Debate stirs up over funding of political parties

Czech political parties have one thing going for them: that is the generous system of state funding for their activities. But that system has come under attack for its cost, the flaws in the party financing rules and the policing of those rules. In this week’s Talking Point, party financing is put under the spotlight.

The Czech system of party political financing has grabbed the headlines recently. First of all parties are all out of pocket after launching election campaigns for the October elections that have now been put back until the middle of 2010.

Secondly, there was a proposal from newcomer party TOP 09 that the generous system of state funding be halved.

And finally, political parties have made headlines for failing a honesty test set by a daily paper. Several parties showed they were willing to perform political favours in return for donations. Heads fell at the Christian Democrats, TOP 09 and the Communist Party with parties also looking as though they were trying to get around the election law on declaring donations.

Generally, speaking Czech state funding of political parties is lavish, perhaps overly so. Jan Outlý is head of the politics department at Hradec Králové University and has specialised in studying party funding.

“The Czech system of political party funding is very generous and political parties are very much dependent on it. On average they receive more than three-quarters of their annual income from the state, which in years when elections take place is more than 80 percent. So we can say that the majority of the income of the political parties comes from the state.”

Compared with other European countries, state funding is lavish. Other countries try to put a limit on the overall amount of state financing. Mr Outlý again:

“In Germany, which is one of those cases, political parties cannot receive more than 50 percent of their income from the state. On average, public subsidies in Germany are only a little bit more than 30 percent of their incomes.”

He says that one of the damaging results is that Czech parties have started to live in a separate, cosy and well-funded world apart protected from the need to motivate their supporters or approach the public for financial support.

“The parties know that even a very expensive campaign will be paid off by the state after the elections. So what they do more than searching for funds from donations is that they simply take loans from banks, which leads a little bit to the situation that political parties live separated from society.”

With that no doubt in mind, the new kid on the Czech political bloc, Top 09, has promised to lodge a proposal to halve funding of political parties for the next three years starting almost immediately. Leading TOP 09 figures and former finance minister Miroslav Kalousek estimates the move could save the state around a billion crowns.

TOP 09 argues that political parties should share in the current belt tightening because of the economic crisis. It adds that cutting financing now will still leave parties with enough time to tailor their election campaigns for next year’s lower house elections accordingly.

TOP 09’s stance on funding should not be much of a surprise. As a political newcomer, it stands out from other Czech parties because it is reliant on donations rather than state funding. The current Czech financing system largely rewards parties on the basis of their past election performance and the number of seats gained.

Annual payments to parties are made on the basis of every vote they get in elections to the lower house, Senate, regional and European elections as long as their total support is over a certain, low, percentage threshold. In addition, they get other payments based on the number of seats they have in everything except the European Parliament. And finally, they are given payments to help finance election campaigns to the lower house and European Parliament.

With no election pedigree and not many seats to its name, TOP 09 has little to lose and a lot to gain from state funding being slashed.

Former foreign minister and party leader Karel Schwarzenberg says the party is overwhelmingly reliant on donations and these are all made public.

“If you check on the internet, you will see our donors. We publish everybody with his full name so you can see everybody who has given us something. Thank God there are quite a lot of people in the Czech Republic who support us and give some amount of money. Not the big companies, but there are smaller entrepreneurs, it is private persons and some, I know, who are not so rich but have given what in their position is quite a lot of money. So I am really impressed by the donors.”

The reception to TOP 09’s proposal has been cool from the other parties already plugged into state support. No other party has voiced support for it and it looks like being sunk without trace when eventually tabled in the lower house of parliament.

Parties are currently in relatively poor financial shape after launching campaigns for October lower house elections which have now been postponed until next year. The Social Democrats alone have said the postponement cost them around 100 million crowns.

TOP 09 collected around 25 million crowns for the now postponed October elections and expected a bit more money to boost that sum. Mr Schwarzenberg says this would have been enough for its needs.

“It would have been sufficient for the campaign if the elections had been in October or even at the beginning of November. Now, when they will be some time in Spring, we have of course to try to put up some more money and appeal to our members and all who wish us well to repeat their good deed.”

Compared with such donations, the state hand outs for the main parties look pretty large. It is estimated that the right-of-centre Civic Democrats altogether received around 200 million crowns in 2008 with the left-wing Social Democrats getting around 130 million. It is a moot point whether the size of TOP 09’s donations say more about the party itself or the difficulties of launching a party reliant on donations when the Czech public is not used to being tapped for donations from parties.

As Mr Schwarzenberg comments, the current system has been devised by the parties for the parties. It has an automatic tendency to exclude newcomers breaking into the club.

But there are other major problems with the current system. Its generosity would appear at least to have the merit of curbing parties’ greed for getting illegal donations, perhaps for political favours. The exposure in September by the daily newspaper Dnes about how many party bosses seemed willing to do such favours for donations seems to undercuts that argument.

And the current laws governing funding also look flawed. Indeed, according to Professor Outlý, Czech laws on party funding appear to be the worst drafted and weakest in Central Europe.

The law does specifically call for parties to make public direct cash donations made to them by companies. But is eloquently silent on other forms of indirect aid. Mr Outly again:

“The law is not very strict in terms of goods and services that companies can give to parties, especially during election campaigns: cheap advertisements and things like that.”

He says ad industry experts scratch their heads in wonder when the parties declare how much they have spent on campaigning simply because it does not add up. Either their figures or wrong or they have got cut price deals in return for, well, we do not know what.

There appear to be other loopholes as well. Many candidates for election carry out individual campaigns in tandem with the political party ones. But the former are not governed by the law.

Compounding that problem is the fact that there is no independent watchdog keeping a check on the whole problematic area of party funding.

“The problem of the law on political finance control is that the body which controls political financing in the Czech Republic is the parliament, the house of representatives, which means that parties really control themselves. We do not have any independent body that could control the reports that the parties have to make public. So this is probably the biggest problem concerning donations to political parties.”

Mr Outlý has little hope for the TOP 09 initiative slashing state support or that the current funding framework will be reformed. Existing political parties seem to have far too much at stake in it continuing unchanged and successful newcomers soon find themselves sucked into a system that looks all too comfortable.