OPTIONS PAPER 5: CORRUPTION AND POLITICAL FUNDING

Concern about corruption in British political life – through conflict of interests, lobbying, second jobs and party funding in Westminster – has intensified in recent years. It is widely perceived that corruption is in plain sight  but Westminster frequently refuses to acknowledge this. Whilst Britain is not a deeply corrupt country it is slipping and we need to be permanently vigilant as transparency once lost is difficult to regain.

This year, the UK fell to its lowest-ever position in Transparency International’s Corruption Perceptions Index, compiled by expert views of potential corruption in a country’s public services. Having been ranked 18 out of 181 countries in 2022, it is now 20th (its lowest ranking since the current Index was relaunched in 2012). 

A number of high-profile examples have brought the issue to the attention of the press and public. Alleged cronyism has become a potent example of the government’s ‘VIP Lane’ for equipment procurement during the pandemic which bypassed standard processes of competition and saw a number of individuals and companies affiliated with the governing party being granted high-worth contracts. 

The post of the Government’s Anti-Corruption Champion has been vacant since its last holder, a Conservative MP, left in 2022; and the Electoral Commission’s regulatory and enforcement functions have been watered-down by the government in the past two years. 

The subject of political funding has also garnered much press interest in recent years. There have been particular concerns about big money donors donating money to the Conservative Party, including Russian oligarchs; as well as Chinese money being invested in the Labour Party. According to experts and a parliamentary committee, London has become known as the ‘money laundering capital of the world’.

Corrupting influences on our politics are increasingly plain to see with substantive consequences. The problem is that the country continues to perceive corruption as an occurrence solely linked to criminal behaviour and something that happens abroad. This complacency, born of exceptionalism about the infallibility of the mother of parliaments, means that the British political system is vulnerable to corrupt practices flourishing. 

The UK has poor anti-corruption practices in place to deter corrupt behaviour. Change will only come through a recognition that there is a problem and that action must be taken. As experts in the field note, corruption does not have to involve illegal behaviour. In the UK, there is often a lack of hard evidence of corrupting influences found in the closely-woven networks between power and money. But these exist – and the extent to which these networks of influence impact policy and decision-making must be changed. 

While some high profile egregious cases provide easily understood examples of political corruption our focus should be on systemic issues of corruption and their prevention rather than individual cases. However, it is not enough to complain about incidents once they have occurred.

An enforcement approach can only go so far – the incentives for individuals and institutions to engage in such practices in the first place must be removed. Given the extent to which networks of influence and transactional relationships operate behind closed doors, greater transparency sits at the heart of incentivising against corrupt behaviour. There has to be greater accountability for the decisions those in positions of power make and, in large part, this can be secured through fostering greater openness about the various interests they have. 

Finally, we must consider how politics is funded in Britain. Political parties, candidates and politicians need money to operate and campaign and we need to invest properly in politics. The question is how to do this, without generating corruption, in a way that enhances confidence in our democracy.A key challenge is that the very people who profit from corruption in positions of power, are the same people who do not want things to change. Nevertheless, a balanced approach of transparency, new systems of rules removing incentives for corruption, and sanctions could be put in place to build greater trust with the electorate and allow the UK recover its falling rankings on corruption on the global stage. 

This options paper presents some ways in which this might be achieved. The options are based on evidence sessions held with experts and the notes from these sessions are on the Commission website and evidence submitted by organizations working on corruption. 

What Is Corruption? 

Corruption does not simply amount to illegal and fraudulent behaviour in the criminal sense. In politics, it can be defined as an abuse of power for private gain and contrary to the public interest. 

Transactional corruption takes the form of individuals who act in this way, while institutional corruption involves institutions that have deviated from their purpose and may be beholden to external forces. Individual cases of corruption can be easier to discern but the systemic corruption of public decision-making influenced by private interests is more complex and more damaging. 

How corruption works in the British political system is subtle – there is often no ‘smoking gun’. An example of this is peerages given to party donors. There is nothing to suggest that seats in the House of Lords are openly sold, but it is of note that substantial donors to the governing party by personal associates of recent governments and prime ministers have been rewarded with peerages.

Corruption includes the misdirection of public funds, which tends to happen when individuals have a monopoly of decision-making powers and discretion over who gets what, without accountability. Incidents of pork barrel politics have been identified by the media through the Towns Fund in which public money has been channelled to constituencies that suit the government electorally. 

Political financing is a key area of interest when considering corruption in the British system. As political parties are only partially funded through public money by the state or directly by ordinary voters, they are reliant on private donations and membership fees. Membership of political parties has plummeted from around 2.8 million individuals in the 1950s. At the same time, there is no meaningful regulation of these donations in the UK. This raises questions about the motivations of big donors to political parties. While ideological reasons clearly play a part, access to power also operates. 

It is a reality that individuals putting money into politics believe they are buying something in return whether it is access or direct influence over national or international policy and contracts. Individuals who give money have a lot of influence as a result and a small number of people give big sums.

MPs command access to themselves which can lead to lobbying and the exertion of influence. One example of how access is provided to big money donors is the Conservative Party’s Leader’s Group, which includes social events and policy meetings attended by the prime minister and key ministers.

It is also concerning that some big money donors to political parties are facing allegations of corruption in other countries and have used strategic lawsuits against public participation (SLAPPs) to stymie media scrutiny. The government defines SLAPPs as an abuse of the legal process with the primary purpose to harass, intimidate and financially and psychologically exhaust one’s opponent. Journalists looking into financial scandals have been particularly targeted.

MPs’ second jobs, conflicts of interest and lobbying represent other key areas for corruption in the UK’s political system. Whether politicians are working in the public interest or serving private interests is most readily understood in relation to the other work MPs undertake to supplement their parliamentary incomes. While second jobs like consultancies may not always garner huge sums for the individual politician, they can be corrupting when the private interests paying them come into conflict with the public interest. One example might be the advice being provided to betting companies that would benefit from favourable legislation. Payments to politicians are not limited to secondary employment. They can also include paid-for holidays, gifts and hospitality. 

The following options address the various ways in which our democracy is currently vulnerable to these different aspects of political corruption and what could be done about this. 

Option 1 

Change the perception of corruption in the UK so that in politics and the media there is an understanding that it is a problem the British political system must tackle. 

Political parties, candidates and elected politicians must be clear that they work for the public benefit. They must condemn overt and subtle influence that is, or could be seen to be, corrupt.

Corruption in the UK is too often understood as illegal and fraudulent criminal behaviour, with decision-makers quick to point out this happens in foreign countries and deny it features in the British political system. However, corruption does exist in UK politics in the form of networks of influence that operate through money and proximity to power.Both in politics and in the media, there must be greater recognition of this and thus scrutiny of corrupt practices within our politics. 

Option 2

Change the funding of political parties to safeguard UK politics against big money influence, foreign money, and disreputable donors. 

We should introduce a cap on donations to political parties. An annual and a lifetime cap on individual donations would limit the amount of private money entering British politics.  A cap could apply to donations made nationally as well as to local parties.

Ban donations from companies and unincorporated associations.A company can currently donate to a political party if it “carries on business in the UK”. However, there is no requirement for this donation to derive from profits generated in the UK. This loophole is used to obscure the underlying source of donations. Together with donations by unincorporated associations, this is a significant entry point for foreign money (and, at worst, the proceeds of crime) in British politics. Unincorporated associations must have more than one member, a main office in the UK, and be conducting business or other activities in the UK. 

Change the rules on reporting of donations. Reporting thresholds for political parties mean they only have to declare donations of more than £11,180 to the Electoral Commission (with a lower limit of more than £500). This means substantial numbers of smaller donations made by an individual over a period of time, or by a number of individuals, do not need to be declared. A publicly available register of all donors and donations to political parties should be available to the electorate and to the media. 

Introduce regulatory oversight of checks on donors by political parties. Parties are only currently required to impose controls on the status of a donor – they are not required to conduct a risk-based due diligence approach towards donations to check the suitability of a donor or to identify the true source of donations. According to the National Crime 

Agency, a donation is lawful if it is from a permissible donor and it was their decision to donate the money – with experts raising concerns that this leaves the door open for gifts derived from abroad, making the British political system vulnerable to foreign influence. Legislation could be amended so that parties are required to ask the right questions of their donors. For individuals, for instance, this could include a process for parties to verify that the donor is not donating on behalf of a third party.  Spotlight on Corruption has developed a ‘Know Your Donor’ policy for political parties: a proportionate and risk-based framework for handling donations, with enhanced checks on higher-risk donations which are not over-burdensome. According to the organization, this would need to be underpinned by a credible sanctions regime, adequately resourced enforcement, and guidance and training for political parties. Options for funding this would include the government or Electoral Commission – including state funding for a centralized compliance unit in the Commission tasked with assessing donations and advising parties. 

Introduce transparency rules for groups run by parties providing access for donors including parties having to demonstrate safeguards built in to avoid donors exerting undue influence in areas of policy. 

Option 3

Introduce democratic funding of political parties and create a Democracy Voucher

The Democracy Voucher scheme in Seattle, USA, encourages small donations with each registered voter having four $25 vouchers to give to any eligible candidate standing for election to municipal office. A UK version could be adapted so that this is transacted at the ballot box, with no necessity for the money to go to the same person or party who is being voted for. This state funding could be sufficiently generous for local and national politics and would provide an incentive to vote. It could replace the need for big donors.

Another option would be to encourage small donations from individuals and make them tax efficient, in the same way as charitable donations.

A third option would be for state funding to match small donations, for example a donation at either a local or national level of less than £20.

A wider exploration of how political parties are funded in the UK should be considered. State funding is the norm across European democracies, but in the British system, parties are dependent on private money from donors.

Option 4

MPs’ second jobs and transparency of interests need to be reformed to deter lobbying and conflicts of interest. 

The presumption should be that MPs (and members of the reformed Senate, see the Commission’s paper) should not have second jobs. If a second paid relationship is considered it should be in the public benefit, would have to go through an approval process and would have to be fully declared.

The Register of Ministerial Interests should be published fortnightly as is the Register of Members Interests which is a list of disclosures MPs are required to make of any financial interests or benefits which “others might reasonably consider to influence” their work as an MP. This requires disclosures of interests of family members to avoid even perceived conflicts of interest and should include information on financial value of gifts or benefits. The Register should require MPs to provide a record of meetings held with individuals and organizations about government business and social meetings.

The rules should be changed to require government departments to publish information about all meetings and hospitality held by ministers. The Ministerial Code should require ministers to report any engagements with donors, when an official is not present (including in party political contexts), to their departments for publication.  In all meetings they hold in the course of their roles, not just those involving ‘government business’, MPs should be required to identify a ‘public interest’ in why the meeting is held. 

Change the rules around transparency for consultation submissions. When consultations are launched by the government, there is currently no requirement for submissions by private organizations to be published. The rules could be changed to require all submissions to government consultations – and parliamentary committees – to be published. Private organizations should not be able to hide behind commercial sensitivity if their intention is lobbying. The presumption should be towards full transparency. 

Introduce greater transparency around the membership of All-Party Parliamentary Groups. APPGs are groups MPs can form around specific issues, with meetings and events regularly held. They can be useful ways for MPs to have valuable discussions, but they can also be a channel for corruption through outside influences sponsoring or running groups and their activities. The Register of APPGs includes the officers of groups and financial assistance and gifts received by the group, but not the overall membership – this should change.

The Advisory Committee on Business Appointments (ACOBA) should be made fully independent of government, be put on a statutory footing and a review of its rules and procedures conducted to guard against perceptions and situations of a ‘revolving door’. ACOBA is independent of government – but “sponsored” by the Cabinet Office – and considers applications, under the government’s business appointment rules, for former ministers and senior civil servants. The issue of ministers and civil servants’ future desires or intentions to obtain employment outside of the political system, especially in the areas they are working in, is relevant to their decision-making while in their roles. 

The Independent Advisor on Ministers’ Interests and the Commissioner for Public Appointments – and the governance codes for these roles – should also be put on a statutory footing. 

There should be an open recruitment process for the appointment of special advisors. The influence of SPADs in government is immense – as the Covid Inquiry has recently brought to light – and yet open recruitment processes are not held for these positions. 

Any organization providing people to work or help in the office of an MP should be transparent and on a public register.

Option 5

Remove the power of patronage for the awarding of peerages to prevent  appointments being made for political, personal and monetary support. 

The Commission has suggested comprehensive reform of the second chamber in a separate paper, but in the meantime there should be a ban on peerages being given to donors to political parties.The prime minister currently has the power to put big donors or personal friends into the House of Lords. This is an abuse of power and as such is corrupt and must end.

Option 6

Strengthen the regulation of political financing to provide an effective watchdog.

Enhance the enforcement powers of the Electoral Commission which is tasked with overseeing elections and regulating political finance in the UK – and make it fully independent from government. Under changes introduced in 2022, the government now has the power to issue a ‘strategy and policy statement’ for the Commission – a move which, in effect, removed its regulatory independence. The changes also removed its power to initiate criminal proceedings (although it does still have responsibility for civil enforcement). Its advice is also regularly sidelined. For example, the 2022 changes removed the 15-year limit on British citizens living abroad being eligible to vote in UK elections – extending the vote to all British citizens who have ever lived in Britain. The government estimates up to 3.4 million British nationals abroad could become eligible to vote, who would also be able to donate to political parties and form unincorporated associations to do so. The Electoral Commission previously expressed concern that such a measure could increase levels of fraud but the legislation was introduced regardless. 

Option 7

Strengthen national enforcement on corruption and political financing to produce a strong deterrent against corrupting behaviour. 

There is no lead national agency for the criminal enforcement of breaches of electoral law around financing in the UK and there is unusually weak apparatus to tackle corruption. Both need to be considered as urgent areas of reform. 

The Serious Fraud Office is a government department tasked with prosecuting serious or complex fraud and corruption. It should be made fully independent of government and placed on a statutory footing with adequate funding. Since tackling corruption is already in its terms of reference, its name should be changed to the Serious Fraud and Corruption Office. 

Improve the enforcement of election finance crime by bolstering the work of the National Crime Agency to take a lead in this area. Experts have suggested the creation of a dedicated election finance unit, with specialist expertise, within the NCA. 

Consideration could be given to the creation of an anti-corruption agency, using the experience of other countries such as Singapore, Australia, Italy and France which have all set up such bodies. It would be fully independent of government and placed on a statutory footing, with clear terms of reference and the resources to ensure rigorous enforcement. The UK could set up something small and nimble, similar to the Modern Slavery Commission. 

Option 8 

Reaffirm the importance of guarding against state capture to protect against corruption.  

State capture occurs when governments are taken over by a narrow interest or a group running the country for its private or personal gain and not in the public interest. Preventing state capture has been of particular concern to countries such as South Africa and the USA. But the UK should be on its guard. Preventing state capture requires state institutions to be robust in their original functions, such as the judiciary, civil service, media, electoral watchdog, public accounts auditing, civil society. All these institutions have been weakened  in recent years in the UK by elected governments. 

2024