The government’s Representation of the People Bill goes some way towards protecting our democracy by introducing stronger checks on donations and enhancing enforcement. However, there is still far to go if we are to truly strengthen the necessary safeguards and close all loopholes.
Specifically, the government needs to:
- Beef up the Electoral Commission’s independence and powers – by removing the Strategy and Policy Statement and increasing its fining power,
- Introduce stronger criminal enforcement – by making enforcement easier and increasing sentences,
- Make the cap on corporate donations have teeth – by focusing on profit over revenue,
- Make the Know Your Donor policy more effective – by strengthening its criteria and putting changes in the hands of the Electoral Commission,
- Reduce the amount of money spent on elections to create a fairer playing field – by introducing a donations cap and giving the Electoral Commission the power to recommend changes to the spending limit,
- Prevent the serious risk of cryptocurrency donations with a ban – by ensuring that cryptocurrency is not a permissible donation,
- Address the loophole in relation to donations from unincorporated associations – by ensuring that all UAs making a donation have to register with the Electoral Commission.
In the context of plummeting public trust in politics, of concerns of foreign interference, and of the system being awash with undue influence, the government needs to seize this once-in-a-Parliament opportunity to embrace root-and-branch reform.
The Representation of the People Bill that the government published on 12 February is a historic opportunity to protect and enhance our democracy. Amidst the threat of foreign interference in our politics, with trust in politicians at rock bottom, and with big money sloshing through party coffers, the government needs to move beyond tinkering and embrace fundamental reform.
The bill takes important steps towards addressing these issues. These include:
- requiring companies to have a genuine connection to the UK to be able to donate, including being headquartered here and being majority controlled by UK citizens,
- introducing new ‘Know Your Donor’ or ‘risk assessment’ requirements for parties, candidates and campaigners to conduct due diligence checks on the source of donations,
- preventing unincorporated associations (UAs) from making donations that come from ineligible donors, and increasing transparency requirements by lowering the threshold for when UAs have to register with the Electoral Commission.
- extending the Commission’s enforcement mandate to cover candidates, local third-parties and recall petition offences.
But while these proposed measures are a significant step forward, the government needs to go much further if it is to have a genuinely ‘zero tolerance’ approach to foreign interference, protect our elections, and crack down on undue influence in our politics.
This Representation of the People Bill is a unique and once-in-a-Parliament opportunity to make these changes. The Prime Minister came into office saying he will clean up politics. This is his chance to live up to his promise.
As the Bill progresses through Parliament, the government specifically needs to:
1. Beef up Electoral Commission independence and powers
The Bill as currently drafted goes nowhere near far enough to ensure that the Electoral Commission is fully independent, and has the powers it needs to undertake robust civil enforcement of political finance rules as the UK’s key electoral regulator.
Not only has the government failed to remove the power for a minister to set a Strategy and Policy Statement for the Electoral Commission (despite its opposition to the introduction of this power), it has failed to take the opportunity to ensure that oversight of the Commission through the Speaker’s Committee is robustly independent, and that the Commission has the right powers in statute to fulfil its crucial mandate to police electoral rules.
During the passage of the bill the government must:
- Remove the power for the government to set a Strategy and Policy Statement for the Electoral Commission, so it can operate without any political interference.
- Expand the Speaker’s Committee to include lay members and stipulate in legislation that no party should ever have a majority on that Committee.
- Ensure that future appointments of chairs of the Commission are restricted to former or current senior judges, with input from the Lord Chief Justice on the appointment.
- Ensure that the Electoral Commission’s ability to impose fines of up to £500,000 is placed on the face of the Bill, rather than left to a statutory instrument, and enable it to impose fines of 4% of campaign spending in egregious cases – as recommended by the Committee on Standards in Public Life.
- Enhance the information sharing powers in the Bill so that the enforcement and tax authorities can share relevant information with the Electoral Commission (not just the other way round).Give the Electoral Commission the power to compel evidence from entities it does not regulate such as social media companies and crypto exchanges, without having to start a formal investigation first.
- Ensure that as a regulator, the Commission can impose civil penalties to a civil standard instead of a criminal standard as it currently has to do.
2. Introduce stronger criminal enforcement
The Bill contains no new measures to tackle the UK’s serious criminal enforcement gap on electoral finance offences, although this is under consideration by the Rycroft review. The gap has resulted from inadequate criminal law, low sentences, and lack of specific mandate or resourcing for a law enforcement body to hold responsibility for criminal investigations.
The government has proposed commencing section 54A of the PPERA, which will require a donor declaration that no other person has provided them money ‘in connection with’ the donation. Legal experts have raised concerns that the clause is too vague, too reliant on a subjective assessment by the donor, too difficult to prove, and does not explicitly ban foreign money. Additionally it only applies to those who donate to parties.
Section 54A was drafted in 2009, and it must be updated before commencement to take into account new risks and new trends in elections.
During the passage of the Bill, the government must:
- Bring forward a revised section 54A in primary legislation which ensures that the declaration:
- applies to those making donations to candidates, unincorporated associations and third-party campaigners as well as parties;
- is required for any donation over £500;
- includes a clause that requires the donor to declare that the money being donated does not originate from the proceeds of crime.
- Introduce provisions that ensure the Bill more clearly and expressly prohibits parties and candidates receiving money being indirectly or directly received from foreign impermissible sources.
- Increase the level of sentence for criminal offences in the Bill to reflect that political finance breaches are a ‘serious crime’ and that egregious conduct will incur serious consequences.
3. Make the cap on corporate donations have teeth
The government’s proposed rules for corporate donations – designed to prevent donations made via shell companies – contains genuinely welcome provisions that only companies that are majority owned or controlled by those eligible to vote can donate.
However, rather than adopting the recommendation made by the Committee on Standards in Public Life and multiple electoral experts that companies should only donate from two years of profit after tax, the government has opted for a ‘revenue’ test.
The Electoral Commission has already highlighted that the government’s proposed revenue test is deeply flawed and will “allow companies to make legitimate donations many times their revenue, with no guarantee of the source of these funds.” It has also stated that a test based on profit “would provide much stronger protection against foreign interference and greater assurance for voters.”
It is also concerning that the Bill gives the relevant Secretary of State the power to revise the rules on the ‘significant control test’ for companies, rather than leaving future changes up to Parliament or the Electoral Commission.
The government must:
- Replace the revenue test with a test that stipulates companies can only donate from total profit that they have made and paid tax on in the UK.
- At a bare minimum – if keeping a revenue test – require that a company’s total annual donations may not exceed its annual revenue, rather than allowing that amount to be donated separately to multiple recipients.
- Amend the Section 54A donor declaration to make sure it contains a clause for corporate donors, which requires them to declare that their donation has come from post-tax profits.
- Give the power to alter the rules on the ‘significant control test’ to the Electoral Commission rather than the relevant Secretary of State.
- Introduce a prohibition on public contractors, including pre-approved suppliers, from making political donations.
4. Make the Know Your Donor policy more effective
The Bill introduces a requirement for those receiving donations and loans (which includes parties, candidates, and relevant third parties) to undertake new ‘risk’ assessments. The Bill also provides for the Electoral Commission to come forward with guidance for parties about how to apply the risk assessment. This is a welcome measure.
However, there are various weaknesses with how this provision has been drafted which must be addressed.
Firstly, the requirement only kicks in where the donation is over £11,180, regardless of the entity receiving a donation. For a party that might be proportionate. But for a candidate or a small third-party campaigner a donation of £10,000 could be a significant portion of their campaign funding.
Secondly, given that the main purpose of the bill is to prevent foreign interference, it is surprising that the risk factors cited do not include whether a donor has any links to politically exposed persons or business connections with high risk jurisdictions, nor any requirement to review the business associations linked to the donor. Additionally, the Bill as drafted gives parties too much discretion as to what they can consider relevant risk factors.
And finally, the Bill allows for the Electoral Commission’s guidance on how to apply risk assessments to be modified by a minister before being laid before Parliament under the statutory instrument process. This undermines the independence of the Electoral Commission and allows political interference in the provision of regulatory advice.
As the Bill progresses through Parliament, the government must:
- Amend the financial threshold for when the Know Your Donor checks are required to match reporting thresholds rather than having one threshold for all those subject to the requirement.
- Amend the ‘risk factors’ to include specific references to checks for links to politically exposed persons and business connections with high risk jurisdictions, and ensure that the language in the final risk factors is tightened by stating ‘any risk factors that a reasonable person would consider relevant.’
- Remove the ability of the Secretary of State to modify guidance developed by the Electoral Commission.
5. Reduce the amount of money spent on elections to create a fairer playing field
The Bill contains no measures at all to ensure spending limits in elections are set at reasonable and fair levels nor to prevent unlimited donations being made.
Currently, spending limits can be raised by the Secretary of State in line with inflation – as was done by the last government in 2023 when it raised spending limits by 80%. Other considerations such as the actual costs of elections, as well as the importance of ensuring public confidence in fair elections, including the ability of smaller parties to compete, and preventing excessive influence from a small handful of donors which might suggest lower spending limits are not reflected in statute.
Spending limits are also about broad social equality. Academic evidence shows that lower spending limits help create more political competition, and increase the number of candidates from less wealthy backgrounds. A 25% decrease in spending caps leads to an average candidate who is 40% less wealthy.
Additionally, it is highly undesirable that the government of the day can decide to set spending limits for parties. This needs to be made more consistent with third-party campaigners where spending limits can only be raised on recommendation from the Electoral Commission.
The government must:
- Introduce a principle of an annual donation cap in primary legislation, with a statutory mechanism for the Electoral Commission to set the level, after extensive engagement with experts and the public, and with the approval of the Speaker’s Committee – unless Parliament can agree during the passage of the Bill what that level should be.
- Ensure that spending limits for parties can be amended only on the recommendation of the Electoral Commission, and that these limits must take into account public confidence in elections, and the ability of all parties to compete on a level playing field.
- Extend spending limits and reporting rules beyond the current regulated period to apply on an annual basis.
6. Prevent the serious risks of cryptocurrency donations with a ban
The Bill does not contain any measures relating to cryptocurrency donations, although this is under consideration by the Rycroft review.
Given the very serious risks of illicit funds and foreign interference through cryptocurrency donations, the UK should follow the example of countries such as Ireland and Brazil in imposing a ban on cryptocurrency donations.
As the Bill progresses through Parliament, the government will therefore need to:
- Ensure that donations in cryptocurrency are not permissible donations, at the very least until the Electoral Commission considers it has the appropriate regulation and expertise to regulate their use in political finance, and experts as well as Parliament agrees with that assessment.
7. Address the loophole in relation to donations from unincorporated associations
The Bill contains very welcome measures to prevent donations from impermissible donors being made through unincorporated associations. It also introduced new transparency requirements which mean that these bodies will have to register and start reporting the money they receive once they hit a threshold of £11,180 and report any gifts over £2,230 (down from £37,270 and £11,180 respectively).
However, it is still possible for an unincorporated association that is not required to register to make donations without any checks. That creates an unnecessary and undesirable loophole.
To address this loophole the government should:
- Ensure that any unincorporated association that makes a donation to a party over £500 is required to register with the Electoral Commission so that it can be properly regulated.
