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The Big Short? The Government’s consultation on Short money

Yesterday, the Government quietly published a consultation paper seeking views on how it should implement a 19% cut in Short money – the money provided to Opposition parties in the House of Commons to assist them in their parliamentary business. Hannah White examines the consultation, to assess the Government’s case.

It is right for the taxpayer to pay to support opposition parties. As we have said previously, the development of policy, knowledge and skills helps opposition parties hold the government to account. This is an important part of the Westminster system, and has a positive impact on the effectiveness of government. It also increases the effectiveness of those parties when they subsequently come into government. While we welcome the Government’s move to consult on Short money, the consultation paper published yesterday does little to clarify the case for a cut. That is to say, it does not provide any explanation of its proposed cut based on an assessment of areas where efficiencies could sensibly be found. Instead it takes a curiously back-to-front approach to the business of consultation, beginning by seeking to justify the 19% cut announced in November. More troublingly, there are two ways in which the figures used in its ‘Rationale for Savings’ could be seen as misleading: First, the paper compares a real terms cut of 19% in government departments by the end of parliament with an immediate cash terms cut of 19% for Short money. The paper suggests that a 19% upfront cut in Short money followed by a freeze in cash terms over the remainder of the Parliament would be ‘in line with the average savings asked of non-protected Whitehall departments over this Spending Review’. But the cuts made by government departments will be in real terms rather than cash, and no department has been asked to make an immediate 19% cut in 2016/17 and then maintain a level budget in cash terms (declining in real terms). Instead they will aim to hit their 19% target by the end of the parliament. The following chart demonstrates the considerable difference between these two approaches.
Second, the consultation paper states that Short money has ‘risen year on year from £6.3 million in 2010–11 to £9.5 million in 2015–16, an increase of 50%’. It explains this increase is due to automatic RPI indexation and higher election turnout, increasing the absolute number of votes (one factor used to calculate Short money, along with the number of seats a party wins). But using 2010 and 2015 as the dates to illustrate the increase, without explaining how the different election outcomes in those years changed the cost of Short money, is misleading:
  • In 2010, the decision of the Liberal Democrats to go into coalition disqualified them from receiving Short Money. This depressed the Short Money figure because it meant there were fewer opposition party seats and votes to be paid for than had they stayed in opposition (according to the House of Commons Library, 279 opposition seats and 9.8 million votes in total).
  • By contrast in 2015, the narrowness of the Government’s Commons majority means there are more opposition seats (314) and votes (18.8 million) to be paid for. This, combined with UKIP’s success in winning a single parliamentary seat (which means that the party’s 3.8 million votes attract a Short money dividend) has led to a significant increase in the amount of Short Money being paid out.
None of this is to say that the way Short money is currently calculated is necessarily right. Nonetheless, the outcome of the last election produced a jump in the overall cost of Short money, which makes it legitimate to question whether the principles on which it is calculated are the right ones. The idea of determining how much money each party should get based on number of seats and votes was first proposed in 1974, when Short money was introduced. Automatic uprating in line with the Retail Price Index (RPI) was introduced in 1993. The last significant change was in 1999, when the value of the votes and seats elements of the formula were increased in line with a recommendation from the Committee on Standards in Public Life. A specific sum for the Leader of the Opposition was also introduced. Since then, the way that political parties do their parliamentary business has undoubtedly changed – not least with the advent of the internet. A zero-based review of opposition party costs could be an illuminating exercise and would be useful in inform any decision on how Short money should be allocated in future. Failing this, it would be useful to review current Short money expenditure, but it’s impossible to see how opposition parties currently spend their Short money. As the Government points out in its consultation, all the parties currently have to do is show the Commons authorities a certificate proving that their accounts have been audited. The Institute believes that – in line with other moves towards transparency across the public sector – political parties should have to disclose a full account of their use of Short money to the Commons authorities and a summary of that information should be made publicly available. The Government clearly thinks it is time for the House of Commons to revisit the justification for Short money and it is reasonable for it to do so. But it is inappropriate to propose a significant cut without first reviewing the principles on which Short money is calculated and assessing the costs incurred by opposition parties. An arbitrary cut risks undermining the important role that Short money plays in improving the effectiveness of opposition parties and the role they play in Parliament – a temptation the Government would be wise to resist.
The chart shows real-terms forecast budget changes, deflated by RPI. Departmental cut is the average cut applied to RDEL (Resource Departmental Expenditure Limits) at non-protected departments (i.e. excluding MoD, SIA, DFID, DH, DfE, Scot, Wales, NI), excluding depreciation. Abbreviations for government departments can be found here.

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