Historical Background
The use of tax-payers' funds to finance candidates and parties is by no means a recent phenomenon. It was a time-honoured practice in some countries for governments to use secret funds to help their political allies. In Britain, Secret Service money worth £10,000 a year was used for partisan purposes by the government of the day until the 1880s. The Conservative government abolished the Secret Service money in a move probably less motivated by morality than by the desire to deny this source of finance to any future Liberal government.19
The nineteenth century also witnessed Bismarck's active use of a secret Reptile Fund. Its main use was to bribe journalists (known contemptuously as 'reptiles'). But the fund was deployed additionally for a variety of political objectives both within Germany and abroad.
During the Cold War, clandestine flows of governmental funds for elections and party-building reached very large proportions.
Alongside this old system of concealed governmental funds for party politics, the twentieth century saw the development of financial assistance from public funds for members of legislatures. Pay and allowances for parliamentarians and later for party groups in legislatures became normal.
The innovation since the late 1950s has been that public funds have increasingly been provided openly to candidates and parties. An early example of overt public funding was in the American territory of Puerto Rico. Professor Paltiel has outlined the background:
'The pioneering subsidy system introduced in Puerto Rico with the Election Fund Act of 1957 was designed to remove the former dependence of the island's main political parties on the entrenched sugar interests and on the 'macing' of civil servants, many of whom were pressured into donating as much as 2 percent of their salaries to the party in power. The act provided for the creation of an election fund in every four-year cycle from which registered 'principal' political parties - those which had gained 10 percent of the votes cast for governor in the previous general election, presented candidates in every district, and won representation in the legislature - could withdraw up to $75,000 in nonelection years and $150,000 in election years to meet administrative, operational, and election costs.'20
The first direct subsidy system in West Germany was introduced in 1959. Writing in 1989, Herbert E. Alexander21 listed the following dates when direct public subsidies were introduced or when legislation for such payments was enacted in a number of countries:
| COUNTRY | YEAR |
| Costa Rica | 1954 |
| Argentina | 1955 |
| (West) Germany | 1959 |
| Austria | 1963 |
| France | 1965 |
| Sweden | 1966 |
| Finland | 1967 |
| Israel | 1969 |
| Denmark | 1969 |
| Norway | 1970 |
| Brazil | 1971 |
| Canada | 1974 |
| Italy | 1974 |
| United States | 1976 |
| Spain | 1977 |
| Mexico | 1978 |
| Venezuela | 1978 |
| Turkey | 1983 |
| Australia | 1984 |
Additional countries with direct financial subsidies to parties and / or candidates include:
- Czech Republic
- Greece
- Hungary
- Nicaragua
- Poland
- Portugal
- Romania
- South Africa
- Taiwan
Countries without direct state funding of extra-parliamentary party organisations or candidates included in 1995:
- Britain
- India
- Ireland
- Luxembourg
- Malaysia
- The Netherlands
In The Netherlands there is, however, public funding of educational institutes linked with the parties.
Varying Uses and Forms of Public Subsidies
It is convenient to distinguish between
(a) payments for election costs and payments for the routine organisation of political parties between elections,
(b) payments to political parties and payments to candidates,
(c) payments to central party organisations and payments to local party organisations.
Subsidies - Electoral Costs Versus Routine Organisational Costs of Parties
Examples of countries where public subsidies are for electoral costs include Canada, France, Italy (since 1993), and Poland.
The routine, operational costs of party organisation are funded in Austria, Brazil, Czech Republic, Germany, Greece, Hungary, Italy (from 1974 to 1993), Japan, Portugal and Sweden.
In some jurisdictions, there are subsidies both for routine organisational costs and for election campaigns. These include Hungary, Israel and Mexico.
Subsidies - to Candidates Versus to Party Organisations
The distinction between payments to political parties and payments to individual candidates is illustrated by the system of election subsidies in Canada. There are two separate categories of election subsidy, one for individual parliamentary candidates, the other for the national party organisations.
Subsidies to National Versus Local Party Organisations
It is usually the central organs of a political party which receive public payments. This serves to increase their clout in internal party politics. There can be little doubt that the overall effect of direct subsidies to parties has been to strengthen the trend towards the centralisation of power within them - a development that has resulted from other causes too.
There are exceptions to the rule. In Sweden, a separate subsidy may be granted by municipalities directly to local party organisations, a system to combine public funding with a degree of decentralisation. Since 1977, all authorities and provinces in Sweden subsidise the parties represented on their councils. 22
In some federal regimes, such as Australia, Canada and the United States, second-tier authorities - states or provinces - supplement federal subsidies (which concern the costs of federal elections or federal party organisations) with subsidies for activities at the state or provincial level. According to Alexander, there was public funding in most Canadian provinces and (West) German as well as Austrian länder. A minority of state governments in the United States and Australia also had subsidies. There were even schemes in a few American localities - Seattle, Tucson and Sacramento County. (p. 15.)
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