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Political donations from British citizens living overseas will be capped at £100,000 as part of a major reform to the role of money in politics.
The government has also imposed an immediate and retrospective ban on all political donations made via cryptocurrency.
The new restrictions on who can donate to political parties were announced on Wednesday in response to an independent review by former senior civil servant Philip Rycroft, which warned that the “persistent problem” of foreign interests seeking to influence British political life had become “more acute” in recent years.
The new rules are expected to be felt particularly by Nigel Farage’s Reform UK, which has received around £12m in the last year from Thailand-based British businessman Christopher Harborne, and which is the only political party to have received donations in cryptocurrency.
The review was commissioned in December by Communities Secretary Steve Reed. The Labour government has committed to implementing its 17 recommendations in full.
Speaking in the House of Commons on Wednesday, Reed said the decision to cap donations retrospectively was necessary to prevent exploitation of any regulatory gap.
“In light of the gravity of the issues raised in the report, I am not prepared to allow any window of opportunity in which malign actors based overseas can funnel dark money into our politics,” he said.
Reed said that cryptocurrency poses a particular risk to electoral integrity due to its capacity for anonymity. He described its use in political financing as “unacceptable” and said it “undermines public confidence” in the electoral system.
“The anonymity inherent in cryptocurrency transactions could make it easier to mask the origin of donations and to evade robust checks on the true source of funds,” he said.
The review also recommends the creation of a dedicated law enforcement unit to investigate foreign interference in UK politics, alongside tougher sanctions for breaches of electoral law. Ministers are further considering a ban on foreign-funded political advertising and new requirements for lobbyists acting on behalf of overseas interests to register their activities.
The ban on cryptocurrency donations will remain in force until both Parliament and the Electoral Commission are satisfied that sufficient regulatory safeguards are in place.
To enact the reforms, the government will bring forward amendments to the Representation of the People Bill.
The new restrictions were broadly welcomed by transparency campaigners, with Dr Jess Garland, Director of Police and Research and the Electoral Reform Society (ERS), saying the Rycroft report “identifies a loss of trust in our democratic system and processes”.
However, the ERS called on ministers to go further by capping all donations, not just those from overseas.
“This is widely supported by the public and would help prevent our politics from being swamped with massive donations, which now frequently reach into the multiple millions,” Garland said.
This was echoed by Transparency International UK, with Director of Policy, Duncan Hames, saying: “Even Rycroft acknowledges that his remit didn’t extend to the most fundamental question — whether to cap how much any single donor can give. He recognises that unlimited donations are driving an arms race for funds and invites Parliament to debate this during the Bill’s passage. Parliament should take him up on that.”
