Party Loans

As I see it, there are several issues surrounding the 'Loans for Lordships scandal (See also Lord Falconer's 'Today' interview)

1) Were loans given on the understanding that some benefit would be conferred? 2) Was there the expectation that loans would be converted to donations once the election was out of the way?

These questions are both unanswerable in practical terms, though on the Today Programme today, Chai Patel said that he was willing to make a donation, but was telephoned and asked if this could be converted to a loan. I find this interesting. I would like to hear a comment from Millbank on this point.

I also note that if loans were made on commercial terms, there is a questionmark over why the loans were not made commercially - the only two reasons I can think of is that commercial lenders think that the party in question will default, or that the commercial lender will ask for their money after the loan expires.

3) What is the proper mechanism for funding parties?

I would be opposed to state funding. Why should I, as a taxpayer, financially give support to parties I would not choose to vote for, let alone give money to? Tax relief on party donations is reasonable, (similar to charitable donations). Why should the established parties gain preferentially from any such system - as some selection mechanisms would need to be in place to decide funding levels, or we would get lots of one man political parties being set up! I certainly would not want to fund someone like Veritas, the BNP, UKIP or the Monster Raving loonies.

A limit on donations, of say, £10000 seems reasonable. With Tax Relief that is made higher.

4) By what right does Labour make public the names of people who had made agreements to loan anonymously? It might be convenient for them to do so, but it's not right to do so retrospectively, at least without agreement. The Tories have said that they will not do this as they made legal agreements and are sticking to them. It may not be the political thing to do, (at least short term) but it is the honourable thing.

5) Several of the donors have said that they will not be converting the loans into donations. This leaves a rather interesting hole in the finances of the Labour Party in particular. It will be interesting to see if state funding is pushed in time to pay these loans back.

I do not have a problem with large donations or loans, per se, however there is an inevitable conflict set up when these are from individuals or organisations. One solution might be a ban on loans from individuals, but with named donations allowed (donations of less than X per year can be anonymous - as long as money laundering regulations apply). This could be coupled some form of blind trust, which individuals can pay into anonymously and the party cannot see who gave the money. This would be hard to set up in a secure way - and in a way that would make auditing possible to be sure that the parties were not using the trust to hide big donations.

It's a tough problem, there are no easy answers.

However, state funding is a wrong answer.