It’s not just Musk - we need to stop British billionaires bankrolling our politics

Keir Starmer needs to introduce new laws to cap individual donations and bar corporate political funding before it’s too late, writes former Electoral Commission David Howarth.

By David Howarth

Elon Musk and Nigel Farage have dominated the news agenda in recent weeks. Musk’s seeming desire to push his huge fortune behind Reform UK has been useful in one respect: it’s brought back into focus Britain’s flawed system of party finance.

The chair of the Committee on Standards in Public Life this weekend said that the law should be further tightened to prevent foreign funding of British politics. But the central weakness of the system is not that it is vulnerable to foreign billionaires – it’s that it is already bankrolled by British billionaires.

We have no limit on how much donors can give. Any plutocrat who has acquired the right to vote in Britain can give whatever they like. That’s why we need a tight cap on political donations and new legislation that bars companies from being able to donate to politics altogether.

Defenders of the current system say that unlimited donations are unobjectionable as long as party spending is limited during election periods.

But relying solely on spending limits to curb the power of money on our politics is a bad idea. There are simply too many holes through which vast amounts of expenditure can slip.

Spending controls apply only during officially defined election campaign periods. Most of the time, parties can spend unlimited amounts. But we now live in an era of constant campaigning. The concept of a separate campaign period is meaningless.

Even during official campaign periods some important types of spending escape control. Spending on staff by national parties does not count, so that, for example, the costs of making national party online videos almost completely disappear if done in-house. And some kinds of election spending during the campaign by non-party organisations are exempt.

Most strikingly, campaign expenditure, even if aimed at supporting a specific candidate, avoids all electoral law if made by a newspaper, so that the easiest way for billionaires lawfully to influence British elections is via the press.

Another problem is enforcement. Constituency spending limits are enforced not through the Electoral Commission but either by expensive court proceedings or by a largely uninterested criminal justice system. Enforcement action by this route is vanishingly rare.

The Electoral Commission does have jurisdiction over national party spending limits, but its enforcement powers are insufficient. Its civil penalties stop at £20,000 per offence, an amount so small in relation to the amount of money now sloshing through politics that it can be treated as a cost of doing business.

The Commission’s investigatory powers are also restricted, lacking the full range of techniques available to, for example, the National Crime Agency, including any power to investigate activity outside Britain. Boris Johnson’s government removed the Commission's powers of criminal prosecution, powers it was proposing to start using because of its frustration with the police.

But even if we could close all the loopholes on spending and even if the Electoral Commission had adequate investigatory, prosecution and enforcement powers, the lack of any limit on the size of donations would still have a seriously corrupting influence on our politics.

British politics is increasingly funded by a handful of rich men (and they are mainly men.) Last year, two-thirds of donations came from just 19 donors, each of which gave more than £1 million, according to recent research by Transparency International.

Unlimited donations means that it is far more efficient for political parties to concentrate their fundraising efforts on a few super-rich donors, who then feel that they can exert influence over the party. Why waste time and money on asking millions of people for small donations when you could generate more money from a small number of billionaires? It is no coincidence that Reform UK has followed the Conservatives in appointing a very rich person as party treasurer (Nick Candy, who is himself a former Tory donor.)

The party treasurer’s job is to use their networks of wealthy acquaintances to generate a small number of very large donations. The same pattern applies in the Labour Party. Since the mid-1980s every single treasurer of the Labour Party has been a senior trade union official. Labour equally relies for donations on a small number of donors, mainly trade unions who also feel that they should be able to exert influence over the party.

So if the system is broken, why has reforming it been so difficult? The main reason is that both the Conservatives and Labour, have a vested institutional interest in allowing unlimited donations. Both feel like they stand to benefit from the status quo - in much the same way a recently victorious party always struggles to see the flaws in first past the post.

Labour and the Conservatives both say that imposing a limit on donations would either bankrupt the parties or require extensive state funding to make up for their lost revenue. This is not the case. Barack Obama's first presidential campaign demonstrated nearly two decades ago that vast sums can be raised in small donations. Developments in technology since then have made mass fundraising even easier.

Labour supporters of the status quo add a further unconvincing argument, that the unions are emotionally integral to the party in a way that individual donors are not to other parties. But with a few tweaks of the rules, the lump sum contribution of a union could be recognised as hundreds of thousands of small donations from individual trades union members.

So will we see change this time? Some reforms should be easy for any honest government to carry out, including restoring the Electoral Commission’s independence and prosecution powers and enhancing its enforcement and investigatory powers. Other reforms need only a small amount of political courage, such as extending spending controls beyond official election campaign periods.

The difficult question is what to expect about limiting the size of donations and banning corporate donations. The Musk story should have been a wake-up call, but Keir Starmer is innately conservative: so far the government has made noises about new legislation, but not until 2026. This could be too little, too late.

David Howarth is professor of law and public policy at Cambridge University. He served on the Electoral Commission between 2010 and 2018 and, prior to that, was a Liberal Democrat MP for Cambridge.