Political Party Finance and the Electoral Commission

Baroness Finn Excerpts

Thursday 2nd July 2026 Lords Chamber

[Baroness Finn (Con)]

My Lords, I too thank the noble Earl, Lord Kinnoull, for bringing forward this important debate and for giving me the opportunity to discuss some of the issues beforehand.

There is a simple constitutional caution at the heart of this matter. A Government should not direct the power of the state to undercut the lawful flow of funds to their political opponents. Once that line is crossed, it is not easily uncrossed. It invites reprisal when power changes hands, and it weakens public confidence that electoral law is being made in the national interest rather than in the interests of the party temporarily in office. Party finance law is not ordinary lawmaking; it is the law by which the competitors in our democracy agree on the rules of the contest. The Government of the day are the trustee of those rules, not the proprietor.

The previous Government were right to be tough on hostile state activity. They passed the National Security Act 2023, creating the statutory framework for the foreign influence registration scheme. No one in this House should be complacent about foreign interference, but the existence of that threat does not justify Ministers blurring the distinction between foreign interference and lawful donations made by registered electors or genuine UK businesses. This side of the House has been consistent: changes to the rules should be made through proper cross-party consultation. That is a long-honoured constitutional custom, an argument so eloquently put forward by my noble friend Lord Maude of Horsham.

In its 2016 report, the House of Lords Select Committee on Trade Union Political Funds and Political Party Funding, chaired by the noble Lord, Lord Burns, recorded the importance of cross-party consensus on matters affecting the interests of rival parties. The committee quoted Sir Winston Churchill, to whom my noble friend Lord Maude referred today. In the other place on 16 February 1948, he said:

“It has become a well-established custom that matters affecting the interests of rival parties should not be settled by the imposition of the will of one side over the other, but by an agreement reached either between the leaders of the main parties or by conferences under the impartial guidance of Mr. Speaker”.—[Official Report, Commons, 16/2/1948; col. 859-60.]


That was the right principle in 1948 and it remains the right principle today. It is striking that one of the witnesses who repeated Churchill’s words to the committee was the then general secretary of the Labour Party, now the noble Lord, Lord McNicol of West Kilbride. He described that custom as a “principle of fairness”. I therefore simply ask the Minister: what has changed?

Sir Nick Clegg warned that issues of money and power in British politics should be dealt with on a cross-party basis. Jack Straw said that, in this area, the Government of the day act as a trustee for our democratic system. They were both right. Following Sir Hayden Phillips’s report, commissioned by Sir Tony Blair, cross-party talks were convened. In 2011, Sir Nick Clegg again convened cross-party talks on party funding and donations. In 2013, an unofficial cross-party working group published a draft Bill.

If cross-party consensus was already a well- established custom in 1948 then by 2026 it is more than a passing courtesy. Whether or not one calls it a full constitutional convention, it is plainly an established democratic restraint. The Burns committee ultimately concluded that

“while there is no formal convention that all reform of party funding must take place by consensus, history shows that governments of both main parties have acted with a degree of restraint; and indeed it is desirable to seek consensus. If any government were to use its majority unilaterally to inflict significant damage on the finances of opposition parties, it would risk starting a tit-for-tat conflict which could harm parliamentary democracy”.

That warning could hardly be clearer. Whatever party is in power, it would be detrimental for conventions to break down and to open the door to US-style hyper-partisan legislation. As Sir Nick Clegg warned the committee in 2016, if a Government acted unilaterally, they would

“rue the day … because one day the boot will be on the other foot”.

That is why the Government’s handling of the Rycroft review and the Representation of the People Bill is so troubling. I do not here criticise Sir Philip Rycroft’s review, nor do I deny that there are legitimate questions about transparency, enforcement and the resilience of our political finance system. However, an independent review commissioned by Ministers is not a substitute for proper cross-party talks led by Ministers.

The Labour manifesto contained a broad statement that the Government would

“protect democracy by strengthening the rules around donations to political parties”.

That sentence does not give Ministers carte blanche to rewrite the financial rules of political competition unilaterally. Ministers have said that officials have engaged with political parties through the Parliamentary Parties Panel on technical aspects of reform—that is not enough. Technical consultation with party professionals is not the same as cross-party political agreement. A review by officials or by an independent reviewer is not the same as party leaders, Ministers and opposition parties sitting down to agree rules that affect them all. The Government have now chosen to take forward some of the Rycroft recommendations, but not all of them, through the Representation of the People Bill. That selective approach is precisely why trust is so important. If Ministers cherry-pick from a review in a way that happens to disadvantage their political opponents, they should expect the closest possible scrutiny from this House.

I turn to the proposed cap on donations from overseas electors. I shall make one point absolutely clear: there is a fundamental distinction between foreign interference and a lawful donation from a British citizen who is registered to vote. I take note of what the noble Lord, Lord Frost, said about being a British citizen. There is a long-standing principle, originally recommended by the Committee on Standards in Public Life, that permissible donors should include those on the UK electoral register. Prior to 2022, British citizens overseas could already vote in UK parliamentary elections and make donations, subject to the 15-year time limit. In response to the comments made by the noble Lord, Lord Wallace of Saltaire, the Elections Act did not invent that principle; it removed the arbitrary 15-year cut-off. The Government propose a £100,000 annual cap on donations and regulated transactions by overseas electors, with retrospective effect from the date of announcement. We do not support that arbitrary cap or its retrospective application. All this should not happen without cross-party agreement.

I turn next to corporate donations, a matter so effectively addressed by my noble friend Lord Massey. If Ministers intend to adopt a post-tax profit test, they should first publish a full impact assessment showing how it would affect donors across all parties, including donations accepted by the governing party itself. They should explain how the rule would apply to start-ups, investment-heavy businesses, social enterprises, companies in volatile sectors and firms with uneven earnings. They should also explain why a profit test is preferable to a genuine business test backed by stronger due diligence and enforcement. The Government should not smuggle through a major restriction on corporate political giving under the banner of anti­interference.

The noble Earl, Lord Kinnoull, has rightly drawn attention to the important role of the Electoral Commission. We agree that it needs operational independence and sufficient resources to perform its functions effectively and command the confidence of the British people. The Murrell case is a salutary reminder that the improper use of party funds is not a technicality; it strikes at trust in political life. But that case also illustrates the point. The answer to wrongdoing is the effective enforcement of the law, as my noble friend Lord Johnson of Lainston made clear—it is not the partisan remaking of political finance rules in a way that burdens lawful opponents.

The Government’s present approach risks confusing two very different things. One is the legitimate need to protect our democracy from foreign interference and financial abuse. The other is the temptation for a Government to tilt the rules of political competition in their favour. This House should be vigilant in resisting the second while supporting the first.

We are ready to engage seriously on transparency, enforcement and the protection of our democracy, but we will not accept unilateral, retrospective and partisan changes to party finance law. We will not accept the conflation of British overseas voters with foreign actors. We will not accept broad restrictions on genuine UK businesses without proper evidence, proper scrutiny and proper cross-party agreement.

The Government should change course. They should withdraw from unilateralism, convene proper cross-party talks and return to the constitutional restraint that has served our parliamentary democracy so well. Above all, Ministers should remember that in this field they are not merely legislators—they are trustees of the democratic system itself.