In the public meetings of the European Parliament’s Committee on Constitutional Affairs (AFCO) held on 15 and 22 June, several Members of the European Parliament expressed their interest in “running the numbers” on various proposals for the reform of the public funding regime of European political parties. Indeed, in addition to its underlying philosophy and goals, the financial impact of a public funding regime is an essential element that must be considered before its adoption. This analysis by European Democracy Consulting aims at providing decision-makers with reliable figures and insightful visualisations in order to better grasp the concrete impact of their reform proposals.
Current distribution of public funding
What the law says
The description of the current regime of public funding applicable to European political parties is found in Regulation 1141/2014 on the statute and funding of European political parties and European political foundations. Relevant provisions are found in Article 17 (Funding conditions) and Article 19 (Award criteria and distribution of funding).
With regard to eligibility, Article 17(1) states that “a European political party which is registered in accordance with the conditions and procedures laid down in this Regulation, which is represented in the European Parliament by at least one of its members, and which is not in one of the situations of exclusion referred to in Article 106(1) of the Financial Regulation may apply for funding from the general budget of the European Union”. An essential element here is the requirement for a European political parties to have at least one MEP in order to benefit from European public funding.
With regard to the distribution, Article 19(1) states that, out of the total amount of funding allocated for the public funding of European political parties:
- “10% shall be distributed […] in equal shares”, making up the lump sum, while
- “90% shall be distributed […] in proportion to [European parties’] share of elected members of the European Parliament”, making up the MEP-based funding (as a form of electoral subsidy).
Current amounts of European public funding
According to Article 18(1), European political parties seeking to receive European public funding must “file an application with the European Parliament following a call for contributions or proposals.” As described by the European Parliament, European political parties submit their application for funding by 30 September of year X in order to receive public funding for the year X+1. A pre-financing takes place in February X+1, reports on the use of funds are submitted by European parties by the end of June X+2, and the process wraps up with final payments (or the recovery of funds) in early X+3.
As a consequence, the result of the May 2019 European elections impacted the September 2019 and September 2020 requests for funding, and therefore the distribution of European public funding for the years 2020 and 2021.
The visualisation below presents the distribution of European public funding for 2020 and 2021. The left side is limited to the MEP-based funding, while the right side comprises both the lump sum and the MEP-based funding. These figures are provided by the European Parliament.
Note: these sums are the maximum amounts that each European political party may receive, but not necessarily the amounts that each European party has received (or will receive) in practice. The reason for this is that, according to Article 17(4), European public funding “shall not exceed 90 % of the annual reimbursable expenditure”, meaning that not all expenses are covered and that European parties must provide at least 10% of their annual reimbursable expenditure from private sources. Should a party fail to raise sufficient private funds, the amount of European public funding provided is decreased in order not to exceed the 90% requirement.
The decision to base the electoral subsidy on European parties’ number of MEPs (MEP-based funding) and not on each party’s number or share of votes (vote-based funding) has a major consequence: it translates electoral thresholds to European party funding. As such, a European political party will not obtain European public funding despite receiving electoral support in a Member State if it fails to get MEPs elected in that Member State. This applies both to legal thresholds (which are defined in law and may require up to 5% of the votes cast in order for candidates to be elected) and to natural thresholds (the minimum share of the vote required to elect an MEP, which reaches 16,7% in Member States with the floor number of 6 allocated MEPs). Overall, any lack of proportionality in the electoral system will be translated into a lack of proportionality in the allocation of the electoral subsidy.
The impact of legal and natural thresholds disproportionately affects European political parties with smaller national member parties, which are more likely to fail to reach electoral thresholds in a number of Member States. Consequently, it favours European political parties with larger national member parties by providing them with a larger share of European public funding than their actual share of electoral support. For instance, by some measure, the EPP and PES have received, via their member national parties, a combined 37% of the vote at the 2019 European elections. Despite this, they have received over 48% of allocated public funds for 2020 and 2021. Between the introduction of European public funding in 2004 and 2019, these two parties have consistently received over half of all available European public funding.
Additionally, in the case of the EU, the use of degressive proportionality (which gives citizens of smaller Member States more per-capita representation in the European Parliament) also skews the equality of citizens in directing public funding to the party of their choice through their vote.
Draft report of the AFCO Committee
On 22 June, the two co-rapporteurs for the report on the application of Regulation 1141/2014, MEPs Rainer Wieland and Charles Goerens, presented their draft report to the AFCO Committee. In its paragraph 28, this draft report “proposes that the distribution of Union funds be based on the number of votes received by the European political parties in the last European elections”. It therefore proposes to replace MEP-based funding with vote-based funding.
With no further information about this reform, this proposal should be understood as amending the second bullet point of Article 19(1) with a phrasing along the lines of “90 % shall be distributed among the beneficiary European political parties in proportion to their share of votes in the last European elections”, meaning that the only change made is the source of the percentage used.
Votes received by European political parties
The main challenge of this reform is to precisely assess the number of votes received by European political parties at European elections. Since European elections are organised and carried out at the Member State level, European political parties do not directly compete in these elections and their name does not appear on ballots. Instead, European citizens vote for lists of national parties or coalitions of national parties. Several cases can therefore occur.
- A national political party runs with its own list in a Member State. If this party is a member of a European political party, the votes it receives can be directly attributed to its European political party of membership.
- Two or more national political parties form an electoral coalition with a common list in a Member State, and all of them are members of the same European political party. The votes they receive can be directly attributed to their European political party of membership.
- Two or more national political parties form an electoral coalition with a common list in a Member State, but some of them are members of different European political parties or some of them are not members of any European political party.
This last case requires a decision on how to allocate the votes received by the common list to each of the national political parties and, consequently, to the one or more European political parties involved. Belgium provides an easy solution to this conundrum, as its electoral system allows citizens to express a preference for a candidate on the list. This preference can be used to assess the level of support received by the candidates of each national political party and, therefore, for each national party.
In the absence of this expressed preference (which is the case for the remaining Member States), several options are available. The first option is to split the vote equally between the various national parties making up the electoral coalition. This option makes the allocation of votes easy, but fails to reflect the relative importance of the various members of the coalition, which may be significant.
Another possibility is to allocate the votes based on the number of candidates from each national party present on the list. This requires party membership information on all candidates, a request which may be complicated further when larger Member States require lists to have as many candidates as there are seats allocated to the Member State. This solution provides some information about the relative importance of the members of the coalition, but may also lead to a biased view when smaller parties are given a number of non-eligible positions as a gesture of goodwill.
A similar possibility is to allocate the votes based on the number of candidates from each national party actually elected. This requires much more limited membership information (only on the 705 elected MEPs) and is therefore more easily implementable than the previous version. It also better takes into account the relative importance of the members of the coalition by focusing on the top candidates. However, it brings back the issue of electoral thresholds (whereby European political parties composed of smaller national parties may receive support but fail to see their candidates elected on the coalition list). Additionally, this solution becomes unreliable as the number of elected candidates decreases: with only one candidate elected, all the votes go to a single national party, and the method does not provide a solution when no candidate is elected.
Alternatively, the members of the electoral coalition themselves could be relied on to assess their own relative strength and could agree on a allocation of votes among themselves. This solution would be rather easy to implement, as it places the onus on national parties themselves. However, letting coalition members decide the allocation of votes removes the objectiveness of an external criteria and places smaller national parties (which may hope to fair better than expected) at a disadvantage when bargaining with larger parties. Furthermore, this bargaining is likely to lead to horse-trading and quid pro quos (whereby smaller parties could agree to a smaller share in exchange for favours or positions), which would be detrimental to the transparency and rule-based nature of public funding.
One last solution is to give this decision back to voters in a way that the electoral system may not allow for. For instance, the allocation of votes could be decided using the number of individual donations received by each national party of the coalition during the campaign. The amount of the donations would not be taken into account and several donations by the same individual would be counted as one. This proposal requires proper post-electoral reporting, which the transparency of the party system would benefit from anyway. It would have the added benefit of increasing parties’ incentive to reach out to voters, and of helping increase parties’ private income through small donations.
In the absence of a clear framework, however, the amount of information available on electoral coalitions for this analysis is limited and, with the exception of Belgium, the number of elected MEPs from each national party is the most readily available information. With the exception of Belgium, the allocation of votes was therefore made based on the national party membership of elected MEPs. When no MEPs were elected, the allocation of votes was made equally between the members of the electoral coalition.
Impact of the proposal
Changing the basis of the calculation of the electoral subsidy from MEP-based to vote-based means that some European political parties will gain funding, while others will lose funding. This is the direct result of re-aligning this public subsidy with voters’ choices. More specifically, European parties which had received a share of MEPs lower than their share of the vote will see their share of the new electoral subsidy increase, and therefore gain funding. Conversely, European parties which had previously received a share of MEPs greater than their share of the vote will see their share of the new electoral subsidy decrease, and therefore lose funding.
Far from being a punishment on some parties, these gains and losses are merely a truer reflection of citizens’ opinions at the polls. A detailed table given in Annex 2 indicates, for each Member State, whether European parties’ share of MEPs is higher or lower than their share of the votes received in the 2019 European elections.
The visualisation below shows each European political party’s share of MEPs, its share of the vote at the 2019 European elections, and the difference between these values. Controls on the right-hand side allow a choice between the public funding amounts of 2020 and 2021.
The visualisation below provides the amount of electoral subsidy allocated to European political parties under the current MEP-based regime, the amount of electoral subsidy that would be allocated using a vote-based distribution, as well as the difference between the two. Controls on the right-hand side allow a choice between the public funding amounts of 2020 and 2021.
Improving the funding regime
While making the electoral subsidy reliant on votes instead of MEPs is a step in the right direction to more faithfully rewarding European political parties for the electoral support they receive from citizens, we can do more to improve the European public funding regime and ensure that it promotes a healthy European party system, more closely connected to European citizens.
Using fixed amounts instead of percentages
As we have seen, the current European public funding regime uses a split-envelop mechanism: a total amount is agreed upon every year for the funding of European political parties, and this envelop is split between European political parties, and divided into a lump sum and an electoral subsidy. In its current phrasing, the draft report of the AFCO Committee proposes to change the electoral subsidy from MEP-based to vote-based, but it does not challenge the split-envelop model itself.
The main issue of a split-envelop funding regime is that it fails to ascribe public funding in a way that is directly correlated to a party’s own performance. By using percentages, it always assesses a party’s performance relative to that of other political parties.
In the case of the European public funding regime, this is done at two levels: via the number of political parties, and via the electoral subsidy. Since the envelop of public funding is split between all qualifying European political parties, the amount available for each party is dependent on the sheer number of political parties qualifying for funding every given year. And while negotiations for the envelop itself may seek to factor in the number of parties, these negotiations cannot foresee exactly how many parties will actually qualify. This dependence of funding on the number of European parties is especially problematic in the European party system, where the number of political parties has proved much more unstable than in national party systems (with the number of European parties progressively doubling from 8 to 16 between 2004 and 2016, before crumbling to 10 by 2017).
Since the number of MEPs (Brexit aside) is fixed, the creation of new European parties only affects the distribution of MEPs between European parties and, therefore, the distribution of MEP-based funding (the same would go for vote-based funding). However, the lump sum is distributed equally to all European political parties, and its amount mechanically goes down as the number of parties goes up. Since the objective of the lump sum is to ensure a minimum level playing field and to help parties cover basic expenses, its amount should not fluctuate with the number of parties qualifying for funding.
Additionally, using percentages for the distribution of the electoral subsidy (whether MEP-based or vote-based) means that their amount of public funding received under this subsidy depends not just on their electoral performance, but also on that of other parties. For instance, should Party A fail to mobilise its base and lose votes, its electoral subsidy will decrease, which is to be expected. However, even if those citizens stay at home, the share of the vote of other political parties will increase, and so will their electoral subsidy; yet this increased funding does not reflect any extra achievement on the part of these other parties.
By contrast, using a fixed amount for the lump sum and an amount-per-vote for the electoral subsidy remedies these shortcomings. Using a fixed amount for the lump sum, given equally to all parties regardless of their number, provides increased financial stability and predictability, especially for smaller political parties which will know how much they are sure to expect. The amount of the lump sum can be decided based on more objective criteria, including basic party expenses, such as office space in Brussels, and basic administrative, IT and communications costs. Finally, this amount can be adjusted on a yearly basis using a consumer price index based on Eurostat figures.
Likewise, using an amount-per-vote for the electoral subsidy has multiple advantages. On the one hand, it links directly the electoral subsidy to a party’s electoral performance: more votes, more funding; fewer votes, less funding. It also gives European political parties a direct interest, not only in getting a greater share of the vote, but in getting a greater number of votes, and therefore in mobilising voters and increasing voter turnout.
On the other hand, it allows for a more advanced rewarding mechanism. Under the split-envelop model, all votes are rewarded equally. However, while the “one person, one vote” principle is essential in terms of representation, it is not compulsory in terms of public funding. Instead, a system of brackets can be devised to give a greater reward to the first votes, making the electoral subsidy regressive. A threshold can also be set up, preferably at a rather low level.
At any rate, since tying public funding to votes provides citizens with the indirect possibility to financially support the European party of their choice, it is essential that this amount-per-vote be the same in all Member States. This ensures the equality of European citizens across the Union, and avoids European parties focusing their electoral efforts in Member States where their “reward” per citizen would be greater.1
Likewise, systems of bonuses are not recommended. A bonus given to the first N number of parties or to parties receiving more than a given number of votes would run directly against the regressive nature of the funding system, which aims at retaining somewhat of a level playing field among political parties. This is an essential part of ensuring that smaller parties are able to defend their ideas and, therefore, of guaranteeing political pluralism. In the context of the European Union, the idea behind a geographical bonus is understandable, but its implementation is better served through a membership-based subsidy (discussed below) than via the electoral subsidy.
The visualisation below compares the amount of the electoral subsidy between the split-envelop model (MEP-based or vote-based) with the amount provided using an amount-per-vote. Controls on the right-hand side provide the possibility to create a threshold, select the value of the vote, and set a bracket (0 means no bracket). A table summarising the various amounts of the electoral subsidy and their differences is given in Annex 3.
It must be noted that, unlike with the current split-envelop system, the total amount of the electoral subsidy actually disbursed to European political parties cannot be precisely known in advance, since it rests on the voter turnout. However, there is no risk of unforeseen costs, as this subsidy has a built-in maximum amount (the amount-per-vote multiplied by the number of eligible voters).2 On the one hand, the EU’s low voter turnout would mean that a substantial share of the total allocated amount for this subsidy would not be disbursed; on the other, knowing that a large amount of public funding is allocated and available can incentivise political parties to further encourage citizens and eligible residents to vote.
Rewarding individual membership
According to the European Parliament, as of May 2021, the number of individual members of European political parties ranged from 0 for the EFA to 955 for ALDE. Out of ten European political parties, six had fewer than 12 individual members — for a Union of close to 450,000,000 citizens. In practice, no European political party has yet seized the opportunity to develop a wide individual membership.
Given the importance for a healthy European democracy of strengthened ties between European citizens and their European political parties, a dedicated stream of public funding could aim at incentivising and rewarding the individual membership of European parties. For this subsidy to serve its purpose, it is important that its scope be limited to individual members of the European parties themselves, and not extended to individual members of their national member parties.
As for the proposed electoral subsidy, an amount-per-member could be granted to European parties alongside the lump sum and the electoral subsidy. Given the current quasi-absence of individual members in European parties, a highly regressive system could be put in place: the first thousands or tens of thousands of members would be highly valued, while the following ones would have a much lower value.
For instance, European political parties could receive €100 per member for the first 5,000 members and €30 after that. As a further incentive, a minimum threshold on the number of members can be implemented, for instance 500. A ceiling could cap this stream of funding, so as to avoid unwanted skyrocketing costs. Over time, the regressive distribution could ease, and the price difference between the first members and the remaining ones could slowly even out, thereby encouraging a larger membership.
Of course, safeguards must be put in place to avoid fake or abusive registrations. In the Netherlands, parties are required to have at least 1,000 members paying a membership fee of at least €12. A similar system could be used for European political parties, in addition to periodic controls by the APPF of citizens’ actual membership status. In order to be considered valid, individual members should have already paid their membership fee in full.
The visualisation below shows the value of the proposed membership-based subsidy based on European political parties’ current individual membership. Controls on the right-hand side provide the possibility to create a threshold, select the value associated with a member, and set a bracket (0 means no bracket).
Finally, mindful of the EU’s current Member State-centric political organisation, it seems important to reward not just a wide individual membership, but also a European political party’s presence in a larger number of Member States – instead of building strong presences in just a few Member States. A distribution key based on Member States’ population (with floor and ceiling values) can be used to compute the minimum number of members needed in a Member State for a European party to be considered “sufficiently present” in this Member State. A mathematical formula can then link the number of Member States in which a European party is present with a multiplying coefficient that would increase the member-based subsidy.
For instance, using this multiplying coefficient, a European political party with 400,000 members spread across 20 Member States would receive more public funding than another party with 400,000 concentrated in two Member States. Through this system, European political parties would have a direct incentive to broaden their presence in Member States.
A number of mathematical formulas can be used to compute the proposed multiplying coefficient. In order to fit their purpose, these formulas should make the coefficient increase substantially between 1 and 5 Member States, and stabilise towards the maximum desired value of the coefficient between 20 and 27 Member States. This way, European political parties would have a substantial interest in having sufficient presence in several Member States, while additional Member States beyond 20 would not be overly valued. An example of formula and coefficient is given in Annex 4.
Unfortunately, given the limited information provided by the European Parliament (which is limited to the total number of individual members per European party), it is not possible to test the impact of the proposed geographical multiplying coefficient on European political parties: the value of the subsidy would at most be multiplied by the maximum value of the coefficient, but we cannot know exactly by how much, and using the number of Member States where European parties have member parties would not provide a remotely faithful image of their individual membership.
Rewarding the raising of private funding
While the public funding of political parties is important to ensure that parties are sufficiently funded and not captured by private interests, it remains essential for parties to have an incentive to reach out to citizens and raise private donations, in particular small donations. In practice, private donations currently account for around 1% of European parties’ public and private income.3
In order to incentivise European political parties to reach out to citizens and reward the raising of private funding, a dedicated stream of funding matching private donations with public funding can be created, in addition to the lump sum, the electoral subsidy, and the member-based subsidy. Under this stream, each euro of private donations received — therefore excluding membership fees, which are compulsory contributions by party members, the value of which is set by the party itself — would be matched with a fixed sum. This matching fund can be apply to all donors or, preferably, be limited to natural persons.
As with previous recommendations, a regressive system would provide a greater reward for a first bracket, and a cap on the amount of donations per donor would prevent this subsidy from being skewed in favour of high-earners. As with the member-based subsidy, a multiplying coefficient can be divised to incentivise European parties to raised private funding from across the Union.
For instance, in Germany, political parties receive €0.45 of public funding for each donated euro, up to €3,300 per donor and per year. In the case of European political parties, and given the very limited amount of private donations, each euro could be matched with €10 euros in public funding up to €500,000 of cumulated donations, and €3 after that; only donated amounts of €4,000 per donor would be taken into account.
The visualisation below shows the value of the proposed matching fund based on European political parties’ donations. Controls on the right-hand side provide the possibility to create a threshold, select the value associated with every private euro raised, and set a bracket (0 means no bracket). The value of donations received by European political parties is for the years 2018 and 2019 (and an average of the two) and published by the APPF; donations for the year 2020 should be published shortly. Donations can include natural and/or legal persons.
Finally, the visualisation below compares the total value of the proposed European public funding regime — including lump sum, the vote-based electoral subsidy using an amount-per-vote, the member-based subsidy, and the matching fund — with the current amounts currently received by European political parties (with the lump sum and MEP-based funding as a percentage). The figures for the funding streams are the ones displayed in the previous visualisations and account for users choices of thresholds, values and brackets; a table summarising these values is given in Annex 5.
One of the core principles of the design of a public funding regime is to align the types and modalities of the subsidies with the behaviour that seeks to be rewarded.
The lump sum rewards the mere creation of a political party and contributes to the promotion of political pluralism; it should be calculated to provide basic financial security and stability, and cover a parties’ minimum expenses. The electoral subsidy rewards electoral performance; it should be designed in a way that rewards each party according to its own performance and, preferably, incentivise parties to mobilise citizens. The member-based subsidy rewards parties for involving citizens in the political arena; especially in the context of the EU, it should create a dynamic of individual membership that is currently missing, preferably spread across the Union. Finally, the matching fund rewards parties for involving citizens through financial donations; especially in the context of the EU, it should create a dynamic of small donations fundraising that is currently missing.
These considerations (the current structure of the European party system and the direction in which we wish to see it evolve) are crucial in the design of a successful regime of public funding. The current regime has led to financial and party instability, has failed to create a true level playing field and to fairly reward electoral performance, and has not led European parties to develop their individual membership or acquire a reliable source of private funding. This regime must be reformed and the right lessons must be learned. This analysis, alongside the recently-published ODHIR comments on the reform of European parties (and its accompanying Addendum), provides solid legal and technical bases for a successful reform gearing the European party system towards European citizens.
Annex 1 – Results of the 2019 European elections
Annex 2 – Difference between shares of votes and MEPs
Annex 3 – Amount of the electoral subsidy
Annex 4 – Geographical multiplying coefficient for the member-based subsidy
Annex 5 – Amount of the total proposed subsidy
- As noted earlier, the use of degressive proportionality for the election of MEPs already introduces a breach of citizens’ equality in the current MEP-based electoral subsidy.
- In Germany, a grand total is allocated for the public funding of political parties, but it is not limited to the electoral subsidy and also includes the matching of private donations.
- Private income here refers to donations and contributions. For more information on donations and contributions received by European political parties, see European Democracy Consulting’s analysis on Visualising donations and contributions.