Political Party Finance and the Electoral Commission

Lord Lemos Excerpts

Thursday 2nd July 2026 Lords Chamber

[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.