Pandora Papers: Why are donations to political parties often so controversial?

The Pandora Papers leak has once again cast a spotlight on the funding of UK political parties by wealthy donors.

The Conservative Party are under scrutiny after files included in the Pandora Papers leak revealed how a prominent donor was involved in a corruption scandal.

In the past, Labour and the Lib Dems have also been exposed for accepting money in questionable circumstances.

Parties need to be able to raise money in order to run. But there are concerns when it looks like those giving cash expect something in return

How are parties funded?

Running a political party costs money, particularly in the build-up to elections. Some £50m was spent by parties during the 2019 general election.

Most income comes in the form of donations including those from individuals and companies.

To give money as an individual you have to appear on a UK electoral register. Companies must be registered in the UK and carry out business in the country.

Other sources of income for parties include membership fees, loans and a limited amount of public money.

A vast majority of the Conservative Party's donations come from individuals: 68% during the 2019 election campaign.

• Who funds the Tory party and what's in it for them?

The Labour Party's income looks different. During the 2019 general election campaign, 93% of donations came from trade unions. National parties only have to record donations above £7,500, so the totals do not pick up the large base of Labour supporters who give small amounts.

The largest union backer of Labour is Unite the Union. Last year it gave the party £1.6m in donations. This is on top of the fees that union members pay to "affiliate" with the Labour Party.

What have been the scandals?

At the start of his premiership, Tony Blair faced criticism over his interactions with Formula One tycoon Bernie Eccleston. New Labour had received £1m from Mr Eccleston months before coming to power in 1997, with another possible chunk on the way. It was later revealed that he had met Mr Blair to lobby him to exempt F1 from a tobacco advertising ban.

A "cash for honours" scandal hit Tony Blair's government in 2006, when it emerged that a number of large secret loans had been made to the Labour Party before the 2005 general election. Some of the lenders had subsequently been nominated for the House of Lords.

Tony Blair became the first prime minister to be questioned by the police during an investigation. However, the long and expensive probe led to no charges from the CPS.

Offering seats in the House of Lords is still a controversial issue. In 2020 Prime Minister Boris Johnson nominated Peter Cruddas - who had given £50,000 to Mr Johnson's campaign to be party leader - for a seat in the House of Lords, going against official advice.

A businessman who was later convicted for perjury became the Liberal Democrats' largest donor in 2005, giving £2.4m to the party. The party faced criticism for not returning the donation, despite Michael Brown not being a registered UK voter and donating through a newly-created company.

It's not always wealthy individuals. This summer the police launched an investigation into the SNP's finances after the party had raised money in a crowdfunding drive. Donors had complained about how the money went on to be used.

What about donations to MPs?

MPs can accept their own donations and gifts, as long as they declare them. The register of MPs' interests - which includes outside employment and free tickets to horse races - is updated every two weeks.

Politicians are frequently found to have failed to declare interests in the correct way - usually resulting in an apology in Parliament. In 2018 DUP MP Ian Paisley admitted "deep personal embarrassment" after failing to declare two luxury holidays paid for by the Sri Lankan government.

What checks do parties have to carry out?

Parties themselves must report donations and loans of more than £7,500 to the Electoral Commission - the organisation which regulates political donations in the UK. This register is updated every three months.

Each party has a treasurer, who is legally responsible for checking whether a donor is legitimate.

Guidance from the Electoral Commission says: "As soon as you receive a donation, you must make sure you know who the donor is, and start checking their permissibility. You have 30 days to decide whether to accept or refuse the donation."

If a party breaks the rules about making declarations to the Electoral Commission a range of sanctions are available - including fines of up to £20,000. Very serious offensives can also be referred to the police.

Should the system be changed?

A parliamentary report published this year recommended steps to address the "risk that the current rules on donations from companies provide a route for foreign money to influence UK elections".

The committee argued that donations should only be made "from profits generated in the UK," and that new checks should be put in place "for identifying the true source of a donation".

The report was welcomed by pressure groups including the Electoral Reform Society and Transparency International.

In its 2019 election manifesto, the Conservative Party said it would "protect the integrity of our democracy". It has introduced new legislation, currently going through parliament, that includes measures to tighten the rules that prevent foreign money being used in campaigning.

The Pandora Papers is a leak of almost 12 million documents and files exposing the secret wealth and dealings of world leaders, politicians and billionaires. The data was obtained by the International Consortium of Investigative Journalists in Washington DC and has led to one of the biggest ever global investigations. More than 600 journalists from 117 countries have looked at the hidden fortunes of some of the most powerful people on the planet. BBC Panorama and the Guardian have led the investigation in the UK.

Pandora Papers coverage: follow reaction on Twitter using #PandoraPapers, in the BBC News app, or watch Panorama on the BBC iPlayer (UK viewers only).