Elon Musk’s $100m Threat to Bankroll Nigel Farage and Reform Exposes the Gaping Loopholes Endangering UK Democracy

Reports that billionaire X/Twitter owner Elon Musk is considering donating nearly £80 million ($100m) to Nigel Farage’s Reform UK party have sounded alarm bells about the state of Britain’s loophole-ridden election laws. 

Anti-corruption experts warn that outdated regulations leave the door open for hugely wealthy foreign donors to interfere in UK elections.

The sheer scale of Musk’s mooted donation should not be underestimated, given it is close to the total amount donated by all other political donors put together in the UK last year.

However, as things stand there is little to prevent it happening. Although current UK electoral laws prevent foreign nationals donating to British political parties, there is nothing stopping the money being funnelled through a UK-registered company, like Tesla.

Questions over just such an arrangement surfaced during the recent Conservative leadership contest when Robert Jenrick received £40,000 from two companies – one owned by an Israeli billionaire and another owned by an Australian hedge fund scion – as well as further donations from a company that received funds from an untraceable British Virgin Islands company.

Following the reports of Musk’s potential donation, Keir Starmer is facing calls to urgently overhaul the system.

Starmer so far appears resistant to act, with a Downing Street source insisting this week that it was “not a priority” to implement a cap on donations.

Senior figures in his party are starting to raise the alarm, however.

At an event in Westminster on Wednesday, attended by Labour MPs, campaigners from Transparency International revealed that almost a tenth of the cash recently donated to parties and politicians came from unknown sources. 

Proposed reforms include restricting corporate donations, and strengthening the Electoral Commission’s independence and enforcement powers which were scaled back under the previous Conservative Government. 

Other key recommendations from the campaigners include a £10,000 annual cap on individual donations, and banning public contractors from donating to parties. 

Duncan Hames, Director of Policy and Programmes at Transparency International UK, revealed that UK political parties raised £85 million from private donations in 2023, while £115 million over the past 20 years came from “questionable” sources. More than two thirds of that went to the Conservatives.

Meanwhile, two thirds of the donations to parties last year came from just 19 individuals giving over £1 million each. 

Hames noted that foreign interference appears to be growing in Europe:  “Those with great wealth have used it to claim great power in Georgia, in the Caucasus, where citizens protest the theft of their election daily. 

“Now the country’s wealthiest man commands his ‘Georgian Dream’ party and controls the direction of the country. In Moldova, an oligarch flew voters to Russia, who then returned with suitcases full of cash. 

“And in Pennsylvania [US], one of the world’s richest men [Musk] created the spectacle of making people millionaires, through a lottery for those engaging in a political campaign. It was perhaps most influential in persuading ordinary Americans that he and his billionaire friend would just love the chance to make them rich too.” 

The report also identified £48 million from donors alleged to have bought privileged access or honours, and £42 million from those linked to allegations of corruption or fraud, since 2001. Foreign governments like Qatar, Saudi Arabia, and Bahrain also spend heavily funding visits to their countries for MPs, stoking concerns about foreign influence and the PR-washing of dictatorial states.

Public trust in political financing is also declining, with only 30% believing party funding is fair and transparent, down from 37% in 2011, according to Transparency International.

Former Public Accounts Committee chair Baroness (Margaret) Hodge emphasised the need to fully ban foreign donations and strengthen criminal enforcement of rule-breaking.

Concerns were also raised about third-party campaigning and “super PAC” style influence by non-party groups developing in the UK, imported from the United States. Falling voter turnout is seen as linked to the perception of wealthy donors’ influence on politics.

The panelists agreed that the Electoral Commission lacks adequate resources and enforcement capabilities. 

And Labour’s Hodge called for Keir Starmer to set up his promised independent Ethics and Integrity Commission, with legal powers to overhaul standards in public life and clean up Britain’s political funding. 

She claimed it was “very sad” he had not launched it straight away in July, as it would have “closed the door on all the terrible behavior that we’ve seen over the last decade”. 

Responding to a question from Byline Times, Labour’s Phil Brickell MP said there was “clearly a risk” in not acting on the threat of political corruption. 

“On the panel, we’re all very supportive of the measures in the report and recognise the challenges of a system which is, frankly, out of date and needs to move with the times…Fundamentally this is part of the wider package of modernisation that needs to happen as to how our politics is done In the country.”

Transparency International’s Duncan Hames added: “Last year, one man, [Conservative donor] Frank Hester, gave a party that led the Government an amount of money equivalent to 1/8 of all of the declared donations to all political parties in the UK that year. Just one man”. 

Shortly before the General Election, and with bulging coffers, the Conservatives massively hiked the election spending limits. 

The Institute for Public Policy Research’s Dr Parth Patel said: “Public contractors give quite a lot of money to political parties in this country, particularly the Conservative Party. [Yet] it’s banned even in the US.”

Baroness Hodge also called for a new “duty to prevent money laundering and fraud” for political parties, and suggested a cap on political donations. “It’s very scary” how much dirty money is going into politics, she added.

The event followed the Observer reporting on Sunday that foreign regimes are “donating millions in the form of flights, food and hotel stays” to MPs and peers. “The gifts and hospitality from governments including those of Qatar, Saudi Arabia and Azerbaijan are allowed, even though all other types of donations must come from a permissible UK source,” the paper noted. 

Keir Starmer’s first King’s Speech setting out his legislative agenda was disappointing in its failure to include plans to clean up political finance. However, there are rumours that a new Election Bill could be on its way. 

Supporters say it would need to appear in his next King’s Speech in 2025 or 2026 to avoid claims of “gerrymandering” or warping elections in Labour’s favour ahead of the planned next General Election in 2029. 

Asked about the Government’s plans this week, the Prime Minister’s spokesman insisted that “the Government’s commitment remains, as it is in the manifesto, to protect democracy by strengthening the rules around donations to to political parties.”

You can read Transparency International’s new report, Cheques and balances: Countering the influence of big money in politics.

Update: Duncan Hames is Director of Policy and Programmes at Transparency International UK, not its Chief Executive, as previously reported.