Political Finance Rules

Lloyd Hatton Excerpts

Thursday 6th March 2025 Commons Chamber

[Lloyd Hatton (South Dorset) (Lab)]

I beg to move,

That this House recognises that loopholes in regulation allow for opaque funding of political parties; expresses concern over the prevalence of substantial financial contributions from corrupt individuals and foreign governments, which render political parties susceptible to manipulation and undue influence; acknowledges the risk these opaque funds pose to national security and the health of our democracy; further recognises the need to strengthen the powers and independence of regulators to help the regulation of political donations; and calls on the Government to tighten the law on permissible donations to make clear that political parties cannot accept money from impermissible sources or from companies that have not made enough money in the UK to fund the amount of their donation or loan.

Before I start my remarks, I pay tribute to everything that was said from the Dispatch Box in the last debate by the Under-Secretary of State for the Home Department, my hon. Friend the Member for Birmingham Yardley (Jess Phillips). This House and our Government are stronger, more effective and more compassionate because of her contribution and her work.

I begin by declaring an interest: I am a member of a political party. I have spent many years actively involved in party politics as a campaigner, a local councillor and now as a Member of Parliament, so I know that political parties sit at the centre of our political landscape and that they are key pillars in our elections and our broader democratic system. Of course, those parties need funding to fulfil their day-to-day functions and to contest elections. Our pluralistic democracy depends on lively and active political parties that can campaign and engage with the public. Indeed, tomorrow evening I will be back out on the doorstep, clipboard and leaflets in hand, listening to voters and campaigning with my local Labour party. Those very activities would be impossible without political donations.

However, far too often the financing of political parties involves suspect donations making their way into party coffers. And the numbers are not small. Research by Transparency International found that �115 million in donations�almost �1 in every �10 of reported donations �came from unknown or questionable sources between 2021 and 2024. How has that been allowed to happen? Unfortunately, the UK�s political finance rules, designed to block foreign donations and dirty money from seeping into political parties, are ripe for abuse and riddled with loopholes.

Hostile state actors, kleptocrats and international billionaires are easily able to sidestep the UK�s permissibility rules and funnel money, via UK-registered shell companies, into our political parties. As it stands, a British company is permitted to make donations using money raised overseas, even if the company has not generated sufficient funds to support that same donation. That means that foreign actors or any mystery donor could legitimately use shell companies as a conduit to channel money into political parties here in the UK.

This is symbolic of a much bigger problem. It should not be that easy to pump money into British politics behind a layer of corporate secrecy. Donations that could come from anyone, anywhere pose a significant threat to the security and integrity of our democratic system. Foreign interference in British democracy and elections is a direct attack on our sovereignty, our national interest and our vital democratic institutions.

We have been warned about the problem for many years. A series of independent review bodies and the security services have sounded the alarm time and again. They have made it clear that risks are posed by opaque donations coming in from overseas. In 2020, a report by Parliament�s Intelligence and Security Committee identified that multiple members of the Russian elite with links to Vladimir Putin had tried to donate or successfully donated to British political parties.

Later, in 2022, MI5 warned that an alleged Chinese agent had sought to influence parliamentarians on behalf of the Chinese Communist party. In 2023, concerns were raised in Parliament about alleged links between the Chinese Communist party and party fundraising. The then Minister of State for Policing, the right hon. Member for Croydon South (Chris Philp), noted that

�all political parties need to be alert to the danger of representatives of hostile states seeking to infiltrate or influence their activities.��[Official Report, 19 April 2023; Vol. 731, c. 249.]

I fear that our unhealthy dependence on a handful of large donors also poses a risk of undue influence and capture by narrow vested interests. We know that of the �85 million of private donations made in 2023 alone, two thirds came from 19 mega-donors, each giving well over �1 million. Just recently, one would-be mega-donor dominated headlines for that very reason. Elon Musk, the richest man in the world and not a British citizen, was giving �serious thought� to donating millions of pounds to a British political party�Reform UK. As a South African-born billionaire who lives in the United States, Elon Musk cannot legally make a personal donation to a British political party, but, as we know, he could easily go through the UK subsidiaries of his various companies.

Although that rumour has not yet come to pass, the risk that it poses to the integrity of our democracy cannot be overstated. I repeat: it should not be this easy to pump money into British politics, especially from halfway across the world. Our democratic institutions and elections should never be the plaything of a billionaire who cannot even vote in a British election, and a UK-registered company should not be a convenient vehicle to allow them to make such a donation. Even the perception that our political parties are captured by those with deep pockets has a corrosive effect on public trust in politics and in us as politicians. At a time when that trust is regretfully at a historically low level, we need to tackle that perception head-on and show that our politics is not for sale and cannot be unduly influenced.

How do we go about toughening up the rules? First, we close the loopholes I have outlined once and for all and ensure that companies are able to make donations only from profit made in the UK in the last two years, as well as introducing a requirement for political parties to identify the true source of donors� funds. Secondly, we need to have a tough deterrent for those who break the rules, because even if Elon Musk were ever to breach election law, why would he care? The maximum fine that the Electoral Commission can impose is just �20,000�not even small change to the world�s richest man.

Unfortunately, the previous Government only made matters worse when they stripped the Electoral Commission, which is tasked with regulating political finance, of its independence and further opened the floodgates to mega-donations by drastically increasing spending limits during election periods by around 80%. Strengthening the rules around donations to political parties is a manifesto commitment of this new Government. I know that the Government and Ministers are committed to restoring trust and protecting British democracy, so I hope they will act swiftly on that commitment by restoring the independence of the Electoral Commission and empowering it to impose much larger fines.

The Government should also look closely at capping donations and spending, perhaps in line with recommendations put forward by the independent Committee on Standards in Public Life. Smart tweaks to existing regulations, such as increasing fining powers, lowering reporting thresholds and capping spending limits, do not require primary legislation. Those changes could be enacted quickly and still have a significant impact on cleaning up our politics and ensuring that our parties are all free from suspect donations. Finally, I sincerely hope that Ministers will look closely at the role that shell companies play in allowing opaque donations to be made here in the UK, often originating from overseas.

I am proud that this Labour Government were elected on a mandate to restore integrity in politics. As the Prime Minister rightly stated in his victory speech in the early hours:

�The fight for trust is the battle that defines our age.�

I wholeheartedly agree with him, and I look forward to hearing from the Government and from hon. Members here today exactly how we can win this crucial battle. Only by doing so can we protect democracy, clean up our politics and rebuild trust with the public.

[Several hon. Members rose�]

--- Later in debate ---

[Lloyd Hatton]

I thank all Members for a thoughtful and constructive debate. I thank the hon. Member for North Herefordshire (Ellie Chowns) and my hon. Friend the Member for North East Hertfordshire (Chris Hinchliff) for their particularly thoughtful contributions, my hon. Friend the Member for Poole (Neil Duncan-Jordan) for his powerful remarks about the relationship between donations and public trust, and the hon. Member for Wimbledon (Mr Kohler) for his consensus-driven contribution.

I thank my hon. Friend the Member for Walthamstow (Ms Creasy) for outlining the urgent need for change�we cannot keep waiting for reform to materialise�and my hon. Friend the Member for Kensington and Bayswater (Joe Powell) for setting out the important context of our global responsibility to fight dirty money and clean up politics. I thank my hon. Friend the Member for Cities of London and Westminster (Rachel Blake), who is no longer in the Chamber�[Hon. Members: �Yes she is!�] Oh, she is. Apologies�she has been playing musical chairs. I thank her for highlighting what is at stake if we fail to defend our vibrant democracy. I thank my hon. Friend the Member for Bolton West (Phil Brickell) for outlining robustly the risks posed by Russian oligarchs and their dirty money. We must stand up against it.

Before I bring my remarks to a close, I gently say to the hon. Member for Dewsbury and Batley (Iqbal Mohamed) that this is an important discussion�I think we all agree on that�but we must always be driven by facts and evidence. Oversimplifying the arguments means that we will not get the right outcomes. I believe that one can support a policy such as increasing defence spending to 2.5% without somehow being in hock to or in the pocket of the military industrial complex, as he put it. That is a gross oversimplification, and I gently remind him of that.

Finally, I thank the Minister for her contribution. I welcome the Government�s commitment to setting out their thinking on this important issue later this year. I thank her for reconfirming that foreign donations have no place in British politics and for making it clear that the Government agree about the need for stronger safeguards. The Electoral Commission will play a crucial role in this. We must ensure that it is fully independent.

Question put and agreed to.

Resolved,

That this House recognises that loopholes in regulation allow for opaque funding of political parties; expresses concern over the prevalence of substantial financial contributions from corrupt individuals and foreign governments, which render political parties susceptible to manipulation and undue influence; acknowledges the risk these opaque funds pose to national security and the health of democracy; further recognises the need to strengthen the powers and independence of regulators to help the regulation of political donations; and calls on the Government to tighten the law on permissible donations to make clear that political parties cannot accept money from impermissible sources or from companies that have not made enough money in the UK to fund the amount of their donation or loan.