Money in politics: a lesson from history

Big money has had a corrosive impact on UK politics for centuries, yet it’s taken the prospect of a $100 million donation to focus minds on why it still matters now. At the 2024 election, Labour pledged to protect democracy and strengthen the rules around political donations, and ministers have confirmed they’ll make a statement on their intentions before the summer. Ahead of this announcement and any associated legislation, Transparency International UK is producing a series of explainers covering who funds our politics, how, and why big money poses an increasingly existential threat to our democracy.

Democracy in crisis. One only has to take a cursory look over the Atlantic to realise how serious it is. The ability of billionaires to buy what they want in Washington has never been so brazen. And we are not immune. 

It was not long ago that stories of cash securing privileged access and potential influence covered the headlines – from planning to procurement and peerages – doing damage to already rock-bottom levels of trust in our politicians. To avoid further and possibly terminal decline, ministers must take bold action. When looking for solutions we can learn a lot from our own past. While history doesn’t repeat itself exactly, it has surprising similarities with the present.

In doing so, we can see that what we face now isn’t entirely new, and that periodically Prime Ministers have risen to the moment. With the current Government committed to introducing an Elections Bill within this Parliament, Sir Keir Starmer has the opportunity to do so now. This is a once in a generation chance to protect our democracy from being sold to the highest bidder, and securing its future in uncertain times.

But before we explain the hows or whys, a quick history lesson.

Same issue, different centuries

At the heart of our woes is big money, fuelled by the ever-increasing price of politics. Though the nature of this threat has changed through the ages, it is a problem almost as old as the Palace of Westminster itself. 

Until last year, the most expensive UK election on record was 1880. This was an era of large scale disenfranchisement (especially of women), rotten boroughs were a recent memory, and the Labour Party did not even exist. In 2005, academics calculated the cumulative cost of the contest to candidates was around £100 million. Given inflation since then, it’s higher still – around £170 million today.

This wasn’t just because printing was expensive or Facebook didn’t exist. There were no controls on how much candidates could spend, nor meaningful enforcement of laws to stop them bribing the electorate. And when the stakes are high, some are willing to do whatever it takes to secure victory.

The resulting free-for-all saw dozens of legal battles over results, and eight borough Royal Commissions. The election was a farce.

The ebb and flow of reform

To avoid a repeat of this costly debacle, Parliament limited spending by candidates for the first time through the Corrupt and Illegal Practices Prevention Act 1883. For the next century, there followed relatively little change to this framework, which focused on limiting spending by candidates (or those opposed to them) and trying to tackle the most egregious forms of electoral corruption. At least, until the 1990s.

The cash for questions saga – where sitting MPs accepted payments to lobby on behalf of businessman Mohammed Al-Fayed – came to epitomise another era mired in sleaze. Following New Labour’s landslide victory in 1997, Prime Minister Tony Blair asked the Committee on Standards in Public Life to look at the vexed issue of party funding, seen as a key driver of recent impropriety. Its inquiry and subsequent report were expansive, recommending a radical overhaul of the status quo, including:

• new limits on national expenditure, to provide a level ceiling on the spending arms race between the largest two parties
• greater transparency over parties’ finances, including disclosure of substantial donations, and controls to prevent them originating from foreign sources
• a new statutory regulator to monitor and ensure compliance with these rules

Despite some modest changes since (some for better, others for worse), this framework has remained largely unchanged for a quarter of a century. Yet it is increasingly proving insufficient to the task.

Breaking the democratic doom loop

Our recent research found almost one in ten pounds reported by political parties and their members since 2001 has come from unknown or questionable sources. Elon Musk’s reported musings before Christmas also show how those with deep pockets consider our democracy is for sale. And our analysis of new data from the 2024 election suggests it could be the most expensive in recent history.

These are all interrelated. If the cost of politics is exorbitant, parties and their members will seek increasingly risky means to fund it. For some, the quickest way is to turn to a small number of very wealthy people to cover their bills. However, this gives their backers significant leverage in exchange, and raise expectations that their investment will generate a return further down the line. Cue the next scandal waiting to happen.

This doom loop is slowly destroying our democracy.

But it doesn’t have to be this way.

Reduce the cost of elections and you cool the pressure to seek out seemingly limitless amounts of money, including from increasingly dangerous sources.

Cap donations and you reduce parties’ growing dependency on a small group of wealthy and influential backers while encouraging them to reach out more to the wider electorate.

And empower those tasked with policing the law so these changes are not just words on a piece of paper.

Polling shows measures like these would be popular with the public, with backbenchers also expressing their support. There is an open door here to deliver real change that could reinvigorate our polity. History doesn’t have to repeat itself so long as we learn from past mistakes. If there’s one lesson for ministers right now, it’s that they cannot be bold enough.