Trump and Musk show why Starmer needs to cap political donations

Cleaning up politics is free and popular - so why is Labour so reluctant to act?

Only a supreme optimist would say democracy is in rude health. This week, the US inaugurated a president who has continually lied about losing the 2020 election.

Trump’s first acts included pardoning the January 6 insurrectionists and rescinding a Biden executive order promoting voter access and expanding voter registration. Elon Musk, who poured $240 million into Trump’s campaign, even gave a Nazi ‘Roman’ salute from the stage.

During the inauguration I got a text from an investigative journalist friend. “This is why we need to stop foreign interference in British politics.”

It’s hard to disagree. Musk, of course, is already threatening to pump money into Nigel Farage and Reform.

Watching the US this week, I found myself asking why British politicians have done so little to protect democracy from autocrats and oligarchs - why, despite all the warnings, is it still possible to donate unlimited amounts of money to British politics?

It’s not like nobody has ever asked these questions before. In 2006, Tony Blair, under fire over the “cash for honours” scandal, tasked Hayden Philips with writing a review of political finance in Britain. The former senior civil servant’s report, which landed the following year, was astute and far-sighted.

Philips recommended that donations to political parties should be capped at £50,000; limits should be placed on election spending; political parties should be given state funding.

What happened next was grimly predictable. Philips’s recommendations were widely praised and then swiftly kicked into the long grass, where they have remained ever since.

It’s a familiar story when it comes to political finance reform—myriad independent reports, proposals for change and warm words are followed by the deafening silence of political inaction.

This, of course, was before Elon Musk. The world’s richest man has reportedly been “privately discussing” how to remove Keir Starmer before the next election. The Electoral Commission has called for new laws on foreign interference. Surely this time the government will act?

Well, maybe. Starmer was elected on a manifesto that promised to “protect democracy by strengthening the rules around donations to political parties.” Labour has rarely missed an opportunity to excoriate Tory “sleaze”.

But Number 10 and its outriders have had surprisingly little to say about billionaires bankrolling our politics. Even worse, the Observer last month reported that ministers were resisting demands to bring in legislation to prevent a foreign national—like Musk—from donating through a UK-based company as it would “play into Reform UK’s hands”. This is the logic of the madhouse.

While Starmer’s government has seemed less inclined to act, many of his backbenchers are now talking about the urgent need to take big money out of British politics. A new all-party parliamentary group (APPG) on fair elections brought out a report last year calling for donation loopholes to be closed. The group includes more than 60 Labour MPs.

In recent weeks there has been a flurry of activity in parliament. The backbench business committee this week approved a debate on money in politics, expected to take place next month.

“Political finance is one of those things that never gets to the top of the ‘to do’ list until there is a crisis,” says Labour MP Joe Powell, who chaired the campaign group Kensington Against Dirty Money before being elected in July and now chairs the APPG on anti-corruption and responsible tax.

“Under the previous government there were lots of accusations of them actively soliciting foreign money so I don’t think there was much will there,” Powell added.

Funding has long been at the root of so many political scandals, from VIP PPE lanes for party donors to “cash for access” exposes. “We have to make the case that this is a long-standing issue that needs to be addressed. It shouldn’t just be about Musk and Reform, it is something that there should be cross-party support for to protect our democracy,” says Powell.

Parth Patel, associate director for democracy and politics at the Institute for Public Policy Research (IPPR) thinktank, agrees. “Musk has put money in politics on the agenda. I don’t think that will disappear. The question for government is are they willing to deal with it.”

That’s a question many are asking. An elections bill was conspicuous by its absence from Starmer’s first King’s speech. New legislation is expected to come in the next parliamentary session— including measures such as votes at 16 and automatic voter enrolment —but it is hard to discern much enthusiasm in government for political finance reform.

“Elections policy and delivery” seems a curious add-on to housing and local government minister Rushanara Ali’s homelessness brief. Privately, many MPs believe that it will come down to whether Number 10 has any appetite for changing a system under which Labour massively out-fundraised the Tories barely six months ago.

There is widespread consensus on what needs to be done. The week that Rishi Sunak announced the general election, transparency campaigners unveiled a list of recommendations to improve political finance laws and their enforcement. The proposals were lifted from reports by the Committee on Standards in Public Life, cross-party committees and other interventions by the Electoral Commission since 2010.

Patel, who authored a recent report that found voter apathy may be tied to the influence of big money in politics, says one policy above all others matters: capping political donations.

“A donations cap is the first order change that transforms how our democracy runs over the next 10 years,” Patel says, whose report recommended a cap of £100,000 a year on donations.

An MP who used to be a Conservative cabinet minister agrees, but told me that the cap needed to be significantly lower: “The only way to solve this issue is to cap donations at a reasonable amount, say £10,000 per person per year to any political organisation. So you can’t donate £10,000 to each party or anything like that.”

But there is scepticism, too. Labour has more wealthy donors than ever before, and is still reliant on trade union funding, long a sticking point in any conversation about political finance reform. Only one Conservative MP (David Davis) supported the successful application for a backbench committee debate on money in politics.

Today, former home secretary David (Lord) Blunkett called for a cap on political donations - the government responded by saying that a cap is “not a current priority”.

As one former Liberal Democrat MP put it to me, “some sort of legislation is likely but it’s also likely to be ineffectual, like introducing a donation cap but making the limit £1 million, which is far too high.”

Another problem is that the architecture of British democracy has become increasingly politicised. The Electoral Commission was stripped of its independence by Boris Johnson, after successfully prosecuting Vote Leave for breaching electoral law during the Brexit referendum.

Sunak’s introduction of voter ID—against the election watchdog’s advice—reeked of political calculation. We’re not at “stop the steal” yet, but there are uncomfortable American echoes.

Sue Hawley, executive director of the campaign group Spotlight on Corruption, says Starmer “needs to act quickly so it doesn’t look like gerrymandering ahead of the election.” But the former Tory minister puts political finance reform even more bluntly. “We basically said ‘nothing to see here’”, they say. “Labour is saying ‘there’s lots to see here but we’re not going to do anything about it.’”

There’s a great irony in this. Political finance reform offers a technocratic Labour government something it badly needs: a genuinely popular political project. Just 13 per cent of Britons think campaign funding is transparent enough. Curbing the power of billionaires to influence politics is a vote winner. It’s also free.

A programme of democratic renewal anchored in taking money out of politics would give Starmer a left populist appeal that the government is sorely lacking. But so far it seems like Labour’s inner circle is more wary of upsetting its own donors than it is willing to seize the opportunity to transform our politics.

A version of this piece appeared online on Prospect magazine.