Nicola Sturgeon’s party has come under intense scrutiny over how they have handled more than £650,000 worth of donations received through several crowdfunding campaigns between 2017 and last year.
Critics have accused the party of misappropriating the funds raised ostensibly for a future independence campaign, with the SNP treasurer admitting the money had been spent, but “an amount equivalent” would go towards paying for independence campaigning in future.
The party had claimed the funds were “ringfenced” for a referendum campaign, but concerns were raised when the party’s accounts showed it had less than £100,000 in cash in the bank.
Police Scotland are assessing a complaint against the SNP connected with the controversy, but have yet to open a full investigation.
However, following the scandal, electoral law experts and democracy campaigners have called for a rule change to make it easier for donors to track how their money is spent by political parties.
Tom Brake, a former Liberal Democrat MP who lost his seat at the 2019 general election and is director of the pro-democracy campaign Unlock Democracy, said the UK Government should give the Electoral Commission new powers to force political parties to publish how they spend money raised through single-issue campaigns.
He said: “Very stringent rules apply to charities. If money is donated for a specific (restricted) purpose, a clear audit trail must be maintained to prove the funds were spent appropriately. People who give to political parties are entitled to the same transparency and accountability.
"They will want to know that when they give to a specific campaign, their money is going to be spent on that campaign.
"As long as the rules don't force them to do so, the political parties should voluntarily provide this auditability.
"The government will have an opportunity very soon in the Elections Bill to address this. They should grasp the chance and give the Electoral Commission the powers to enforce new rules on restricted party donations."
Legislation governing the operations of political parties does not require political parties to ringfence donations unless a specific use is expressly stated in a bequest.
This allows parties such as the SNP to use cash raised in crowdfunders for running costs without breaching electoral law.
Charity law, by comparison, requires any donations raised for a specific cause to be ringfenced and only in exceptional circumstances can the money raised be used for another purpose.
The SNP have repeatedly said the money raised has been “earmarked” by the party for future spending, meaning they plan to spend the same amount as was raised on independence referendum campaigning.
Political parties are restricted in the amount they can spend on referendums by the Referendums (Scotland) Act, with the SNP’s maximum spend in indyref2 capped at £1.5 million.
Dr Alistair Clark, a senior lecturer in politics at Newcastle University and an expert in electoral law, said the law around party donations was written with the internet in its infancy, meaning issues such as how crowdfunded donations are regulated would not have been central to their development.
He told The Scotsman the issue should be “looked at again”, but indicated it was likely parties would push back on any attempt to strengthen the law due to concerns it would make operating between elections more financially challenging.
He said: “Electoral law around party donations dates to 2000 when the internet was in its infancy. Crowdfunders therefore haven’t been central to the development of or any thinking around changes to the party finance regime.
"The area probably needs looked at again, but there’s a balance to be struck and much would depend on the size of the donations.
"Beyond campaign spending restrictions in elections, political parties are not particularly restricted on what they spend donations and their money on and would likely resist any calls to ringfence funds for specific purposes.
"There are questions around bringing party funding into line with charity law. One particular area of this is money laundering requirements, which are required for charities, but not for political parties.
"There is a case for looking at charity law and party funding law, not least because both are voluntary organisations and it seems anomalous for parties to be treated differently.
"However, parties would likely resist any move towards being forced to ringfence funds because they need funds to continue their operations between elections. I would not hold out much hope for reform in that regard."
Gavin Millar QC, one of the UK’s leading experts in electoral law, also said increased transparency around crowdfunded donations and how they are used by political parties would be welcome.
He said: “Because crowdfunding is being used more and more in all areas of public life and if it becomes increasingly used by political parties for single issue campaigning, I think the donors are entitled to see how their money is accounted for and spent.
"Statutory regulation would reduce the risk of or temptation to bend the rules and use the money for other things.”
A Cabinet Office spokesperson said: “Fundraising is a legitimate part of the democratic process. The alternative is more taxpayer-funding of political campaigning, which would mean less money for frontline services like schools, police and hospitals.
"The UK has a stringent regulatory framework for political donations and campaign spending. Parties must only accept money from legitimate sources, declare certain donations to the Electoral Commission and publish comprehensive spending returns for election campaigns.
“It is important to ensure regulation is proportionate and does not overly burden parties whose local associations are mostly made up of volunteers. The Elections Bill will strengthen the laws on political finance to provide greater clarity on who is campaigning in UK elections, striking the balance between transparency and practicability."