Political donations: it’s time to have a cap that even the poorest can afford

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

The BBC keeps a shopping list of scandals dating back to the early 1990s. The last 12 months alone have seen revelations in the Pandora’s Papers (special access to the Prime Minister for high profile donors), cash for honors (“once you pay your £3m you get your peerage”), and Russian donations (to name a few).

Our analysis, based on reports from openDemocracy, correlates donations to the ruling party with favorable government policy. Property developers have given more than £60m between 2010 and 2020. They have received indirect grants of around £50bn over the same period. New laws have made it easier for developers to get projects approved (even against local opposition) and have inflated the cost of housing. From 2010 to 2019, the ruling party received £3.5m from Russia-linked donors. During this time “The British government…has actively avoided looking for evidence that Russia has interfered [in the UK’s democratic processes]”. Ministers blocked arms sales to Ukraine against the advice of the army commanders. More than £1million from donors with interests in fossil fuels correlates with authorizations for new oil exploration in the North Sea and (despite the “net zero” rhetoric) and the highest fossil fuel subsidies in G20.

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

The party with the most money usually wins more elections. In 2019, the winning party spent around £16m, surpassing their nearest rival by £4m. The average donation is around £18,000, more than a minimum wage worker earns in a year. Donors represent less than 0.01% of the population. About 20% of all donations come from just 10 men. This elite group receives privileged access to those 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 the culture wars) was funded by just 24 people that year. Both received extensive media coverage and many of their talking points were picked up by mainstream politicians.

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

We offer 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. Donation revenue would reflect a party’s true appeal to voters rather than its availability to a few wealthy individuals. The cap would include any payment in any form and would be accompanied by a ban on donations from “non-natural” persons (preventing circumvention of the rules by channeling payments through unincorporated companies or associations) . The Electoral Commission would have the power to determine the precise level of the cap based on the principle that the maximum donation should be affordable for every member of society. It is of course possible that this will lead to a cap of £0 – but we don’t see it as a bad thing to link politicians’ prospects of receiving donations to their ability to reduce absolute poverty.