What is the state of political inequality in the UK, asks Simon Kuper? Parties here have shifted from being mass organisations to de facto oligarchies, with a handful of “super-donors” able to buy political influence. Given this, what should the current government do to protect our democracy?

British people traditionally enjoy sneering at the outsized role of political donations in American elections. True, US politics has a “big money problem”. But few Britons seem to realise that the UK has caught a variant of the same disease. I discuss it in my book Good Chaps: How Corrupt Politicians Broke Our Law and Institutes – And What We Can Do About It.

You could say that Britain has a “small money problem”, since buying political influence is much cheaper here than in Washington. But in Britain, too, rich donors have acquired far more influence than average citizens. We talk a lot about the UK’s economic inequality, but too little about its political inequality. As Rory Stewart has said, rightly expressing Britain’s problem in startlingly American language: “we need campaign-finance reform.” And the new Labour government is now in a position to deliver it.

Funding parties: from membership fees to “super donors”

The British problem stems from the transformation of our political parties from mass organisations into de facto oligarchies. In the early 1950s, Conservative Party membership peaked at 2.8 million, while Labour had about 1 million. Add on members of trade unions affiliated to Labour, and the party’s membership hovered somewhere around five million from the mid-1940s until the early 1990s.

In many British towns, local party headquarters used to occupy a fine building on the high street. Lots of apolitical people became members just to have somewhere to play snooker or dance on a Saturday night. (The first gig the adolescent Paul McCartney ever played was at “a place called the Conservative Club, which was above a shop in Broadway, Liverpool.”) All those concerts, members’ fees, raffles and (for Tories) wine-and-cheese evenings funded the parties.

But gradually, the members died off. By the late 1980s, Tory membership had shrunk to 1 million. Only 131,680 party members were eligible to vote in the recent leadership election, and barely 95,000 of them bothered to do so.  

As the French economist Julia Cagé remarks, in her book Le prix de la démocratie, which compares the funding of parties in different countries: “the Conservative Party is not a mass party.”

Lost membership fees have been replaced by donations. The parties built big fundraising operations, soliciting money chiefly from rich men in London. Donations have soared this century – initially to the Tories, who more than tripled their donations between 2001 and 2019 while Labour’s barely rose. By 2019, British politics had 116 so-called “super donors” who gave more than £100,000 to a party in one year. In 2019, for the first time, total political donations hit £100 million.

But Tory donors are no longer, as in Thatcher’s day, literal “captains of industry” – bosses of large companies listed on the stock market. Labour’s PPERA Act of 2000 forced listed companies to get shareholders’ approval before making political donations. Few companies even bothered trying. They were replaced by individual donors.

The rise and rise of individual donations

Some donors are old money – heirs, such as the Sainsbury supermarket family. “The largest private donors to the Conservatives and Labour in the current parliament were both called Lord Sainsbury,” reported my newspaper, the Financial Times, last year. John Sainsbury gave to the Tories (finishing with a bequest after his death in 2022) while his cousin David funded Labour.

But the Sainsburys were atypical among modern political donors. By the time they began giving large sums, they had largely withdrawn from the family business. They were, essentially, rich retirees with political opinions.

This century, a new class of Tory donor has emerged: a small group of London-based entrepreneurs, who run their own private companies

This century, a new class of Tory donor has emerged: a small group of London-based entrepreneurs, who run their own private companies. They include Anthony Bamford, whose family owns the JCB construction-equipment company, various property developers, and hedge-funders such as Michael Hintze and Paul Marshall, who co-owns GB News and recently paid £100 million for The Spectator magazine.

Another entrepreneur-donor is Frank Hester, who is in the healthcare technology business, and once said that seeing Labour MP Diane Abbott made him “just want to hate all black women”. Hester gave the Conservatives a record £20 million in the nine months before July’s election.

What donors receive in return

Donors get to meet ministers in informal settings, often over dinners, with no civil servants present. Conservative donors were granted regular meetings with the prime minister and chancellor. It’s not merely that donors can put their personal wishlists to power. Politicians, through frequent contact with donors, come to see the world from their point of view.

Some donors receive more tangible benefits. Recall the Covid VIP Lane affair, in which ministers directed billions in contracts for masks and other protective kit to often useless companies set up by Tory donors.

It’s not merely that donors can put their personal wishlists to power. Politicians, through frequent contact with donors, come to see the world from their point of view

Once Labour under Keir Starmer became business-friendly and electable, it overtook the Conservatives on donations. The party raised £9.5 million during the election campaign, about five times more than the Tories. Labour’s biggest donors include Gary Lubner (former boss of vehicle windscreen repair company Autoglass), green energy tycoon Dale Vince, and the hedge-funder Martin Taylor. These men seem genuinely to be ideologically left-of-centre, supporting Labour against their personal economic interests, which might be better served by the Tories.

But Labour is now probably also attracting more self-interested donors. Its largest ever donation, £4 million from the Cayman Islands-registered hedge fund Quadrature, was declared only after the election. Many opportunistic donors will give to whichever party is in power. Former Conservative donor Mohamed Amersi flirted with Labour last year:

I feel that the country needs help in many places in the North, in the East, where societies are broken… So whoever is best placed and has a strategy on how best to deal with their constituency, I’m happy to support. If a Labour MP comes and says: ‘Look, I have been an MP here and I need money to help with my outreach, can you help?’ I will do it.

The spectacle of rich men in London essentially buying shares in political parties further dents trust in politics. By 2021, in a poll by the Institute for Public Policy Research, the proportion of Britons saying politicians were “out for themselves” reached 63 per cent, then the highest on record. By December 2023, in a poll by We Think asking specifically about politicians in Westminster, it hit 70 per cent. If Labour cannot restore trust, Britain could easily fall victim to a charlatan promising to “drain the swamp”.

Party-funding reform: a way to strengthen democracy?

Happily, Labour’s election manifesto pledged to “protect democracy by strengthening the rules around donations to political parties.” It also promised to “establish a new independent Ethics and Integrity Commission, with its own independent Chair, to ensure probity in government.” These are things that Labour could do cheaply and quickly, whereas rebuilding public services will be expensive and take years.

The boldest step Labour could take would be setting sharp limits on political donations. Canada’s limit for individuals is C$1725 (just under £1,000). But parties need to get money from somewhere. The fairest – and least popular – way to fund them would be through state financing. British public funding for parties is lower than in comparable countries: about £13 million in total in 2022-2023, or 25p per registered voter. The French state gives about €3.50 per voter, calculates Daniel Chandler of LSE. Boosting funding by £150 million, or a bit over £2 per Briton, would lift the UK to around the French level. Long-term, that could save billions if, for instance, it stopped governments funnelling contracts to donors, as in the Covid VIP Lane scandal.

If state funding for parties is unpalatable, Labour could at least limit donations, make them more transparent, and restrict donors’ access to ministers. Either way, the government has a rare window to clean up politics.

Good Chaps: How Corrupt Politicians Broke Our Law and Institutes – And What We Can Do About It, published by Profile Books, is out now.

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All articles posted on this blog give the views of the author(s). They do not represent the position of LSE Inequalities, nor of the London School of Economics and Political Science. 

Image credits: chris dorney and Everett Collection via Shutterstock.