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Supply Chain Risk

Public funding of political parties

Public trust in political parties is not impressive. Yet, political parties are the bedrock of democracy and the representation process that underpins it. In recognition of this, several democratic countries finance their political parties. Others, like Italy, have abolished the public financing of party politics.

Money is a critical tool for political parties to organise collective action, communicate with voters and recruit the right people to run for office. We all can gain if we have suitably qualified people run the government when they are in office and hold the government accountable when they are in opposition.

As the Nationalist Party moves forward under new leadership, its appointment of a new treasurer to take over its attempts at improving its financial position is a reminder of this vital issue.

The financial situation of Malta’s political parties seems to alternate between adequately healthy and alarmingly precarious and the PN has been in the latter category for some time.

The power of incumbency, undoubtedly, has an influence on the financial resources that political parties have available to conduct election campaigns. Ensuring a level playing field in democratic competition is also about the availability of money. There is often a correlation between campaign spending and performance in elections.

Recent revelations in the media show how, for some time, business elites indulged in state capture by building perverse relationships with political leaders. These shocking revelations, once again, raise the question of whether taxpayer money should finance political parties in Malta. The risk of state and policy capture by a few business people is a real threat to the democratic process and the broader public interest.

Even in the best of times, under the current system of financing, donors often expect a sort of ‘reimbursement’ for donations made during an election campaign. They expect to benefit in future dealings with the respective public administration, for instance through public procurement of favourable concessions.

A 2013 Edelman Trust Barometer found that 50 per cent of respondents in 26 countries distrusted the government and political parties. Among the key factors they cited to explain such distrust were “wrong incentives-driving policies” and “corruption/fraud”. These perceptions have probably not changed much since.

Acknowledging the risks associated with vested interests influencing policymaking is the first step to introducing more transparency in the way that political parties conduct their business.

The case for public, as opposed to private, financing of political parties is, on balance, quite strong. However, it would be fallacious to assume that the public financing of political parties would eliminate abuse and corruption.

Any political financing system should include striking a balance between public and private funding, the tight regulation of direct and indirect state contributions and spending limits on electoral campaigns. Conflict of interest and lobbying also need to be regulated to ensure fairness of the democratic process.

Public money would help political parties shape the public debate with policy options untainted by business interests. And if the governance of political parties is upgraded, more talented people from different social backgrounds would be drawn to dedicate themselves to the common good.

Besides the public financing of political parties, parliament should consider revising the way we pay our representatives. Parliamentarians and government ministers need to be adequately compensated to ensure that they will dedicate as much time and focus to their public office as the electorate expects from them.

Ultimately, the financing of political parties is influenced by and influences relations between parties, politicians, businesses and the electorate. While public financing of politics does not guarantee good governance, it certainly reduces the risk of state capture.

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