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The Government has pledged to act on the findings of a landmark report designed to tackle foreign interference in UK elections.
On Monday, ministers pledged to implement the recommendations of the recent Rycroft review into the risks of meddling and corruption in Britain’s party funding system.
The decision is a big step forward, but it misses one vital element.
Ministers have rejected calls from backbenchers, including Stella Creasy MP, to go further and introduce an overall cap on political donations for UK voters, triggering disappointment among democracy campaigners.
In the House of Commons, Minister Samantha Dixon confirmed that a previously-announced annual £100,000 cap on donations from overseas voters would be extended for a year after they return to the UK.
It follows the announcement of the £100,000 overseas-donations cap in March, after which Reform funder Christopher Harborne, a Thailand-based billionaire crypto tycoon, announced plans to return to the UK.
Labour’s moves would bar him (and others reportedly returning, such as fellow crypto-billionaire Ben Delo) from donating for 12 months after coming back to the UK, to avoid donors simply ‘popping back’ to the UK to avoid the cap.
But Dixon rebuffed repeated calls from backbenchers to introduce an overall donations cap, arguing: “The Government’s view is that there is a place for legitimate donations in political financing in the UK.”
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The planned new residency requirement for returning overseas voters will apply retrospectively from 25 March – the date of the original announcement – again to capture those who may have rushed back to Britain after the Government said rules would be tightened.
A temporary ban on all political donations made via cryptocurrency, of any amount, will also continue until the safeguards are deemed robust enough to deal with the risk of money laundering or hiding the true source of funds.
What’s Changing
One move welcomed by anti-corruption campaigners is that the law on companies donating to political parties will be tightened so that eligibility is based on a firm’s post-tax profits, rather than revenue.
No company will be able to donate more than it has made in post-tax profits over a period of five years. This would likely catch out some of the troubled firms that Byline Times recently reported as having donated nearly £500,000 to Reform in recent years. There is no suggestion they broke electoral law.
Minister Dixon also confirmed to MPs that a known loophole around so-called unincorporated associations being subject to weaker transparency rules on giving to parties would be dealt with in amendments to the Government’s Representation of the People Bill, which will again be before MPs on 14th July.
Donors giving large sums will also have to sign a declaration stating they are legally able to do so, for those giving above a threshold to be developed with the Electoral Commission. This is seen as a key way any wrongdoing, later proven, can be prosecuted.
Due diligence checks on party purseholders – “Know Your Donor” rules – are also being strengthened, adding donors’ location (e.g. if they’re abroad) as a risk factor parties must take into account when accepting large sums.
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Candidates for office will also have to declare that any substantial donations (over £2,230) come from permissible sources, covering their campaigning activity in the year before they formally became a candidate.
There will be new information-sharing abilities between the Electoral Commission and anti-corruption agencies – including national security bodies – to aid investigations into potential wrongdoing.
The Electoral Commission will also be able to demand information from parties, and potentially donors, outside of a formal investigation.
Rycroft’s call for tougher criminal sanctions and sentences for foreign interference and illegal donations was backed in principle by ministers – but the Government says further work with law enforcement, political parties and others is needed before they will propose legislation here.
The Permanent Secretary of the Home Office has been appointed as the civil service’s champion for “sustaining our democracy”, coordinating Whitehall’s efforts on the issue – a gap spotted by Phillip Rycroft in his review.
Amendments will be tabled to the Representation of the People Bill ahead of its third reading in the Commons next week.
Communities secretary Steve Reed wrote in the Government’s response: “The threat we face is real, persistent and evolving. But so too is our response…
“The National Security Act 2023 has transformed our ability to confront hostile state activity head-on, while the Counter Political Interference and Espionage Plan will ensure a coordinated and relentless effort across the whole of government to protect our political system.”
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He added: “The government is going further still. Through the Representation of the People Bill, we are strengthening transparency in political finance, tightening the rules on donations, closing loopholes and making it harder than ever for those who would seek to exploit our system. We are not standing still – we are taking decisive action to meet the challenges of today.”
He suggested further legislation may be on its way, likely under Andy Burnham as PM, adding: “Where we can legislate now, we will. Where further work is required, we will move at pace to deliver it.”
It comes as Labour called for the elections watchdog, the Electoral Commission, to investigate the “previously secret donations” made to Nigel Farage by convicted criminal George Cottrell. The party’s chair, Anna Turley, has written to the EC’s Chief Executive, Vijay Rangarajan, calling for an investigation to be opened following reports over the weekend.
On Tuesday, Farage dramatically announced his intention to resign his seat and trigger a by-election over the looming Standards Committee investigations he faces in Parliament. No major party plans to run against him, with several branding it a “stunt” and a “media circus.”
Labour is asking the Electoral Commission to assess whether the donations should have been declared. It is also asking it to assess whether Montenegro-based George Cottrell was on the UK electoral register at the time of the donation – if not, Farage would likely have been barred from accepting these donations.
In his statement on Tuesday, Farage said: “Now they’ve come after our money…Over the last year, some big donors have been attracted to us…These are men who’ve gone off as entrepreneurs around the world and succeeded… Now government ministers refer to them in Parliament as malign actors.”
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‘Democracy Still Up For Sale’
However, Fair Vote UK says the Government’s response to the Rycroft review leaves the “biggest political donations loophole” untouched – the lack of an overall cap on donations.
Kyle Taylor, Director of Fair Vote UK, said: “The Government says it wants to stop foreign money influencing UK elections, but the elephant in the room is unlimited domestic political donations. If million-pound donations from overseas are considered a threat to the integrity of our democracy, it’s hard to explain why million-pound donations from within the UK are not.”
Olly Buston, Director of Clean Up Westminster, echoed the concerns, saying: “The Government’s response to Rycroft has a hint of incompetence and a whiff of gerrymandering” – as the year-long cap on donating from returning overseas voters appears aimed at Reform UK.
“[It’s] incompetence because their tinkering will not stop the flood of dodgy money to Reform and others, gerrymandering because this smells too much like trying to fix elections rather than fixing democracy,” Buston said.
He added: “Rycroft was about stopping foreign financial interference in UK elections, but undue influence matters whether it comes from Thailand or Tunbridge Wells. As long as multi-million-pound political donations remain legal, our democracy will still be up for sale.”
Over the weekend, Stella Creasy MP announced that she would table an amendment to introduce a £100,000 domestic annual cap on political donations. Clean Up Westminster said Parliament now has a “historic opportunity to break the grip of big money on British politics.”
Tom Brake, Chief Executive of Unlock Democracy, said the Government’s latest proposals “tie political donations up in ever more complicated rules that are hard to explain, harder to enforce and risk looking less than even-handed.”
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“While it’s welcome ministers accept the need for tougher restrictions on donations, these complex proposals risk replacing one set of problems with another,” Brake argued.
Unlock Democracy believes it would be “far simpler, not to mention more effective” to cap all political donations at the same level – no more than £100,000 – regardless of who or where they come from.
“Steve Reed has said that ‘British democracy is not for sale’. But these proposals do not stop political parties receiving multi-million donations from wealthy UK individuals or large companies,” Brake added.
Transparency International UK also welcomed tighter checks on foreign money in UK elections but warned that the government’s reforms “address the wrong end of the problem,” policing who is allowed to donate while doing nothing to limit how much any one person can give.
The anti-corruption organisation said the package leaves the greatest structural threat to British politics – the growing power of a small number of ultra-wealthy donors – “entirely untouched.”
Transparency International UK is also backing the amendment to the Representation of the People Bill from Stella Creasy MP, to introduce a £100,000 cap on political donations. The organisation is urging MPs from all parties to support it.
Electoral Reform Push
Nearly 170 MPs, including 88 Labour MPs, have now signed an amendment to the Representation of the People Bill calling for a National Commission on Electoral Reform.
Surpassing the 164 MPs who signed Meg Hillier’s reasoned amendment to the Government’s welfare reform Bill last summer, backers say it has become the most-signed amendment to any piece of legislation since the last general election.
The tally includes MPs from eight political parties as well as independents.
Labour MPs, who make up a majority of the signatories, describe the amendment as an “open goal” to the incoming Prime Minister, Andy Burnham, who has long supported both Proportional Representation and establishing a National Commission on Electoral Reform.
MPs are urging Mr Burnham to launch a National Commission within his first 100 days in office, as the Representation of the People Bill returns to Parliament next Tuesday.
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