Money and Politics: Regulating Political
Donations in the United Kingdom and Germany
Jakub Talacko11160233
University of Amsterdam
Supervisor: Prof. Jeffrey Harrod
Second Reader: dr. R. M. Sanchez Salgado Master Thesis - Political Science
European Union in a Global Order
1 Table of Contents
1 Table of Contents ... 2 2 Lists ... 4 2.1 List of Abbreviations ... 4 2.2 List of Figures ... 5 3 Introduction ... 6 3.1 Research Question ... 8 3.2 Research Method ... 9 4 Literature review ... 104.1 Existing Theoretical Approaches ... 10
4.1.1 Majoritarian Electoral Democracy ... 11
4.1.2 Economic Elite Domination ... 13
4.1.3 Majoritarian Pluralism ... 14
4.1.4 Biased Pluralism ... 15
4.1.5 Choosing the Most Suitable Theoretical Approach ... 16
4.2 The Findings of Current Comparative Political Finance ... 18
5 Case Studies ... 21
5.1 Political Finance Regulation ... 21
5.1.1 Campaign Finance in the United Kingdom ... 28
5.1.2 Campaign Finance in Germany ... 35
5.2 Introducing the Data-sets ... 40
5.2.1 Data-set for the United Kingdom ... 40
5.2.2 Data-set for Germany ... 41
6 Presenting and Interpreting the Data... 41
6.2 Patterns of Donations in the United Kingdom ... 43
6.2.1 Patterns of Donations by Individual Companies in the United Kingdom ... 45
6.3 Patterns of Donations in Germany ... 54
6.3.1 Patterns of Donations by Individual Companies in Germany ... 56
6.4 Comparative Perspective ... 67
7 Conclusion ... 70
8 Reference List ... 74
8.1 Primary Sources ... 74
8.1.1 Data-sets ... 74
8.1.2 Legal and Governmental Publications ... 74
8.1.3 Newspaper Articles ... 75
8.1.4 Webpages of Companies Studied or Business Reports ... 76
2 Lists
2.1 List of Abbreviations
CDU Christian Democratic Union of Germany CSU Christian Social Union in Bavaria
EU European Union
FDP Free Democratic Party of Germany JCB J.C. Bamford Excavators Limited PPA Political Parties Act
PPERA Political Parties, Elections and Referendums Act 2000 SPD Social Democratic Party of Germany
2.2 List of Figures
Figure 1- Theory Predictions (Gilens & Page, 2014) ... 17
Figure 2 - Combined Donations of the UK Companies ... 44
Figure 3 - Donations by Norbrook Laboratories... 46
Figure 4 - Donations by JCB ... 48
Figure 5 - Donations by Ministry of Sound ... 49
Figure 6 - Donations by International Motors ... 51
Figure 7 - Donations by IPGL ... 52
Figure 8 - Combined Donations of the German Companies ... 55
Figure 9 - Donations by BMW ... 56
Figure 10 - Donations by BMW to Individual Parties ... 57
Figure 11 - Donations by Allianz... 59
Figure 12 - Donations by Allianz to Individual Parties ... 59
Figure 13 - Donations by Philip Morris ... 61
Figure 14 - Donations by Philip Morris to Individual Parties ... 61
Figure 15 - Donations by Daimler ... 63
Figure 16 - Donations by Daimler to Individual Parties ... 64
Figure 17 - Donations by Rheinmetall ... 65
Figure 18 - Donations by Rheinmetall to Individual Parties ... 66
3 Introduction
“One of the best predictors of policy around is Thomas Ferguson's investment theory of politics,.. which essentially ,…,describes elections as occasions in which groups of investors coalesce and invest to control the state”. - Noam Chomsky1
Much like the essence of Chomsky’s quote, the essence of this thesis has been inspired by the works of professor Thomas Fergusson. As for myself, growing up in a transitioning post-communist country, there was no absence of examples where various groups of people took a firm control of the state. They may have had been members of different parties but the story almost always ended up the same. Whilst the general population struggled with the challenges of a rapid transition towards a capitalist, free market economy, those in power made sure that state’s wealth was properly distributed - among their backers, friends, and families. Perhaps this background has significantly influenced my perception of both money and the state to the extent that reading Ferguson’s (1995) book “Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems“ felt like finally reading about a scholar that had similar perception of the workings of the state and the role of money in it.
With the new found theoretical base discovered in the works of professor Ferguson, the thesis took a turn towards the exploration of the direct relationship between political campaign donations and the influence they had on policy-making in the corner of the world that I grew up in - Europe. However, it soon became apparent that the scholarly foundations laid out in works of predominantly American scholars such as - aforementioned Thomas Ferguson or Anthony Downs - were in some cases only usable in the context of the United States. Mainly databases containing large quantified policy data-sets such as Gilense’s or Baumgartner’s were shown to be unparalleled to any of those that dealt with the situation in various European countries. Indeed, the effort to establish such complex databases proved to be beyond the effort and scope of this thesis.
However, in the process, an idea was born. Due to the nature of campaign laws and mainly the financial disclosure laws - countries such as Germany and the United Kingdom both possess a very transparent and accessible campaign finance records. These official data-sets in
1
Obtained from Mr. Chomsky’s official Facebook Page, slightly edited - https://www.facebook.com/NoamChomskyQuotes/posts/614649181912506
themselves are comparable to those that the Federal Election Commission2 in the United States uses and thus lend themselves to some of the hypotheses and methods that the scholars in American Politics deploy. The fact that these records span the period of over 10 years and contain crucial information about the donors allows us to track their during different circumstances and over longer periods of time. Therefore, this data lends itself to an extensive analysis that allows testing of some predictions made by various theories of political finance studies.
The thesis also presents a literature overview which provides an overview of the most dominant approaches to the study of political finance in the wider field of the American Politics Studies. This allows the thesis to build a proper theoretical bridge required to use some of the findings made in the field of US political finance. These findings serve well as building blocks that allow the main analysis of the thesis to better focus itself and also provide smaller testable hypotheses for the data part.
Moreover, the thesis deploys a structure based on two case studies from two major European countries - the United Kingdom and Germany. In these case studies, the most important feature that shapes the landscape of political finance is described These two countries were chosen mainly because of their exemplary transparency when it comes to the money involved in financing political activities. Furthermore, both countries are significant powers in the European Union both in terms of economic and political clout and the importance of findings will reflect this situation. Also, a dual case study element allows for a greater comparative analysis in terms of political finance. This will allow for an in-depth comparison of the significance of the different legal backgrounds that exist in Germany and UK as far as the workings of the political finance system in each country goes.
The relevance of the topic studied stems from the nature of the field that is investigated. The study of domestic politics, especially in an area such as political finance is of significant importance for anyone who desires to improve on the ideal of the liberal democracy and its workings. The study itself allows an insight into the behaviour of political donors who play a large role in financing political campaigns. Thus, the actions of donors have direct impact on the workings of our democracies, as modern day campaigns do depend on outside financing (Snyder,
2
For a comparison see Federal Election Commission (2015) and the data-sets for Germany and the United Kingdom
1990). It also allows for further testing of some of the established theoretical approaches in the study of the political campaign finance. The theoretical implications along with previous insights can both be tested against the data provided.
The focus is placed especially on big corporations and industry representatives and their contributions to political campaigns. Are the preferences of the big donors reflected in the policy outputs of governments that come to power using these donations to fund their campaigns? If yes, then the patterns of donations will surely reflect this. Professor Thomas Ferguson has argued in his book “Golden Rule: The Investment Theory of Party Competition and the Logic of Money-Driven Political Systems“ that this is indeed the case, at least in the United States. Thus, in my thesis, I hope to reapply and re-invent this theory in the specific context of the two European countries and their respective unique regulatory systems. Truly, the European context offers an opportunity to expand upon this theory as it provides us with the chance to cross-examine some of the assumptions put forward by the theory in different countries under different institutional settings. The laws in place in Germany and the United Kingdom ensure that the flow of money to political parties can be traced. Thus, the two countries offer a great opportunity to expand upon the scholarly knowledge in the field of comparative political finance, especially in the European part of it.
3.1 Research Question
The main research question is: “How do different regulatory practices influence the
patterns of donations to political parties among large donors?”. The most important goal of this
thesis is to explore the relationship between donors who contribute to political parties and the behaviour that can be observed when it comes to their donations along with the influence o regulatory practices upon this behaviour. In order to establish a clear empirical factor that can serve as an indicator of this behaviour, the patterns of donations these donors create over the years are used. To understand the assumptions that the most important scholars put forward, the theoretical chapter pays significant attention to the way political donors are perceived in modern democratic political systems. These assumptions in themselves constitute a smaller set of hypotheses that will also be tested. Furthermore, the practices through which states regulate their political finance system are introduced. These are to be understood as sets of regulations that set a legal framework in which the political party and the donors operate. The regulations
themselves are presumed to directly impact the behaviour of large donors and are thus explored. The main implications that are obtained from the literature about political finance systems are then also tested against the data and contribute to expanding on the answer to the main research question.
3.2 Research Method
In order to provide the best answer to the questions listed above the thesis needs to utilize the correct research methods. There are three major components that are used in this thesis to reach that goal.
First, the current literature and scholarly work on the relevant themes to the study of political finance are reviewed. This extensive review allows to build upon the existing knowledge and insights, whilst borrowing from the methods used by previous scholars that have worked within the field. The theoretical review also provides information about the fitting sub-questions that need to be answered in order to answer the main research question.
Second, qualitative analysis is also used when discussing the relevant legal backgrounds of the two countries that are the focus of this thesis. By providing the relevant legal regulation in detail some of the insights from the theoretical review can be further specified to suit better the real situation in the two countries studied. Thus, the major component of this thesis consists of a qualitative analysis based on both scholarly work and existing primal legal writings.
Third, the quantitative part of this thesis consists of the presentation of the data relevant to the case study. The data presented come from the official governmental political finance reports of both Germany and the United Kingdom. The data is deployed in order to allow the testing of the hypotheses that were generated in the qualitative part. The main focus is placed on the observation of the behaviours that donors display over time. The amount these actors donate can be traced over the years and the patterns of their donations can then be established. Thus, one can observe the patterns of both specific companies and also the patterns of the combined donations over the years. Also, due to the case study aspect, there is an opportunity to compare the patterns not only between individual companies within a country but also cross-nationally.
The focus on companies is placed mainly due to the insights obtained from the theoretical review. The theoretical approaches that were found to be the most fitting place a large emphasis on donations of large companies or corporations. Therefore, the thesis also focuses on these
actors. The companies were chosen randomly from the data-sets that are used within the thesis. Although, the companies were chosen randomly the requirement was that companies chosen must have exhibited donations in a multitude of different years. This requirement was enforced in order to ensure that patterns could be observed.
The wider cross country comparison is slightly weakened due to the smaller sample size. However, even in a smaller sample size, some differences can already be observed. This type of an analysis lends itself to the comparison of the country specific regulatory systems. This method should be able to showcase whether there are significant differences among how companies within each country operate. To make this method more reliable even with a smaller sample size the companies were chosen at random. Presumably, the combined insights from the theoretical background and previous scholarly work along with a rigorous analysis of the systems that regulate political finance in each country should be able to provide an answer to the differences in the behaviour of companies within each system.
4 Literature review
4.1 Existing Theoretical Approaches
In this review, the established theoretical frameworks that could be useful to the study of the effects of political donations on policy making will be presented. These frameworks along with their terminology and definitions are examined to allow the selection of the most suitable framework for the purpose of the thesis. This analysis will also consequently specify the theoretical origin of this thesis in the current research landscape.
To allow for a better analysis of the most dominant approaches in an established and clear structure the division implemented by Gilens and Page (2014) are used. Their study which oversaw the testing of all the major theoretical approaches to the study of American Politics employs the division of theories in the following categories - Majoritarian Electoral Democracy, Economic Elite Domination, Majoritarian Pluralism and Biased Pluralism. This division is useful for the purpose of determining the most suitable theoretical approach for this thesis. It also allows the reader to understand better the theoretical origin of this thesis as the categorisation is very well described in the works of Gilens & Page. The consideration of all the major theoretical
approaches is useful, as it provides differing views of the role of the corporate and business donors in the political world.
Furthermore, a confusion may arise as to why this thesis employs a division of theories grounded in the study of American politics, whilst dealing primarily with cases from the United Kingdom and Germany. First, the categories that are presented are wide enough to encompass the major theoretical approaches to the study of domestic politics from other areas of the world. Second, the differences between the political systems of the United States, United Kingdom, and Germany are undeniably existent (Nassmacher, 2001). However, these theoretical approaches which concern themselves primarily with the assumptions about the workings of the system in general, do not necessarily need to be constrained by the details important in the study of comparative politics. Third, there is an undeniable advantage that comes with the categorisation used by Gilens and Page, which is the access to their quantified analysis that compares the merits of these schools of thought in a single model.
Moreover, there are significant similarities between the scholarly concerns of the theoretical approaches and the aims and goals of this thesis. The existing approaches that study the American politics do concern themselves to a larger or smaller extent with the monetary and other incentives that affect the policy process (Gilens & Page 2014, p. 2). Thus, they are very relevant for the theoretical grounding of this thesis as it deals foremost with political donations and the patterns that arise from the actions of donors over time. The major actors within the research are often divided into subgroups. Thus, G and P use the following categories - Average Citizen also known as “median voter”, Economic Elites and Mass- based or Business- oriented Interest groups or industries (Gilens & Page 2014, p. 3). These categorisations are further utilized when assessing the suitability and coherence of each of the main theoretical approaches that will be discussed below.
4.1.1 Majoritarian Electoral Democracy
Encompass rational choice theories of electoral democracy. These theories, in general, assume that parties seek to maximize their votes in order to secure power (Downs, 1957). Thus, the most appealing strategy is assumed to be the catering to the needs of the average citizen. Therefore, the policy that fits the median voter is seen as the equilibrium (Davis, Hinich &
Ordeshook, 1970). This position is also seen as the most democratic, as it at least theoretically presents the best compromise for the society as a whole (May, 1952).
Needless to say, this approach is very idealistic and some of its predictions are rather simplified and ignore some of the difficulties that policy making must overcome in the real world. As Ferguson (1995) points out these predictions struggle when a policy is “multidimensional” meaning there is not a clear spectrum of preference ranging from zero to one. This is, unfortunately, the case with many modern policies that are increasingly interlinked with many issues and have complex implications (Kooiman, 1993). Also, the assumption that parties will cater to the needs of the median voter and then hold their promise, as well as ensure that the implementation of the policies goes as intended simplifies the difficulty of policy making and policy execution on the institutional level (Sen, 1970).
Nevertheless, there is a bulk of scholarly evidence that supports some of the predictions and claims made by the Majoritarian Electoral Democracy approaches. According to the research made by Monroe (1979, 1998) the policies enacted by the US government has been mostly in agreement with the preferences of the general public. There are also other studies that support the general notion that median voter is the crucial variable that determines the outcomes of many US policy debates(Page & Shapiro, 1983; Erikson, Wright & McIver, 1993; Erikson, Mackuen & Stimson, 2002). Subsequently, this would imply that the median voter as a variable lends a great amount of predicting power. These studies show that the U.S. federal government policy overlaps with the preference of the median voter roughly two-thirds of the time. Indeed, other studies show that changes in public policy often follow the shifts of median voter opinion, precisely in two out of three occasions (Gilens & Page 2014, p. 6).
However, these findings are often criticized claiming that the median voter proxy is not necessarily the variable that causes the change, but merely confounds with the general trend. In a publication by Larry Bartels and Martin Gilens (2009), the findings suggest that there may not be a direct relationship between public policy and median voter preference at all. The concern is that groups such as wealthy individual or organized interest groups may simply hijack the median voter for their own cause through the manipulation of the public opinion. Similar findings were also found in the study that focused on the main actors and their influence in US Foreign Policy (Jacobs & Page, 2005).
4.1.2 Economic Elite Domination
The concerns expressed above regarding the nature of the relationship between median voter and public policy outcomes are precisely what the theories grouped under Economic Elite Domination target in their criticism. The theoretical tradition of Economic Elite Domination approaches predicts that influence on policy is correlated with actors economic resources. Thus, an individual with a larger disposable income, business or other types of wealth is presumed to be able to exercise a much larger influence on the policy outcomes than someone with a diminished pool of resources. Other characteristics that some of the EED theories see as essential to obtaining influence on policy making are - social status and a position within an institution (Gilens & Page 2014, p. 6).
An important feature of these theories is the assumption that such elites often cooperate on issues of common interests and form alliances that allow them to pool their resources and increase their collective power (Bottomore, 1993). These alliances are often formed based on a shared history of origin, class or social interactions. For many scholars, these alliances are at the root of all the problems with the current model of liberal democracy. Due to the alliances between individuals that may collectively have control over a large portion of media, academia, political institutions whilst possessing the material resources as well as organisational capacity to coordinate these structures effectively create systems that can bypass the widely popular and supported model of control as imagined by the Majoritarian Electoral Democracy approach (Fergusson, 1995; Pizzo et al., 2015).
Some of the most important and iconic works within this school of thought include Charles Beard and his claims that the U.S. constitution was designed to cater to the needs of the rich landowners, wealthy businessman whereas the majority compromised by small land farmers and members of the working class were left out (Beard, 2012)3. C. Wright Mills expands on this idea in his book The Power of Elite (1999) where he identifies distinguishable cliques of elites in the military, political and economic spheres. His analysis confirmed the idea that such alliances of elites are often able to bypass the democratically elected representatives and thus also the power of the people. An interesting finding is also the indication that the elite status is not usually assigned purely on the wealth of the individual, positions within the institutional setting
3
can play a significant role (Michels, 2001). In his 2001 book “Top Down Policy Making” Thomas Dye (2001) posits the thesis that power comes from an elite consensus among the politicians, lobbyists, lawyers and NGOs in Washington rather than the people.
Finally, in their complex statistical analysis Page and Gilens (2014) show that economic elites and organized groups have a substantial independent impact on the policy of the US government. On the contrary, the influence of average citizens and mass-based interest groups seems to have little to no independent influence. This is a significant finding as their method of analysis lends it a great amount of credibility due to the intra-theory analysis they have done.
4.1.3 Majoritarian Pluralism
A name that almost implies a contradiction in itself, as the terms ‘majoritarian’ and ‘pluralist’ are often pitted against each other when discussing comparative politics (Dunleavy & Margetts, 2001). However, this approach attempts to combine the assumption that there is often a plurality of various groups or factions that compete for power with the general workings of the system. The thoughts of those who belong to the majoritarian pluralists often acknowledge the risks such as tyranny or authoritarian rule, thus they seek a system that can best adapt to the needs of the wide and diverse citizenry. Nevertheless, the assumption is that these groups can form wider alliances and support each other, thus creating majorities and eliminating the possibility of tyranny in the process (Gilens & Page 2014, p. 8).
The struggles that are often studied by this approach encompass the disagreement between various organised interest groups, business firms or whole industrial sectors. All of these are actors that seek to influence the policy making process, hence the plurality (Gilens & Page 2014). This idea is even further supported by the likes of David Truman (1971) and his work in The Governmental Process. In his work Truman claims that organised groups should be at the centre of political analysis as they are very effective at securing influence in the policy making process. Another assumption is that every group will exercise at least some level of influence as once it appears on the political landscape it becomes an actor of influence. This is because of the majoritarian mechanism that this approach presupposes where groups are able to shift support and create wider alliances (Truman, 1971, p. 511). Thus, no group can be completely discounted and the expectation is that in the end, a situation similar to the one envisioned by Majoritarian Electoral Democracy approaches will occur. That is, a policy
outcome catered to the “median group”. Thus in some ways, the MED approach agrees with the Majoritarian Pluralism. They both believe that the system is difficult to be abused by a single actor or a group and that it rather caters to the needs of the average voter or group.
The ideal representative theory of the majoritarian pluralist approach is presupposed to be Robert Dahl and his analysis of the workings of the American politics in which he seeks to understand the conditions under which a competition among groups can lead to the best outcome for the median voter (Dahl, 1956; 1989). Thus, the plurality of actors is presumed to lead to the best possible outcomes for the majority.
Also, the criticism in many ways resembles the one found with the Majoritarian Electoral Democracy approaches. Specifically, the claims are that it is quite simplified ignoring the difficulties that all kinds of groups will be able to shift and organize themselves in such ways as to remain effective actors. This criticism mainly inspired by Mancur Olson’s (2009) writings presents the phenomenon of “free riding” as the chief issue with the Majoritarian Pluralism approach. If some groups do not have the incentive to always act in their best self-interest or to even form as individuals may simply see the costs as too high. This a serious and well-grounded criticism as the costs that each individual suffers in the process of competing in the policy arena may be dissuasive (Olson, 2009). This, in turn, invalidates some of the fundamental claims of the Majoritarian Pluralism such as the indispensability of each group and their flexibility that is crucial to the workings of the system as presumed by the Majoritarian Pluralists.
4.1.4 Biased Pluralism
The approaches that can be summarized as “Biased Pluralism” come from the same universe as the “Majoritarian Pluralist” but with a darker outlook on the workings of the system. Based around Olson’s line of thinking that not all groups are equal, the approach necessarily leads to a biased situation where certain groups hold an advantage over the others. As much as Majoritarian Pluralist overlap slightly with the theories of Majoritarian Electoral Democracy, can one observe similarities between the theories of Economic Elite Dominance and Biased Pluralism. In the eyes of Biased Pluralism, groups still compete for influence, however, more often than not the ones that are victorious belong to the camp of corporations, businesses and professional associations (Schlozman & Brady, 2012).
In the works of Thomas Ferguson (1995), the concept of party politics as “politics of investment”. He claims that businesses, corporations, and industries as whole fund certain political parties to cater to their needs through their policy-making. Other authors such as George Stigler coined this phenomenon as “the capture of the regulators by the regulated” (Stigler, 1971). These findings are very interesting as they change the perspective from a system that caters to the needs of the median voter to a system where the actor that can foot the bill the best has the politicians ear.
The assumptions and conclusions presented by the Biased Pluralism approach often resemble those made by the Marxist and Neo-Marxist traditions. In the traditional Marxist sense, it is presumed that in the capitalist state those who hold the means of production also hold the keys to ensuring that it will remain in such a way (Przeworski & Wallerstein, 1982). Indeed, these views resemble those of Biased Pluralism as they point to the uneven playing field among various actors. The predictions made by authors such as Ralph Miliband (1969) suggest that the groups representing corporations or vast businesses tend to have the upper hand. The Marxist way of thinking comes in many ways very close to scholars such as Ferguson or Stigler. They all agree there is a certain group that has obtained an immense control over the society and managed to paralyze many of the mechanisms that are presumed to be able to prevent this situation from occurring.
There are also some of the most complex and quantified studies to be found within this tradition. In his study, Mark Smith (2000) looked at how successful the U.S. Chamber of Commerce was at getting its way with the Congress. The study documents cases where the Chamber went against the wishes of the median voter and presents a success rate. The conclusion is that the Chamber’s average success has been fairly high. Also, the study by Frank Baumgartner (et al., 2009) showed that there is indeed an effect of resources when it comes to the success rate of influencing the policy makers. These findings should be crucial to our understanding of the role that actors with significant disposable wealth can play in our political systems.
4.1.5 Choosing the Most Suitable Theoretical Approach
The most dominant theoretical approaches were presented above in order to present a chance to clearly justify the theoretical approach that would be most compatible with the goals of
this thesis. It is clear that all four schools of thought are established approaches with years worth of scholarly writing and research to provide the necessary base for a research in a similar scope to this thesis. Nevertheless, there are crucial differences among the theories when it comes to the specific predictions they make about the workings of the political systems that are the focus of the analysis. Namely, the explanatory power for the workings of the system is placed on a different set of actors in each of the theoretical approaches with some minor overlap present among a few of them. To be able to better grasp the differences between each of the approaches a look at Figure 1 presents a clear and quick summary.
Actors Type
Theory
Average Citizen Economic Elites Mass Interest
Groups Business Interest Groups Majoritarian Electoral Democracy
Large influence No influence No influence No influence
Economic Elite Dominance
Some influence Large influence No influence Some influence
Majoritarian Pluralism
Some influence No influence Large influence Large influence
Biased Pluralism
No influence No influence Some influence Large influence
Figure 1- Theory Predictions (Gilens & Page, 2014)
The table shows the most important independent actors according to each of the theoretical approaches. This is important as it suggests that the schools of thought disagree when pointing out the most significant influencers of the workings of the political systems. Since the focus of this thesis is the patterns of donations among the companies of various sizes, it is necessary to justify such a choice. From the definition of Economic Elite and Business Interest Group, it becomes clear that the actions of companies studied in this thesis fall within these groupings. As one can see in Figure 1 there are theoretical approaches which simply do not assign a great predictive value to actors such as Economic Elites or Business Interest Groups. Among these are ‘Majoritarian Electoral Democracy’ which disregards the influence of both Economic Elites and Business Interest Groups, both ’Majoritarian Pluralism’ and ’Biased Pluralism’ discount the influence of Economic Elite but they accept the influence of Business Interest Groups. The grouping of ’Economic Elite’ theories unsurprisingly assigns considerable
influence to both Business Interest Groups and Economic Elites. Thus, it grants a theoretical backing for the choice of actors being studies in this thesis.
Furthermore, the findings of Page & Gilens (2014) present a strong case for the accuracy and soundness of the ’Economic Elite Domination’ theories. According to the findings of their study, the most accurate theoretical approaches were shown to be the ’Economic Elite’ approaches. Their findings show that generally the public has a little independent influence on the makings of public policy. On the other hand, individual economic elites or the groupings of economic elites (corporations, businesses etc.) were shown to have the largest influence on the outcomes of policy making (Page & Gilens, 2014, p. 16).
What are the implications of these findings for the structure and goals of this thesis? First, it informs us that the most important actors to study are indeed the economic elites. Thus, it lends a greater significance and importance to the study of the behaviour of these economic elites. One of the ways this can be done is to observe the behaviour of these economic elites when it comes to financing political campaigns, which is precisely the focus of this thesis. Second, by implication it also allows us to justify the lesser emphasis placed on groups such as mass-based interest groups or the donations coming from the larger public. Third, it provides a strong theoretical and scholarly backing for the detailed study of the political finance regulatory systems in the following chapters. These systems are designed to alter the conditions under which the political parties and wealthy elites are forced to operate. Thus, understanding these systems should be crucial to correctly depicting the situation in both of the countries that are being analysed in detail.
4.2 The Findings of Current Comparative Political Finance
The field of comparative political finance has been slowed down in its development for many years by the lack of access to relevant data that would allow the testing of its many hypotheses (Scarrow, 2007, p. 194). However, as the laws surrounding political finance and transparency evolved, so did the field of comparative political finance. With greater access to more reliable and accurate data, the scholars of the field could deploy more sophisticated methods and arrive at more precise hypotheses (Scarrow, 2007). However, the real significance and importance for the purpose of this thesis lie in uncovering the methods used by the scholars within the field and to understand the focus of their analysis. The previous works in this field
also present an outstanding opportunity for the generation of additional sub-hypotheses that can be tested using the data-set utilized in the analytical part of the thesis.
As explained above, the field underwent a significant shift in its focus and methodology with the spread of laws altering the access to data relevant to the discipline. Thus the early scholarly work in political finance primarily focused on single domestic countries, or groups of them but rarely engaged in a comparative analysis. The focus of the early scholars was primarily focused on two aspects - legal and general practice. Scholars such as Overacker (1941) and Pollock (1932) published works in which they focused on noting down and explaining the workings of the system in relation to funding its political parties. Some scholars took an even more specific approach and focused on analysing the funding practices of specific parties (Heidenheimer, 1957). Works such as Heidenheimer’s (1957) provided a great insight into the workings of political parties and their general practices when it came to obtaining funds for their activities. However, a more comparative approach, especially on a cross-country level was often found to be difficult due to the legal and cultural differences and also due to the uneven distribution of information. Therefore, some of the early cross-national comparative works focus on specific parts of the world due to the similarity (Gunlicks, 1993). In the newer works the amount of countries increased along with the attempts at greater cross national analysis (Nassmacher, 2001). It is thus clear the difficulties found within the field often have to do with the differences between the countries that decrease the quality of chances of success of the analysis.
However, not all attempts at cross national comparisons between political finance regimes were futile or shallow. Several studies have focused on proving that the importance of finance in political campaigns is indeed significant (Welch, 1981). Further studies have also shown that the influence funds have on the success or failure of a political campaign may be different depending on the position of the politician at the beginning of the campaign. These studies have indicated that the money spent by those seeking to renew their tenure carries lesser impact than the money spent by the ones seeking to challenge them (Green & Krasno, 1988, 1990). Thus, incumbents tend are on average less dependent on outspending the challenger than vice versa (Gerber, 1988). These are significant findings to be considered in the analytical part where the behaviour of the donor will be tracked. For example one may argue that the donors should be more likely to spend more money on supporting the challengers. This also presents an
interesting premise to consider when dealing with a system that caps the spending at a reasonable low amount. Furthermore based on the findings of these studies, it is reasonable to expect higher donations to both incumbents and challengers during the election years. It also confirms the significance of studying the ways in which political campaigns are funded. Moreover, the implication that spending caps tend to favor the incumbents over the challengers (assuming they can be reached by both parties) presents an interesting question as to how these influence the behaviour of donors. Are the donors more likely to decrease their funding for challengers in systems with a reachable spending cap? Conversely, will the spending of donors supporting challengers be higher in systems without a spending cap?
Other studies have shown that the impact of public funding can also be significant when considering election outcomes (Nassmacher, 2001; Ikstens et al., 2002). The existence of public funds presents a significant change to the political finance landscape. Especially, when combined with the spending cap it can present the donor with an interesting situation. One of the concerns lies with the loss of dependency that the parties are presumed to have on the wealthy donors (Scarrow, 2007, p. 205). Does the existence of public funds for political parties mean a decreased importance of funds coming from big donors? Will this impact the donation patterns in countries with such conditions? A study by Primo and Milyo (2006) found out that the perception of government does not change in the eyes of the voters when public funding is present. Thus, at least from the perspective of the voter, the impact of these regulations cannot be found.
There are also findings that present a challenge to some of the questions this thesis seeks to answer. In a study from the United Kingdom, Fisher (1999) looked at the effectiveness of spending on a national level. It was found that simply increase in spending was not found to be correlated with the increase in popularity. This finding questions the effectiveness of money in securing election outcomes. However, it also presents a greater opportunity to expand the research as Fisher (1999) notes down the exceptionally short time which parties in Britain have to influence the elections. Could this perhaps mean that a greater effectiveness of funds can be observed in countries with longer campaign time? These findings present great building stones for the comparative case study in the analytical section.
Further findings introduce a slightly different perspective of the problems that surround the study of comparative political finance. The expansion of disclosure and transparency laws certainly helped with growing the field and scholarly work within, however, it is not without a
risk. Pinto-Duschinsky (2002) presents the concern that the data that are now made available to study the financing practices and structures among parties and their donors may sometimes be misleading. Pinto-Duschinsky warns of an analysis based solely on the assumption that laws are always honoured, as he points out that this is often not the case. These concerns are backed up by his research showing a concern of some politicians that work within these systems. The problem seems to be that the laws are simply often not obeyed enough and the enforcement is lacking. Thus the reporting practices and disclosure standards often suffer, limiting the usefulness of these data (Pinto-Duschinsky, 2001). The important information to take away from these findings is the need to consider the general practice and enforcement in the countries studied in the case section. Also, a rebuttal is offered by Scarrow (2007) when she points out that although there are bound to be some errors within the data that are now obtainable, the usefulness still stands for the comparative purposes of the study of political finance.
5 Case Studies
In this section, the main two case studies are presented. The legal, political and societal aspects of the United Kingdom and Germany are highlighted where relevant to the issue of political campaigning and its funding. Also, the importance of political finance systems and regulation is explained in detail. The different options that states have when it comes to regulating the relationship between a donor and a political party are introduced. To better understand the most important aspects of each of the regulatory practices, the impact of each of these is explained and tied to the theoretical background where possible. Furthermore, the data that are used in the quantitative part of the thesis are discussed. The description of these data contains the basic information about which variables they contain, their source, accessibility and the forms in which they are presented.
5.1 Political Finance Regulation
The first factor that one must consider when observing the behaviour of actors that donate money to political causes must be the environment in which they operate. The legal aspect also belongs among the traditionally established approaches to the analysis in the field of comparative political finance as mentioned in the theoretical section. Understandably, the relationship
between money and political power is a sensitive one and has thus been regulated in both of the countries that are considered in this case study (Scarrow, 2007). It is crucial to show the ways in which institutional setting in each country shapes the workings of the political arena. To allow for a clear and understandable analysis of the situation in each country, the most important aspects of political finance regulation will be discussed first. This will entail describing some of the most prominent ways of limiting the range of options for both the supporters and the political parties as well as explaining the impacts that each regulatory element has. Also, the importance of these regulations in relation to the behaviour of donors is made explicit where appropriate.
Sources of Funding
One of the most common ways of regulating political finance is to target sources of funding (Pinto-Duschinsky, 2002). Sources of funding encompass any potential donors whether they are individuals, companies or corporations. The regulators may decide that they will limit the pool of potential contributors by discriminating between them based on characteristics such as nationality or residency. Other factors may be the legal status of the donor, some states may ban corporations from becoming a source of funds for a political cause (Atwill, 2009).
The implications of these regulatory attempts lead to the desire to control the links between various actors and political parties. It is difficult to deny the idea that there is some concern in the minds of the regulators when it comes to the potential of political parties creating the links of financial dependency on the undesired actors (Van Biezen, 2004).
One of the common factors involved in barring certain actors from getting involved with political parties finance is the link between the actor and the country (Koß, 2010). It is presumed that the country’s fate should lie in the hands of political parties elected by its own people. However, the question whether to allow the financing of political movements from actors outside of the country is less clear. There are plenty of historical examples where covert methods such as financing radical parties or the movements of the opposition were used to destabilize or cripple a country (Blasier, 1985). Other types of foreign funding include foreign aid or funds from likeminded political parties in other countries (Wild & Foresti, 2010). Thus, it is relevant from the regulatory point of view whether to allow foreign contributions or not as the impact can be decisive. Some countries bar all foreign sources of funding, whereas some opt to allow specific kinds (Sullivan, 1996). An example of such different approach can be found in France and
Germany (Atwill, 2009). Whereas France prohibits all foreign funding going to political parties or candidates, Germany has a more lenient approach towards the members of the European Union (Atwill, 2009).
Thus, based on the insights obtained from the teaching of the Economic Elite Domination theories the regulations that deal with sources of funding can be seen as possibly the most potent. In countries where political donations from corporations are not allowed, it is reasonable to assume that there can be no financial dependency of political parties on donations from these actors. Based on the studies such as (Welch, 1981; Nassmacher, 2001) the funding plays a very significant role in deciding political campaigns. Assuming that political parties and even more so their individual candidates seek to win the election, there is a reasonable concern that in systems where donations from corporations are allowed there will be pressure on these actors to cater to the needs of corporations. Furthermore, countries that allow political donations from legal entities that reside outside of their territory open themselves to foreign influence. This effect can be exacerbated in such regulatory systems where donations from multinational corporations are allowed. In extreme cases, this can lead to the hijacking of the governmental structures by alien business interests (de Mesquita & Smith, 2011).
The Impact of Public Funding
According to Project Ace (2016), which gathers information for voters and researchers about political finance regulation around the world, out of 220 countries surveyed 130 (59 %) receive direct public funding, 120 (54,5 %) indirect public funding and only 39 (17,7 %) have no form of subsidy for their political parties at all. These data show another common way of altering the conditions in which political parties have to operate when dealing with their potential backers. The most widespread means of supporting political parties through public funding is to provide them with financial support dependent on their performance in local or state-wide elections (Ortuno-Ortin & Schultz, 2005). The effect of such public funding seems to be pushing parties towards a greater responsiveness to the general electorate as they benefit substantially from attracting the greatest amount of voters (Ortuno-Ortin & Schultz, 2005, p. 789).
These findings seem to support the predictions of theories such as ‘Majoritarian Electoral Democracy’. At the very least, systems with public funding dependent on obtaining large amount of votes to receive financial support should presumably come closer to the ideal model imagined
by the theory. This is because of the nature of the assumptions that the theory makes about the behaviour of political parties. However, these findings also bear an implication for the position of actors that were put under the ‘Economic Elite’ category, as greater responsiveness to the masses must inevitably come at the cost of someone’s influence. Interestingly enough, the study also found that the relationship between responsiveness to the public and public funding decreases in systems where other means exist that can secure large sums of finance for the political parties (Ortuno-Ortin & Schultz, 2005, p. 782). A closer look at the research shows that parties tend to be less responsive when they can rely on loyal donors that supports the party regardless of the policies (Ortuno-Ortin & Schultz, 2005, p. 784). Thus, the variable of public funding presents an interesting variable that can influence the behaviour of company donors that will be studied in the analytical section. Will the donation patterns differ in system with differences in public funding?
Moreover, the regulators can ‘fund’ and change the conditions in the system also in a more subtle and indirect way. Atwill (2009) mentions that the most substantial kinds of indirect public funding are the limitations placed on broadcast times. Some restrictions may prohibit parties from purchasing additional broadcast time, other may distribute some basic broadcast time to each party and allow parties to purchase more depending on their preference and funds available. Thus, the authority may decide about the “allocation, length and frequency of the broadcasts” (Atwill, 2009). Since one of the most significant parts of a political campaign is the time a candidate spends in mass media, this is a very impactful restriction (Holbrook, 1996). Given that one of the assumptions of the ’Elite Domination’ theory is the superior capability to secure large sums of funds as one of the cornerstones upon which influence is secured, the decrease of capabilities that money can secure can be presumed to be very significant (Prior, 2007). Large donations or the access to superior funding is bound to lose at least some importance when one of the most powerful campaign strategies is taken out as an option to be purchased.
Limits on Expenditures
Much like limiting the purchasability of additional broadcast time has a negative impact on the influence a large donation can secure, putting a limit on the expenditures as a whole can lead to similar consequences on a much larger scale. As mentioned above, outspending one’s
opponent is still largely a good strategy when political campaigns are concerned (Scarrow, 2007). Thus, actors who have the possibility to allow political parties or candidates with the option to outspend their opponents should probably be seen as crucial in systems where this strategy is possible. Although, all the other regulatory options that are discussed in this section can significantly alter how much a single donor or a small group of actors can enable this strategy, it still remains true that outspending remains an important strategical goal where possible. Thus, imposing an expenditure limit can significantly alter the importance of various donor to the political parties. Depending on the popularity of the party and their raising capabilities, this can potentially also limit their need to secure the support of the wider public. In systems where only expenditure limit is imposed, a party can rely on financing from wealthy donors such as large corporations. The party itself may not be able to outspend an opponent who can secure the support and donations from a wider populace, but it can run the campaign without the need for a larger support from smaller donors.
An interesting aspect of this type of regulation that has been foreshadowed before is the advantage for incumbents that campaign limits seem to cause. Research has repeatedly shown, that where campaign limits are imposed incumbents are much harder to be replaced by challengers (Pastine & Pastine, 2010). This could possibly manifest in the data that will be analysed by increased donations to challengers in systems where spending limits are not in place. On a similar premise, systems that place a spending limit upon political parties should show a decrease in donations for challengers.
Regulating Campaign Time
A significant factor that can completely change the way in which campaigns are led is the time parties receive before an election to launch a campaign. Regulations much like in other cases vary when it comes to campaign time. The number of time between the announcement of an election date and the elections itself may vary as much as few weeks to several months (Atwill, 2009). When assessing the importance of money in political campaigns and conversely, the importance of actors capable of making large donations, it is once again crucial to consider the effectiveness of campaign funds. Limited campaign time appears to be another possibility that the regulators have to diminish the value of campaign funds. Thus, this factor presents another important circumstance that needs to be considered when analysing the difference
between patterns of donations among donors from the UK and Germany. The assumption being that countries with shorter campaign times will have a smaller need for funds from big businesses and corporations among their political parties. This would in return mean that the donors in these countries are less likely to donate or are likely to donate lesser amounts as the theory suggests that the influence they will be exercising is smaller. Thus, in countries with short political campaigns, the expected “return” should be much smaller for donors than in countries with long periods of campaign time. The risk of allowing free competition in regards to advertising has also been acknowledged by the European Court. The risk comes from the possibility of buying out enough broadcast time to block out the other less wealthy party, thus distorting the public debate (Ó Fathaigh, 2013).
Limits on Contributions
Among other tools that regulators around the world may utilise to change the conditions of political competition are various legal requirements of restrictions that can be placed upon the process in which the money transfers from the possession of the donor to the respective political party or candidate. These restrictions usually fall under one of the following categories. First, limits on the amount of money that can come from a single donor. Second, conditioning the option to make an unlimited contribution with the disclosure of the identity of the donor (Scarrow, 2004). The first option theoretically presents more control as in an ideal world it would ensure that each citizen can only donate so much money. However, flat contribution limitations are hard to enforce if not paired with the need to disclose the identity upon donating. This issue can be somehow fixed by relying on bank transfer donations as opposed to simple cash donations which are harder to trace. Nevertheless, countries such as United Kingdom, France or Germany seem to utilize a system that combines either the need to disclose identity or to abide by a limit on the contribution (Atwill, 2009).
To understand the relevance of such measures to our study of the behaviour of large donors such as companies, it is once again necessary to consider the assumptions put forward by the theories of ‘Elite Domination’. Assuming that companies operate like investors when contributing to political parties, these flat limits placed on contributions severely limit and level the playing field with other actors which have much smaller disposable income. Thus, in systems that employ a form of flat contribution limit for all donors, meaning corporations and citizens
alike, the ability of corporations or wealthy citizens to become crucial investors in the endeavour of political parties should be greatly diminished. Consequently, political regimes that have these limitations in place should naturally experience lesser relationships between large donors and political parties.
However, even in cases where flat limits on contributions are only upheld as long as the donors remains anonymous, such as UK or Germany, the need to tie the contribution to the donor presents a potentially significant obstacle. This is due to the issues that such transparency practices combined with other methods tend to cause to otherwise possible corrupt practices (Kolstad & Wiig, 2009).
Another regulatory practice that can change the conditions under which political parties secure their funds are the tax reliefs granted for contributions. Once again the detailed wording and application of this kind of regulation are crucial. Depending on the specifics, tax reliefs can favour parties with rich supporters as they can benefit more from having their larger income free of tax, especially in countries with progressive taxing (Scarrow, 2004). Moreover, not only can the wording of the regulation favour parties based on whether their average supporters is richer or poorer, the tax exemptions can also work in favour of corporations, trade unions or associations if they are included in the relevant legislation (Scarrow, 2004). Thus, in an ideal case a system in which tax reliefs are also applicable to corporations or large businesses, it is reasonable to expect that donations will be even more generous since under such conditions their profitability increases. Nevertheless, this could potentially be offset by offering tax reliefs also to regular voters, thus increasing the frequency and amounts of the donations coming in from larger masses. The interplay with other regulatory practices such as contribution limits, expenditure limits or limited broadcasting time will surely determine how impactful the tax relief is.
Ensuring Transparency
As was foreshadowed above, transparency laws constitute an important feature when it comes to curbing corruption, including corruption present in political finance. As the theories of ‘Economic Elite Domination’ suspect, there is often an unhealthy relationship between powerful groups such as corporations, large business owners and political parties. On top of that, scholars such as Fergusson (1995) have found that parties often align with specific industrial interest and remain in a sort of symbiotic alliance. In this state, the industrial sector provides the party with a
large financial capabilities in order to secure policies in its favour. Some argue that this issue remains present even in systems with a certain amount of transparency such as the current establishment in the United States (Fergusson, 1995). Investigative efforts have shown that there is reasonable evidence to believe that there are connections within elites in the political, financial and educational sectors of the United States that have together managed to bring about, or at the very least aid the financial crisis of 2008 (Pizzo, Fricker & Muolo, 2015). These works show how difficult it is to prevent these powerful alliances among influential actors within the political and business system. Nevertheless, they also make a very good case to show how important transparency laws when fighting against similar interest alliances.
Indeed, the transparency laws aid in the efforts of politicians, researchers or journalist who seek to deconstruct these cliques and prove wrongdoing. As has been shown in the chapter about comparative political finance as a scholarly field, the access to data allowed the field to better develop itself. The reason why these data became available can be attributed to the larger trend towards greater transparency across several countries. Thus, the presence of strong transparency laws along with the presence of strong independent media or other actors with investigative capabilities should enhance the possibility to expose these unhealthy alliances (Lindstedt & Naurin, 2010).
Nevertheless, this thesis is not primarily normative and therefore the important question remains how this will impact the behaviour of corporations and businesses in regards to their patterns of political donations. Unfortunately, the effect on the patterns of donations cannot be compared as one can presume that countries where transparency laws are low will not be able to provide data required for the analysis. However, depending on the effectiveness of the ‘watchdogs of democracy’ and the willingness of the system to punish this corruptive behaviour, it is reasonable to assume that unhealthy alliances will be less frequent, or at the very least more subtle.
5.1.1 Campaign Finance in the United Kingdom
In the following subsection the above explained regulatory methods are introduced in the specific legal context of the United Kingdom along with a brief history of the regulatory practices. The most important developments in regards to the regulatory practices in the United Kingdom are described, along with the general rationale behind them. Each of the regulations is
described and the impact it has on the system of political financing is described. Finally, the combination of each of the regulations discussed is presented as a complex system that determines the behaviour of political parties and their financial backers. It is important to note that the focus is mainly placed on regulation relevant to the elections for the Parliament.
History of Regulatory Attempts
The political campaign finance system has been regulated since 1883 when the ‘Corrupt and Illegal Practices Act’ was introduced (Rix, 2008). In 1975 the state subsidies for political parties were introduced. These were based on the number of votes each party has received. The amount received per vote has been increased in 1999 (Fisher, 2001). Since 1976 there has been a number of reports prepared by both governmental committees and outsiders that recommended various approaches to the regulation of political finance (Hansard Commission, 2000; Pinto-Duschinsky, 1981). The concern has been primary with the connection between political parties and the wider public, encouraging numerous small donations over few big ones through the use of various incentives, shifting away from the dependence on businesses and trade unions toward average citizens and increase transparency in finance of political parties (Fisher, 2001). Unfortunately, for a plethora of reasons the increase in regulatory attempts did not manifest until labour came into power in 1997. The Neil Committee that was established to come with a report and proposals on how to change the system produced a very significant list with over 100 reform proposals (Fischer, 2001). Subsequently, the Neil Committee report entered the parliament and passed into law with some minor changes on 30 November 2000 as ‘the Political Parties Elections and Referendums Act 2000’ (further referred to as “PPERA”) (Ghaleigh, 2006).This
The focus of the system lies on limiting spending rather than donating. The system is also transparent, as it tracks donations and expenditures alike and requires these to be publicly accessible. The current system is largely based on PPERA and some previous legislation such as parts of the ‘Representation of the People Act 1983’ (further referred to as “RPA”’ (Feikert, 2009). Below the most important features of the United Kingdom’s regulatory system are presented and analysed.
When considering the restrictions that are in place currently in the United Kingdom, it is best to start with the overview of who constitutes a legitimate political donor and what are the exclusive criteria in place. The UK’s system offers quite a rich and developed system of distinguishing valid donors. First of all, a political party can only accept a donation from a permissible donor. These permissible donors include individuals on a UK electoral register, political parties who are registered, registered trade unions, registered societies or a registered association (Feikert, 2009). All of these actors must be UK based (PPERA § 54). The only exception to this are British citizens who live outside of the borders of the UK. However, even these citizens must be registered in an electoral register (Feikert, 2009).
The restriction placed on permissible donors are very significant as they limit the supporter base upon which the party may rely to succeed in an election. Since only actors based in the UK are included, this regulation should effectively exclude most of the influence outside of the United Kingdom. Also by requiring the donor to be registered, this regulation forces a great deal of transparency upon both parties and donors as the donation can always be traced to its source.
Public Funding and Broadcasting
The United Kingdom does not employ a system that would provide funding to political parties from the state (Atwill, 2009). At least not in levels comparable to the funding that is provided to many political parties in the democracies of other western European states (Fisher, 2001. The decision to not implement increased state funding for political parties was made based primarily on the recommendations from the Neil report (Fisher, 2001). The recommendation against came because of disbelief of the committee in the usefulness of state funding. However, Fisher (2001) points out that there are several reasons why the lack of state funding in the UK political finance system is quite troublesome. Fisher (2000) shows that parties rely primarily on election cycles to secure their funding. However, outside of the election, they struggle to secure sufficient funds to cover the financial expenditures that come with running the political party and keeping up sufficient infrastructure required for political competition. This insight is quite troubling when combined with the information provided in the theoretical section. If parties struggle to secure sufficient funds for themselves and they operate in a system without sufficient state funding, it leaves them vulnerable to the influence of rich donors.
On the other hand, the political finance system in the United Kingdom employs the use of regulated broadcasting time to provide a sort of indirect public funding to the political parties. Each of the parties is awarded a certain time on screen that is given for free (Communications Act 2003§ 333) . Thus, the political parties have guaranteed access to one of the most important ways of engaging the voter. Although, it is important to note that the system favors larger established parties which receive proportionally more on screen time, given the higher amount of seats they have (Feikert, 2009).
Limits on Contributions
The concern that lack of extensive public funding can cause is amplified when one considers the absence of regulations placed on contributions. In the United Kingdom, only limits placed on donations are of different nature than one would expect. The donation is only legitimate when its value is above £200 as far as political parties are concerned and £50 when one speaks about an individual candidate (PPERA § 54). There are no limitations placed upon the top end of a contribution. Thus, a permissible donor can donate any amount of funds to a political party as long as it is above £200. However, it is required that donations above £5,000 - nationally and £1,000 - locally be publicly announced (Fisher, 2001). Feikert (2009) notes that this requirement was abused using such loophole where the loans were not considered donations. This exception was abused in the financing of the 2005 general elections, however, it has since been amended and loans are now part of the normal party expenditure (White & Lester, 2007).
The law is also precise when it comes to defining what constitutes a donation - “gifts of money and property; subscriptions and affiliation fees; sponsorship; money spent on behalf of a party; the provision of property, services, or facilities; or the lending of money” (PPERA § 50; Feikert, 2009). Thus the system covers a wide range of options that are traditionally available to supporters of political parties in a typical setting. The goal is to cover all the possible means of supporting a party and include them on the donation list to ensure transparency (Fischer, 2001).
Therefore, the limitations in place are not particularly strong or extensive. From the preview of effective political finance regulations that was introduced in the beginning of this section, it is apparent that the lack of top end limits on contributions favours those who can take advantage of them. Thus, once again borrowing from the findings of Ferguson (1995) the alliance between dominant industrial sectors and political parties is possible. Given the fact that
the only obstacles between a large donation and a political party are the requirements of UK residency and the requirement to announce the donation, one may wonder whether the UK’s system will resemble the predictions of Fergusson.
Limits on Expenditures
On the other hand, one should not make conclusions about the effectiveness of the regulatory system before going through all of its components. The extent to which the expenditure of political parties is constrained by the legal requirements stands in a stark contrast to those placed on the contributions. First, the UK caps out the expenditures of political parties in elections depending on how many constituencies they are competing in. Thus, the expenditure caps amounted to roughly £30,000 per constituency, whilst for parties contesting constituencies across the country the highest possible cap would be £19 million (Feikert, 2009). In the 2015 elections, these figures appear to remain roughly the same, with the highest possible cap being £19,5 million (BBC, 2014). The time window that is included is set on 365 days. Thus, the campaign limit covers 365 days for the purpose of monitoring expenditure (Fischer, 2001).
Interestingly enough, when one considers the reported expenditures in the 2010 general election campaign, it appears that the limit is not really that limiting. Only three parties have contested all seats in the elections - Conservatives, Labour and Liberal Democrats. However, none of them have reached the cap of £19 million. Conservatives came closest with £16,8 million, followed by Labour £8 million and finally Liberal Democrats £4,8 million (UK Political Info, 2010). The data from the general election of 2005 show Conservatives and Labour with spending just below £18 million and Liberal Democrats lagging behind with £4,7 million (UK Political Info, 2010). Thus, one may question the usefulness of such a high expenditure limit and even more so its effectiveness. Does the expenditure limit really free parties from the dependence on rich donors if they cannot even reach the cap?
Besides imposing a clear expenditure limit, the regulations also include a strict and quite a broad definition of what constitutes an expenditure “party political broadcasts, advertising, unsolicited material to electors, manifesto or other policy documents, market research and canvassing, media/publicity, transport, rallies or other events.” (PPERA § 73; Feikert, 2009). Thus the wording of the regulation makes sure to cover many possible gray areas through which
