Political_Donations_JakubTalacko

Money and Politics: Regulating Political
Donations in the United Kingdom and Germany
Jakub Talacko
11160233
University of Amsterdam
Supervisor: Prof. Jeffrey Harrod
Second Reader: dr. R. M. Sanchez Salgado
Master Thesis - Political Science
European Union in a Global Order
The Global Politics of Investment and Trade

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1 Table of Contents
1 Table of Contents............................................................................................................. 2
2 Lists.................................................................................................................................. 4
2.1 List of Abbreviations ................................................................................................ 4
2.2 List of Figures........................................................................................................... 5
3 Introduction...................................................................................................................... 6
3.1 Research Question .................................................................................................... 8
3.2 Research Method ...................................................................................................... 9
4 Literature review............................................................................................................ 10
4.1 Existing Theoretical Approaches............................................................................ 10
4.1.1 Majoritarian Electoral Democracy................................................................... 11
4.1.2 Economic Elite Domination............................................................................. 13
4.1.3 Majoritarian Pluralism ..................................................................................... 14
4.1.4 Biased Pluralism .............................................................................................. 15
4.1.5 Choosing the Most Suitable Theoretical Approach......................................... 16
4.2 The Findings of Current Comparative Political Finance........................................ 18
5 Case Studies................................................................................................................... 21
5.1 Political Finance Regulation................................................................................... 21
5.1.1 Campaign Finance in the United Kingdom ..................................................... 28
5.1.2 Campaign Finance in Germany ....................................................................... 35
5.2 Introducing the Data-sets........................................................................................ 40
5.2.1 Data-set for the United Kingdom..................................................................... 40
5.2.2 Data-set for Germany....................................................................................... 41
6 Presenting and Interpreting the Data.............................................................................. 41
6.1 The List of Hypotheses........................................................................................... 42

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6.2 Patterns of Donations in the United Kingdom........................................................ 43
6.2.1 Patterns of Donations by Individual Companies in the United Kingdom ....... 45
6.3 Patterns of Donations in Germany.......................................................................... 54
6.3.1 Patterns of Donations by Individual Companies in Germany ......................... 56
6.4 Comparative Perspective ........................................................................................ 67
7 Conclusion ..................................................................................................................... 70
8 Reference List ................................................................................................................ 74
8.1 Primary Sources...................................................................................................... 74
8.1.1 Data-sets........................................................................................................... 74
8.1.2 Legal and Governmental Publications............................................................. 74
8.1.3 Newspaper Articles.......................................................................................... 75
8.1.4 Webpages of Companies Studied or Business Reports ................................... 76
8.2 Secondary Sources.................................................................................................. 77

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2 Lists
2.1 List of Abbreviations
CDU Christian Democratic Union of Germany
CSU Christian Social Union in Bavaria
EU European Union
FDP Free Democratic Party of Germany
JCB J.C. Bamford Excavators Limited
PPA Political Parties Act
PPERA Political Parties, Elections and Referendums Act 2000
SPD Social Democratic Party of Germany
UK United Kingdom

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2.2 List of Figures
Figure 1- Theory Predictions (Gilens & Page, 2014) ....................................................... 17
Figure 2 - Combined Donations of the UK Companies.................................................... 44
Figure 3 - Donations by Norbrook Laboratories............................................................... 46
Figure 4 - Donations by JCB ............................................................................................ 48
Figure 5 - Donations by Ministry of Sound...................................................................... 49
Figure 6 - Donations by International Motors .................................................................. 51
Figure 7 - Donations by IPGL .......................................................................................... 52
Figure 8 - Combined Donations of the German Companies............................................. 55
Figure 9 - Donations by BMW ........................................................................................ 56
Figure 10 - Donations by BMW to Individual Parties...................................................... 57
Figure 11 - Donations by Allianz...................................................................................... 59
Figure 12 - Donations by Allianz to Individual Parties.................................................... 59
Figure 13 - Donations by Philip Morris............................................................................ 61
Figure 14 - Donations by Philip Morris to Individual Parties .......................................... 61
Figure 15 - Donations by Daimler .................................................................................... 63
Figure 16 - Donations by Daimler to Individual Parties................................................... 64
Figure 17 - Donations by Rheinmetall.............................................................................. 65
Figure 18 - Donations by Rheinmetall to Individual Parties ............................................ 66
Figure 19 - Summary of the Hypothesis Testing.............................................................. 68

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3 Introduction
“One of the best predictors of policy around is Thomas Ferguson's investment theory of politics,..
which essentially ,…,describes elections as occasions in which groups of investors coalesce and invest to
control the state”. - Noam Chomsky1
Much like the essence of Chomsky’s quote, the essence of this thesis has been inspired by
the works of professor Thomas Fergusson. As for myself, growing up in a transitioning post-
communist country, there was no absence of examples where various groups of people took a
firm control of the state. They may have had been members of different parties but the story
almost always ended up the same. Whilst the general population struggled with the challenges of
a rapid transition towards a capitalist, free market economy, those in power made sure that
state’s wealth was properly distributed - among their backers, friends, and families. Perhaps this
background has significantly influenced my perception of both money and the state to the extent
that reading Ferguson’s (1995) book “Golden Rule: The Investment Theory of Party Competition
and the Logic of Money-Driven Political Systems“ felt like finally reading about a scholar that
had similar perception of the workings of the state and the role of money in it.
With the new found theoretical base discovered in the works of professor Ferguson, the
thesis took a turn towards the exploration of the direct relationship between political campaign
donations and the influence they had on policy-making in the corner of the world that I grew up
in - Europe. However, it soon became apparent that the scholarly foundations laid out in works
of predominantly American scholars such as - aforementioned Thomas Ferguson or Anthony
Downs - were in some cases only usable in the context of the United States. Mainly databases
containing large quantified policy data-sets such as Gilense’s or Baumgartner’s were shown to
be unparalleled to any of those that dealt with the situation in various European countries.
Indeed, the effort to establish such complex databases proved to be beyond the effort and scope
of this thesis.
However, in the process, an idea was born. Due to the nature of campaign laws and
mainly the financial disclosure laws - countries such as Germany and the United Kingdom both
possess a very transparent and accessible campaign finance records. These official data-sets in
1
Obtained from Mr. Chomsky’s official Facebook Page, slightly edited -
https://www.facebook.com/NoamChomskyQuotes/posts/614649181912506

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themselves are comparable to those that the Federal Election Commission2
in the United States
uses and thus lend themselves to some of the hypotheses and methods that the scholars in
American Politics deploy. The fact that these records span the period of over 10 years and
contain crucial information about the donors allows us to track their during different
circumstances and over longer periods of time. Therefore, this data lends itself to an extensive
analysis that allows testing of some predictions made by various theories of political finance
studies.
The thesis also presents a literature overview which provides an overview of the most
dominant approaches to the study of political finance in the wider field of the American Politics
Studies. This allows the thesis to build a proper theoretical bridge required to use some of the
findings made in the field of US political finance. These findings serve well as building blocks
that allow the main analysis of the thesis to better focus itself and also provide smaller testable
hypotheses for the data part.
Moreover, the thesis deploys a structure based on two case studies from two major
European countries - the United Kingdom and Germany. In these case studies, the most
important feature that shapes the landscape of political finance is described These two countries
were chosen mainly because of their exemplary transparency when it comes to the money
involved in financing political activities. Furthermore, both countries are significant powers in
the European Union both in terms of economic and political clout and the importance of findings
will reflect this situation. Also, a dual case study element allows for a greater comparative
analysis in terms of political finance. This will allow for an in-depth comparison of the
significance of the different legal backgrounds that exist in Germany and UK as far as the
workings of the political finance system in each country goes.
The relevance of the topic studied stems from the nature of the field that is investigated.
The study of domestic politics, especially in an area such as political finance is of significant
importance for anyone who desires to improve on the ideal of the liberal democracy and its
workings. The study itself allows an insight into the behaviour of political donors who play a
large role in financing political campaigns. Thus, the actions of donors have direct impact on the
workings of our democracies, as modern day campaigns do depend on outside financing (Snyder,
2
For a comparison see Federal Election Commission (2015) and the data-sets for Germany and the United
Kingdom

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1990). It also allows for further testing of some of the established theoretical approaches in the
study of the political campaign finance. The theoretical implications along with previous insights
can both be tested against the data provided.
The focus is placed especially on big corporations and industry representatives and their
contributions to political campaigns. Are the preferences of the big donors reflected in the policy
outputs of governments that come to power using these donations to fund their campaigns? If
yes, then the patterns of donations will surely reflect this. Professor Thomas Ferguson has argued
in his book “Golden Rule: The Investment Theory of Party Competition and the Logic of
Money-Driven Political Systems“ that this is indeed the case, at least in the United States. Thus,
in my thesis, I hope to reapply and re-invent this theory in the specific context of the two
European countries and their respective unique regulatory systems. Truly, the European context
offers an opportunity to expand upon this theory as it provides us with the chance to cross-
examine some of the assumptions put forward by the theory in different countries under different
institutional settings. The laws in place in Germany and the United Kingdom ensure that the flow
of money to political parties can be traced. Thus, the two countries offer a great opportunity to
expand upon the scholarly knowledge in the field of comparative political finance, especially in
the European part of it.
3.1 Research Question
The main research question is: “How do different regulatory practices influence the
patterns of donations to political parties among large donors?”. The most important goal of this
thesis is to explore the relationship between donors who contribute to political parties and the
behaviour that can be observed when it comes to their donations along with the influence o
regulatory practices upon this behaviour. In order to establish a clear empirical factor that can
serve as an indicator of this behaviour, the patterns of donations these donors create over the
years are used. To understand the assumptions that the most important scholars put forward, the
theoretical chapter pays significant attention to the way political donors are perceived in modern
democratic political systems. These assumptions in themselves constitute a smaller set of
hypotheses that will also be tested. Furthermore, the practices through which states regulate their
political finance system are introduced. These are to be understood as sets of regulations that set
a legal framework in which the political party and the donors operate. The regulations

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themselves are presumed to directly impact the behaviour of large donors and are thus explored.
The main implications that are obtained from the literature about political finance systems are
then also tested against the data and contribute to expanding on the answer to the main research
question.
3.2 Research Method
In order to provide the best answer to the questions listed above the thesis needs to utilize the
correct research methods. There are three major components that are used in this thesis to reach
that goal.
First, the current literature and scholarly work on the relevant themes to the study of
political finance are reviewed. This extensive review allows to build upon the existing
knowledge and insights, whilst borrowing from the methods used by previous scholars that have
worked within the field. The theoretical review also provides information about the fitting sub-
questions that need to be answered in order to answer the main research question.
Second, qualitative analysis is also used when discussing the relevant legal backgrounds
of the two countries that are the focus of this thesis. By providing the relevant legal regulation in
detail some of the insights from the theoretical review can be further specified to suit better the
real situation in the two countries studied. Thus, the major component of this thesis consists of a
qualitative analysis based on both scholarly work and existing primal legal writings.
Third, the quantitative part of this thesis consists of the presentation of the data relevant
to the case study. The data presented come from the official governmental political finance
reports of both Germany and the United Kingdom. The data is deployed in order to allow the
testing of the hypotheses that were generated in the qualitative part. The main focus is placed on
the observation of the behaviours that donors display over time. The amount these actors donate
can be traced over the years and the patterns of their donations can then be established. Thus, one
can observe the patterns of both specific companies and also the patterns of the combined
donations over the years. Also, due to the case study aspect, there is an opportunity to compare
the patterns not only between individual companies within a country but also cross-nationally.
The focus on companies is placed mainly due to the insights obtained from the theoretical
review. The theoretical approaches that were found to be the most fitting place a large emphasis
on donations of large companies or corporations. Therefore, the thesis also focuses on these

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actors. The companies were chosen randomly from the data-sets that are used within the thesis.
Although, the companies were chosen randomly the requirement was that companies chosen
must have exhibited donations in a multitude of different years. This requirement was enforced
in order to ensure that patterns could be observed.
The wider cross country comparison is slightly weakened due to the smaller sample size.
However, even in a smaller sample size, some differences can already be observed. This type of
an analysis lends itself to the comparison of the country specific regulatory systems. This method
should be able to showcase whether there are significant differences among how companies
within each country operate. To make this method more reliable even with a smaller sample size
the companies were chosen at random. Presumably, the combined insights from the theoretical
background and previous scholarly work along with a rigorous analysis of the systems that
regulate political finance in each country should be able to provide an answer to the differences
in the behaviour of companies within each system.
4 Literature review
4.1 Existing Theoretical Approaches
In this review, the established theoretical frameworks that could be useful to the study of
the effects of political donations on policy making will be presented. These frameworks along
with their terminology and definitions are examined to allow the selection of the most suitable
framework for the purpose of the thesis. This analysis will also consequently specify the
theoretical origin of this thesis in the current research landscape.
To allow for a better analysis of the most dominant approaches in an established and
clear structure the division implemented by Gilens and Page (2014) are used. Their study which
oversaw the testing of all the major theoretical approaches to the study of American Politics
employs the division of theories in the following categories - Majoritarian Electoral Democracy,
Economic Elite Domination, Majoritarian Pluralism and Biased Pluralism. This division is useful
for the purpose of determining the most suitable theoretical approach for this thesis. It also
allows the reader to understand better the theoretical origin of this thesis as the categorisation is
very well described in the works of Gilens & Page. The consideration of all the major theoretical

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approaches is useful, as it provides differing views of the role of the corporate and business
donors in the political world.
Furthermore, a confusion may arise as to why this thesis employs a division of theories
grounded in the study of American politics, whilst dealing primarily with cases from the United
Kingdom and Germany. First, the categories that are presented are wide enough to encompass
the major theoretical approaches to the study of domestic politics from other areas of the world.
Second, the differences between the political systems of the United States, United Kingdom, and
Germany are undeniably existent (Nassmacher, 2001). However, these theoretical approaches
which concern themselves primarily with the assumptions about the workings of the system in
general, do not necessarily need to be constrained by the details important in the study of
comparative politics. Third, there is an undeniable advantage that comes with the categorisation
used by Gilens and Page, which is the access to their quantified analysis that compares the merits
of these schools of thought in a single model.
Moreover, there are significant similarities between the scholarly concerns of the
theoretical approaches and the aims and goals of this thesis. The existing approaches that study
the American politics do concern themselves to a larger or smaller extent with the monetary and
other incentives that affect the policy process (Gilens & Page 2014, p. 2). Thus, they are very
relevant for the theoretical grounding of this thesis as it deals foremost with political donations
and the patterns that arise from the actions of donors over time. The major actors within the
research are often divided into subgroups. Thus, G and P use the following categories - Average
Citizen also known as “median voter”, Economic Elites and Mass- based or Business- oriented
Interest groups or industries (Gilens & Page 2014, p. 3). These categorisations are further
utilized when assessing the suitability and coherence of each of the main theoretical approaches
that will be discussed below.
4.1.1 Majoritarian Electoral Democracy
Encompass rational choice theories of electoral democracy. These theories, in general,
assume that parties seek to maximize their votes in order to secure power (Downs, 1957). Thus,
the most appealing strategy is assumed to be the catering to the needs of the average citizen.
Therefore, the policy that fits the median voter is seen as the equilibrium (Davis, Hinich &

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Ordeshook, 1970). This position is also seen as the most democratic, as it at least theoretically
presents the best compromise for the society as a whole (May, 1952).
Needless to say, this approach is very idealistic and some of its predictions are rather
simplified and ignore some of the difficulties that policy making must overcome in the real
world. As Ferguson (1995) points out these predictions struggle when a policy is
“multidimensional” meaning there is not a clear spectrum of preference ranging from zero to
one. This is, unfortunately, the case with many modern policies that are increasingly interlinked
with many issues and have complex implications (Kooiman, 1993). Also, the assumption that
parties will cater to the needs of the median voter and then hold their promise, as well as ensure
that the implementation of the policies goes as intended simplifies the difficulty of policy making
and policy execution on the institutional level (Sen, 1970).
Nevertheless, there is a bulk of scholarly evidence that supports some of the predictions
and claims made by the Majoritarian Electoral Democracy approaches. According to the research
made by Monroe (1979, 1998) the policies enacted by the US government has been mostly in
agreement with the preferences of the general public. There are also other studies that support the
general notion that median voter is the crucial variable that determines the outcomes of many US
policy debates(Page & Shapiro, 1983; Erikson, Wright & McIver, 1993; Erikson, Mackuen &
Stimson, 2002). Subsequently, this would imply that the median voter as a variable lends a great
amount of predicting power. These studies show that the U.S. federal government policy
overlaps with the preference of the median voter roughly two-thirds of the time. Indeed, other
studies show that changes in public policy often follow the shifts of median voter opinion,
precisely in two out of three occasions (Gilens & Page 2014, p. 6).
However, these findings are often criticized claiming that the median voter proxy is not
necessarily the variable that causes the change, but merely confounds with the general trend. In a
publication by Larry Bartels and Martin Gilens (2009), the findings suggest that there may not be
a direct relationship between public policy and median voter preference at all. The concern is
that groups such as wealthy individual or organized interest groups may simply hijack the
median voter for their own cause through the manipulation of the public opinion. Similar
findings were also found in the study that focused on the main actors and their influence in US
Foreign Policy (Jacobs & Page, 2005).

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4.1.2 Economic Elite Domination
The concerns expressed above regarding the nature of the relationship between median
voter and public policy outcomes are precisely what the theories grouped under Economic Elite
Domination target in their criticism. The theoretical tradition of Economic Elite Domination
approaches predicts that influence on policy is correlated with actors economic resources. Thus,
an individual with a larger disposable income, business or other types of wealth is presumed to
be able to exercise a much larger influence on the policy outcomes than someone with a
diminished pool of resources. Other characteristics that some of the EED theories see as essential
to obtaining influence on policy making are - social status and a position within an institution
(Gilens & Page 2014, p. 6).
An important feature of these theories is the assumption that such elites often cooperate
on issues of common interests and form alliances that allow them to pool their resources and
increase their collective power (Bottomore, 1993). These alliances are often formed based on a
shared history of origin, class or social interactions. For many scholars, these alliances are at the
root of all the problems with the current model of liberal democracy. Due to the alliances
between individuals that may collectively have control over a large portion of media, academia,
political institutions whilst possessing the material resources as well as organisational capacity to
coordinate these structures effectively create systems that can bypass the widely popular and
supported model of control as imagined by the Majoritarian Electoral Democracy approach
(Fergusson, 1995; Pizzo et al., 2015).
Some of the most important and iconic works within this school of thought include
Charles Beard and his claims that the U.S. constitution was designed to cater to the needs of the
rich landowners, wealthy businessman whereas the majority compromised by small land farmers
and members of the working class were left out (Beard, 2012)3
. C. Wright Mills expands on this
idea in his book The Power of Elite (1999) where he identifies distinguishable cliques of elites in
the military, political and economic spheres. His analysis confirmed the idea that such alliances
of elites are often able to bypass the democratically elected representatives and thus also the
power of the people. An interesting finding is also the indication that the elite status is not
usually assigned purely on the wealth of the individual, positions within the institutional setting
3
Originally published in 1914

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can play a significant role (Michels, 2001). In his 2001 book “Top Down Policy Making”
Thomas Dye (2001) posits the thesis that power comes from an elite consensus among the
politicians, lobbyists, lawyers and NGOs in Washington rather than the people.
Finally, in their complex statistical analysis Page and Gilens (2014) show that economic
elites and organized groups have a substantial independent impact on the policy of the US
government. On the contrary, the influence of average citizens and mass-based interest groups
seems to have little to no independent influence. This is a significant finding as their method of
analysis lends it a great amount of credibility due to the intra-theory analysis they have done.
4.1.3 Majoritarian Pluralism
A name that almost implies a contradiction in itself, as the terms ‘majoritarian’ and
‘pluralist’ are often pitted against each other when discussing comparative politics (Dunleavy &
Margetts, 2001). However, this approach attempts to combine the assumption that there is often a
plurality of various groups or factions that compete for power with the general workings of the
system. The thoughts of those who belong to the majoritarian pluralists often acknowledge the
risks such as tyranny or authoritarian rule, thus they seek a system that can best adapt to the
needs of the wide and diverse citizenry. Nevertheless, the assumption is that these groups can
form wider alliances and support each other, thus creating majorities and eliminating the
possibility of tyranny in the process (Gilens & Page 2014, p. 8).
The struggles that are often studied by this approach encompass the disagreement
between various organised interest groups, business firms or whole industrial sectors. All of
these are actors that seek to influence the policy making process, hence the plurality (Gilens &
Page 2014). This idea is even further supported by the likes of David Truman (1971) and his
work in The Governmental Process. In his work Truman claims that organised groups should be
at the centre of political analysis as they are very effective at securing influence in the policy
making process. Another assumption is that every group will exercise at least some level of
influence as once it appears on the political landscape it becomes an actor of influence. This is
because of the majoritarian mechanism that this approach presupposes where groups are able to
shift support and create wider alliances (Truman, 1971, p. 511). Thus, no group can be
completely discounted and the expectation is that in the end, a situation similar to the one
envisioned by Majoritarian Electoral Democracy approaches will occur. That is, a policy

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outcome catered to the “median group”. Thus in some ways, the MED approach agrees with the
Majoritarian Pluralism. They both believe that the system is difficult to be abused by a single
actor or a group and that it rather caters to the needs of the average voter or group.
The ideal representative theory of the majoritarian pluralist approach is presupposed to be
Robert Dahl and his analysis of the workings of the American politics in which he seeks to
understand the conditions under which a competition among groups can lead to the best outcome
for the median voter (Dahl, 1956; 1989). Thus, the plurality of actors is presumed to lead to the
best possible outcomes for the majority.
Also, the criticism in many ways resembles the one found with the Majoritarian Electoral
Democracy approaches. Specifically, the claims are that it is quite simplified ignoring the
difficulties that all kinds of groups will be able to shift and organize themselves in such ways as
to remain effective actors. This criticism mainly inspired by Mancur Olson’s (2009) writings
presents the phenomenon of “free riding” as the chief issue with the Majoritarian Pluralism
approach. If some groups do not have the incentive to always act in their best self-interest or to
even form as individuals may simply see the costs as too high. This a serious and well-grounded
criticism as the costs that each individual suffers in the process of competing in the policy arena
may be dissuasive (Olson, 2009). This, in turn, invalidates some of the fundamental claims of the
Majoritarian Pluralism such as the indispensability of each group and their flexibility that is
crucial to the workings of the system as presumed by the Majoritarian Pluralists.
4.1.4 Biased Pluralism
The approaches that can be summarized as “Biased Pluralism” come from the same
universe as the “Majoritarian Pluralist” but with a darker outlook on the workings of the system.
Based around Olson’s line of thinking that not all groups are equal, the approach necessarily
leads to a biased situation where certain groups hold an advantage over the others. As much as
Majoritarian Pluralist overlap slightly with the theories of Majoritarian Electoral Democracy, can
one observe similarities between the theories of Economic Elite Dominance and Biased
Pluralism. In the eyes of Biased Pluralism, groups still compete for influence, however, more
often than not the ones that are victorious belong to the camp of corporations, businesses and
professional associations (Schlozman & Brady, 2012).

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In the works of Thomas Ferguson (1995), the concept of party politics as “politics of
investment”. He claims that businesses, corporations, and industries as whole fund certain
political parties to cater to their needs through their policy-making. Other authors such as George
Stigler coined this phenomenon as “the capture of the regulators by the regulated” (Stigler,
1971). These findings are very interesting as they change the perspective from a system that
caters to the needs of the median voter to a system where the actor that can foot the bill the best
has the politicians ear.
The assumptions and conclusions presented by the Biased Pluralism approach often
resemble those made by the Marxist and Neo-Marxist traditions. In the traditional Marxist sense,
it is presumed that in the capitalist state those who hold the means of production also hold the
keys to ensuring that it will remain in such a way (Przeworski & Wallerstein, 1982). Indeed,
these views resemble those of Biased Pluralism as they point to the uneven playing field among
various actors. The predictions made by authors such as Ralph Miliband (1969) suggest that the
groups representing corporations or vast businesses tend to have the upper hand. The Marxist
way of thinking comes in many ways very close to scholars such as Ferguson or Stigler. They all
agree there is a certain group that has obtained an immense control over the society and managed
to paralyze many of the mechanisms that are presumed to be able to prevent this situation from
occurring.
There are also some of the most complex and quantified studies to be found within this
tradition. In his study, Mark Smith (2000) looked at how successful the U.S. Chamber of
Commerce was at getting its way with the Congress. The study documents cases where the
Chamber went against the wishes of the median voter and presents a success rate. The conclusion
is that the Chamber’s average success has been fairly high. Also, the study by Frank
Baumgartner (et al., 2009) showed that there is indeed an effect of resources when it comes to
the success rate of influencing the policy makers. These findings should be crucial to our
understanding of the role that actors with significant disposable wealth can play in our political
systems.
4.1.5 Choosing the Most Suitable Theoretical Approach
The most dominant theoretical approaches were presented above in order to present a
chance to clearly justify the theoretical approach that would be most compatible with the goals of

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this thesis. It is clear that all four schools of thought are established approaches with years worth
of scholarly writing and research to provide the necessary base for a research in a similar scope
to this thesis. Nevertheless, there are crucial differences among the theories when it comes to the
specific predictions they make about the workings of the political systems that are the focus of
the analysis. Namely, the explanatory power for the workings of the system is placed on a
different set of actors in each of the theoretical approaches with some minor overlap present
among a few of them. To be able to better grasp the differences between each of the approaches
a look at Figure 1 presents a clear and quick summary.
Actors Type
Theory
Average Citizen Economic Elites Mass Interest
Groups
Business
Interest Groups
Majoritarian
Electoral
Democracy
Large influence No influence No influence No influence
Economic Elite
Dominance
Some influence Large influence No influence Some influence
Majoritarian
Pluralism
Some influence No influence Large influence Large influence
Biased
Pluralism
No influence No influence Some influence Large influence
Figure 1- Theory Predictions (Gilens & Page, 2014)
The table shows the most important independent actors according to each of the
theoretical approaches. This is important as it suggests that the schools of thought disagree when
pointing out the most significant influencers of the workings of the political systems. Since the
focus of this thesis is the patterns of donations among the companies of various sizes, it is
necessary to justify such a choice. From the definition of Economic Elite and Business Interest
Group, it becomes clear that the actions of companies studied in this thesis fall within these
groupings. As one can see in Figure 1 there are theoretical approaches which simply do not
assign a great predictive value to actors such as Economic Elites or Business Interest Groups.
Among these are ‘Majoritarian Electoral Democracy’ which disregards the influence of both
Economic Elites and Business Interest Groups, both ’Majoritarian Pluralism’ and ’Biased
Pluralism’ discount the influence of Economic Elite but they accept the influence of Business
Interest Groups. The grouping of ’Economic Elite’ theories unsurprisingly assigns considerable

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influence to both Business Interest Groups and Economic Elites. Thus, it grants a theoretical
backing for the choice of actors being studies in this thesis.
Furthermore, the findings of Page & Gilens (2014) present a strong case for the accuracy
and soundness of the ’Economic Elite Domination’ theories. According to the findings of their
study, the most accurate theoretical approaches were shown to be the ’Economic Elite’
approaches. Their findings show that generally the public has a little independent influence on
the makings of public policy. On the other hand, individual economic elites or the groupings of
economic elites (corporations, businesses etc.) were shown to have the largest influence on the
outcomes of policy making (Page & Gilens, 2014, p. 16).
What are the implications of these findings for the structure and goals of this thesis? First,
it informs us that the most important actors to study are indeed the economic elites. Thus, it lends
a greater significance and importance to the study of the behaviour of these economic elites. One
of the ways this can be done is to observe the behaviour of these economic elites when it comes
to financing political campaigns, which is precisely the focus of this thesis. Second, by
implication it also allows us to justify the lesser emphasis placed on groups such as mass-based
interest groups or the donations coming from the larger public. Third, it provides a strong
theoretical and scholarly backing for the detailed study of the political finance regulatory
systems in the following chapters. These systems are designed to alter the conditions under
which the political parties and wealthy elites are forced to operate. Thus, understanding these
systems should be crucial to correctly depicting the situation in both of the countries that are
being analysed in detail.
4.2 The Findings of Current Comparative Political Finance
The field of comparative political finance has been slowed down in its development for
many years by the lack of access to relevant data that would allow the testing of its many
hypotheses (Scarrow, 2007, p. 194). However, as the laws surrounding political finance and
transparency evolved, so did the field of comparative political finance. With greater access to
more reliable and accurate data, the scholars of the field could deploy more sophisticated
methods and arrive at more precise hypotheses (Scarrow, 2007). However, the real significance
and importance for the purpose of this thesis lie in uncovering the methods used by the scholars
within the field and to understand the focus of their analysis. The previous works in this field

19
also present an outstanding opportunity for the generation of additional sub-hypotheses that can
be tested using the data-set utilized in the analytical part of the thesis.
As explained above, the field underwent a significant shift in its focus and methodology
with the spread of laws altering the access to data relevant to the discipline. Thus the early
scholarly work in political finance primarily focused on single domestic countries, or groups of
them but rarely engaged in a comparative analysis. The focus of the early scholars was primarily
focused on two aspects - legal and general practice. Scholars such as Overacker (1941) and
Pollock (1932) published works in which they focused on noting down and explaining the
workings of the system in relation to funding its political parties. Some scholars took an even
more specific approach and focused on analysing the funding practices of specific parties
(Heidenheimer, 1957). Works such as Heidenheimer’s (1957) provided a great insight into the
workings of political parties and their general practices when it came to obtaining funds for their
activities. However, a more comparative approach, especially on a cross-country level was often
found to be difficult due to the legal and cultural differences and also due to the uneven
distribution of information. Therefore, some of the early cross-national comparative works focus
on specific parts of the world due to the similarity (Gunlicks, 1993). In the newer works the
amount of countries increased along with the attempts at greater cross national analysis
(Nassmacher, 2001). It is thus clear the difficulties found within the field often have to do with
the differences between the countries that decrease the quality of chances of success of the
analysis.
However, not all attempts at cross national comparisons between political finance
regimes were futile or shallow. Several studies have focused on proving that the importance of
finance in political campaigns is indeed significant (Welch, 1981). Further studies have also
shown that the influence funds have on the success or failure of a political campaign may be
different depending on the position of the politician at the beginning of the campaign. These
studies have indicated that the money spent by those seeking to renew their tenure carries lesser
impact than the money spent by the ones seeking to challenge them (Green & Krasno, 1988,
1990). Thus, incumbents tend are on average less dependent on outspending the challenger than
vice versa (Gerber, 1988). These are significant findings to be considered in the analytical part
where the behaviour of the donor will be tracked. For example one may argue that the donors
should be more likely to spend more money on supporting the challengers. This also presents an

20
interesting premise to consider when dealing with a system that caps the spending at a reasonable
low amount. Furthermore based on the findings of these studies, it is reasonable to expect higher
donations to both incumbents and challengers during the election years. It also confirms the
significance of studying the ways in which political campaigns are funded. Moreover, the
implication that spending caps tend to favor the incumbents over the challengers (assuming they
can be reached by both parties) presents an interesting question as to how these influence the
behaviour of donors. Are the donors more likely to decrease their funding for challengers in
systems with a reachable spending cap? Conversely, will the spending of donors supporting
challengers be higher in systems without a spending cap?
Other studies have shown that the impact of public funding can also be significant when
considering election outcomes (Nassmacher, 2001; Ikstens et al., 2002). The existence of public
funds presents a significant change to the political finance landscape. Especially, when combined
with the spending cap it can present the donor with an interesting situation. One of the concerns
lies with the loss of dependency that the parties are presumed to have on the wealthy donors
(Scarrow, 2007, p. 205). Does the existence of public funds for political parties mean a decreased
importance of funds coming from big donors? Will this impact the donation patterns in countries
with such conditions? A study by Primo and Milyo (2006) found out that the perception of
government does not change in the eyes of the voters when public funding is present. Thus, at
least from the perspective of the voter, the impact of these regulations cannot be found.
There are also findings that present a challenge to some of the questions this thesis seeks
to answer. In a study from the United Kingdom, Fisher (1999) looked at the effectiveness of
spending on a national level. It was found that simply increase in spending was not found to be
correlated with the increase in popularity. This finding questions the effectiveness of money in
securing election outcomes. However, it also presents a greater opportunity to expand the
research as Fisher (1999) notes down the exceptionally short time which parties in Britain have
to influence the elections. Could this perhaps mean that a greater effectiveness of funds can be
observed in countries with longer campaign time? These findings present great building stones
for the comparative case study in the analytical section.
Further findings introduce a slightly different perspective of the problems that surround
the study of comparative political finance. The expansion of disclosure and transparency laws
certainly helped with growing the field and scholarly work within, however, it is not without a

21
risk. Pinto-Duschinsky (2002) presents the concern that the data that are now made available to
study the financing practices and structures among parties and their donors may sometimes be
misleading. Pinto-Duschinsky warns of an analysis based solely on the assumption that laws are
always honoured, as he points out that this is often not the case. These concerns are backed up by
his research showing a concern of some politicians that work within these systems. The problem
seems to be that the laws are simply often not obeyed enough and the enforcement is lacking.
Thus the reporting practices and disclosure standards often suffer, limiting the usefulness of
these data (Pinto-Duschinsky, 2001). The important information to take away from these
findings is the need to consider the general practice and enforcement in the countries studied in
the case section. Also, a rebuttal is offered by Scarrow (2007) when she points out that although
there are bound to be some errors within the data that are now obtainable, the usefulness still
stands for the comparative purposes of the study of political finance.
5 Case Studies
In this section, the main two case studies are presented. The legal, political and societal
aspects of the United Kingdom and Germany are highlighted where relevant to the issue of
political campaigning and its funding. Also, the importance of political finance systems and
regulation is explained in detail. The different options that states have when it comes to
regulating the relationship between a donor and a political party are introduced. To better
understand the most important aspects of each of the regulatory practices, the impact of each of
these is explained and tied to the theoretical background where possible. Furthermore, the data
that are used in the quantitative part of the thesis are discussed. The description of these data
contains the basic information about which variables they contain, their source, accessibility and
the forms in which they are presented.
5.1 Political Finance Regulation
The first factor that one must consider when observing the behaviour of actors that donate
money to political causes must be the environment in which they operate. The legal aspect also
belongs among the traditionally established approaches to the analysis in the field of comparative
political finance as mentioned in the theoretical section. Understandably, the relationship

22
between money and political power is a sensitive one and has thus been regulated in both of the
countries that are considered in this case study (Scarrow, 2007). It is crucial to show the ways in
which institutional setting in each country shapes the workings of the political arena. To allow
for a clear and understandable analysis of the situation in each country, the most important
aspects of political finance regulation will be discussed first. This will entail describing some of
the most prominent ways of limiting the range of options for both the supporters and the political
parties as well as explaining the impacts that each regulatory element has. Also, the importance
of these regulations in relation to the behaviour of donors is made explicit where appropriate.
Sources of Funding
One of the most common ways of regulating political finance is to target sources of
funding (Pinto-Duschinsky, 2002). Sources of funding encompass any potential donors whether
they are individuals, companies or corporations. The regulators may decide that they will limit
the pool of potential contributors by discriminating between them based on characteristics such
as nationality or residency. Other factors may be the legal status of the donor, some states may
ban corporations from becoming a source of funds for a political cause (Atwill, 2009).
The implications of these regulatory attempts lead to the desire to control the links
between various actors and political parties. It is difficult to deny the idea that there is some
concern in the minds of the regulators when it comes to the potential of political parties creating
the links of financial dependency on the undesired actors (Van Biezen, 2004).
One of the common factors involved in barring certain actors from getting involved with
political parties finance is the link between the actor and the country (Koß, 2010). It is presumed
that the country’s fate should lie in the hands of political parties elected by its own people.
However, the question whether to allow the financing of political movements from actors outside
of the country is less clear. There are plenty of historical examples where covert methods such as
financing radical parties or the movements of the opposition were used to destabilize or cripple a
country (Blasier, 1985). Other types of foreign funding include foreign aid or funds from
likeminded political parties in other countries (Wild & Foresti, 2010). Thus, it is relevant from
the regulatory point of view whether to allow foreign contributions or not as the impact can be
decisive. Some countries bar all foreign sources of funding, whereas some opt to allow specific
kinds (Sullivan, 1996). An example of such different approach can be found in France and

23
Germany (Atwill, 2009). Whereas France prohibits all foreign funding going to political parties
or candidates, Germany has a more lenient approach towards the members of the European
Union (Atwill, 2009).
Thus, based on the insights obtained from the teaching of the Economic Elite Domination
theories the regulations that deal with sources of funding can be seen as possibly the most potent.
In countries where political donations from corporations are not allowed, it is reasonable to
assume that there can be no financial dependency of political parties on donations from these
actors. Based on the studies such as (Welch, 1981; Nassmacher, 2001) the funding plays a very
significant role in deciding political campaigns. Assuming that political parties and even more so
their individual candidates seek to win the election, there is a reasonable concern that in systems
where donations from corporations are allowed there will be pressure on these actors to cater to
the needs of corporations. Furthermore, countries that allow political donations from legal
entities that reside outside of their territory open themselves to foreign influence. This effect can
be exacerbated in such regulatory systems where donations from multinational corporations are
allowed. In extreme cases, this can lead to the hijacking of the governmental structures by alien
business interests (de Mesquita & Smith, 2011).
The Impact of Public Funding
According to Project Ace (2016), which gathers information for voters and researchers
about political finance regulation around the world, out of 220 countries surveyed 130 (59 %)
receive direct public funding, 120 (54,5 %) indirect public funding and only 39 (17,7 %) have no
form of subsidy for their political parties at all. These data show another common way of altering
the conditions in which political parties have to operate when dealing with their potential
backers. The most widespread means of supporting political parties through public funding is to
provide them with financial support dependent on their performance in local or state-wide
elections (Ortuno-Ortin & Schultz, 2005). The effect of such public funding seems to be pushing
parties towards a greater responsiveness to the general electorate as they benefit substantially
from attracting the greatest amount of voters (Ortuno-Ortin & Schultz, 2005, p. 789).
These findings seem to support the predictions of theories such as ‘Majoritarian Electoral
Democracy’. At the very least, systems with public funding dependent on obtaining large amount
of votes to receive financial support should presumably come closer to the ideal model imagined

24
by the theory. This is because of the nature of the assumptions that the theory makes about the
behaviour of political parties. However, these findings also bear an implication for the position
of actors that were put under the ‘Economic Elite’ category, as greater responsiveness to the
masses must inevitably come at the cost of someone’s influence. Interestingly enough, the study
also found that the relationship between responsiveness to the public and public funding
decreases in systems where other means exist that can secure large sums of finance for the
political parties (Ortuno-Ortin & Schultz, 2005, p. 782). A closer look at the research shows that
parties tend to be less responsive when they can rely on loyal donors that supports the party
regardless of the policies (Ortuno-Ortin & Schultz, 2005, p. 784). Thus, the variable of public
funding presents an interesting variable that can influence the behaviour of company donors that
will be studied in the analytical section. Will the donation patterns differ in system with
differences in public funding?
Moreover, the regulators can ‘fund’ and change the conditions in the system also in a
more subtle and indirect way. Atwill (2009) mentions that the most substantial kinds of indirect
public funding are the limitations placed on broadcast times. Some restrictions may prohibit
parties from purchasing additional broadcast time, other may distribute some basic broadcast
time to each party and allow parties to purchase more depending on their preference and funds
available. Thus, the authority may decide about the “allocation, length and frequency of the
broadcasts” (Atwill, 2009). Since one of the most significant parts of a political campaign is the
time a candidate spends in mass media, this is a very impactful restriction (Holbrook, 1996).
Given that one of the assumptions of the ’Elite Domination’ theory is the superior capability to
secure large sums of funds as one of the cornerstones upon which influence is secured, the
decrease of capabilities that money can secure can be presumed to be very significant (Prior,
2007). Large donations or the access to superior funding is bound to lose at least some
importance when one of the most powerful campaign strategies is taken out as an option to be
purchased.
Limits on Expenditures
Much like limiting the purchasability of additional broadcast time has a negative impact
on the influence a large donation can secure, putting a limit on the expenditures as a whole can
lead to similar consequences on a much larger scale. As mentioned above, outspending one’s

25
opponent is still largely a good strategy when political campaigns are concerned (Scarrow,
2007). Thus, actors who have the possibility to allow political parties or candidates with the
option to outspend their opponents should probably be seen as crucial in systems where this
strategy is possible. Although, all the other regulatory options that are discussed in this section
can significantly alter how much a single donor or a small group of actors can enable this
strategy, it still remains true that outspending remains an important strategical goal where
possible. Thus, imposing an expenditure limit can significantly alter the importance of various
donor to the political parties. Depending on the popularity of the party and their raising
capabilities, this can potentially also limit their need to secure the support of the wider public. In
systems where only expenditure limit is imposed, a party can rely on financing from wealthy
donors such as large corporations. The party itself may not be able to outspend an opponent who
can secure the support and donations from a wider populace, but it can run the campaign without
the need for a larger support from smaller donors.
An interesting aspect of this type of regulation that has been foreshadowed before is the
advantage for incumbents that campaign limits seem to cause. Research has repeatedly shown,
that where campaign limits are imposed incumbents are much harder to be replaced by
challengers (Pastine & Pastine, 2010). This could possibly manifest in the data that will be
analysed by increased donations to challengers in systems where spending limits are not in place.
On a similar premise, systems that place a spending limit upon political parties should show a
decrease in donations for challengers.
Regulating Campaign Time
A significant factor that can completely change the way in which campaigns are led is the
time parties receive before an election to launch a campaign. Regulations much like in other
cases vary when it comes to campaign time. The number of time between the announcement of
an election date and the elections itself may vary as much as few weeks to several months
(Atwill, 2009). When assessing the importance of money in political campaigns and conversely,
the importance of actors capable of making large donations, it is once again crucial to consider
the effectiveness of campaign funds. Limited campaign time appears to be another possibility
that the regulators have to diminish the value of campaign funds. Thus, this factor presents
another important circumstance that needs to be considered when analysing the difference

26
between patterns of donations among donors from the UK and Germany. The assumption being
that countries with shorter campaign times will have a smaller need for funds from big
businesses and corporations among their political parties. This would in return mean that the
donors in these countries are less likely to donate or are likely to donate lesser amounts as the
theory suggests that the influence they will be exercising is smaller. Thus, in countries with short
political campaigns, the expected “return” should be much smaller for donors than in countries
with long periods of campaign time. The risk of allowing free competition in regards to
advertising has also been acknowledged by the European Court. The risk comes from the
possibility of buying out enough broadcast time to block out the other less wealthy party, thus
distorting the public debate (Ó Fathaigh, 2013).
Limits on Contributions
Among other tools that regulators around the world may utilise to change the conditions
of political competition are various legal requirements of restrictions that can be placed upon the
process in which the money transfers from the possession of the donor to the respective political
party or candidate. These restrictions usually fall under one of the following categories. First,
limits on the amount of money that can come from a single donor. Second, conditioning the
option to make an unlimited contribution with the disclosure of the identity of the donor
(Scarrow, 2004). The first option theoretically presents more control as in an ideal world it
would ensure that each citizen can only donate so much money. However, flat contribution
limitations are hard to enforce if not paired with the need to disclose the identity upon donating.
This issue can be somehow fixed by relying on bank transfer donations as opposed to simple
cash donations which are harder to trace. Nevertheless, countries such as United Kingdom,
France or Germany seem to utilize a system that combines either the need to disclose identity or
to abide by a limit on the contribution (Atwill, 2009).
To understand the relevance of such measures to our study of the behaviour of large
donors such as companies, it is once again necessary to consider the assumptions put forward by
the theories of ‘Elite Domination’. Assuming that companies operate like investors when
contributing to political parties, these flat limits placed on contributions severely limit and level
the playing field with other actors which have much smaller disposable income. Thus, in systems
that employ a form of flat contribution limit for all donors, meaning corporations and citizens

27
alike, the ability of corporations or wealthy citizens to become crucial investors in the endeavour
of political parties should be greatly diminished. Consequently, political regimes that have these
limitations in place should naturally experience lesser relationships between large donors and
political parties.
However, even in cases where flat limits on contributions are only upheld as long as the
donors remains anonymous, such as UK or Germany, the need to tie the contribution to the donor
presents a potentially significant obstacle. This is due to the issues that such transparency
practices combined with other methods tend to cause to otherwise possible corrupt practices
(Kolstad & Wiig, 2009).
Another regulatory practice that can change the conditions under which political parties
secure their funds are the tax reliefs granted for contributions. Once again the detailed wording
and application of this kind of regulation are crucial. Depending on the specifics, tax reliefs can
favour parties with rich supporters as they can benefit more from having their larger income free
of tax, especially in countries with progressive taxing (Scarrow, 2004). Moreover, not only can
the wording of the regulation favour parties based on whether their average supporters is richer
or poorer, the tax exemptions can also work in favour of corporations, trade unions or
associations if they are included in the relevant legislation (Scarrow, 2004). Thus, in an ideal
case a system in which tax reliefs are also applicable to corporations or large businesses, it is
reasonable to expect that donations will be even more generous since under such conditions their
profitability increases. Nevertheless, this could potentially be offset by offering tax reliefs also to
regular voters, thus increasing the frequency and amounts of the donations coming in from larger
masses. The interplay with other regulatory practices such as contribution limits, expenditure
limits or limited broadcasting time will surely determine how impactful the tax relief is.
Ensuring Transparency
As was foreshadowed above, transparency laws constitute an important feature when it
comes to curbing corruption, including corruption present in political finance. As the theories of
‘Economic Elite Domination’ suspect, there is often an unhealthy relationship between powerful
groups such as corporations, large business owners and political parties. On top of that, scholars
such as Fergusson (1995) have found that parties often align with specific industrial interest and
remain in a sort of symbiotic alliance. In this state, the industrial sector provides the party with a

28
large financial capabilities in order to secure policies in its favour. Some argue that this issue
remains present even in systems with a certain amount of transparency such as the current
establishment in the United States (Fergusson, 1995). Investigative efforts have shown that there
is reasonable evidence to believe that there are connections within elites in the political,
financial and educational sectors of the United States that have together managed to bring about,
or at the very least aid the financial crisis of 2008 (Pizzo, Fricker & Muolo, 2015). These works
show how difficult it is to prevent these powerful alliances among influential actors within the
political and business system. Nevertheless, they also make a very good case to show how
important transparency laws when fighting against similar interest alliances.
Indeed, the transparency laws aid in the efforts of politicians, researchers or journalist
who seek to deconstruct these cliques and prove wrongdoing. As has been shown in the chapter
about comparative political finance as a scholarly field, the access to data allowed the field to
better develop itself. The reason why these data became available can be attributed to the larger
trend towards greater transparency across several countries. Thus, the presence of strong
transparency laws along with the presence of strong independent media or other actors with
investigative capabilities should enhance the possibility to expose these unhealthy alliances
(Lindstedt & Naurin, 2010).
Nevertheless, this thesis is not primarily normative and therefore the important question
remains how this will impact the behaviour of corporations and businesses in regards to their
patterns of political donations. Unfortunately, the effect on the patterns of donations cannot be
compared as one can presume that countries where transparency laws are low will not be able to
provide data required for the analysis. However, depending on the effectiveness of the
‘watchdogs of democracy’ and the willingness of the system to punish this corruptive behaviour,
it is reasonable to assume that unhealthy alliances will be less frequent, or at the very least more
subtle.
5.1.1 Campaign Finance in the United Kingdom
In the following subsection the above explained regulatory methods are introduced in the
specific legal context of the United Kingdom along with a brief history of the regulatory
practices. The most important developments in regards to the regulatory practices in the United
Kingdom are described, along with the general rationale behind them. Each of the regulations is

29
described and the impact it has on the system of political financing is described. Finally, the
combination of each of the regulations discussed is presented as a complex system that
determines the behaviour of political parties and their financial backers. It is important to note
that the focus is mainly placed on regulation relevant to the elections for the Parliament.
History of Regulatory Attempts
The political campaign finance system has been regulated since 1883 when the ‘Corrupt
and Illegal Practices Act’ was introduced (Rix, 2008). In 1975 the state subsidies for political
parties were introduced. These were based on the number of votes each party has received. The
amount received per vote has been increased in 1999 (Fisher, 2001). Since 1976 there has been a
number of reports prepared by both governmental committees and outsiders that recommended
various approaches to the regulation of political finance (Hansard Commission, 2000; Pinto-
Duschinsky, 1981). The concern has been primary with the connection between political parties
and the wider public, encouraging numerous small donations over few big ones through the use
of various incentives, shifting away from the dependence on businesses and trade unions toward
average citizens and increase transparency in finance of political parties (Fisher, 2001).
Unfortunately, for a plethora of reasons the increase in regulatory attempts did not manifest until
labour came into power in 1997. The Neil Committee that was established to come with a report
and proposals on how to change the system produced a very significant list with over 100 reform
proposals (Fischer, 2001). Subsequently, the Neil Committee report entered the parliament and
passed into law with some minor changes on 30 November 2000 as ‘the Political Parties
Elections and Referendums Act 2000’ (further referred to as “PPERA”) (Ghaleigh, 2006).This
The focus of the system lies on limiting spending rather than donating. The system is also
transparent, as it tracks donations and expenditures alike and requires these to be publicly
accessible. The current system is largely based on PPERA and some previous legislation such as
parts of the ‘Representation of the People Act 1983’ (further referred to as “RPA”’ (Feikert,
2009). Below the most important features of the United Kingdom’s regulatory system are
presented and analysed.
Sources of Funding

30
When considering the restrictions that are in place currently in the United Kingdom, it is
best to start with the overview of who constitutes a legitimate political donor and what are the
exclusive criteria in place. The UK’s system offers quite a rich and developed system of
distinguishing valid donors. First of all, a political party can only accept a donation from a
permissible donor. These permissible donors include individuals on a UK electoral register,
political parties who are registered, registered trade unions, registered societies or a registered
association (Feikert, 2009). All of these actors must be UK based (PPERA § 54). The only
exception to this are British citizens who live outside of the borders of the UK. However, even
these citizens must be registered in an electoral register (Feikert, 2009).
The restriction placed on permissible donors are very significant as they limit the
supporter base upon which the party may rely to succeed in an election. Since only actors based
in the UK are included, this regulation should effectively exclude most of the influence outside
of the United Kingdom. Also by requiring the donor to be registered, this regulation forces a
great deal of transparency upon both parties and donors as the donation can always be traced to
its source.
Public Funding and Broadcasting
The United Kingdom does not employ a system that would provide funding to political
parties from the state (Atwill, 2009). At least not in levels comparable to the funding that is
provided to many political parties in the democracies of other western European states (Fisher,
2001. The decision to not implement increased state funding for political parties was made
based primarily on the recommendations from the Neil report (Fisher, 2001). The
recommendation against came because of disbelief of the committee in the usefulness of state
funding. However, Fisher (2001) points out that there are several reasons why the lack of state
funding in the UK political finance system is quite troublesome. Fisher (2000) shows that parties
rely primarily on election cycles to secure their funding. However, outside of the election, they
struggle to secure sufficient funds to cover the financial expenditures that come with running the
political party and keeping up sufficient infrastructure required for political competition. This
insight is quite troubling when combined with the information provided in the theoretical section.
If parties struggle to secure sufficient funds for themselves and they operate in a system without
sufficient state funding, it leaves them vulnerable to the influence of rich donors.

31
On the other hand, the political finance system in the United Kingdom employs the use of
regulated broadcasting time to provide a sort of indirect public funding to the political parties.
Each of the parties is awarded a certain time on screen that is given for free (Communications
Act 2003§ 333) . Thus, the political parties have guaranteed access to one of the most important
ways of engaging the voter. Although, it is important to note that the system favors larger
established parties which receive proportionally more on screen time, given the higher amount of
seats they have (Feikert, 2009).
The concern that lack of extensive public funding can cause is amplified when one
considers the absence of regulations placed on contributions. In the United Kingdom, only limits
placed on donations are of different nature than one would expect. The donation is only
legitimate when its value is above £200 as far as political parties are concerned and £50 when
one speaks about an individual candidate (PPERA § 54). There are no limitations placed upon
the top end of a contribution. Thus, a permissible donor can donate any amount of funds to a
political party as long as it is above £200. However, it is required that donations above £5,000 -
nationally and £1,000 - locally be publicly announced (Fisher, 2001). Feikert (2009) notes that
this requirement was abused using such loophole where the loans were not considered donations.
This exception was abused in the financing of the 2005 general elections, however, it has since
been amended and loans are now part of the normal party expenditure (White & Lester, 2007).
The law is also precise when it comes to defining what constitutes a donation - “gifts of
money and property; subscriptions and affiliation fees; sponsorship; money spent on behalf of a
party; the provision of property, services, or facilities; or the lending of money” (PPERA § 50;
Feikert, 2009). Thus the system covers a wide range of options that are traditionally available to
supporters of political parties in a typical setting. The goal is to cover all the possible means of
supporting a party and include them on the donation list to ensure transparency (Fischer, 2001).
Therefore, the limitations in place are not particularly strong or extensive. From the
preview of effective political finance regulations that was introduced in the beginning of this
section, it is apparent that the lack of top end limits on contributions favours those who can take
advantage of them. Thus, once again borrowing from the findings of Ferguson (1995) the
alliance between dominant industrial sectors and political parties is possible. Given the fact that

32
the only obstacles between a large donation and a political party are the requirements of UK
residency and the requirement to announce the donation, one may wonder whether the UK’s
system will resemble the predictions of Fergusson.
On the other hand, one should not make conclusions about the effectiveness of the
regulatory system before going through all of its components. The extent to which the
expenditure of political parties is constrained by the legal requirements stands in a stark contrast
to those placed on the contributions. First, the UK caps out the expenditures of political parties in
elections depending on how many constituencies they are competing in. Thus, the expenditure
caps amounted to roughly £30,000 per constituency, whilst for parties contesting constituencies
across the country the highest possible cap would be £19 million (Feikert, 2009). In the 2015
elections, these figures appear to remain roughly the same, with the highest possible cap being
£19,5 million (BBC, 2014). The time window that is included is set on 365 days. Thus, the
campaign limit covers 365 days for the purpose of monitoring expenditure (Fischer, 2001).
Interestingly enough, when one considers the reported expenditures in the 2010 general
election campaign, it appears that the limit is not really that limiting. Only three parties have
contested all seats in the elections - Conservatives, Labour and Liberal Democrats. However,
none of them have reached the cap of £19 million. Conservatives came closest with £16,8
million, followed by Labour £8 million and finally Liberal Democrats £4,8 million (UK Political
Info, 2010). The data from the general election of 2005 show Conservatives and Labour with
spending just below £18 million and Liberal Democrats lagging behind with £4,7 million (UK
Political Info, 2010). Thus, one may question the usefulness of such a high expenditure limit and
even more so its effectiveness. Does the expenditure limit really free parties from the
dependence on rich donors if they cannot even reach the cap?
Besides imposing a clear expenditure limit, the regulations also include a strict and quite
a broad definition of what constitutes an expenditure “party political broadcasts, advertising,
unsolicited material to electors, manifesto or other policy documents, market research and
canvassing, media/publicity, transport, rallies or other events.” (PPERA § 73; Feikert, 2009).
Thus the wording of the regulation makes sure to cover many possible gray areas through which

33
a donation of the sort can be made. However, Fischer (2001) notes that these limitations will
most likely be unable to prevent the use of loopholes.
Campaign Time
Perhaps one of the most interesting characteristics of the United Kingdom’s election
apparatus is the short and unpredictable time parties receive to campaign on their behalf. The
typical campaign length usually amounts to six to seven weeks. The campaign schedule is not
set, until the Prime Minister decides to pick a date for the election (Representation of the People
Act 1983). The only requirement being that the elections have to happen within the five years of
the parliament duration (Feikert, 2009).
The limited campaign time by itself may present a certain challenge as to how parties
could reach the expenditure limit. Fischer (2001) points out that because of the regulation of
broadcasting time by the state authorities, the parties may find themselves struggling to find
outlets for their expenditure as broadcast time typically presents the largest expenditures. This
presents an interesting context for the UK’s political finance system in which parties may find
itself with an abundance of funds, but limited effective ways of spending them.
Ensuring Transparency
The political finance system of the United Kingdom may lack in areas such as limits on
contributions, however, the extent to which transparency is ensured is very far reaching. Indeed,
scholars such as Casas-Zamora (2005) classify UK’s approach as heavily geared towards
ensuring transparency. Feikert (2009) also finds that the focus of the system seems to be placed
upon transparency. It is not surprising when one considers the extent to which the UK’s system
requires the donors to go through the troubles of signing into the proper register system. Also,
the fact that these registers along with the information about the contributions are available to
public, journalists and researchers such as me speaks to the extent to which these donors can be
scrutinized. Additionally, the changes introduced in PPERA changed some of the practices that
were possible prior. For example, parties can no longer withhold information for up to a year but
instead have much shorter reporting periods, thus they cannot withhold potentially damaging
information about their funding until after the election (Fischer, 2001).

34
Fischer (2001) offers an explanation as to why there has been so much focused placed on
transparency. The main reasons are believed to be the lack of funding, shrinking of membership
base and continuous decline in the trust of public institutions among the wider public. Fischer
(2001) points out that the recommendations of Neil’s committee report were largely focused on
increasing the confidence of the public in the system of political finance.
Evaluation of the United Kingdom’s Political Finance System
The most important regulatory parts of the system of political finance of the UK have
been introduced. However, the question remains. Does the UK system of political finance
undermine or amplify the influence of big donors? There are several aspects to consider. First,
the limitations placed upon contributions seem to be fairly limited, mainly focusing on isolating
alien contributions from outside of the UK. Second, the limits upon expenditures are much more
extensive. Nevertheless, the effectiveness of these is questionable. Especially, given that the
expenditure cap has not been reached, one may question whether it is an effective expenditure
limit at all. Third, the transparency that the system ensures is quite extensive. The links between
parties and donors are very hard to hide, as the contributions are directly linked to specific
donors. Also, the requirement that donors have to be part of their predesigned register ensures
that this link between the money and the donor is hard to conceal. Fourth, there seems to be a
lack of extensive funding for the political parties when it comes to the state. There are some
exceptions, such as the freely distributed broadcasting time and some minimal grants for political
parties. However, when compared to other democracies the funding is indeed limited.
When looking to others for the evaluation of the system as a whole there seems to be
some consensus. Casas-Zamora (2005) classifies the system as extensive in transparency and the
limits placed upon expenditure. However, it is pointed out that the system lacks in limits on
contributions and in the subsidisation of political parties by the state (Casas-Zamora, 2005, p.
27). Feikert (2009) presents the system as focusing on limiting the expenditure of parties rather
than the contributions of supporters, whilst ensuring transparency of the process. Fischer (2001)
also finds that the system lacks in public funding of political parties and points out that the
changes introduced by PPERA put other parts of the system on a comparative level with other
democracies. Fischer (2001) point out that the new legislation limits expenditures and increasing
transparency to solidify this argument.

35
5.1.2 Campaign Finance in Germany
Following the same structure as above, the regulatory methods in Germany are
introduced, along with their specific caveats, historical reasons, and rationale behind them. The
most significant provisions of the political finance system of Germany are introduced and
explained in relation to their significance for the workings of the system. Much like in the case of
the United Kingdom, the focus lies on the regulatory practices relevant for the election to the
Bundestag - the lower chamber of Germany’s political system. In the end, the political finance
system in Germany is evaluated as a whole for the impact it should have on the behaviour or
large donors in political campaign finance. The insights from the theoretical section are used to
make predictions for the analytical part, based on the information obtained about Germany’s
political finance system.
History of the Regulatory Practices
To understand the general attitude of the wider German population towards the regulation
of political finance, one must take into consideration the traumatic experiences of Hitler’s rise to
power in 1933. The German Basic Law, also known as Grundgesetz, reflected the desire to
prevent future chancellors from obtaining too much power over the parliament and barred the
undermining of the constitutional order by political parties when it came to power in 1949
(Lehmann & Ledford, 1990). In a similar fashion, the regulatory practices in Germany’s system
have historically aimed at promoting transparency and sought to establish an oversight over the
flow of finances to the political parties in the republic (Palmer, 2009). Article 21 of The German
Basic Law (2015) makes it clear that political parties are to disclose their sources of funding.
However, over the years the system had to be updated. The most important development
was the Political Parties Act of 1967 which specified the rules for transparent financing and
addressed the way in which public subsidies for political parties would be allocated (Deutscher
Bundestag, 2016). Thus, the Basic Law Article 21 and the updated Political Parties Act Articles
4 and 5 constitute the most important legal documents for understanding the political finance
system of Germany (Küstermann, 2003). Below the most important features of this system are
presented and scrutinized.
Sources of Funding

36
The restrictions that the German political finance system places upon potential donors
can be found in Article 4, Section 25 of the Political Parties Act (PPA). The parties are
prohibited from accepting donations from outside of the German territory. However, there are
exceptions to this rule which cover - citizens of the European Union, German citizens living
abroad and donations under €1,000 (PPA, §25(2)). Anonymous donations below €500 are also
allowed (Palmer, 2009).
As far as donations from corporate entities are concerned, there seems to be some
confusion. Palmer (2009) claims that there are no restrictions on donations from corporations.
However, the PPA specifies that publicly traded corporations are excluded from the list of
eligible donors (PPA, §25(1)). Also, corporations and business enterprises that are not owned by
at least 50% by a German citizen are not allowed to make political contributions (PPA, §25(2)).
Thus, it seems that there are certain restrictions in place. Nevertheless, aside from publicly traded
corporations, there are really no restrictions for German-owned businesses. Among the rest of
the entities that are in some way restricted are charitable organizations, trade unions, professional
associations, industrial or commercial associations, and governmental bodies (Palmer, 2009, p.
3).
Thus, in comparison to the United Kingdom, there are a couple of differences one can
observe. First, Germany is more lenient towards alien and anonymous donations. Second, it
appears that the restrictions placed upon publicly traded corporations do not have parallels in the
United Kingdom. Third, interestingly enough Germany sees no difference between its citizens
and the citizens of the EU as far as political donations are concerned.
Public Funding and Broadcasting
The role of the state in the financing of political parties is quite extensive when it comes
to Germany. Section 18 of the Political Parties Act presents the specifics of public funding. It
presents a complex scheme in which parties are allocated funds based on the votes they have
received. The budget that is put aside for this purposes is capped at €133 million. The
government also matches €0,38 for each euro received from membership fees and donations up
to €3,300 (Palmer, 2009).
Thus, the German system of public funding changes the conditions under which parties
seek funding in quite a dramatic way. It encourages parties to obtain higher rates of membership

37
and more frequent private donations. Due to the cap on donations that are still state subsidised,
this system encourages parties to obtain a large amount of smaller supporters rather than a couple
of big ones. A brief look at the main sources of finance for the German political parties reveals
that the most important sources of income are membership fees and state subsidies, which each
accounts for one-third of the total income (Politische Databank, 2007). On average around 10
percent came from private contributions and around 3 percent came from corporate sources
(Palmer, 2009). Thus, the dependence of German political parties on the contributions from
corporate sources in a very limited.
As far as the role of the state in regulating the broadcasting times goes, the German case
presents an interesting case due to its federal nature (Brück, 2014). The federal law does not
provide any regulations in regards to campaign time or broadcasting. However, the laws of the
individual federal states often do (Palmer, 2009). The most important are the prevalent allocation
of very limited time segments for political advertising. Other than these state allocated segments,
the political parties have no option of purchasing more time on air (Palmer, 2009). However, the
existence of Talk Shows and other programs that are meant to connect the public with the
candidates and allow the candidates to express their views still do exist. Moreover, the analysis
of the 2002 general elections in Germany has shown that the broadcast time was comparable to
that of United Kingdom in terms of total minutes spent on screen (Esser & d’Angelo, 2006).
During the election day, the UK’s television broadcasters spent 503 minutes vs 479 minutes
spent by Germany’s TV stations (Esser & d’Angelo, 2006). Interestingly enough, the United
States where political campaigners are known to spent large sums of money on advertising
segments compared with 546 minutes. Therefore, Germany presents a regulatory system in
which the political parties do get comparable exposure, however, without the need to spend large
sums of money on the TV advertisements.
The decision of the German federal states to prohibit the purchasing of additional TV
time may have to do with the lack of limitations placed on both contributions and expenditures
(Van Biezen, 2004, p. 19). There are no limits placed upon how much an eligible donor can
contribute to a political party. The relevant section 25 of the Political Parties Act only specifies
that donations below €1,000 can be made in cash. Thus, the political finance system of Germany

38
does not try to discourage large donations. On the contrary, Palmer (2009) mentions that private
contributions are often seen as desirable and are encouraged to offset the significant funding
flowing from the state to political parties.
In a similar fashion, the German political finance system also does not regulate the
expenditures (Van Biezen, 2004, p. 19). The German parties are thus free to spend as much as
they can afford. Considering that the research has established a strong correlation between
outspending one’s opponent and winning the election (Scarrow, 2007) this would point to a very
fertile ground for a high influence of large donors. However, this assumption is disproved in the
German case when one considers the budget structure of the German parties presented in the
Sources of Funding subsection. It is clear that the role of large donors and corporate
contributions is not very significant. Nevertheless, there is no regulatory obstacle for a sudden
dramatic increase in large contributions from corporations or businesses.
Campaign Time
There is no clear schedule set for the election campaigns. Nevertheless, due to the
regulations targeting advertising, such as billboards, radio and TV broadcast, effective
campaigns take place few weeks before the election (Palmer, 2009). Perhaps due to the limited
time to campaign before elections take place along with the limited means of doing so explains
that German parties spend only around one-third of their budgets on campaigning (Deutscher
Bundestag, 1999). It is thus a similar case as in the United Kingdom that both the means and the
time are limited. Thus, the same set of assumptions applies. The effectiveness of the donations
will be reduced due to the nature of the system in which the political parties have to campaign.
Transparency
The approach towards transparency in the German political finance system relies on
exposing the identity of large donors to the public. Only donors that contribute over €10,000
annually have to be mentioned by their name and address. Whilst contributions above €50,000
have to be announced in a more timely and public manner. Thus, in comparison to the system of
the United Kingdom, there is less transparency in regards to smaller donors that do not contribute

39
over the €10,000 mark. Nevertheless, Van Biezen’s (2004) comparative analysis has found that
on average Germany’s transparency regulation still very much puts it above many other
countries in that regard.
Evaluation of Germany’s Political Finance System
Finally, it is important to put all the pieces together and look at Germany’s system of
political finance as a whole. The system presents both simplicity and complexity depending
which area of regulation is concerned. Specifically, Germany’s lack of regulation in the area of
contributions and expenditures leaves the parties potentially vulnerable to the influence of big
businesses. However, this is most likely sufficiently countered by the quite complex and very
generous system of public funding that parties receive. Also, the exclusion of publicly traded
corporations from the list of eligible donors could be helpful in this regard. Furthermore,
Germany also bolsters its system by limiting the possibilities of political parties to purchase
additional airtime on TV and presents a shorter time window during which parties can campaign.
Thus, there is a possibility for the political parties to secure much greater portion of their funding
from other than state resources. However, it is legitimate to question whether that would be very
effective in such a system. Once again, the effectiveness of large private donations is hampered
in this system because they are excluded from the state subsidy and perhaps this is why corporate
donations constitute only 3 percent of Germany’s political parties income sources.
However, how do these regulatory practices influence the behaviour of wealthy donors
such as corporations or businesses? After all, theory informs us that outspending seems to still be
a valid strategy, especially for challengers. Assuming that large donors indeed behave like
investors as Fergusson (1995) predicts, there are several features of the system that must
diminish the attractiveness of the investment into the campaigns of political parties. First, the
amount of money the state allocates to supporting political parties may lead to them gaining an
increasing independence on larger donors, thus diminishing the significance of the money these
parties receive from such sources. Importantly, the way in which the subsidisation is tailored
means that parties are encouraged to secure more funding by appealing to a large number of
actors that will donate in smaller amounts. Also, the other part of the subsidisation is dependent
directly on the number of seats a party secures in an election. Giving parties yet another reason to
shift their focus to the median voter as opposed to a wealthy donor. The transparency laws also

40
reflect this tendency to favour donors that contribute in relatively smaller amounts. It is possible
to doubt whether the €10,000 cap over which the donor’s identity must be revealed is sufficient
in ensuring that the system remains transparent. Nevertheless, it is reasonable to assume that
large businesses would need to donate more than €10,000 a year to secure a large amount of
influence over the political parties in the same manner as the Economic Elite Domination
theories describe. Thus, the system should be transparent enough as to reveal an existence of
such connections between large donors and political parties.
In comparison to the UK’s political finance system, there appears to be a multitude of
similarities as well as some differences. The two system are similar in their lack of extensive
regulation for contributions and to an extent also expenditures. Furthermore, both systems
feature very transparent requirements when compared to other countries around the world (Van
Biezen, 2004). The UK’s system is more diligent as it ensures that all donations are tied to
specific donors. Both countries also feature limited campaign times, as well as limited means of
conducting the campaign itself. The most significant difference is, without a doubt, the presence
of extensive and generous state funding in Germany and the lack of it in the United Kingdom. As
was shown in the Sources of Funding subsection, German political parties rely extensively on the
subsidy from the state to fund their activities.
5.2 Introducing the Data-sets
Following the extensive presentation of the regulations and the significance of these
regulations in both countries of the case study, the data-sets will be introduced. The most
important feature of this case study lies in the use of data about political donations in both
countries. In the following paragraphs, each data-set is presented. The main features of each
data-set are explained, such as their source, availability, the variables that the data-set contains
and the shortcomings it may have.
5.2.1 Data-set for the United Kingdom
The data that are utilised to track the patterns of donations among specific companies in
the United Kingdom were obtained from the website of the Electoral Commission (EC), which
labels itself as “the independent elections watchdog and regulator of party and election finance”.

41
The EC has been set up by the UK parliament to ”regulate party and election finance and set
standards for well-run elections” (The Electoral Commission, 2016).
The data-set itself can be found on the website and is presented in the form of a search
engine that offers several options to find the exact information needed. It is thus possible to
select data from a certain time period, only include certain donors or only certain type of
donations. Overall, the way the data-set is presented as well as its accessibility really make a case
for UK’s commitment to a transparent system. The data itself contains information about the
donor’s identity, the amount he has donated, the party he donated to and the year of donation.
The relevant information has been extracted from this website into an Excel sheet and are
presented in the form of graphs in the next section.
5.2.2 Data-set for Germany
The data about political donations in Germany were obtained from the website of the
German Parliament - Bundestag. The data themselves are provided in the form of downloadable
pdf files for each year starting with 2002 and ending with 2014 (Deutscher Bundestag, 2016).
The pdf files are comprehensive reports about party spending and the donations party has
received in that year. Much like with the UK data, the data relevant for the Germany’s part of
case study have been extracted into an Excel sheet and are also presented in the next section. The
data contain information about donor’s identity, residency, the amount donated, the date of
donation and the political party the donation was given to. It is necessary to mention, that
contrary to the United Kingdom there are only donors who had given above €10,000 over the
course of a year.
6 Presenting and Interpreting the Data
In this section, the data showing the donations from five companies from the United
Kingdom and five companies from Germany are presented. In order to make the data more
understandable, they are presented in the form of figures. The figures are utilised are either
column graphs that are used to show the combined donations or to show the donations of
companies that only donated to one party in the time period observed. In case the company has
donated to various parties over time, or perhaps to multiple parties in the same year different

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