(5 days, 6 hours ago)
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Lord Sikka
To ask His Majesty’s Government what plans they have to reform the law on donations to political parties.
Lord Sikka (Lab)
My Lords, this week Transparency International published its global index on corruption. The UK has dropped to its lowest ever score and now is more corrupt than Estonia, Hong Kong, Uruguay, Japan, Ireland and Australia. The main reason is that political parties and too many legislators are available for hire to corporations and the super-rich. Of course, corporations and the super-rich do not donate; they invest and expect a return. The grateful politicians oblige by organising threatening issues off the political agenda, feather-duster regulatory systems, tax perks to the rich, crony contracts, VIP lanes, honours and even peerages. This skulduggery happens behind a wall of organised secrecy.
In the 2023 OECD Open, Useful and Re-usable data (OURdata) Index, the UK was ranked 25th. It is now less open and transparent than Colombia, Denmark, Estonia, France, Ireland, Korea, Lithuania, Poland, Slovenia, Spain and Sweden—what a state of affairs. In the year before the 2024 general election, companies handed £42 million to political parties and individual legislators. The Conservatives accepted £15 million from Phoenix Partnership, which is wholly owned by Frank Hester, even though he said that MP Diane Abbott made him “want to hate all black women” and that she “should be shot”. Since 2016, Hester’s company has received £591 million from public contracts. Labour received £4.7 million from Quadrature Capital, a company controlled from the Cayman Islands. Not so long ago, Elon Musk promised £100 million to Reform UK to secure his ideological objectives.
The Electoral Commission does not know the origins of money used as political donations. Any person on the electoral register can pass money, whether from Elon Musk or the Mafia, as political donations. No one knows where foreign-resident UK voters get their money from. Even if the Electoral Commission could investigate, it will not get access to foreign bank accounts and cannot follow the money trail, so there is no way of stopping any foreign money. Companies registered in the UK can hand money to parties, but this does not have to come from their trade or profits in the UK. Even if that requirement were introduced, it could not be effectively implemented. Profits can be manufactured through intragroup transactions and aggressive accounting. In any case, small companies that frequently front these donations on behalf of the rich do not publish meaningful accounts because of the obsession with deregulation.
Greater transparency is considered to be good, but that alone will not end political corruption because political parties remain for sale to the highest bidder. The biggest casualty of political donations and corruption is confidence in the institutions of government. In the 2024 general election, the voter turnout was 59.9%, and people say to me, “It doesn’t matter who we vote for. Corporations and the super-rich always win because they fund parties and legislators”. Policy-makers eagerly meeting donors rarely show the same enthusiasm for meeting the homeless, the hungry, the less fortunate and the poor, who seem to be written out of the system altogether.
Normal people cannot fund political parties or buy suits and glasses for Ministers and they are on the receiving end of some terrible policies. More than 120,000 people die every year from fuel poverty, but Governments do not curb profiteering or upset the interests of corporations and the rich. By design, the poorest 20% pay a higher proportion of their income in taxes than the richest 20%. Some 300,000 people die every year while awaiting a hospital appointment, sacrificed to the so-called fiscal rules.
Abraham Lincoln associated democracy with government of the people, by the people and for the people. Such an ideal cannot be achieved as long as big money can buy political parties and legislators and subvert public choices. We need to end the direct funding of political parties by corporations, trade unions and the rich. I have already argued that it is impossible to keep foreign money out of politics. Corporations can be used, and have been used, to circumvent constraints. Some want to put an upper limit on corporate and personal donations; of course, only corporations and the rich will still be able to fund parties and the corruption we suffer from will continue. Normal people cannot compete in this kind of arms race. In a country where 24 million people live below the minimum living standards, handing more of their income to political parties is simply not possible at all.
The press release issued last night on the Representation of the People Bill suggests that the Government will tweak the system, but that tweaking will not end the political corruption. It will not stop the rich and corporations buying the political system. We need a fundamental rethink. My proposal is this: no limits on political donations on any legal or natural person, but no political party may directly receive a penny from them. All the money should go into what I call a fund for democracy, then that money should be shared in accordance with political parties’ share of the vote and membership. Parties producing good policies will get a bigger share. On realising that they cannot buy the political system, corporations and the rich will inevitably stop political donations. At that point, we can discuss the alternatives, including possible state funding of parties.
Finally, we cannot not have government of and for the people without ending direct political donations. Will any party rise to the challenge and rid us of inbuilt political corruption?
Baroness in Waiting/Government Whip (Baroness Blake of Leeds) (Lab)
My Lords, Members may have noticed that the clock is not working at the moment. I ask noble Lords to stick to their time limit of three minutes—I will wave when their time is up—because we need to make sure that we have time for the Minister’s response.
Lord Hayward (Con)
My Lords, I congratulate the noble Lord, Lord Sikka, on obtaining this debate, although I am going to follow a substantially different tack. I should add that my first declaration in the register of interests in the House of Lords was a ticket to the rugby World Cup final in 2015 given to me by the referee.
I want to make two points. One is on—noble Lords will be aware that I have been pursuing this issue for a number of years—the funding of opinion polls, which are, in effect, campaigning. A few years ago, YouGov took on a poll and the Telegraph displayed it in full, but we were unable to establish who had actually funded it and the circumstances around it.
I have given notice to the Electoral Commission again that I intend to pursue it when we get to debate the legislation, which I understand has been tabled in the Commons in the past few minutes, but I could not get a copy of it before the debate started. That is one matter of concern, because effectively opinion polling is used as a substantial manner of campaigning.
The other item that I wish to raise is relevant in light of the events in politics this week. It is not in a general election but at least one potential candidate for the leadership of the Labour Party is supposed to have already a war chest of £1 million. Any campaign that relates to funding for a post in government or as Leader of the Opposition should be subject to the same requirements as election campaigning in general. At the last leadership election in the Tory Party, Robert Jenrick received £75,000 pounds from a tax haven abroad. I made it absolutely clear that I thought that that should be declared and treated in the same way as overseas funding, because it has a direct bearing on British politics. Those are the two items that I wished to raise.
Lord Pack (LD)
My Lords, likewise, I should acknowledge the exceptionally impressive timing of this debate, coming just after the Government have published the Representation of the People Bill. It is fair to say, from all we know of the Bill so far—I have not had time to read it yet by any means in full—there is a welcome direction of travel on many issues in terms of trying to improve the transparency around donations to political parties. I fear, however, that it does not go far enough. Obviously, some of those issues are to do with foreign money and potential foreign government interference. Hopefully, the Rycroft review will, in due course, set out ways in which we can go further on that.
I therefore want to concentrate on a slightly different issue in my brief comments. They draw on the research that I published with Chris Butler last year on donations that are made directly to candidates and rightly declared on the candidates’ election expense forms when they submit them, which is all above board, legal and how the law is intended to operate. However, those donations then, in effect, disappear from view because donations made directly to candidates at the moment do not then appear on the Electoral Commission’s register of donations. So, if you are, for example, an inquisitive journalist or somebody doing the due diligence process and you look at the obvious public records, the donations do not appear there at all.
This is not a trivial amount of money. Chris Butler and I estimated that, for the 2019 general election, £3.4 million of donations came into our political system, potentially influencing people, but did not then appear in the Electoral Commission’s records. Moreover, although those election expense forms are kept locally by the relevant returning officers, they are not published and are destroyed after a period. Although the Electoral Commission gathers such forms in, it does not publish them. Indeed, as Chris and I discovered, the Electoral Commission is not terribly keen on releasing copies of that information. When it did release some information to us, much of it was redacted.
With that redacted information, we did our best to compare, for those elected as MPs, whether the donations then appeared on the MPs’ register of interests. We found that around one in 10 of the donations made did not appear on the register. One should caveat that—there may be innocent explanations—but it adds to the general picture that there is a problem, which I hope the Government will be keen to address, about the volume of money that flows in as direct donations to candidates that is not properly caught by our current transparency regimes.
Baroness Shah (Lab)
My Lords, I welcome this debate on donations to political parties. It is right that we examine how our political system is funded and that we do so with seriousness and transparency. I welcome the Government’s announcement today on the Representation of the People Bill and, in particular, measures to protect candidates, campaigners and staff from intimidation or abuse. At its heart, this debate is about strengthening our democracy and rebuilding public trust and about ensuring that participation in our democratic life is meaningful and fair. That is not only about money; it is about participation and franchise. It is in that spirit I slightly change tack from some of the focus around funding and speak in support of extending the franchise to 16 and 17 year-olds.
Young people today are growing up in a context markedly different from that which shaped many of us in this House. They face existential challenges that are not abstract or distant but immediate and personal. Climate change, housing insecurity and economic and global uncertainty threaten not only their prosperity but their sense of future. Yet many feel that they have little agency over the decisions taken here in Parliament that will define those futures. Extending the vote to 16 and 17 year-olds offers elected representatives a powerful incentive to engage seriously with this cohort. It encourages political parties, candidates and institutions to speak with young people, not merely about them. It creates space for dialogue, political education and a politics that listens as well as instructs.
The evidence supports this approach. Research by the Electoral Commission shows that nearly three-quarters of young people believe that politics should be taught more in schools and colleges. While many understandably encounter political content through social media, they are far more likely to trust the information that they learn about politics in an educational setting. Yet many young people still do not feel confident about voting; they want to understand how voting works, why it matters and how to make informed choices.
Crucially, the same research tells us that, when young people understand how politics works and why it is important, they are far more likely to get involved and perhaps tackle the issues that the debate has already raised. That is why I particularly welcome the focus on civic education throughout schooling. Extending the franchise alongside strengthened civic education is not a leap of faith; it is a coherent and evidence-based approach to democratic renewal.
Young people today are asking for the same recognition. They are not disengaged because they do not care; many are disengaged because they care deeply and do not see their concerns reflected in decision-making or accessibility to politics. Granting them the vote is not a cure-all, but it is a meaningful and practical step in affirming that their stake in society is real. As legislators, it is incumbent on us to strengthen, not narrow, the foundations of our democracy. Engaging young people fosters habits of participation, accountability and civic responsibility that endure across a lifetime. It reinforces the principle that democracy is not only something that we inherit but something that we must renew.
Extending the franchise is an act of confidence in our young people and in our democratic system to grow stronger through inclusion. In a debate rightly focused on trust and democratic integrity, I urge the House to see this measure as an opportunity that we should embrace.
Lord Hannan of Kingsclere (Con)
My Lords, I am grateful to the noble Lord, Lord Sikka, for introducing the debate and for being so frank about the proposal. As he said right at the end, the alternative to private donations is state funding, which indeed is the lesson of everywhere where we have seen it happen.
There are two obvious objections to a state-funded system. First, we do not have the money. We already have taxes at a higher level than they have been since the end of the 1940s, when we were still coming back from full mobilisation. We are borrowing £150 billion a year and spending £110 billion of that fending off existing creditors and servicing—not paying off—the interest on existing debt. If only we were paying off some of it. The idea that, at this fiscal moment, we would make a new demand on the wallet of the taxpayers is eccentric—or brave, if I can put it more neutrally.
Secondly, once you put this power into the hands of the state, you necessarily open the door to arbitrary decisions as to which parties qualify or can be disqualified. When I was a Member of the European Parliament, this happened in Belgium. Private donations were more or less banned following the Agusta scandal. This then, in effect, put immense power in the hands of the majority of Belgian parties to defund political parties of which they disapproved—for example, because they were in favour of Flemish separatism. That is an extraordinarily powerful loaded gun to put in the hands of any Government. What is the alternative? If people cannot manage without state funding, maybe the parties should do less. Maybe they should trim their ambitions to their means, rather than having to spend all these gazillions on every election.
I am conscious of the time, so I will finish with two quotations. As the age becomes darker and more illiberal, I will cite two quotations from old Whig heroes, one from the end of the 18th century and another from the end of the 19th. I begin with Thomas Jefferson, who came out with a very powerful objection when he said,
“to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors, is sinful and tyrannical”.
It is an extraordinary proposal. I am sure there would be people who would deeply resent funding me and I am sure other people would deeply resent funding the noble Lord, Lord Sikka—and others would dislike the idea of funding anyone in between us.
I will close with this, from JS Mill, who wrote that
“if the employees of all these different enterprises were paid by the government, and looked to the government for every rise in life; not all the freedom of the press and popular constitution of the legislature would make this or any other country free otherwise than in name”.
Amen.
Lord Watson of Invergowrie (Lab)
My Lords, I appreciate the panache and brio with which the noble Lord, Lord Hannan, delivers his speeches, but I have to say that I disagree with him on state funding. I will develop that in the time available to me. JS Mill and Thomas Jefferson lived some time ago, long before the days of what we would understand to be democracy.
I commend my noble friend Lord Sikka for getting this debate. He went on at some length about countries higher on the scale than the UK in terms of corruption measures. He mentioned various countries, but not Germany. I think Germany is the best example of support for political parties. In Germany’s system there is state funding, with three legs to its stool. The first is democratic legitimacy, because the money follows the votes that political parties gain. The second is transparency, with donations having to be declared fully—anything above €50,000 immediately and anything above €10,000 in the parties’ annual reports. That is important. There is also a prevention of undue influence, which I think we see in this country in terms of political donations.
The Conservative Party is funded by business. The Labour Party is funded to some extent by business but mainly by trade unions: I declare an interest as a member of Unite. That does not give us a level playing field. I am sure the noble Lord, Lord Pack, will feel that the Liberal Democrats do not get a fair crack of the whip. If votes lead to the financial donations that the state makes to political parties, as in the German system, following an election, the people understand what they are paying and why they are paying it. The direct connection is important. Generally, I think voters would rather see a fair system and a level playing field, where things are open and transparent, and it is clear that any political party that gains sufficient votes gets support to go into future elections. I do not think that is a bad idea.
Incidentally, in Germany the state also matches donations that political parties get from membership fees and individual small donations, up to a capped limit. That is a good example that we could follow and I hope my noble friend will be able to say something about what the Government’s intentions are in the Bill that has just been published. I commend the German model. France, Italy, Spain and Canada also have a form of state funding. It works for them and it could work for us as well.
Lord Rogan (UUP)
My Lords, I congratulate the noble Lord, Lord Sikka, on securing this debate. I will highlight what I regard as an unacceptable anomaly in the current laws on donations to political parties seeking election throughout the United Kingdom.
Noble Lords will be aware of the list of permissible funding sources for political parties in Great Britain. However, not all your Lordships may know that there is an additional list of sources for political parties in Northern Ireland, and it is quite extensive. The list includes Irish citizens, most Irish-registered companies, trade unions, building societies, friendly societies and, most importantly, Irish-registered political parties.
The consequence of this means that, while foreign political donations are barred in Great Britain, foreign money can and does enter United Kingdom politics through Northern Ireland. This list of additional sources specifically for parties in Northern Ireland was, of course, compiled to satisfy the insatiable demands of Sinn Féin/IRA.
The republican movement has never been short of cash, regularly funded throughout the Troubles and since by protection rackets and bank robberies, including the Northern Bank raid in central Belfast, which added some £26.5 million to Sinn Féin/IRA coffers more than six and a half years after the signing of the Good Friday agreement. However, much of this funding has come from the United States of America, most notably from an organisation known as Friends of Sinn Féin.
According to a recent article in the Irish Times, in the six months to October last year, Friends of Sinn Féin recorded more than $57,000 in donations, including almost $19,000 from a trust set up by an Arizona woman who died in 2020. Since 2022, Friends of Sinn Féin has received more than $440,000 from this trust. Last year, the Belfast Telegraph reported that another front group, Friends of Sinn Féin (Canada), donated some $14,000. That matters, because I am sure no noble Lord believes that Sinn Féin/IRA records the cash it receives.
The current anomaly in party funding affects politics not only in Northern Ireland but in Westminster. There are currently seven Sinn Féin/IRA MPs entitled to take their seats in the other place, but they refuse to do so. However, their election prospects were undoubtedly boosted by foreign money supporting their campaign. I simply ask the Minister how and why it is acceptable that current UK law relating to funding includes a carve-up designated to assist one political party. There can be no justification for it and that anomaly should be removed.
Lord Leigh of Hurley (Con)
My Lords, I declare my interest as a senior treasurer of the Conservative Party. I congratulate the noble Lord, Lord Sikka, on his very prescient timing, securing this debate just as the Representation of the People Bill is introduced today.
The Government are proposing to introduce “enhanced due diligence” measures in the forthcoming elections Bill. One has to ask why. If the intent of the legislation is to protect against foreign interference, the new regulatory regime should be targeted in that respect, rather than seeking to envelope genuinely domestic and permissible transactions in extra and excessive red tape. Political parties and regulated donees have a legal obligation to ensure that they receive donations only from permissible sources, which in the case of companies must be companies carrying out business in the UK. Foreign donations are already banned. There are criminal offences in relation to fraud declarations and funnelling unlawful donations via the back door.
However, parties could do with more information from government agencies. In the case of Christine Lee, who gave some £700,000 to Labour Party recipients, it would have been helpful if the security services had alerted Labour to the Chinese Communist Party involvement, for its benefit. Likewise, HMRC has recently declined to share information with national political parties because of so-called tax confidentiality. This fails to recognise an important fact: political parties are not banks or tax authorities. Their assessment of risks is otherwise limited to what is in the public domain. If there are particular risks from specific foreign threats, there should be mechanisms to inform parties of those risks.
The greatest risk of foreign influence lies in third parties, rather than highly regulated and very transparent political parties. That is why we see money flowing into Islamist causes and Gaza independence-style campaigns, which is very worrying. Certainly, the Conservative Party undertakes due diligence checks on its donors, in terms of, first, regulatory compliance and, secondly, political screening and reputational impact. Donations from shell companies are not allowed and not taken. In government, the Conservatives tightened the law against foreign interference and foreign spending; it is the Labour Government who are now dragging their feet by failing to implement properly the foreign influence registration scheme and by not adding China to the enhanced tier. Also, I add my name to those advocating banning cryptocurrency donations. I can see no reason to use them other than for nefarious purposes.
The Government need to recognise that donors are generally good citizens who want to help a political party and want it to succeed. Some do so by giving their time, some by giving financial resources. Over the years, Labour, Lib Dems and all parties have had many such folk, albeit that some may have now withdrawn, given the performance of their party. Of course, that has left Labour completely beholden to the unions. Is this healthy? The result has been the morally offensive Employment Rights Act, where Labour has been forced to allow unions to clip members’ fees into their political funds unless members object. This is the wrong direction of travel. Genuine donors need to be thanked and applauded, not demonised.
Lord Sahota (Lab)
My Lords, I rise with a profound sense of responsibility because the issue before us goes to the very heart of our constitutional settlement: the integrity of our democracy. At the moment there is a growing and deeply troubling perception that British democracy is simply on sale to the highest bidder. That perception alone should alarm us all. We are witnessing donations whose true origins are unclear and that are rooted through opaque structures, sometimes linked to foreign interests and are too often beyond the effective scrutiny of the regulator. This is not a theoretical concern; it is a present and pressing danger. The principle is simple: decisions about the future of the United Kingdom should be made by the British people, not shaped by unknown donors, overseas interests or hidden financial powers.
Democracy is about equality of voice, not inequality of wealth. The Committee on Standards in Public Life has recommended a cap of £10,000 on donations to political parties. Such a cap would not stifle political participation; it would protect it. It would ensure that political parties are funded by broad public support rather than a narrow group of wealthy benefactors.
The integrity of our democracy is at stake. The United Kingdom is respected around the world as a beacon of democratic governance, often described, rightly or wrongly, as the mother of all democracies. That reputation has been earned over the centuries through reform, restraint and a shared commitment to fairness and accountability. It must not be squandered now. Democracy cannot be treated as a commodity traded to the highest bidder. It is a trust handed down to us and held on behalf of future generations. Safeguarding requires courage, transparency and a willingness to confront uncomfortable truths. This House has a duty to act. If we fail to strengthen our law on political donations, we risk allowing money to speak louder than the citizen. We cannot and must not take that risk.
Lord Mott (Con)
My Lords, I thank the noble Lord, Lord Sikka, for securing this important debate. I will be positive. Legitimacy and transparency must be at the heart of political-party finance. I share the concerns about hostile foreign states trying to exert influence in this way, but these concerns must not lead us down the road of substantially increased public funding of political parties. Having to attract donations, big and small, is part of a competitive electoral landscape and one of the ways in which parties are challenged to remain relevant.
As updates to the law are made, we need to ensure that they are compatible with new technology. I disagree slightly with my noble friend Lord Leigh. We need safeguards around things such as crypto donations, but the system should work to facilitate them in a legitimate manner, not try to prevent them.
We are missing an important question in this debate. We should be asking: how do we make it more attractive for people to become donors to political parties? Legitimate UK voters and businesses donating to a political party is not a shameful act—far from it. In fact, it should be celebrated as a positive way for people to participate in political life, a fundamental enabler of our democratic system and an important way in which we can exercise our democratic rights.
To support this view, we should look to provide tax relief on political donations in a similar way to what we already do for charitable donations. This would not only make it more attractive for people to donate but send a clear signal that legitimately made and transparently declared donations are of benefit to our democracy and that political parties are essential institutions worthy of support, which must be led by people, not the state.
In designing such a system, I recognise that there may be a need for a limit to the amount of tax relief on offer, but I do not think such relief needs to go hand in hand with a cap on donations. For example, as the noble Lord, Lord Watson, mentioned, we should look to Germany, where there is no limit on how much someone can donate, but the first €3,300 attracts tax relief. Will the Minister commit to looking seriously at such a proposal as part of any update to the law on political donations?
Lord Wallace of Saltaire (LD)
My Lords, I particularly welcome the suggestion that the noble Lord, Lord Mott, made. The ideal way to fund political parties is a large number of donations from your voters and your members. That is what my party has largely relied on. We lack large donors, except under exceptional circumstances, and we have to work very hard to get those £20, £200 and £2,000 donations.
We are all watching what happens in the United States at the moment, where money dominates politics and where a small number of ultra-wealthy people—some of whom are explicitly anti-democratic, such as Peter Thiel —are influencing the way things are going. UK sovereignty means that we need to restrict the flow of funds from abroad so far as we can. This means funds not only from foreign states but foreign citizens, foreign companies and UK expatriates who moved abroad to avoid paying UK taxes but nevertheless want to interfere in the political life of the country they have left behind.
We now know a lot about Russian penetration of the Conservative Party and about Russian interference in the Brexit campaign. We do not know whether various Middle Eastern states put money into favoured parties, lobbies and think tanks to promote their own interests. We now have the extraordinary announcement from a US State Department Under Secretary that US federal funds will be channelled into right-wing groups across Europe, including in the UK, including the bodies which in many ways are threats to constitutional democracy and open society.
Restrictions on expatriate donations are a more difficult and delicate issue. One of the largest donations in recent British politics came from a long-term UK expatriate in Thailand. There are 100,000 UK citizens in Dubai, some extremely rich and some possibly willing to act as intermediaries for foreign state actors in putting money into British politics. We agree that corporate donations should be allowed only from companies that have declared substantial profits from operations within the UK. I suggest that it should also be a condition that donations above a modest limit can come only from people who have submitted a UK tax return for the previous year or more.
Current restrictions focus mainly on donations to political parties. However, political movements, such as Tommy Robinson’s, also play a large and active political role, as do think tanks, such as the Henry Jackson Society, the Global Warming Policy Foundation and the TaxPayers’ Alliance, and lobbies, such as the Free Speech Union and Labour Together, which has not declared its funding.
There is some evidence, and many more unconfirmed reports, that foreign money flows into some of these, both from foreign Governments and from wealthy individuals, foundations and corporations. That is also foreign interference. In some cases, it is clearly hostile foreign interference and should be made more transparent and limited. The elections Bill offers us the chance to tighten controls on all these, and I look forward to making it work.
Baroness Scott of Bybrook (Con)
My Lords, I am grateful to the noble Lord, Lord Sikka, for bringing forward this debate but I cannot, in any way, agree with his solutions, either the ideas for all-party use of a donations pot—I am not sure how big that pot would be—or the endgame of state funding.
The statutory framework governing donations, principally the Political Parties, Elections and Referendums Act 2000 and the Representation of the People Act 1983, were designed to prevent foreign money distorting British politics. Those principles remain sound. But the landscape has evolved: new financial vehicles, shell companies, unincorporated associations and cryptocurrencies present risks that were understandably not explicitly legislated for a generation ago. This is a fact that hostile actors increasingly seek to exploit.
We recognise that the Government’s July 2025 elections strategy acknowledged that the current framework is no longer sufficient. It proposed stronger checks on donations, greater transparency for gifts and limits on company donations etc. We also note the announcement the independent review into electoral resilience following troubling allegations of foreign interference, and the Secretary of State’s commitment to examine illicit funding streams, including cryptocurrencies. We support the objective of protecting our democracy from hostile actors.
The previous Conservative Government took steps in this direction, strengthening national security legislation and committing to improved information-sharing between agencies and political parties. This was precisely because of the real and evolving threat of foreign interference at the time.
However, strategies and reviews are not substitutes for legislation. The electoral strategy was published seven months ago, and the Representation of the People Bill is only just being laid before Parliament today. There has been little consultation with political parties as these things are starting to be put forward; I do not believe that that has ever happened before. At a time when state-backed interference, opaque funding routes and emerging financial technologies present genuine risks, delays here will have consequences. How will the Government ensure, in particular through the Bill, that parties are properly supported, including through proportionate and lawful information sharing if they are to undertake enhanced checks on donors? What specific safeguards will be introduced to ensure that foreign money, whether channelled through companies or digital assets, cannot penetrate our political system?
The safety and integrity of our democracy should never be partisan; nor can reform be endlessly deferred. If the Government believe that the existing framework is no longer robust, as they say they have done for nearly two years, it is now time to move from review to action.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, I am very pleased to respond to this QSD. As many Lords have said, it is timely indeed, as we are pleased to introduce the Representation of the People Bill today; I look forward to many further discussions as that Bill works its way through our House.
I thank my noble friend Lord Sikka for opening the debate, and other noble Lords for their contributions. My noble friend always brings an interesting approach to this subject. Although I do not quite share his conspiracy theory approach to matters, I would say, as a veteran of many elections, that the power of the vote is still as strong as ever. We all need to inspire confidence that the vote is mightier than the pound; I hope that we will all strive for that.
The speeches we have heard today illustrate a shared desire to protect our democracy from those who seek to disrupt it. We all know that this is a clear and present danger, which our Government are resolutely determined to tackle. The Government committed in their manifesto to strengthening the rules around donations to political parties, including enhanced safeguards against foreign donations. The threat of foreign interference is evolving and is becoming increasingly hostile and sophisticated, while the current rules are no longer sufficient to address these risks.
The Government take a zero-tolerance approach to foreign interference, and we cannot afford to wait. That is why the reforms set out today in the Representation of the People Bill put prevention first, reducing pressure on law enforcement, protecting parties from exploitation and delivering greater transparency and stronger safeguards against malign foreign actors. These reforms implement a number of recommendations made by stakeholders, including the Ethics and Integrity Commission, formerly the Committee on Standards in Public Life; the Electoral Commission; and the National Crime Agency.
I turn to the specific measures set out in the Bill. Current electoral law sets out who may donate and the basic checks that campaigners must make, but these rules no longer reflect modern anti-money laundering standards. So, we are strengthening the system by introducing new “know your donor” checks for donations over £11,180. I know that is a random amount: I did raise that. Recipients will now have to carry out a risk assessment, checking for signs of foreign or unlawful funding, before deciding whether to accept or return a donation.
Key stakeholders have warned that the current eligibility criteria for companies to donate are far too weak and expose political parties and other recipients to the risk of accepting foreign donations and proceeds of crime. This means that shell companies—companies that are registered today, owned by anyone and funded from anywhere, without a single day of trade—could donate to our political parties. That is why we are introducing new stringent eligibility criteria for companies wishing to make political donations. Companies will have to show sufficient revenue to cover their donation, be headquartered in the UK and be majority-owned or controlled by UK electors or citizens in order to be eligible to make a donation.
Stakeholders are also concerned that unincorporated associations could be used to funnel illegitimate foreign funding into our political system. Unincorporated associations can currently give large sums with limited transparency. This leaves clear vulnerability to foreign or illegitimate money, so we are tightening the rules. We are reducing the thresholds for when unincorporated associations must register with the Electoral Commission and for when unincorporated associations must report gifts to the Electoral Commission. We are also requiring unincorporated associations intending to make significant donations to check the permissibility of the political gifts they receive to ensure that they come from permitted UK sources. We are also reinforcing the principle that only permissible donors may fund UK politics.
Where illicit funds enter the system via impermissible donors, such as individuals not on the electoral register, they will be subject to full forfeiture, providing a clear deterrent and supporting compliance by political parties and campaigners. Beyond these measures, we will commence existing provisions in law, which will require anyone making contributions of more than £11,180 to declare any benefits linked to their donation. This will ensure that we can identify the true donor and prevent people acting as fronts for others. Forced declarations will be a criminal offence, supporting enforcement authorities to take action against illegal donations.
Robust regulation and enforcement of political finance rules are crucial for combating the threat of foreign interference. That is why we are addressing enforcement gaps by extending the Electoral Commission’s enforcement role and civil sanctioning powers. This will enable police resources to be directed towards the most serious criminal offences. We will also increase, via secondary legislation, the Electoral Commission’s maximum fine from £20,000 to £500,000 per offence, with safeguards to protect against disproportionate burdens on campaigners with fewer resources. This will create a more meaningful deterrent against serious breaches of the rules.
Finally, to ensure that we are leaving no stone unturned, we have launched an independent review into foreign financial interference in UK politics, which will make recommendations to government by the end of March. The Rycroft review will focus on the effectiveness of the UK’s political finance laws, as well as the safeguards in place to protect our democracy from illicit money from abroad, including crypto assets. The Government will carefully consider all recommendations made in that report.
I want to respond to a few of the points made. If I do not get to them all, I will reply in writing. The noble Lord, Lord Hayward, asked about polls. Transparency requirements under electoral law exist for third-party campaign spending, including market research and canvassing. They are all in scope of the spending rules. The imprint rules also apply to those market research issues. On leadership elections, I am afraid they are a matter for political parties.
The noble Lord, Lord Pack, asked about donations and registers of interest. Parliament sets the rules around registers of interest, so that is a matter of parliamentary rule-making. I thank my noble friend Lady Shah for her points about voting for 16 year-olds. She hit on a crucial point. Extending the franchise to 16 and 17 year-olds means that we must make sure that they have trust in the system, and we are increasing civic education to provide that background to their voting.
On the question from my noble friend Lord Watson, I am sure the Rycroft review will be looking at international models to make sure we learn from them.
In reply to the noble Lord, Lord Rogan, Irish citizens remain permissible donors in Northern Ireland, and political parties there can also accept donations from Irish sources, such as Irish companies, that meet the prescribed conditions. That is consistent with the Good Friday agreement.
In reply to the noble Lord, Lord Leigh, the issue about China is a Home Office question. I will revert to colleagues in the Home Office and get back to him on that one.
In reply to my noble friend Lord Sahota, there is no intention from the Government to cap donations at the moment. The new Bill is all about transparency, so I hope I have covered some of those issues.
In reply to the noble Lord, Lord Mott, political parties and other campaigners will remain able to raise sufficient funds to communicate their views to the electorate, while protecting our democracy against those who seek to covertly undermine it. We do not consider tax relief on political donations to be part of the solution, I am afraid.
In reply to the noble Lord, Lord Wallace, I think I covered overseas interference in my speech. Overseas electors are subject to the same counter-fraud measures as domestic electors, including having their identity confirmed as part of the registration process.
I hope that I covered most of the comments of the noble Baroness, Lady Scott, in my speech. I will check Hansard, though, and respond further if I missed anything.
In closing, I thank my noble friend Lord Sikka for raising such an important debate and Members across the Committee for some very key contributions. I am sure we will have more of those as the Bill makes its way through the House.
The Deputy Chairman of Committees (Baroness Healy of Primrose Hill) (Lab)
My Lords, the Grand Committee stands adjourned until at least 2 pm, in the hope that we can get the clocks fixed.