The allocation of direct public funds[1] is based on a formula on which a decision is taken on how much each party or candidate should receive. There are three main principles that can guide the allocation: equality, proportionality and need. The most common option is to use a formula combining elements of the three principles. All parties or candidates represented in parliament may for example receive a small, equal sum, or they may receive a larger part in proportion to the votes they gained in the last election, and a third part may be given only to parties that contest the election for the first time. One way of dividing the sums is to use different formulas depending on what the funds are supposed to (or allowed to) be used for.
Allocation based on equality can be of the following types:
- An equal amount is given to all parties and/or candidates that contest an election This allocation can prove very costly and risks encouraging political parties who are not in the game to win or try to influence politics, but rather to get a share of the public funds
- An equal amount is given to all political parties that received a certain number of seats/mandates in the last election
Restricting the equal funds to political parties with a certain representation in the body concerned by the election limits the risk of funds being allocated to parties that are not a serious election alternative, but also risks discouraging political parties and candidates who are new to the political arena. This risk is aggravated by the fact that all electoral systems reduce the number of parties that obtain seats and thereby discriminate against small parties. This discrimination fills a function in providing a body able to take decisions, but may unintentionally have a more far-reaching effect if the number of seats are used as allocation formula for public funding. Given that this allocation is based on political parties, it is common in countries with electoral systems based on political parties rather than candidates.
- An equal amount is given to all political parties and candidates represented in the national legislature
If funds are given to all political parties and candidates represented in the body concerned by the election, small and new parties are still discouraged but a wider range of actors are included.
- An equal amount is given to all parties and candidates that received a certain number of votes in the last election
Widening the target group even more would mean that parties and candidates that received a certain amount of public support in the last election would receive public funds, even if they did not reach the vote threshold for representation. The threshold is usually set between 1 and 2 percent of the national vote. It is less common that the threshold is set in real number of votes.
Proportional allocation refers to systems where parties or candidates receive more funds depending on the amounts of candidates presented, votes received etc. Common criteria for proportional allocation are:
- Funds are given in proportion to the number of candidates put forward
The allocation of funds depending on the number of candidates put forward for election by a political party is mostly used in countries with electoral systems based on political parties rather than candidates.
- Funds are given in proportion to the "representational level" of the candidate list put forward
Public funds are sometimes used to increase the participation of under-represented groups by encouraging political parties to field both men and women, and to field candidates of diverse backgrounds.
- Funds are given in proportion to funds raised (matching grants, aka “matching funds”)
One often mentioned criticism against direct public funding of parties and candidates is that they would become increasingly independent from their members and supporters. With this independence there is a risk that they will tend to not listen to their members and supporters on issues of leadership selection and policy decisions. To counteract this, systems of “matching grants” where political parties and candidates receive public funds in proportion to what they have been able to raise from members and supporters have been introduced. This may work to the disadvantage of new or small parties unable to mount successful fund-raising campaigns.
- Funds are given in proportion to seats/mandates held
As mentioned above, all electoral systems tend to discriminate against small parties in order to create a legislature apt to take decisions. This discrimination may have more far-reaching implication and prove even more disadvantageous if funds are allocated depending on the number of seats held. The advantage is that parties that already have representation have thereby proven the level of their public support.
- Funds are given in proportion to votes received
Funds given in proportion to votes cast in favour of the party or candidate in the last election is a system which is still disadvantageous for new and small parties, but to a lesser extent than allocation based on seats.
- Funds are given in proportion to party membership or other signs of support
Allocation based on seats or votes stems from the idea that the political party should have to prove its public support before obtaining public funds. Other ways of ensuring that a party has support may be to base the allocation formula on membership registers. This would give new parties with a significant level of public support better chances to gain access to public funds. Membership levels are however not automatically a clear indication of how much support the party would get in general elections, and membership registers may be difficult and time consuming for the election authorities to verify.
Lastly, political parties with special needs may get access to funds aimed at leveling the playing field. The following are some allocation types based on special needs:
- Funds given to new political parties Party systems need to be open to new political parties, and public funding is often perceived as preserving a status quo where the established political parties remain in power much because of the allocation of public funds. This can be counteracted by providing special grants for new political parties.
- Funds given to small political parties Allocation criteria based on number of seats held or votes received in the last election work to the disadvantage of small political parties. At times special funds are set aside for small political parties if it is perceived as a common good to have small parties in addition to the bigger ones. In other cases, proportional allocation can be used to work to the advantage of small parties by for example letting the first percentage of votes translate into more funds than the following percentages.
- Funds given to minority parties or candidates Public funds can be used to encourage the participation of under-represented groups. Parties or party lists fielding national minority candidates can either receive special funds or be exempt from fulfilling threshold criteria mentioned above.
