Karl-Heinz Nassmacher. Handbook of Party Politics. Editor: Richard S Katz & William Crotty. 2006. Sage Publishing.
If a scandal makes political finance an issue that engages the interest of a broader public, democracies that hitherto have been reluctant to introduce stricter legislation on the financing of parties and candidates will start to regulate these matters more tightly. Thus countries with established traditions of democracy can offer useful experience to nations in transition to democracy.
Rules on Party Expenditure
Traditionally campaign spending in the Anglo-Saxon orbit is subject to legal constraints. A close relationship with first-past-the-post electoral systems which create manufactured majorities seems obvious. Restrictions, however, ‘have proved a constitutional minefield’ as supreme courts have had to decide ‘whether particular laws adhere to the frequently contradictory principles of fairness and of freedom of expression,’ (Pinto-Duschinsky 2002: 52).
As far as expenditure is concerned, this instrument is rarely used. Only in Britain (and its dominions) has campaign expenditure by a non-candidate been banned since 1883. The current issue is independent expenditures, referred to as ‘third-party advertising.’
A ban on paid media advertising is more frequent. Before the 1980s, only the allotment of time was a major issue in most European countries. As commercial channels became available, the opportunity to buy additional time had to be considered as well. Because expenditures rose, parties tried to handle the problem in different ways: by providing more free media time (see the discussion on indirect subsidies below), by relying upon an informal agreement among the media which offered some paid advertising time on local or regional radio and television (Sweden), by regulating access to paid media time (by setting conditions for TV spots) or by prohibiting the purchase of media time altogether (e.g. Britain, France and Spain). In 1992, a rule of the latter type was struck down by the High Court in Australia, because it interfered excessively with the freedom of speech necessary for free elections (Chaples, 1994: 34). In the Netherlands, paid political advertising was never banned, but until 1998 it was precluded by a code of conduct among advertising agencies. Most countries control the allocation of broadcasting time (see below).
In Britain, campaign spending at the constituency level has been limited since 1883. Such limits were introduced to prevent wealthy candidates from buying votes. Meanwhile campaigns have become much more nationalized. A new law, effective since 2001, limits the campaign expenditures of national party organizations as well. The maximum amount varies by type of election. The British tradition of establishing spending limits for constituency candidates also spread to the dominions.
In 1974, Canada was first in limiting spending during a campaign period by registered political parties as well as by constituency candidates. Canadian parties have coped strategically with national campaign ceilings: whereas the NDP tried to boost campaign spending (because of the national reimbursement), the PC increased pre-campaign publicity in order to stay within the nationwide campaign spending limit. In 2004, Canada introduced spending limits for constituency nomination contestants. In Australia the mechanism of expenditure limitation has been abolished after decades, because it was regarded as useless in the context of modern party democracy (Amr and Lisowski, 2001: 66).
In France, Italy, Spain and Portugal, expenditure limits for both candidates and parties are on the statute book. French limits depend on the type of election and the number of voters involved. Spanish law establishes the legal maximum to be spent by a party as a fixed amount per electoral district plus an additional sum depending on the number of inhabitants of the constituency. Parties in Portugal are allowed to spend up to a percentage of the monthly minimum wage for each candidate on their list. In Italy, election expenditure per candidate is restricted. An additional limit applies for parties that field candidates in all constituencies. In Israel, a fixed amount per seat held in parliament is the basis for all calculations on spending limits, with some leeway for small parties.
Most cases show that it is rather difficult to draw a line between current expenses and campaign spending, or between the expenditures of candidates and those of the parties supporting them. The stricter the rules for campaign expenses are, the more likely media advertising by ‘independent’ groups (‘Citizens for …’ or ‘Citizens against …’ will spring up (Mendilow, 1989: 140)). Because LDP candidates in Japan during the 1980s and early 1990s exceeded the legal limit somewhere between 6 and 13 times, expenditure limits were abolished in 1994.
In Germany, Austria, Switzerland, the Netherlands and Sweden, there are no legal limits on party or candidate expenditure, either by total amount or by specific item, either for campaign expenses or for routine spending. In Austria, a voluntary agreement among the major parties was tried, but it has been discontinued (Sickinger, 1997: 335).
Rules on Party Income
Due to the important role of parties in democratic systems, various rules have been adopted which either restrict or favour specific types of political income. Incentives to stimulate specific fundraising activities by political parties are still rare among these rules (Austin and Tjernström, 2003: 220-3).
In most countries, anonymous contributions (see the next section) are banned. Parties in France, Spain, Portugal and Israel may not accept money from foreign governments or institutions (except the European Parliament). However, virtually all parties received ample financial support from abroad, especially during the transition years. In order to prevent disguised contributions, in Israel loans can be negotiated from banks only (Mendilow, 1996: 348).
Since 1995, candidates and parties in France have been forbidden to receive funds from private corporations and public sector companies. In Italy, Spain, Portugal and Japan, donations from public or semi-public entities are banned. Moreover, labour unions and other organizations in Japan may no longer donate to individual politicians. Do such bans work? Until 1993 it was illegal for Portuguese parties to receive financial contributions for routine activities or election campaigns from national companies or foreign individuals and companies. However, this prohibition did not prevent de facto financing by private business, usually through individuals as intermediaries.
Although Germany and Austria do not apply such bans there are practical restrictions. In Austria, political donations by organized interests are subject to an income tax surcharge to be paid by the recipient party; in Germany, the Constitutional Court has banned tax benefits for corporate donors. In the Netherlands, parties are restrained from soliciting corporate donations simply by traditional ethics (Koole, 1994: 126).
Portugal stipulates ceilings for all kinds of donations. Spanish law limits donations, and the limits have tended to become stricter over time (van Biezen and Nassmacher, 2001: 148). In Japan, different contribution limits have been set for annual totals of donations given by individuals to parties and their fundraising bodies, to financial support groups of politicians and to other political organizations (e.g. habatsu or koenkai). Since 1994, individual politicians have been limited to one personal fundraising committee. In 1994, Israel reduced the ceiling for contributions to parties. Separate limits are stipulated for contributions to internal party primaries for the nomination of candidates on the party list. By a rule introduced in 2004, individuals in Canada may contribute no more than C$5000 per year to a party, to a leadership contestant or to a non-party candidate for the federal parliament. For corporations and trade unions the rule is much stricter.
In many countries (Britain, Australia, Germany, Austria, Switzerland, the Netherlands and Sweden) there is no statutory limit on the total amount of political contributions which a person or corporation may give to a party or a candidate.
Meanwhile nearly all liberal democracies have introduced direct public funding of political parties. Only Switzerland—with the exception of two cantons (Drysch, 1998: 121)—remains aloof. Everywhere public money makes the work of parliamentary groups more professional. In Britain, the ‘Short money,’ given to the opposition in Parliament, was a first step towards public subsidies; recently the UK has introduced public funding for policy research. In general, public subsidies were meant to reduce the influence of big donors and to avoid corruption or to cover rising expenses for electronic media and the party. Public funding is given to parties, to candidates or to both. Party subsidies are available for routine operations and/or for campaigns. The total amount available for public funding can be distributed in different ways. Frequently parties receive an amount of money for every vote polled or for each member of parliament (MP).
There are various thresholds to qualify for a subsidy. The German threshold (0.5 per cent of the national vote or 1.0 per cent in a minimum of three state elections) is lower than any other. Portugal, with about 0.6 per cent, and Austria, with 1.0 per cent of the national vote, are next in line. Canada requires a party to win 2 per cent of the national vote in those constituencies in which it has endorsed a candidate, in order to receive a subsidy; Japanese law requires 5 seats or 2 per cent of the vote. Political parties in Sweden receive a general party subsidy at the national level which depends on the average number of parliamentary seats held by a party after the two most recent elections. This is complemented by an office assistance subsidy which consists of a fixed base amount and an additional sum that depends on the number of MPs. For parties without seats in the Riksdag, thresholds of 2.5 per cent and 4.0 per cent of the vote, respectively, are applied. The amount of additional funding for parties at the regional and local level is decided upon by the respective assemblies and given per seat as well as according to votes. In Austria, an annual subsidy for party organizations is supplemented by campaign subsidies for federal and European elections. On top of federal subsidies, each of the nine Austrian states grants funding to political parties as well. Quite similar to Sweden, most of the public money given to parties in Austria is provided at the subnational level.
The Netherlands has now turned to very modest direct subsidies (at the national level only). Before 1999, only indirect support via affiliated foundations was available for specific purposes (research, training and youth). Party subsidies continue to be goal-oriented, but the list of purposes now includes contacts with foreign parties and information for party members. Campaign spending is explicitly excluded. Funds for youth organizations and research institutes are earmarked (Gidlund and Koole, 2001: 121).
The Italian, Spanish and Portuguese systems of direct funding of political parties, although different from each other in detail, include annual subsidies for routine activity and subsidies for campaign expenses (van Biezen, 2000: 331, 336). Israel provides party subsidies for campaigning as well as operating expenses. Traditionally, the ‘financing unit,’ a fixed amount per seat held in parliament, is the basis for all calculations. Any new party is entitled to a retroactive campaign subsidy based on its representation in the newly elected parliament. In addition, each party participating successfully in local elections is entitled to a municipal subsidy.
Due to a reform in 1994, Japan provides government subsidies for political parties. During the late 1990s, almost half of the total subsidy was collected by the dominant party of many decades (LDP, Jiminto), while three to five other parties (regularly in opposition) shared between them roughly the other half.
This review of national rules indicates that there is no incentive against cost explosion. Quite to the contrary, Israel, Japan, Italy and Austria have the highest level of party expenditure. Specific rules seem to be more appropriate to address this problem. Ceilings for public funding are inherent in reimbursement rules, which provide only a percentage of total expenditure (for candidates, as in France, or for parties and candidates, as in Canada), in matching rules (as applied to US presidential primaries) or in the legal stipulation that only a given percentage of party income can be provided by the public purse (e.g. the ‘relative maximum’ rule in Germany).
In France, parties which have presented themselves for the legislative elections in at least 50 single-member districts receive public funding in proportion to the number of votes won in the first round and the number of seats held. New parties not receiving this subsidy may collect a public matching grant, provided that they are able to solicit a given amount of money from a given number of people. A campaign reimbursement of up to 50 per cent of the legal spending limit is paid to individual candidates who win at least 5 per cent of the vote in their constituency in the first round. Candidates for the presidency may claim one-third of their legal campaign spending (Koole, 2001: 82).
In Canada, every eligible party is entitled to a quarterly allowance per valid vote plus 50 per cent of its declared election expenses. Constituency candidates are reimbursed for up to 60 per cent of the applicable spending limit, if the candidate obtained at least 10 per cent of the valid votes cast. About half of all candidates and roughly two-thirds of the major party candidates qualify for reimbursements.
In Germany, subsidies are limited by two ceilings. First, no party may receive its public entitlement unless it has collected an equal amount from membership fees, individual or corporate donations. Second, public subsidies to all parties may not exceed a total of €133 million, in due course to be adjusted for cost inflation. About 40 per cent of this subsidy is distributed according to the number of votes polled. The other 60 per cent of the subsidy matches small donations by individuals and membership fees at a rate of 2:1 (Gunlicks, 1995: 101-21). The six parties represented federally regularly receive more than 95 per cent of the total allocation, while the rest is distributed among five to ten minor parties. No such subsidies are available for local party organizations or individual party candidates.
Among parties, there is an increasing dependence on public subsidies. However, this differs by country (due to the overall financial regimes) and by party (due to their political legacies). Workers’ parties are less dependent on public financing (mainly because of income from dues and unions), while bourgeois parties (in France and Sweden) and Green parties (in all European countries) receive more than 80 per cent of their income from state funds. Conservative parties, which in former times depended on large donations, now have problems getting along without public subsidies because their traditional source of funds is questioned publicly. In third-wave democracies (e.g. Spain) up to 90 per cent of the total annual income of parties is transferred from the public purse (van Biezen, 2000: 335).
In order to encourage (preferably small) contributions to candidates and parties, a tax exemption can be granted. The benefit of paying less tax (especially income tax) is available for different amounts and different donors (individuals and/or corporations), for example, in Australia, Austria, the Netherlands and Portugal. In Italy, donations of €190 to €19,000 to parties are tax-deductible for individuals or corporations which may claim a 22 per cent income tax benefit (Melchionda, 1997: 206). In 1994, Japan introduced tax benefits for contributions to a political party or a fundraising or support group (koenkat), but not to a candidate. In order to qualify for the tax benefit the contribution has to be made by an individual and the total amount per year has to exceed ¥ 10,000 (= US$89). The taxpayer may choose between a tax deduction (not exceeding 25 per cent of his or her total income) or a tax credit of 30 per cent (Levush, 1997: 142).
Since 1974, individuals and corporations in Canada have been able to claim a tax credit against income tax. The tax credit system (federally and, meanwhile, in all provinces) has stimulated individual giving by the middle class and family businesses, both of which provide large amounts of money in small donations. This public bonus for political donations from private sources has reduced the parties’ dependency on corporate donations. Agents of all candidates as well as registered parties may issue (official) tax receipts. In the 1980s, more than two-thirds of the government’s total contribution to parties and candidates took the form of tax credits (Stanbury 1993: 95). The high level of economic development and the general well-being of Canadian citizens were essential prerequisites for the success of this public incentive. The tax credit tends to favour parties organized along mass party lines and those able to reach great numbers of people via direct mail drives (Paltiel, 1989: 72).
Today the tax benefit in Germany, which equally applies to donations by an individual and to dues paid by a party member, is limited to individual contributions. The maximum contribution eligible for tax benefits is fixed at about €3000. For half of the maximum, each individual taxpayer may claim a 50 per cent tax credit; the other half can be deducted from taxable income. No tax benefits are available for corporate donations. Large donations have been almost completely replaced by public subsidies. Many countries do not provide tax benefits for private donors—Sweden, Spain, Israel, Switzerland and the UK among them. In Switzerland only 9 of the 23 cantons, but not the federation, offer a tax deduction to political donors (Drysch, 1998: 83). The UK has distanced itself from tax relief because this form of state aid to political parties is considered to be too expensive.
Voter registration is taken care of by the state in European countries. Local governments pay for election officers, polling station facilities and delivery of election materials. In Israel, the state is responsible for the transportation of voters to and from distant polling booths (Mendilow, 1989: 133).
Media access is most important among the indirect subsidies. In countries with state-owned radio and TV stations, airtime traditionally has been provided for policy statements and party advertising. Sometimes private media offer the same service because this is required by law. Free airtime is allocated either according to party strength (number of seats and/or extent of popular vote) or on equal terms. In Israel, a compromise between both methods governs the allocation of broadcasting time (Levush, 1997: 116). In Australia, no party may receive more than half of the total time (Chaples, 1994: 32-5). In Japan, there are free spots on public television and radio as well as free newspaper advertisements. The number of all these advertisements is governed by the number of candidates. The most restrictive conditions apply in Switzerland, where parties are not allowed to present their own advertising material in the electronic media.
In some countries, such as Britain, candidates are entitled to a free mailing to every elector within the constituency or to reduced postage for mass mailings. Spain provides quite large sums of public money for the costs of direct election mailings.
Free use of halls in public buildings (e.g. schools) for rallies or meetings (Britain, Japan, Spain) and reduced rates for office space (Italy) are other options. Free space for posters on billboards may also be provided (Spain, the Netherlands, Israel and Germany).
For Germany, Austria and the Netherlands, public subsidies for party-affiliated foundations have to be mentioned. However, only part of their work is relevant party competition: the training of party workers, candidates and municipal councillors, and political (not necessarily policy) research for the parties.
If one portion of a subsidy to parliamentary groups is earmarked for advertising (as it is in Austria) there is strong indication that party organizations will save for extra spending. Furthermore, incumbent politicians may ‘abuse’ their offices and assistants, paid for by a flat grant, or specified allowances for free travel, postage, telephone and computer facilities.
Rules on Transparency
Time and again scandals have unleashed demand for more transparency in political funding. The major aim of legal action is to make political money an issue of public policy, in which the public keeps a lasting interest. Although perfect transparency may not be achieved, the desire for proper financial conduct is legitimate in any democracy. Limitations of action will result from principle as well as from practicality.
Disclosure of Donors’ Identity
People have a right to know who are the backers of a party. Nevertheless disclosure of donors’ identity is riddled with contradictions. The very idea of the secret ballot suggests that a donor’s privacy should be protected. Considerable influence by ‘fat cats,’ however, undermines democratic equality (‘one person, one vote’). The practical solution will distinguish between donors (individual, corporation, organization) and look for cut-off points. The legislative task at hand is to find an enduring and reliable separation between contributing money (as a means of political participation) and buying access to decision-makers or a specific decision (as incidents of influence peddling).
While Swedish law still upholds the traditional view that the privacy of each donor has to be respected (Gidlund, 1994: 108), Austria has found the ‘half-way’ solution of gathering information (for later inspection by the federal audit office in the event of a scandal) but not disclosing any donor’s identity to the public (Sickinger, 1997: 134). Most democracies now have disclosure rules that separate individual from corporate donors and define a threshold for amounts that have to be disclosed. In this respect Germany Britain and the Netherlands are at the high end (between US$5000-10,000), while the USA, Canada, France and Japan represent the low end (with disclosure thresholds ranging between US$ 100 and US$ 400). In Australia, the threshold for disclosure is A$1500. In Portugal, donations by individuals which exceed 10 times the monthly minimum wage have to be disclosed.
Furthermore, any disclosure regulation has to identify the legal procedure, a person or institution who is responsible and the kind of information which has to be disclosed. The latter can be very different. Alongside the amount donated, name (as in Canada and the UK) and address (as in Australia) can be required. Stricter rules may also stipulate the disclosure of ID number (e.g. in Spain), the employer or occupation of the donor, and the date of the donation (e.g. in France). For a policy to be effective, the information disclosed should be accurate, timely, accessible and comprehensible to potential users.
Some countries have instituted additional provisions. In Britain, donations must be reported quarterly between elections, and within 7 days during a campaign period. In Japan, disclosure also applies to individuals and corporations buying tickets for fundraising events. In Portugal, any donation by a legal entity has to be accompanied by a written confirmation. In Italy, a corporate donation must be approved by the board of directors and (according to statute law, but rarely in practice) has to be disclosed twice—in the donor company’s annual report and in the recipient party’s balance sheet. Full disclosure always places an administrative burden on the parties, occasionally even without really improving their openness and accountability (Young, 1991: 20).
Reporting of Party Funds
In nearly all countries, parties and candidates either are required by statute law to give a report or do so on a voluntary basis. Information given in such reports is often rather incomplete. This especially concerns the elements of a party which provide reports and the categories which are to be reported. Reports usually include various sources of party income and items of expenditure—staff and offices, advertisements in print media, radio and TV, campaign material, direct mailing, and opinion polling. The major problem of reports in many countries is that data for the regional and local party organizations are not included. The reports (most of them have to be submitted annually and additionally after elections) must be presented to a specific branch of public administration, parliament or a special agency (see below). Usually the reports have to be published.
Among the Anglo-Saxon countries, Canadian reporting rules are the most rigorous. The chief agents of registered parties have to report each year; after an election the parties as well as the official agent of each candidate must file a return on the election expenses incurred. Recently constituency associations, leadership campaigns and nomination contestants have been added to those who file financial reports. Although Britain, where legislation has concentrated on candidates for more than a century, and Australia have some experience in political finance rules, the reporting regime in both countries is less developed.
Sweden and the Netherlands have a legal tradition of not reporting party funds because their parties are considered to be part of civil society. Both countries, however, provide for some transparency, although financial reports cover the national party organization only and do not follow a common format (Gidlund, 1991: 20; Koole 1990: 50, 62). In other European countries, reporting is stipulated by law, although to different degrees. Party reports in Austria have to prove that public subsidies have been spent in accordance with the law: several Länder demand reports, albeit less strict than federal law. Thus the data published by Austrian parties are by no means comprehensive (Sickinger, 1997: 236) and the level of transparency is much less than for their German counterparts.
Annual reports in Germany include income and expenditure, debts and assets of the entire party organization at all levels (local, state and federal). This comprehensive accountability has been in effect since 1984 and is safeguarded by a detailed clause in the constitution (Article 21). The only major problem of previous years has been solved by recent regulation: a separate category for ‘assessments’ (contributed to party coffers by federal, state and European legislators as well as municipal councillors) has been restored to the reporting schedule.
Regulations in France, Italy, Portugal and Spain look almost perfect as laid down in the statute book. However, each country offers specific loopholes, among them support committees in campaigns, local party branches, and a strict separation between annual and campaign reports. In Japan, parties, candidates and their support groups have to give detailed statements of their income and expenditure. Israeli parties have to include affiliated bodies, such as newspapers, in their reports. Nevertheless the funding situation in these countries is far from transparent. Moreover, enforcement is a serious problem.
Rules on Enforcement
Many different authorities and agencies are responsible for monitoring, control and enforcement. Nevertheless, public opinion informed by watchful eyes in the media will be more important. Public agencies cannot have much impact without public interest in their activities.
Monitoring and Control
Problems with monitoring and control of party and campaign funding have led to changes in regulation and increased transparency in many countries. As there is no regulation on party funding, no control is required in Switzerland. Despite considerable public funding, Swedish law does not touch upon the autonomy of parties either. Austria and the Netherlands restrict public scrutiny to auditing the spending of public subsidies. For this purpose, both countries rely on the professional expertise of a chartered accountant selected by the recipient party (Koole, 1990: 50; Sickinger, 1997: 132-5).
With the exception of just a few countries, financial reports by parties and candidates are published in an official document (Spain, Portugal, France, Italy, Germany) and/or in newspapers (Austria and Italy). In some countries, the financing of political life is dealt with by different administrative bodies (e.g. in France, Italy, Spain), by just one public authority (as in Austria, Germany, Japan, the Netherlands) or by a special agency (e.g. in Australia, Britain, Canada and the USA). The latter agency is responsible for the auditing of reports and will act on behalf of the general public.
Case studies of several countries show that highly sophisticated rules and over-regulation of the subject do not lead to best practice (Austin and Tjernström, 2003: 141-5). Much depends on the set of instruments available and the political will to use them. In Australia, tougher legislation, combined with efficient operation of an agency (see below), has effectively limited abuse. In Britain, the statutory limits for campaign spending in constituencies were generally accepted, but rarely checked (Pinto-Duschinsky 1981: 249). Especially in by-elections, limits were often exceeded without anyone complaining.
In France, the very complex and sometimes contradictory nature of legal stipulations leaves transparency of party funds still lacking. In other countries, reporting procedures look perfect at first glance, but there is still room for grave doubts concerning efficiency and impact. In Italy, for example, it was an open secret for many years that expenses reported in published accounts exceeded declared income. Spanish and Portuguese parties have proven reluctant to introduce tight obligations and timely reporting. State auditors have limited authority to go beyond the information which is offered by the parties (van Biezen, 2000: 332; del Castillo, 1994: 100).
In Israel, the state controller found that most parties had laundered money and illegally transferred foreign funds during the 1999 campaign. Before that scandal broke two major loopholes had already been identified: the establishment of non-profit organizations and the raising of large contributions ahead of the nine-months reporting period (Hofnung, 1996: 144). In Japan, national and local election agencies administer the process of reporting and disclosure. However, they are not allowed to verify financial statements. Frequent scandals show that bans are not monitored effectively.
In Germany, the parliamentary administration under supervision of the speaker of the federal parliament has to check parties’ financial reports, to publish them and to comment on them in a parliamentary paper. Over the course of decades, reporting has gradually improved to impressive quality. However, time and again some find loopholes in the regulation, generally in its less developed disclosure part. It all started with a massive influx of donations assigned to the name of a party’s bagman or termed ‘anonymous,’ and money from corporate sources (laundered to ensure a tax-exempt status). Occasionally corporate donations are split among subsidiaries of big companies (which is perfectly legal, but incurs the wrath of the media). More recently, scandals have involved (clandestine) funds of a party leader, (unreported) surplus funds held in a foreign bank account and donations by a businessman interested in a specific policy decision although they were disclosed properly. A watchful administration and an active public will do more to stop such practices than stricter regulation.
Sanctions and Enforcement
Because Sweden has no rules on the statute book, no sanctions are necessary for enforcement. The Netherlands operates disclosure rules but they have no specific sanctions in the event of non-cooperation. Everywhere else fines and imprisonment are rare. Under the legal regime for constituency campaigns in Britain, it is up to a defeated candidate to file a legal case against the winner. The year 1999 saw the first major post-war case against a sitting MP and her election agent (Crown vs. Jones and Whicher). Although both were initially found guilty of spending twice the constituency limit, the decision was later reversed on appeal.
If parties in Austria or Germany do not meet reporting requirements, public subsidies will be withheld. When it was revealed that a major party in Germany had not reported considerable assets held in foreign bank accounts by one of its state branches, the speaker of the federal parliament refused to grant the full amount of the public subsidy to the federal party. In addition, a severe cash penalty was imposed for not disclosing the identity of various donors who had contributed to the former party leader’s secret fund. In passing, it should be noted that a scandal similar to the one which struck Germany in early 2000 could not have occurred in the Netherlands, Sweden, Canada, Britain, Austria or Switzerland -simply because no legislation of an equally demanding character was in place in these countries at the time.
In Italy, infringement of the law seems to be generally accepted by candidates, parties and donors as well as in wider sections of civil society. Thus the practical value of various sanctions (fines, prison sentences of up to 4 years, or suspension of subsidy allocations) is reduced. In the event of a suspected violation of the law in France, the attorney general can take up the matter, but administrative and penal sanctions are very modest. If irregularities with candidates’ campaign reports occur, an electoral judge can apply electoral sanctions (e.g. declare a candidate ineligible).
The prerogatives of Spanish authorities are even more restricted. Election officials may report breaches of the law to the public prosecutor, but they cannot impose any sanction (van Biezen and Nassmacher, 2001: 151). The audit office may recommend that the public subsidies for a party not complying with the rules be reduced. Authority to impose sanctions ultimately rests with the Spanish parliament. Sometimes parties actually prefer to pay a relatively small fine, rather than to comply with all legal provisions. In Portugal, in 1996 three of the four parliamentary parties were fined a total of US$10,000 for infringements of the law.
In Israel, the Knesset Finance Committee frequently has retroactively increased the financing unit, that is, the amount of the public subsidy as well as the spending limit. If inspection by the state controller reveals any suspicion of a criminal act, he must refer the matter to the attorney general. Traditionally enforcement of rules has been less strict than the letter of the law prescribes. If accounting rules or deadlines for reporting and disclosure are violated in Japan, the person responsible can be fined or imprisoned. Implementation, however, has been rather lenient: up to 1992 no MP had been prosecuted (Blechinger, 1998: 240, 342-3). Since 1994 the number of cases in which politicians have been sentenced for violation of the political funds control law has increased.
Experience in Italy, Israel and elsewhere, not least the USA, has shown that detailed regulation sometimes achieves the opposite of what was intended either because it opens up the search for legal loopholes or because political actors change the rules to suit their purposes. If rules are applicable, much depends on their enforcement (Austin and Tjernström, 2003: 145-53).
Although Paltiel (1976: 108) considered an independent agency in charge of enforcing party financing rules as a necessary element of any reform legislation, such bodies operate in no more than five democracies: Australia, Britain, Canada, France and the USA. (For the US Federal Election Commission see Chapter 39 in this Handbook.) In Canada, the chief electoral officer is charged with additional duties: to look into alleged violations of funding rules and to impose sanctions if necessary. As the Canada Elections Act can only be enforced through the criminal courts, most offences are resolved with punitive measures. Outright violations of the law are rare due to financial regulations that work effectively for candidates and parties.
The Australian Election Commission (AEC) is composed of a (former) federal judge as chair, the Electoral Commissioner as chief executive and another part-time, non-judicial member, hitherto the Australian Statistician. The AEC is empowered to probe into party accounts. For continuous monitoring of political funds, it has developed a three-year audit cycle to cover all state branches of the registered parties. Personnel resources constitute a major limitation.
French presidential elections fall under the jurisdiction of the Conseil Constitutionnel, which has only limited powers to apply sanctions. A special authority, the CCFP, is comprised of nine members, appointed for 5 years, and has 30-40 staff. It approves, rejects or changes the reports which candidates submit regarding their campaign spending, as well as the annual reports by political parties (Doublet, 1997: 43-6). Nevertheless, the powers of the CCFP are rather limited.
Recently in Britain, an independent Electoral Commission of five commissioners has been installed. It oversees compliance with new requirements (especially monitoring of donations, their disclosure and submission of proper party accounts). The commission may recommend to the Director of Public Prosecutions that he ask a court to apply criminal sanctions (fines, imprisonment) against those responsible within the parties.
After reform legislation, political parties in most Western democracies are officially recognized, their nationwide campaigns under purview of a law, their financial operations subject to statutory transparency. One can probably say that ‘compulsory reporting and disclosure of … income and cost had a sanitising effect’ on parties and elections (Paltiel, 1989: 73).