MPs to tighten laws allowing foreign donations to influence UK elections

The Guardian

16-07-2025

Ministers are planning to close loopholes that could allow foreign money to influence UK elections, with a crackdown on illegitimate donations through shell companies and new tests on political donors.
As part of a push to tighten up electoral law, the government will on Thursday announce a series of measures to ensure donations come from allowable UK sources.
These will include making sure foreign sources of money cannot be transferred into UK shell companies that carry out no business in the UK.
The changes will also involve asking parties to do enhanced checks on donors and will require donor organisations known as 'unincorporated associations' to make sure all contributions over £500 come from legitimate UK sources.
At the same time, there will also be stronger fines of up to £500,000 for those that break the rules, with any false or misleading declarations constituting a criminal offence.
Rushanara Ali, the minister for democracy, said: 'The world is changing and the threats that risk undermining our democracy are evolving too.
'We must strengthen the protections to help reduce those risks. That's why we are taking action to close loopholes and strengthen donation rules, so the public can have confidence in the electoral process.'
Under the plans, political parties will be required to assess companies they are receiving donations from against a series of tests, proving their connection to the UK or Ireland. Companies used for political donations will have to prove they are generating income in these countries.
Currently, any UK company can make donations to a political party, regardless of when it was set up, where its money comes from and who its owners are.
There will also be enhanced 'know your donor' checks, meaning parties will have to consider the risk of any money coming from illegitimate sources. New guidance will be provided by the Electoral Commission on conducting these risk assessments.
The committee on standards in public life and the Electoral Commission have previously called for strengthened regulations and greater transparency in political donations.
However, the new rules are expected to stop short of imposing caps on political donations.
Some campaigners had called for more sweeping reforms after the US billionaire Elon Musk floated the idea of giving $100m to Reform UK – an idea he now appears to have dropped after tensions with the party's leader, Nigel Farage.
He would not, as a foreign national, be able to donate and under the new rules and would have to prove any donation through a UK-based company had UK-generated revenue.
The overhaul is also likely to stop short of a ban on donations in cryptocurrency, despite Pat McFadden, the Cabinet Office minister and close ally of the prime minister, Keir Starmer, telling MPs on Monday he thought there was a case for doing so given how hard it was to trace their source.
His comments come two months after Farage announced Reform would become the first party in British politics to accept donations in bitcoin, mirroring a similar move by Donald Trump in the 2024 US presidential election.
The campaign group Spotlight on Corruption has warned the practice could allow foreign countries to undermine British democracy, saying digital currencies 'may play a role in future political interference schemes'.
Government sources said on Tuesday the strengthening of general rules regarding foreign interference would also apply to digital currencies.
A government source said: 'Protecting our democracy from hostile foreign interference is a central responsibility of government and that's why we are taking action to ensure it continues to thrive for generations to come.
'We want as many people as possible to engage in our democracy with confidence in the electoral process and our forthcoming reforms will help us do that.'
Alongside the political financing changes, the elections paper is also expected to back votes from the age of 16 and encourage more voter registration.