Money to politics, the challenge of transparency

In Italy the role of parties decreases, but the number of actors involved grows. A complex theme and picture, with laws still failing to intercept the new dynamics and a fragmentation of the subjects in the field.

This article was published on OpenPolis  as a part of the ESVEI project.

The abolition of direct public funding for politics has contributed to completely revolutionising the matter. The change affected above all the comprehensibility of the system, and therefore its transparency. If on one hand the state spends less, on the other hand the current system is so complex that monitoring it has become much more complicated.
Being in politics has a cost, and while in the past political movements only organised, economically and logistically, through parties, now the number of subjects involved has multiplied. Political foundations, associations, parliamentary groups, think tanks – the galaxy of structures that carry out political activities has increased.
Yet, due to the increasing complexity, Italian laws are struggling to intervene appropriately with clear and direct rules. When in recent years we have intervened to request more and better information, we have often forgotten to set up a proper system for monitoring compliance with the rules. The are many problems, and they concern both the input – who finances politics – and the output – how politics spends the money.

The context

With the 2013 reform under the Letta government in Italy, direct public funding for parties was progressively eliminated. This consisted mainly of the so-called electoral reimbursements, which were ultimately abolished in 2017 – a form of funding linked to elections, in which the state paid individual parties a sum of money calculated, among other things, based on the electoral result. The gradual abolition of electoral reimbursements is the product of both the economic crisis and a strong anti-political sentiment, caused by numerous corruption and malfeasance scandals.

This transition, which lasted from 2013 to 2017, meant that the parties' revenues decreased by over 50% in a few years.

The parties' revenues decreased by over 50% 

Revenue performance of registered parties (2013-17)

BACKGROUND
The chart takes into account income from the ordinary management of the parties and M5S as reported in the deposited financial statements. For 2017, at the time of data collection (July 2018) the accounts of Stella Alpina, M5S (association), IdV, CoR, Mov. Puglia in più, Fare! were not traced.

This system was then replaced by different mechanisms, left to the voluntary choice of the taxpayer in the tax return (2×1000) or to the tax incentive of private donations to parties (26% deduction on donations). In short, a system based on direct public funding has been replaced by one based on indirect funding. Both, however, are struggling to take off, and while for 2x1000 mechanism this can be considered normal, as it is a novelty, the decline in private donations to parties is striking.

Private donations to parties are falling

Trend of donations to political forces (2013-17)

BACKGROUND
Individuals are defined as ordinary citizens. Corporations are companies and other private law entities. Since 2014, a threshold of € 100,000 per year has been added for donations to parties.

The problem with the 2x1000 mechanism, besides being little used by the tax payers, is that we are talking about low figures compared to the needs of parties. The difference between the amount allocated by the state and the amount collected by the parties is always considerable, as citizens do not use this type of financing. In 2018 the amount of money received by Italian parties through 2x1000 even decreased from 15.3 million in 2017 to 14.1 million Euros.
But if the novelty is that party coffers are increasingly empty, what does not seem to change is the fact that politics, on a national scale, has a cost. And therefore the question is only one, how is politics financed?

Multiplicity of actors, the role of parliamentary groups

If many things have changed within parties with the abolition of electoral reimbursements, the external scenario has followed a similar dynamic. To understand how the funding of politics evolves, we can look not only at parties, but at all the structures that revolve around a certain movement.

The first by economic magnitude lies in the political groups of parties in representative institutions, above all the parliament, that receive funding to carry out their institutional activities. However, the boundary between institutional activities and party activities is very blurry.

The amount of money collected by parliamentary groups between 2013 and 2017 was far greater than that received by the parties. And, not surprisingly, this has led many parties to use the funds of the parliamentary groups to carry out activities of more political than institutional character. Money from parliamentary groups was then used to pay for party demonstrations, staff, and internal staff as well as communication material for electoral campaigns.

Groups receive more public contributions than parties

Comparison of public funding for groups and parties in the 17th legislature (2013-17)

BACKGROUND
Pending the publication of the 2017 budgets of parliamentary groups, the contribution figure for that year was estimated on the basis of what was received the previous year.

Yet, while both the mapping of political groups and the information on their budgets are public, for other structures it is difficult to obtain information.

Foundations and political associations

The vacuum generated by the parties' economic crisis meant that the sharing of ideas on the res publica, a characteristic dominion of parties, required a new "home". To meet this need, over the years we have witnessed the growth of think tanks, foundations, and political associations. These structures have become realities parallel to the parties, used to carry out a number of activities including fundraising, political training, and the organisation of factions.

The political rise of Matteo Renzi and his foundation Open was a perfect example – a structure parallel to the party of origin, in this case the Democratic Party, used to raise funds, organise events, and aggregate the electoral base. These structures are not only an instrument of political affirmation, but also a tool to weave transversal relationships between parties.

In 2013 the arrival of the Letta government, born of a post-electoral agreement between centre-left and centre-right, saw the presence of numerous ministers belonging to the Vedrò foundation: political opponents who had already established personal relationships in a foundation.

Associations can also become a "neutral" ground for establishing relations with representatives of the academic, political, and journalism world. The latest example is the SUM kermesse, organised by the Gianroberto Casaleggio association, in which Davide Casaleggio, a leading member of M5S, has been putting together various exponents of the public political debate for two years now. The Movement itself, not being a party in the official sense of the word, bases the vast majority of its organisation on a network of associations, including the Rousseau association.

Until the anti-corruption law was approved under the current Conte government, all these structures received the same treatment as any other association and foundation in the country. This implied that they were not required the level of transparency generally required of parties, which did not allow to analyse either their budgets or the donations they received.

With the approval of the anti-corruption law some things have changed, but the main issue remains unsolved. By establishing transparency obligations for these structures, we are certifying the increased complexity of the Italian political scenario. Formalising the need for more and better information on foundations and political associations confirmed their role in our country's political dynamics. Structures also vary in characteristics. In fact, all foundations, associations, and committees have been equated with the parties when:

If in the past the scope of political subjects was limited to the about 20 parties officially recognised in the party register, now the number probably exceeds the hundred units.
Such equiparation has undergone recent changes in terms of funding. In fact, with the "growth decree" the Conte government has effectively abolished the ban for these structures to receive funding from abroad, as it is instead for parties. A normative confusion that sees foundations/associations as equal to political parties, but with fewer prohibitions in the field of funding.
A question then – that of the relationship between associations and politics – which has not necessarily been solved by the latest reforms, as shown by the recent case of the Cultural Association Lombardia-Russia and its alleged links with Lega.

It is not impossible, more generally, for organisations without politicians in top management, and therefore not involved in the transparency obligations now imposed, to have strong ties with political parties.

Unofficial channels, online propaganda 

Today parties, parliamentary groups, foundations, and associations are the most traceable channels for doing politics on the territory. Unofficial channels, however, are more difficult to monitor – a particularly critical issue when speaking, for example, of online political propaganda. In this field, the parliament has yet to intervene to regulate the matter. To date, in fact, the rules in place for traditional political propaganda do not apply to online political propaganda.
Transparency is therefore in the hands of the individual companies that provide these online advertising tools: above all Facebook, Google, and Twitter. The main solution set up by these platforms to increase transparency of online political propaganda involves the official accreditation of the structures and individuals who intend to advertise political content. This involves, for example, the obligation to provide information, including who is paying for the ad.

At the 2019 European elections, the Democratic Party spent the most in online propaganda

Money spent on Google and Facebook in advertisements for political purposes

BACKGROUND
The advertising on Facebook and Google of the official profiles of the main Italian parties (Lega, M5S, PD, Forza Italia, FdI, + Europa), their leaders, and their head candidates was analysed. Data of the individual party therefore include all the items listed above.

Even if this system could really intercept anyone who does political propaganda online, this would open up another issue. As the number of actors involved in politics has increased, and not all of them can be traced back to registered organisations like parties, an individual or a structure that does online propaganda is not necessarily intercepted by the system. Even if they were, not all information of interest is then made available by the websites. One would know, for example, who pays for the specific propaganda content, but not who provided that money to that person or that structure.

This is to say that, by increasing the number and types of structures active in the field of politics, further levels of complexity are reached for already obscure fields like that of online political propaganda.

Laws for transparency, but nobody checks 

The picture is complex, and there are many actors, but some rules to make political funding more traceable are already in place. The problem, however, is that no one monitors their compliance or, in other cases, those who should do not have the means to do so.

For example, deputies and senators have the obligation to deliver both their asset declarations and the electoral campaign report form, including the received funding, at the beginning of the term. The law establishes that this information must be accessible in a text format that can be easily interrogated, but above all in an open format, to facilitate its re-use.
But it is precisely when analysing the patrimonial declarations of MPs and members of the government that clear problems emerge. It is apparent that the formats used do not make the data fully accessible, readable, and reusable. In fact, they are mostly handwritten documents, scanned and uploaded in PDF (with the result that some parts are illegible). From a certain point of view, therefore, the institutions are violating the law, not complying with what had been established in 2013.

There was also the case of the Guarantee committee for the statutes and the transparency and control of the statements of political parties. The structure has repeatedly denounced understaffing and underfunding in its annual report – a situation that does not allow it to fully and independently carry out its control work on party budgets. The situation is made even more serious by the fact that now the committee will also oversee foundations and political associations, following their equation with parties. A law was passed to make party budgets more transparent, and above all the donations they receive, but the body that was set up to monitor them was not given the means to do so.

Why all this is a problem

Parties have lost centrality in national political dynamics. Their weakening in finances and level of influence has in fact changed many balances.

With less strong, stable, and central parties, new actors have emerged in the political arena. Some, like parliamentary groups, are directly linked to parties; others are not, or not as clearly. A complex picture, in the reconstruction of both the structures and the financial flows involved.

The abolition of public funding of parties has therefore contributed to the fragmentation of political actors, indirectly compromising the transparency of the system – especially the matter of funding, now more complex to trace, and particularly vulnerable to scams.