Election Campaign Finances: Regulation

Chloe Smith Excerpts

Thursday 8th July 2021 Westminster Hall

[The Minister for the Constitution and Devolution (Chloe Smith)]

Thank you very much, Mr Paisley. It is an absolute pleasure to return to the House in person after some illness, but it is a particular pleasure to join you this afternoon and to respond to this debate under your chairmanship.

First, I thank hon. Members for the debate that we have had. It is extremely important that these subjects have been debated this week. I particularly thank my hon. Friend the Member for Folkestone and Hythe (Damian Collins) for doing so with reference to his deep experience in these matters and the research that I know he and colleagues have done through their work on parliamentary Committees.

Let me also, at the outset of my speech, welcome the new hon. Member for Airdrie and Shotts (Anum Qaisar-Javed). It is a pleasure to have her taking part in this debate and to congratulate her on her by-election victory. She is absolutely right: social media has indeed opened up our democracy, enthused many people and engaged many new voters. That is absolutely a good thing, and I join her in welcoming it. She is also correct to say—all of us here today know this—that the key electoral legislation that we work under is old. It is 20 years old or 40 years old, in the case of the Political Parties, Elections and Referendums Act 2000 and the Representation of the People Act 1983 respectively, so it is time to update it, and that is the substance of what we are talking about today.

The Government are, and I personally am, committed to upholding the integrity of our electoral system. Before I take that sober tone too far, let me give the House today the amusement of why the word “integrity”, which everyone seems so keen on, is missing from the short title of the Elections Bill. That is because it is in the long title. People will be delighted to read it there. People will find it incredibly reassuring that we want to have a Bill that talks about our elections and emphasises their integrity.

As part of our commitment, we take the regulation of election campaign finances really seriously. We already have a comprehensive regulatory framework in the legislation to which I have referred; albeit that it is decades old in establishment, it is doing its work still. That framework governs the spending and funding of candidates, political parties, third party campaigners and other campaigners at elections. Those rules help to maintain the integrity of our elections and uphold the really important principles that we will all agree on, Mr Paisley, of fairness, transparency and controls against foreign interference.

At this point, allow me to acknowledge a particularly important point made by the hon. Member for Aberavon (Stephen Kinnock), who says that we have the opportunity to lead the world. I am glad that he agrees with me, because this is indeed based on our strong democratic heritage. It is based on the work that we do with our international partners at the G7, and I commend to him the work that was publicised at this year’s G7 summit about the rapid response mechanism and, indeed, a speech that I made shortly after that about the ways in which our Defending Democracy programme here in the UK does this work internationally with our partners and domestically. The Bill that is now before the House also does this, so I will talk about how it does so, while setting out the strengths of the existing framework. I will start with donations.

It is absolutely right that voters and organisations in the UK are able to donate to political parties, to specific candidates, and to election campaigns. Our democracy is strengthened by—indeed, it is built on—the idea that people may donate to campaigns that they believe in. The transparency of that, including the regulation of donations and electoral funding, is a cornerstone of our electoral system and contributes towards a healthy democracy. UK electoral law already sets out a stringent regime of donations controls to ensure that only those with a genuine interest in UK electoral events can donate to candidates or registered third-party campaigners and political parties. For political parties and third- party campaigners, a donation is any contribution with a value of more than £500, while for candidates the donation threshold is £50. Donations can be accepted only from certain permissible sources, such as individuals registered on a UK electoral register, and that includes registered electors overseas.

May I say in passing, Mr Paisley, that I am really sorry that the Labour Front-Bench team seems to think that all overseas electors are in some way dodgy. They are not. They are a vital part of the fabric of our democracy and they deserve their place, which is why we are extending that part of the franchise in the Elections Bill. Donations can also be accepted from registered companies that carry out business in the UK, trade unions appearing on a relevant UK list or a UK-registered limited liability partnership or friendly society.

I also gently pick up the hon. Member for Edinburgh North and Leith (Deidre Brock), who I think is misguided in the extreme—and possibly as unwise as her party leader was this week in the Opposition day debate—to try to have a go at unincorporated associations, from which her party has benefited; I hope that she will reflect on that while she tries to spray mud around. The key point I want to make here is that donations from foreign donors are not permitted. That is the key distinction, and it is the right one that we all depend on.

Turning to permissibility checks, how do we know that donations are fair? Political parties, registered parties, registered third-party campaigners and candidates are supported to carry out the necessary permissibility checks by the Electoral Commission, who provide guidance and advice. If a donation is not permissible, as we all know, it must be returned. In order to ensure accountability and transparency, as we all know, the details of donations received must be recorded and reported, including those that may be impermissible by the Electoral Commission. The commission publishes this online, ensuring that the details of donors of significant amounts are available for public scrutiny. That is one of the foundations of our system, and it is quite right. Political parties are in addition required to provide quarterly donations reports and annual accounts.

There are also important rules about proxy donations, which prevent donations from being given by a permissible donor on behalf of someone else who does not meet the relevant criteria to donate, and that means that the rules cannot be circumvented in that way. It ensures that only those people and organisations with a legitimate interest in UK elections are permitted to fund campaigns.

I want to pick up an argument that has been advanced this afternoon and that I recognise comes in the work of the APPG, led by the hon. Member for Aberavon and the hon. Member for Edinburgh North and Leith. It is the argument that the framework I have just outlined is not enough in itself, and that darkness may still creep in. I would share that concern if I thought that was real, but I think that the framework is enough. It is sound; it is sufficient. It rests on core principles. I look forward to more debate on this point as we get into the Elections Bill, but I want to place it on the record at this point that I think the donations framework is the right one and that it is based on sound principles. I think there is more that can be done in guidance, and a couple of hon. Members have mentioned the idea borrowed from financial services of what they would call the Know Your Client regime, or the idea that an entity can proactively check for itself where its donations or support may be coming from. I am sympathetic to those arguments. We may be able to look at providing guidance to help recipients be proactive in complying with the good framework that we have in place.

Let me turn to spending. The rules also carefully control the spending of political parties, third-party campaigners and candidates in the period before an election, as I suspect, Mr Paisley, we all know. The regulated period differs across the different elections, and we will be familiar with the lengths of time. Candidates are subject to regulation from the day when they become a candidate, and the regulated period for political parties and third-party campaigners is, for example in a UK parliamentary general election, 365 days.

At all those times, spending limits are applied. While they differ according to the type of campaigner or the specific election, these limits are in place to ensure that there is a level playing field and that no campaigner could unfairly spend more on an election campaign than anybody else. That avoids the situation that we see in some other countries, where election campaigns are all too often a fundraising race, which can be unhealthy. In the UK, our spending limits provide for an even playing field but also allow for a focus on the merits of the competing policy arguments at an election. I acknowledge the point made by my hon. Friend the Member for Folkestone and Hythe that there is a debate to be had about the regulation of arguments and of what happens during election campaigns. I will not cover that in my remarks, but I acknowledge his points and look forward to addressing them on another day.

I turn again to how we know our spending framework is good. We know it is good because reports on it must be made to the Electoral Commission or the returning officer. As we all know, that includes all spending on digital campaigning as well as on more traditional campaigning methods. Information is then made available for public scrutiny, and returns for political parties and third parties are published online by the commission. Once again, that brings us back to a core principle that is already in our regulation and that should stay there in pride of place: having transparency for the public and accountability for campaigners.

Let me turn to enforcement. It is absolutely critical that measures are in place to ensure that all campaigners, including parties and candidates, follow the rules on political finance. I have just made the point that transparency and public accountability play an important role. To facilitate that, the Electoral Commission publishes and regularly updates guidance on political finance, including on donations and spending, as well as information on donations. Campaigners can also contact the Electoral Commission for advice. It is really important that the guidance is accessible and comprehensive, and I note another recommendation in the report published yesterday by the CSPL, which calls on the commission to improve its online resources and guidance. That is quite an important point, because campaigners must be supported in understanding how to comply with the rules, if this important regulatory framework is to be effective.

When political finance rules are broken, be it by a political party or a third party campaigner, the Electoral Commission has the necessary powers to investigate, has civil sanctioning powers to take action where it feels necessary, and can and does refer far more serious suspected offences to the police. Clear guidance and proportionate use of both civil and criminal sanctions are essential for ensuring compliance and communicating the seriousness of the rules.

I turn to some of the measures in the Elections Bill, which will further strengthen the rules on election campaign finances. I am acting on a recommendation in the House of Lords Democracy and Digital Technologies Committee’s report to introduce a new tier of registration for third party campaigners. At this point, I acknowledge the political attack that the hon. Member for Putney attempted to make, which is that somehow I have jumped the gun on the CSPL by having the temerity to publish the Elections Bill this week. I am not sure that she can have it both ways. I have spent years listening to and reading recommendations from all quarters to ensure that the Bill is as good as it can be. I welcome the CSPL’s work and that of many Committees, and I suggest that we now get on with the Bill.

Under the new rules, campaigners spending more than £10,000 on regulated campaign expenditure during a regulated period anywhere across the UK will be required to register with the Electoral Commission. That is particularly important, with digital campaigning proving far more cost-effective than traditional offline campaigning. The rules will ensure that campaigners spending significant amounts of money in any of those ways are transparent and accountable to the public—again, that is one of the core principles. The Bill will also protect the integrity of spending limits, and the even playing field that they provide, by removing the potential for anybody to register as both a political party and a non-party campaigner at the same time. I find it breathtaking that this has actually happened—a campaign group has done both, which is a slap in the face for those who believe that we should have a level playing field and that spending limits mean something.

I turn now to another thing that our Bill does: there will be provisions to clarify the law on notional expenditure for candidates. This clarification is intended to restore the understanding widely held before a Supreme Court ruling in 2018. It is really important that candidates are liable only for benefits in kind that they use themselves or that they or their agent directed, authorised or encouraged someone to use on the candidate’s behalf. Doing that will allow candidates and agents to have confidence in their legal responsibilities again. It is really important that those involved in campaigning, spending and reporting—particularly volunteers, as election agents often are—understand their responsibilities and can execute their duties with certainty.

A theme that we will return to time and again with the Elections Bill is the broad-based nature of our politics in this country. It is something to be proud of that our democracy is built on volunteers and grassroots participation. I acknowledge that there will be an argument for taking regulation to the extreme degree. One of the recommendations in the report by the hon. Members for Aberavon and for Edinburgh North and Leith and their APPG, which I have read carefully, is to reduce to zero the threshold for non-cash donations, for example.[Official Report, 18 August 2021, Vol. 699, c. 12MC.] I am concerned that such a recommendation might damage that space for legitimate grassroots participation in our democracy inside this country, which I will defend to my dying day. I am sure we will return to that in further debates, but I thought it helpful to set out my thinking on that at this point.

I will turn to digital imprints, on which my hon. Friend the Member for Folkestone and Hythe rightly focused when he said that he is seeking transparency of funding and of information. That is really important, and I entirely agree with him. I am proud that the Elections Bill will do something world-leading. Not many countries have so far succeeded in doing that, so it is really important that we take the opportunity to do that and do it well.

We are seeking to introduce a digital imprints regime for digital campaigning material. The importance of doing so is widely recognised. We have consulted in depth on the policy to ensure that we create something that will stand the test of time. As set out in the most recent Government response to our consultation, the new regime will require those behind online political adverts and other digital campaign material targeted at the UK electorate to declare themselves all year round, wherever they may be in the world, providing greater levels of transparency to online campaigning. We are also empowering the relevant authorities to access the information that they need, including from social media companies, to investigate suspected offences. As I have mentioned, through those proposals we will be introducing some of the most comprehensive digital imprint rules in the world. I really look forward to giving them the correct scrutiny through the Elections Bill.

I draw my remarks on this area to a close by thanking the Committee on Standards in Public Life for its review, which many hon. Members have spoken about. It included recommendations on a range of fronts. I am pleased to say that we are already taking forward a number of the recommendations as part of the Bill, including the new requirement for political parties to declare if they have assets and liabilities of more than £500 when registering with the Electoral Commission, and if so, to provide details on them.

Furthermore, the Bill will meet the CSPL’s call for the Government to ban foreign organisations or individuals from buying campaign advertising in the UK. We will do that by restricting all third-party campaign expenditure to UK-based or otherwise eligible campaigners during a regulated period before an election. That will safeguard our democracy from foreign interference, in addition to a number of other measures—domestically and with our partners—to defend our democracy.

The Government keep all the rules on elections under close review. Therefore, in addition to what we are bringing forward in the Bill and what we have already covered today, I always welcome reports such as that of the CSPL and other bodies, because they help us to reflect on the most precious thing we have—our democracy.

I again thank the hon. Members who secured today’s debate, and all those who have contributed to it. We have heard a number of arguments begin to be drawn out today, following in the tradition of the reports, investigations and evidence that have been drawn together by parliamentary Committees and—as I mentioned—by the many years of work that go into bringing a Bill before this House. I hope that hon. Members agree that we have begun to engage with those arguments, and that there will be much more to do as we go through the process of the Elections Bill. I really look forward to those debates.

My fundamental argument throughout will be that the existing framework is strong. It is built on the right principles and it serves us well, albeit it needs updating for our age, which, as I have outlined, is what we are doing, particularly with digital imprints. The rules on funding and spending in election campaigns—including, as I have said, by political parties, third-party campaigners and candidates—prize transparency and fairness, while placing important controls on foreign funding and spending. The Electoral Commission has a rightly important role to play in providing guidance to help campaigners comply with the rules. Both the commission and the police have the necessary investigatory and enforcement powers to ensure compliance with the law. As I have said, there will be further measures in the Bill to strengthen those existing principles by increasing transparency, preserving the integrity of spending limits, and extending the prohibition on foreign spending in elections.

The Government remain 100% committed to ensuring that our elections are secure, fair, modern and transparent. That is why I am very pleased to have been part of today’s debate.