Political Capture: How Donations Made in the Shadows are Putting Democracy in Danger

POLITICAL CAPTUREHow Donations Made in the Shadows are Putting Democracy in Danger

An investigation by the Byline Intelligence Team and The Citizens, revealing the profiles of Conservative Party backers in the UK, has exposed how a lack of transparency and the culture of political donations is putting British democracy at risk

An exclusive investigation into the profile of elite Conservative donors by the Byline Intelligence Team and The Citizens revealed how the majority of the Government’s top backers are white, male, in their 60s, and working in finance. A quarter of those who have given at least £100,000 in a single donation have been recognised with an honour, title, or place in the House of Lords

Indeed, when it comes to its top donors – those donating more than £1.5 million to the party – 55% have been honoured with titles or awards such as OBEs and MBEs. This might, in itself, be shocking enough. But sometimes, the story is as much about what we don’t know, as what we do. 

Of the 286 donors who have made single gifts larger than £100,000 to the party since 2010, there are 26 names that we simply know nothing about. This is because the Electoral Commission – the elections watchdog, which monitors party donations – only records the forename and surname of donors, and sometimes their title. It is therefore impossible to reliably identify donors who have fairly generic names – such as ‘John Smith’ or ‘Dave Brown’.

This makes it difficult to determine exactly who is giving big money to political parties, and what relationship they have with the parties themselves. 

Many of the elite donors identified in this investigation used multiple versions of their names. For example, the Conservative Party’s largest elite donor, Sir Michael Farmer, donated using his title, just his forename, and just his initials. Other donors appeared to give money under their wives’ name.

What is hard to prove is why donors would use a variety of names. Is it to mask how much money individual men and women are donating to the Conservatives (or any other party) for fear of public scrutiny? Or is it merely an accident?

Whatever the reason, this lack of transparency is bad for democracy and makes a mockery of how the UK records donations and therefore tracks their influence. 

---

Money From Abroad

As this investigation was finalised, the Government announced plans in its new Elections Bill to scrap a ban that prevents individuals who have not lived in the UK for a significant period of time from donating to political parties. 

The bill will allow UK citizens who have lived abroad for more than 15 years to join the Electoral Register, which would give them a lifetime right to vote in, and fund, elections in the UK. 

Because such a rule would benefit tax exiles – non-domiciled citizens who are based abroad in order to avoid tax laws – this would mean those who don’t pay taxes in the UK still having influence over the country’s politics and politicians, including on how tax revenue is spent. 

The move to allow foreign money into the electoral system should not come as a surprise.

The Conservatives have already faced scrutiny over the extent of Russian influence on British democracy and its MPs. Although its publication was delayed until after the 2019 General Election, the Intelligence and Security Committee of Parliament’s ‘Russia Report’ revealed how 14 Government ministers had received funding from donors linked to Russia – including Chancellor Rishi Sunak and COP 26 President Alok Sharma. Lubov Chernukhin, listed in this investigation as one of the few women elite donors, was one of the people named in the Russia Report. 

The Byline Intelligence Team and The Citizens’ research into Conservative Party donors also coincided with the revelation that Prince Charles’ former valet, Michael Fawcett, had helped a Saudi tycoon access a CBE, having donated £1.5 million to royal charities.  This fits into a pattern of one-quarter of elite Conservative donors having received honours or peerages. Three inherited theirs, but the majority were given their awards since the Conservatives came to power in 2010 and during the time period they were making large gifts to the governing party.

There is no evidence that the honours were given in exchange for donations. But donations can lead to cosy relationships with ministers, invites to gatherings and meetings – access, basically, that the average donor could not hope to obtain. 

---

Big Donors, Small Pond

All political parties receive donations. Even party membership is a form of donation, albeit a modest one. The Labour Party is famously supported by trade unions, while Lord David Sainsbury made a large donation to the Liberal Democrats in 2019.

But there is a reason the super-rich tend to favour the Conservative Party with their gifts – and that is because the Conservative Party tends to favour the super-rich.

It is notable that the average Conservative ‘elite’ donor (one who have given at least £100,000 in a single donation) has donated more than £500,000 in the past decade. This average is almost three times the amount of the total funds the Labour Party received from individual donors during the 2019 General Election.

From cuts to welfare that take money out of the poorest people’s hands, to tax giveaways that put money into the richest coffers – the Conservatives design policy to make the rich richer. Even the new clause in the Elections Bill, allowing tax exiles to fund politics, is done in recognition that it tends to be wealthy business people who take their money offshore. 

Decreasing membership numbers in the Conservative Party means that it is becoming ever more dependent on its biggest backers. This risks having grave consequences for democracy, as wealthy donors start to expect a return on their investment. 

Speaking to Peter Geoghegan for his book Democracy For Sale, the economist Frances Coppola explains how “we should be worried that a major party in Britain is struggling to raise funds”.

“As that continues they will have to dance ever more to the tune of the cranks who fund it,” she added. “This will likely mean growing numbers of policies that benefit particular niche interests.”

Conservative MPs such as Grant Schapps claim that donations don’t translate into political influence. But when is it ever that simple? From Brexit to the smoking lobby, construction to free ports, as Coppola says, a variety of niche interests linked to large donors are making political headway – often through a network of free market think tanks that surround Westminster. 

These think tanks rarely disclose their funding, but there’s a merry-go-round of influence. Donors support the right-wing parties and right-wing think tanks. Those think tanks write reports about a new policy area that is then placed on a Conservative MP’s desk. The issues then make it onto the political agenda. The donors get a return on their investment. 

---

What Next for Transparency?

If the trends in political donations continue to follow the current path, the UK risks moving closer to the US model – where ‘dark money’ from wealthy business interests fuel parties and hold sway over policy. This has been particularly disastrous with regards to the fossil fuel lobby, which has spent billions of dollars in Washington D.C. to frustrate progress on the climate crisis. 

This investigation offers some clear recommendations that can improve transparency in the donation system and therefore protect democratic processes.

First, all donors should have to provide their date of birth, as well as a forename and surname, and only be allowed to donate under one name. This would make it easier to identify those with generic names, and end the practice of spreading donations across multiple identities. 

The Electoral Commission should also provide a cumulative total amount of donations made by individuals. This means that, if a person has given five donations of £25,000, it is obvious in one look that they have donated £125,000 in total. 

Finally, donations made via companies should not receive tax breaks. When a donation is made through a corporation, it should have a named individual attached to it and that named individual should be the person with significant control of the company. Again, this will make clearer who is giving the money and how much they have given. 

However, given that the Elections Bill seeks to severely weaken the powers of the Electoral Commission, the potential to improve democratic accountability is under greater threat than ever.