Ministers are resisting demands to rush through measures to block Elon Musk from handing millions to Nigel Farage, amid a growing clamour for an overhaul of Britain’s political donation laws.
The government is facing mounting calls this weekend for an urgent clampdown that would limit the amount a foreign national can donate via their UK-based companies.
Margaret Hodge, the government’s new anti-corruption champion, is one of a series of prominent political, security and legal figures calling for reforms.
The calls come after Farage caused anxiety among senior figures in both main parties with his claim that Musk, the richest man in the world, was giving “serious thought” to donating millions of pounds to Reform UK after the pair met last week at Mar-a-Lago, Donald Trump’s Florida estate.
However, there are concerns at the heart of the government that a hurried attempt to introduce rules targeting a Musk donation could backfire and hand Farage the chance to claim that Reform UK was being sabotaged by the establishment.
One source rejected the idea that ministers were poised to “rush through” rule changes in response to Musk’s interest.
“We’ll beat Reform by defeating their arguments rather than changing the rules to stop them getting money from Elon Musk,” said a source. “You don’t successfully take on populists by changing the rules in bid to thwart them.”
While Labour has pledged to tighten up rules around political donations, insiders suggested reforms were not likely until the end of next year at the earliest.
In the meantime, proposals being pushed in Whitehall that link the amount that can be donated through a company to the last two years of profits may do little to restrict Musk.
As a US citizen, Musk cannot legally make a personal donation to a British political party, but he could do so through the UK subsidiaries of his various companies, which made about £90m in profits over the last two years.
The latest Opinium poll for the Observer shows that most voters believe there should be a cap on political donations. It found that 56% believe there should be such a limit, while only 16% think there should be no cap. A third wrongly believed a cap was already in place.
The Electoral Commission, the political finance watchdog, last week repeated its demand to link donations to the UK profits of the companies used to make them. Farage immediately pounced on the comments, describing the Electoral Commission as “establishment stooges” and suggested that the main parties were fearful of Reform’s rise.
“Never mind peerages for donations or the millions given to them by foreign businessmen via UK companies in the past,” he said. “This old order needs to be swept away.”
However, several senior Labour figures said the party had to take on Reform by showing its tough decisions on tax rises and planning reforms would ultimately improve people’s lives, despite short-term unpopularity. According to the latest Opinium poll, Keir Starmer’s net approval remains at a lowly -32%, while Farage is significantly ahead on -9%.
The news comes as a series of influential figures called for a change in the law around party financing – particularly a new cap on donations made through a company.
Jonathan Evans, who chaired the committee on standards in public life when it drew up tighter rules on donations that were never adopted, said it was now time to introduce a cap and force parties to make enhanced checks on gifts.
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“Our report on the regulation of electoral finance got support across our committee, which included representatives of all the major political parties,” Lord Evans said.
“We were very disappointed that the government of the day did not accept any of our recommendations. I don’t think the situation has really improved since that point. It’s important that voters and members of the public should have confidence that the money is coming from appropriate sources. That seems to us to be the absolute basic minimum that you would expect
“We have suggested that companies should not be able to donate more money to a political party during a particular campaign than they generate in the UK in profits within thetwo preceding years. If you haven’t made any profits, then one does wonder where the money is coming from.”
Margaret Hodge said a cap on political donations was essential. Photograph: Karl Black/Alamy Live News/Alamy Live News.
The current committee chair, Doug Chalmers, also backed reforms.
Lady Hodge said that a cap was essential and called for tighter rules on foreign donations. “You should get transparency, tougher regulation and proper enforcement and accountability,” she said. “There’s lots of agreement on this and I think we’ve just now got to legislate. You’ve just got to sort it out.”
David Anderson KC, the former independent reviewer of terrorism laws, said Labour must live up to its manifesto commitment to tighten donation rules, warning that not doing so risked further undermining public trust.
“The current controversy about Elon Musk and Reform illustrates a much broader problem,” Lord Anderson said. “The Electoral Commission, the committee on standards in public life, parliamentary select committees and others have been saying for years that the current rules are insufficient to guard against foreign interference in UK elections.
“In particular, the lax rules on business donations leave the door open for foreign money and proceeds of crime being channelled into politics via UK-registered shell companies.
“Labour promised in their manifesto to protect democracy by strengthening the rules around donations to political parties. Trust in our politics is dangerously low: they need to get on with it.”
