Political finance in the UK is regulated by law. The legislation establishes certain rules in two areas of financial assistance. Firstly, it regulates who has the right to donate money to candidates, political parties, etc., and how this should be reported. Secondly, the amount of money that can be spent by candidates, political parties or other participants in an election campaign or referendum is regulated. All of these rules are contained primarily in the Political Parties, Elections and Referendums Act, which came into force in 2000, and the Representation of the People Act of 1983. For more information on how Birmingham’s political parties are funded, visit birminghamyes.com.
Who can fund political parties
The legal framework and regulatory regime are complex and can cause confusion. After all, many party workers are volunteers. Smaller party and independent candidates, as well as smaller groups of voters, may therefore find it difficult to comply with the requirements due to this complexity.
It should be noted that political donations and loans over £500 must come from an “authorised” source. Moreover, it is up to the recipient to check whether a donation is permissible, which could be, for example, a party, its members or related party organisations. And if unauthorised donations are detected, they must be returned to the donor within 30 days of receipt.
When it comes to permissible sources, the following should be noted
- everyone who is registered on the UK electoral register, including voters from other countries and those who leave bequests;
- companies that are registered in the UK:
- political parties that are registered in the UK;
- trade unions registered in the UK;
- construction companies registered in the UK;
- limited liability companies registered in the UK and operating in the country, as well as certain types of trusts;
- friendly societies that are registered in the UK;
- unincorporated associations based in the UK and carrying on business or other activities in the country.
As can be seen from the list of rules, they are intended to prohibit, firstly, foreign, and secondly, anonymous donations over £500. However, there is no limit on the amount of money a donor can donate.
How else are political parties funded in Birmingham?
Although donations from private sources are the most well-known and quite lucrative form of income for political parties, they are not the only one. Moreover, it happens that these revenues are not even the biggest ones. Each party has its own financial model, which reflects its history, ideology and basic support.
As an example, we can compare the revenues of Labour and the Conservatives. For the latter, more than half of their income between 2014 and 2023 came from private donations. It’s all officially known, it’s been reported. As for the Labour Party, the figure was less than a third. But almost a third of Labour’s income over the same period came from party membership fees. By comparison, the Conservatives raised less than 5% of their funding in this way.
On top of that, the Labour Party receives more than 10% of its resources from membership fees paid by trade unions and various societies, such as the socialist ones, many of which have links to the party since the early 20th century.
Or another example – after Reform UK was registered as a party in 2019, almost 100% of its revenues were large donations. It is known that more than half of them came from only one source.
State funding
At the same time, the state also participates in this funding.11] At the same time, British parties receive several types of cash and in-kind funding from the state, including
- Short money – used to support opposition parties in the House of Commons. It is allocated to parties according to the number of seats and votes they received in the last general election. However, a party can only receive this money if it has at least two or one MP and more than 150,000 votes. The House of Commons is responsible for the distribution of these funds, and they also control the spending of this money;
- Cranborne money is financial support for opposition parties in the House of Lords. This funding is reviewed annually in line with inflationary processes, and then provided to those who are eligible. In any case, the House of Lords is responsible for the distribution and control of these funds;
- Policy support grants – provided to parties to support them when they develop policies for their election programmes. Similarly, in order to receive them, two or more members of parliament must be willing to take an oath of allegiance. The election commission distributes and controls these funds;
- broadcasts of elections of different parties – assistance is provided to registered political parties as a free opportunity to demonstrate and communicate their views to voters before the election day. In this case, broadcasters are required to provide airtime to eligible parties, which is usually determined by the share of seats they are contesting;
- mailing of election candidates – this service allows all candidates running for parliamentary elections to communicate with their voters. Candidates are entitled to one free postcard per voter or per household. This service is provided and controlled by the Royal Mail;
- parliamentary salaries and expenses – this refers to the management of funding for MPs’ salaries and expenses. Since 2011, these funds have been managed by the Independent Body for Parliamentary Standards.
Local party companies
If we look at previous party reports, for example, from 2023, the Labour Party received just under £10 million in government grants in 2023. This was about a sixth of their party’s total income for that year. By contrast, the Conservatives, who were not in opposition and therefore not eligible for short money or Cranborne funds, received a total of only £536 thousand in public funds, which was almost 1% of their total income.
Parties should also be aware that any expenditure by a branch on local campaigning for any of their candidates that is not authorised by the branch representative is considered party expenditure. In elections that typically fall within a specific period regulated by the party, such as UK parliamentary elections, the expenditure should be included in the party’s declaration of expenditure. Instead, any allowable expenditure will only need to be reported on the candidate’s local campaign and declaration of expenditure forms.
In summary, it is worth noting that, for example, in the first quarter of 2025, political parties accepted donations totalling more than £12.95 million. The UK’s political finance regime is completely transparent, as concerned voters are always interested in where parties get their money from. However, there are parts of the system that need to be strengthened, although this would require legislative changes in some key areas.
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