Political party funding is a method used by a political party to raise money for campaigns and routine activities. The funding of political parties is an aspect of campaign finance.
Political parties are funded by contributions from multiple sources. One of the largest sources of funding comes from party members and individual supporters through membership fees, subscriptions and small donations. This type of funding is often referred to as grassroots funding or support. Solicitation of larger donations from wealthy individuals, often referred to as plutocratic funding, is also a common method of securing funds. Parties can also be funded by organizations that share their political views, such as unions, political action committees, or organizations that seek to benefit from the party's policies. In certain locales, taxpayer money may be given to a party by the federal government. This is accomplished through state aid grants, government, or public funding. Additionally, political fundraising can occur via illegal means, such as influence peddling, graft, extortion, kickbacks and embezzlement.
Donations and membership fees
Political parties may be given money by organizations, businesses, individual donors and special interest groups, such as trade unions. These groups may offer money or gifts to either the party or its leading members as incentives. When this happens with the goal of influencing the political stance or actions of the party, this is referred to as lobbying.
Since the second half of the 20th century, parties that typically relied upon donations or membership fees have been facing mounting problems. Increased scrutiny of donations and the long-term decline in party memberships in most western democracies are placing a greater strain on funding. For example, in the United Kingdom and Australia, membership of the two main parties in 2006 was less than an eighth of what it was in 1950, despite significant increases in population over the same period.
Straddling personal and public political funding, a U.S. public funding program allows taxpayers to direct $3 of their federal income tax to finance the qualified expenses of eligible presidential candidates. Rather than a contribution, the small individual donation constitutes a redirection of income tax owed without additional direct disbursement by taxpayers.
In some parties, such as the post-communist parties of France and Italy, or the Socialist parties in Ireland and the Netherlands, elected representatives take only the average industrial worker's wage from their salary as a representative, while the rest contributes to funding their party in general. Although these examples may now be rare, "rent-seeking" from incumbents continues to be a feature of some parties, such as in Nepal.
In the United Kingdom, it has been alleged that peerages have been awarded to party fund contributors, with benefactors becoming members of the House of Lords and thus in a position to participate in the legislative process. For instance, UK Prime minister David Lloyd George was found to have been selling peerages. To prevent similar future corruption, Parliament enacted the Honours (Prevention of Abuses) Act 1925, making the outright sale of peerages and similar benefits a criminal act. However, some benefactors are alleged to have attempted to circumvent this by disguising their contributions as loans, giving rise to the "Cash for Peerages" scandal.
Such activities, as well as assumed influence peddling, have given rise to demands for donation caps. As the costs of elections increase, so do the demands of party funds. In the UK, some politicians have advocated that parties be funded by the state, a proposal that promised to give rise to debate in the country that was first to regulate campaign expenses in 1883. However, no legislative action has followed the proposal.
Public subsidies
In many democracies, subsidies for party activity were introduced decades ago. Public financing for parties and candidates has several permutations and is increasingly common. Germany, Sweden, Israel, Canada, Australia, Austria, and Spain are cases in point. More recently, France, Japan, Mexico, the Netherlands, Poland, and others have followed suit.
There are two broad categories of public funding:
Direct - entailing a monetary transfer to a party. Indirect - including broadcasting time on state media, use of the mail service, or supplies.