A new formula: let the state pay for politics

Tony Blair's utterly unexpected decision last night to hand back the donation given to his party by Bernie Ecclestone, President of Formula One Holdings, has far-reaching implications for future political funding in Britain. This will matter, in the long run, much more than the messy government decision to exempt Formula One from the ban on tobacco advertising. As far as the latter is concerned, Mr Ecclestone's donation was always more important than the public health minister Tessa Jowell's past marital links with the motor racing industry. Ms Jowell didn't take the decision. Mr Blair did. It was on Downing Street orders that health officials travelled to Europe to seek a blanket exemption for motor racing from the EU ban; and as a fallback, if that failed, for a 10-year phased introduction to allow the industry to seek alternative sponsorship.

The real point of last night's announcement is that it raises huge long- term questions of over how sustainable private sector funding of parties will now be. Labour, to its credit, has travelled light years from the previous government's obsessive secrecy over party funding. Given, however, that the Prime Minister backed the Formula One exemption - rightly or wrongly - for reasons unconnected with the donation, but still handed the money back, he has thrown serious doubt over future donations by those businesses that are bound to be affected by government decisions. In particular he has propelled state funding back to the top of the political agenda.

We now know that Mr Ecclestone gave money to the party in the normal way, and that the issue of Labour's pre-election blind trust turns out not to be relevant. It is anyway at present dormant and empty, having served its purpose of funding Blair's office when he was in opposition. That doesn't alter the fact that the blind trust was a bad idea. Ostensibly, the trust provided a clean and convenient method of funding the leader's office. The argument was that had the leader known who funded his office he might have fallen foul of the Nolan regime when called upon in the Commons to tackle issues of direct interest to the donors. No doubt Blair was indeed kept in ignorance of the donors. Nevertheless the notion that walls were so Chinese that no one else in the Labour Party other than the trustees themselves could ever entertain a suspicion about who might have made large donations is absurd; as absurd as the fiction which prevailed in the Conservative Party that the party treasurer kept all the secrets and that ministers never knew a thing about party donors. In nine cases out of 10, businessmen want it known to at least someone who counts that they were donors.

The one undeniable consequences of the blind trust method of funding was to keep the names of the donors from the rest of us. We now know Mr Ecclestone wasn't a blind trust donor; but if he had been, we might never have known. It isn't even slightly impugning any Opposition leader's integrity, then or now, to say that it would be much better if henceforth his or her office was paid for either out of general party funds - or possibly, through an increase in Short money, by the state. Sir Patrick Neill has already made it clear that he regards blind trusts as a highly suitable target for investigation. I'm sorry, but most businessmen don't give money for the sheer altruistic joy of anonymously helping a cause they believe in.

Which is precisely why, on the larger issue, Labour was correct and far-sighted in deciding to publish the details of all donations over pounds 5,000. It seems almost inconceivable that Sir Patrick will not, at the very least, impose a similar requirement on all parties. This would, once and for all, end the Tory party's historic secrecy on the issue. But it also bites on Labour itself because the party now receives more money from business than it has ever done before.

But if there is a single lesson from the Ecclestone affair it is that annual publication almost certainly isn't enough. First, rather than allow the parties to dribble out the list in the midst of much bigger news generated by their annual conferences, Sir Patrick should oblige all the main parties to make much more of a public issue of their funding by publishing the lists, perhaps on the same designated day, ensuring proper scrutiny and comparison. Second, he will have to examine whether the amounts, as well as the names of the donors, should be published.

Third, Sir Patrick, who on the basis of his first public showing looks admirably open-minded and robust, should also consider some means of investigating a selection of government decisions each year in which party donors may have an interest. Let's say, for example, that the Government clearly decides to reverse John Gummer's previous policy of refusing planning permission for out-of-town shopping centres, and that Sainsbury's, with the strongest of commercial interests in promoting such a change of policy, continues to be an important Labour Party donor. Is there any reason why there shouldn't be an independent examination of the factors and reasoning behind the decision? After all, if, as ministers will certainly continue to maintain, they are quite blind to such influences, then such an examination will simply serve to back them up. The National Audit Office already has the right to call for papers on decisions in which it is interested. There is no reason why Sir Patrick's committee should not have the same rights in undertaking similar spot inquiries.

All these reforms might serve to make private sector funding of political parties more acceptable. But the case for public funding may prove much stronger. Personally, the Prime Minister has always been extremely wary of state funding, which is why he quietly dropped it as firm party policy in favour of referring the whole funding issue to Sir Patrick's committee. This was partly, perhaps, because he wanted to recreate Labour as a party with a lot of business funding, on the model of the Victorian Liberals; but more because he was understandably reluctant, at a time when politicians were held in low esteem, to try the patience of electors further by making them pay for political parties. But the Government is already considering a limit on election expenditure, which would contain the costs to the taxpayer. State funding is acceptable in much of Europe. There will be a considerable debate within the Government before it submits its evidence to Sir Patrick. But state funding is suddenly looking more likely than it did before last night's announcement.