Limit foreign political donations, says UK government’s ethical adviser

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Sir Keir Starmer’s adviser on ethical standards has called on the government to “protect electoral integrity” by limiting donations from companies to profits made in the UK, following fears Elon Musk could disrupt British politics with a large donation to Reform UK.

Doug Chalmers, chair of the government’s Committee on Standards in Public Life, told the Financial Times the law should also be changed so political donations made by businesses do not exceed their net profits after tax in the two years prior to a donation.

“At stake here is the basic principle that only those who are entitled to vote and conduct business in the UK should be able to fund our political parties and therefore influence the outcome of UK elections,” Chalmers said. “It is an important area that needs addressing to protect UK electoral integrity.”

Chalmers was speaking after Reform UK leader Nigel Farage said he had met Elon Musk and that the US tech billionaire was considering making a sizeable donation to the populist party.

The revelations sparked widespread concern across Westminster that a financial intervention from Musk could have a significant and lasting impact on British politics, giving Reform UK the resources to transform itself into a credible vehicle for power. 

It also drew attention to a long-standing loophole in electoral law that means foreigners are able to donate to UK political parties through British businesses they own even though they are forbidden from donating directly.

The Electoral Commission, the UK’s elections watchdog, also said on Wednesday it was in discussions with the government about changing the law to ensure that only profits made in the UK can be donated to political parties.

Vijay Rangarajan, Electoral Commission chief executive, said the “system needs strengthening . . . to protect the electoral system from foreign interference”.

But the suggestions put forward by Chalmers and Rangarajan are likely to do little to curtail donations by Musk, whose companies made nearly £90mn in profits in the UK over the past two years.

According to their most recent accounts, social media company X’s UK subsidiary, Twitter UK, made profit before tax of £14.5mn in 2021 and 2022 combined, while Starlink Internet Services UK Ltd made profit before tax of £226,000 in 2022 and 2023. 

Tesla Motors Ltd, the UK subsidiary of the electric vehicle company Musk founded and in which he is the largest shareholder with a 13 per cent stake, made £74mn in profits before tax across 2022 and 2023. 

Musk’s AI company xAI also incorporated in the UK last week, giving him a new vehicle through which he could potentially make a donation to Reform. It has not yet published any accounts.

The Committee on Standards in Public Life has been calling for political donations by companies to be limited to profits made in the UK since 1998. 

Chalmers said he was “encouraged that the government has said publicly that it is looking at this area”.

Labour pledged in its general election manifesto it would “protect democracy by strengthening the rules around donations to political parties”, highlighting concerns about foreign interference.

Government officials told the FT they were looking at changing the law to limit corporate donations to profits made in the UK, but said that no legislation would be brought forward in the next year.

Several countries have more stringent laws to limit individuals exercising outsized influence in elections. In France, companies are not allowed to donate to parties or candidates, while individuals are allowed to give a maximum of €7,500 per year.

In Finland, no single donor can give more than €30,000 per year, according to Transparency International.