But at the same time, our political system is badly tarnished. Too often the public simply feel that politics can’t deliver the change they know our country needs. We cannot solve our problems as a country unless we change what is wrong with our politics. And we cannot change what is wrong with our politics unless we change the way it is funded.
The overwhelming majority of those who give money to political parties do so for good reasons and are motivated by genuine conviction and values. But one of the reasons why so many people are so sceptical towards political parties and cynical about politics itself is the perception that big donations can buy special favours or influence.
At a time when politics is seen as being disconnected from most people’s lives, the public need to know that their elected leaders are not just listening to those who can pay.
So I believe it is time now for real change: it is time to take the big money out of politics.
We have now begun a new round of cross-party talks on this issue and I am determined that this opportunity to bring about that change is not wasted.
It will not be easy because the three main parties have different histories, funding structures, and constitutions. For change to work, every party, my own included, will have to accept change that will be uncomfortable.
Today I want to set out the principles of reform:
- A strong, low cap on donations from individuals, organisations and companies
- Tight spending limits for political parties
- Widening the funding base of political parties
The Tories say they want to limit donations to £50,000 a year. That is twice the average annual wage. The Tories would allow an individual to donate £250,000, or a married couple to give £500,000, over the course of a parliament. David Cameron has said he does not regard any donation of less than £50,000 as “significant”. But how many people could even consider giving such a sum in one year to a political party? A cap set at £50,000 would be unacceptable because it would still keep big money in politics and still leave parties open to questions about buying access.
To tackle this problem we need a strong, low cap. Sir Christopher Kelly’s report on this issue suggested a cap of £10,000. But even that is still out of the reach of most individuals and high by international standards.
Instead, we should cap donations at £5,000. A low cap is essential if we are to achieve our objective to take big money out of politics. Anything other than a strong and low cap would be unacceptable.
People will ask what a cap of this sort means for trade union funding for the Labour Party.
I believe it is only fair that a cap we want to impose on companies and individuals should also cover donations from trade unions.
This will cost Labour millions of pounds but I also believe it is these kind of difficult decisions which are necessary to make change happen.
The 3 million levy payers - nurses, teaching assistants, engineers, shopworkers - would continue to be linked to the Labour Party through the £3 or so they pay each year through their unions.
There is the world of difference between a wealthy individual giving millions, and millions of trade union levy payers paying a small sum of money to affiliate to the Labour Party.
At a time when too much of politics is out of touch with the vast majority, I am proud that all these working people have a role in the Labour party. I am proud of our link to the unions. It is part of what makes Labour rooted in our communities and I am determined it will remain so.
The second principle is that there should be a tighter cap on party spending: we need an end to the so-called party funding “arms race”. It is the capacity to spend money which drives parties to raise it.
In fixed term parliaments, it should be possible to limit campaign expenditure for longer than the rules currently do.
The current cap is also too high with none of the main parties reaching it in 2010. To have any real meaning, the limit of £19 million should be reduced substantially.
The third principle is that parties must widen the funding they receive. The proposals I am outlining would lead to a significant reduction in the funding available to all parties.
All the independent reports on this subject, including that by Sir Christopher Kelly most recently, have argued that the introduction of a donation cap would have to be accompanied by more public funding for political parties.
I do not believe that is realistic in the current economic circumstances and no one is suggesting such a course be taken during the lifetime of this parliament.
If this does need to be addressed in the longerterm, let us first use the negotiations to look elsewhere and see whether other changes can address the issues thrown up by reform of party political funding.
So we need to look in detail at lower caps on spending, at how parties can seek to widen their funding base by placing more emphasis on small donations and at whether there are ways to reshape the money already spent on politics.
Contrary to what is sometimes written, Labour receives funding from a range of sources. Around 40 per cent comes from the unions and a similar proportion from our members. We receive more of our income from members than either of the other main parties.
But we can do more.
The change I am outlining here would represent an upheaval in funding of political parties. The problems that have arisen are long-term and deep-rooted so it may be that change will also take time.
The last Labour government passedlegislation requiring the disclosure of donors’ identities as well as banning foreign money and we did it by consensus.
It is essential that we build lasting change once again. We should proceed in such a way that any change does not significantly disadvantage one party over another. It should be done by consensus and of course in the meantime parties will still need to be funded, including through donations of more than £5,000.
But change must and will come. If you ever needed reasons why we must change our politics, you only need to look at the antics of this out of touch Government in recent weeks: a Budget which forces millions to pay more so that millionaires can pay less, drawn up on the advice of some of the Conservative Party's millionaire donors.
It is in the interests of our democracy and our country to bring about change.I call on David Cameron and Nick Clegg to show the same determination to change our politics.