Prime minister rejects predecessor call to ban political party donations

Kaja Kallas and Jüri Ratas sign the coalition agreement between their parties.
Kaja Kallas and Jüri Ratas sign the coalition agreement between their parties. Source: Priit Mürk/ERR

Prime Minister Kaja Kallas (Reform) rejects calls from her predecessor and Center Party chair Jüri Ratas to put party finances solely on the state budget. Kallas called the current system, which includes donations and membership fees as well as state grants, optimal.

Speaking at the regular government press conference Thursday, Kallas said: "I am increasingly convinced that the former Minister of Finance Martin Helme has not given the previous Prime Minister a good overview of the state budget. The state budget is not in a good position, therefore this proposal is not appropriate at the moment," he said.

Ratas told ERR Thursday that the matter could be put to the Riigikogu.

Ratas made announcement same day party watchdog appealed lifting of Center Party illegal donation fine

Donations tend to become much more significant in election year than in a non-election year, though state budget grants remain constant.

Center has seen no shortage of donation scandals and on the same day Ratas made his announcement, reports appeared that the ERJK was appealing the lifting of a €1 million-fine issued to the party following an alleged illegal donation.

Last year, the party had to return a €50,000 donation, whose origins were unclear, while it was an alleged corruption scandal involving a major Center donor, Hillar Teder, which helped bring about the collapse of the Center/EKRE/Isamaa coalition last month, though Center remains in office, and Ratas is set to become the next Riigikogu speaker - a very key post.

Reform rejects protection money scheme

Registered parties are granted sums from the state budget each year in proportion to their size and Rigiikogu representation. In the last quarter of last year, Reform got €447,134 and Center got €341,926 (Reform has more Riigikogu seats than Center at 34 versus 25 – ed.).

Reform, however, rejects the practice of so-called protection money (Estonian: Katuseraha, literally "roof money"), a state budget top-up which is issued in the lead-in to voting on the state budget late on in the year to parties to distribute as they see fit to various regional projects, some of them controversial, as a way of greasing the wheels for the main state budget voting process. Reform has not accepted protection money for some years.

Speaking on Thursday, Kaja Kallas said that since Estonia was not a massively wealthy nation and given more pressing needs such as health care, education and fighting the pandemic, the existing financing system should remain, a system which, in the case of donations, is strictly regulated and monitored.

Party finance watchdog chief and deputy divided on issue

The chair and deputy chair of the party financing watchdog body, the ERJK, voiced differing views on Ratas' proposal.

ERJK chair Liisa Oviir said that removing scope for donations would alleviate influence-buying fears, noting that the major donors often hedge their bets by donating to more than one party, often both in office and in opposition.

Oviir said: "The beneficiaries that have attracted the attention of large donors are usually government parties ... [Removing the facility to donate to parties] may alter the overall viewpoint that these donations may be buying some kind of benefit."

Examples might be donating in order to potentially obtain favorable treatment in procurement processes, for instance.

Ratas' suggestion would thus make the picture clearer, she said, but the topic needed in-depth discussion in order to set up state support that was fair an equitable to all parties, both in terms of size and of worldview.

Kaarel Tarand, ERJK deputy chair, on the other hand, welcomed the discussion, but came down more on Kallas' side, saying it is ideal that party supporters and members prop up their own parties.

"The concept that the Riigikogu should analyze, discuss and reach a newer and better solution to the existing system of financing political parties must be fully supported," Tarand told ERR Thursday.

However, banning donations from private individuals altogether was not the solution, he went on, noting that the state budget ight get treated as a bottomless money pit.

"We can never be sure of what is enough [in terms of state funding] for the parties. They will continue to determine the money for themselves via the state budget," Tarand pointed out.

Legal issues also apply, Tarand said – since parties are non-profit bodies, that status would a) be compromised by Ratas' proposal and b) see party members become somewhat surplus to requirements.

The change would not necessarily make political financing more transparent either, he said, since parties would now be financed by the taxpayer in effect.

Keeping the current system might also improve the collection on membership fees, which for some parties had been quite lax, Tarand went on.

Center tried to abolish finance watchdog body altogether

The former Center/EKRE/Isamaa coalition submitted a bill last year which would have nationalized Tarand's organization, the ERJK, and placed it under the auspices of the National Audit Office (Riigikontroll). This bill was filibustered out of contention ahead of the summer break by the Social Democratic Party (SDE) – a party which critics say dominates the ERJK (Liisa Oviir is a former SDE minister – ed.) – and was finally scrapped altogether when the coalition collapsed and the new Reform/Center line-ip entered office last month.

ERR's online news in Estonian analyzed party donations last year, a non-election year, and 2019, which saw two elections, to the Riigikogu and to the European Parliament.

Whereas in the non-election year, donations stood at €1.2 million from private individuals, in 2019 the figure had been more than twice that at €3.5 million, a figure constituting over a third of parties' annual income.

Party donations rise substantially in election years

Naturally, party expenditure is higher in an election year, with campaigning etc.

State budget expenses stand at €5.4 million a year for party support, however, by far the largest share of party revenues, which in 2020 stood at €6.8 million – 79 percent of the total. The €1.2 million in donations last year made up 17 percent of party revenues, while membership fees at €216,000 across all parties accounted for just 3.2 percent of the total.

While state budget support was the same in 2019 – election year as we have seen – at €5.4 million, as a proportion of revenue it was smaller, at 56 percent, while at €3.5 million, donations made up over a third of the total.

While Jüri Ratas did not touch on the permissibility of parties taking out bank loans under his proposed new system – the practice is currently legal and engaged in – these were not large in election year, with €650,000 in loans issued, or about 7 percent of total revenues.


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Editor: Andrew Whyte

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