Minutes before Charles Kennedy addressed the Liberal Democrat conference on Thursday morning, Lord Clement-Jones, his party treasurer, made a financial appeal to delegates. Arguing that, unlike others, the Lib Dems could not rely on the monetary blessing of millionaires, he asked them to place what sum they could afford in the yellow buckets that were then being passed around the audience.

If the peer had foreseen that The Times would reveal that a £2.4 million gift from a non-UK resident, the entrepreneur Michael Brown, about whom he knew very little and his activists nothing, was being investigated by the Electoral Commission, he might have chosen his words more carefully. And if the commission were to determine that this huge sum of money had to be repaid, the Liberal Democrats would have to pass vast yellow dustbins, not mere buckets, around an angry faithful to make up the massive shortfall.

For that reason, the commission will be urged, publicly and privately, to accept the “in all good faith” argument that will be presented by the Lib Dems. Other political parties will not make much hostile noise because they would rather that their “grey area” donations did not enter the spotlight.

Silence here would not be golden. It is important that the commission realises that this is a crucial test case for it. It has the duty to investigate the facts with all the vigour at its disposal: to discover what was asked of Mr Brown by the Liberal Democrats; whether there were sufficient internal checks made by senior figures there; and what interest was taken in the legitimacy of the donation after the event. All the relevant material should be published.

There is an entirely understandable but deeply disturbing cynicism in the country about money and politics. The sight of would-be national leaders devoting so much of their time seeking to impress those who could offer them major financial support is profoundly unappealing. While lip service is regularly paid to raising more money from far smaller donations — especially on the internet — there has not been enough progress. The reputation of politics as a whole is being demeaned by this spectacle. The commission may feel that, at present, its most effective power is to embarrass, a step it should not shrink from if necessary.

This all demonstrates that the law is inadequate in two key respects. First, it is too vague. It would be better to state simply what is deemed to be an acceptable donation rather than attempt more complex definitions about what is a “foreign” contribution. Secondly, and more urgently, the law as it stands is far too retrospective. At election times, in particular, big money is raised and spent before the details of the contribution have become public. It is too late to negate its impact then.

The best solution would be to insist that any individual or corporate donation about a certain size — such as £100,000 — should be referred to the Electoral Commission before it could be used by a political party. The commission could then be a serious policeman and not a belated umpire struggling in bad light. The commission itself should be part of the drive for new authority rather than standing shyly on the sidelines. It needs teeth as well as eyes and ears. A new law relating to other aspects of the work of the commission will be placed before Parliament in this session. The Liberal Democrats might be wise to move the amendments suggested here.