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The Earl of Kinnoull
That this House takes note of the regulatory regime for political party finance and the role of the Electoral Commission.
The Earl of Kinnoull (CB)
My Lords, at the core of any western liberal democracy is trust. The citizen must trust the institutions that make up their democracy and the people within those institutions. They must trust also that the oversight arrangements will work and, if someone or something breaches that trust, that there will be a mechanism to put things right. Within our democracy, and in common with other western liberal democracies, there will always be questions about political party finance. Political party finance in the UK is regulated by the Electoral Commission, which I will come back to shortly.
Trust in the ruling party in Scotland is at a very long-term low. There is the First Minister who could not see a huge and shiny motor home outside her mother-in-law’s house; the refrain in rural Perthshire is, “She should’ve gone to Specsavers”. This is the same First Minister who believes that full co-operation with the police is hours in their custody repeating “no comment”. Another First Minister is vigorously trying to stop a Scottish Parliament inquiry into something so damaging for our democracy—with no apology for the obvious and serious conflict he has—as such an inquiry would inevitably seek to look into his actions and inactions as well. Be it a Cabinet or a board of directors, members have joint responsibility for what has gone on. Indeed, a director is personally liable for their negligence.
The SNP leader claims the SNP national executive committee to be different. Members of the NEC, he feels, have no responsibility or liability for their actions and inactions over the decade of immoral mess. The judge in the case made it clear that the embezzlement was not particularly sophisticated, which only underlines how deep the NEC’s failure was, individually and collectively. The senior members of the NEC have then reached for the Pontius Pilate kit to wash away the blame. That is very wrong. The leader, former leader and long-term treasurer over the decade all owed a particular duty to their party and each year would have made the usual clear representations to their auditors. They remain the most active at trying to prevent more scrutiny that would examine their actions and inactions. This presents that horrible conflict. They do this to their great shame.
The seriousness of the situation means a lot of questions must be answered. The nation has rightful questions over the short money, the policy development grants, the money raised for the ring-fenced funds that have disappeared, and simply the money of the members of the SNP. To the extent that funds have been improperly used, restitution must be made. The Electoral Commission is the regulator of political finance and I expect it to play a public and leading role in the process, but a parliamentary investigation also is more than warranted. I ask the Minister: do the Government intend to be fully supportive of any Westminster or other parliamentary inquiry to look at this very serious matter?
The other recent situation that has been so damaging to our trust has been the saga of the £5 million and Nigel Farage. Mr Farage announced in March 2021 that he was
“stepping back from front-line politics”.
Christopher Harborne, who had been a major supporter of Reform UK Party Ltd, gave Mr Farage £5 million in early 2024. Subsequently, in mid-2024, Mr Farage stepped back into “front-line politics” in time to be elected as the MP for Clacton-on-Sea. He says that there was no need for him to report the £5 million gift to anyone. The trouble with this account of affairs is that Reform Party UK Ltd is a company, and during the relevant period there were three directors: Richard Tice, Mehrtash Azami and Nigel Farage. Nigel Farage therefore never stepped back from politics. He is a very strong personality and he sat on the small central board of his party at all the relevant times. I imagine his lawyers are fighting very hard to get him off on a technicality, but morally at least he is in the wrong.
The vital thing where any regulator is concerned is to ensure that they have the correct powers, the correct duties and the correct level of resources. The Electoral Commission is rather a new body, born in 2001 following the Political Parties, Elections and Referendums Act, or PPERA. It came to life in what was already a very large and very complicated field and canon of electoral law. In the intervening years since 2001, there have been several Acts of Parliament which have amended PPERA and several carefully thought-through reports pointing to a direction of simplifying and strengthening matters. I will briefly mention one or two of the key ones.
The Law Commission produced a 230-page report on electoral law in 2020. Although this was not so much about political funding, it picked up strongly on the theme of needing to simplify things. There were 106 recommendations. Recommendation 1 was:
“The current laws governing elections should be rationalised into a single, consistent legislative framework governing all elections”.
As we settle down to a 27th Representation of the People Bill later this year, I for one will recall this simple wisdom.
The Committee on Standards in Public Life, chaired by our own noble Lord, Lord Evans of Weardale, published Regulating Election Finance in 2021. This report, with its 47 recommendations, said at recommendation 1:
“The government should bring forward a bill to simplify and consolidate electoral law”.
That is the second respectable institution making the same powerful and obviously correct point.
Last year, in July, the Government produced a policy paper, Restoring Trust in our Democracy. The sponsoring Minister was Angela Rayner. This, essentially, was the trailing document for the Representation of the People Bill announced in the latest King’s Speech. There is, however, no mention of a consolidation Bill. I ask the Minister to comment on that.
In March this year, we had the welcome Rycroft review, which was aimed particularly at the difficult issue of foreign money. The Government’ response to this review was given in the House of Commons Chamber orally the day the review was published. It was most positive on the review and announced that there would be a ban on cryptocurrency and a donations cap of £100,000 for overseas voters. Can the Minister clarify exactly how these proposals will be brought forward? It is easy to see how the trust of the electorate can be in question when the legal environment is so complex and so unclear, and when institutions such as the Law Commission and the Committee on Standards in Public Life recommend major and logical change.
Before I close, I must set out at least some of the major areas where change would help, apart from a simple consolidation Bill. The first would be to decriminalise offences that are essentially administrative in nature. This would allow fines and enforcement notices to replace the full force of the criminal law. Regulators would no longer need to bother hard-pressed police to pursue wrongdoers, creating a much speedier and proportionate regime, as in most of the rest of regulated life.
Secondly, maximum fines are too low. The maximum fine for a breach of political finance law is £20,000 today, and that was set in 2009. For the special regime set up for the Scottish referendum, it was £500,000, which I suggest is a more proportionate number.
Thirdly, the Electoral Commission is today limited as to how it can give and receive information with other agencies and organisations. Most other regulators have statutory regimes that allow for this to happen, and the Electoral Commission needs to be put in a similar place. These things and others, I suspect, will be part of our work as a Chamber on the 27th Representation of the People Bill.
In closing, I return to the importance of trust in all of our institutions and in the people who work within them. As I survey the scene, I feel that the position is most unsatisfactory, and we owe it to ourselves and our citizens to be better here. The Electoral Commission must have greater legal clarity on its duties and powers. It must have sufficient resource to be able, as an independent body, to give confidence to us all in this difficult area of political finance. We will have an interesting debate and I look forward to every speech. In the meantime, I beg to move.
Lord Blunkett (Lab)
My Lords, it is a pleasure to follow the noble Earl, Lord Kinnoull, and to thank him for initiating this short debate. I agree entirely with his opening remarks in relation to what has happened in Scotland. Even my guide dog would have been able to see the motor home, never mind the multiple very clever coffee makers.
It is appropriate that we should be debating this before the latest Representation of the People Bill reaches us, because on the previous occasion, the 26th Bill, it was my pleasure to join with the noble Earl’s predecessor, the much-missed Lord Judge, in trying to get right what we were debating at that time—both the powers and independence of the Electoral Commission and where we were going. Much has changed in those very few years. I say to my noble friend on the Front Bench, whose fault it is not, that we did not really need the Rycroft review, important and informative as it is, to tell us that there was a major problem with bitcoin. It is remarkable that the Bill as drafted, and not yet amended on Report in the Commons, missed this out.
Sadly, that is an indication of our time, where reviews rather than action, missing the point, being somewhat behind the door, and looking at the past rather than the future have been too prevalent. We have got to get real in this area. It is time to understand the absolute reality and check what is taking place now, to equip our laws and our Electoral Commission for the future. If we do not, the basic tenets of our democracy will be undermined.
It is a sadness to me that one of the great donors to Reform UK—£5 million direct to the leader and £12 million to the party—turns out to have been born in Sheffield. This is not something I can be proud of. Mind you, the particular location was not in Sheffield at the time he was born, so maybe I can avoid that one.
We have a situation where it is suggested, including by Rycroft, that it might be possible that people who are registered to vote—this underlines the importance of those who pay taxes—should be enabled to donate. I ask my noble friend the Minister whether we should always have a cooling-off period when people change their location or seek to renew their electoral rights, so that we cannot have somebody changing their domain and their ability to donate very large sums at a whim. In other words, we have to be much more sure-footed.
In my short contribution, I think it is important that we move quickly on developing still further, and reinforcing, citizenship and democracy in our schools and colleges. As the new Representation of the People Bill indicates, we will be asked to approve that 16 and 17 year-olds can vote in general elections. It is beholden on us to make sure that they understand how our constitution works—in fact, it is beholden on all of us to take a good cool look at how our constitution works. We are not a presidency. We elect a Parliament, and Parliament then selects and puts forward a Prime Minister Only in circumstances with complicated PR would a situation arise where there would have to be a general election, because the parties that had colluded in deciding who should be the Prime Minister would have to have changed. Therefore, the suggestion at the moment that a change in Prime Minister should automatically result in a general election is a misunderstanding of how our democracy actually works.
Today, it is beholden on us to send a message to the House of Commons to get on with bringing forward the Bill, to complete Report and allow us to scrutinise it, and, above all, to look to the future, not the past.
Lord Maude of Horsham (Con)
My Lords, I join the noble Lord, Lord Blunkett, in thanking the noble Earl and congratulating him on introducing this debate. It is a timely and incredibly important subject. I speak as a veteran, at various stages in a long and chequered career, of engaging in cross-party talks on party funding.
The concern I have about where we are today is that the long-established convention on these matters of changing the rules on party funding—that they are pursued only after cross-party talks, with agreement being sought—seems to be being abandoned. The noble Earl made a powerful case for a much more comprehensive and simple approach to these matters, so it is a matter of regret and concern that the Government have chosen to pick a couple of cherries out of the Rycroft report and introduce them, at a relatively late stage, into a Bill already going through its legislative process. That is a breach of the approach which has been followed pretty rigorously.
I recall that, in the period after the 2005 election, when Sir Hayden Phillips—sadly, now the late Sir Hayden Phillips—was asked to undertake one of these reviews, Jack Straw and I, accompanied by the noble Lord, Lord Tyrie, had comprehensive discussions, which sadly did not reach agreement. They did not reach agreement because the Labour Party had a concern that a cap on donations of £50,000 could not be applied to donations by trade unions. At that point, the whole deal that was being fashioned—which would have gone some way to re-establish trust and support in the system—fell down.
There is another concern here, which is the introduction of a retrospective element into what is apparently being proposed. There is a cap to be introduced retrospectively on donations from legitimate electors—people who are entitled to vote but who happen not to be living in this country. I query the whole principle of saying that some voters are more equal than others. If there is a concern about the right of people living overseas—the noble Lord, Lord Blunkett, slightly raised this point—to have full rights in our Parliament and our democratic processes then that should be dealt with differently, but to say that for one particular aspect of participation in our parliamentary democracy they should be disadvantaged in this way seems plainly wrong. These matters should be treated very carefully indeed.
There was a very good reason, first set out by Sir Winston Churchill in the late 1940s, why parties should treat these matters very carefully. If a Government are seen to be using their position to advantage themselves and disadvantage their competitors, that can trigger a tit-for-tat approach, because no party has a lifetime hold on power. At various stages during the 2005 Parliament, and during discussions that took place subsequently in the coalition Government, the approach that Jack Straw and I took was that which the then Labour Party was strongly committed to. All of this was approached by seeking consensus wherever possible. I strongly urge the Minister to take this message back to his colleagues in the other place, because this is a dangerous path.
Lord Wallace of Saltaire (LD)
My Lords, in following the noble Lord, Lord Maude, with whom I worked in the coalition many years ago, I am thinking of the 2022 Act, through which the Conservative Government were certainly trying to advantage themselves and disadvantage their competitors. That is one of the reasons why we have this Bill before us today, and this is a debate to which we will return.
Last Thursday we debated the problem of rebuilding public trust in our democratic institutions, so it is highly appropriate that today, we move on to discuss the Electoral Commission as the guarantor of the integrity of our campaigns. To play its role effectively, the Electoral Commission needs to have sufficient powers and to be seen as independent of government. In last Thursday’s debate, the noble Lord, Lord Hannan, argued that political debate is
“a free and open encounter”—[Official Report, 25/6/26; col. 820.]
in which truth will always emerge victorious, regardless of the channels of influence available to, for example, Elon Musk, as opposed to the ordinary citizen. In his speech, the noble Lord, Lord Frost, denounced
“the absurd and dangerous Rycroft review … which was written … to justify unnecessary and authoritarian solutions.”.—[Official Report, 25/6/26; col. 808.]
The noble Baroness, Lady Fox of Buckley, decried
“self-righteous campaigns against foreign actors”—[Official Report, 25/6/26; col. 816.]
as an effort by the establishment to distract the public from what she sees as the real reasons for public discontent.
Both the noble Lord, Lord Frost, and the noble Baroness, Lady Fox, regard the BBC as a greater threat to democracy. All three dismissed the impact of money on politics. Yet all of us who have been involved in democratic elections know from painful experience how important financial resources are. Money on its own does not win elections if candidates are poor and messages weak, as Reform has been discovering. But effective campaigns carry costs. When one side is richly funded and the other is skint, campaigns are not an open and fair contest.
American democracy is providing us with a test case in the importance of money in politics. The Supreme Court’s ruling against congressional limits on political donations opened the sluice gates for donors to try to buy candidates. The sums of money now involved in congressional elections are eye-watering. A presidential campaign costs more than the GDP of several members of the UN. That brings with it corruption, and foreign interference. The Republican Party and the think tanks which drive its agenda have been captured by ultra-wealthy individuals and companies which resist progressive taxation and government regulation and often deny climate change and the impact of their products on human health.
Growing inequality between the extremely wealthy and the ordinary citizen exacerbates this distortion of democratic debate. Wealthy British expatriates who avoid paying tax but nevertheless want similarly to reshape British politics aim to change the balance of public debate in this country. The flow of private money from ultra-wealthy sources in America is now a greater threat to free and open debate in Britain than money flowing from Russia, China or—until the recent elections—Hungary. That money flows into third-party campaigns and partisan think tanks as well as political parties, and we will need to look at that.
So far as I understood last week’s speech from the noble Lord, Lord Frost, he sees the ultra-wealthy as better able to understand and support the real wishes of ordinary voters than government, or what he calls the “British political class”. I am not sure whether that makes him an anarchist or an illiberal democrat, which is to say, an authoritarian in the style of Viktor Orbán or Donald Trump. I believe in liberal democracy and in creating, so far as possible, a level playing field for all contending opinion in public debate and, in particular, in political campaigns. For that, we need a trusted Electoral Commission with sufficient powers to punish those who break the rules.
I hope that the Conservative Front Bench will admit the error it made in government in attempting to limit the independence of the commission and enormously increase campaign spending limits. Wealth piles up on one side of politics—which is not, whatever the noble Lord, Lord Frost, believes, the side of the poor or the left behind. Money is a vital aspect of political campaigning, but massive flows of money pollute politics and endanger democratic debate, and we must use the forthcoming scrutiny of the Representation of the People Bill to regulate that flow more tightly.
Lord Jay of Ewelme (CB)
My Lords, I have learned much from the debate so far, and we will learn a lot from the speeches still to come. It is a particular pleasure to speak after the noble Earl, Lord Kinnoull. I am conscious that I am somewhat outside my comfort zone in speaking today, and so I will speak principally as a voter. I vote assiduously in local elections; I used to vote assiduously in European parliamentary elections, but alas no more, and I would vote assiduously in general elections were I allowed to do so. I hope the Minister will tell us what plans the Government have to enable Peers to vote in general elections in future.
The need to tighten up the present arrangements for political party financing is clear, as the noble Earl, Lord Kinnoull, has said. In 2020, when Boris Johnson was Prime Minister, the Law Commission reported:
“The current laws governing elections should be rationalised into a single, consistent legislative framework”.
In April 2026, under the present Prime Minister, the Rycroft review recommended that there should be an annual cap on donations from British donors living abroad, a moratorium on donations in crypto assets, and that political parties’ ability to monitor donations and deal with the threat of foreign financial interference should be strengthened. That is all very sensible, and I am glad that some of the Rycroft report’s recommendations will be included in amendments to the Representation of the People Bill. Can the Minister update us on the progress of that important Bill and on proposals to strengthen the Electoral Commission, whose role in monitoring and enforcing the present system is crucial?
It strikes me that, as the noble Lord, Lord Blunkett, has said, this is all becoming quite urgent. The noble Earl, Lord Kinnoull, has rightly spoken of the importance of trust in our political system and in our political parties. The Electoral Commission’s annual public opinion tracker shows that 14% of the British public thinks that political party financing is transparent. Without transparency there is no trust, and without trust we will see the rise of parties on the extremes and a dangerous lack of public confidence in our democracy, so we need reforms soon.
There are alternative ways of funding political parties. France, Germany and Spain all permit public funding under certain conditions, and to do so here would not be especially innovative. There is already Short money and the policy development grants scheme, and there is free TV airtime for party-political broadcasts. None the less, I know the outcry that further public funding of political parties might cause. One can imagine the response of the Daily Mail if it were proposed by the Labour Party, and of the Daily Mirror if it were proposed by the Conservative Party. But if the choice is between the continuation of the present system, with all its failings, on the one hand, and public funding effectively monitored by the Electoral Commission on the other, I would not, as a taxpayer, self-evidently choose the former.
I therefore hope that all three political parties, in responding to this debate, will make clear their absolute commitment to reformed and properly monitored political party funding arrangements that will still arguments for extended public funding.
Lord Johnson of Lainston (Con)
My Lords, I welcome this debate into this important matter, but more to help put the record straight than to add further fuel to the misconception about how mainstream political parties raise funds. The noble Earl, Lord Kinnoull, raised some extremely important points, but the situations he illustrated were criminal acts in my view. The law is clear; it is the enforcement that is the problem.
With the exception of my noble friend Lord Leigh of Hurley, I think I have been involved in party fundraising for probably longer than anyone in this House. I see it as my duty to encourage people to support my party. Indeed, when asked by people from other persuasions if they should donate to their cause, I always encourage that too. I do not have an interest to register. I have stopped raising money for the Conservative Party for the time being—I am afraid I found I had run out of friends and people were crossing the road to avoid me.
In all my time as a treasurer, as chairman and as vice-chairman for finance for the last 15 or so years, I was never—not once—asked to influence something in exchange for a donation. All our donors wanted, and sadly seldom got, were basic conservative principles put to work in government. I see some union Barons opposite; they probably feel the same way about their own contributions. It is a totally incorrect idea that there is a nefarious influence, either from home or abroad. In fact, everyone involved in funding whom I dealt with in the Conservative Party was absolutely petrified that they might break the rules in some way.
What these debates and sentiments end up doing is building further on the myth that giving to a political party is somehow a bad act. We in this House should actually be making it easier to donate, with less friction, and, frankly, it should be more applauded. Noble Lords worry about the potential for Elon Musk to make huge donations, but that is illegal for him as a foreign citizen from a foreign entity. In fact, it would be worse for us if mainstream parties cannot raise enough money to take their messages out to the electorates and are superseded by fringe parties instead.
The proposals for enhancing the powers of the Electoral Commission have some merit, though. The reducing of certain classes of offence, as has been mentioned, to a civil matter is eminently sensible. The fear of good people acting as election agents or some village tombola raising a few hundred pounds should not be a matter for the police where genuine mistakes are made. This is a good move for our politics. I applaud the current leadership of the Electoral Commission for its very sensible approach to proportionality, which we should always bear in mind.
What I would recommend is probably a bit contentious on my own side, but it is quite simple: we should impose a cap—I have said this consistently—on donations from any individual. It could be £100,000, £50,000 or £75,000—whatever it is can be discussed. We should, at the same time, raise the threshold of reporting to a higher level, maybe £20,000, under which only a record should be kept, and remove small fundraising events entirely from the onerous rules which reduced the level of local activity in politics. No one person should be able to buy a political party, but many people should be encouraged to engage at a sensible level and not be hounded for it. Unless we do these things, we will further denigrate our system at a huge cost to our security and future.
I also think to some extent this should relate to the unions. I am very careful, and I do not like the political manoeuvring that tries to limit the power of unions to donate, because the Conservative Party has a foundation, which is also an aggregation of donations, which is a very important part of our funding. We should be aware of where influence is directed, and to suggest that the unions do not have direct policy-making power is absurd. Indeed, they have been championed in terms of how they have selected the new leader of the Labour Party and, potentially, the new Prime Minister. In any debate we should be very open about that because what we want is transparency. If we have transparency, we will have faith in politics.
At the end of the day, we are missing a key point here. The real issue is to confront the fact that we now have, in this Parliament, MPs elected not on national issues but on narrow sectarian issues based on communities abroad. We have serious issues of voter fraud, family voting, intimidation of candidates and people’s trust in our elections is declining fast. We are so worried that a rich American might give some money to Restore that we are totally missing the point about where we should be directing our attention. The people trying to influence our politics from abroad are not donating to the Conservatives, Labour or the Liberal Democrats. They are running their operations from abroad in order to influence voting intentions here. We are entirely missing the point if we think that it is about donations to parties.
We should use this debate not to spend our time limiting and controlling but to find ways to enlarge the support bases of our mainstream parties, showing the country that donating to a political party is a good thing, and using our powers here to encourage people to step forward and become a more meaningful part of our democracy. The alternative is state funding of political parties, which we can neither afford and I do not think we should support.
Baroness Hayter of Kentish Town (Lab)
My Lords, Labour’s 2024 manifesto promised to
“protect democracy by strengthening the rules around donations to political parties”—
an aim shared, I am sure, by all of us from whichever party or none. Trust in politics, Parliament, our system of government and lawmaking is crucial for the maintenance of democracy. Sadly, such trust has declined and we need action to restore it.
Money is one element. Donations to political parties have a whiff of buying influence or access, whether the money comes from companies or wealthy individuals. I say “wealthy” because it is big money that concerns people, not the purchase of £20 of raffle tickets, which, yes, we still do. The Government have taken action and, unlike the noble Lord, Lord Maude, I am delighted that the Rycroft review recommended a cap on donation from non-residents. It has been mentioned by other noble Lords. Most in the House will know that I have raised this issue ever since the previous Government extended from 15 years to life the period in which those who have left our shores but still have a UK passport can remain on the electoral roll. I welcome the cap, though I still cannot understand how someone who pays no tax here and does not use our services or contribute to our economy or to civil society should be able to fund a political party. They have no skin in the game, so why are they influencing our politics by financing a party’s ability to campaign and win?
We have already heard from the noble Earl, Lord Kinnoull, and my noble friend Lord Blunkett about the enormous amounts of money paid to Reform by people who no longer live here. I think some of them are based in Thailand and elsewhere. That money from people who do not live here—they may have a British passport—is not good for politics or our democracy. Further than that, how can we check on the bona fides of overseas donors in a sort of “know your donor” requirement? Where did they get the money from that they are going to contribute? Is it their own or has it come from a non-permitted donor? Is the donor even alive or in prison? Are they working for another Government? It may be that they are, quite legitimately, but does it not feel a bit odd that they are then funding our political parties? How will the Electoral Commission, or any individual party, police these donations and undertake due diligence, either on the person or on the source of their money?
Furthermore, how effective in terms of democracy is a cap of £100,000 a year per person? Over a five-year Parliament, a couple could give £500,000 each. That is £1 million per Parliament from an expat couple, who may not have lived here for decades and may have no intention of returning. I hope that, when the Bill arrives here, I and others in the House can persuade my Government to reduce this cap to £10,000 a year, or else make donations possible only for those who are registered for tax in the United Kingdom.
My second ask of the Government is to support my Private Member’s Bill, which will have its Second Reading tomorrow. This would require any person or organisation lobbying a Minister or Permanent Secretary to be on the register of lobbyists and report such meetings. It is not a lot to ask, and it is what virtually all our equivalent democracies do. I am an old lobbyist, so I have no problem with the practice. In fact, I think when I was lobbying on behalf of Alcohol Concern, the noble Lord, Lord Frost, was arguing exactly the other case on behalf of the Scotch Whisky Association. It is quite right that we both did that, but surely that should be out in the open, because many lobbying approaches are from people with money behind them. Good government means listening to everyone affected by policies or legislation, but it should not be in secret. We should be able to see who has the ear of government.
I finish by thanking the noble Earl, Lord Kinnoull, for his introduction, particularly his opening bits about Scotland. It is bad for the whole of the United Kingdom what has happened in one part of it.
Lord Frost (Non-Afl)
My Lords, it is very good that we are having this discussion today; I want to raise two issues. The first is the role of the Electoral Commission and the second is the composition of the electoral register.
On the first, I cannot entirely agree with the general approval of the direction of travel of the Electoral Commission in recent years. I worry that we are creating another quango, as we have previously in other areas, that in day-to-day practice is relatively unaccountable. We have touched on the reporting arrangements that were originally brought in for the Electoral Commission when it was created. There is not real accountability to the Speaker’s Committee; it is a financial scrutiny loop, really. Of course, the Speaker’s Committee has a government majority on it. That is why the Government that I was briefly a part of changed this in 2022, so that there was at least some attempt to pay due regard to broader strategic priorities in this area. It seems that we are now going to change this back.
The problem is that somebody has to decide how the Electoral Commission acts. If it is not proper accountability from outsiders, then it is the permanent bureaucracy that runs it. The permanent bureaucracy is not, in my view, neutral, and has a very strong worldview in these areas. We saw that on the Electoral Commission during the Brexit period when the commission went after people without properly understanding its own rules, putting individuals through the wringer. We saw it—I say this at the risk of distressing the noble Lord, Lord Wallace—in the highly contentious and political recommendations in some areas of the Rycroft review. We see it in some of the actions of the Electoral Commission even today. I do not think it should be a semi-political actor and I do not think its head should be a political figure, but that is what is beginning to happen. I happen to agree with the comments by the head of the commission a few months back:
“As a matter of principle, we do not think that capacity constraints are a legitimate reason for delaying long planned elections”,
but I do not think it is his job to be rebuking the elected Government in these highly political areas. There are real risks here.
The only thing that would be worse than government direction of the commission would be the commission becoming a player itself. It should be an umpire, not a player. The head of an electoral regulator carries automatic media authority. When he pronounces on contested questions, he lends the weight of officialdom to one side of a live political argument. Public confidence depends on visible restraint by the Electoral Commission. I worry that the powers that we are about to give it will push it in the opposite direction.
On my second point, on the electoral register, we all believe and often say that you must be a British citizen to be able to donate to a political party—Ministers often say this. Actually, it is not true. The condition is that you have to be on the electoral register. As we know, the electoral register includes many qualifying Commonwealth citizens, and indeed Irish citizens, resident here, so the right to bankroll a British political party in fact goes rather further. The real problem is not the donation issue itself, but the absurdity in the first place of having large numbers of non-British citizens on our electoral register. I must say that, when I have written and spoken on this subject, I find that people are incredulous—they literally cannot believe that you do not have to be a British citizen to be on the UK electoral register.
The scale is not marginal; it almost certainly runs to the millions. The Electoral Commission itself holds no record of it, but we can estimate it. In the 2021 census, there were 1 million adults here holding only a Commonwealth passport. That figure has plausibly doubled, at least, since then. The Electoral Commission’s own report in 2023 found that 66% of eligible Commonwealth citizens in Great Britain were registered to vote. This is not even properly policed. Zimbabwe withdrew from the Commonwealth in 2003 yet, more than 20 years on, its nationals can still register to vote because Parliament never amended the relevant schedule to the nationality Act.
This is not a new problem. The noble and learned Lord, Lord Goldsmith, recommended in 2008 that the rules should be changed to establish a clear connection between citizenship and the right to vote and donate. That has never been taken up. This is the real scandal. If we are really worried about foreign influence in our politics, we need to stop foreign citizens voting. If people want to vote in our country, they need to commit to our country and become citizens. This anomaly has lasted too long and it should be ended.
Lord Carter of Haslemere (CB)
My Lords, I declare an interest as I have been advising the charity Spotlight on Corruption on these issues. I am grateful to the noble Earl, Lord Kinnoull, for initiating this debate, since what is more important than the integrity of our electoral system?
Political party finance goes to the heart of this. For many years, there has been no restriction on how much a party can receive from donors, meaning that some parties have had a game-changing advantage during elections. Electoral success should not be significantly determined by financial power, since that diminishes our democracy and risks a handful of wealthy individuals subverting political discourse and policy-making. Now that we have more parties—some at the extremes of right and left—competing for power and receiving large donations, the need to instil a greater degree of fairness in how much each party can receive and spend has never been so important.
To their credit, the Government are addressing some of the issues in their Representation of the People Bill, such as the commencement of Section 54A of the Political Parties, Elections and Referendums Act 2000, which will require donors to declare whether they have received money from another individual in connection with their donation. Parties will be prohibited from accepting any donation without such a declaration. However, the wording of Section 54A, enacted—unbelievably—17 years ago but never commenced, is vague and too easy to circumvent in 2026. It prohibits money given to the UK donor
“with a view to, or otherwise in connection with, the making of the donation”.
However, the UK donor might have received the money from a person abroad who was not on the electoral roll and who purported to give it for a different purpose, in circumstances where it was obvious to each of them, but no one else, that it was intended as a political donation. The noble Baroness, Lady Hayter, touched on that point. One answer is to expressly prohibit foreign money unless earned by an elector here or abroad, since it would be much easier to establish whether money has come from abroad and test the legitimacy of that than to try to prove beyond reasonable doubt that the donor knowingly or recklessly made an unlawful declaration under Section 54A.
The Government have said they will impose a £100,000 limit on donations from an elector abroad, but this does not deal with non-electors abroad. It also seems inconsistent to treat electors in the UK and abroad differently. As an alternative to a donation cap, is it time for a tighter cap on campaign spending? After the 80% increase in the spending limit in 2023, both Labour and the Conservatives increased their campaign spending by tens of millions. Set at the right level, spending limits promote fairness by preventing wealthier parties massively outspending others, and thereby reduce the risk of electoral success being influenced by financial power. The amount of the spending limit should be independently agreed with the Electoral Commission, the Ethics and Integrity Commission and the Speaker’s Committee. Fair spending limits are arguably the best way of putting political parties on a more equal footing. As Professor Keith Ewing put it, not having fair spending limits is like
“inviting two people to participate in the race, with one participant turning up with a bicycle, and the other with a sports car”.
The Government should also facilitate criminal enforcement, which is virtually non-existent. Despite receiving referrals from the Electoral Commission, there have been no prosecutions by the Met, no doubt because of the complexities of electoral law, lack of resources and other priorities, but there is no point having rules if they are not enforced.
The Electoral Commission has the expertise in electoral law, and one option is to give it more resources to investigate offences; for example, by having greater powers to demand information from financial institutions and others, with the police retaining responsibility to refer cases to the CPS. Alternatively, as recommended by the Joint Committee on the National Security Strategy in its recent third report, we could create a new national political finance enforcement unit, staffed by secondees from across existing agencies.
To conclude, election Bills do not come around often. The Government are addressing some issues in their Bill but not going far enough. They need to take this rare opportunity to finish the job by tightening restrictions on political donations and spending, and by giving more powers to the Electoral Commission to investigate breaches.
Lord Massey of Hampstead (Con)
My Lords, I start by thanking the noble Earl, Lord Kinnoull, for introducing this debate on such an important subject for our country. I declare my interest as a former chief executive of the Conservative Party and indeed a donor to the party for over 25 years, although not on the scale of Mr Harborne.
Lord Massey of Hampstead (Con)
A great shame. I come to this debate from a slightly different angle, perhaps, from other noble Lords. I have always believed that assisting the work of a political party that shares one’s views and values is a form of public service. As a party, the Conservative Party has always been deeply committed to the principles of the Electoral Commission and we adhered very carefully to the rules and always carried out detailed due diligence on large donors. I agree with the idea of a cap on overseas donors and with the idea of increased fines for misconduct; however, I am concerned about some proposals in the Bill which would be unfair to companies wanting to support any of our parties.
I want to address another concern, which is the matter of electoral fraud, as I am concerned that some items in the Bill could have the unintended consequence of making this easier. Most political parties believe that companies should be able to donate to a political party. At the same time, we are all aware of the potential for foreign money to enter our politics, which of course can come through individuals as well as corporates. The question is: what is the test we ought to apply in practice to judge eligibility to donate? The Bill stipulates three tests—perhaps I am getting slightly ahead of myself, as it is not yet before us, but I am addressing an item that will be in the Bill. The three tests are UK-generated revenues, UK headquarters and majority UK control. I strongly agree with the last two: we need companies to be in the UK and majority controlled by UK shareholders. However, the idea that the revenue should be generated in the UK could create some unfairness for those who make some or all of their revenues outside the UK.
The revenue source condition will not stop a determined shell company, but it will penalise genuine UK-owned businesses. In addition, the information on the geographic source of revenue is simply not discoverable for private companies, in effect, making it impossible to apply this new test to any company. I ask the Government to look again at this revenue source requirement.
I now turn to voter fraud, which is another serious issue that should concern us all. The Bill may unwittingly open a door to fraud by allowing non-photo ID to be used as verification. It also provides for the acceptance, without proper checks, of digital ID and introduces the idea of vouching. For those who have not read about vouching, this means that voter A can tell polling station staff that voter B is eligible and has the necessary ID. These proposals amount to a significant loosening of our voter verification rules at a time when there are rising concerns at the growing number of election frauds that have been alleged over several years. If we are worried about interference in our politics, and we should be, we ought to be alive to the real risks posed by voter fraud in certain areas. In this context, it is not clear why any dilution in the stricter requirement introduced by the last Government should be introduced.
This fraud risk is reinforced by the proposal for automatic registration, which will provide further opportunities for wrongful voting, as we know the electoral roll is only 84% accurate. However, I commend the Government on one important change, which is that candidates for UK general and local elections will now have to prove their identity. It seems extraordinary, does it not, that until now we have allowed people to stand for Parliament without having them prove their identity? The whole system needs to be as rigorous as possible to reinforce public confidence in our electoral system and in democracy itself. It is all about trust, as mentioned by the noble Earl, Lord Kinnoull, right at the beginning of this debate.
A final concern I want to raise, and I will be very brief, is about votes for 16 year-olds. This change is manifestly inconsistent with almost all rules defining adulthood, including by this Government, and the eligibility rules of the overwhelming majority of OECD countries. In implementing the social media ban up to 16, the Government recognised the vulnerability of young people to malign influences, yet the Bill places an expectation of competency for them to vote as soon as they turn 16, which is a dangerous precedent and should be resisted when the Bill comes before us.
Lord Kerr of Kinlochard (CB)
The noble Earl, Lord Kinnoull, introduced the debate with his usual courtesy and wisdom, but he reminded us that, as a highlander, for all the courtesy, he carries a claymore. I cannot follow him in that—I am a boring lowlander.
I want to support the plea from the noble Lord, Lord Blunkett, for urgency with the Representation of the People Bill. It is worrying that it has been three months since the Rycroft report came out. I thought Rycroft was quite right when he presented it saying that he did not want to press a panic button, but he did want to ring an alarm bell. I think that it is alarming.
The particular angle I want to explore, one that has not been touched on so far in this debate, is hostile state actors using agents of opportunity, gullible, greedy or malevolent, in this country. We need to look closely at the financial links that have been well documented between RN in France and Moscow and the links that are well documented between the AfD in Germany and Moscow—the Fidesz link with Budapest is of course notorious. There were reports of close involvement, interference, by Russia in the Romanian and Moldova elections. I cannot stand that up, but the reporting seemed convincing.
Last weekend, I heard a senior Ukrainian say that with the war going rather better, even though the Americans have reduced their support, the worst thing for Ukraine, the thing it feared most now, was an election going wrong in a major European state. I think he was talking about France, but he might have been talking about Italy or Germany, or he could have been talking about us. What will happen if the Russians reach the same analysis, if they believe that undermining our trust in our democracy will assist in getting a party in power in a western European capital that is less willing to support Ukraine? You do not need a crystal ball; they have done it before and they know how to do it.
The Representation of the People Bill has been sitting in the Commons, and we do not know when Report will be. I think that the message we should send, the message from the noble Lord, Lord Blunkett, is that we want to see it soon and to see it amended and strengthened along the lines that Rycroft recommended.
We need to increase rather sharply the penalties for political parties which are found not to have checked their donors adequately, if parties do not know their donors, or if a state actor turns out to have been behind a donation by an individual, association or company. We should nudge the parties in the right direction by increasing the risks they run if they do not do so by giving the Electoral Commission stronger investigatory powers, such as the power to require information from other government agencies, as the noble Earl, Lord Kinnoull, recommended, and the deterrent of much higher penalties.
I do not share the concern of the noble Lord, Lord Frost, about the leadership of the Electoral Commission. The current leader of the Electoral Commission and the noble Lord occupied the same desk in the Foreign Office and they were both extremely effective. I hope that the Government are using the delay in the Bill to strengthen it and that, toughened up, it will reach us before the leaves are off the trees. Rycroft was right to sound the alarm.
Lord Shamash (Lab)
My Lords, thank you for allowing me to speak in the gap. I declare an interest, having been the election lawyer to the Labour Party for many decades. I will talk about one small, narrow issue. One frustrating issue is the consolidation of the Representation of the People Act—the number of volumes that I have on my desk is so wide. It is about time we did this; it has been called for for years.
I am particularly concerned about enforcement. The way to deal with it is quite tricky. If an MP has transgressed, you can commence an election petition. That is very expensive to do, and parties and people I have advised over the years have had to think twice about whether it something for which they want to take the risk. There is a piece of legislation that many noble Lords will know: the Recall of MPs Act 2015, where MPs can be recalled if they are convicted or suspended by the House of Commons. I invite my noble friend the Minister to think about how we could revisit that legislation and whether the better bits of it could perhaps be incorporated into a separate or amended bit of legislation, with some enforcement powers. When foreign money comes in and seeks to promote whoever it is, and that candidate wins an election, they are there; they are elected. The procedure to get rid of them must be easier, clearer and obvious to the public, otherwise people will give up because they do not have the resources or the political commitment to it. I ask the Minister to think about it, and I am happy to meet him separately to see how we could take this forward.
The noble Lord, Lord Jay, raised the issue of enforcement. It is important for the Electoral Commission to have the power to be able to achieve this, but we must be very careful about giving it too much power, because we do not want it breathing down the necks of all the politicians. I am sure many noble Lords who have been involved in politics over the years would not want that. I thank noble Lords and I hope that the Minister will now consolidate the Representation of the People Act.
Lord Pack (LD)
My Lords, I join other noble Lords in thanking the noble Earl, Lord Kinnoull, for such a helpful and timely debate. As we have heard from the contributions today, it is useful to debate this topic in advance of legislation coming to this House, but with a step back from the necessary microfocus we quickly get into when the legislation is in front of us. As someone who has also long called for consolidation of election law, I have been particularly heartened by the number of contributions, including the one before me, highlighting this issue and raising its importance.
When I asked an Oral Question in this place a while ago about the topic, it was perhaps understandable but a little disappointing that the Government’s position seemed to be that, because consolidation will take a long time to carry off, they were not going to prioritise it. One can therefore unfortunately characterise the Government’s position as: “Because it’s going to take a long time, we’re going to put off starting it”. The alternative interpretation is that, because it is going to take a long time to do, maybe that is all the more reason to start it sooner rather than later.
I very much agree with the comments by the noble Lord, Lord Carter, about the long delay in implementing the provision about the original source of money. It is welcome to say something nicer about the Government’s position in this case. It is welcome that the Government have definitely moved on that—it happened to be the topic of my first Oral Question in this House, and I acknowledge that the Government have moved on that issue. But underlying all this is a basic tension in a free and democratic society between, on the one hand, the basic principle of one person, one vote—an essential equality between us all—and, on the other, the fact that we all should be free to spend or give our money as we wish in a free and democratic society. That means that, inevitably, those with more money have an ability to chip away a little bit at the fundamental equality that there should be in a democracy.
Not all these issues are going to be easy to resolve or address, but it might be useful to focus on one area which has not had attention so far in the debate: donations that are made direct to candidates at election time and declared on their candidate expense returns. This is an issue on which I did some research with Chris Butler that was published in Political Quarterly a couple of years ago. I am sure all noble Lords are deeply familiar with that, but I will expand on it for those who are newer to the topic. If, for example, at general election time, someone makes a donation directly to a candidate, which is then declared on their election expense return perfectly legally and properly, the problem is that that money then essentially disappears from the system. Those donations direct to candidates do not appear in the Electoral Commission’s published register of donations.
Moreover, when Chris and I asked the Electoral Commission for copies of some of the expense returns that it had kept so that we could do our research, it decided—I am sure on good legal advice—that it could share those forms only with the names of the donors redacted for data protection reasons. We have a system where donations are declared on bits of paper but, when you ask to see those bits of paper, the name of the donor is redacted. That is, I think it is fair to say, an unsatisfactory situation. It is unsatisfactory not just in principle: our estimate was that around £3.5 million was donated at the 2019 general election in this way, so it is not merely an obscure, fun or trivial point but a route by which millions of pounds are flowing into our political system. Indeed, about one in four donations received by successful candidates who were elected were direct to them; the money was not recycled from a political party and then passed on to them. As I said, who those donations were from were, in effect, kept secret.
In some cases, where people are successful and are elected, there is the MPs’ register of interest, which people are meant to fill in and declare appropriate sums on. But that does not wholly solve the problem, because that applies only to donations of a higher threshold and only to people who are successful. The names were redacted on the forms that the Electoral Commission was willing to provide so one has to step cautiously in trying to compare those forms with the MPs’ register of interests, but Chris Butler and I found that about one in 10 of the donations appear to be of a significant enough sum to an MP that they should be on the MPs’ register of interests, and that there was no matching entry on the register of the right size. There may be some explanations in one or two cases, but there is a question about how the system does not appear to be properly joined up, and a non-trivial amount of donations that people who end up being MPs receive and should be declaring do not appear to be being properly recorded.
There are many other circumstances in which donations direct to candidates and direct to politicians are reasonable, legit and above board, and the system works well. I say that not only because, when I twice ran to be president of my own political party, I received donations directly, which are all properly recorded and can be looked up on the Electoral Commission website. I hope that the example I have given highlights how much of an issue there is around the donations of money directly to individuals.
I will briefly give one other example. It is true that the Representation of the People Bill, as it stands, introduces a cap on foreign donations, but that cap is a per candidate or per person cap. Therefore, very simply, under the current proposals any political party contesting all the seats in the country—most of the parties that contest across the board do not stand in Northern Ireland, so there are 632 seats, including the one held by the Speaker—would be able to donate 632 times the cap. As such, the figures that the noble Baroness, Lady Hayter, gave earlier are unduly modest on the amount of money that could legitimately be given within the spirit of what is currently proposed.
I very much hope that we will hear from the Minister some intentions and thoughts around tightening up some of the proposals, particularly for donations made directly to politicians and candidates. Of course, if the Electoral Commission is right—I grant that it will have taken specialist advice on this—that it is not allowed to release the names of those donors, that may be a suitable ground for an additional amendment to the Representation of the People Bill when it comes our way.
I will end on what may seem like a slightly less important point, but it concerns a fundamental, underpinning issue: the consolidation of election law. It is easy to always think that tidying up stuff and making it neater is never quite the priority. I confess that I have never put demanding the consolidation of election law as the headline story on the front of a Lib Dem Focus leaflet—and were I to find a colleague who was planning to do so, I would reach for the phone to tell the printers, “Don’t print this yet!”
None the less, the long-term commitment to keeping things neat, tidy, clear and comprehensible brings significant benefits. The Rycroft review rightly highlights the potential benefit in helping protect our democracy against foreign interference. Returning officers would absolutely talk about the benefits of it making their lives easier and, particularly in an environment of stretched budgets, making it more possible to run elections successfully in a more cost-effective manner. A bit like the frustrated parent who is trying to tell their teenage child to remember to tidy their bedroom now and again, I hope that, in that spirit, we will hear from the Minister on the topic of consolidation.
Baroness Finn (Con)
My Lords, I too thank the noble Earl, Lord Kinnoull, for bringing forward this important debate and for giving me the opportunity to discuss some of the issues beforehand.
There is a simple constitutional caution at the heart of this matter. A Government should not direct the power of the state to undercut the lawful flow of funds to their political opponents. Once that line is crossed, it is not easily uncrossed. It invites reprisal when power changes hands, and it weakens public confidence that electoral law is being made in the national interest rather than in the interests of the party temporarily in office. Party finance law is not ordinary lawmaking; it is the law by which the competitors in our democracy agree on the rules of the contest. The Government of the day are the trustee of those rules, not the proprietor.
The previous Government were right to be tough on hostile state activity. They passed the National Security Act 2023, creating the statutory framework for the foreign influence registration scheme. No one in this House should be complacent about foreign interference, but the existence of that threat does not justify Ministers blurring the distinction between foreign interference and lawful donations made by registered electors or genuine UK businesses. This side of the House has been consistent: changes to the rules should be made through proper cross-party consultation. That is a long-honoured constitutional custom, an argument so eloquently put forward by my noble friend Lord Maude of Horsham.
In its 2016 report, the House of Lords Select Committee on Trade Union Political Funds and Political Party Funding, chaired by the noble Lord, Lord Burns, recorded the importance of cross-party consensus on matters affecting the interests of rival parties. The committee quoted Sir Winston Churchill, to whom my noble friend Lord Maude referred today. In the other place on 16 February 1948, he said:
“It has become a well-established custom that matters affecting the interests of rival parties should not be settled by the imposition of the will of one side over the other, but by an agreement reached either between the leaders of the main parties or by conferences under the impartial guidance of Mr. Speaker”.—[Official Report, Commons, 16/2/1948; col. 859-60.]
That was the right principle in 1948 and it remains the right principle today. It is striking that one of the witnesses who repeated Churchill’s words to the committee was the then general secretary of the Labour Party, now the noble Lord, Lord McNicol of West Kilbride. He described that custom as a “principle of fairness”. I therefore simply ask the Minister: what has changed?
Sir Nick Clegg warned that issues of money and power in British politics should be dealt with on a cross-party basis. Jack Straw said that, in this area, the Government of the day act as a trustee for our democratic system. They were both right. Following Sir Hayden Phillips’s report, commissioned by Sir Tony Blair, cross-party talks were convened. In 2011, Sir Nick Clegg again convened cross-party talks on party funding and donations. In 2013, an unofficial cross-party working group published a draft Bill.
If cross-party consensus was already a well- established custom in 1948 then by 2026 it is more than a passing courtesy. Whether or not one calls it a full constitutional convention, it is plainly an established democratic restraint. The Burns committee ultimately concluded that
“while there is no formal convention that all reform of party funding must take place by consensus, history shows that governments of both main parties have acted with a degree of restraint; and indeed it is desirable to seek consensus. If any government were to use its majority unilaterally to inflict significant damage on the finances of opposition parties, it would risk starting a tit-for-tat conflict which could harm parliamentary democracy”.
That warning could hardly be clearer. Whatever party is in power, it would be detrimental for conventions to break down and to open the door to US-style hyper-partisan legislation. As Sir Nick Clegg warned the committee in 2016, if a Government acted unilaterally, they would
“rue the day … because one day the boot will be on the other foot”.
That is why the Government’s handling of the Rycroft review and the Representation of the People Bill is so troubling. I do not here criticise Sir Philip Rycroft’s review, nor do I deny that there are legitimate questions about transparency, enforcement and the resilience of our political finance system. However, an independent review commissioned by Ministers is not a substitute for proper cross-party talks led by Ministers.
The Labour manifesto contained a broad statement that the Government would
“protect democracy by strengthening the rules around donations to political parties”.
That sentence does not give Ministers carte blanche to rewrite the financial rules of political competition unilaterally. Ministers have said that officials have engaged with political parties through the Parliamentary Parties Panel on technical aspects of reform—that is not enough. Technical consultation with party professionals is not the same as cross-party political agreement. A review by officials or by an independent reviewer is not the same as party leaders, Ministers and opposition parties sitting down to agree rules that affect them all. The Government have now chosen to take forward some of the Rycroft recommendations, but not all of them, through the Representation of the People Bill. That selective approach is precisely why trust is so important. If Ministers cherry-pick from a review in a way that happens to disadvantage their political opponents, they should expect the closest possible scrutiny from this House.
I turn to the proposed cap on donations from overseas electors. I shall make one point absolutely clear: there is a fundamental distinction between foreign interference and a lawful donation from a British citizen who is registered to vote. I take note of what the noble Lord, Lord Frost, said about being a British citizen. There is a long-standing principle, originally recommended by the Committee on Standards in Public Life, that permissible donors should include those on the UK electoral register. Prior to 2022, British citizens overseas could already vote in UK parliamentary elections and make donations, subject to the 15-year time limit. In response to the comments made by the noble Lord, Lord Wallace of Saltaire, the Elections Act did not invent that principle; it removed the arbitrary 15-year cut-off. The Government propose a £100,000 annual cap on donations and regulated transactions by overseas electors, with retrospective effect from the date of announcement. We do not support that arbitrary cap or its retrospective application. All this should not happen without cross-party agreement.
I turn next to corporate donations, a matter so effectively addressed by my noble friend Lord Massey. If Ministers intend to adopt a post-tax profit test, they should first publish a full impact assessment showing how it would affect donors across all parties, including donations accepted by the governing party itself. They should explain how the rule would apply to start-ups, investment-heavy businesses, social enterprises, companies in volatile sectors and firms with uneven earnings. They should also explain why a profit test is preferable to a genuine business test backed by stronger due diligence and enforcement. The Government should not smuggle through a major restriction on corporate political giving under the banner of antiinterference.
The noble Earl, Lord Kinnoull, has rightly drawn attention to the important role of the Electoral Commission. We agree that it needs operational independence and sufficient resources to perform its functions effectively and command the confidence of the British people. The Murrell case is a salutary reminder that the improper use of party funds is not a technicality; it strikes at trust in political life. But that case also illustrates the point. The answer to wrongdoing is the effective enforcement of the law, as my noble friend Lord Johnson of Lainston made clear—it is not the partisan remaking of political finance rules in a way that burdens lawful opponents.
The Government’s present approach risks confusing two very different things. One is the legitimate need to protect our democracy from foreign interference and financial abuse. The other is the temptation for a Government to tilt the rules of political competition in their favour. This House should be vigilant in resisting the second while supporting the first.
We are ready to engage seriously on transparency, enforcement and the protection of our democracy, but we will not accept unilateral, retrospective and partisan changes to party finance law. We will not accept the conflation of British overseas voters with foreign actors. We will not accept broad restrictions on genuine UK businesses without proper evidence, proper scrutiny and proper cross-party agreement.
The Government should change course. They should withdraw from unilateralism, convene proper cross-party talks and return to the constitutional restraint that has served our parliamentary democracy so well. Above all, Ministers should remember that in this field they are not merely legislators—they are trustees of the democratic system itself.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Lord Lemos) (Lab)
My Lords, I welcome the opportunity to respond to this debate on the regulation of political finance and the role of the Electoral Commission. I thank the noble Earl, Lord Kinnoull, for opening the debate, and other noble Lords for their contributions to what has been a fascinating, timely and important debate.
It is clear from the contributions that we all share a deep commitment to sustaining trust in our elections and in our democracy. That is what is at the heart of the Government’s approach. I will try to respond to the many important questions raised, although I am afraid I am a bit hopeless at the namechecking—but I will do my best. I will certainly read Hansard carefully with my officials and, if necessary, follow up in writing any points I have missed.
I start by making the general point, which I know other noble Lords have made, not least the noble Earl, Lord Kinnoull, that our democracy in this country is central to our very identity as a nation. Our democracy is respected and, in many cases, revered around the world. We are all proud of that democratic heritage and seek to protect it.
That is why it is a priority for this Government to stop foreign interference in UK politics, including from foreign state actors, as the noble Lord, Lord Kerr, has said, and to protect our democracy. A key pillar of this is strengthening the rules on political donations and ensuring that they are effectively enforced. The Representation of the People Bill contains crucial reforms that will deliver stronger safeguards against interference from malign foreign actors. I recognise what the noble Baroness, Lady Finn, said, that the previous Government took action, which we have built on: greater transparency for voters and more effective enforcement. These reforms implement a number of recommendations from key stakeholders, including the Ethics and Integrity Commission and the Electoral Commission, and I will come in a moment to the question of consolidation of electoral reform.
On political finance, our reforms aim to strike the right balance between protecting UK elections from foreign interference while making sure—I emphasise and reinforce this point—that legitimate donors can continue to fund electoral campaigns. This includes an enhanced due diligence “know your donor” scheme to guard against the possibility of money from illegitimate sources finding its way into the UK’s political system, which the noble Lord, Lord Kerr, drew attention to. Recipients of donations over £11,180 will be required to carry out a risk assessment considering the risks of donations being from impermissible sources. As such, they will have to check for signs of foreign or unlawful funding before deciding whether to accept or return the donation. I note the points made by the noble Lord, Lord Johnson, about being overly intrusive in these matters, but these “know your donor” approaches will help with transparency.
I turn to company donations. Key stakeholders have also warned that the current eligibility criteria for companies to donate is far too weak, and we are also introducing new requirements on company donations. The noble Lord, Lord Massey, made a number of important observations about company donations; I fear I will not have time to deal with them all, but all companies will have to demonstrate that they have a genuine connection to the UK through strict new eligibility criteria. I note the points he made, and I am sure we will debate them again. Companies will have to have made sufficient revenue to fund their donations; be headquartered in the UK; and be majority owned or controlled by UK electors or citizens. It really is quite a simple principle at stake here: foreign companies and investors that have no meaningful stake in the UK should not be part of our democracy. These measures will help prevent the use of shell companies and reduce the risk of improperly sourced, impermissible funds being channelled into our politics.
I turn briefly to unincorporated associations. Stakeholders have also argued that existing rules surrounding unincorporated associations are a key vulnerability in our current regime. We are therefore tightening these rules and improving transparency. By reducing reporting thresholds, they will also be subject to stricter transparency requirements.
A number of noble Lords raised enforcement and the role of the Electoral Commission. The Government’s view is that having a properly empowered regulator in the Electoral Commission, which has the right powers, the right deterrence and the right capacity for enforcement, is essential to a functioning democracy. To that extent, I do not share the concerns expressed by the noble Lord, Lord Frost, although he made some other very significant points. These changes to the rules that we are proposing, around political donations, will address vulnerabilities and close loopholes in the existing systems.
However, to uphold trust in our democracy, we also need to ensure, as I have said, that enforcement of those rules is robust but proportionate. We are strengthening the powers of the Electoral Commission to ensure that enforcement is effective, and there is a strong deterrent for breaches of the rules. We are extending the Electoral Commission’s remit and civil sanctioning powers to include the enforcement of political finance offences relating to candidates. Currently, these can be pursued only through the police and the courts, which has led to a notable gap in effective enforcement since criminal prosecution is rarely pursued. Extending the Electoral Commission’s role will close this enforcement gap by providing more flexible and proportionate avenues for enforcement and promote more robust and encompassing regulation.
A point that the noble Earl, Lord Kinnoull, raised with me, and I want to make very clear, is that a robust political finance framework must be underpinned by a strong deterrent against serious malpractice. The current maximum fine the Electoral Commission can impose is just £20,000—that is insufficient. Therefore, we will significantly increase the Electoral Commission’s fining powers to a maximum of £500,000 per offence. We hope that that will have a deterrent effect and that it will improve enforcement.
I turn to the points made by the noble Earl, Lord Kinnoull, and the noble Lord, Lord Kerr. The Electoral Commission is hindered in its ability to share information with other regulators and law enforcement bodies, and we are therefore providing the commission with an explicit statutory gateway to share information, nurturing collaboration on cross-cutting issues, such as foreign interference. I know that many stakeholders want us to go further, and I am sure that we will debate that at some length, when the legislation comes before your Lordships’ House.
We recognise how vital it is for the health of our democracy that we have a regulator that is truly and fearlessly independent, and this is a central point in the Government’s approach. We are repealing the Government’s powers to designate a strategy and policy statement for the Electoral Commission. We regard that as an unwarranted requirement, and we want to put beyond any doubt the foundational principle of the Electoral Commission’s independence and strengthen confidence in its ability to oversee elections and regulate political finance without fear or favour in the future.
Virtually all noble Lords mentioned the Rycroft review. The Government welcome Philip Rycroft’s review, and we will be responding to the report in full very soon—not in due course but very soon. Obviously, I will not give any further hints.
I can tell your Lordships’ House, though, that Report stage in the Commons will be on 14 July. A number of noble Lords asked me about that, and I am happy to confirm that that is the case. My noble friend Lord Blunkett asked me about that with particular force, so I should acknowledge that.
We are already taking immediate steps to implement two of the review’s recommendations through the Bills currently before Parliament. First, we will cap donations from overseas electors that are over £100,000 a year. A number of noble Lords, including the noble Baroness, Lady Finn, and my noble friend Lady Hayter, commented on that. We want to cap donations from overseas electors, and the cap will include all donations from overseas electors received from 25 March, to respond to the question asked by the noble Lord, Lord Blunkett. Secondly, we will introduce a complete moratorium on crypto asset donations—they are far too opaque—until such point that Parliament and the Electoral Commission are satisfied that there is sufficient regulation in place to ensure confidence and transparency in donations being made in this way.
I now turn to some of the specific questions that noble Lords asked me. On the question of consultation on the Bill, which the noble Lord, Lord Maude, and the noble Baroness, Lady Finn, laid some emphasis on, we accept, of course, that individual political parties are important stakeholders and are crucial to this process. It is right that reforms that address systemic risks, such as foreign interference, opaque funding routes and inconsistent assurance tests, are also grounded in independent expert analysis and negotiated not only with those who are directly regulated and affected. This will ensure that the framework operates impartially, consistently and free from perceptions of favouring particular parties.
I take seriously the comments that both the noble Baroness, Lady Finn, and the noble Lord, Lord Maude, made about the need for restraint and vigilance about tit for tat—prisoner’s dilemma approaches to party funding. These measures will ultimately enhance trust and integrity in the system for the benefit of all campaigners.
On the question of overseas electors, raised by the noble Baroness, Lady Finn, and the noble Lord, Lord Carter, many donations from British citizens living abroad are legitimate and lawful. We would not seek completely to prevent them. We are acting on the independent recommendations in the Rycroft review—he identified the risks and recommended a cap rather than an outright ban. A cap will provide an additional but proportionate safeguard against the risk, and we are acting to implement this without delay. I know that my noble friend Lady Hayter has strong views on this, which she has expressed, but that is where we are.
Noble Lords will not expect me to comment on individual cases currently being investigated, either by the Parliamentary Commissioner for Standards or the Electoral Commission. But, in response to the opening remarks of the noble Earl, Lord Kinnoull, we take very seriously some of the issues that have been raised in relation to these individual donations, and we would encourage all the authorities, but particularly the Electoral Commission, to take any investigative or enforcement action necessary.
The Peter Murrell scandal does raise serious questions about the SNP’s misuse of donations, possibly public money and the scale of the cover-up. As the Prime Minister has said, there are clearly serious and legitimate questions that deserve answers and scrutiny. To the question from the noble Earl, Lord Kinnoull, it is now for the Scottish Affairs Committee to decide whether to undertake substantive work on this matter.
A number of noble Lords raised the question of the consolidation of electoral law. The noble Lord, Lord Pack, spoke eloquently on the long history of his commitment in this area. We understand the cause for the consolidation of electoral law and perhaps even modernisation in some ways, but the Government have made manifesto commitments. While it may be true, as the noble Lord, Lord Pack, suggested, that if something is going to take a long time you should get on with it—he made the analogy of tidying bedrooms, but I happen to have a poor track record in that department—these are manifesto commitments, and they are our priority. I think that he would expect and accept that.
In relation to my noble friend Lord Blunkett’s question about decriminalising administrative offences, our reforms will clarify that it is the Electoral Commission that is responsible for enforcing such administrative breaches via civil sanctions, allowing police resources to be directed towards tackling more serious criminal offences and clamping down on foreign money entering politics.
I will make a final specific point, and then I will wind up. On donations to individuals, the Government are extending the remit of the Electoral Commission to close the enforcement gap and strengthen the scrutiny of candidate finance.
I have already said that the Report stage of the Bill will take place in the Commons next week, on 14 July, and the Government will publish our response to the Rycroft review very soon. Those are two important milestones in this whole conversation, which we will return to in the autumn—as the noble Lord, Lord Kerr, said, before the leaves fall from the trees.
The Earl of Kinnoull (CB)
I thank all noble Lords who have taken part in the last very interesting 90 minutes. I thank particularly the Minister for answering very fully quite a lot of questions that were put to him in an encouraging way.
In summary, the first thing that was a common theme among everybody was that there is a problem with trust, and accordingly, we must do something about it. The point that I wish I had made was made by the noble Lord, Lord Blunkett, which was about education and the importance of educating people in our country about our constitution and the difficult things we have been talking about today. I do hope we will think on that all round.
I was not going to say, but I will say, that my logical deduction was that the noble Lord, Lord Johnson, does not exchange Christmas cards with Christopher Harborne when he said he had run out of friends and had stopped raising money.
I was on the Trade Union Bill committee when we sat for a very intense month and were chaired by the noble Lord, Lord Burns, in 2016. I well remember all the evidence we got and the necessity for there to be cross-party co-operation on some of these very difficult areas that were discussed by the noble Lord, Lord Maude, and the noble Baroness, Lady Finn.
The noble Baroness, Lady Finn, read out some quotes from our report. I remember those sessions, and the feeling that the noble Lord, Lord Burns, and I definitely had, being the two Cross-Benchers on that committee, was that, if you bash one of the three main parties, when the other party is in power you will get bashed back. We were very keen with our report to point that out and to try to make sure that we did not get into some sort of see-saw arrangement between the two parties. Speaking purely as a Cross-Bencher, I therefore hope that there could be some sort of starting up of cross-party consultation on this difficult area, without presupposing anything, to at least see whether there could be a landing area. The machine-gun was not being aimed at the Conservative Party; it was being aimed in a different direction, at the £5 million. I well understand that, so I am sure there is a way through that somehow.
Everybody praised the Electoral Commission. I was extremely interested in the remarks of the noble Lord, Lord Frost. From listening to them, I do not think that he was anti-Electoral Commission, but he was very keen to point out that it needed to remain independent and that it must be non-partisan and non-political. I agree with him on all those points all round, and his was a very valuable contribution. I had said that it was important that the Electoral Commission had the correct powers, duties and resources, but there is a fourth thing that is important, which is that it must remain very independent—truly Cross-Bench, as it were—and I think that has been widely agreed here.
With regard to what is going to go on, I spoke about the need for decriminalisation and I was very pleased to hear what the Minister said about that. I spoke about the necessity of raising fines and I was very pleased to hear what the Minister said about that. I spoke about the need to be able to share lots of information, and I had a very detailed briefing from the Electoral Commission about all the problems it has had with information sharing. I was very pleased with what the Minister had to say about that.
Two very interesting speeches on hostile states came from the noble Lords, Lord Kerr and Lord Jay. I must say that those are very wise points indeed and I hope that, when we come to the Bill, we will think hard about whether what is being proposed will cope with that particular threat, which is substantial. We must not miss the opportunity; as someone pointed out, even though there have been 26 of them, soon to be 27, they do not come along that often, and we must do that.
Finally, before I sit down, on the matter of consolidation, I do not think there is anyone who is anti-consolidation, and I hope that there will be a desire to move to try to consolidate at least the 26, soon to be 27, although there are also one or two other things that might go into it, such as the PPERA itself, and we must get on with it. I hope that the consolidation effort will not be tripped up by the worries about political party funding. There is lots in the consolidation that can get on with that, and that could get on. That is for another time and, in the meantime, I commend this Motion.