Nick Clegg Captures the Mandarins’ Castle

Party-funding and constitutional reform reveal the Whitehall machine playing into the hands—and coffers—of the Lib Dems

Constitutional Affairs Features UK Politics Westminster
Power grab: Civil servants are helping Nick Clegg force constitutional changes which will assure the Lib Dems blocking power (PA)

Last month’s report by the Committee on Standards in Public Life on party funding reform is only the latest example of the doleful influence of a pro-Clegg mandarin. It is no pleasure to have to write that the report is the most flawed study this important committee has produced since it was created in 1994. It bears the hallmark of its chairman, Sir Christopher Kelly, a former permanent secretary to the Department of Health, who was selected in 2007 to replace the usefully troublesome trade unionist Sir Alistair Graham.

Under the chairmanships of Lord Neill of Bladen, the Warden of All Souls College, Oxford, and Graham, the committee produced effective, empirically robust studies on party funding (1998) and problems of electoral administration (2007). The 1998 report formed the basis of the Political Parties, Elections and Referendums Act of 2000. The quality of its work has declined precipitously since Graham was denied a second term as chairman and a former top civil servant took the helm.

From the start of its latest inquiry, Kelly adopted the nostrums of another civil servant, Sir Hayden Phillips, former Permanent Secretary to the Lord Chancellor’s Department. I have remarked in evidence to a House of Commons select committee on the errors and failings of Sir Hayden’s reports on party funding produced for Tony Blair in 2006 and 2007. 

In order to bolster the argument for his predetermined conclusion — more public funding for political parties — Phillips used misleading and incomplete statistics to demonstrate that there was an “arms race” in political spending between the two main parties. Having refused to investigate the various existing forms of public funding of political parties, he grossly understated the amount currently expended by the taxpayer as a means to justify more public funding.

Sir Christopher Kelly’s methodology and objectives have much in common with those of Sir Hayden. In order to remove the influence of “big money” in British politics, he argues, there must be a cap on donations to parties at the level recommended by the Liberal Democrats — £10,000 per donor per annum. Kelly fails to show how this cap would achieve the objective. Wealthy donors would simply redirect their political gifts to think-tanks and sundry bodies which promote the objectives of a political party but are legally independent from it.

One might have expected the Committee on Standards to investigate such party-related payments. It repeatedly declined to do this. The effect is to give a skewed view of political funding in Britain today. Whereas the Liberal Democrats are considerably poorer as a political party than their main rivals, they benefit from some of the largest party-related payments, which are not recorded in their accounts. Neither Conservatives nor Labour have anything to rival the pro-Lib Dem Joseph Rowntree Reform Trust Ltd. At the end of 2009 its endowment was £31.7 million. The £15 million donated by Lord Sainsbury to the Institute for Government before the general election of 2010 was (as described in Standpoint last April) devoted to a politicised cause: the promotion of a coalitionist, continental European model of government in which Liberal Democrats would play a pivotal role. With its close links to the Cabinet Secretary and senior civil service, the Institute for Government also promoted support within Whitehall for the continental European system. The Electoral Reform Society represents another core Lib Dem cause. The ERS and its subsidiaries had reserves at the end of 2009 of £13.7 million. With some £2 million in leftover funds from the Communist Party of Great Britain, Unlock Democracy provides further backing for pro-Lib Dem constitutional reforms.

The Kelly Committee’s recommendation of some £20 million a year in public funding for the political parties — a scheme of particular benefit to the Liberal Democrats — comes in the wake of the scandals concerning MPs’ expense claims. Those revelations concentrated on the use by MPs and peers of public funds for their personal and family benefit. At least as important are practices prevalent among members of the House of Commons, the devolved legislatures, MEPs and councillors involving the use of money received in public funds for party political purposes, funds designated to allow elected officials to carry out their public duties. Here, too, the committee failed to undertake the necessary research.

Finally, the committee used a so-called “model” to estimate how much political parties would lose from a donation cap of £10,000 per annum. Albeit with provisos, it suggested that the taxpayer should make up for the supposed loss to the parties of a contribution cap. This loss is a fallacy: political parties find ways to adapt their fundraising to new rules. A study of the US showed that parties actually raised more money after the introduction of restrictive rules about permitted contributions.

Less noticed but more important than Sir Christopher’s report was the final publication on October 24 of Sir Gus O’Donnell’s parting shot, the Cabinet Manual. O’Donnell is likely to make his mark as the most controversial Cabinet Secretary of recent times. His departure is rumoured to have been less amicable than it was presented to be. Not the least of his actions were his attempts to introduce constitutional innovations before the 2010 general election which would have boosted the chances of the Liberal Democrats in the event of a hung election. Dressed up as a method borrowed from a Commonwealth country (New Zealand), the procedures recommended by O’Donnell to form a government in these circumstances reflected and promoted the coalitionist practices of countries on the European continent with multi-party systems and proportional representation voting. O’Donnell’s proposed method clearly favoured the Liberal Democrats.

Some of the sting has been taken out of O’Donnell’s original proposals published in December 2010. That version was modified in response to criticisms submitted to three parliamentary committees; it then seems to have been changed yet again and delayed further over the summer recess. 

The civil service-Lib Dem nexus has taken other forms too. It presents a potent problem for David Cameron. Within No 10, a number of Cameron’s political advisers have been squeezed out and career civil servants have taken their places. When it comes to policy development and, in particular, advice on vital constitutional matters, Team Cameron is dangerously understaffed. In part, the determination of the top official in Downing Street, Sir Jeremy Heywood, to reassert civil service influence around the Prime Minister is a rational reaction to the Gordon Brown era. But the cull of political advisers has gone too far. 

By contrast, Clegg’s agreed role within the Coalition puts him at the centre of power as far as constitutional matters are concerned. Having lost the referendum on the Alternative Vote, Clegg retains a hope of forcing constitutional changes which will assure his party a blocking power over British politics in the future. This will happen if the projected reforms of the House of Lords — to be elected by proportional representation according to the Coalition Agreement-reach the statute book. It is to Clegg that the Committee on Standards in Public Life answers; hence the slant of the report on party funding. There may be a temptation for Team Cameron to rely on the reluctance of current members of the House of Lords to vote for their own demise. But it is dangerous to rely on members of the Lords themselves to block the projected reform. On a related topic,  a recent posting on the website of the Constitution Unit at University College London proclaims proudly that the Liberal Democrats have been granted an extra £500,000 pounds worth of special advisers (Spads) as the result of a research project carried out by the unit with funding from the Nuffield Foundation. The UCL unit is itself an influential part of the civil service-Lib Dem nexus.

The behaviour of Liam Fox’s informal adviser Adam Werrity was a godsend to the civil service. It permitted the Cabinet Secretary to preach to Conservative ministers, some of whom have turned to unofficial advisers because they have been unable to trust their officials and have had too few Spads. The paradox is that the Cabinet Secretary has been no slouch in consulting outsiders — especially at the Institute for Government and the Constitution Unit — on politically sensitive matters. If anyone has been stretching the limits of constitutional propriety, some would argue it has been O’Donnell himself. O’Donnell quietly published the Cabinet Manual — his pet constitutional reform project formulated in consultation with these two outside bodies — when Conservative ministers were feeling bruised by the Defence Secretary’s resignation over Werrity. Margaret Thatcher’s former adviser, Lord Powell, went as far as to report to the Lords Constitution Committee the view that the Cabinet Manual was, in part, a “civil service power grab”. O’Donnell’s stated preference in 2010 for a coalition came in for particular criticism.  

There is, of course, the underlying question of why so many top civil servants are closer to Clegg than to Cameron and why they would be happier with a Lib-Lab coalition. The answer is partly cultural. Over a considerable period of time, the Conservatives have tended to be uninterested in matters of constitutional reform and have unwisely failed to participate in intellectual discussions within think-tanks and universities. There is a broader and deeper problem. Political parties need roots. After the Second World War, the Tory Party not only had a far higher membership than Labour, it enjoyed widespread support within key social institutions. The Church of England was known as “the Conservative Party at prayer” — difficult to imagine today. Judges tended to express traditional views. During the Thatcher era, the Tories enjoyed prolonged political success but neglected their roots. The consequences are seen today. Another reason why civil servants tend to be hostile to the Conservatives is because they are part of the state apparatus and have an institutional interest in big government (whether in the UK or EU).

Whatever the reason, Cameron cannot afford to surrender the Whitehall machine either to the civil service or to Nick Clegg.