The question of who funds politicians and political parties in the UK has become increasingly contentious, with the rise of mega-donors giving vast sums leading to calls for a new cap on individual or company donations per year. Recent controversies, including Nigel Farage's £5m gift from Thailand-based crypto billionaire Christopher Harborne, have intensified pressure for greater transparency around financial interests.
How Are Political Parties Funded?
Donations from individuals, companies, and organisations constitute the largest share of political funding. Parties also receive income from membership fees, party conference events, and state funding known as 'Short money' for opposition parties with MPs. Donations above £500 for parties and above £50 for candidates must come from permissible sources: voters on the electoral register, UK-registered companies carrying out legitimate business, UK-registered trade unions, and unincorporated associations.
Why Private Donations Over Greater State Funding?
The House of Commons library explains that political funding is underpinned by 'voluntarism', protecting citizens' freedom to give money as they choose and avoiding excessive state control over parties. However, critics argue that voluntarism can lead to reliance on a small number of wealthy donors, generating 'a suspicion and risk of undue influence'. Politicians also recognise that voting for greater state funding may be unpopular with the public given competing demands on the Treasury.
Transparency Rules and the Push for a Cap
Legislation from 2000 governs donation transparency, requiring donors and parties to register names, donation sizes, and dates on a publicly available register. Donations exceeding £11,180 in one year must be reported. Despite this, many MPs are troubled by the millions flowing from mega-donors. For example, £20m went to the Conservatives before the last election, £15m to Reform UK from Harborne, and £4m from crypto entrepreneur Ben Delo. The government recently capped donations from overseas investors at £100,000 per year.
Research by Transparency International shows the proportion of political donations from individuals and companies giving £1m or more jumped from 1% in 2015 to 35% by 2024. Labour MP Stella Creasy argues this does not go far enough and is pushing for a £100,000 cap for all donors, while another Labour MP, Alex Sobel, has proposed a £1m cap.
Government Resistance to a Cap
No 10 has stated that people should be free to give whatever they want to political parties. There is also suspicion that Labour is reluctant to back a policy that could limit donations from trade unions, although potential loopholes exist. The GMB union opposes a cap, fearing a backlash against union funding of parties in the future.
Rules on Gifts and Benefits for MPs
MPs must declare any gifts or benefits above £300 in value if received in their capacity as a parliamentarian or for political purposes. Gifts worth more than £500 must come from a permissible source. MPs must also register gifts received by third parties, such as family members, if given because of the MP's status. The rules state that purely personal gifts from partners or family members do not need to be registered, but if there is any doubt, the benefit should be registered. MPs must declare all current financial interests and any benefits received in the 12 months before their election.
Would a Cap Have Prevented Farage's £5m Gift?
It depends. Farage argues the gift was personal, not political, and thus did not need to be declared. The standards commissioner is investigating. A cap would certainly have curtailed funding from Harborne and Delo to political parties, and would also have affected the Conservatives and Labour to a lesser extent.
