Keir Starmer must strengthen the rules around political donations to protect the electoral system from foreign interference, the Electoral Commission has said, amid rising concerns about Elon Musk’s plans to donate millions of pounds to Reform UK.
Vijay Rangarajan, chief executive of the elections watchdog, said that linking donations to political parties to the UK profits of companies owned by foreigners was one of the urgent changes needed to retain the trust of voters.
The move, which the Guardian understands is being considered by the government, could cap the amount that Musk, the world’s richest man, could donate through the British arm of his social media company X (formerly Twitter).
Twitter UK’s latest publicly available accounts show pre-tax profits of £8.5m in 2022, on a turnover of £205m, substantially lower than the $100m (about £79m) that Musk was initially said to be willing to donate.
After a meeting with Musk this week at Mar-a-Lago, Donald Trump’s Florida estate, Nigel Farage, the Reform UK leader, said the multi-billionaire was giving “serious thought” to bankrolling the party.
The prospect has been met with alarm inside the Labour government, with sources suggesting that it would “not be within the spirit” of the existing party funding rules and that it underlined the need for the legislation to be tightened up.
Electoral law in the UK currently stipulates that all donations and loans to political parties worth more than £500 should come from “permissible donors” registered in the UK. These include voters on the electoral register or companies registered in the UK.
The watchdog also wants political parties to be legally bound to make enhanced checks on donations to assess their risk, and to ensure those who donate to “unincorporated associations” are permissible donors.
“It’s crucial that UK voters have trust in the financing of our political system, so they need to see how parties and campaigners are financed and how they spend that money at elections,” Rangarajan told the Guardian.
“Our current laws include checks on the permissibility of donations and are intended to provide transparency over the source of political donations. But the system needs strengthening, and we have been calling for changes to the law since 2013, to protect the electoral system from foreign interference.
“We recommend three key changes: limit company donations to the money that they have made in the UK; legally require parties to conduct know-your-donor checks on donations to assess and manage their risks; and ensure those who donate to unincorporated associations are permissible donors. We are discussing these proposals with the government.”
Labour pledged in its manifesto to protect democracy from the threat of foreign interference by strengthening rules around donations. The Guardian understands that officials have already begun detailed discussions with the watchdog over drafting and implementation of the plans.
“Now is the moment to close the loophole,” said one source. “Any donation from Musk would be a significant risk politically because it would open up Reform UK to the charge of being financed by foreign money.”
As a US citizen, Musk cannot legally make a personal political donation to a British political party. But in an interview after the meeting Farage said: “He wants to help us, he’s not opposed to the idea of giving us money, provided we can do it legally through UK companies.”
Reform UK has said it wants to “professionalise” the party as it attempts to grow its support after winning five seats at the general election. This could include setting up offices in constituencies across the country, an internal research operation and spending millions on political advertising.
The prime minister’s spokesperson said: “The rules around donations are already clear and work is ongoing to reinforce the existing safeguards in that space … We’ll set out more details on that in due course.”
after newsletter promotion
Tightening the rules would require primary legislation and ministers are not expected to bring forward a bill to deliver on their manifesto pledge until the end of next year at the earliest, with the changes not introduced until 2026.
Some officials are concerned that pressing ahead with the Electoral Commission’s recommendations any sooner could look like a politically motivated attempt to prevent Reform UK from building up a war chest before the next election.
But Labour backbenchers are pressing the government to act. Joe Powell, the MP for Kensington and Bayswater, said on BlueSky: “I am utterly staggered by Reform UK’s shameless plans to subvert UK election law.
“A Reform MP explained to me this morning just how they’ll do it. This is about more than any specific individual – it’s about hostile foreign actors trying to undermine our democracy.”
Labour figures are also concerned about the photograph of Reform UK’s treasurer, Nick Candy, a multimillionaire property magnate, posing alongside Musk and Farage at the Mar-a-Lago meeting. They fear that wealthy rightwingers could be encouraged to donate to Reform UK in anticipation of a similar meeting with a senior member of the Trump administration, particularly if they run a business that could be hit by tariffs.
The Commission on Standards in Public Life, which advises the prime minister on ethical issues, has also previously recommended that donations be linked to UK profits in its review on regulating election finance.
Lord Khan of Burnley, an elections minister, told peers this month: “We are considering changes that will help protect our system from foreign interference, such as tighter controls on donations.
“For example, the Electoral Commission has pointed to a need to consider the rules on company donations. Details of these proposals will be brought forward in due course.”