Revealed: UK politics infiltrated by ‘dark money’ with 10% of donations from dubious sources | Party funding

Loopholes in the law are allowing “dark money” to infiltrate UK politics, with almost £1 in every £10 donated to parties and politicians coming from unknown or dubious sources, analysis reveals.

Cash from companies that have never turned a profit, from unincorporated associations that do not have to declare their funders, and banned donations from overseas donors via intermediaries are all entering the system, according to research by Transparency International (TI).

Foreign governments are also donating millions in the form of flights, food and hotel stays. The gifts and hospitality from governments including those of Qatar, Saudi Arabia and Azerbaijan are allowed, even though all other types of donations must come from a permissible UK source. “It is increasingly clear that this loophole presents a reputational and security risk to our democracy,” TI said.

The findings are revealed in a report by the campaign group to be published this week. TI researchers analysed 78,735 donations worth £1.19bn reported to the Electoral Commission between 2001 and 2024. They found that £115m came from unknown or “questionable” sources – equivalent to almost £1 in £10 donated to parties from private sources.

Of the £115m from unknown or questionable sources, more than two-thirds – £81.6m – went to the Conservatives, partly explained by the party’s greater reliance on private donors than Labour, which gets more from membership fees and unions.

In response, the Electoral Commission, which regulates political finance in the UK, said reform was needed to “strengthen the system further”. A spokesperson said: “We stand ready to work with government and parliament on delivering improvements.”

The analysis, seen by the Observer, also reveals that the total donated privately to parties has risen dramatically, from £30.6m in 2001 to £85m in 2023. Meanwhile, between March 2001 and July 2024, £48.2m was given to UK politicians and parties by donors alleged or proven to have bought privileged access, influence or honours; £42m came from donors alleged or proven to have been involved in other corruption, fraud or money laundering; £38.6m came from unincorporated associations that have not reported the source of their income, despite parliament introducing new transparency rules in 2010; £13m came from donors alleged or proven to be intermediaries for foreign funds or a hidden source; and £10.9m was from companies that have not made sufficient profits to support the political contributions they made.

Beyond financial donations, the researchers analysed transparency registers since 2001, finding that MPs have accepted £11.6m of visits abroad, including £4.5m from foreign governments, parliaments and regime-linked groups.

Among the biggest funders of overseas trips was Qatar, which spent £460,000 on gifts and hospitality for UK politicians, mostly in the run-up to the 2022 World Cup; Saudi Arabia, which spent £400,000; Bahrain, which spent £200,000; and Azerbaijan, which spent £140,000.

TI said this was possible due to a “gap in legislation which allows foreign governments, including hostile states, to court UK politicians through all-expenses-paid overseas visits”.

Other comparable democracies such as that of the US have explicit rules to manage the funding of overseas trips funded by foreign governments.

In some cases, politicians went on to promote the interests of the governments that gave them gifts and hospitality. In 2022, the Observer revealed how Alun Cairns, then chair of the Qatar all-party parliamentary group (APPG), made a Commons speech praising Qatar before the World Cup.

The former Tory MP had received £9,323 worth of donations from the Qatari government in 2022 for two trips to Qatar. A statement via Cairns from the since dissolved Qatar APPG said it played an “active role in scrutinising all aspects of UK-Qatar relations, including human rights, ethics, education, energy and infrastructure”.

TI’s analysis further reveals how companies can donate even if they have no clear record of doing business in the UK. They must be registered with Companies House, incorporated in the UK and should be “carrying on business here”.

But TI said this was a “low bar” because while political parties are supposed to check for suspicious activity, such as a company being dormant, there is no ban on accepting money from them.

Another “loophole” means that since 2010, unincorporated associations – groups with no legal entity or requirement to disclose their funders – have donated huge sums to UK political parties and MPs. This includes private clubs linked to both the Conservatives and Labour.

Campaigners say the findings show the UK’s vulnerability to “undue influence from large donors, suspicious and corrupt individuals and foreign governments”.A briefing from Spotlight on Corruption this year concluded that “our electoral finance laws are riddled with loopholes and the enforcement regime is not robust enough”.

Yet despite longstanding concerns, the UK government’s response appears to have gone in the wrong direction.

In the period covered by the TI analysis, it increased the threshold for reporting donations by 136%. In 2022, changes made by the Elections Act 2022 under the Conservatives stripped the Electoral Commission of its ability to prosecute criminal offences and gave ministers the power to set its strategic and policy priorities.

It also changed the rules on unincorporated associations so they are now not required to register with the Electoral Commission at all unless they donate more than £37,270 in a year, despite a 2021 warning from the committee on standards in public life that they could be a backdoor route for foreign money to influence UK elections.

Duncan Hames, director of policy at TI, said the findings showed the need for urgent reform, including an end to funding from unincorporated associations and shell companies and lower election spending limits to reduce reliance on private donations.

“Gaps in political finance rules are failing to stop money from questionable sources being funnelled into our politics,” he said. “We need tighter spending rules, reforms to bring dark money out of the shadows and more accountability for those who abuse the system. We just don’t whose money it really is.”

Jess Garland, director of research at the Electoral Reform Society, said: “The concern is that if the current rules aren’t updated, we will end up with a politics for sale to the highest bidders.”

The Electoral Commission said independence and impartiality were “core to what we do” and that it had a duty to “monitor and secure compliance with the donation rules”.

“We will take enforcement action where necessary,” a spokesperson said.

It added that while current laws provide transparency over the source of political donations, “reforms are needed to strengthen the system further”, including a requirement for enhanced due diligence checks and laws preventing donations from companies that have not made a UK profit.

It also said it was ready to work with politicians to deliver improvements, including “providing expert advice on the workability and impact of any proposed legislative changes”.

Labour has previously committed to protect democracy by reforming the UK’s political finance laws, saying in its manifesto: “We will protect democracy by strengthening the rules around donations to political parties” – but is yet to say exactly how.

The Ministry of Housing, Communities and Local Government, which oversees electoral integrity, was contacted for comment.