Labour maintains Conservative oversight of election watchdog whilst leaving major donation loopholes open
Cat Smith MP warns government reforms are 'too timid' to prevent foreign interference as Electoral Commission calls for full independence
Cat Smith spent years attacking Conservative policies that let the government interfere with Britain's independent election watchdog. Now her own party is in power, and she's delivering the same warning - this time about Labour.
"Regrettably, a pretty emphatic no," the former Shadow Democracy Minister said at University College London when asked if Labour's planned election reforms go far enough. The proposed Elections and Democracy Bill represents "the bare minimum", she argued, offering only "a few welcome crumbs" whilst leaving British democracy vulnerable to foreign interference and dark money.
The bluntest criticism? Labour is keeping the Conservative policy that lets ministers guide the supposedly independent Electoral Commission. And the government has no plans to cap political donations, despite Elon Musk openly discussing an $100 million gift to Nigel Farage's Reform UK.
Smith's assessment exposes an uncomfortable reality about democratic reform: parties view constitutional safeguards differently depending on whether they're in opposition or government. What seemed dangerous when Conservatives wielded it appears more tolerable when Labour holds the same power.
The regulator that must answer to government
Here's what Labour opposed in opposition and now defends in government: a "strategy and policy statement" that lets ministers guide the supposedly independent Electoral Commission's work.
When Conservatives introduced this power in 2022, Labour MPs led fierce opposition. The Electoral Commission's entire board warned collectively that governmental influence was fundamentally inconsistent with an independent electoral body's role. The commission still wants the policy repealed entirely.
Labour kept it anyway.
The mechanism works simply but insidiously. The watchdog that regulates political parties, including the governing party, must "have regard" to that government's stated priorities. Creating such power for any sitting government to influence policy is, Smith argued, "fundamentally corrosive to public trust" and "the ultimate conflict of interest".
Tom Hawthorne, the Electoral Commission's head of policy, reinforced this at the UCL event. Independence must be "clear for voters and campaigners to see". Government influence, or even potential influence, contradicts that role.
Smith remembers warning Conservative ministers: "You will not be in Government forever. You're setting up a system for any sitting Government to influence policy." Now she delivers identical warnings to Labour colleagues: "It might be very nice when you're in Government and you think you can influence it, but it's not fair and it's not right."
The principle doesn't change with the party in power. Yet somehow the threat level does. This tells you something uncomfortable about how parties think about democratic safeguards - they're essential protections when opponents hold them, negotiable complications when you do.
The doors left open
Labour's reforms would introduce "Know Your Donor" checks, reduce transparency thresholds, and implement a "profit test" for company donations. Sensible measures. They close some obvious gaps.
They leave the fundamental architecture remarkably permeable.
Consider unincorporated associations - membership organisations that can donate to political parties. Unlike parties themselves, these groups face no requirement to verify their own donors' eligibility. Anyone, including foreign nationals, can donate to an unincorporated association, which then legitimately passes money to political parties. The government proposes lower reporting thresholds. This addresses transparency, not the loophole itself.
Company donations work similarly. UK-registered companies can donate even if they generate little profit in Britain. Foreign entities establish UK subsidiaries, channel money through them, donate to parties - all technically legal. The planned "profit test" would require companies to generate sufficient UK profits to cover donations. Experts note this still leaves substantial room for foreign influence.
Then there's what Rose Whiffen from Transparency International UK called "the elephant in the room" - big money itself. Nineteen donors gave over £1 million each in 2023, providing two-thirds of private party funding. One donor alone accounted for one in every eight pounds donated that year.
The Electoral Commission's maximum fine would rise from £20,000 to £500,000. Sounds substantial until you remember parties spent over £100 million in 2024. Even half a million represents a rounding error, hardly a transformative deterrent.
The international outlier
Britain's permissiveness stands out starkly. France caps individual donations at €7,500 yearly. Canada, Finland, Italy, Japan, Mexico, and South Africa all impose limits. Research suggests roughly half of countries worldwide restrict political contributions.
The UK has no limit whatsoever - unlike Canada, France, or even the United States. Corporate donations are allowed whilst many democracies ban them entirely. The theoretical ban on foreign donations is undermined so thoroughly it's practically meaningless.
Most OECD countries ban contributions from foreign states or enterprises. Britain technically has the ban but enforces it so weakly that foreign money flows through registered companies or unincorporated associations with relative ease. The loopholes aren't accidental gaps in otherwise robust defences. They're the system working as designed.
This matters because it demonstrates that restricting big money isn't radical. It's normal practice in functioning democracies. Britain's refusal to follow suit isn't about protecting freedom or tradition. It's about protecting access to unlimited funding.
Why the turkeys won't vote for Christmas
The explanation for Britain's outlier status is brutally simple: political parties resist donation reform because they benefit from the current system.
Mark Stephens, a political finance expert, stated it plainly: parties have "fought shy" of reform because "they want the donations". The turkeys won't vote for Christmas. This creates a permanent barrier regardless of which party governs.
Labour's position on donation caps demonstrates the dynamic perfectly. Over two-thirds of Britons support limits, according to polling. The government's response? No plans to introduce caps. Not a priority. This sits awkwardly with the manifesto promise to "protect democracy by strengthening the rules around donations".
The calculation is transparent. Caps would constrain Labour's own fundraising. Trade unions provide significant Labour funding. The Conservatives rely on wealthy individuals. Both parties have reasons to preserve the system, whatever their stated commitment to democratic integrity.
Smith acknowledged this directly, noting the government was "largely ignoring" the need for "deep structural overhaul of political finance". The concentration of donations among mega-donors creates obvious corruption risks. Addressing it would require Labour to limit its own funding sources.
Public funding could resolve the dilemma, as it has across Europe. Adequate state support would reduce dependence on large private donations. But expanding public funding for parties remains politically toxic in Britain, creating a perfect circle: parties need money, public funding is unpopular, so parties preserve unlimited private donations.
The Musk situation transformed this comfortable equilibrium into visible crisis.
When Musk made it real
Reports that Elon Musk was considering $100 million for Reform UK turned theoretical vulnerabilities into immediate threat. The world's richest person, a US citizen who cannot vote in British elections, openly discussing whether to bankroll a British political party with more money than all parties combined raised in an entire quarter.
Smith admitted this prospect "completely changed my approach" to donation caps. It's one thing to discuss democratic integrity abstractly. Quite another to watch someone threaten to spend unprecedented sums on your electoral system.
The threat also revealed how Labour's reforms would fail in practice. Musk cannot personally donate. But Tesla's UK arm generated over £23 million in profit last year. "Know Your Donor" checks would establish Musk controls the company. The profit test might limit the amount. Neither would prevent a determined billionaire from directing millions through technically legal channels.
As political finance expert Sam Power noted, Labour's changes might close the most glaring loopholes but do nothing to address the elite power relations that allow billionaires to find ways around restrictions. This is why the Electoral Commission and transparency organisations wanted more ambitious measures - a genuine profit test, donation caps, closing the unincorporated association loophole entirely.
Labour declined. The government apparently prioritises maintaining funding flexibility over closing every vulnerability. Pragmatic politics, perhaps. But it leaves British democracy exposed in ways most comparable nations addressed decades ago.
The bet Labour is making
Smith's critique exposes the core tension in democratic reform. Governments must regulate systems they depend upon. Asking politicians to constrain their own fundraising is asking them to voluntarily reduce their advantages. Technically possible. Politically nearly impossible.
This explains why her warnings carry weight. As a backbench MP no longer in shadow cabinet, she can speak freely about her government's limitations. Her assessment that reforms represent "the bare minimum" rather than "brave reform" acknowledges that political constraints prevent ambitious action.
The Electoral Commission's persistent advocacy for full independence and stronger powers reflects similar frustration. The commission knows what would make British elections more secure. It has stated clearly what reforms would close dangerous loopholes. Governments of both parties have declined to implement the most robust safeguards.
The result is a system that appears to reform whilst leaving fundamental vulnerabilities intact. Britain will get "Know Your Donor" checks and higher fines and lower transparency thresholds. These improvements matter. But the country will still lack donation caps, unlike most democracies. The Electoral Commission will still operate under governmental guidance, unlike independent regulators elsewhere. Large companies and wealthy individuals will still contribute far more than citizens in France or Canada can.
Whether incremental reform proves sufficient depends on whether someone like Musk decides to exploit the remaining loopholes. The government is betting that modest tightening will deter foreign interference whilst preserving the financial flexibility parties want.
Smith's warning suggests this bet may prove optimistic. "I will not be satisfied until I see the strategy and policy statement taken out of the law," she said, demanding the Electoral Commission receive "back its independence".
Until that happens, British democracy operates under constraints most comparable nations would consider unacceptable risks. Sometimes the bare minimum isn't enough. And sometimes parties discover that constitutional safeguards matter most precisely when you're no longer the one who controls them.
