Increasing the amount of money that political parties can spend during election campaigns might not sound sensible, but as Justin Fisher explains, the government’s proposal to do so seems reasonable in principle, but must be implemented with care to avoid disproportionately benefiting the two most popular parties.

On 20 July, Michael Gove, the Secretary of State responsible for overseeing party finance regulation, announced that party (and candidate) campaign spending limits for Westminster elections were to be increased in line with the value of money. This received little fanfare and was only touched upon briefly in the press the following month. This proposed change is both welcome and significant. So why is the change being proposed? To understand this, it is worth explaining how party spending limits are calculated.

Party Spending limits

Party (rather than candidate) spending limits were introduced by the Political Parties, Elections & Referendums Act 2000 (PPERA). Setting the period of regulation as 365 days before a general election, the act devised a formula for parties based on the number of constituencies in which a party fielded a candidate. The overall party spending limit was set at the number of seats contested multiplied by £30,000. Thus, at the 2019 general election, if a party fielded candidates in the 631 constituencies in Great Britain (assuming they did not contest the seat of the Speaker), the national party spending limit would be £18,930,000.

However, the sum per constituency (£30,000) set by PPERA in 2000 has never been adjusted for inflation. As a result, the national party limit is approximately 50% lower in real terms than when it was introduced. When accounting for whole-year inflation, the £18,930,00 spending limit equates to approximately £9,473,344 at 2022 prices. This erosion of the level in real terms has occurred over a period of relatively low inflation. So, given the relatively high rates of inflation experienced in 2023, this real-term figure will be even lower come the end of this year.

What’s the problem?

Why does this matter? Most obviously, the value of the spending limits introduced by PPERA bears little relation to the real value today. But more specifically, there are three potential issues.

First, the previous failure to adjust this figure for inflation challenges the ability of parties to campaign effectively. As the Secretary of State observed, the cost of printing, postage and communication – which is vital for parties and candidates to engage with voters – has risen, while the spending limit has not.

Second, with these and other costs rising while the spending limit is static, there are growing potential difficulties in terms of party compliance with the rules. Parties have rarely pushed up close against the existing limit (though the Conservatives came very close in 2017) but left unchecked, this is likely to cause difficulty. While some may argue that the limits should be lower anyway (the Committee on Standards in Public Life’s review in 2011 proposed a 15% reduction, for example), it is in no one’s interest for there to be regulation with which parties struggle to comply.

Third, the previous failure to adjust party spending limits for inflation presents a challenge to a principle laid out by PPERA – namely that parties and candidates should be the principal actors in elections. Third-party (sometimes known as non-party) campaigning has always existed and was regulated by PPERA. But, there is evidence that third parties are becoming increasingly cognisant of the possibilities of extensive campaign activity. In 2019, there was a record number of registered non-party campaigners (61), together with a record level of expenditure – over £6 million –  compared with less than £2 million (at 2019 prices) in 2015. Coupled with that, evidence from the 2016 EU referendum shows more evidence of extensive ‘third party’ campaigning. Then, registered campaigners (analogous to third parties) participated in large numbers (123), and spending by the registered campaigners on the Remain side was greater than the spending limits of the designated campaigns (Leave and Remain – analogous to political parties). These levels of third-party activity have the potential to threaten the integrity of spending limits and the primacy of parties in electoral contests – particularly if the distribution of third-party activity is asymmetric and overwhelmingly negative towards one party or campaign. If we want parties to remain as the principal actors in elections, then it is sensible to raise the spending limits as proposed by the Secretary of State.

Raising limits immediately in line with inflation poses risks

However, raising limits is one thing; how you raise them is another. One approach would be to raise them immediately in line with the value of money in time for the next election. This would set the new limit at nearly £38 million at 2022 prices – even higher at 2023 ones. The danger of doing this would be (at least) twofold.

First, it would be very likely to widen the spending gap between the two largest parties and their competitors. While the Liberal Democrats actually outspent Labour in 2019 (having received a donation of some £8 million just prior to the campaign), the typical pattern has been that the Liberal Democrats have spent between 24% and 37% of the Conservatives’ campaign expenditure. Given the Liberal Democrats’ lack of a natural pool of large donors, the gap between higher and lower-spending parties would be likely to widen quite significantly.

Second, while parties’ income typically reflects the general election cycle, party popularity at any one time is influential in their ability to raise income. In 2019, the Conservatives raised over £19 million in declared donations in the short period between dissolution and polling day. Labour, by way of contrast, raised only £5.4 million, 61% of which came from one source – Unite. So, a significantly larger spending limit would almost certainly benefit those parties that were most able to raise money – typically, the most popular ones. The concern here is not which party benefits, but that parties that are most popular at the time of the spending limits uplift would be most able to exploit this higher limit and would be disproportionately advantaged.

What is a better approach?

A better approach would be to raise party spending limits as proposed by the Secretary of State, but in a phased manner over a number of years. This would help mitigate the issues described above, which have the potential to distort electoral competition, while ultimately achieving the entirely appropriate adjustment of spending limits for the value of money. Correcting the failure over 23 years to adjust limits for inflation is a good idea – doing it in one go presents significant potential problems. Government has sought to address real-terms wage decreases incrementally. The same approach should be applied to party spending limits.

Will anything actually change?

The other remaining question is whether or when any uplift in spending limits will happen. This is not the first time that the government has signalled its intent in respect of spending limits. In December 2020, the then Minister of State for the Constitution and Devolution, Chloe Smith, announced a similar proposal and it has taken over two and a half years to reach the current point. Whether this can be implemented in advance of the likely 2024 election remains to be seen, particularly as we may already be within the regulated period for national party spending (365 days before polling day). There may also be political costs. Although, as Michael Gove has pointed out, this will have no impact on the taxpayer due to the UK’s lack of extensive state support for political parties, raising party spending limits may be politically risky. Carrying this out so close to the election may appear as though this is designed to bolster the electoral chances of the governing party. Equally, given the current opinion poll ratings, the beneficiary of a rise in spending limits in 2024 may actually be Labour, who in the last quarter (Quarter 2 of 2023), raised more in declared donations than the Conservatives.

About the author

Justin Fisher is Professor of Political Science and Director of Brunel Public Policy at Brunel University London.

Featured image credit: Michael Gove (CC BY-NC-ND 2.0) by UK Government.