Bankers, residents of the Bahamas, real estate moguls, and big oil executives. If you think this sounds like a list of those making up the global elite, then you’d be right. It’s also a list of some of the individuals and private companies that dug into their deep pockets to fund political parties’ activities during the general election campaign.
Over the past four weeks, the Electoral Commission has published weekly updates of donations to political parties. Reading these figures week on week, it has been striking how much money from private hands has been thrown at this election.
The Conservatives have been the main beneficiary of the deep pockets of donors. Over the past four weeks, they have received just under £11 million in donations over £7,500 from private individuals or companies. That compares with £4.5 million for Labour, and just £860,000 for the Liberal Democrats. That’s a huge 66% of reportable donations that have gone to the Conservatives.
Money flows through our politics, influencing the process from start to finish: from decisions about what is going to be prioritised or excluded from manifestos, through to who gets the ear of a Minister at fundraising dinners - money speaks volumes, and literally buys those who can afford it a seat at the table.
Millions of pounds have been donated, and it would be naive to suggest these donors expect nothing in return. We must challenge the influence of money in our elections and how the policy agenda is set as a result.
Here are some of the sneaky tactics used by the rich and powerful, so they can make their voices heard in the corridors of power.
The Electoral Commission publishes all large donations on its website - that’s all donations over £7,500 to central parties and over £1,500 to local parties. But there are plenty of options for donors that want their identity to be concealed. They can use loopholes like those in Northern Ireland which anonymise donations, to get around transparency laws in the UK. While that won’t work for general elections, the threshold is set per person and so donors can funnel donations through their family or friends. Both Petrofac billionaire Ayman Asfari and his wife Sawsan Asfari gave £50,000 to the Conservative Party in the same week last month. Of course, it is against the rules to conceal the true source of a donation, but the lines are often blurred.
Channeling donations through front company
Legislation outlines that individual donors have to be on the UK electoral register. The government also passed a law in 2009 preventing non-doms from making donations — unfortunately, it’s 8 years on and they haven’t got round to enacting it. Like former non-dom Lord Ashcroft, donors use UK registered limited companies to channel money out of offshore accounts. If donors don’t already have a registered limited company, then it’s easy enough to just set one up. The Political Parties, Elections and Referendums Act 2000 requires that UK companies wishing donate to political parties must be “carrying on business”. Fortunately for donors, no one bothered to include a definition of what exactly that meant. According to the Electoral Commission “a company need not be generating a profit or even “actively trading” so all donors really need is an address and a Companies House registration.
Donors often make their donations through holding companies, making it harder to determine who is behind them or what interests they may be pursuing. For example, Rainy City Investments Ltd donated £100k to the Conservative Party. Only when we dig a little deeper do we find out that the company is controlled by Fred and Peter Done, the Brothers who own Betfred. Given the ongoing government review into Fixed Odd betting terminals, it’s important that we know if betting companies may be trying to influence the Government.
Similarly we know little about Future Management Services Ltd who donated £50k. Further research reveals that it is controlled by Lebanese billionaire Fouad Makhzoumi who was embroiled in a scandal after recruiting the the minister in charge of arms sale Jonathan Aitken to the board of one of his companies who then went on to promote a deal in which Makhzoumi has a financial interest. Donors should not be able to hide behind generically named companies.
Set up a club
If a donor wants to keep their donation history private then one option would be to set up a club. A dinner club, a book club, a tennis club, it doesn’t matter as long as it’s an unincorporated association. An unincorporated association is any organisation set up through an agreement between two or more people that doesn’t seek to make profit. Since the scandal involving the Midlands Industrial Council the Electoral Commission have made life a little harder. Unincorporated associations that donate more than £25,000 have to register with the commission and list all ‘gifts’ over £7,500 in the year before, after, and of the donation. But that still gives them a chance to donate £24,999 to a dinner club and let it be passed it on to the party.
Since July 2009 Unincorporated Associations have donated around 12 million to the Conservatives, 9 million to Labour and £5 million to Lib Dems. An investigation by Open Democracy also found that many were not complying with their reporting requirements. We have little clue where these vast sums of money are coming from.
Splashing the cash
At the end of the day if you’re filthy rich then you can simply go for broke and buy a political party, as there’s no limit on individual donations. When a party becomes increasingly reliant on generous donations they have little choice but to make sure their donors are happy. Like Stuart Wheeler (who once gave £5 million to the Conservative Party) says, a donor’s ability to influence their party is “absolutely natural and unobjectionable”.
This may be the tactic of British citizen now resident in Bahamas, Richard Gore who gave a whopping £1 million to the Conservative party. Or Addison Lee founder, John Griffin who gave £900,000. Whilst most of us struggle to get a meeting with our local MPs, these men will undoubtable have access to the most senior figures of the Conservative party.
So, how do we fix this?
1. Cap donations
By capping donations at £5,000, individual donors would not have an overwhelming influence on campaigns. Politicians would be forced to appeal to a broader and more diverse audience to source their campaign funds, rather than simply pleasing a few multi-millionaires. The cap would need to be the same for everyone: individuals, companies, unincorporated associations and members associations. A low cap would mean that using tricks like splitting donations or setting up companies, would require more effort that the potential benefits.
2. Crackdown on corporate donations
While banning corporate donations would open up new loopholes, like individuals making donations and then being repaid by the company, the thresholds for company donations need to be strengthened. The definition of “carrying on business” is so broad it’s meaningless.
3. Public funding
Public funding of political parties put them on a level playing field. We need to have an honest conversation about what form public funding of political parties should take, and how this could be used to best promote democracy. Schemes to match small individual donations could be devised to encourage parties to seek broad grassroots support, not just pander to powerful interests. There are many options to explore.
You can read our ‘How to be Dodgy Donor’ guide for more information on the tactics used by the rich and powerful to influence.
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Political donations can be found using the Electoral Commission’s database.