Labour and the Tories must accept state funding

The political class is in denial over the need for democracy to pay for democracy.

The latest sleaze scandal is a symptom of a chronic malady which will not be cured until all parties accept that external financing of democracy inevitably opens them to the accusation of exchanging influence over policy for receipt of cash. Every continental and commonwealth parliament has gone through the same agony of political scandals arising from parties having to raise cash for core democratic activity from external sources. Every country has had to come to terms with the need for democracy to pay for democracy.

British political parties remain in denial on this issue. The Conservatives remain addicted to big donations from rich business chums. Labour depends on trade union cash and even if the cheques are an aggregate of small payments they allow a small number of union leaders to wield influence and have access.

In the past two decades, both parties have been rocked by allegations over cash for access and influence, or the undemocratic concept that appointment as a legislator may be connected to payment to political parties.

I have seen in so many other countries the same process of parties defending occult external financing and then, as scandal after scandal broke, coming round reluctantly to accept full democratic funding.

The Conservatives would benefit as people would no longer see the party as being the servant of the rich. Labour would benefit as the accusation that unions dictate candidates and policy would fall away. Wealthy businessmen and major trade unions would of course support the Tories and Labour, and campaign for causes and policies just as is the case in other countries. But the public would no longer believe that money-rich donors have undue influence.

I urged these measures after 1997 but failed to persuade Labour ministers. I put up papers to Robin Cook with whom I worked at the Foreign Office but despite Robin's commitment to radical reform he was too nervous of making the case for democracy paying for democracy. At the time, Labour was awash with external business donations even though the £1 million offered by Bernie Ecclestone marred Tony Blair's first term. That should have been a warning but Labour refused to embrace party funding reform. This denial ended with the disaster of the police investigation into the loans for peerages scandal that blackened the last years of Labour in office.

I tried to persuade Labour ministers to amend the seriously defective Political Parties, Elections and Referendums Bill to bring some extra money for policy work. It was an attempt to augment the already existing level of state funding available.

But Tony Blair and Gordon Brown (and to be fair most Labour ministers) were locked in denial on the need for more state funding. They did not want to provoke rows with trade unions and thought the cash from pro-Labour wealthy individuals would keep on flowing in.

Yesterday in the Commons, Francis Maude for the Conservatives proved that he, like his Labour predecessors, remains in denial on democracy paying for democracy as he continued to denounce the idea of state funding. Labour is enjoying the Tories' discomfiture but no Labour MP urged democracy paying for democracy in the exchanges in the Commons.

The most recent scandal is very damaging to David Cameron but Labour's current Schadenfreude is transitory. The only way this problem has been solved in other countries is full democratic, transparent funding for political party work. The rest of the world has learned that lesson. It is worrying that British politics remains in such denial.

Denis MacShane is MP for Rotherham and a former Europe minister. Follow him on Twitter: @denismacshane

David Cameron speaks at the Alzheimer's Society announcing more funding for research into dementia. Photograph: Getty Images.
Denis MacShane is MP for Rotherham and was a minister at Foreign and Commonwealth Office
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In your 30s? You missed out on £26,000 and you're not even protesting

The 1980s kids seem resigned to their fate - for now. 

Imagine you’re in your thirties, and you’re renting in a shared house, on roughly the same pay you earned five years ago. Now imagine you have a friend, also in their thirties. This friend owns their own home, gets pay rises every year and has a more generous pension to beat. In fact, they are twice as rich as you. 

When you try to talk about how worried you are about your financial situation, the friend shrugs and says: “I was in that situation too.”

Un-friend, right? But this is, in fact, reality. A study from the Institute for Fiscal Studies found that Brits in their early thirties have a median wealth of £27,000. But ten years ago, a thirty something had £53,000. In other words, that unbearable friend is just someone exactly the same as you, who is now in their forties. 

Not only do Brits born in the early 1980s have half the wealth they would have had if they were born in the 1970s, but they are the first generation to be in this position since World War II.  According to the IFS study, each cohort has got progressively richer. But then, just as the 1980s kids were reaching adulthood, a couple of things happened at once.

House prices raced ahead of wages. Employers made pensions less generous. And, at the crucial point that the 1980s kids were finding their feet in the jobs market, the recession struck. The 1980s kids didn’t manage to buy homes in time to take advantage of low mortgage rates. Instead, they are stuck paying increasing amounts of rent. 

If the wealth distribution between someone in their 30s and someone in their 40s is stark, this is only the starting point in intergenerational inequality. The IFS expects pensioners’ incomes to race ahead of workers in the coming decade. 

So why, given this unprecedented reversal in fortunes, are Brits in their early thirties not marching in the streets? Why are they not burning tyres outside the Treasury while shouting: “Give us out £26k back?” 

The obvious fact that no one is going to be protesting their granny’s good fortune aside, it seems one reason for the 1980s kids’ resignation is they are still in denial. One thirty something wrote to The Staggers that the idea of being able to buy a house had become too abstract to worry about. Instead:

“You just try and get through this month and then worry about next month, which is probably self-defeating, but I think it's quite tough to get in the mindset that you're going to put something by so maybe in 10 years you can buy a shoebox a two-hour train ride from where you actually want to be.”

Another reflected that “people keep saying ‘something will turn up’”.

The Staggers turned to our resident thirty something, Yo Zushi, for his thoughts. He agreed with the IFS analysis that the recession mattered:

"We were spoiled by an artificially inflated balloon of cheap credit and growing up was something you did… later. Then the crash came in 2007-2008, and it became something we couldn’t afford to do. 

I would have got round to becoming comfortably off, I tell myself, had I been given another ten years of amoral capitalist boom to do so. Many of those who were born in the early 1970s drifted along, took a nap and woke up in possession of a house, all mod cons and a decent-paying job. But we slightly younger Gen X-ers followed in their slipstream and somehow fell off the edge. Oh well. "

Will the inertia of the1980s kids last? Perhaps – but Zushi sees in the support for Jeremy Corbyn, a swell of feeling at last. “Our lack of access to the life we were promised in our teens has woken many of us up to why things suck. That’s a good thing. 

“And now we have Corbyn to help sort it all out. That’s not meant sarcastically – I really think he’ll do it.”