Monday, 20 May 2013

Time to get serious about party financing

Following the earthquake brought about by the 9 March election, the pieces have now fallen into place, with only the election of the PN deputy leaders still awaited to complete the new political formations.

It is therefore time to get serious about introducing democratic order to the long neglected issue of party financing.

Before making suggestions about this or that measure, there are issues of principle which need to be exposed, discussed and decided upon.

These are:

· Should political parties be financed by the state in a controlled manner or should we merely attempt to have transparency regarding private political donations?

· If state financing is adopted, how can individuals be deprived of their constitutional right to donate their property to whomever they wish?

· Should political parties be forced to be just that, i.e. stand-alone political parties, or are they to continue being business organisations with commercial interests in media, travel and telephony?

· What is to happen to the real estate owned by the political parties, excluding their main headquarters?

Let me go into these four issues in greater detail.

Should political parties be funded by the state through taxpayers’ funds?

There are strong objections to the adoption of taxpayers’ funding for political parties. Many object to adding to the taxpayer’s burden and others object to the very principle of seeing their tax euros going to fund political activity.

I think that such objections are out of order. Like it or not, there is no escaping the fact that political parties are the main instruments for the execution of democracy. Democracy is sacred and dear to us all, and if the taxpayer will not finance it directly, somebody else will. Those who are given the opportunity to finance political activity will consider their funding as an investment for gaining preferential access to – and special treatment from – the party they have financed to win government.
For all the lip service that politicians pay to ‘no strings attached’ funding, I remain unconvinced that, in practice, it really exists. Governments could develop conflicting loyalties in their duties to the general electorate as against their obligations to their financiers.

Many argue that this could be controlled by insisting on transparency, with donations above a certain threshold required to be officially declared. But who says that formal declarations, even if rigorously applied, would remove a conflict of interest?

If the threshold for undeclared donations is sufficiently high it will be relatively easy to circumvent the flimsy control of public declaration by making donations below the threshold, using several donors as fronts for the ultimate string-puller. And if the political organisations are to be allowed to run their side-line business activities through subsidiaries or joint-ventures, what control can be exercised to distinguish between genuine revenue and donations dressed up as business revenue (such as advertising on political media at inflated prices) which would have the same effect as an outlawed donation reaching the same beneficiary through a legal channel?

As for the objection about taxpayers being loaded with this additional burden, one should question whether society is not already loaded with it (and more) through the loss of corporate governance resulting from private political contributions.

How can individuals be deprived of their constitutional right to donate their property to whomever they wish?

Were the model of state financing to be adopted, and private donations become outlawed or restricted to very low thresholds – like, for example, €25 through the telethon type of funding – would this not be an infringement of the right of every individual to dispose of their private property in any way they wish? Could such a measure be constitutionally challenged?

I am no constitutional expert, but such a restriction would not be breaking new ground at law. This principle has already been adopted in respect of the hereditary transfer of immovable property to the Church, which was outlawed to prevent clergymen persuading moribund parishioners to secure a place in heaven in exchange for donating their earthly treasures to the Church.

Even if constitutional impediments do exist, we can work our way around them. By forcing the full declaration of such donations, the amount received would go to reduce the grant that the state would give to the political parties. So whilst not rendering such donations illegal, or prohibiting them altogether, there will be no incentive for the donor to give them, or for the political party to seek them, as what is gained from such donations would be lost from state funding.

Stand alone political parties, or business conglomerates?

Whatever form of control is introduced, whether complete state funding or disclosure above a certain threshold, the question of whether political parties are to be allowed to operate commercial activities outside their core function has to be addressed.

If political parties are allowed to proceed with commercial activities outside their core political function, I very much fear that any funding control that is imposed could easily be vitiated by dressing up donations to appear as normal business revenue. The only difference would be a loss of tax revenue as, whilst political donations are not allowed as a valid tax expense, it would be quite likely that donations dressed up as advertising or telephony charges would be accepted as a tax expense deductible against taxable revenue.

I find it strange that, after the state has found it necessary to divest and privatise all commercial activities to allow more space for the private sector, such activities are now being encroached upon by the political parties. It does not make sense!

What is to happen to the real estate owned by the political parties outside their main headquarters?

Apart from their headquarters, both our main political parties are reportedly asset rich, especially with regard to the ownership of immoveable property.

Their local centres in prominent locations in most towns and villages do not even start to tell the whole story. They also own various other properties which are not being put to any use.
Yet both parties have substantial debts which they incurred mostly to build their headquarters and their media organisations. Repaying such loans without asset sales represents substantial challenges.
Both main parties should put their heads together and see what property they truly need to carry out their political activities. Do they need clubs in every town and village? Maybe three or four regional centres would be enough in present day realities.

The rest of the properties they do not need could be catalogued and valued and an arrangement similar to the one reached between the government and the Curia be negotiated in order to cancel the debts of both parties and ensure they are prohibited from borrowing under whatever arrangements are finally reached to control political party funding.

This is not meant as a blueprint but as an exposition of the issues that must be addressed if a fair and lasting solution on the subject of political party funding is to be found.

This article was published in The Malta Independent on Sunday 19 05 2013

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