| The Funding of Political Parties in the United Kingdom | ||||
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CHAPTER THREE DONATIONS TO POLITICAL PARTIES : REPORTING REQUIREMENTS 3.1 This chapter explains the proposals made in the draft Bill, based on the Neill Committee's recommendations, on the reporting of donations to political parties and the submission of accounts. The question of donations from foreign and other "impermissible" sources is dealt with in Chapter 4. 3.2 The relevant recommendations from the Neill Committee are recommendations 1 to 23. These set out a scheme for achieving transparency in the financial affairs of the parties. The main elements of the scheme are:
The Government agrees with this approach and Parts III and IV of the Bill (clauses 36 to 63) provide for the accounting and disclosure regimes. What is a political party? 3.3 A Bill which requires the parties to submit accounts etc. needs to identify what constitutes a political party for these purposes. Although everyone knows in a general sort of way what a political party is, the structure of the political parties is loose and sometimes complex. There are a number of existing statutory references to political parties, but the term is not defined in law. 3.4 The Registration of Political Parties Act 1998 established a voluntary system of registration. Under the terms of that Act any organisation which considers itself to be a political party may apply for registration. The only stipulation is that they make a declaration that the party intends to have one or more candidates at an election. Since the 1998 Act was passed, 83 political parties have registered with the Registrar of Political Parties at Companies House. But registration under the 1998 Act confers only rights and not responsibilities. Any system which imposes obligations on parties cannot rely on parties voluntarily bringing themselves within that system. 3.5 The approach taken in the draft Bill is that the key feature of a political party, and the only reliable criterion for treating an organisation as a political party, is that it puts up candidates for elective office. Any such organisation will seek to demonstrate to the electorate its unity of purpose by supporting candidates for election under a common banner or description. It is through such descriptions, as they appear on the ballot paper, that political parties can be identified. 3.6 Under the provisions of clause 19 of the draft Bill, therefore, only a candidate standing on behalf of a registered political party will be able to use a description, other than "Independent", on the ballot paper in a parliamentary or other relevant election1. As now, the use of a party description by a candidate will need to be authorised by the nominating officer of the party and the description will have to be one which voters are likely to associate with that party. 3.7 Entitlement to use a description on a ballot paper will, as a result, be tied to registration as a political party. Once registered, a party will be subject to the controls on the disclosure of donations and to requirements to submit accounts. A genuine independent candidate will, as now, be able to stand for election in his or her own name and use the description 'Independent' on the ballot paper without the need to register with the Electoral Commission. 3.8 Having established the requirement on political parties to register with the Electoral Commission, the next stage in the process is to establish the make-up of the organisation being registered. Political parties, particularly those organised across the United Kingdom or one or more of its constituent parts, characteristically have a central headquarters organisation together with a number of sub-units organised on a geographical basis, usually at the level of parliamentary constituencies and local authority wards. In addition, some political parties have, within their overall structure, organisations devoted to special interests (such as youth or women's movements) and affiliated bodies. In some cases, too, the party's constitution treats as part of a party organisations which, in a regime constructed to control funding, are better regarded as donors. The trade unions affiliated to the Labour Party are an obvious example. There is no standard pattern, but it is important to establish the boundaries of each political party for the purpose of the reporting and accounting arrangements. 3.9 Clause 22 provides that each registered party must deposit with the Commission a scheme setting out its internal structure. Such schemes must be approved by the Commission. As well as being a source of information for the Commission, such schemes will be relevant in determining the arrangements for regulating the financial affairs of the party (paragraphs 3.27 and 3.28 below) and in identifying those parts of the party (known as "accounting units") to which the lower threshold for the reporting of donations is to apply (paragraph 3.14 below). The registered Treasurer 3.10 The Neill Committee acknowledged the difficulties that would arise if the Electoral Commission was obliged to deal with each sub-unit within a party. It therefore recommended (R9) that each party should designate a responsible officer whose duty would be to report to the Commission all disclosable donations received by any part of the party's organisation. The Government agrees with this approach and clause 21 of the draft Bill requires a registered party to have a registered Treasurer. The registered Treasurer of a party will be responsible not just for the reporting of disclosable donations, but also the keeping of the party's accounts (paragraph 3.27 below) and compliance with the requirements on election expenditure (see Chapter 7). The definition of a donation 3.11 The Neill Committee recognised that full transparency of political parties' sources of funding required the disclosure not just of monetary donations but also of gifts in kind, goods and services received at beneficial rates and sponsorship deals (R6). The Government agrees that the term 'donation' should be broadly defined. Clause 47 provides that a donation includes:
The definition excludes the value of any voluntary service provided to a party by its members and supporters. 3.12 It would be unreasonable to expect political parties to identify and maintain records of every donation, however small. The Neill Committee suggested that there should be a de minimis limit, below which it would not be necessary to keep records of every donation or aggregate them for the purpose of identifying large donations made up of small packets (see paragraph 3.14 below). The Neill Committee recommended that the de minimis limit should be set at £50, and the draft Bill adopts this figure. This would exclude most standard subscriptions from members of the party. But the Government recognizes that at this level there would still be significant administrative implications for all the political parties. The Government would therefore welcome views on whether a higher threshold would be justified. 3.13 It is appropriate to exclude from the definition of a donation certain payments or benefits-in-kind, the cost of which is met from public funds and where the receipt or entitlement to such payment or benefit is derived from statute. These categories will include the receipt of free air-time for party political broadcasts and free postage of a communication to electors in European Parliamentary elections and other elections where registered parties stand. The reporting of donations 3.14 A 'disclosable donation' will be:
3.15 In reporting disclosable donations to the Electoral Commission, political parties will be required to provide the following information (R7 and Schedule 5):
3.16 Political parties will normally be required to make reports to the Electoral Commission covering the periods January to March, April to June, July to September and October to December (R11; clause 56). The reports will need to be submitted to the Commission within thirty days of the end of each reporting period. 3.17 However, the draft Bill follows the recommendation of the Neill Committee by providing that, during the run-up to a general election, parties will be required to make reports at seven-day intervals (R12 and clause 57). This additional reporting requirement will apply from the date the general election is announced to polling day. Clause 61 of the draft Bill enables the additional reporting requirement to be applied to elections to the European Parliament, the Scottish Parliament, the National Assembly for Wales and the Northern Ireland Assembly. 3.18 Donations reported to the Electoral Commission by political parties will be entered into the register of disclosable donations (R10 and clause 62). The register will be available for public inspection at the Commission's offices. The Commission may also be expected to make the register available on the Internet. 3.19 It is implicit in the Neill Committee's scheme and in these disclosure requirements that the registered Treasurer will need to be notified of all donations above the de minimis level received both by the central organisation and by all accounting units within the party so that he or she is in a position to aggregate donations made by the same donor. This reinforces the case for considering carefully whether £50 is the right figure. Financial assistance to political parties 3.20 The Neill Committee recommended that state funds should be made available to political parties to assist them with meeting the start-up costs involved (R5) in compliance with the new statutory disclosure requirements. There is, however, no suggestion in the Committee's report that support should be available on a continuing basis. 3.21 The Government's present view is that the cost of introducing arrangements for the disclosure of donations need not be great, but they will undoubtedly place some new burdens on the political parties. The Government is ready therefore to give favourable consideration to this recommendation in the light of views and information received from the parties. Anonymous donations 3.22 As the Neill Committee recognised, it is a necessary corollary of these reporting requirements that anonymous donations must be refused (R8). Under the provisions of clause 55 it will be an offence for the treasurer to accept a donation of £50 or more for the benefit of a registered political party where the identity of the donor is not known. An offence will not be committed where an anonymous donation is either returned (for example to a solicitor acting on behalf of an unnamed client) or, if that is not possible, surrendered to the Electoral Commission within thirty days of receipt. Discrimination against donors 3.23 Evidence submitted to the Neill Committee suggested that in the context of Northern Ireland the public disclosure of donations might lead to donors being discriminated against or facing acts of intimidation. This led the Committee to recommend, firstly, that such intimidatory or discriminating action should be made a criminal offence (R17) and, secondly, that consideration should be given to a short-term and reviewable exemption from the reporting requirements in respect of donations made to political parties in Northern Ireland (R20). 3.24 The Government is not persuaded of the need for new criminal offences in this area. In Northern Ireland, which was the particular focus of the Neill Committee's concerns, discrimination or intimidation against a donor to a political party would already constitute a criminal offence under existing legislation2. Similarly, in Great Britain a number of existing offences could apply3. In addition, section 17 of the Local Government Act 1988 places local and other public authorities under a statutory duty to disregard non-commercial matters including any political affiliations or interests when awarding contracts. 3.25 Whilst the Government considers that the existing law provides sufficient sanctions where incidents of discrimination or intimidation occur, it is clearly preferable that such incidents are avoided in the first place. The Government agrees with the Neill Committee that in Northern Ireland, where special considerations apply, there is a case for not applying the full disclosure regime in the short term. But the legislation is intended to apply throughout the United Kingdom and so, in the Government's view, any exemption should be as limited in its effect as possible. The Government doubts whether it is necessary, as the Neill Committee suggested, to exempt Northern Ireland parties altogether from the reporting requirements. Instead, clause 63 of the Bill provides power for the Secretary of State for Northern Ireland to exempt information relating to donations made to a Northern Ireland party from the Electoral Commission's duty to publish disclosure reports. The Government proposes that the exemption should apply initially for five years, whereupon it will be subject to review and capable of extension. Publication of annual accounts 3.26 To reinforce the transparency of the financial affairs of political parties, the Neill Committee recommended that, in addition to the reporting of disclosable donations, they should also be under a statutory duty to make their annual accounts available for public inspection via the Electoral Commission (R3). 3.27 The registered Treasurer of a political party will be under a duty to ensure that proper accounting records are kept in respect of the whole party (clause 36). Where a registered party has accounting units responsible for keeping their own accounts, the duty to maintain these will rest on the treasurer of each accounting unit. 3.28 The registered Treasurer will be required to prepare an annual statement of accounts in respect of the party (clause 37). For the purposes of such a statement, the income and expenditure of any accounting unit would be excluded. However, the treasurer of each accounting unit included in the scheme deposited with the Electoral Commission will be under a separate duty to prepare a statement of accounts. 3.29 The Electoral Commission will be able to specify by regulations the form and content of parties' accounts (R4 and clause 37(2)). The Commission will be able to specify different requirements according to whether the gross income or total expenditure of a political party or sub-unit does not exceed £1,000, exceeds £1,000 but not £250,000, or exceeds £250,000. This power to vary the accounting requirements according to the level of a party's income and expenditure will enable a 'light touch' regime to apply to those parties and sub-units which have only very limited income and expenditure. At one end of the scale, a party or sub-unit with an annual gross income or total expenditure of less than £1,000 might be required to produce a very simple annual statement, whilst at the other end of the scale a party or sub-unit with an annual gross income or total expenditure of £250,000 or more will be required to have its accounts audited (clause 38). 3.30 All political parties, irrespective of the amount of their income or expenditure, will be required to submit their accounts to the Electoral Commission. The accounts will need to be with the Commission within three months of the end of the financial year where they are not audited. Following consultation with the main political parties, the Government has concluded that it would be reasonable to allow parties up to six months to submit their accounts where they are audited. Sub-units of parties will only be required to send their statement of accounts to the Commission as a matter of course if their gross income or total expenditure exceeds £25,000 in that financial year. A sub-unit whose income or expenditure is below this threshold will, however, be required to submit a copy of its statement of accounts to the Electoral Commission if the Commission requests it. 3.31 Subject to any exemption for Northern Ireland, statements of accounts submitted to the Electoral Commission by parties or their sub-units will be available for public inspection. Common accounting period for political parties 3.32 Recommendation 4 of the Neill Committee's report proposed that the Electoral Commission should have the power to prescribe a standard accounting year. While clause 36(6) of the draft Bill confers such a power on the Commission, it also enables the Commission to specify a different financial year for different parties. Preliminary consultation with the political parties suggests that a common financial year is not a priority, particularly given that common reporting periods will, in any event, apply to parties in respect of their disclosable donations and their election expenditure (see Chapter 7). The intention is that the costs and benefits of the parties moving to a common accounting year should be weighed up by the Electoral Commission, in discussion with the parties, once the basic system is in place. Under these proposals, the Electoral Commission would be free to decide that for each political party they will specify the financial year chosen by that party. Blind trusts 3.33 In recommendation 21 of their report, the Neill Committee recommended that blind trusts should be prohibited as a mechanism for funding political parties, party leaders or their offices, Members of Parliament or parliamentary candidates. 3.34 So far as donations to political parties as such are concerned, a blind trust will not constitute a "permissible source" (see clause 50) and so a prohibition is inherent in the proposals in the draft Bill as it stands. 3.35 As matters stand, regulation of the receipt of moneys by Members of Parliament is within the purview of the House of Commons Select Committee on Standards and Privileges. Members of Parliament are required to disclose, in the Register of Members' Interests, any financial support above a minimum threshold received either as candidates for election or in connection with membership of the House4. The Parliamentary Commissioner for Standards, who maintains the Register, has advised that donations over £1,000 received by individual Members in connection with their candidature for the leadership of their party would be amongst those that would fall to be disclosed. No Member of Parliament has sought to register a blind trust in the current Parliament. Members of the Scottish Parliament5, of the National Assembly for Wales6, of the Northern Ireland Assembly7 and of local authorities8 are subject to similar disclosure requirements in respect of their financial interests. 3.36 The Government accepts, however, that blind trusts should also be prohibited as a source of donations to other party members or groups, and not just to Members of Parliament. The Government proposes to take this issue forward in the context of the further work it proposes to do, before the Bill is introduced into Parliament, on donations to individual members of parties (see immediately below). Donations to individual members of political parties 3.37 In recommendations 22 and 23 of their report, the Neill Committee addressed the wider issue of donations to individual members of political parties or to unofficial groups within a party, as distinct from donations to political parties as such. The Government sympathises with the view that the principles of openness and accountability should apply equally to such donations. 3.38 As a result of the Government's proposals to introduce directly elected mayors in London and elsewhere, there will increasingly be high-profile contests within political parties to secure a party's nomination for such offices. Such contests may take on the characteristics of primary elections during the course of which considerable sums could be spend by the competing candidates. It is important that the sources of such funding are subject to public scrutiny in the same way as the funding of political parties. 3.39 The Government therefore proposes to implement recommendation 23 and require the disclosure of donations of £5,000 or more given to an individual party member or group. Before doing so, the Government would welcome views on whether the Electoral Commission should receive individual reports from the individual recipients or whether a responsibility should be laid upon party organisations to account for such matters. It is also for consideration whether these arrangements are to apply to Members of Parliament and other holders of elective office who are already obliged to report such donations in registers of interest.
1 The relevant elections are elections to the Scottish Parliament, National Assembly for Wales, Northern Ireland Assembly and European Parliament; local government elections and local elections in Northern Ireland. 2 Under section 1 of the Protection of the Persons and Property Act (Northern Ireland) 1969 it is an offence to cause a person to leave their home or employment by means of certain acts of intimidation. In addition, the Fair Employment and Treatment (Northern Ireland) Order 1998 (SI No 1998/3162) makes it an offence to discriminate against someone, on grounds of religious belief or political opinion, in the field of employment, education and the provision of goods and services. 3 Including the offences of harassment under the Protection from Harassment Act 1997 and of using threatening, abusive or insulting words or behaviour under section 5 of the Public Order Act 1986. 4 The Code of Conduct, together with The Guide to the Rules Relating to the Conduct of Members Approved by the House of Commons on 24 July 1996 (HC 688). 5 Section 39 of the Scotland Act 1998 requires the Scottish Parliament to establish a register of Members' interests and Members of the Parliament to record registrable interests in that register. 6 Section 72 of the Government of Wales Act 1998 makes similar provisions in respect of the National Assembly. 7 Section 43 of the Northern Ireland Act 1998 does likewise in respect of the Northern Ireland Assembly. 8 Local councillors in England and Wales are required to declare certain pecuniary interests in their local authority's register of interest maintained under section 17 of the Local Government and Housing Act 1989. The Government has proposed a new framework to deliver high standards of conduct throughout local government in its draft Local Government (Organisation and Standards) Bill (Cm 4298, March 1999).
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