Dear Democratic Reform Supporters:

We apologize in advance for a somewhat longer article than usual.  If you’re short on time, check out the executive summary and the graphs below:

EXECUTIVE SUMMARY – Reality Check Shows PM’s Claims Are Incorrect

The Prime Minister recently argued that the reason he called for a longer campaign was because the other parties are already campaigning on the public dime, implying that the Conservatives weren’t (at least, not to the same extent), stating that he thinks the parties should operate on their own resources and not rely on the taxpayer.  

However, Fair Voting BC’s analysis shows that the Conservatives receive a greater public subsidy than any other party ($55-75M in the past year, vs ~$35M for the Liberals and $25M for the NDP), raise a greater fraction of their total budget from public sources than the other parties (88-91%, vs 86-87% for the Liberals and NDP), and are expected to receive a much greater public subsidy per expected vote than the other parties ($12-17, vs $9 for the Liberals and $5 for the NDP).  

Our verdict:  the Conservative Party is securing more public support in both absolute and relative terms than the other major federal parties.  Read on for the details.

Update: some of the sources we consulted to write this article did not list the numbers for the Green Party.  We have therefore not been able to come up with as reliable an estimate for their subsidies as for the other parties, but have added those figures we have been able to ascertain. 

FAIR VOTING BC REALITY CHECK

PM Says Parties Should Operate Without Subsidies: When Prime Minister Harper called the election this past Sunday, “[h]e was quickly peppered with media questions about why he was subjecting Canadians to a campaign that promises to be the longest in more than a century and the costliest in the country’s political history.  Simple, Harper replied: Conservative rivals are already campaigning, and they’re doing it on the public dime.”

He went on to explain: “If we’re going to begin our campaigns and run our campaigns, that those campaigns need to be conducted under the rules of the law, that the money come from the parties themselves, not from the government resources, parliamentary resources or taxpayer resources.  What we do by calling this campaign is making sure we are all operating within the rules and not using taxpayers’ money directly.”

So, is the Prime Minister right to imply that the Conservative Party is much less reliant on public subsidies than the other parties, given that the Conservative Party has phased out the per-vote subsidy and expanded the spending limits for campaigns lasting longer than 37 days?  Fair Voting BC is pleased to present a reality check [CBC asks a similar question].

Forms of Public Subsidy:  Federal parties have historically received three forms of subsidies:  (1) the per-vote subsidy, (2) tax credits to donors, and (3) reimbursement of 50-60% of campaign expenses (expenses incurred during a writ period).  In addition, the government benefits from control over government advertising resources.

1. Per-Vote Subsidy:  The Conservative Party has benefitted more than the other parties from the per-vote subsidy, receiving close to $100M from this source since 2004 (when it was implemented to compensate parties for losing access to corporate and union donations), while the Liberal Party has received about $75M, the NDP about $55M, and the Green Party about $12M.  While the last per-vote subsidy payment was issued in spring 2015, these payments have certainly contributed significantly to the ‘war-chests’ of the various parties that they will be drawing on in this election campaign.

2. Tax Credits to Donors:  When taxpayers give political parties $1.00, they are reimbursed up to $0.75, which can make the net cost to the taxpayer as little as $0.25.  On average, parties receive $2 from the public purse for every $1 in net contributions from individual donors.  In 2009, this subsidy totalled $30M for all parties [Wikipedia].  In 2014, the top three parties reported raising $20M (CP), $15M (LP) and $9.5M (NDP), so the corresponding public subsidies were on the order of $13M (CP), $10M (LP) and $6M (NDP).

3. Reimbursement of Campaign Expenses:  The third main way in which the public subsidizes parties is by reimbursing over 50% of their campaign expenses.

Estimating War-Chest Size:  We have not been able to find current estimates of the size of each campaign’s ‘war-chest’, but the federal parties certainly accumulate significant resources between elections.  It was recently reported that the parties ended 2013 with accumulated assets of $16.3M (CP), $9.4M (LP) and $5.9M (NDP) at the national level, with the CP holding another $15.8M at the local level and $4M held on behalf of the local associations.  The LP and NDP had $8.1M and $4M, respectively, at the local level.  In addition, the parties raised considerable sums throughout 2014 ($20M/$15M/$9.5M, respectively, and $3M for the Green Party) and have recently reported the results of their fundraising through the first two quarters of 2015 ($13.7M/$8.1M/$7.8M/$1.5M) [see Elections Canada files].  They therefore have about $70M, $40M and $27M available to the largest three parties (we have insufficient data to estimate the amount available to the GP), less any expenditures they have made over the past 18 months.

Extended Campaign Limit Changes Only Affect Conservative Party:  Under the current regulations, each party running a full slate of candidates is entitled to spend a maximum of about $25 million for a five-week campaign and each candidate about $100,000, or ~$34M in total for the 338 ridings (though parties will generally concentrate their local spending in the much smaller number of swing ridings to save on overall expenses).

Under the recently passed Fair Elections Act, the government allowed the spending limits to increase for longer campaigns.  Had the campaign been the standard five weeks in length, it is likely that only the Conservative Party would have been constrained in its spending.  However, Prime Minister Harper’s decision to call an extended 11-week campaign means that the expenditure limits will roughly double, to about $52M per party and $210k per candidate ($71M total), effectively removing the constraint on spending the CP would otherwise have faced.  Since no other party would likely have been restrained by the regular campaign limits, they will not gain any benefit from the increased limits and will simply have to spend their existing funds over a longer period.

Subsidies:  Since 50-60% of a party’s campaign expenditures are reimbursed, the Conservative Party therefore stands to recoup a larger amount of money than they would have with a shorter campaign period.  We estimate that the three main parties will likely receive approximately $35M, $20M and $13M for the CP, LP and NDP, respectively, in expense reimbursement at the end of this year’s campaign (at $68M, this would be a considerable increase from the $48M these parties received following the 2008 election [Wikipedia]).  The GP received $1.7M in reimbursement in 2008.

4. Use of Government Advertising Budgets:  Although not normally considered to be a part of the election financing system, the governing party has access to a significant advertising budget while in office.  Government advertising costs run to approximately $100M per year, with some of the largest contracts in 2012-13 being the Economic Action Plan campaign at $15M (for a program that had ended two years previously), Responsible Resource Development at $8M, and a campaign promoting tax cuts at $7M.  The government recently spent $7.5M in May touting the success of the Economic Action Plan and an additional $13.5M to advertise its pre-election budget.  At least some significant portion of this funding could reasonably be considered to be subsidized partisan advertising, especially when government representatives are not scrupulous in separating their partisan and official responsibilities, as Minister Poilievre was recently accused of when he wore a Tory golf shirt when announcing the government’s $3B child benefit payment program.  In recognition of the potential for conflict of interest, the Ontario government requires the Auditor-General to approve all government advertising to ensure it is not partisan.

Summary of Subsidies:

1. Subsidy by Party:  The graph below shows the total subsidies by party for the three largest federal parties – it includes an estimate for the 2014 per-vote and donor subsidies, as well as an estimate for the 2015 campaign expense reimbursement subsidy, and assumes that $20M of the government’s annual advertising budget can be considered to be support for the governing party.  From this graph, it is clear that the Conservative Party receives on the order of $75M in public subsidies in an election year ($55M if the government advertising subsidy is excluded), compared with about $35M for the Liberal Party and $25M for the NDP.  We estimate the Green Party would have received under $5M in subsidies.

2. Ratio of Private Donations to Public Subsidy:  The next graph shows the ratio of the net donor contributions to the total amount of money spent by a party in an election year – this ranges from a low of 9% for the Conservative Party if the government’s advertising is included (12% without) to a high of 14% for the Liberal Party (and 13% for the NDP).  The Conservative Party therefore relies more on public subsidies as a fraction of their overall expenditures than the two other largest parties.

3. Public Subsidy Per Vote, By Party:  Finally, we calculate the estimated amount of the public subsidy per expected vote in the upcoming election (using CBC’s PollTracker data from Aug 4 to estimate what fraction of the vote each party will win and assuming 15M voters).  The final graph shows that Conservative Party is expected to receive a public subsidy of approximately $12-17 per expected vote (depending on whether or not government ad expenditures are included), while the Liberals will receive about $9/vote and the NDP about $5/vote.

Verdict:  So, to address Prime Minister Harper’s claim that campaign money should “come from the parties themselves [and] not from … taxpayer resources”, it is clear that all federal parties are heavily subsidized by the taxpayers, and the Conservative Party much more so than the others.

Note:  Arguable That Entire System is Publicly Funded:  One significant use of party funds is to generate the donor funds that are so important to a party’s overall budget – $1 of net voter contribution gets multiplied three times due to the donor tax credit program and another two times by the campaign expenditure reimbursement program, for a total of $5 of public subsidy for every $1 of private contribution.  Interestingly, the fundraising costs needed to generate these contributions are, on average, just about equal to the amounts raised [Wikipedia].  For example, in 2009, the Conservatives spent over $6M to raise about $5M in private funding, while the Liberals spent about $2M to raise $2.5M.  Without the public six-fold multiplier, the federal parties would be unable to raise any significant amount of money directly from the public because the cost of their fundraising campaigns would consume the entire amount of the donations.  In effect, since the cost of fundraising effectively cancels out the net amounts received, essentially all the funds that parties use to conduct their campaigns come from the publicly-provided pool.  The only functional purpose of the fundraising system is to provide indirect guidance on how much the public wishes each political party to receive.  Some have argued that it would be more efficient to use more direct approaches such as an annual check-off box on tax returns – this would be a useful thing for a future government to consider [Institute for Research on Public Policy, Flanagan and Coletto – U of Calgary].

As the election campaign unfolds, we will be sending out more frequent updates discussing issues particularly relevant to the campaign.  Stay tuned!