Taxpayers must not be forced to pay

Allister Heath
IT is clear that the current system of party funding doesn’t work. Parties rely too much on large donations – from wealthy individuals in the case of the Tories and from trade unions in the case of Labour. It would be better if they were able to tap into lots of smaller donations, rather than a few large ones, something which ought to be possible if they energised their memberships. Some pressure groups have vast numbers of paying members; there is no reason, in the era of internet campaigning, that this couldn’t also be possible for radically reformed political parties. The disconnect between grassroot members and the funding of parties is one reason why all three main ones have been taken over by establishment candidates competing for the centre ground. This has been a disaster for genuine pluralism in Britain and helps to explain why politicians have all become less representative of the public.

At the very least, much greater transparency is required. Sunlight is a great disinfectant. But one thing is certain: taxpayer funding of political parties would be a terrible mistake, even though that would be the solution that many of today’s establishment politicians would privately love to see. Many don’t really like their members, who they find irritating or excessively ideological; they don’t even like their donors. But state financing would mean members of the public would have to fund views they find abhorrent and would turn the party system into even more of a closed shop. New parties would never be able to emerge to challenge the existing ones (as the Scottish Nationalists, Greens and Ukip have done, to a greater or lesser extent). Radical reform is required – but the nationalisation of politics is the last thing we need.

Two myths need nailing. The first is that George Osborne’s cuts have already been huge. The second, even more pernicious myth, is that Osborne is already paying down the debt (he used such a terminology twice during his Budget speech).

According to the Institute for Fiscal Studies, 88 per cent of cuts to social security benefits and 94 per cent of the cuts to non-investment public sector spending are still to come. The UK is merely two years into a seven-year programme of deficit reduction which will see spending fall in real terms (it will continue to go up in cash terms) and state expenditure decline as a share of GDP. Even then, the deficit won’t have been eliminated on the measure that matters – public sector net borrowing will remain at 1.1 per cent of GDP in 2016-17. But even that requires another election before the target is reached, and therefore a bitter campaign at a time when voters will be sick and tired of austerity. Is this really realistic? And as Ian Stewart of Deloitte points out, this is a tiny margin for error given that the government is likely to borrow a total of £338bn extra between now and then.

That is just too risky for comfort, given the extreme inaccuracy of macroeconomic forecasts: Two years ago the official prediction for UK growth in 2012 stood at 3.5 per cent. A year ago that had been cut to 2.5 per cent. In last week’s Budget it stood at 0.8 per cent. The truth is that Osborne’s plans still rely far too much on ultra-bullish long-term growth forecasts. If they don’t materialise, he – and the country – will be toast.
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