Date:
Author: Sam Power, Lecturer in Politics, University of Bristol
Original article: https://theconversation.com/elon-musk-wants-to-give-nigel-farage-us-100-million-this-is-the-funding-loophole-that-makes-it-legal-245179
A £78 million political donation from Elon Musk “will break our democracy”. This was the stark warning from investigative journalist Peter Geoghegan when news broke that the world’s richest man was preparing a “fuck you, Starmer payment” of US$100 million to Nigel Farage’s Reform party.
There is a lot that people don’t agree on when it comes to money in politics. But one thing on which politicians tend to be aligned is that foreign interference is bad. It runs against the principle of self-determination.
Politics, we tend to believe, is the business of nations and their citizens. This was, of course, why Reform (née the Brexit party, née UKIP) campaigned so passionately to “take back control” from Brussels in the Brexit referendum.
Most countries in the world (71% at last count) ban foreign donations to political parties – albeit to different extents. In the UK, unfortunately, there is one pretty large loophole in the rules. If you own a company that operates in the UK (as X/Twitter does, in part), then you can give money through that.
The Labour government has promised to “protect democracy by strengthening the rules around political donations”. The wording here is vague enough that it can do either the bare minimum or something altogether more revolutionary if it so chooses.
Given that anything related to political financing was absent from the king’s speech earlier this year, the fear was the “bare minimum” would be the order of the day. However, Musk’s promise of a donation to Reform might well have changed this.
Path dependence and critical junctures
Rule changes in the UK tend to happen when a scandal or event sheds light on the complete absurdity of the system as it is. In the social science literature we call this the relationship between “path dependence” and “critical junctures”.
Once we set off on a path, either as individuals or institutions, it becomes harder and harder to change course. As Conservative politician Lord Hailsham – quoted at the beginning of Sam Freedman’s excellent book Failed State – put it: “Nations begin by forming their institutions, but, in the end, are continuously formed by them.”
That is until a critical juncture shakes us from our collective stupor. A large shock to the system creates an opportunity for a completely different way of thinking. And this, largely, is how it works with money in British politics. We trundle along, often – though not always – doing the bare minimum and fixing things at the edges, unless shocked into more significant action.
EPA
A good example of the UK’s stop-go approach to political financing reform is the loans for peerages scandal that arose in the wake of the 2005 general election. During the campaign itself, Labour’s chief fundraiser Lord Levy (also known as Lord Cashpoint) had solicited approximately £14 million in loans.
Eyebrows were raised because loans, at that time, were not subject to the same disclosure requirements as donations. You had to make public any donation over £5,000, but you could loan as much as you like without it appearing on a register. Eyebrows were raised even higher when it transpired that those who had loaned Labour over £1 million had subsequently been nominated for a peerage.
Needless to say, the police got involved, Tony Blair was interviewed under caution (it probably sped up his resignation) and Lord Levy was arrested. The police ultimately took no further action and everyone got very angry.
Lord Levy even wrote a barnstorming book (which I’ve read so you don’t have to) called A Question of Honour in which he wrote: “There were many reasons that I had been against Labour taking loans … loans, unlike donations, had to be paid back.”
The law was changed after this debacle but only slightly, such that rules around the disclosure of loans were brought in line with rules on donations. This was despite the Hayden Phillips Review in 2007, recommending much more significant changes (including a £50,000 annual cap on donations to political parties).
‘Giving a toddler a gun’
The question now is how bold will the new UK government be in its legislative reaction to Musk’s promised benevolence?
The Guardian has reported that it may cap donations at £100,000 a year (though it probably won’t come into effect until at least 2026). The Committee on Standards in Public Life (CSPL) recommended the cap on donations be more like £10,000.
In general, it is probably a good idea to, at the very least, do something about malign foreign actors or, put more bluntly, old-fashioned shit stirrers.
In 2021, I was giving evidence to a parliamentary committee about proposed changes to the way that we regulate elections (and some elements of our political finance system). The then Conservative government wanted to adapt the rules around the functioning of the Electoral Commission (which I, and others) thought was a bad idea.
One of those people was sitting next me: Lord Evans the then chairman of the CSPL. His argument was that the reforms were “a bit like giving a toddler a gun. It may not immediately lead to disaster but it is an extremely dangerous thing to do.” His point was not that the Conservatives were dangerous, but that we need rules in place to protect us from people that are (even if we find them uncomfortable or restrictive).
If we don’t protect our institutions, then it is likely that at some point someone will come along who is willing – and able – to burn the whole system to the ground. The analogy is certainly apt now. The toddler with the gun is here – and he’s driving a Tesla for good measure. Perhaps its time we all started taking electoral integrity much more seriously.