Does UK politics have a dark money problem?

Dark money refers to opaque political spending where the sum and/or source of funds is undisclosed or unknown. This includes: 

• donations and loans
• election campaign expenditure
• spending on other policy or election influencing activities 

Typically, it is associated with the US, where loose campaign finance regulation has allowed wealthy special interest groups to spend around $1 billion influencing elections and policy decisions anonymously. 

While experts think UK political finance is relatively transparent compared to its counterparts, there remains a strong disconnect between this international status and public opinion here at home. According to a recent survey by the Electoral Commission, only 18 per cent of respondents thought money in politics is open to scrutiny. Our research has also found at least £62.5 million in UK political contributions whose origins are unclear. This provides a cloak of secrecy through which vested and foreign interests can seek to unduly impact our democracy. The UK Government’s raising of disclosure thresholds for donations and loans in 2024 seem unlikely to help address these concerns. 

There are a range of detailed and complex disclosure requirements under UK law, covering an array of different actors in our democracy. These transparency requirements work alongside other safeguards, including rules on who can donate to political causes (outlined in our previous explainer) and a ban on anonymous donations over £500. 

Those required to report donations and loans include: 

• political parties
• branches of political parties, called accounting units
• candidates standing for election (donations only)
• regulated donees, such as members of political parties, groups of party members, and holders of elective office
• registered non-party campaigners (donations only) 

Beyond donation and loan reporting the law requires several other financial filings, including: 

• annual statement of accounts from political parties and their accounting units
• post-election spending returns from political parties, candidates, and non-party campaigners
• post-election statement of accounts from some non-party campaigners
• reports of political ‘gifts’ to unincorporated associations making substantial political donations or loans  

Reporting thresholds for donations 

We identify five key gaps in the law that allow dark money to enter our political system: 

• company permissibility
• unincorporated associations
• reporting thresholds
• pre-candidacy donations
• regulated donee donations and loans 

Company permissibility 

The law intends to allow companies to make political donations if they have an economic stake in the UK. However, this is currently defined as ‘carrying on business’, which in practice has proven to be a very low bar. This has enabled firms to donate even though they have never turned a profit and/or have no physical or online presence, raising questions about the source of funds. In one instance, the Ministry of Defence has raised significant national security concerns about an energy project proposed by one of these company donors – a claim the donor contests vigorously. 

Our research demonstrates the potential scale of the problem, with ten companies making £10.9 million worth of political donations since 2001 where the source of the funding is unclear. 

In contrast, other comparable democracies like France and Canada have banned donations from all companies, as did Brazil in 2015, following a myriad of scandals around political influence. India’s Supreme Court also recently ruled that companies can only donate 7.5 per cent of their average profits from the last three years to political parties. The Electoral Commission, the Committee on Standards in Public Life, the UK Government’s ethics watchdog, and a coalition of NGOs have recommended the law be strengthened in this area. 

Unincorporated associations 

Unincorporated associations are loose groupings of two or more people with a shared purpose. They are currently permissible donors if they are carrying on business or activities wholly or mainly in the UK, and whose main office is here. While this flexibility in the law allows groups of councillors to pool their resources without having to set up a company to donate through, they can also be an opaque vehicle for funds of unknown origin. 

Unincorporated associations are problematic in two ways. Firstly, they could be used as a conduit for otherwise illegal donations. This is because they do not need to check the permissibility of political ‘gifts’ given to them. An impermissible donor, say a citizen of a foreign country, could give money to one of these groups and as long as the unincorporated association makes the decision about where the money goes, it could then pass on that donation to a political party. This is a clear loophole which could be used for money of foreign and questionable origin to enter our political system. 

Secondly, despite the law requiring transparency of gifts given to unincorporated associations, most of these groups’ income remain unreported – we still do not know where 96 per cent of their political contributions originate from. Our research finds that out of the £40.4 million of donations to political parties we can only account for £1.7 million of this funding, leaving a transparency gap of just over £38.6 million. The large discrepancy between reported unincorporated income and expenditure shows the law, which is now 15 years old, is not working as intended and opacity remains.  

Reporting thresholds 

Those subject to disclosure requirements only have to report donations and/or loans above certain financial thresholds defined in law. The rationale for disclosing only significant contributions attempts to balance the imperatives of the public interest with the right to privacy and administrative burdens. Inevitably, the level of the threshold is arbitrary and filled with trade-offs. Setting them too low risks imposing undue bureaucratic burdens on those subject to reporting requirements, while setting them too high risks undermining the policy objective of transparency. 

Despite relatively low reporting thresholds set back in 2000, they have been raised twice by governments to over twice the size of their original value. Consequently, millions of pounds in donations are likely being removed from the public record. For example, were the new reporting thresholds applied to contributions made between 2001 and 2023 to political parties, this would have resulted in a £31.8 million transparency black hole. 

This is in contrast with countries such as Australia who have recently decreased their reporting threshold after years of widespread criticism about their dark money problem. The new lower reporting threshold for donations is $5,000 AUD (about £2,500), reduced from $16,900 AUD. In Canada and the US, the reporting thresholds for contributions are as low as CN$200 (£105) and USD$200 (£150) respectively. 

Pre-candidacy donations 

When Parliament sits for more than 55 months, there are additional rules on campaigning by prospective parliamentary candidates i.e. those seeking election but not yet formally nominated as a candidate. Known as the ‘long campaign’, these controls on spending and donations apply between the 55th month of Parliament sitting and its dissolution, which signifies the start of what is called the ‘short campaign’ from dissolution to polling day. Parliament introduced these rules in 2009 to counter concerns about opaque funding and excessive spending at the constituency level. 

Information about previous levels of long campaign spending and donations are available on the Electoral Commission’s website. In 2015, when these rules last applied, candidates reported a total of £11.8 million in contributions towards their pre-candidacy electioneering. 

Due to a series of early elections, these rules have not applied since. Yet the regulator’s interpretation of the law has changed significantly. In the run up to the 2024 general elections, the Electoral Commission told us that it did not think there were any controls or disclosure requirements for contributions to regulated pre-candidacy spending. Even more worrying was that they did not think these contributions were covered by the rules on donations to regulated individuals, neither. This approach has re-opened the black hole in pre-election funding that existed before 2009.  

Regulated donee donations and loans 

Currently, the rules on donations and loans to individual politicians are too ambiguous, resulting in public interest information being omitted from official records without consequence. For example, around £50,000 from Lord Brownlow towards renovations of Boris Johnson’s Downing Street flat are nowhere on disclosures made to the Electoral Commission, Parliament or UK Government. This is possible because the legislation could be clearer about how to treat these contributions, and the regulator has taken an unduly narrow interpretation of how they apply in practice. 

Without clearer direction in law from Parliament, the Electoral Commission risks continuing to take an overly cautious and restrictive interpretation of what is and is not regulated. The consequence would be porous controls on money in politics, and a lack of transparency over gifts given to those occupying the highest public offices. 

Transparency International UK, the Committee on Standards in public Life and Spotlight on Corruption have recommended several reforms to bring dark money out of the shadows. These include changes to: 

Prevent shell companies from being used as a conduit for impermissible and unknown funds by ensuring companies and limited liability partnerships can only donate from genuine commercial activity carried out within the UK. 

Prevent unincorporated associations from funnelling dark and otherwise impermissible money into politics by subjecting their income to permissibility checks and reducing their reporting threshold for these contributions to £500. 

Improve transparency and simplify reporting requirements by equalising the disclosure threshold for donations and loans with the permissibility threshold of £500. 

Clarify donation rules to put beyond doubt that any donations towards spending by those standing for election during the pre-candidacy ‘long campaign’ are regulated and reportable, and that contributions given to someone in their ministerial capacity are covered by the law.