Elections Bill

(Limited Text - Ministerial Extracts only)

Lords Hansard - Part 2 & Committee stage
Monday 28th March 2022 Lords Chamber

[Lord Stunell (LD)]

My Lords, I think that I am now the 11th Peer to tell the Minister that the legislation is not strong enough when it comes to protecting our elections from the financial bigwigs. Indeed, there was a report from the Committee on Standards in Public Life last July. I hope that the noble Lord, Lord True, is back with us for the next stage of this Bill, but we have had some discussions with him about how many of those recommendations in last year’s report the Government believe that they have incorporated in this Bill. He has been a little bit coy about that; I might perhaps try to tempt the noble Baroness or the noble Earl to try a little harder on which of the 47 recommendations in last July’s report by the Committee on Standards in Public Life the Government believe that they have incorporated in this Bill, and which ones they are positively rejecting.

However, I want to speak about a preceding report from the Committee on Standards in Public Life in 2011. I thought that maybe if it had a 10-year run-in, there might be a better chance that we would achieve success in this Bill from some of its recommendations. Noble Lords will know that I am a member of CSPL, but I certainly was not in 2011—I was fulfilling a different role then. That report reviewed the case for having any kind of financial limits on elections. The top risk is the risk of capture of a political party by donors, capture of its policy, its practice and its personnel. Regarding policy, some of us have been frustrated for a long time by the inability of successive Governments to get to grips with tax havens around the world. I am sure that it is completely unconnected that a number of donors live in tax havens, but it could be something which the public would be suspicious about, even if we are far too knowing to believe that a party might be influenced by that.

What about the difficulty in bringing offshore banking onshore? Could that have anything to do with where donors are starting from and where they are banking? What about getting a beneficial ownership register of all companies and making Companies House work properly? Again, we find very little progress, which is very much in the interests of people who make big donations to political parties.

So policy can be affected, perhaps by slowing it down or perhaps by driving it slowly into the sand. Some of us think that this Bill is a victim of that, with so many proposals not grasped but avoided. My noble friend Lord Clement-Jones gave some powerful evidence about the way in which there has been a failure, in this Bill, to confront electronic campaigning, as has been recommended to the Government by many bodies and persons.

There is a risk of capture of policy and of practice, and that is in how government acts and what happens. I point to the free market for high-end property purchasing in London, which has suddenly come to a grinding halt, at least as far as some purchasers are concerned. Obviously, it serves the economy of the UK fine to sell hugely overpriced houses and leave them empty, while various dictators in the former Soviet Union sit on their extracted wealth, but it is not all about foreign donors.

I bring to your Lordships another situation where government practice has been distorted by motives that are not necessarily in the best interests of public service. I refer to the company PPE Medpro, reported in the Guardian this morning as having secured a contract for the supply of 25 million sterilised surgical gowns during the pandemic. Those gowns were bought by PPE Medpro for £46 million and sold to the Government for £122 million. In this case, the money is going in the opposite direction to the one we have been talking about for most of this group of amendments. According to the Guardian report, it turns out that those sterilised surgical gowns were, in fact, unsterilised; they were not double-wrapped and they a had false or misleading BSI test number on them. I understand the Department of Health is trying to get its money back, but the mindset that led to that fiasco unfolding is part of the capture, by big donors and big-donor thinking, of a political party.

Then there is personnel—policy, practice and personnel. It is almost embarrassing to say it, but recommendation 19 of the 2011 report of the Committee on Standards in Public Life was that there should be full publication of the criteria for political appointments to the House of Lords. I plead guilty as a political appointment to the House of Lords, as probably should a number of other noble Lords here, but it makes the point that there is an unhealthy connection between money, donations and preferment. It is not simply the House of Lords that is in scope.

Amendment 212DA in my name repeats two of the recommendations from that 2011 CSPL report. In fact, the noble Baroness, Lady Bennett of Manor Castle, quoted from it but, for the purposes of time, left out some words beyond the end of that quote. Recommendation 1 states that there should be a limit of £10,000, which is the figure I have included in this amendment. There should be a democracy of donors, as was spelled out by the noble Baroness, Lady Bennett.

Recommendation 6 of that report figures in the second part of my amendment, in that there should be a reduction in national election spending limits of 15%. That was from the CSPL in 2011; the election spending limits had been in place for five years, at that time, and the committee thought they should be reduced by 15%. Fair enough—they have not been increased, but it has now been proposed that they should be increased by over 60%. Far from the 15% reduction that the CSPL thought was sensible 10 years ago, the Government now propose that they are increased by 60%.

I would put in a case for CSPL’s proposals and recommendations and therefore for my amendment. I also strongly support the other amendments that have been put forward. Perhaps the most powerful—not to decry any of the others—is what I have chosen to call the Rooker-Butler amendment, Amendment 212G, which should put the wind up every political party if it comes into force. It proposes that there should be a “risk assessment” for all donations over £7,500. It seems to me that, as a basis for proceeding further, it can hardly be beaten. But I cannot leave out the amendment of my noble friend Lord Wallace and the noble Baroness, Lady Hayman, that would capture “unincorporated associations” as well—this is recommendation 10 of the Committee on Standards in Public Life’s report of 2011.

I finish by simply saying that the Government may or not be ready to take on the recommendations of the Committee on Standards in Public Life’s report from last year, but, for goodness’ sake, will they please agree to take on those that it made 10 years ago and that have still not been implemented?

[Earl Howe (Con)]

My Lords, this group of amendments brings us to the subject of political donations, and I am grateful for the contributions from all sides of the House on this topic. I have listened carefully and noted the strength of feeling that clearly exists around it.

I will start with a word of general reassurance: the integrity of our political system is of the utmost importance to Her Majesty’s Government and, without doubt, all parliamentarians—the noble Lord, Lord Butler, was quite right in what he said on that score. Therefore, it is vital that the rules on political donations are kept continually under review. We must ensure that they continue to provide an effective safeguard to protect that system integrity.

Therefore, it is right that, as a matter of principle and practice, UK electoral law already sets out a stringent regime of controls on political donations to ensure that only those with a legitimate interest in UK elections can make political donations—and that political donations are transparent. This includes registered UK electors, registered overseas electors, UK-registered companies that are carrying out business in the UK, trade unions and other UK-based entities. Donations from individuals not on the UK electoral register, such as foreign donors, are not permitted. There is only a very limited exception to this, whereby, for political parties registered in Northern Ireland, permissible donors also include Irish citizens and organisations, provided that they meet prescribed conditions. This special arrangement reflects the specific context in Northern Ireland.

In order to address the tabled amendments and contributions as fully as I can, I propose to frame my response thematically. I turn first to Amendments 198,199, 204, 212D and 212E, all of which make reference to alleged “foreign donations”. I am afraid that this group of amendments does not find favour with the Government because they seek to remove the rights of overseas electors to make political donations as well as to remove the right to make donations from non-UK nationals who are registered to vote in the UK. Overseas electors are British citizens who have the right to vote; they are important participants in our democracy, as are non-UK nationals on the electoral register. We intend to uphold the long-standing principle that, if you are eligible to vote for a party, you are also eligible to donate to that party. Amendments 198, 199, 204 and 212D would ignore that principle by removing the rights of overseas electors entirely.

I must repudiate the suggestion of the noble Baroness, Lady Hayman of Ullock, that this is all about increasing political donations to the Conservative Party. The Bill delivers the Government’s manifesto commitment to remove the arbitrary 15-year limit on the voting rights of British expatriates, broadening their participation in our democracy.

The issues at stake here are matters of principle. Supporters of many parties back votes for life. The Liberal Democrats pledged in their two most recent manifestos to scrap the 15-year rule. In addition, one of the most passionate and high-profile campaigns for votes for life has been led by Harry Shindler, who lives in Italy and is 100 years old, a World War II veteran and the longest serving member of the Labour Party. I say to the noble Lord, Lord Sikka, that this measure will not open the floodgates to foreign political donations. Registered overseas electors are eligible to make political donations as important participants in our democracy. It is only right that they should be able to donate in the same way as other UK citizens registered on the electoral roll. I say again: the changes within this Bill will simply scrap the arbitrary 15-year limit on these rights.

[Lord Wallace of Saltaire (LD)]

Would that be without any cap on the size of the donation offered? Would the Minister consider that a cap on the size of a donation offered by, for example, Sir Philip Green might be appropriate?

[Earl Howe (Con)]

I will come to the subject of caps on donations in a moment.

On Amendment 212E, the noble Lord, Lord Rennard, recently tabled a Question for Written Answer about the uncommenced provision in the 2009 Act. This provision, Section 10, refers to residence and domicile for income tax purposes as a criterion for permissible political donations. Although a response was issued to him by my noble friend Lord Greenhalgh on 14 March, I hope that it will be helpful if I repeat it briefly for the benefit of the Committee.

The Government have no current plans to bring into force the uncommenced provision, Section 10 of the Political Parties and Elections Act 2009, regarding donations from non-resident donors. There is a very good reason for this: the provision is not workable given that an individual’s tax status is subject to confidentiality. It may therefore be difficult or even impossible for the Electoral Commission, political parties and other campaigners to accurately determine whether a donor meets the test set out in Section 10.

Furthermore, as a matter of principle, taxation is not connected to enfranchisement in the UK. If a British citizen is able to vote in an election for a political party, they should be able to donate to that political party subject to the requirements for transparency on donations. There is clear precedent here. Full-time students are legally exempt from paying council tax but still have the right to vote. Likewise, those who do not pay income tax rightly remain entitled to vote. For these reasons, the Government cannot support these amendments.

The other key theme that this debate has focused on is that of donations made by companies or other entities such as unincorporated associations. I will address Amendments 197, 198, 200, 210, 212 and 212G in the remarks that follow. As I have said before, only those with a legitimate interest in UK elections can make political donations, such as UK-registered companies which are carrying out business in the UK, trade unions and other UK-based entities. There is only a very limited exception to this, whereby, as I indicated earlier, for political parties registered in Northern Ireland permissible donors are a wider category.

The law is already clear that, if a company wants to donate to a party or fund a campaign, it must be a permissible donor. The recipient of a donation is responsible for checking that the donor is eligible; that is to say that it is registered in the UK and carrying out business in the UK. The recipient must also report the relevant donations to the Electoral Commission quarterly, and weekly during election periods. To ensure transparency about party funding, donation reports are published by the Electoral Commission on its online database.

Unincorporated associations are permissible donors only where they carry on business or other activities wholly or mainly in the United Kingdom and where their main office is in the UK. Further to this, any unincorporated associations making political contributions of more than £25,000 in a calendar year must notify the Electoral Commission and are subsequently subject to various reporting requirements relating to their own funding. Members’ associations, many of which are unincorporated associations, are separately regulated as regulated donees and must report on donations and loans that they receive.

Amendment 197 would introduce a new obligation on unincorporated associations to take all reasonable steps to check whether donations they receive intended for political purposes come from a permissible donor. At first glance, “all reasonable steps” appears perfectly reasonable. However, this would represent a significant change for unincorporated associations which, as I outlined previously, are already subject to significant reporting requirements. It singles them out from other types of donors and puts them instead closer to the level of political parties in their due diligence obligations. This could mean many voluntary groups and local sports clubs and societies all facing a significant extra due diligence cost simply because they fall into an unlucky category. That does not strike me as fair, and I would be concerned about the possible chilling effect on democratic participation of those groups.

Amendment 198 is an attempt to restrict donations from organisations. As drafted, it would exclude UK-based companies with fewer than five employees from making donations. Furthermore, it is unclear how one would determine who has “significant control” of an unincorporated association, as their governance structures are not regulated in the same way as other legal entities. Although I am sure this was not the intention, it demonstrates quite well the risk of serious unintended consequences if amendments which place restrictions on who can participate in our democracy are made with haste and without consultation. Furthermore, Amendment 198 would make it an offence for an ineligible company to even offer a donation, regardless of whether it is accepted and regardless of whether it was aware the donation it was offering is impermissible. This is unnecessary.

Donations from impermissible donors are already illegal, and it is the political parties and campaign groups receiving the money, the ones which better know and understand this area of law, which are accountable and responsible for checking, returning and reporting impermissible donations. In addition—this point has been highlighted previously—it is an offence for a donor knowingly to facilitate the making of an impermissible donation.

I am grateful to my noble friend Lord Hodgson for his Amendment 210, which would prohibit donations from individuals or companies that hold public contracts with a value equal to or exceeding £100,000. The complexities of procurement frameworks are slightly beyond the scope of this debate, but let me say that, while well-intentioned, it is not clear how this amendment would operate in practice. Seemingly, there is no limitation on a person making a donation to a party prior to entering into a contract with a public body, and it is unclear whether the prohibition extends beyond the lifetime of the contract and, if so, for how long. It is important to note that the existing legislation already provides for publication of donations to political parties, regulated donees and recognised third-party campaigners, therefore enabling any discerning citizen and our free press to scrutinise any large donations.

I also thank the noble Lord, Lord Sikka, for his Amendment 212. As he explained, the intention of this amendment is to prevent shell companies being used to make large donations. Similar concerns on source of donations underpin Amendment 200 and the substantial Amendment 212G from the noble Lords, Lord Rooker and Lord Butler, which would introduce requirements for registered parties to carry out risk assessments and due diligence checks on donations.

However, as I have already outlined, there are strict rules requiring companies making donations to be incorporated and carrying out business in the UK. Existing rules also prohibit circumventing the rules through proxy donors. That is on top of a legal requirement for political parties and other recipients to conduct permissibility checks and report to the Electoral Commission.

The principle of strengthening the system to provide greater levels of assurance on the sources of donations to ensure they are permissible and legitimate is important. We take seriously the risk of donors seeking to evade the rules. Indeed, the Government recently set out their final position on the reforms to the corporate registration framework, ahead of introducing legislation, in the Corporate Transparency and Register Reform White Paper.

The introduction of mandatory identity verification for those incorporating and filing with Companies House will be essential for making information on the companies register more reliable. It will mean that those with the intention of fraudulently misusing the UK corporate registration framework will have their activities traced and challenged. For example, all directors of UK limited companies will be required to verify their identity in order to be registered, and overseas companies will be required to verify the identity of all their directors. This, in combination with a new power for the Companies House registrar to proactively pass on relevant information to law enforcement and other public and regulatory bodies, including the Electoral Commission, will help ensure that any company making political donations is properly trading in the United Kingdom.

However, we do not want to impose disproportionate legal obligations that hinder the ability of parties and other campaigners to generate funds against the cost of carrying out checks on donations to ensure that they come from permissible sources. To do so would risk it not being cost effective for parties to accept smaller donations and therefore exclude some people from being able to participate in our democracy in this way. The current rules are proportionate and achieve this balance.

[Lord Rooker (Lab)]

I am listening carefully to the Minister. Going back, say, a decade before the Government started to tighten up the anti-money laundering rules, companies, accountants, company secretaries and company lawyers all said, “Our professional obligations and institutions require us to do all these checks.” But they were not doing them, hence the Government had to bring in some anti-money laundering rules. Why are political parties any different?

[Earl Howe (Con)]

My Lords, I hope I have already explained how the Government intend to legislate in the future to create greater transparency of companies. As I said at the beginning, all we can do is keep the rules under review. I am suggesting that in this particular area, the balance is about right.

[Lord Stunell (LD)]

I understand that the Government have a point of view on this, but it is clearly in contradiction to that of the Committee on Standards in Public Life, the Electoral Commission and others. Can the Minister expand on his reasoning for rejecting their proposals?

[Earl Howe (Con)]

I will answer the noble Lord’s point about the Committee on Standards in Public Life in a moment, if he will allow. First, I turn to Amendment 200, jointly tabled by the noble Lord, Lord Wallace, and my noble friend Lord Hodgson, which seeks to introduce new restrictions on donations. The amendment seeks to confer additional powers on the Electoral Commission to identify donations that the commission considers to be a risk to national security or that do not meet a “fit and proper test”, to be determined by the Secretary of State.

This is not the commission’s role or area of expertise, and it would therefore be entirely inappropriate to give it this responsibility to assess risks to national security. The commission is simply not equipped to make some of the judgments proposed by this amendment. The commission has said of this proposal that it

“would be a significant change to our current remit and is not a role we are seeking, as the benefits of this proposal over and above the work of the established security agencies are not clear”.

Put simply, countering foreign interference is the responsibility of the Government, the appropriate law enforcement agencies and the intelligence services, not the Electoral Commission.

The Government already work closely with a range of partners, including the Electoral Commission, to maintain the integrity of democratic processes and take the necessary steps to tackle the risk of foreign interference. The cross-government Defending Democracy programme brings together capabilities and expertise from across departments, security and intelligence agencies and other partners to ensure that democracy remains open, vibrant and secure. In support of this, the Government have set out their intention to bring forward separate legislation to counter state threats. This will give our security services and law enforcement agencies the additional tools they need to tackle the evolving and full range of state threats.

The amendment would also require the Electoral Commission to determine whether a donor meets a “fit and proper” test in respect of the integrity and reputation of the person, based on criteria set out by the Secretary of State. It is our view that the rules are already clear about who is a permissible donor. Beyond this, any further judgments about the appropriateness of receiving a particular legal donation are for the recipient of the donation to judge, and for those recipients to justify their decision through scrutiny enabled by the transparency in our system. It should not be for the Electoral Commission to make these judgments on behalf of others.

--- Later in debate ---

[Lord Collins of Highbury (Lab)]

Would the noble Earl acknowledge that trade unions are different? They are highly regulated and the law was changed to ensure that every individual who makes a contribution to a political fund has to approve it. It is contracting in now—a change this Government made without consultation with other parties. So to put trade unions in the category of a millionaire or a corporate company is totally wrong.

[Earl Howe (Con)]

My Lords, I am not casting aspersions on trade unions. I was seeking to suggest that making them a unique case, as the amendment seeks to do—

[Lord Collins of Highbury (Lab)]

I have explained why they are a unique case: you have already changed the law without consultation with any party. You changed the rules, forcing individual trade union members to contract in to their political funds. Their political funds are highly regulated and highly controlled, and were subject to a change in the law—so they are different.

[Earl Howe (Con)]

I do not contradict the noble Lord in any respect as to what he said about trade unions. I say again that I cast no aspersions on trade unions or their practices at all. I am simply saying that it seems unfair and undemocratic to have this distinction made in the way the noble Baroness seeks to do in her amendment.

Fundraising is a legitimate part of the democratic process. There is no cap on political donations because parties, candidates and other types of campaigner have strict limits on what they can spend on regulated campaign activities during elections.

The other amendment in the noble Baroness’s name—

[Baroness Bennett of Manor Castle (GP)]

Before the Minister goes on to the next amendment, I asked whether he agreed that there should be any limit. If we imagine an election campaign, one party’s spending limit is about £20 million. Does the Minister think it appropriate that one person can donate £20 million for an entire election campaign? What does he think that would do to our democracy?

[Earl Howe (Con)]

My Lords, there are two issues there: one is the question that the noble Baroness seems to be asking, which is whether there should be a limit on donations, and the other is whether there should be a limit on spending. There is a limit on spending in general elections, as she well knows. If she is asking whether I think there should be a cap on donations, I have to say that I do not.

[Baroness Bennett of Manor Castle (GP)]

Sorry, perhaps I was not clear. To put it another way, should there be a maximum percentage that one person can donate to one party’s campaign? If a campaign is funded to the maximum spending limit by one person, it is one person’s campaign. Does the Minister think that would be appropriate?

[Earl Howe (Con)]

That is a highly hypothetical question. I would be happy to give it consideration. For the moment I have to say that the answer is no, but I will reflect on it.

The other amendment in the noble Baroness’s name, Amendment 212B, seeks to place new obligations on donors to report donations to the Electoral Commission where the aggregate total for the year is over £5,000. Yes, there should be transparency around any significant amount of money funding parties and election campaigns, but that does not mean putting the burden on donors. It is for political parties and candidates—the recipients of the donations, who are familiar with the rules—to keep accounting records and report donations over the relevant thresholds to the Electoral Commission. Placing any unnecessarily bureaucratic responsibility on donors such as individual citizens could lead to a chilling effect and discourage people from making donations.

Amendment 212DA, tabled by the noble Lord, Lord Stunell, seeks to cap donations to political parties at £10,000 per calendar year. Perhaps inadvertently, it would require that every penny in a collection box be recorded and attributed to someone, effectively spelling an end to small donations. Even more significantly, the Government cannot, on principle, support caps on donations as this would only lead to taxpayers footing the bill for the inevitable funding shortfall. There is absolutely no public support for expanding the level of public funding already available to political parties. Public funds should be focused on delivering world-class public services and levelling up communities across our country.

The noble Lord asked about the recommendations in the report from the Committee on Standards in Public Life. The Government responded to the report published by the CSPL on regulating election finance in September last year. The Elections Bill already contains measures that closely link to recommendations made in that report, such as the new requirement on political parties to declare their assets and liabilities over £500 on registration, and a restriction of third- party campaigning to UK-based or otherwise eligible campaigners. However, as the Government response stated, the recommendations in the report deserve full consideration, and more work must be done to consider the implications and practicalities, which, I hope the noble Lord will acknowledge, are very considerable.

In conclusion, controls on electoral funding and transparency of electoral funding are a key cornerstone of the UK’s electoral system and contribute to a healthy democracy. UK electoral law sets out a stringent regime of donations controls to ensure that only those with a legitimate interest in UK elections can make political donations and that political donations are transparent. The Government absolutely recognise the risk posed by those who wish to evade the rules on donations. That is why there are existing provisions which explicitly prohibit money being funnelled through permissible donors by impermissible donors, and why it is an offence for donors and campaigners to purposefully evade the rules.

It is right that voters and organisations with a legitimate interest in UK elections be able to donate to political parties, candidates and campaigns. Our democracy is strengthened by people donating to campaigns that they believe in. I am, of course, aware that stories about political donations are never far from the newspapers, but rather than being indicative of a broken system, I firmly believe that this is a sign of the system working. The checks that parties and other campaigners are required to carry out and the reports published by the Electoral Commission allow the press and the public to scrutinise political donations. It is very important to balance the need for parties and other campaigners to generate funds against the cost of actually carrying out checks on donations to ensure they come from permissible sources. The current rules are proportionate and achieve that balance. I hope that, on that basis, noble Lords will feel able not to move their amendments when they are reached, and that the noble Baroness, Lady Hayman, feels able to withdraw her amendment.

[Baroness Hayman of Ullock (Lab)]

My Lords, I thank the Minister for his response to this large group of amendments. In responding to my amendment, he said that there was a Conservative Party manifesto commitment to extend the franchise for overseas electors. My amendment was not about that manifesto commitment; it was about the donations that could then come in through that action. I was not saying that that should not happen. The amendment was specifically related to donations, and that is what I want to come back to now.

I think we can say that we disagree as to whether excessive foreign donations being allowed to come into our politics is a good thing and whether there should be a cap on them. If the Government feel that stopping overseas donations is not an option, in my opinion, we should certainly look at whether we can cap the amounts.

I agree strongly with the first thing the Minister said: the integrity of our electoral law is of the utmost importance. This is why there has been so much concern in this debate over whether that integrity is being undermined by the way in which political donations currently work. I know that the Minister said that the current laws manage this, but it is really disappointing that he does not accept the great concerns that have been raised about how donations can ultimately buy political influence. We must be very careful in our country that we do not tip into the way in which other countries have operated when donations get very large. I just wish that the Government would accept that there is a problem and that it needs to be nipped in the bud. This is an opportunity to legislate for that.

I will finish by saying that a lot of strength of feeling on this issue has been expressed in Committee today. I am sure that we will return to this on Report but, in the meantime, I beg leave to withdraw the amendment.