Elections Bill

Lord Wallace of Saltaire Excerpts

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

[Baroness Hayman of Ullock (Lab)]

My Lords, there are quite a number of amendments in this group, of which Amendment 197 is mine. I want to pay attention to amendments specifically looking at foreign interference in our elections and some of the consequences of the provisions to extend the overseas elector franchise. Under the previous group of amendments tabled in the name of the noble Lord, Lord Clement-Jones, we discussed foreign interference, but looked specifically at digital materials, whereas this is wider.

By way of introduction, I say that voters deserve to know that elections in the UK are free and fair, and that laws are in place to safeguard them from unlawful influence. The Bill is an opportunity to make that tighter and better. The Electoral Commission recommended introducing new duties on parties, based on existing money laundering regulations, to enhance the due diligence and risk assessment of donations. The reasons behind this are to protect parties further and to build confidence among voters that sources of party funding are thoroughly scrutinised.

Unfortunately, we do not believe that the Bill takes this into account or does enough, as the Electoral Commission recommends. We need an effective regulatory and enforcement regime that ensures that foreign and dark money cannot enter our political system through donations to political parties. We believe there is the risk not only of money coming into the system that should not be there but of losing the level playing field that we have always striven to achieve in our election law. It is disappointing that the Bill so far does not address these problems. Our amendments and those of other noble Lords aim to address this.

As it stands, the Bill creates a paradox, because it opens the floodgates for a potentially large influx of foreign-based money into our democracy while making it harder for civil society organisations, charities and trade unions to have their say—as we heard during the debates on previous days on Clauses 24, 25 and 27—despite the massive contribution they make to British life. We have tabled amendments that would protect our democracy from this foreign money that is already impacting our politics. We believe that this Bill threatens to make the situation much worse.

Concerns about how our democracy is being affected by malign foreign influences have been highlighted in the Russia report and were mentioned in the previous debate. I am sure we will hear more about this from the noble Lord, Lord Wallace of Saltaire, when he speaks to his amendment on this specifically, so I will not go into any more details about the Russia report.

Why are we concerned that the Bill will allow even more foreign interference in our democracy? The system created by the Bill is more vulnerable to overseas interference. It allows a person to call up any and every local authority to say that they were resident in the area 30 or 40 years ago and provide what we think is fairly flimsy proof; I am sure that it will not be a photographic identification, as would be the case for other electors. Having done that, they would then be able to donate enormous sums of money, if they wished. I am sure that the Minister will say that that is not the intention but, if he accepts our amendments, he can be sure that the possibility of this happening is strictly safeguarded.

We have a number of amendments. Amendment 197 specifically looks at whether a person making a donation for political purposes is a “permissible donor”—if not, that is then rejected. My noble friend Lady Smith of Basildon has an amendment that would require donors to be based in the UK, and one that would prevent overseas electors from donating. My noble friend Lord Collins has an amendment about the Secretary of State publishing

“draft legislation to regulate expenditure deriving from donations by non-UK nationals.”

We also support other amendments in this group that have been tabled to provide better security against overseas donations. If the Minister has understood our genuine concerns and intends to close this loophole that will weaken our democracy, he can choose from plenty of amendments that will greatly improve the Bill. We believe that this is a serious matter and that these amendments bring proportionate safeguards.

However, if the Government do not accept these amendments or commit to introducing their own in a similar vein, it will look as if the real motivation behind these changes to overseas voting is to create a loophole in donation law that would allow donors to bankroll Conservative Party campaigns from their offshore tax havens. What other justification is there for changing the law in this way, without closing this loophole?

Let us look at some of the evidence. Research from the Times shows that, through existing methods, the Conservative Party was able to accept about £1 million from UK citizens living in tax havens ahead of the 2017 general election. The Bill takes away the barriers that kept this at just £1 million. With the situation in Ukraine, it is more important than ever to end the flow of dirty Russian money flooding into our country—and that must include political donations, to block the threat of foreign interference in our politics.

We appreciate that it is impossible for someone with only Russian nationality, however rich they are, to donate legally to a UK political party. But what has undoubtedly happened is that a series of people with dual UK-Russian nationality or with significant business links with Russia have donated heavily to the Conservative Party in recent years. Questions about Russian donors that warrant further investigation have been raised in the media during the current Prime Minister’s tenure. For example, Lubov Chernukhin has given the Conservative Party over £2 million, £1.9 million of which was given after her husband, Vladimir, received money from Suleiman Kerimov, a man who was later sanctioned by the United States Treasury, not only for being a Russian government official: he was arrested in France for smuggling in hundreds of millions of euros in suitcases.

Then there is Mr Temerko, who has donated £1.2 million to the Conservative Party. The problem is that he used to operate at the very top of the Russian arms industry, with connections high up in the Kremlin. He works with Mr Fedotov, who is a key shareholder in Aquind Ltd, which the Guardian reports has donated £700,000 to the Conservative Party, along with another firm. This is unfortunately the same Mr Fedotov who, according to the Pandora papers, has revealed that his fortune was made through an offshore financial structure in the mid-2000s, at about the time that he was allegedly siphoning funds from the Russian state pipeline company, Transneft.

Another big Tory donor in the Johnson era is the businessman Mohamed Amersi, who has given £258,000 over the period. He advised on a lucrative telecom deal in Russia in 2005, with a company that a Swiss tribunal subsequently found to be controlled by an associate of Russian President Vladimir Putin. We consider this extremely concerning. One reason for this is that the Sunday Times recently reported that high-value Conservative donors were invited to participate in an “advisory” group, during which they were allowed to bend the ear of the Prime Minister, senior Ministers and officials.

Members of the public have a pretty low opinion of politicians much of the time. Reports of outside influence that threatens to undermine our democracy serve only to further drive down trust. The Bill provides an opportunity to increase trust in our political system, but, unless this loophole is closed and political donations are cleaned up and given proper scrutiny, trust will continue to fall. If we are to open up our system by allowing far more overseas electors to vote, we must at the same time ban them from making donations to individual politicians and parties. That is the only way to ensure that our system does not receive unwarranted donations and influence from outside. I beg to move.

[Lord Wallace of Saltaire (LD)]

My Lords, my name is on several of the amendments in this group, and I will therefore speak to some of them.

Amendment 197 would tighten the rules on permissible donors and incorporated associations. Amendments 198 and 199 would limit permissible donations to companies and individuals resident in the UK, as would Amendments 204, 212D and 212E. Amendments 200 and 212G, the longest in this group, offer different language on the need for much more careful scrutiny of donations. Amendments 212A, 212B and 212DA, with the reference to the CSPL, would put caps on donations. The Minister will have noticed that, among other things, we are concerned that people who do not live in the United Kingdom should not be allowed to donate to political parties, even if they are on the electoral register.

In a facetious moment, I wondered whether I might table a separate amendment banning British citizens who live in Monaco or the Channel Islands from donating to political parties. Since the major motive of British citizens moving to those places is to avoid tax, that would be a way of saying that we do not want people who are deliberately avoiding paying tax in Britain to be funding political parties here, which we know happens. Some people believe that the main factor in extending overseas voting in the slipshod way it is being done is to make it easier for tax exiles to make major donations to the Conservative Party. “Perish the thought”, the Minister may say—but not everyone in the Conservative Party is as honest as he is.

I will talk mainly about Amendment 200, which some noble Lords may have noticed makes a reference to the ISC report on Russia. I remind the Minister that the Intelligence and Security Committee specifically recommended that the evidence it had collected on foreign interference in British politics should be published as fully as possible, and that the Government have said that they see no need to do so because, in their opinion, foreign interference has not been successful. That seems to be a mistake, and I hope that the Government will come to their senses and publish that evidence. So long as it remains unpublished, it will look as though the Government have something embarrassing that they are trying to hide.

The noble Baroness, Lady Hayman, mentioned a number of major donors. One has to say in passing that it is astounding that we are now six years after the 2016 referendum and we still do not know where the largest single donation to the Brexit campaign came from. I was told by a senior figure in the City that everyone in the City knew exactly where it came from and that it had come from a foreign state. I do not know that—but we ought to be informed and we ought to have had some ability to discover where that £8 million came from.

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Simply put, if you think as I do—let us leave all the specific allegations about specific donors at specific times—there is surely no argument but that these two issues of ability to vote and ability to donate are closely related issues that, in their different ways, can distort the outcome of a general election. I certainly, for one, think that something needs to be done about it.

[Lord Wallace of Saltaire (LD)]

My Lords, before the noble Lord sits down, I remind him of the third link in this, which is that campaigning for overseas voters is going to be very expensive and the advantage will go to the party that has the most money, in terms of contacting them and soliciting their vote. So, in terms of a level playing field, the addition of another 2.5 million overseas voters tips the balance even further in favour of the richest party.

[Lord Grocott (Lab)]

I absolutely agree with that.

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[Lord Wallace of Saltaire (LD)]

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

[Earl Howe (Con)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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[Lord Wallace of Saltaire (LD)]

My Lords, in this overfull House at this late hour, I will be extremely brief. I note that the noble Lord, Lord Hodgson, who said to me earlier that he thought that this is one of the more important groups to which we had yet to come, has felt it necessary to go. So I will simply say that it is important that we come back to this issue given that this Bill is such a mess and has failed to do so many of the things which several committees recommended it should do. It has also been sharply criticised by a Commons committee.

I would choose Amendment 205; if the Labour Front Benches were minded to bring that back at Report stage, I would certainly give it support and there would be others around the House who would too. Having missed—or refused to take—this opportunity, we had better try to get it right again soon. The integrity of British elections is a very important principle. The questions of how our elections are regulated are fundamental. This is a very unsatisfactory Bill, and Amendment 205 would ensure that we have another go to deal with many of the things which it has been suggested that we need but which this Bill does not provide.

[Baroness Scott of Bybrook (Con)]

My Lords, these amendments seek to require the Government to commit to a timetable for wholesale review and consolidation of electoral law and to further consultations to be conducted on the Bill. The Government remain committed to ensuring that our electoral law is fit for purpose, now and into the future. We agree that electoral law should be revised and improved, but a wholesale review takes significant consideration and policy development is not something that we should rush at and potentially get wrong. The Government’s immediate priority will be the implementation of our manifesto commitments, which this Elections Bill delivers. This would allow us to update our electoral law in important ways, strengthening our current framework by addressing known vulnerabilities in our systems.

Amendment 206 would oblige the Secretary of State to establish a committee consisting of members of both Houses of Parliament to conduct post-legislative scrutiny of this Bill within five years of its passing. I have heard the arguments at Second Reading, and in previous Committee sessions, over perceived potential future impacts, and I understand the desire to ensure that any such legislation has the impact intended. It is already the settled will of noble Members that significant pieces of primary legislation should be subject to post-legislative scrutiny. Indeed, it was only a couple of years ago that the Government published a post-legislative assessment of the Electoral Registration and Administration Act 2013. Things would not be any different when it comes to the legislation before us today. It is the Government’s view that to include an obligation in the legislation is not necessary in light of our plans to conduct scrutiny and evaluation of the measures in the Bill in due course.

I note the purpose of Amendments 214 and 215: to require the Secretary of State to publish a consultation and an impact assessment before measures are commenced. The measures in this Bill deliver not only on recommendations by parliamentarians, Select Committees, international observers and electoral stakeholders but also on a range of consultations. This includes the overseas electors policy statement issued in October 2016, the Government’s 2017 call for evidence on the accessibility of elections and the Protecting the Debate: Intimidation, Influence and Information consultation of July 2018. My officials have consulted with administrators and civil society groups throughout the policy development, and they are continuing to do so in our implementation planning. We have also published both an equality impact assessment and an economic impact assessment before introducing these measures, and we will continue to monitor impacts, as I have said. I can assure the noble Baroness that the Government are listening but, at this time, do not consider these amendments necessary.