Party subsidies are subsidies paid by the government directly to a political party to fund some or all of its political activities. Most democracies (in one way or the other) provide cash grants (state aid) from taxpayers' money, the general revenue fund, for party activity. Such funds may cover routine or campaign costs incurred by the party. Among the established democracies India and Switzerland, but not the United States (which has the Presidential Campaign Fund) or the United Kingdom (which pays the Short Money, the Cranborne Money and a Policy Development Grant) are the most notable exceptions. Party subsidies can be relatively small (as in the U.K.) or quite generous (as in Sweden, Germany, Israel and Japan).
The recipients of public support (in cash or kind) are party organizations, parliamentary groups (party caucussses) and/ or candidates for public office (parliament or presidency). In combination with rules that enforce fair access to and fair distribution of state aid among the players of the politzical game, government funding fo political activity can be an acceptable policy option for democratic polities. The allocation of party subsidies follows general rules for access to and distribution of such grant, for example access for all parties represented in the national parliament and distribution in proportion to the number of seats held in the current parliament, or in proportion to the number of votes polled in the most recent election. Many subsidy schemes are linked to reporting and disclosure obligations for the recipient parties.
Rare instruments of party subsidies are matching funds and tax credits. Matching funds are granted to a political competitor who has proven to a government authority that he or she solicited small individual donations. Tax credits can be deducted by the taxpayer from tax liability because some part of a political donation is treated like an advance payment on tax. Because matching funds and tax credits depend on financial contributions by individual citizens such support is more compatible with a participatory concept of democracy than flat grants, which do not require specific efforts by the fundraising parties (or candidates).
In many democracies public funding for political parties was introduced after scandals, which revealed political corruption or illegal funding, had become public knowledge. In other countries, the rising costs of political competition stimulated the spread of party subsidies (government funding). Costa Rica and Uruguay in 1954 were the first to introduce such subsidies. They were followed by Puerto Rico (a U.S. territory in the Caribbean) in 1957 and (West)Germany in 1959. In Quebec (1963), a Canadian province, Sweden (1965), Finland (1967) and Israel (1969) parties received such support rather early. Since the 1970s many countries have introduced party subsidies: Norway (1970), Canada and Italy (1974), Austria (1975), the U.S. (1976), Australia (1984), Denmark (1986), France (1988), Belgium (1989), Japan (1994), Ireland (1997), the Netherlands (1999), the U.K. (2000) and New Zealand (2010). Nowadays among the established democracies only India and Switzerland stand out as exceptions to the rule. By now it is also used in Greece, Portugal, Spain and other more recently established democracies in Europe and Latin America.
Although the mainstream opinion is in favour of party subsidies now, they are still disputed. Supporters of party subsidies argue that directly providing the campaign funds reduces political corruption, as parties do not need to raise "money with an opinion/ strings attached".
Opponents argue  that party subsidies
- petrify the party system and thereby lock the democratic process,
- make the foundation and/ or the electoral participation of new parties practically impossible, because such parties do not receive public funding right from the start and occasionally private funding is prohibited.
- Political finance
- Political party funding
- Political donations in Australia
- Party funding in Austria
- Federal political financing in Canada
- Party finance in Germany
- Political funding in Japan
- Party funding in the Netherlands
- Party finance in Sweden
- Alexander, Herbert E. (ed.): Comparative Political Finance in the 1980s, Cambridge, UK et al.: Cambridge University Press, 1989, pp. 14/15.
- Casas-Zamora, Kevin: Paying for Democracy. Political Finance and State Funding of Parties, Colchester, UK: ECPR, 2005, pp.30/31.
- Cf. Pinto-Duschinsky: 'it's their party, and we pay for it', in: The Sunday Times, October 22, 2006 - http://www.timesonline.co.uk/tol/comment/article608907.ece.
- For a brief compilation of pros and cons see Casas-Zamora; Paying for democraxy. Polirtical finance and state funding for parties. Colchester, UK: ECPR Press, pp. 28/29.
- The argument to the contrary was already published in: Alexander, Herbert E. (ed.): Political Finance in the 1980s, Cambridge UK et al: Cambridge University Press, 1989, pp. 248/249.
- The Greens (Die Grünen) and the Pirate Party (PIRATEN) in Germany are examples to the contrary after they had survived their very first, unsuccessful election bids. Cf. external link to the distribution of party subsidies in that country.
-  International IDEA, Political Finance Database, Question 19: Direct party subsidies.
- Subsidies to the parties, Ministry of Justice, Finland (brief explanation in English).
- General deskription of subsidies to parties in Germany by the Parliamentary administration.
- Distribution of subsidies to individual parties in Germany by the Parliamentary administration.
-  Information by the Dutch parliament on Party subsidies
-  Article on party subsidies in the Swedish Wikipedia
-  Article on party subsidies in the Italian Wikipedia