Comment: Transparent accounts could solve the party funding impasse

It's time to knock heads together to reveal a middle ground on party funding reform.

By Alex Stevenson

There's a real atmosphere of doom and gloom around today as the Conservatives, Labour and the Liberal Democrats shake their heads at today's party funding reform proposals. Yes, the current state of play is as downcast as the grey clouds hanging over Westminster this lunchtime. But there are still ways and means of finding an answer. The next few years could reveal real scope for compromise.

Both the Conservatives and Liberal Democrats had committed to shaking up the present system in their party manifestos, after all. Following the general election they agreed to pursue reform of the current system by removing "big money" from politics. So the committee on standards in public life was right to be optimistic by launching an inquiry into the issue trying to move on from the 2007 impasse over Labour's trade union funding.

Today Sir Christopher Kelly's committee has proposed introducing a cap on individual donations of £10,000. This would lower parties' income, but this could be fixed by getting each voter to pay 50p more a year.

Let's face it. The report is effectively dead on arrival. Deputy prime minister Nick Clegg has concluded extra state funding of £23 million a year for political parties is unacceptable in the current climate.

The coalition has indicated it accepts the need for a donation cap in principle, however. So I asked Sir Christopher: might there be a way of pushing ahead with a cap without the public having to stump up extra cash?

"If you set the cap high enough, you don't need any further state funding," he explained. Raising it to a higher level means party supporters will lose out, and that "you don't persuade people you've actually dealt with the issue". The conclusion is a miserable one: "What is the point of half dealing with the issue?"

The problem faced by politicians now is that the committee's attempt to deal with party funding head on has resulted in an impasse. Labour won't budge on union funding, which the Tories say should only be allowed if each member explicitly agrees to their donation going to parties. The Conservatives are refusing to allow a donation cap as low as £10,000 because they rely more than any other party on big-figure cheques. Neither side is likely to budge.

For now, the story is one of deadlock and despair. Today's headlines are not going to help the enormous problem of public cynicism about politics.

But it's just possible today's report from the committee lays the foundations for a deal in a few years' time. There are two big roadblocks to an agreement being reached. Both can be dealt with in the near future.

The first addresses the miserable-taxpayer argument head on. After the 2015 election the coalition's austerity programme should have succeeded in taking the sting out of the deficit reduction tail. An economic recovery will (we hope) be underway. So the big objection of the Liberal Democrats, who can't cope with the unpopularity of pushing this measure through now, will have evaporated.

The second roadblock is the biggest one of all – the Labour-Tory spat over donation caps. A £50,000 cap would be the Tories' preferred option, significantly more than the £10,000 proposed by today's report. But Labour won't accept that because it would disproportionately damage their finances compared to the other parties.

Might there be a middle ground, somewhere between the two figures, where the parties' assessments of the fallout broadly coincide? This is the holy grail of the party funding debate. The deal would have to include reform of the way the unions fund Labour – a big ask, admittedly – but all involved believe one is possible.

Why in five years and not now? Because although right now the parties' accounts are a joke, it's a problem they're about to fix.

"Obtaining comprehensive and consistent data for the income and spending of political parties is not straightforward," today's report says. That's something of an understatement. Accounting information is fairly limited. The extent of internal transfers, and of potential double-counting, isn't clear, the report complains. So transparency is a huge problem.

Help is at hand from the Electoral Commission, which has agreed draft standards with the main parties about adopting a comment set of standards. If agreement collapses here, too, the committee suggests the Electoral Commission should use its existing powers to enforce them.

It seems absurd that the biggest problem facing a party funding deal is simply that the negotiators don't even know what they're up against.

We can't force the parties to come up with a compromise. But if narrow political advantage is deployed to try and block this emerging, heads should be knocked together to at least reveal whether there is the possibility of finding that elusive middle ground.