grant voters a notional voucher which they could direct to a political campaign of their choice. This would enable insurgent campaigns to attract small donor funding in an equitable way. Similarly, large companies or unions could grant vouchers out of their political funds to their members or employees. This would enable the views of members and employees to continue to be expressed, but without top-down control by corporate or union bosses. This would enable very large donations to be outlawed. If political parties were able to fund themselves entirely from the support of ordinary people, there would be no public interest in allowing companies to donate to political parties in the first place.

Of course, as with constitutional reform, changes to the electoral system, and much else in politics, the only way for the campaign finance system to change is for government to decide to do it. This requires a party that succeeded under the old system to decide to change it. For now, that looks very unlikely, our current government is not going to look a gift horse in the mouth. Perhaps the next government will have a slightly less myopic and cynical view of British politics. This one seems content with its reprehensible donations.