The only effective remedy is to ban all private donations, or bribes, to political parties.

Prem Sikka is an Emeritus Professor of Accounting at the University of Essex and the University of Sheffield, a Labour member of the House of Lords, and Contributing Editor at Left Foot Forward.

‘Free and fair elections’ is the slogan of liberal democracies. But when did we have free and fair elections?

The slogan obfuscates the power of corporations and wealthy elites in shaping public choices. People merely rubber-stamp the policies already decided by political elites and their financial backers. Some crumbs are occasionally thrown to the masses but the rich and corporations always win because they control the means of production and public information, fund political parties and threaten to cause chaos if their wishes are ignored.

It is hard to recall any mass social movement calling for cuts in real wages and benefits; ever-lengthening queues for hospital appointments; profiteering by corporations; tax abuses by corporations and the rich; substandard housing, lousy pensions, inadequate social care, bailout of banks and energy companies; subsidies for corporations, or rivers full of sewage. Yet these things have happened because governments bow to the power of corporations and the rich to buy the political system. Governments indulge them with tax cuts, lax laws and poor enforcement whilst condemning most of the voters to misery and premature death.

Political donations are a sport for the rich. The richest 50 families hold more wealth than half of the UK population. The top fifth of households have 63% of the country’s wealth, while the bottom fifth has only 0.5%.The bottom 50% of the population have 5% of wealth, and the top 10% a staggering 57%. Whichever way you look at it, only the rich have the resources to fund political parties, get access to policy makers and sway government policies.

All major parties are for sale to the rich and corporations. Tories received £10m from Frank Hester’s firm Phoenix Partnership. Hester was famously locked into a racist tirade and said that Diane Abbott – Britain’s first Black female MP – made him “want to hate all Black women” and that she “should be shot”. Companies linked to Tory donors received £8.4bn in public contracts since 2016.

We all remember how former Labour Prime Minister Tony Blair bent the rules and exempted Formula One racing from a tobacco advertising ban to secure a £1m donation. Subsequently, due to public uproar the money was retuned. Prior to the 2024 election Labour received £4m from Cayman Islands -based hedge fund with shares in oil and arms and £2m by Ecotricity, owned by Dale Vince, the green energy tycoon. Labour’s biggest individual donor was Lord David Sainsbury, who gave the party £2.5m.

Businessman Zia Yusuf was the second biggest Reform UK donor, providing £200,000. Since the election, he has become the party’s chairman. ‘Cash for honours’ has been a recurring theme in UK politics as parties nominate donors for peerages, knighthoods and other honours.

The UK’s political elites have been content with the sale of the political system to the highest bidder, but are now stirred by revelations that the right-wing US billionaire Elon Musk is funding Reform UK MPs and is considering handing $100m (£78m)  to Reform, pushing the UK closer to the right-wing policies preferred by the incoming US President Donald Trump.

To prevent foreign money from shaping UK politics, some have proposed bans on foreign donations, financial limits on donations by corporations and donations. The head of Electoral Commission has said that corporate donations must come of profits made in the UK. Such suggestions assume that ‘foreign’ and ‘profits’ can easily be defined and policed. There is no central enforcer of company law. Many donations are routed through small companies which enjoy exemptions from numerous disclosures. The UK’s electoral policing system relies on the voluntary disclosures by donors and recipients and has no capacity to act swiftly. The above reforms can easily be bypassed and won’t achieve the desired objectives.

The only effective remedy is to ban all private donations, or bribes, to political parties. This can be supplemented by state funding of political parties with strict limits and public accountability.

Currently, the UK’s Political Parties, Elections and Referendums Act 2000 requires that donations or loans must be from “permissible sources”. These include: individuals registered on a UK electoral register, UK-registered unincorporated associations, and UK-registered companies which are incorporated in the UK and carry on business in the UK. An unincorporated association doesn’t need to register with the Electoral Commission unless it makes political contributions exceeding £37,270 in a calendar year – and even then, it doesn’t have to reveal how it raised the money. Secrecy is embedded within the legislation. Since 2020, more than £13m has been donated to political parties through “unincorporated associations”. Nearly two thirds went to the Conservative Party.

Prior to the Elections Act 2022, British citizens living abroad for more than 15 years could not vote in the elections and were therefore not on the electoral register and could not fund political parties. The Act changed that and enabled the tax exiles with no intention of living in the UK, to vote and fund parties. Thus, it is impossible to prevent foreign money from entering UK politics and swaying elections. How will any election regulator know whether the money donated by tax exiles is clean?

The idea of restricting donations to Individuals on the UK electoral register cannot prevent foreign or even dirty money from funding political parties. An election law expert gave the hypothetical example of a Russian oligarch’s wife, who is a British citizen registered on the electoral roll in London, making a donation in her own name. “The authorities will just accept it without investigating, because they say, ‘Well, she’s on the register, and she says it’s her money’.”

If Elon Musk’s friends and associates are on the UK electoral register and make political donations, nothing will appear to be abnormal, and no questions will be asked.

Companies registered in the UK are permitted to make donations. Elon Musk’s X (formerly Twitter) has corporate presence in the UK and can therefore make political donations. He also controls Tesla UK, Starlink Internet Services UK and other companies and they can make donations too. Each can create hundreds of subsidiaries and as legal persons they can make donations. The distinction between domestic and foreign is not always clear-cut. For example, a Dubai-based Investment Fund, which owns right-wing broadcaster GB News, has made a £50,000 donation to a faction of Conservative MPs. This could have been routed through GB News. Is this a domestic or a foreign donation? Neither the Electoral Commission nor the Police have the capacity to investigate the origins of political donations.

In July 2021, a report by The Committee on Standards in Public Life recommended that “donations should only be made from profits generated in the UK”. However, there is no watertight legal definition of profit. Profit has no physical appearance and is calculated by applying accounting rules made by the private sector. The accounting rules or standards are pliable. The profits of a company can be manufactured with intragroup transactions.

Tax exiles have long used shell companies and complex corporate structures to circumvent political donation laws. None of this has received any challenge from the Electoral Commission. Even if there were some new financial limits on donations, they can be funnelled through numerous subsidiaries and affiliates to violate the spirit of the law.

The only effective measure is to ban all political donations, and the giving and receiving of such donations a criminal offence. Such a ban would force political parties to compete and develop publicly acceptable policies. The successful parties would attract more members and membership fees. Those unable to do so will wither.

Political parties already receive funding from the state. It is called ‘short money’ and is available to opposition parties under strict rules. The financial support assists an opposition party in carrying out its Parliamentary business, travel and associated expenses and running costs of the Leader of the Opposition’s office. The principle could be extended to provide state funding for elections related spending, subject to strict rules. Some will object to state funding of political parties, but the alternative is the current corrupt situation where politics are hijacked by corporations and the rich.

The possibilities of a “government of the people, by the people, for the people” are stymied by corporations and the rich. They fund parties to shape public choices and prevent emancipatory change. A total ban on political donations is needed. Parties will have to rely upon their membership fees. This will reduce the money available to the parties and they will need to spend it wisely, possibly by eliminating misinformation. State-funding, subject to strict controls, can also be considered. Corporations and political elites are dependent upon each other for advancement of their power and interests, at the expense of people. Ending that dependence is a necessary precondition for possibilities of democracy.

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