| The Funding of Political Parties in the United Kingdom | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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CHAPTER SEVEN LIMITS ON CAMPAIGN EXPENDITURE 7.1 The Neill Committee recognised that there was public concern not simply about the sources of income received by parties but also about their expenditure, particularly in the context of election campaigns. Their report examines the spiralling cost of general elections that has been in evidence since 1983. They concluded that the pressure to match, if not out-spend, the other side feeds the demand for ever more large donations and the perception that wealthy individuals and organisations are buying influence. It also fosters the impression that political parties and others are seeking (with whatever success) to 'buy' people's votes at elections. 7.2 Arguably, the rapid growth in spending over the last four general elections has only been possible because our electoral law has not caught up with the politics of the twentieth century. Election campaigns are no longer primarily a contest between candidates in individual constituencies, but between political parties fighting it out across the whole country. The Representation of the People Act 1983 which re-enacted legislation first passed one hundred years earlier was in its original form designed to deal with the bribery and corruption that was much in evidence in the constituency contests of the day. It did this by placing tough controls on what a candidate could spend at an election. For the average constituency, the limit is now some £8,000. These expenditure controls on candidates were reinforced by even tighter controls on what a third party could spend in support of, or in opposition to, a candidate. Indeed, the limit on third party expenditure now just £5 is so low that it has been held by the European Court of Human Rights to amount to an unjustified restriction on freedom of expression1. Against that background, it can readily be argued (see paragraph 10.25 of the Neill report) that it is the absence of national campaign limits, rather than their possible presence, which constitutes the anomaly. 7.3 The Government accepts that, whilst limits on what a candidate may spend in his or her constituency contest are still appropriate, electoral law must now be brought up to date by placing parallel limits on what political parties and other organisations may spend in the national campaign arena. 7.4 Part V of the draft Bill contains the Government's proposals in this area. They are largely based on the Neill Committee's recommendations but with some detailed technical modifications as explained below. Many of the issues raised in this chapter are also relevant to the elections, in May 2000, to the Greater London Authority. The limits on campaign expenditure in those elections will be the subject of consultation later this summer. Setting the limits 7.5 The Government accepts the Neill Committee's conclusion (R48) that the new national spending limits should be separate from, and additional to, those that now apply to candidates and individual constituencies. 7.6 The Neill Committee's report addresses the question of how to distinguish between campaign and non-campaign spending. The Committee considered whether to recommend overall limits on the total expenditure per year of the parties, but they concluded that it was possible to distinguish between campaign spending and non-campaign spending and that the limits which they recommended should apply only to campaign spending. 7.7 The Government accepts this conclusion, and does not propose that limits should be set on parties' overall expenditure. The scheme proposed in the draft Bill, like the existing constituency limits, only addresses spending on elections. 7.8 It is then necessary, however, to consider whether it is realistic to expect expenditure in connection with one election (for example, a Westminster general election) to be delineated precisely from expenditure in connection with another election (for example, to the Scottish Parliament and/or Welsh Assembly) which is going on at around the same time. This is likely to be a quite frequent occurrence2. The Government is inclined to the view that this would be more difficult than allowed for in the scheme proposed by the Committee, which considers the various elections as essentially separate contests. If more than one election is imminent, advertising etc. by a political party at the national level is likely to be devoted to achieving success at both elections, and any attribution of a share of the cost to this or that election would be likely to be artificial and unconvincing. 7.9 Moreover, the Government is not entirely convinced that no limit should be set on the period to which spending limits apply. In the last resort virtually all the expenditure of a political party, including maintenance of its infrastructure, is devoted to winning elections. Distinguishing between campaign and regular expenditure will depend to some extent on a comparison between what the parties spend in a non-election period and what they spend when an election is imminent. The operation of the existing limits on spending in constituencies rests to some degree on the fact that there is a precise moment (when the candidate is formally adopted) at which the limits begin to apply. 7.10 The scheme proposed in the draft Bill, although aimed at the same results as envisaged by the Neill Committee, therefore takes a somewhat different form. The limits are not set by reference to particular elections, but by reference to particular periods of time in which the elections will be held; and, where there is more than one election, that fact is reflected in a higher aggregate limit. 7.11 To prevent political parties circumventing the expenditure limits by incurring election expenses outside the period during which the limits apply, election expenditure has been defined by reference to the date on which the benefits of the expenditure were received and not to the date on which the expenses were incurred (paragraph 11 of Schedule 6). As a result, the cost, for example, of billboard advertisements displayed during an election period would count towards the expenditure limit irrespective of whether the advertisements were paid for before or after the start of that period. The effect is to determine the expenditure limits both by reference to a time period and, as the Neill Committee recommended (R51), by reference to the purposes for which expenditure is incurred. 7.12 Although the period over which there is sustained campaign activity will vary from election to election, the Government believes that on the basis of recent experience the period for the purpose of applying expenditure limits at a parliamentary general election should be the 365 days ending with the date of the poll. This seems realistic, because the parties' need for their election expenditure will never be higher than during the period leading up to a general election. 7.13 The period of sustained campaigning prior to a Scottish Parliamentary election and an election to the devolved Assemblies is likely to be rather shorter than for a Westminster general election. The draft Bill, therefore, applies limits on campaign expenditure incurred prior to these elections, and to elections to the European Parliament, to the period of four months before the date of the poll. The level of the limits 7.14 The Neill Committee analysed expenditure by the main parties at the 1997 general election. They concluded that the Labour and Conservative parties had spent £26 million and £28.3 million respectively3. These figures covered all campaign expenditure from the beginning of 1996, in the case of the Labour Party, and from 1 April 1996, in the case of the Conservative Party, to polling day on 1 May 1997. The Neill Committee concluded (paragraph 10.42): "Our judgment is that the new national spending limits should be set substantially below the total amounts spent by those two parties in 1997. We suggest a figure of £20 million." The Government shares this analysis and adopts £20 million as the maximum limit for a party organised on a United Kingdom-wide basis fighting a Westminster general election. 7.15 There remains the question whether expenditure limits for particular parties should vary according to the number of seats which they contest. The Neill Committee recommended that they should (R50). 7.16 The draft Bill takes account of the fact that, even at a Westminster general election, some parties will only contest elections in Scotland, Wales or Northern Ireland. It certainly seems desirable to limit expenditure within each of those parts of the United Kingdom separately so as to ensure a level playing field between the parties at that level. Otherwise, a party contesting seats only in Scotland, Wales or Northern Ireland would be able to spend as much in that area as a party fighting the election on a UK-wide basis could spend across the whole of the United Kingdom. 7.17 The Government also thinks it desirable, however, for the formula to reflect how many seats a party contests within England, Scotland, Wales or Northern Ireland. Although contests within those areas are the main case in which a party is likely to be putting up less than a full slate of candidates, it is not the only case, and it would be difficult to justify allowing a party which contests only half or a quarter of the seats in England the same spending limit as one contesting every seat. The draft Bill (Schedule 6) accordingly sets out limits in terms not only of whether the spending takes place in England, Scotland, Wales or Northern Ireland but also in terms of how many seats are contested within each of those areas. The various maximum limits, based on a party contesting all seats at an election, are shown in the table below: ELECTION EXPENDITURE LIMITS FOR POLITICAL PARTIES
7.18 This has to be a detailed scheme. But the situation with which it is intended to deal is itself a complex one, particularly in the light of the fact that there will often be overlapping elections for different purposes. The scheme is designed to produce clear results which take proper account of the extent to which different parties are contesting an election but which will also avoid the need to allocate expenditure artificially to particular elections. Items of expenditure to be covered 7.19 The draft Bill (clause 64) defines 'campaign expenditure' as expenses incurred by or on behalf of a party with a view to promoting or procuring the election of candidates standing in the name of the party or of the party itself (in the case of the list-based elections to the European and Scottish Parliaments and to the Welsh Assembly). In addition, expenses incurred generally enhancing the electoral prospects of candidates standing in the name of a party, or the party itself, are also caught. As recommended by the Neill Committee (R52), campaign expenditure includes benefits in kind as well as cash expenditure (clause 64(3)). 7.20 In their recommendation 53, the Neill Committee propose that legislation should include a schedule setting out a comprehensive list of items of relevant expenditure which should be declared by political parties at parliamentary elections, with the contents of the schedule being kept under review by the Electoral Commission. Clause 71(6) of the draft Bill as it stands enables the Electoral Commission to prescribe a form of the return. Before the legislation is introduced into Parliament, however, the Government will consult the political parties with a view to identifying a list of items to go into the legislation itself, together with a power for the Electoral Commission to trigger subsequent amendments by statutory instrument. Returns as to election expenditure 7.21 The registered treasurer of a party contesting a relevant election will be required to submit a return to the Electoral Commission after an election has taken place. In the case of a Westminster general election the return will cover the 365-day period ending with the date of the election. For other elections the return will normally cover the four months before the date of the poll. Special arrangements will apply where election periods overlap (clause 71). 7.22 Where the expenses incurred by a party are less than £250,000, returns must be submitted within three months of the date of the election which triggered the requirement to make a return. Where a party incurs election expenditure of £250,000 or more the return will need to be audited and submitted to the Electoral Commission within six months of the date of the poll. 7.23 Copies of parties' returns will be available for public inspection (clause 75). 7.24 The Electoral Commission will scrutinise parties' returns and undertake any necessary investigations. The Commission itself will not be a prosecuting authority, but where it finds prima facie evidence of a breach of the expenditure limits, it will report its findings to the police in the normal way. It would be possible for both a party's treasurer and the party itself to be prosecuted for exceeding the expenditure limits. A political party found by the courts to have contravened the expenditure limits will be liable to an unlimited fine (clause 70(3) and Schedule 8). Third party expenditure limits 7.25 To ensure that limits on election expenditure by political parties are not evaded by front organisations, the Neill Committee proposed that limits should also be placed on expenditure by individuals and organisations referred to as 'third parties' designed to promote or damage the electoral prospects of a political party (R55 to R58). The Government agrees that if the limits on election expenditure by political parties are to be effective, appropriate restrictions are also needed on national expenditure by third parties; these will be included in the Bill as introduced. 7.26 The Government proposes that the expenditure controls should apply during the same period in advance of an election as the controls on political parties. In the case of a Westminster general election, therefore, the controls would apply in the 365 days before the date of the poll. In the case of ordinary elections to the Scottish Parliament and the Northern Ireland Assembly4, and for elections to the European Parliament and Welsh Assembly, the expenditure controls will apply in the four months before polling day. Notification to the Electoral Commission 7.27 Any individual or organisation intending to incur election expenditure during the period of a particular election of more than £10,0005 will be required to notify the Electoral Commission of that fact. The notification would need to be sent before the £10,000 limit is exceeded to avoid a criminal offence being committed (R55). The limits on third-party election expenses 7.28 The Neill Committee recommended that the national limit on election spending by third parties should be set at 5 per cent of the maximum limit for any political party (R58). The Government accepts this recommendation. In the case of a Westminster general election, the Bill as introduced will accordingly set the limits at £793,500 in England, £108,000 in Scotland, £60,000 in Wales and £27,000 in Northern Ireland. The third party limits at other elections will similarly be set at 5 per cent of the maximum limit for any political parties. Returns by third parties 7.29 Where a third party has given a notification to the Electoral Commission in respect of a particular election, they will be required to make a return to the Commission after the election in question. Such returns will need to identify the income and expenditure of the third party in connection with the election. In most cases, the election expenses incurred will have been self-funded by the individual, company, trade union or other organisation concerned. In these circumstances, the Government sees no advantage in requiring the third party to establish a separate election fund (R57). Where a third party does receive outside donations to help it fund its election expenditure, however, the Bill as introduced will require the return to specify the total amount of such donations and identify the source and amount of any individual donation or £5,000 or more. It would be unlawful for a third party to accept any such outside donations which were not from a permissible source. Limits on expenditure by candidates and third parties in constituencies 7.30 In addition to recommending the introduction of new controls on national election expenditure by political parties and third parties, the Neill Committee also made a number of recommendations for changes in the law in relation to expenditure by candidates and others at constituency level (R45, R46 and R54). The Government accepts these recommendations. 7.31 Recommendation 45 of the Neill Committee report proposed that, subject to consultation, the limit on a candidate's expenses at a parliamentary by-election should be increased to about £100,000. At present the limit for by-elections (and general elections) is calculated by reference both to a fixed amount per constituency and to an additional amount which depends on the number of electors and whether the constituency is a borough (or, in Scotland, burgh) or county constituency. Although the existing higher limits for by-elections6 were introduced as recently as 1989, the components of the formulae date back to 1883. Given modern means of transport and campaigning methods, the Government does not consider that any difference in the limit between constituencies is still necessary or justifiable. In these circumstances, the Government proposes to adopt a flat-rate limit of £100,000 for all by-elections (clause 91 of the draft Bill). 7.32 The Government is separately giving consideration to whether there is also a case for introducing a single expenditure limit for all constituencies at general elections. A single limit would make for simplicity and transparency. It is recognised, however, that given the lower limits at general elections7, the variation between constituencies based on the number of electors has more relevance than in a by-election. 7.33 The Neill Committee commented on the fact that the form of return as to candidates' election expenses (as contained in Schedule 3 to the Representation of the People Act 1983) is almost comically out of date, referring as it does to the cost of sending telegrams. The Committee recommended (R46) that Schedule 3 should be revised and subsequently kept under review by the Electoral Commission. In order that the form of return keeps pace with changing campaigning methods, the Government proposes to repeal that part of Schedule 3 to the 1983 Act which contains the form of return and instead to confer a power on the Commission to set out a form of return in regulations. The necessary amendments to the 1983 Act will be added to the Bill prior to introduction. 7.34 At present candidates' returns are not subject to any official scrutiny but are simply delivered to returning officers and made available by them for inspection. As recommended by the Neill Committee (R80 and R81), returning officers will be required to send copies of candidates' returns to the Electoral Commission which will be able to investigate whether the returns have been properly made, both on its own initiative or in response to complaints. 7.35 The Government is also giving consideration to whether the law on election expenses needs to be clarified in the light of the Court of Appeal's judgement quashing the conviction of Fiona Jones, the Member of Parliament for the Newark constituency (and that of her election agent) for making a false declaration as to her election expenses8. 7.36 As indicated in paragraph 7.2 above, the existing limit of £5 on what a third party may spend in support of, or in opposition to, a candidate has been held to be contrary to the European Convention on Human Rights. As recommended by the Neill Committee (R54), the Government proposes to increase the limit to £500 (clause 90 of the draft Bill).
1 Bowman judgement dated 19 February 1998. See below, paragraph 7.36. 2 For example, on 6 May 1999 the elections to the Scottish Parliament and Welsh Assembly were held on the same day as local government elections. They were followed five weeks later by the elections to the European Parliament. 3 Tables 3.5, 3.7 and 3.10 of the Neill Committee report. 4 In the case of extraordinary elections the limits will apply from the date the polling day for the election is announced. 5 The Government believes that the lower threshold of £10,000, rather than that of £25,000 recommended by the Neill Committee, is appropriate, particularly in the context of third-party expenditure in Scotland, Wales and Northern Ireland, where expenditure of even £10,000 could have a significant impact. 6 A fixed amount of £19,863 and an additional 22.2 pence per elector in a county constituency or 16.9 pence per elector in a borough or burgh constituency. 7 A fixed amount of £4,965
and an additional 5.6 pence per elector in a county constituency or
4.2 pence per elector in a borough or burgh constituency.
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