Vouchers: a third way for financing political parties

You got your public funding in my private donations! No, you got your private donations in my public funding!

The debate around financing of political parties is caught up between two alternatives, each of which possess seemingly intractable problems, but a third way might be surfacing in the US.

On the one hand, the status quo – of uncapped donations – has terrible consequences. It leads to capture by interest groups (stereotypically Labour by the unions and the Conservatives by big business, and like many stereotypes, there is an element of truth), is anti-democratic (contrary to what the US Supreme Court proclaims, money is not speech, yet if you have more money than I do, it's not hard to imagine which of us gets more say in policy) and has ended up in outright corruption (witness, amongst other things, "I'm like a cab for hire", "premier league" donors, or cash for honours).

Unfortunately, the major alternative model has its own problems. State funding of political parties runs the risk of creating an unaccountable political class, paid from the pocket of general taxation while owing nothing in return. It also entrenches the existing trio of parties in their roles, rendering our already distortionary electoral system immune, to all intents and purposes, to change. And, of course, it would be expensive.

The purported "middle ground" of capping donations, meanwhile, seems unworkable politically, while solving none of the problems. If unions are counted singly, Labour won't sign up. If they aren't, the Tories won't. The cap won't be low enough to prevent some donors still having  outsized influence, and yet it won't be high enough to prevent some or all of the parties suffering major financial hardship.

But a number of American campaign finance experts, including Yale's Bruce Ackerman and Harvard's Lawrence Lessig, support a third way. The idea is that every voter is given a voucher for $50, to donate to a political actor as they see fit – it can go to parties or candidates, mainstream or independents, and it doesn't have to be used at all. In exchange, candidates who want to accept the money must agree to stricter rules. Ackerman suggests mandatory donor anonymity (to prevent "influence peddling"), while Lessig suggests a cap on any individual donation of just $100.

WonkBlog's Dylan Matthews reports that the idea has just been given a boost. John Sarbanes (son of the Sarbanes-Oxley Act's Paul Sarbanes) is planning on introducing the Grassroots Democracy Act to Congress:

The bill has three components. The first is a voucher of the kind Ackerman, Ayres and Lessig endorse, implemented as a $50 refundable tax credit for congressional donations, so even people who do not make enough to pay income taxes are eligible. The second is a matching system, where campaigns that reject PAC money will get $5 from a public fund for every private donation of $1, and those that agree to collect only small contributions receive $10 from the public fund for every private dollar. The third is a fund to provide support to candidates who are facing heavy third-party expenditures from super PACs and other groups, to make sure they aren’t drowned out.

Some of the side-effects of such a reform would be positive, as well. Most interestingly, it introduces a form of PR into the electoral system. Every "vote" using a voucher has the same effect, whether it goes to Labour or the Monster Raving Loony Party, and it is impossible to "waste" it. And depending how widely the vouchers can be used, it could allow people to donate to issue groups as well as parties, meaning that organisations like the Electoral Reform Society could see a boost in their funding.

Of course, the one thing it doesn't ensure is that the balance of power is conserved. For that, parties would be advised to look elsewhere. But MPs who are serious about party funding reform may want to consider a similar move.

Barack Obama. The president elected not to take public funding because he had so many private donations. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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How can Britain become a nation of homeowners?

David Cameron must unlock the spirit of his postwar predecessors to get the housing market back on track. 

In the 1955 election, Anthony Eden described turning Britain into a “property-owning democracy” as his – and by extension, the Conservative Party’s – overarching mission.

60 years later, what’s changed? Then, as now, an Old Etonian sits in Downing Street. Then, as now, Labour are badly riven between left and right, with their last stay in government widely believed – by their activists at least – to have been a disappointment. Then as now, few commentators seriously believe the Tories will be out of power any time soon.

But as for a property-owning democracy? That’s going less well.

When Eden won in 1955, around a third of people owned their own homes. By the time the Conservative government gave way to Harold Wilson in 1964, 42 per cent of households were owner-occupiers.

That kicked off a long period – from the mid-50s right until the fall of the Berlin Wall – in which home ownership increased, before staying roughly flat at 70 per cent of the population from 1991 to 2001.

But over the course of the next decade, for the first time in over a hundred years, the proportion of owner-occupiers went to into reverse. Just 64 percent of households were owner-occupier in 2011. No-one seriously believes that number will have gone anywhere other than down by the time of the next census in 2021. Most troublingly, in London – which, for the most part, gives us a fairly accurate idea of what the demographics of Britain as a whole will be in 30 years’ time – more than half of households are now renters.

What’s gone wrong?

In short, property prices have shot out of reach of increasing numbers of people. The British housing market increasingly gets a failing grade at “Social Contract 101”: could someone, without a backstop of parental or family capital, entering the workforce today, working full-time, seriously hope to retire in 50 years in their own home with their mortgage paid off?

It’s useful to compare and contrast the policy levers of those two Old Etonians, Eden and Cameron. Cameron, so far, has favoured demand-side solutions: Help to Buy and the new Help to Buy ISA.

To take the second, newer of those two policy innovations first: the Help to Buy ISA. Does it work?

Well, if you are a pre-existing saver – you can’t use the Help to Buy ISA for another tax year. And you have to stop putting money into any existing ISAs. So anyone putting a little aside at the moment – not going to feel the benefit of a Help to Buy ISA.

And anyone solely reliant on a Help to Buy ISA – the most you can benefit from, if you are single, it is an extra three grand from the government. This is not going to shift any houses any time soon.

What it is is a bung for the only working-age demographic to have done well out of the Coalition: dual-earner couples with no children earning above average income.

What about Help to Buy itself? At the margins, Help to Buy is helping some people achieve completions – while driving up the big disincentive to home ownership in the shape of prices – and creating sub-prime style risks for the taxpayer in future.

Eden, in contrast, preferred supply-side policies: his government, like every peacetime government from Baldwin until Thatcher’s it was a housebuilding government.

Why are house prices so high? Because there aren’t enough of them. The sector is over-regulated, underprovided, there isn’t enough housing either for social lets or for buyers. And until today’s Conservatives rediscover the spirit of Eden, that is unlikely to change.

I was at a Conservative party fringe (I was on the far left, both in terms of seating and politics).This is what I said, minus the ums, the ahs, and the moment my screensaver kicked in.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.