The Underground Economy of Politics

Secret funding, offshore donors, control by the ultra-rich. Sorry, but this is not democracy.

By George Monbiot, published in the Guardian 3rd May 2024

There’s a sensible rule in British politics: it should not be funded by foreign donors. Democracy is meaningless if a country isn’t run at the behest of its people. But the rule is riddled with loopholes. Those who have done the most to keep them open are those who most loudly assert their patriotism. Noisy “patriots” are always the first to sell us out to offshore capital.

Here are some of the tricks they use. One is the “unincorporated association”. This refers to groups that don’t have to open business bank accounts, file financial statements, register with any official body or even give themselves a name. They’re as transparent as the Berlin Wall on a cloudy day. Astonishingly, these associations are a legal channel for campaign finance in the United Kingdom.

The Good Law Project has calculated that these groups have shovelled £5.3m into the major political parties since 2022. We have no means of knowing where most of this money came from before it passed through these associations. Here’s how it works.

In principle, an unincorporated association must register with the Electoral Commission if it passes more than £37,270 to political parties in the course of a year. But donations don’t count towards this total unless they each exceed £500. So a donor could schedule a payment of £499 to an unincorporated association every minute of every day, amounting to millions of pounds, and the association would neither have to register with the commission nor report such gifts – or even keep a record of them. It’s an open invitation to “impermissible donors”.

The Tories are the worst offenders, taking £3m of the £5.3m. Money passed through these channels has long been directed towards marginal Conservative seats. This means that surprising or narrow Tory victories have been facilitated by funds whose origins no one can see. Ten years ago, Labour railed against the use of these channels. Since 2022, it has used them to amass £1.2m.

The next loophole is the use of corporate subsidiaries. As long as the subsidiary making a donation is UK-registered and operating in some capacity in the country, it doesn’t matter where the parent company is based. An example is the UK subsidiary of a company operated from Dubai, registered in the British Virgin Islands and owned by an Indian food tycoon that gave more than £220,000 to the UK Conservative party. It may be legal. But in what sense is it not a foreign donation?

Of course, the dividing line between foreign and British money is never entirely clear. Even if a company operates only in this country, this doesn’t prevent its foreign owners exercising influence by using it as a funding vehicle. Allowing corporations to donate seems as wrong as allowing unincorporated associations to do so.

After all, the UK, as the Tory MP David Davis has observed, is “the global capital of dirty money”. Why would those who control this money not wish to flex their political muscle? What’s to stop organised crime and foreign kleptocrats buying influence? To give one example, it is hard to explain why a large portion of the lucrative waste disposal industry has been ceded to organised crime in the UK while successive governments look the other way. Might they have been, in effect, legally bribed? Thanks to our opaque funding rules, it’s impossible to say.

If, despite the loopholes, there’s still a problem with a donor’s status, there is always a workaround. As the Guardian’s investigative journalist Tom Burgis has shown, when the multimillionaire Mohamed Amersi first offered to donate to the Tories, there was a hitch – he was not yet listed on the UK’s electoral register. No problem. A Conservative official requested: “The donation must please come from Nadia’s account.” So the legally recognised donor of £200,000 was Amersi’s companion, Nadia Rodicheva, who was registered to vote here. However, the thank you letter the Conservatives sent was addressed to Amersi, as was the bank receipt for the payment. Later, when Amersi, by then a registered UK voter, totted up the funds he had given to the party, he included the money that was declared as a donation from Rodicheva.

Last year, MPs sought an amendment to close the loopholes enabling foreign donations. Conservative MPs were whipped, forcing them to vote it down. Whenever there’s a choice between country and party, the Conservatives, those patriotic stalwarts, choose party.

The next issue is more complicated. It’s entirely right that citizens of the United Kingdom should play a full and active role in our political life, regardless of how long they have lived here. The problem is that some people born overseas have a far better chance of becoming citizens than others. If you are very rich, a red carpet awaits. If you are very poor, it’s razor wire and border guards. The way citizenship is allocated therefore favours a certain politics: the politics that serves the very rich.

The £5m the Conservatives have received from Mohamed Mansour, a naturalised UK citizen who was previously a government minister in Hosni Mubarak’s dictatorship in Egypt, is entirely legal. But it feels profoundly wrong that a former minister of a foreign government should fund a UK political party.

Mansour calls the UK a “second home”. One might question the extent to which he has embraced us. Last year the Sunday Times reported that he had agreed to a multimillion-pound settlement with HMRC after his company, Unatrac, was investigated in a “diverted profit tax case”. Consider that one of his family companies continued operating in Russia for more than a year after the invasion of Ukraine, despite the UK government’s call for divestment. Nevertheless, in December 2022 he was appointed the Conservative party’s senior treasurer, and in March this year he was given a knighthood on Rishi Sunak’s recommendation. A Downing Street source stated that Mansour was being honoured for his charitable works.

In any case, there’s nothing fair about a system in which a few people, whether born here or not, can buy political influence. In my view, the only equitable system is one in which everyone can pay the same small fixed fee for membership of a political party, and no further private funding can be taken. Otherwise, democracy gives way to plutocracy.

But this and other essential reforms are nowhere on the political agenda. Far from it. Those who claim to defend our interests against “foreign interference” and “assaults on our sovereignty” are the very people who ensure we remain prey to them.