Political Finance Rules

I beg to move,

That this House recognises that loopholes in regulation allow for opaque funding of political parties; expresses concern over the prevalence of substantial financial contributions from corrupt individuals and foreign governments, which render political parties susceptible to manipulation and undue influence; acknowledges the risk these opaque funds pose to national security and the health of our democracy; further recognises the need to strengthen the powers and independence of regulators to help the regulation of political donations; and calls on the Government to tighten the law on permissible donations to make clear that political parties cannot accept money from impermissible sources or from companies that have not made enough money in the UK to fund the amount of their donation or loan.

Before I start my remarks, I pay tribute to everything that was said from the Dispatch Box in the last debate by the Under-Secretary of State for the Home Department, my hon. Friend the Member for Birmingham Yardley (Jess Phillips). This House and our Government are stronger, more effective and more compassionate because of her contribution and her work.

I begin by declaring an interest: I am a member of a political party. I have spent many years actively involved in party politics as a campaigner, a local councillor and now as a Member of Parliament, so I know that political parties sit at the centre of our political landscape and that they are key pillars in our elections and our broader democratic system. Of course, those parties need funding to fulfil their day-to-day functions and to contest elections. Our pluralistic democracy depends on lively and active political parties that can campaign and engage with the public. Indeed, tomorrow evening I will be back out on the doorstep, clipboard and leaflets in hand, listening to voters and campaigning with my local Labour party. Those very activities would be impossible without political donations.

However, far too often the financing of political parties involves suspect donations making their way into party coffers. And the numbers are not small. Research by Transparency International found that £115 million in donations—almost £1 in every £10 of reported donations —came from unknown or questionable sources between 2021 and 2024. How has that been allowed to happen? Unfortunately, the UK’s political finance rules, designed to block foreign donations and dirty money from seeping into political parties, are ripe for abuse and riddled with loopholes.

Hostile state actors, kleptocrats and international billionaires are easily able to sidestep the UK’s permissibility rules and funnel money, via UK-registered shell companies, into our political parties. As it stands, a British company is permitted to make donations using money raised overseas, even if the company has not generated sufficient funds to support that same donation. That means that foreign actors or any mystery donor could legitimately use shell companies as a conduit to channel money into political parties here in the UK.

This is symbolic of a much bigger problem. It should not be that easy to pump money into British politics behind a layer of corporate secrecy. Donations that could come from anyone, anywhere pose a significant threat to the security and integrity of our democratic system. Foreign interference in British democracy and elections is a direct attack on our sovereignty, our national interest and our vital democratic institutions.

We have been warned about the problem for many years. A series of independent review bodies and the security services have sounded the alarm time and again. They have made it clear that risks are posed by opaque donations coming in from overseas. In 2020, a report by Parliament’s Intelligence and Security Committee identified that multiple members of the Russian elite with links to Vladimir Putin had tried to donate or successfully donated to British political parties.

Later, in 2022, MI5 warned that an alleged Chinese agent had sought to influence parliamentarians on behalf of the Chinese Communist party. In 2023, concerns were raised in Parliament about alleged links between the Chinese Communist party and party fundraising. The then Minister of State for Policing, the right hon. Member for Croydon South (Chris Philp), noted that

“all political parties need to be alert to the danger of representatives of hostile states seeking to infiltrate or influence their activities.”—[Official Report, 19 April 2023; Vol. 731, c. 249.]

I fear that our unhealthy dependence on a handful of large donors also poses a risk of undue influence and capture by narrow vested interests. We know that of the £85 million of private donations made in 2023 alone, two thirds came from 19 mega-donors, each giving well over £1 million. Just recently, one would-be mega-donor dominated headlines for that very reason. Elon Musk, the richest man in the world and not a British citizen, was giving “serious thought” to donating millions of pounds to a British political party—Reform UK. As a South African-born billionaire who lives in the United States, Elon Musk cannot legally make a personal donation to a British political party, but, as we know, he could easily go through the UK subsidiaries of his various companies.

Although that rumour has not yet come to pass, the risk that it poses to the integrity of our democracy cannot be overstated. I repeat: it should not be this easy to pump money into British politics, especially from halfway across the world. Our democratic institutions and elections should never be the plaything of a billionaire who cannot even vote in a British election, and a UK-registered company should not be a convenient vehicle to allow them to make such a donation. Even the perception that our political parties are captured by those with deep pockets has a corrosive effect on public trust in politics and in us as politicians. At a time when that trust is regretfully at a historically low level, we need to tackle that perception head-on and show that our politics is not for sale and cannot be unduly influenced.

How do we go about toughening up the rules? First, we close the loopholes I have outlined once and for all and ensure that companies are able to make donations only from profit made in the UK in the last two years, as well as introducing a requirement for political parties to identify the true source of donors’ funds. Secondly, we need to have a tough deterrent for those who break the rules, because even if Elon Musk were ever to breach election law, why would he care? The maximum fine that the Electoral Commission can impose is just £20,000—not even small change to the world’s richest man.

Unfortunately, the previous Government only made matters worse when they stripped the Electoral Commission, which is tasked with regulating political finance, of its independence and further opened the floodgates to mega-donations by drastically increasing spending limits during election periods by around 80%. Strengthening the rules around donations to political parties is a manifesto commitment of this new Government. I know that the Government and Ministers are committed to restoring trust and protecting British democracy, so I hope they will act swiftly on that commitment by restoring the independence of the Electoral Commission and empowering it to impose much larger fines.

The Government should also look closely at capping donations and spending, perhaps in line with recommendations put forward by the independent Committee on Standards in Public Life. Smart tweaks to existing regulations, such as increasing fining powers, lowering reporting thresholds and capping spending limits, do not require primary legislation. Those changes could be enacted quickly and still have a significant impact on cleaning up our politics and ensuring that our parties are all free from suspect donations. Finally, I sincerely hope that Ministers will look closely at the role that shell companies play in allowing opaque donations to be made here in the UK, often originating from overseas.

I am proud that this Labour Government were elected on a mandate to restore integrity in politics. As the Prime Minister rightly stated in his victory speech in the early hours:

“The fight for trust is the battle that defines our age.”

I wholeheartedly agree with him, and I look forward to hearing from the Government and from hon. Members here today exactly how we can win this crucial battle. Only by doing so can we protect democracy, clean up our politics and rebuild trust with the public.

Order. As Members will be able to tell, we have considerably more Members wishing to speak than we have time for, so perhaps we will start with an informal time limit of no more than five minutes.

I thank the hon. Member for South Dorset (Lloyd Hatton) for securing this debate on such a crucial topic.

Public trust in politics is at an all-time low; only 12% of people trust political parties, and only 15% of the population think that political funding is transparent. There is clearly a problem at the heart of British politics. As the hon. Member said, it is particularly bad in our country, because we have an Electoral Commission with very little in the way of teeth or of limits. That leaves our democracy open to corrosion and dark money, which we have to be particularly worried about guarding against. As the hon. Member for Brent East (Dawn Butler) said in the previous debate, we must guard our democracy against those anti-democratic forces and against dark money—the influence of money in politics is a core part of that corrosion.

In the UK, there is no limit on individual donations. That is not the case in Canada, in France, or even in the US. Why is there no limit on how much money an individual can donate, and on how much influence they can therefore exert on British politics? Corporate donations are allowed here, but are banned in so many other countries. Foreign donations are theoretically banned here, but loopholes mean that an individual such as Elon Musk could quite easily work within existing, very bendable rules in order to exert what would undoubtedly be a very corrosive influence on our politics. The hon. Member for South Dorset mentioned the Electoral Commission’s lack of enforcement powers: the maximum fine it can impose is £20,000, yet the influence in our politics totals tens of millions of pounds. Just over the past decade, £115 million has come from unknown sources. This is clearly a serious problem.

I welcome the fact that the current Government made a manifesto commitment to strengthen the rules on donations to political parties, in order to protect our democracy from foreign influence. I very much hope that in her summing up the Minister will be able to clarify exactly what that will amount to. What actions do the Government intend to take in order to protect our democracy from foreign influence? Can she commit to taking measures such as strengthening the powers of the Electoral Commission to issue fines, reducing the reporting thresholds in order to increase transparency, and clarifying spending limits? Those measures would not require primary legislation, so can the Government set out the timetable by which they will bring forward those urgently needed measures to protect our democracy?

I intend to make a short contribution on one particular aspect of political funding that I believe is especially corrosive to faith in democracy in our country. Across North East Hertfordshire, from Buntingford to Thundridge, local communities have worked hard to create local neighbourhood plans that are pragmatic but full of hope for the future. However, time and again, those plans are overruled, and residents get development that could hardly be further from what they have sought to secure—poorly designed, palpably unsustainable, and outrageously overpriced. So often, the reason for this is the enormous financial and political pressure that big developers are able to bring to bear on the debates around the future of our towns and villages in their relentless pursuit of profit maximisation.

Our constituents will never have faith that our planning system will deliver fair outcomes that put nature, community life and genuinely affordable homes before developer greed for as long as those same developers—and the lobbyists they employ—are pouring vast sums of money into the bank accounts of political parties. Given the constant clamour for planning deregulation and the already enormous profits that these developers are making, it is hard to escape the conclusion that those sums of money have been a very wise investment on their part.

The Labour Government have inherited the Conservative party’s housing crisis; we must not inherit the same issues of influence that plagued the previous Administration. Trust in politics will return only when we make our position unimpeachable, and the future of development in our towns, villages and countryside is too important even to appear to have been subverted on behalf of private interests. If we want the public to believe that the planning guidelines that we set nationally and locally will be fairly adhered to, it is my contention that we must ban all political donations from developers, those who work for them and the lobbyists they employ.

I thank the hon. Member for South Dorset (Lloyd Hatton) for securing this important debate. The lack of transparency in the funding of our political parties is well documented, although I suspect not so well known among members of the public, who tend to associate the corrupting influence of money in politics with other countries, usually very far away. The reality is that it is taking place on our doorstep.

According to research done by Transparency International, almost £1 in every £10 reported by political parties and their members since 2001 has come from unknown or questionable sources. Some £42 million comes from donors alleged or proved to have been involved in other corruption, fraud or money laundering, and £38.6 million comes from unincorporated associations that have not reported the source of their income, despite Parliament introducing new transparency rules in 2010. The rest of its findings highlight millions from donors alleged or proved to be intermediaries for foreign funds and/or a hidden source, and millions from companies that have not made sufficient profits to support the political contributions they have made.

Other research has confirmed that successive Governments have invested trillions in the defence industry. Our new Government are also proposing to increase defence spending to 2.5% and then to 3%. The defence industry is reportedly responsible for approximately 40% of all corruption worldwide, and much of the money that we and other countries spend in defence is funnelled back through opaque channels into political parties and members. The industrial military complex needs to be investigated and dismantled.

The fact is that our political finance rules are too weak on hidden money, making the system vulnerable to subordination from rich individuals and secretive vested interests. My constituents and people from our country are concerned by the malign influence on Government policy of parties, Governments and Opposition Members and other Members accepting millions from state and industry lobbies, corporations and mega-rich donors.

The hon. Member is making a case. Does he agree that foreign money has no role in our democracy, and that one of the strongest ways in which we can clean up our politics and indeed strengthen our democracy is to make sure that the Electoral Commission has real teeth and has higher fining powers? Does he also agree that where we have concerns about foreign money coming into our country, we should have particular concerns about money coming from people such as Elon Musk?

I completely agree with the hon. Member. The action that the Electoral Commission should be permitted to take should not just be limited to bigger, greater fines for donors. There should be consequences for those accepting donations and potentially being influenced.

My constituents and the people of this country see and feel in their daily lives the deep impacts of pro-rich, pro-war, anti-poor and anti-consumer decisions and policies. The solution lies in reforms: to tighten spending rules; to shine a light on the source of financial contributions; to lower spending limits to reduce campaign costs and reliance on large donations; to introduce donation caps of £10,000 a year for individuals and organisations, as recommended by the Committee on Standards in Public Life; to remove the corrupting influence of big money in politics; and to close loopholes to ensure that overseas trips for parliamentarians are funded only by trusted sources.

The UK used to lead the way on funding transparency. The UK was a founding member of the Open Government Partnership, and placed third in the 2014 OECD open data index, but in recent years the UK has slipped. The most recent OECD rankings saw the UK fall to 24th place, with stories about dodgy dealings, personal protective equipment procurement and Ministers’ disappearing WhatsApp messages all contributing to the decline in the trust that the public place in their politicians.

As has been mentioned, it should be a cause for grave concern that of the £85 million of private donations in 2023 alone, two thirds came from 19 donors giving more than £1 million each, the highest ever share of mega donations. If we do not want our politics to go the way of American politics, with British equivalents to the likes of Elon Musk and his fellow tech billionaires blatantly using money to buy influence and remake politics in their own interests, we need tighter regulation of political finance than we currently have, and full transparency for the public.

I thank my fellow Dorset resident, my hon. Friend the Member for South Dorset (Lloyd Hatton), for securing this important debate. It goes to the heart of the concern that the public have, namely that economic dominance leads to political influence. Money is used to influence politics, and politics is then used to enable those people to make more money through changes in laws or regulations. This is the issue that worries the public. We also know that civic participation diminishes if people feel that they have no influence compared to those with large amounts of money.

Public trust in our political system is at an all-time low. That flows in part from a sense that politicians are unable properly to represent those who elect them, that money in our politics exerts undue influence that is often obscured from public view, and that those who break the rules that do exist are not adequately punished. Nearly 60% of the public think that funding of political parties is not transparent, and only 30% think that political parties that break the rules will face any action. That is why Labour’s manifesto made the welcome pledge to

“establish a new independent Ethics and Integrity Commission, with its own independent Chair, to ensure probity in government.”

The commission must be empowered to challenge the corrupting influence of not only the developer lobby but other big money donors, including those from the oil and gas industry. We should also close loopholes to ensure that overseas trips for parliamentarians are funded only by trusted sources, and publish clearer guidance on the acceptance of gifts and hospitality.

It is worrying, too, that UK political parties are relying increasingly on a small number of extremely wealthy people to bankroll their election campaigns. The last Government increased national campaign spending limits from £19 million to £34 million, which has intensified the demand for donations across all our political parties. As the hon. Member for Dewsbury and Batley (Iqbal Mohamed) said earlier, Transparency International UK claims that between 2001 and May 2024, £42 million came from donors alleged or proved to have been involved in corruption, fraud or money laundering. Political parties should therefore be required by law to identify the true source of funds as part of a risk-based approach to donations, and a donation from a company should not be allowed to exceed its net profits generated in the UK within the preceding two years. A UK-registered company is permitted to make donations using money raised overseas, which is why political parties should be required to conduct checks on donations to assess and manage their risks.

I congratulate the hon. Member for South Dorset (Lloyd Hatton) on securing this debate, and I thank the Backbench Business Committee for granting it.

As the Prime Minister declared last year, and as we see so graphically on the world stage now, the “fight for trust” will be

“the battle that defines our political era.”——[Official Report, 17 July 2024; Vol. 752, c. 56.]

It is clear that if we MPs are to achieve the changes that people need most in their lives, we need a functioning democracy. If those we represent do not trust politicians to act in their best interest, we will not be an effective institution. Currently, it is simply not the case that they trust us. Both in the UK and across the globe, faith in politics and politicians is at an all-time low. In the UK, 76% of people have little to no trust in Members of this House—up from 54% a decade ago. I note with no great relish that this may not be surprising after years of a Conservative Government who were more concerned with their internal politics than the concerns of people around the country, but it should be a deep concern for us all. Rebuilding trust in politics is the goal, regardless of our political colour or persuasion. I am sure that all Members of the House can support that, but it will not happen overnight.

Research from the Electoral Commission shows that only 15% of people agree that there is transparency around the money spent and received by parties and campaigners—down from over a third in 2011. We should be clear that political donations are not inherently wrong and are part of a vibrant democratic system. Individuals should be able to take part in the democratic process through political donations, which can help people to further the goals and ideals that they believe in. Banning any donations would entrench power, leaving new or smaller parties unable to campaign against incumbents. It would work against many of our democratic principles, but it is clear that although political donations are a good thing, we must have adequate transparency as to the source of the money. That is currently not the case.

I call Stella Creasy, with a four-minute time limit.

Thank you, Madam Deputy Speaker. Like everybody in the Chamber, I must be sure to draw the House’s attention to my entry in the Register of Members’ Financial Interests.

“Follow the money” is one of those phrases we always hear, as if there is somehow a crushing inevitability that money determines outcomes in all areas of life, whether personal or political, but now in our democracy there is a clear and present danger that the loudest voices and largest wallets will dominate, and that the two are connected. Even in these difficult political climes, it is extraordinary to think that the existential threat to our country’s democracy posed by the suggestion that Elon Musk could donate £100 million to any political party here has not caused a Cobra meeting to be called, because it is a national security threat. A foreign agent, who is now part of the structures of a foreign state, is openly talking about interfering in our democracy—buying it, and boasting about doing so—and he is not the only one.

I guess that, for many, the idea that politics is so infused with money is not a surprise. After all, we have been trying for over 160 years to regulate foreign donations —and indeed local donations—in this country. For the avoidance of doubt, donating to a political party is a noble thing for people to do, given the concerns and passions they may have, and we in this Chamber have all sought donations. However, we have seen scandals through the years, starting with David Lloyd George and including the cash for questions affair and the personal protective equipment issue. Time and again, Transparency International has drawn our attention to the current data on this, and that is before we even get to Taylor Swift, because she is right: “It’s me, you, hi—we are the problem”. As politicians, we have not regulated this, even though we have seen these problems time and again.