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Authors: Pravar Petkar, Head of Strengthening Democracy Desk; Zoe Neiman, Research Intern; Niharika Girsa, Research Intern Following a week where the US has imposed tariffs on much of the rest of the world – and quickly reversed that decision – the current system of global cooperation is under significant strain. Yet against the backdrop of the current volatility, the 13th UK-India Economic and Financial Dialogue (EFD) shows that there is still scope for longer-term international cooperation in addressing global challenges. The measures agreed by UK Chancellor Rachel Reeves and Indian Minister of Finance Nirmala Sitharaman represent not only a £400m boost to the British economy, but also a valuable deepening of UK-India bilateral ties. The key outcomes include investment by India’s largest digital payments platform into the UK, the expansion of UK universities into the Indian market, and closer economic ties established through the financial services sector.    What have previous EFDs decided?  The UK-India EFD is a recurring high-level meeting between the UK Chancellor of the Exchequer and India’s Finance Minister, focusing on strengthening bilateral economic and financial ties. These dialogues address areas such as financial services, infrastructure development, sustainable finance and trade. Since 2020, UK-India EFDs have consistently prioritised sustainable financial services, infrastructure investment and green finance, shaping the direction of their economic partnership. The 10th EFD, in October 2020, launched the New Partnership on Infrastructure Financing and Policy to drive sustainable infrastructure investment and launched strategic cooperation on GIFT City (Gujarat International Finance Tec-City), India’s first International Financial Centre, promoting ties with UK’s financial services ecosystem. Progression of both projects followed in the 11th EFD in September 2021, with the UK and India reaffirming commitments to GIFT City development as a global FinTech and sustainable finance hub. The UK also committed $1 billion in climate finance investment in India through British International Investment (the UK’s development finance institution), alongside increased support for the Green Growth Equity Fund and the launch of the Climate Finance Leadership Initiative with India, emphasising the continued prioritisation of sustainable finance and infrastructure investment. The 12th EFD in September 2023 reinforced this direction, with continued focus on GIFT City, the FinTech Joint Working Group, and expanding private sector-led sustainable finance initiatives. Over the past five years sustainable investment and green finance have become central to UK-India economic cooperation.     Could Indian technology support British small businesses?  The commercial package agreed at the 13th EFD includes plans for Paytm, India’s largest digital payments app, to invest in the UK. This will “accelerate access to affordable digital payments and credit for small businesses.” Paytm is a pioneer in digital transactions that has reshaped India’s payment landscape. By rapidly rolling out affordable QR codes, Paytm has successfully brought traditionally cash-reliant merchant segments, from small corner shops to street vendors into the digital payments ecosystem. It has also contributed to financial inclusion at an individual level by leveraging technology to bring banking and financial services to a broader population, accelerating India’s shift towards cashless transactions, enabling both peer-to-peer fund transfers and merchant payments through the United Payments Interface (UPI). The scale of UPI uptake is vast. The Reserve Bank of India’s (RBI) monthly bulletin highlights an impressive ten-fold increase in UPI transactions over the past four years, soaring from 12.5 billion in 2019-20 to 131 billion in 2023-24. This growth accounts for 80% of India’s total digital payment volume. Notably, UPI transactions grew by 57% year-on-year in FY24, while debit card transactions saw a decline of 43%. The global significance of UPI, and the wider Digital Public Infrastructure (DPI) of which it is part, has gained increasing recognition: DPI deployment by 2030 is considered crucial in fulfilling the UN SDGs. With the UK’s Treasury Committee highlighting in May 2024 that British small businesses increasingly lack banking support, Paytm’s investment can bring direct benefits to the British economy whilst also positively contributing to the global financial system.     UK-India university collaboration can strengthen Higher Education globally  With universities in the UK under significant – and worsening – financial strain, many have turned to setting up overseas campuses in recent years. Historically, foreign universities could not establish campuses in India. However, India’s 2020 National Education Policy emphasises the need to open up the Indian Higher Education (HE) sector to international students and researchers. This prompted a regulatory change in 2023, with the University of Southampton becoming the first British university to receive a licence to start a campus in India under the new scheme. Not only does this enhance the quality of HE provision and research in India, fostering knowledge exchange, but it also reinforces the global attractiveness of UK HE institutions, contributing to British soft power. At the 13th EFD, it was announced that Coventry University has received approval to establish a campus in GIFT City, with undergraduate degrees in Business to be offered from 2026. It is the first English university to receive approval in GIFT City, with Queen’s University Belfast beginning operations there in January 2026. With this expansion, there is scope for Coventry University’s online and project-based learning offering to be further extended in India. As well as reinforcing the ‘living bridge’ between the UK and India, this outcome from the 13th EFD marks a move towards a more globally distributed HE system, which recent ICfS research has argued is critical to the future of global HE.    Banking and financial services  Several initiatives were announced at the 13th UK-India EFD concerning the banking and financial sectors. HSBC Bank will expand into 20 additional cities in India, covering 95% of its wealth market, Standard Chartered with open offices in GIFT City, Revolut is preparing for launch in India having received RBI authorisation, the FinTech company Wise plans to open an office in Hyderabad and India will pave the way to allow Indian companies to list internationally, including on the London Stock Exchange. These indicate the potential for closer financial ties between the UK and India going forward, which benefits both India’s efforts to become

Author: Pravar Petkar, Head of Strengthening Democracy Desk Who do politicians work for? Modern democracy relies on decision-makers being accountable to the people they govern. Yet political parties seem increasingly in thrall to those with deep pockets, ranging from well-heeled private donors to the titanic influence of Elon Musk on Donald Trump’s re-election campaign. The risk to British democracy has been laid bare by rumours that Musk was planning a $100 million donation to Reform UK. In this climate, the UK must urgently introduce a monetary cap on donations to political parties and needs more extensive public education for citizens on political party funding.  The holes in the current framework  The UK’s regulatory framework for donations to political parties is relatively relaxed. There is no formal cap on how much any donor can donate to a political party. Donations under £500 need not be reported, whilst those over £11,180 must be by law, a threshold increased from £7,500 in early 2024. The transparency of one’s financial transactions is the only real limit in play. Transparency is also having to do more work than ever before: the outgoing Conservative Government increased the general election campaign expenditure limit for each party from £30,000 to £54,010 per constituency, alongside other limits relating to candidates’ expenses. If parties and candidates can spend more, fundraising efforts – and larger and larger donations – will only increase. As Tom Brake has recently pointed out, this situation is exacerbated by donations made by unincorporated associations. These bodies range from golf clubs to dining societies and need not report their finances in the way charities or companies do.  In comparison to the UK’s European neighbours, state funding for political parties is minimal, producing a reliance on private donations. Following the 2024 General Election, just under £7 million was distributed to opposition parties in the House of Commons in ‘short money’ to support parliamentary business, travel costs and the Leader of the Opposition’s office. An additional £1.9 million was disbursed in policy development grants across all political parties in the 2023-24 financial year. In Germany, by contrast, the cap on state funding of political parties in 2024 was €219 million, with private donations a much smaller financial source.  Despite this, the UK is better-off than some other major democracies around the world. For the last 15 years, since the famous Citizens United decision, corporations in the USA have been able to spend unlimited amounts on elections, since any restrictions are considered by the US Supreme Court to violate free speech rights. Meanwhile, India’s Supreme Court declared in February 2024 that it was unconstitutional for political parties to receive donations through anonymous promissory notes termed ‘Electoral Bonds’.  Whilst this protects voters’ rights to information in form, it may also increase the number of unreported cash donations to parties, thus making Indian democracy more opaque.  Why Musk’s donations are a new kind of threat  In this landscape, Musk’s donations – as well as those of any other social media giants – raise a new kind of threat for democracy. All political parties need some form of funding, whether from private donors or the state, to finance their campaigns and provide a space for those with similar political views to assemble and exchange ideas. Yet major private donors can also leverage their financial hold over parties to secure their desired political outcomes, or simply turn a profit.   Musk poses not only this threat, but one that strikes at the heart of any democracy Increasingly, social media platforms such as X not only aspire to be the public sphere, but are it. Research by Ofcom in 2023 shows that 47% of UK adults use social media for news, rising to 71% of 16–24-year-olds. Those like Musk and Mark Zuckerberg who own and control social media platforms have almost unrestricted power to control what ideas can be exchanged in these public spaces, with no accountability to their users or to government. When this power is turned towards the interests of one political party, democracy is eroded from within, because electoral politics is no longer a level playing field. Musk’s role in government following Trump’s re-election should raise alarm bells here, as should his recent appearance at an Alternative für Deutschland (AfD) rally ahead of the German federal elections in February. Because of this, policymakers cannot treat the owners of social media companies as they would any other private donor: more extensive restrictions and transparency requirements are needed because such donations open up multiple paths to influencing elections.   A cap on donations is needed  Discussion about a cap on donations to political parties has intensified in recent weeks in the UK. In an Opinium poll carried out for pressure group Unlock Democracy, two-thirds of the 2,000-odd respondents across parties supported some limits on donations. The Leader of the Liberal Democrats, Sir Ed Davey, raised a question in Parliament on the matter on 8 January 2025, reiterating a position from his party’s 2024 spring conference. Most recently, Liberal Democrat MP Manuela Perteghella introduced a Bill into the House of Commons on 12 February 2025 to impose a fair cap on donations and outlaw foreign donations. Since Musk might use a British subsidiary of X to make a donation, a cap is the most straightforward option for tackling the challenge he poses: it will ensure that nobody – Musk or otherwise – could donate $100m to one party in one go.  Where that cap is set is another matter entirely. Recent commentary for The Constitution Society argues that there is no ‘silver bullet’ for reforming party funding: any cap on donations would “significantly reduce party income and expenditure”, to the detriment of parties’ ability to engage the electorate and hold governments to account. Although political parties today are often viewed as tribal fronts, rather like rival football teams, a political world made up solely of independent politicians would lack the infrastructure to regularly bring elected politicians at all levels and the public together to campaign around

Author: Pravar Petkar, Head of Strengthening Democracy Desk As we near the end of the ‘year of elections’, liberal democracy’s report card is a decidedly mixed one. Although there have been peaceful transfers of power across the world, elections in the UK and France have raised issues of legislative representation and coalition formation. The recent US election has seen misinformation and polarisation in campaigning, and India’s elections continue to be vulnerable to vote buying and identity politics. A recent roundtable discussion hosted by the ICfS considered how we might improve democracy with the aid of emerging technology in this climate. The discussion highlighted that countries across the world should experiment with new ways of doing democracy at the grassroots level, supported by technology. This innovation must nonetheless be accompanied by greater enforcement of existing regulations and more agile development of rules, given the real risks posed by the rapid growth of AI.  Participation is the way forward – at the grassroots level at least  Trust in the current model of popular government has been falling in some of the world’s most long-standing democracies, including the UK and the US. This is for several reasons. There are structural flaws in the election systems of representative democracies: the UK election saw a large majority on little over one-third of the vote, whilst discussion of the US election was dominated by votes in seven key ‘swing states’. These are perhaps exacerbated by misinformation, as seen in the US election campaign. Moreover, once representatives are elected, they must deliver on their promises: yet in the UK in particular, public service delivery has deteriorated significantly over the course of decades. These various systemic flaws require new ways of ‘doing democracy’ to restore that trust.  After a successful citizens’ assembly on abortion in Ireland led to its legalisation in 2018, and the open-source Pol.is platform was used by the vTaiwan initiative to generate popular consensus on Uber licensing, interest has grown in finding new ways to directly engage citizens in public decision-making. Yet putting an issue to the people at national level does not always produce change, as shown by the French Citizens’ Convention on the Climate, amongst others. The design of these mechanisms is key, and not all topics are suitable. Putting major issues of economic policy to a participatory assembly, for example, could have adverse effects for market confidence. Local democracy, then, is perhaps the best starting point, with several instances of citizen participation at local council level in recent years. Evidence of success at local level is needed to make a stronger case for it at the national level.   The benefits of participation are not limited to better or more inclusive decision-making. The polarisation that affects democracy in the UK, US and elsewhere can, in part, be put down to a lack of faith in our fellow citizens to make sound decisions: in the US, many Republicans and Democrats view each other as a ‘threat’. Addressing this requires a means of fostering genuine citizenship, where all those living in a society view themselves as engaged in a common enterprise. Well-designed participatory processes can help here by directing citizens towards engaging with each other on a shared problem.  Technology is here to stay  Alongside participatory experiments, there is growing innovation in ‘DelibTech’ – technological solutions that facilitate deliberation and discussion between citizens. In Libya, the UN used the Remesh AI platform as part of its peacekeeping efforts to gather and cluster opinions and create ‘bridging statements’ to generate consensus amongst society, with the proposals put to a Government of National Unity. The Consensus AI tool has also supported the Conference on the Future of Europe, offering participants the opportunity to vote on statements and submit their own until a 60% majority in favour of one has emerged. The Decidim platform was used in the French Citizens’ Convention on the Climate for external contributions. Greater experimentation with these tools at local level – beyond simply holding deliberative assemblies over video-conferencing – can create the groundswell for future change.   The cost of participatory democracy means DelibTech will have an important role in scaling up these processes in due course. For example, Demos estimates a single 8-day citizens’ assembly with 100 participants would cost between £800k and £1.2m. This high level of expenditure would mean that holding multiple in-person citizens’ assemblies of this kind each year would quickly become financially unsustainable; cheaper options are required, whilst preserving the ability of all citizens to engage in democracy without compromising on the income needed to maintain a reasonable standard of living.  Mechanisms such as Pol.is, Remesh and Consensus AI are also different to social media sites such as Facebook and X: whilst participants can ‘upvote’ others’ comments and add their own, the conversation ‘threads’ that can often generate hostility on other platforms are absent. Whilst many may hold the view that this is good enough reason to avoid technology entirely, a tech-free future is hardly realistic: indeed, the recent migration of social media users from X to newer platforms such as BlueSky only reinforces that technology is here to stay.  The future of democracy requires better tech regulation and education  Whilst emerging technology can play an important role in opening up new opportunities for citizen participation, it is not without its own risks and challenges. Since Large Language Models (LLMs) such as ChatGPT became widely available from late 2022, concerns have been raised around cybersecurity, data bias, privacy, copyright and the dissemination of false information. Questions were raised in this roundtable discussion about the ability of regulatory systems to keep up with rapid AI development, and whether existing regulations could be better enforced. There is also the risk that as systems such as Pol.is and Consensus AI grow, they will be taken over by large corporations. As Marietje Schaake has argued in The Tech Coup, companies such as Microsoft, Google and Meta can evade accountability from nation-states because of the practical power they wield and their influence within