What are the rules around political donations, do they change for an election and can parties give back money?

It’s an election year – and that means political donations have ramped up.

And this has been compounded by the alleged comments of Frank Hester, who is reported to have said Labour MP Diane Abbott made him “want to hate all black women”, after giving £10m to the Conservatives.

But what exactly are the rules on donations? Do they change for elections? Who gets the most money? Why do people donate? And can parties give funds back?

Here we explain:

What are the rules on donations?

Politics and money is a rabbit hole that Lewis Carroll would be jealous of, and the UK’s system is no different.

One of the most important things to note is that the figures are on a much smaller scale to those in the US – in the tens of millions rather than billions.

One key distinction is that donations to MPs are different to political party donations.

MPs have to declare all their interests on a public register, which can be easily searched using the Sky News Westminster Accounts tool.

This is how we know that Frank Hester’s The Phoenix Partnership donated a £15,900 helicopter flight to Rishi Sunak late last year.

His company gave £5m, and he gave £5m personally to the Conservative Party itself.

The rules for these donations require all contributions over £11,180 to be declared. This was recently increased from a threshold of £7,500.

Money donated to political parties in this fashion goes into their accounts but, according to Professor Justin Fisher, an expert in political finance at Brunel University, it does not need to be “ring-fenced”.

This is why there is no way to see what the money donated by Mr Hester and his company was spent on.

The body responsible for regulating and setting standards for donations and party finances is the Electoral Commission.

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Are there different rules for elections?

In short – yes, many different restrictions.

The aforementioned increase in the floor for the declaration of donations was done as part of measures to update financial restrictions that had laid untouched for two decades.

The spending limit for parties during elections also increased. For a party contesting all 650 UK seats it went from around £18m to just over £35m.

However, as no party contests every seat, the effective limit is just over £34m.

According to the Electoral Commission, this applies to spending on certain activities in the 365 days before the election.

Confusingly, it is impossible to know the start date of this period, as the government can call an election whenever it wants, so in November 2023 the Electoral Commission encouraged parties to “behave as if you are in a regulated period from now onwards”.

Other changes included how often parties have to report their donations.

In normal times, figures are published quarterly. After an election is called and parliament is dissolved, publication takes place every week.

There are also restrictions on how much money a prospective MP can spend in an election period.

Each constituency has a limit based on the number of people who live there.

And those hoping to get elected have to declare all their spending, as well as any donation the candidate received over £50.

Who gives the most money – and why?

The biggest donors to political parties can be easily identified through the Sky News Westminster Accounts interface.

It is dominated by individuals, unions, and just a few companies.

At the top of the list sits Lord David Sainsbury, the supermarket heir, who has given more than £13m in donations since the last election – including £5.1m to Labour and £8m to the Liberal Democrats.

He is not to be confused with his cousin, the late Lord John Sainsbury, who gave £10.2m to the Conservatives in the same period.

Next up is the union Unite, which has given £10.7m to Labour, and hundreds of thousands of pounds to Labour MPs.

The GMB union and Unison have both given around £6m to Labour since 2019.

Businessman Graham Edwards gave £5.2m to the Conservatives in this period.

Next on the list is Mr Hester’s The Phoenix Partnership, which has given £5.2m, including the helicopter flight to Mr Sunak.

Mr Hester also donated £5m in a personal capacity to the Conservatives.

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Prof Fisher explained that it used to be more common for companies to donate, instead of individuals – but it is harder to justify this now in an era when spending plans have to get past powerful boards.

Instead, companies can benefit from different, less expensive (on a balance sheet) endeavours, like lobbying or hosting events.

Donors tend to hand over cash or gifts because they want to see a party win which will improve their position, or because of a prior affiliation. Or an individual could just be politically aligned with the party in question.

Can parties return money?

Once again, the short answer is yes.

There have been calls for the Conservatives to return the money given to them by Mr Hester or his company.

Political parties can spend their money how they choose – and this could include giving it back or donating it to charity.

It is not the first time there have been calls for money to be returned.

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The Liberal Democrats faced calls to return money donated to them by Michael Brown, who lived in Majorca but gave money through a company based in the UK – something the rules do not allow.

The Electoral Commission investigated but did not take further action. Mr Brown was later convicted of fraud.

The Labour Party faced calls in 2002 to return a donation from publisher Richard Desmond because his publication “titles are demeaning and degrading to women”.

One time when money did get returned was when Labour accepted a £1m donation from Formula 1 chief Bernie Ecclestone shortly before they came to power in 1997.

At the time, the donation was not made public as there was no requirement to do so. Labour did, however, have a policy at the time of declaring donations.

After coming to power, Labour announced it would ban all sports sponsorships from tobacco companies.

But, following talks with Mr Ecclestone, the government proposed exempting Formula 1 from the ban.

The donation then became public, and a political scandal erupted, so the party committed to give the money back.

In March 1998, Mr Ecclestone cashed a cheque which Labour had written to him for the £1m.

This shows money can be returned, if there is a will to do so.