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It’s time to cap political donations at a level the poorest can afford

The rich are distorting politics. If everyone could afford to donate equally, things might look a little different

Sam Fowles
2 September 2022, 2.55pm
A correlation exists between donations to the party in power and favourable government policy

PA Images / Alamy Stock Photo

Every few weeks sees a new political donations scandal. The system needs fundamental reform. The Institute for Constitutional and Democratic Research’s new report sets out a simple remedy: cap all political donations at a level affordable to the poorest.

The BBC keeps a running list of scandals going back to the early 1990s. The last 12 months alone have seen revelations in the Pandora Papers (special access to the prime minister for high-level donors), cash for honours (“once you pay your £3m, you get your peerage”), and Russian donations (to name but a few).

Our analysis, based on reporting by openDemocracy, charts a correlation between donations to the governing party and favourable government policy. Property developers gave more than £60m between 2010 and 2020. They received indirect subsidies of around £50bn during the same period. New laws made it easier for developers to get projects approved (even against opposition from local people) and inflated the cost of housing. From 2010 to 2019 the governing party received £3.5m from Russian-linked donors. During that time “the UK government… actively avoided looking for evidence that Russia interfered [in the UK’s democratic processes]”. Ministers blocked weapons sales to Ukraine against the advice of army chiefs. More than £1m from donors with interests in fossil fuels correlates with authorisations for new oil exploration in the North Sea and (despite the “net zero” rhetoric) and the highest fossil-fuel subsidies in the G20.

Correlation is not causation and a focus on individual policies risks missing the bigger picture. The real issue is structural – our current system forces political parties to rely on donations. A small number of ultra-rich donors can thus decide which politicians and parties succeed and which fail.

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The party with the most money generally wins more elections. In 2019 the winning party spent around £16m, outstripping its nearest rival by £4m. The average donation is around £18,000, more than a worker on minimum wage earns in a year. Donors represent less than 0.01% of the population. Around 20% of all donations come from just 10 men. This elite group receives privileged access to the people in power and can determine which party has the funds to win or even compete. “Reform UK” (a “hard Brexit” party) received 76% of its 2019 spending from a single donor. “Reclaim” (primarily a vehicle for culture wars) was funded by just 24 individuals that year. Both received extensive press coverage and many of their talking points have been picked up by mainstream politicians.

Reforms must, therefore, focus on the fundamental issue – some people can exert outsize influence simply by having the means to make bigger donations. Economic inequality may be inevitable (even necessary) in a capitalist system, but political power must flow from the consent of all the governed, not just the rich 0.01%.

We propose a simple solution: cap all political donations at a level the poorest can afford. This means that everyone would be able to afford to donate the maximum amount. Income from donations would reflect a party’s genuine appeal to voters rather than their amenability to a few rich individuals. The cap would include any payment in any form and be accompanied by a ban on donations from “non-natural” persons (preventing circumvention of the rules by funnelling payments through companies or unincorporated associations). The Electoral Commission would be given the power to determine the precise level of the cap based on the principle that the maximum donation must be affordable for every member of society. It is, of course, possible that this may lead to a cap of £0 – but we do not see tying politicians’ prospects of receiving donations to their ability to alleviate absolute poverty as a bad thing.

A small number of ultra-rich donors can decide which politicians and parties succeed and which fail

As an (illustrative only) exercise, my team modelled a cap based on the income of a single person working full-time on minimum wage. Such a person would have a monthly disposable income of £65 (albeit based on the cost of living in 2021). We modelled an annual maximum donation at this level (in other words, an annual maximum donation equivalent to one month’s disposable income for a person on minimum wage). We found that all parties would see their annual income fall but those which attract more small donations from ordinary people (such as from a large membership base) would fall the least. Parties that rely heavily on a small number of ultra-rich donors would see the steepest fall. The political influence of (unaccountable) rich donors would, consequently, no longer exceed that of ordinary people.

There is no need to replace donations with more direct public funding. Opposition parties already receive “short money” (around £10.3m in 2019/20), while the governing party has the advantage of the Government Communications Service (technically politically neutral but able to promote the agenda and competence of the government which inevitably includes the governing party). Parties can also access a range of discretionary and entitlement grants.

Politicians currently waste large amounts of money on activities that obfuscate rather than enhance the quality of debate. In 2019, for example, one party spent nearly half a million pounds on a PR company said to specialise in “political shitposting” and “trolling”. The same party spent £1m on Facebook ads of which 88% of which were found to be misleading. Our politicians and (more to the point) our polity can live without these. Instead, we suggest more opportunities should be identified for politicians to share and debate ideas and be held to account such as TV, livestream or radio debates or town halls (both in person and online). Capping donations may, therefore, also help raise the standard of political debate.

Liz Truss, the frontrunner to be the next prime minister, has benefited from large donations from multimillionaire backers. At the same time, she has refused to attend TV interviews and debates. The next leader of the country might have consented to greater accountability were she not able to rely on the resources of her rich backers.

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