December 28, 2024 - 8:00am
Funding rules have long been one of the big fudges of British politics. The money that can be spent in election campaigns is reasonably tightly controlled, but where that money comes from and what can be used outside of election periods are under a far looser grip. Now, it seems like this will be changing. Last week, Lucy Powell, the Leader of the Commons, promised new legislation in the New Year.
Cleaning up funding has been a long-term Labour promise, but recent news has given it a new urgency. The rumours of an Elon Musk mega-donation to Reform UK may not turn out to be true, but they have got Westminster worried. On a level of principle, it shows the potentially outsize influence of foreign money directed at UK politics. On a grubbier political level, blocking that money is a good way of grounding Farage’s ambitions.
The latter possibility creates a real dilemma for Labour. First, there is the worry that changes which look targeted purely at Reform will provoke a backlash and empower the insurgent party. On top of that, there will be some in the Labour Party who might see an advantage in Reform surging. The rise of Farage will generally come at the expense of the Tories, which would obviously aid Labour. Additionally, the threat of Reform could help unite the Left and shore up a struggling Starmer government.
The practicalities of reforming election spending are tricky, too. The current system is largely the result of Tony Blair’s reforms, which increased transparency but provided significant loopholes. In particular, while overseas donations are banned, there is little to stop a UK company from being set up solely as a vehicle for election spending. Labour is likely to follow the Electoral Commission’s guide to stopping this by limiting company donations to a proportion of its profits. This might hamper Musk, but it wouldn’t necessarily stop the wider flow of money into British politics.
Bolder action could, though. In France, for example, it is illegal for any corporation or non-profit to fund political parties, while individual donations are capped at €7,500. Moving to this model would clean up many of the questions about who funds our politics, but it is unappealing for the establishment parties. Both Labour and the Tories are dependent on types of funding — from unions and businesses, respectively — that would be illegal in France. Changing this system would provide a massive challenge for them. Replacing this money with any sort of state funding, as seen in some countries, could also be politically toxic. This is what has blocked most big reforms already.
A more technical approach could further limit what parties spend outside of election time. At present, there is little control over advertising and campaigning activities outside of designated periods. If Reform receives a glut of cash, Farage’s party could spend it now on leaflets, staff, and online ads without having to really account for it. This approach would limit the usefulness of big donations but would be a challenge to enforce.
Spending changes could easily empower incumbent parties against the opposition, and there’s an obvious temptation to cut Reform UK off at the knees. However, reforms were part of Labour policy long before Musk threatened to open his chequebook. Next year will see some action, but it will be a tough one to balance. Labour will not want to cut off its own funding, and will be wary of looking too political in how the changes are enforced. Change is likely to come, but it will be another test of just how bold Keir Starmer is prepared to be.
John Oxley is a corporate strategist and political commentator. His Substack is Joxley Writes.
Mr_John_Oxley
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SubscribeInteresting thoughts around funding. I do think that overtly moving to ban big donations will backfire on Labour as Reform will gain by it appearing a bit like lawfare against the upstart.
I do wonder how different the political landscape across the western democracies would be if party donations were restricted to purely from private individuals and with upper limits?
No lobbying donations, no bulk Union donations, no buying influence just individuals choosing to give some money from taxed income to the party that people think best suited to govern?
This could give new life to democracy, something sorely needed.
Rules, regulations and court cases, Lawfare as such does seem to backfire and once used becomes useful for all sides. Ban Reform donations, ban the AfD, convict Le Pen, indict Trump. A degree of desperation in my mind as certain groups lose control.
I suspect that Reform would have little problem getting funding from member/supporter donations in any case – and far less of a problem than Labour or the Conservatives. Banning corporate donations might only expose this.
A ban on large donations might lead to the change that we most urgently need: de-centralisation and the return of local accountability to institutions such as schools and hospitals.
I vaguely remember about 16-17 years ago the Labour government at the time dropping political donation reform when they realised their proposed reforms would heavily cut their union funding.
Musk isn’t going to give Reform a massive donation. The kite is being flown in order to provoke exactly the current reaction about funding.
My bet is that Reform will back the proposed legislation because it will hurt the other parties much more.
Exactly what I was thinking. People like Elon Musk are very smart and think many more moves ahead on the chessboard than plodders like Starmer and Rachel “my peak chess rating was county second team at best” Reeves.
I think you’re being very generous to Rachel from Customer Complaints.
I agree. Musk & Farage both love stirring the pot. Musk is the opposite of a philanthropist.
He may have spent $200M on Trump but he’s gained several times that in net worth since.
He won’t back Reform unless there’s gain for him.
At latest estimates Reform are unlikely to ever get out of double figures in a GE, it’s unlikely any other party would go into coalition with them.
So they’ll be nothing more than a perpetual thorn in the side of a government.
The Lib Dems could once more be the king makers.
Don’t recall Labour complaining at all when George Soros spent £50 million trying to stop Brexit.
What really needs to be stopped is former MPs becoming directors, consultants etc immediately after leaving Parliament. It is merely influence peddling dressed up as “expertise”. But of course there’s no chance of that.
The Unions and Labour in trouble as without the Unions and it’s enforced subscriptions to Labour. Labour is bankrupt and Alli will have to stop buying Starmers underpants to prop up Labour
In other headline news – Will the bear defecate in the woods?
I wouldn’t be necessarily against regulating more strongly foreign donations as long as it was extended to NGOs as well.
Not words you generally find close together.
Wasn’t Blair buddying up to Larry Ellison of Oracle fame and other rich American donors for grant funding for his institute and getting lots of it I believe. I am sure there is a picture somewhere of Blair and Ellison in some where hot and expensive speeding along in one of Ellison’s powerful boats.
One of the lines Blair’s TBI has been pushing is the massive benefits to be derived of greater NHS data mining / analytics by NHS and Oracle like Palantir is very very bigly in that game.
In other words to label TBI as an apolitical organisation is equivalent to saying the Resolution Foundation is an independent think tank (a la BBC) because it has Willets as the figurehead! It is all about how you tell them!
Both are Labour front organisations.
Foreign donations into our political life already exist it is just done indirectly, below the radar
Larry Ellison! Now there’s a blast from the past!
Campaign funding restrictions generally favour the incumbents and establishment candidates over challengers and insurgent new perspectives. And establishment selective enforcement makes matters worse still.
For example, in the Brexit referendum, “Remain” outspent “Leave” 3 to 1, but the electoral commission’s fine tooth comb enforcement actions were directed primarily at “Leave”, the campaign disfavoured by the establishment.
The only finance rule that would be consistent with democracy is unrestricted donation amounts, but transparency of source. Even full transparency has some problems for small donors who might be subject to intimidation for their political views as expressed by their donations.