It is not commonly known that the bulk of resources provided to political parties comes from the state via the backdoor of parliamentary funding.

The Auditor-General's uncovering of the Labour Party's unlawful pledge-card election spending is merely the tip of the iceberg. The parliamentary parties receive resources and services of more than $40 million a year. These are intended to permit them to carry out their legislative duties and serve their constituents, yet much of this is used for partisan political purposes, electioneering and organising their parties.

About 1200 staff are employed by the Ministerial and Parliamentary Services, many of whom carry out party political research, marketing and organising. Out in the electorates, regional party organisers (previously paid for by the party organisation) have been replaced by electorate agents (paid for by the Parliamentary Service), and the electorate offices that they work in are now de facto regional party headquarters. Mail-outs, glossy leaflets and newspaper advertisements are also paid for by parliamentary funding.

Undoubtedly, state funding has reduced the organic attachment of political parties to society. They no longer have to rely on party members for voluntary work and financial support. Because the parties have lucrative funding in Parliament, their leaders are not responsive to, or concerned with, recruiting ordinary members. Hence since the 1980s, party membership has plummeted. Labour has dropped from 100,000 in the mid-1980s to about 10,000, and National has gone from a high of 250,000 down to as little as 20,000. The minor parties are also not able to sustain large memberships.

This organisational detachment of parties from their traditional supporters has led to ideological convergence in which parties of both left and right are more inclined to come together in the mushy centre. Instead of clearly articulating the interests and demands of distinct social constituencies - which was their classic function - the financial independence gained through state subsidies means that parties are freer than ever to chase the floating voter and simply seek public office.

For instance, today Labour is less the party of working people and National is no longer merely the party of business and farming.

Rather than being reliant on public subsidies, it can be argued that it is healthier for parties to be dependent for their existence on their ability to attract resources of both a financial and volunteering variety from their supporters.

Even institutional sources of support, such as interest groups, corporations or trade unions, provide an ideological anchor, encouraging political parties to stand for distinct political programmes that allow the electorate a greater degree of political choice.

In becoming reliant on state funding, political parties are prone to banding together to ensure its generous but covert supply. The parties have largely designed the generous provision of state funding themselves and, through their control of the Parliamentary Service, they have controlled the regulation of this funding.

Even when the Electoral Commission meets to allocate state-funded election broadcasting time, National and Labour insist on taking part in the decision.

By receiving state funding, the parties are also partially co-opted into the state, blurring the line between political parties as voluntary, representative structures and the state.

Public subsidies have fostered the development of a political class in New Zealand politics made up of an increasingly self-referential group of career professionals who develop an independent understanding of goals and objectives.

Because of this, the parties are becoming more like state-funded bureaucracies or virtual government departments. Party-political state servants, such as the head of the Prime Minister's Department, Heather Simpson, now dominate the internal policy-making processes of the parties. Simpson epitomises the concentration of power in a backroom party professional: paid for by the state, answerable only to the parliamentary leader, but hugely influential on policy development and hence party direction.

The overall effect of the taxpayer-funded life-support system has been to consolidate the status quo in Parliament and prevent the entry of outside competitors. Witness that the only new political party to be elected to Parliament since the introduction of MMP is the Act Party, which was bankrolled by millions of dollars of private wealth. Every other new party including the Greens, Alliance, New Zealand First, United Future, Progressives and the Maori Party has been launched by at least one existing MP. No other new party has been able to compete with the millions of dollars of state-funded resources at the disposal of parliamentarians.

As Richard Prebble acknowledged in 1997, the system is designed by MPs to subsidise their campaigns and make it difficult for outside parties to compete. He pointed out, that during the 1996 campaign, the incumbent National Government not only used state-funded television advertising, but was also able to use ministerial and rental cars, accommodation and daily allowances in campaigning.

Prebble said the National Party electoral officers alone cost $455,000 in salaries and about $390,000 in expenses. The true cost of National's campaign would be over $4 million instead of the $1.4 million that it claimed.

Labour has said that increased state funding would restore confidence in the political system. However, it seems likely that the concerns over unlawful election spending has had the opposite effect on public opinion, giving voters greater reason to distrust parties and making them even less willing to see parliamentary parties handed further public subsidies.

The most significant party finance scandals have involved the use of state funds rather than private financing, and these are likely to have reduced the public's tolerance of state funding. For example, in 2001 the Alliance was scrutinised about the misuse of parliamentary resources, then in 2003 Acts electoral offices and agents were investigated. Now almost every party in Parliament has been caught out by the Auditor-General's investigation.

Many on the left favour state funding of political parties because of the misconception that money equals power and only wealthy parties can compete. But a number of examples from New Zealand political history refute this. New Zealand First and the Greens both obtain decent electoral results from relatively low campaign budgets, while the Act Party has spent millions of business funds for very little result. Even the Alliance Party scored its best result of 18 per cent of the vote when it had virtually no money, and its steady electoral decline occurred parallel to its growing access to millions of dollars in parliamentary resources. Furthermore, most recent elections have not been won by the highest spending party.

If anything, the left should be concerned that state funding has contributed to parties becoming divorced from the public, and that our system of state funding makes it difficult for small parties to grow and enter Parliament.

This, together with the tendency for New Zealand's parties to converge in the middle of the political spectrum, is prohibiting any real choice for voters.

Although the extensive backdoor state funding of parties in New Zealand has solved the financial problems that political parties have had in raising funds from the public and getting them to donate their time, it has also allowed the parties to avoid the deeper problems that afflict them.

Rather than increasing this generous state subsidy, the political system would benefit from being freed from such patronage. Making parties seek their own resources would encourage them to reconnect with society. Those without any real support from the public would be allowed to fade away.

Furthermore, parties without substantial amounts of finance would be forced to develop alternative means of communication and persuasion - maybe even involving actual party members. The inflation in election expenditure might also be reversed, and election campaigns might become less of a media circus. In an ideological sense, the removal of subsidies would encourage parties to be more politically distinctive.

* Bryce Edwards is a New Zealand researcher who worked in Parliament for the Alliance in 2001, and now works in London. Access his PhD on Political Parties in New Zealand