How money buys British politics

Reform UK’s recent twin donations of £36m is the latest startling story of political money in British politics. Nigel Farage and Reform UK are reoccurring characters in the juicier of these stories, with Farage accepting an undeclared £5m personal donation before the 2024 election and being caught in a Channel 4 sting more recently appearing to solicit an illegal donation, before he revealed that he had not, in fact, been listening. However, Labour has its own quainter versions of these stories, with Andy Burnham posing for a montage in a Sainsbury uniform after the supermarket’s CEO donated £164,347 to Burnham’s campaign to become Labour leader and prime minister.

Why are politicians drawn to questionable donations like moths to a headlamp, being willing to endure a measure of public ridicule and occasional legal exposure as a result? The reason is that politics itself is not a free marketplace of ideas, but an expensive game that requires cash to play. Meanwhile, wealthy companies and individuals have major (in)vested interests in the outcome of public policy, driving them to donate to parties and candidates to get the outcome they want. This is the insight of the so-called ‘money theory of politics’.

Money or voters?

The money theory of politics (developed by the US academic Thomas Ferguson) contrasts with ‘voter-centric’ views of politics, which hold that electoral outcomes reflect the views of voters. Some on the left believe that there is a radical majority based on class interest that can be awoken once candidates are brave enough to embrace it. This is the mirror of the Blairite view that there is a permanent majority in the centre that candidates have to brave and be wise enough to walk towards. The rest is noise.

In fact, electoral outcomes have little to do with voters’ support for individual policies reflected in polling. Politics is a game of money and who can finance an effective political campaign. Because not all of business wants the same thing, party systems come to reflect the concerns of elite sections of capital. Before the second world war, politics opposed protectionist Conservative landowners favouring Corn Laws and imperial preference, against free-trade Liberals. In the US, the Republican-Democrat divide also emerged from opposing protectionist manufacturers and free-trade exporters.

Only in exceptional moments when capital is weak and labour is strong do powerful socialist, communist, or labour parties emerge funded by pooling small donations, membership subscriptions and trade union money.

Political investors and British politics

In the middle of the 20th century, the political divide between protectionist Tories and free-trade Liberals began to break down. British politics was instead dominated by a Labour party funded by trade unions, and a Conservative party funded by big business. When capital was weak and labour was strong after the second world war, Labour governments transformed British society. However, as the trade union movement weakened, so too did the electoral clout of the Labour Party.

Tony Blair purposefully repositioned the Labour Party as a party capable of raising political donations from business, mirroring the efforts of Bill Clinton with the US Democrats. Sometimes, Labour has played as the ‘reserve team’ for capital, receiving a flood of business support when the Conservatives lose their touch for economic management. This occurred in 1997 and 2024.

However, the Labour party also appeals to distinct sections of capital. Support for Conservative austerity is all very well for the financial sector, but many lesser industries depend on public contracts awarded by feckless politicians and civil servants. Think of home builders, consultancy firms, utility companies and private healthcare providers sub-contracted by the NHS. The moral panic of a public deficit weighs less if the government’s deficit is your surplus. Political investors can be shy and bashful, but these investors go on display annually at Labour Party conference, pitching their requests for corporate welfare to MPs and MP hopefuls.

Jeremy Corbyn shooed away the corporate donors to establish a different political financing model based on mass membership subscriptions and trade union donations. It nearly worked. But with Keir Starmer in charge, the Labour Party manoeuvred – again, quite consciously – to courting corporate donors, indifferent to a fall in membership.

What does crypto want?

David Sainsbury is a spread better, funding all UK political parties, but crypto specifically loves Reform. Are these just rich kids with a personal hobby in anti-immigrant politics? It is striking that Reform’s mega donations come from this specific section of business that also donated heavily to Donald Trump’s presidential campaigns.

Cryptocurrency is a financial asset (its characterisation as a ‘currency’ is debatable) that is coded in a distributed ledger rather than the central banking system. For non-specialists, this means that crypto is a scarce asset like bars of gold with the potential to hold its value and individuals can own it with it being untraceable by the banking system. This is a clear opportunity for some in the financial sector and organised crime, but a clear risk to the rest of us.

What crypto wants is a hard deregulation – and the UK is a key prize. A large economy in our own right, Britain also hosts the City of London, the most important global financial sector outside of the US. Capitalists by no means favour deregulation across the board and, for some, strong regulation is the key to a credible financial system and a barrier to entry for potential rivals. For crypto and private equity, however, financial deregulation is the goal. With the US having facilitated the expansion of crypto in recent years and the EU posing barriers, a UK led by prime minister Nigel Farage could prove a swing jurisdiction.

What this means for British politics…

British politics used to be a cheap and quaint affair, dominated by hobbyists with the polite guarantee to the rest of us that regardless of who won, nothing much would change. However, Reform’s mega donations could now be bidding up the price of British politics. Any wealthy individual or corporation hoping for the election of Conservative, Labour, or Lib Dem MPs, is now aware that they will have to be writing much bigger cheques to stay competitive. Reform – down, but seemingly never out – is back in the game again with a war chest capable of making it a serious contender in the next election.

…and what it means for the left

Raising big bucks to outspend Reform will be challenging enough for the Conservatives, but it is disastrous for any left-wing project unable and unwilling to rely on large corporate backers. Actors on the left should consider their responsibility in building a single organisation or alliance to focus left-wing activism and support. Demands on government could include a cap on donations, but also a tax on donations with 50% of donations over £1,000 redistributed across all registered political parties according to membership.

Activists should also remember that their political hopes and dreams will remain impotent if they do not find ways to pool time and resources. Challenging the culture in one’s own personal networks is not enough, as progressive ideas currently enjoy a wide purchase in society but limited translation into the ballot box or legislation. Progressives must join political organisations, find and meet each other and donate their pennies to collective efforts – 100 activists giving £1, £2, or £5 a month collectively can fund a lot of leaflets, venue hires and other organising costs.

They have millions. Let’s show them that we are millions.