Governments are prone to passing atrocious laws in a rush. Goodness knows, the Labour era left a long tally of bad laws. But the lobbying bill arriving in parliament on Tuesday takes the whole packet of biscuits for disgraceful intent and practical incompetence.

Sneaked out two days before the Commons rose for the summer – a classic time for stealth publication of reports or bills – its second reading scurries in with minimal scrutiny. So far so good, the bill has attracted relatively little attention. But as MPs and lords wake up, expect a rumpus.

The "transparency of lobbying, non-party campaigning and trade union administration bill" will treat charities, thinktanks, blogs, community groups and activists of every hue as political parties. From tiny groups vocal on local matters to great national organisations, all risk being silenced in the year before a general election, to avoid falling under electoral law. Any organisation spending £5,000 a year and expressing an opinion on anything remotely political must register with the Electoral Commission.

The way permitted campaign spending is calculated has been widened in remit and cut by 60%, so it includes all staffing costs for the year. That will include not only large charities but little groups affiliated to national umbrella organisations whose spending will contribute to a national capped limit. So a Save Our Sure Start or Save Our Hospital in a small town finds every linked Sure Start or NHS campaign counted into its local spending for electoral purposes. Since almost everything is political, this kills much debate in election years when voters should be hearing policy choices.

The National Council for Voluntary Organisations publishes a report from a human rights QC warning that the bill could breach the right to freedom of speech. Lawyers for many charities warn of a legal minefield for trustees: if they trip into electoral law they must send weekly reports of all their spending during the electoral period, when any slip risks criminal charges. The government denies the bill will silence campaigners, but a letter of protest representing swaths of charities – from the British Legion to Citizens Advice – crosses the political divide. The campaign group 38 Degrees says the "proposed gagging law would have a chilling effect on British democracy". The Taxpayers' Alliance agrees: "The bill is a serious threat to independent politics that will stifle free and open democratic debate."

Why the rush? To get the law in place by next May, so the clock starts ticking to gag campaigning for the year's runup to the 2015 election. Nick Clegg is a prime mover on this bill, as minister in charge of constitutional reform. Why are the Lib Dems so gung ho for something so illiberal? They are said to fear targeted campaigns, such as the National Union of Students reminding voters of Lib Dem MPs who signed up "in blood" to a pledge never to raise tuition fees. The government hotly denies this bill will do anything other than prevent US-style abuse by "Super-Pacs" spending unlimited sums on campaigns and supporting a party without mentioning its name. But that's already banned.

David Cameron promised to curb lobbyists, but this bill affects only 1% of lobbying activity, not Lynton Crosby and his lobbying firm, or most of the dubious practices Cameron once described as "the next big scandal waiting to happen". Transparency is welcome, so ministers and permanent secretaries must declare meetings with lobbyists – but not PRs working directly for companies.

The government says charities are over-reacting, but that view is punctured by a lethal analysis from the Electoral Commission sent to every MP. Though it will have to enforce the law, the commission was not consulted on the bill that landed as a bolt from the blue. It says it has been given far too much discretion in interpreting "political campaigning", so its decisions are bound to be challenged in law. The controls "will be impossible to enforce", and the commission warns the bill greatly widens the range of activities that count as electoral costs – to include rallies, events, media work, polling research, transport and staff costs for groups never previously regulated. One big danger for risk-averse charities: it will not be an organisation's "intent" but the "effect of the expenditure" that sweeps them into electoral law, so they can never know what might be challenged. The commission's warning should alarm every MP.

Most damning is the commission's statement that it will have trouble interpreting this catch-all law because there is no "clear rationale for many of the changes". That's politely diplomatic, as the rest of us can see the rationale all too clearly. This government has roused the indignation of what was once Cameron's "big society", now suffering the brunt of his cuts. Many charities see it as their duty to speak up for the causes people donate to. Whether that's for the homeless or the green belt, for deprived young offenders or victims of crime, for the arts or sport, for green energy or anti-windfarms, it's always a fine line – but the Charity Commission already polices their politics, and has installed a rightwing chair.

Ask Clegg's office, responsible for this law, what this is designed to stop, and the answer is, it's "hypothetical". "What if a group of oilmen spent millions in Caroline Lucas's constituency warning that anti-frackers would put out the lights?" But that hasn't happened and is already illegal. Despite lawyers' warnings, Clegg's office denies charities will be affected, but admits that if the law had been in place in 2010, trade unions would have been stopped from campaigning for a year before the election. As Frances O'Grady wrote in the Guardian last month, the law means unions will hit the spending limit just by holding an annual conference in election year, leaving them unable to campaign.

The "rationale" the Electoral Commission seeks in vain is another attack on Labour party support. The shocking state of British party funding should indeed be the real issue, but nothing here stops Ashcroft money flowing, or the shadowy Midlands Industrial Council funding the Tories, or dinners for donors in Downing Street. Nothing curbs the obscene sums all parties spend – a combined £31m at the last election. Electoral corruption sickens voters, already profoundly alienated from party politics. But this is just another crude gerrymander to hobble Labour and gag the government's most dangerous potential critics – charities more trusted by the public than any political party.