Labour is embroiled in a row over whether to impose a cap on political donations after Reform UK received £72 million from two cryptocurrency billionaires.
Ministers are facing pressure to back calls from Labour MPs and peers to limit the sums individual donors can give to political parties.
Andy Burnham previously signalled his support for a £500,000 cap on individual donations. But his Government rejected a proposal from a Labour backbencher to bring in the limit earlier this month.
Several of the party’s MPs have privately expressed their frustration at the move, with one telling The i Paper: “We have shot ourselves in the face.”
Another Labour insider said the donations had triggered a “crisis in democracy” and changed the political funding landscape overnight, after Reform said it would use the money to prepare for power.
Stella Creasy, the Labour MP behind the failed attempt to introduce the donations cap, said: “This is a wake-up call. The Government has admitted that UK mega donations are a problem.”
Reform has received £72 million by cryptocurrency billionaires Ben Delo and Christopher Harborne, who are both British and have spent time living overseas.
Labour split over cap on UK-based donations
The Labour Government has already committed to a £100,000 annual cap on donations from British citizens living abroad with the law to apply retrospectively from March of this year.
But Creasy, and other Labour MPs, were pushing for ministers to go further by introducing an immediate £500,000 cap on UK-based donations, which would reduce to £100,000 in the second calendar year.
She put forward her proposal in the Representation of the People Bill, which is set to change the rules on elections and political donations.
It had the support of 60 MPs from various parties, but it was not put to a vote and the Government declined to back it.
Liam Byrne, the Labour MP and chair of the Business and Trade Committee, told The i Paper that Britain could be heading towards “US style politics”, where wealthy individuals wield disproportionate political power, and ordinary voters risk being “drowned out”.
Byrne called on ministers to introduce “caps on individual donations” to protect democracy and tougher rules to prevent “dark money” from circumventing those limits. Political power, he said, should be won from voters rather than “bought by the biggest cheque”.
Labour MP Alex Sobel also raised concerns over the size of recent individual donations, arguing that they demonstrated a “concerted attempt to buy democracy”. He backed a £1 million annual cap, arguing that universal limits are the only effective way to prevent large donations from distorting politics.
Lord Wills, the Labour peer and former minister, is expected to raise the issue in the Lords on Monday and table a further amendment next month.
The Government’s decision not to support Creasy’s amendment followed opposition from trade unions, which collectively provide millions of pounds in funding to Labour.
Ministers have said the current legislation is not the full extent of their ambitions on electoral reform.
Last month, Angela Rayner, the housing and communities secretary, and Louise Haigh, who is effectively Burnham’s deputy, wrote to the Electoral Commission to argue that existing party and candidate spending limits are “too high” and should be reduced.
They asked the watchdog to recommend new limits by July 2027 at the latest, or sooner if possible.
At the 2024 general election, parties spent £94 million – a record that ministers described as making it the most expensive UK general election in history.
Reform’s £72m raises the stakes
Labour’s divisions have been brought into sharper focus by Reform’s receipt of the donations from Harborne and Delo, now the biggest individual political donors in modern British history.
Farage said the money will help Reform prepare for government and the next general election. He pledged to use it to set up “the best research and policy department British politics has ever seen”, develop costed and workable policies, employ hundreds of campaign managers in target seats and hire lawyers to help draft legislation.
On Sunday morning, Rayner suggested Reform could be forced to return some of its donations haul if the two billionaire backers fall foul of new overseas funding rules, which will limit donations from Britons living abroad.
But Reform’s economic spokesman Robert Jenrick said the party does not expect to have to return any of the money, and that the donations “are entirely within the law”.
Harborne and Delo have both previously been based outside the UK. Harborne is British-born but has been based in Thailand, while Delo recently moved back to the UK from Hong Kong.
Jenrick said Delo returned to the UK “in part so that he can comply with the changes to the law”.
BBC News said it has been told that Harborne has also returned to the UK, but the timeline remains unclear.
“All donations to Reform UK comply strictly with Electoral Commission rules and UK law,” a spokesperson said. “Both men are British citizens who are fully entitled to support political change in their own country, despite the establishment’s desperate attempts to silence opposition.”
Separately, Reform is facing a police investigation into whether it breached laws on foreign donations. They deny any wrongdoing.
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