The persistent role of money in UK politics

Julia Cagé, Edgard Dewitte 04 February 2022

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On 4 October 2021, following revelations in the ‘Pandora Papers’, the Conservative Party in the UK faced calls to return cash from wealthy donors with alleged links to corruption scandals (Davies et al. 2021). This was not the first public scandal involving the private funding of UK politics. A few months before, the Financial Times and the Sunday Times revealed that a major Conservative donor had paid £100,000 for a breakfast with Boris Johnson (Burgis et al. 2021, Pogrund et al. 2021). Surprising? Probably not to those familiar with UK history and the David Lloyd George cash-for-honours scandal of 1922, or with Tony Blair’s similar affair in the 2000s.

These events illustrate just how eager candidates are to raise money for their campaigns. And a large academic literature has shown that, indeed, these funds can improve electoral performance (e.g. Da Silveira and De Mello 2011, Ben-Bassat et al. 2015, Avis et al. 2017, Spenkuch and Toniatti 2018, Bekkouche et al. 2022). But a striking feature of this research is its lack of historical perspective. Though campaigns have existed for as long as elections, many argue that the introduction of new technologies, such as the Internet, have radically changed campaigns by lowering the cost of reaching out to voters (Hersh 2015, Larcinese and Miner 2018). Have the patterns and influence of campaign spending really changed over time? In particular, how have evolutions in electoral environments and campaign finance regulations affected the relationship between candidates’ expenditures and electoral results?

In a recent paper (Cagé and Dewitte 2021), we investigate the role played by money in politics over the very long run by relying on the fact that the UK became the first country to regulate campaign finance more than 150 years ago. We build an exhaustive dataset on general elections in the UK, covering 40 elections from 1857 to 2017, which includes information on campaign spending, electoral outcomes, and socio-demographic characteristics for 69,042 election-constituency-candidates. We show that while the amounts spent on candidates’ campaigns have decreased dramatically since 1880, the correlation between this spending and the votes candidates received has in fact risen, leading to ambiguous conclusions regarding the importance of money in elections. This, we argue, is due at least partly to the introduction of decentralised media technologies, such as local radio and the Internet.

The changing patterns of campaigning

Figure 1 displays how the overall amount spent on general elections (i.e. summed up over all the candidates) has evolved since 1857, normalising it by the average national income. In the 19th century, as much as the equivalent of 20,000 average adult incomes was spent on campaigning; this number fell to 500 in recent years (i.e. less than one adult per electoral district). One of the key drivers of this general pattern is the introduction and tightening of campaign spending limits, as documented by Fouirnaies (2021). However, it is worth noting that a significant share of the candidates spends much less than the legal maximum, particularly in recent years. While the average spending as a share of the legal maximum was equal to 75% of the limit from 1885–1911, it was only one third of the limit during the more recent period.

Figure 1 Long-run evolution of campaign spending 

Notes: The figures plot the long-run evolution of campaign spending. The blue lines with dots report the evolution of the overall campaign spending (summed up over all candidates at the general elections in a given year) over the average national income between 1857 and 2017, and the red dashed line with triangles reports the evolution of the average amount spent by candidates as a share of the spending limit. Data on the average national income are from the World Inequality Database.

Two elements could explain this fact. First, candidates could be financially constrained. Survey data from Fisher and Denver (2009) show that this is indeed the case, at least for recent elections. Second, historical developments could have impacted the nature and relative efficiency of the different campaign spending items (or simply helped candidates understand these efficiencies), so that candidates changed their basket of expenses and how much they considered appropriate to spend. A look at the patterns of spending per disbursement categories, which have been recorded since 1857 and remained the same during the 1885-2001 period, suggests this.

Mid-nineteenth-century election returns show how much candidates relied on paid staff to organise their campaigns. Unbound by any spending limit, they used these staff to target each elector individually through canvassing, conveying, and monitoring – something made possible by the very small electorate and non-anonymous voting process. Returns also contain hints of election corruption (Rix 2008), such as abnormally high spending on agents – the main campaign officers and accountants.

The 1867–1885 period of electoral reforms saw the birth of political campaigns as we understand them (Kavanagh 1995, Lawrence 2009). With the advent of the secret ballot and successive extensions of the franchise, candidates had to find new ways to reach the mass of anonymous electors on whom their fate depended. Hence the growth of open-air election meetings, whose costs start to appear systematically in the expenses data (Figure 2). Because the main technological innovations of this period were to be found in printing, with techniques such as offset-lithography and rotogravure, a new era of paper-based propaganda began through two key channels: election leaflets and the press (Lawrence 2009). Our data shows that these advertising materials account for most candidate spending at the time.

Figure 2 Electoral expenses by category over time

After WWII, the advent of national radio and television initially led national politics to overshadow local campaigns (Lawrence 2009, Johnston and Pattie 2014), but the latter progressively experienced a revival when local radio stations and regional television channels were launched and candidates began competing for their attention. The whole electioneering process became more ‘professional’ with the increasing use of strategy consultants and marketing techniques (Wring and Ward 2010, Lawrence 2009). This meant that the share of spending devoted to advertising kept increasing from this period until the Internet era, when we calculate that candidates devoted on average around 85% of their total expenditures to ‘advertising’ and ‘unsolicited material’ (spending categories changed in 2005), which includes the costs associated with targeting or identifying voters, database costs, and the cost of analysing social media content.

The growing correlation between spending and votes

Exploiting variations in the same candidate’s spending over time and constituencies so as to capture time-invariant candidate heterogeneity (such as quality or charisma), we estimate the average effect of candidates’ electoral expenditures on vote shares. First, we find a positive and statistically significant correlation between the share of the constituency total spending represented by candidates and the share of votes they obtain. The magnitude of this effect is economically significant: in our most conservative specification, a one-percentage-point increase in the spending share of a candidate is associated with a 1.1% increase in their vote count. On average, the total spending in an electoral district amounts to €90,528. Hence, a one-percentage-point increase in the spending share of a candidate corresponds on average to an additional €905 in campaign spending. Holding abstention constant, this corresponds on average to 119 additional votes.

Figure 3 shows that the magnitude of the correlation between campaign spending and votes has consistently increased since the 1880s, despite the passing of stricter campaign finance rules. It peaked during the last three decades of the 20th century – a result that contrasts with the general consensus in the political science literature on the importance of local campaigning at the time. The correlation then suddenly dropped in the early 2000s, but remained at levels close to those of the notably corrupt Victorian-era elections.

Figure 3 Evolution of the relationship between the candidates’ share of the constituency total spending and their vote share, 1857–2017

The role played by new media technologies

How to explain these changing patterns? Using natural experiments, we document the causal impact of the introduction of two technologies which developed at key turning points of our temporal patterns: local radio and broadband Internet. For the former, we exploit a freeze in independent radio licensing that occurred between 1976 and 1980, in the midst of local radio expansion, and show that electoral results are more sensitive to differences in campaign spending in places covered by the media. We reach a similar conclusion when using the rainfall strategy developed by Gavazza et al. (2019) to instrument for broadband internet penetration in the 2000s: between the 2005 and 2010 general elections, we observe a higher correlation between spending and votes in places that gained relatively more exogenous Internet access.

We also relate our temporal trends to the important changes in the electoral environment and conduct of campaigns described above. We provide evidence that the ‘professionalisation’ of local campaigns likely played a significant role in the sudden increased correlation between spending and votes we observe in the 1970s by bringing more sophisticated techniques, especially in marginal constituencies. But the limits on national spending and fundraising transparency rules imposed by the Political Parties, Elections and Referendums Act (PPERA) 2000, and the economic turmoil of the late 2000s, all helped to shift national parties’ focus away from national campaigns towards local ones. By interfering extensively in constituencies’ strategies, these nationally led efforts overshadowed candidates’ localised activities, including their spending. This also had consequences for local campaigns themselves, which would now span longer periods in a more diffuse, less intense fashion.

Better contextualising the role played by financial wealth in electoral politics

These findings – based on studying the entire span of British modern elections – may have important policy implications regarding optimal campaign finance regulations. First, they indicate that, absent the observed drop in the amount spent by candidates – which stems partly from candidates’ difficulties with fundraising and increased transparency – the impact of money in UK politics has become more important in recent decades. Second, they stress the importance of contextual elements, such as campaign technologies and strategies, in our understanding of whether and how campaigns matter. As such, our results make a contribution to ascertaining the role played by spending limits – the most common regulation tool – in a broader context, and pave the way for regulations on the role of media platforms. 

References

Avis, E, C Ferraz, F Finan and C Varjão (2017), “Money and Politics: The Effects of Campaign Spending Limits on Political Competition and Incumbency Advantage”, NBER Working Paper 23508.

Bekkouche, Y, J Cagé and E Dewitte (2022), “The Heterogeneous Price of a Vote: Evidence from Multiparty Systems, 1993-2017”, Journal of Public Economics 206: 104559.

Bekkouche, Y and J Cagé (2019), “How money can turn electoral results upside down”, VoxEU.org, 14 September. 

Ben-Bassat, A, M Dahan and E F Klor (2015), “Does Campaign Spending Affect Electoral Outcomes?”, Electoral Studies 40 (1): 102–14.

Burgis, T, S Payne, K Shubber and G Parker (2021), “Elite Tory donors club holds secret meetings with Boris Johnson and Rishi Sunak”, Financial Times, 30 July.

Cagé, J and E Dewitte (2021), “It Takes Money to Make MPs : New Evidence from 150 Years of British Campaign Spending”, CEPR Discussion Paper 16586.

Davies, H, R Mason, L Harding and J Waterson (2021), “Tories facing calls to return cash from donors named in Pandora papers”, The Guardian, 04 October.

Fisher, J and D Denver (2009), “Evaluating the Electoral Effects of Traditional and Modern Modes of Constituency Campaigning in Britain 1992–2005”, Parliamentary Affairs 62 (2): 196–210.

Fouirnaies, A (2021), “How Do Campaign Spending Limits Affect Elections? Evidence from the United Kingdom 1885–2019”, American Political Science Review 115 (2): 395–411.

Hersh, E D (2015), Hacking the Electorate: How Campaigns Perceive Voters, Cambridge University Press.

Johnston, R and C Pattie (2014), Money and Electoral Politics: Local Parties and Funding in General Elections, Policy Press.

Kavanagh, D (1995), Election Campaigning: The New Marketing of Politics, Oxford: Blackwell.

Larcinese, V and L Miner (2018), “Was Obama Elected by the Internet? Broadband Diffusion and Voters’ Behavior in US Presidential Elections”, CESifo Working Papers 2364‐1428.

Lawrence, J (2009), Electing Our Masters: The Hustings in British Politics from Hogarth to Blair, Oxford University Press.

Pogrund, G and H Zeffman (2021), “Tory chairman Ben Elliot ‘peddled access to Prince Charles’”, The Sunday Times, 31 July.

Gavazza, A, M Nardotto and T Valletti (2016), “Better internet access and UK politics: Unintended consequences”, VoxEU.org, 31 January.

Rix, K (2008), “The Elimination of Corrupt Practices in British Elections ? Reassessing the Impact of the 1883 Corrupt Practices Act”, English Historical Review 123 (500): 65–97.

Silveira, B S D and J M P De Mello (2011), “Campaign Advertising and Election Outcomes: Quasi-Natural Experiment Evidence from Gubernatorial Elections in Brazil”, The Review of Economic Studies 78 (2): 590–612.

Spenkuch, J L and D Toniatti (2018), “Political Advertising and Election Results”, The Quarterly Journal of Economics 133 (4): 1981–2036.

Wring, D and S Ward (2010), “The Media and the 2010 Campaign”, Britain Votes 2010, Oxford University Press, 217–32.

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Topics:  Politics and economics

Tags:  UK politics, campaign donations, electoral campaigns, voting patterns, campaign spending

Associate Professor in Economics, Sciences Po; CEPR Research Fellow

PhD candidate in Economics, SciencesPo

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