Representation of the People Bill (Seventh sitting)

Lloyd Hatton Excerpts

Committee stage
Tuesday 14th April 2026 Public Bill Committees

[Dr Chowns]

I consider companies and trade unions to be completely different entities. One is a profit-making organisation, and the other is a membership association designed to represent the interests of its members. The two are not parallel, and I am completely fine with trade unions making donations.

Company donations have a huge influence on our politics. There is also a tax advantage for companies; there is effectively a taxpayer subsidy to them, and the advantage can be up to about 40% for companies making donations from company funds, compared with individual funds. I would therefore like to hear why the Minister thinks it is important to retain the ability for companies to make donations and does not want to follow the example of France and Canada in stopping such donations. Individuals can still make donations.

On a couple of specific points, the hon. Member for Hazel Grove referenced the fact that there is a clear problem in the Bill as currently drafted. A loophole permits companies to give donations up to the limit multiple times, both to a party and potentially to every single one of its candidates. Surely the limit should be set so that it reflects the total value of donations to all recipients. That has been argued for by the Electoral Commission and in Philip Rycroft’s recommendation 4, and it is also covered by amendments 36 and 37 in the name of the hon. Member for Warwick and Leamington.

It is also clear that the test should be post-tax profit, not revenue. It is far too easy for companies to inflate their revenues by engaging in what is sometimes called transfer pricing in other sectors, effectively enabling them to completely bypass the intended restrictions. Surely it is in the spirit of the Bill, and should therefore be put into the letter of it, that the test should be post-tax profit, not revenue. If we are going to permit company donations, we should be really clear that they are derived from profit made in-country, because using the revenue test provides a huge loophole. Again, that is called for in Philip Rycroft’s recommendation 2, and by the Electoral Commission and many others, so I very much hope the Minister will respond positively.

Amendments 34 and 35, in the name of the hon. Member for Warwick and Leamington, would make the donor criminally liable. The Minister responded by saying that the onus should all be on the recipient of those donations, but that is not how the law operates in other areas when it is broken: the commissioners of the offence, as well as the recipient of the funding, are guilty. So I ask the Minister to think again. If we are talking about large companies making huge donations, they arguably have greater capacity, and certainly just as much responsibility, as the recipient to check that they are operating within the law. I refer the Minister to my comments on a previous clause about establishing a donor register, which would enable us to deal with these issues and involve the Electoral Commission in ensuring that these checks are in place.

I will briefly touch on new clause 13, in the name of the hon. Member for North East Hertfordshire (Chris Hinchliff), new clause 32, in the name of the hon. Member for Poole (Neil Duncan-Jordan), and new clause 52, in the name of the hon. Member for Leeds East (Richard Burgon). They all recognise the widespread concern in UK politics, and among all of us to some extent, about how company donations risk twisting, and in some cases have twisted, our politics. Each of those Members has tabled a new clause seeking to ban donations from particular categories of company donor. The first seeks to exclude property development and construction undertakings, the second seeks to exclude those who have had public contracts at any time in the last 10 years, and the third seeks to exclude any companies involved in oil and gas extraction.

I have huge sympathy for the arguments and for the broad thrust of those new clauses. I am not necessarily convinced that, in their current form, they are ready to be incorporated in the Bill, but they highlight a key concern. For example, there has been widespread concern about cases where large donations by a property developer were associated with planning decisions under a previous Government that went in favour of that property developer. There have also been serious concerns about the revolving door between the Government and the legislature, and profit-making companies. I would really like to hear the Minister’s response to those three new clauses tabled by Labour Members, which highlight concerns about the influence of particular groups of companies on our politics.

However, the issues I really hope the Minister will respond to are, first, stopping all company donations, because people who want to make donations can still make them as individuals; secondly, adopting the post-tax profits test, rather than the revenue test; and, finally, ensuring that the donations limit applies to the total value of donations, not just single donations.

[Lloyd Hatton (South Dorset) (Lab)]

I will keep my remarks brief. As we start the afternoon sitting, it is worth putting on the record that clause 60 goes a significant distance towards finally tightening up the rules around corporate donations, which many campaigners, including in civil society, would argue have been left unaddressed for far too long. What clause 60 seeks to do is effective.

That said, and I will not repeat in too much detail the points made by the hon. Member for North Herefordshire, it is worth reflecting on the recommendations in Philip Rycroft’s review around revenue versus profits, and how we can tighten things up. So I am keen to understand how, as the Bill progresses, we can potentially take his recommendations into account.

It is worth remembering some of the big case studies that have been a cause for concern. We therefore know that, in some cases, corporate donations can carry a significant risk of nefarious interference in the democratic process. There was much media coverage and speculation about the idea that Elon Musk, the California-based billionaire, could legitimately make a donation to a UK political party via a UK subsidiary of Tesla.

When we look at some of the research conducted by CenTax or Transparency International, we see that around £1 in every £10 that comes via a company as a donation could be because the individual in question could not donate directly themselves. According to that same research, around a quarter of money donated by companies is completely untraceable. So these measures are really welcome.

[Paul Holmes]

I do not disagree with what the hon. Gentleman is saying; I think he is well intentioned, and his speech is well researched. However, as set out in the House of Commons Library note, the Electoral Commission itself has warned that the provisions in the clause

“would not reduce the risk of foreign money entering British politics through companies”.

What does he say to that? Does he think the Government should do more?

[Lloyd Hatton]

I think there is a difference between corporate and non-corporate donations. However, what would be really interesting is to see how the Bill progresses in taking forward the Rycroft review. That is a really important point, but I will not go over it again, because it has already been well articulated by the hon. Member for North Herefordshire.

To conclude, the Bill takes serious steps forward in addressing some of the foul play we have seen time and again with corporate donations in the past, and there is a huge body of evidence behind that. However, I would welcome any early advice or opinion the Minister can give us on how we can work on the recommendations set out by Philip Rycroft.

[The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Samantha Dixon)]

It is a pleasure to serve under your chairmanship, Sir Desmond. I will be guided by you, but I do not intend to speak to new clauses 13, 32 and 52 at this stage. However, to respond to a number of points made during the debate, particularly by the hon. Member for North Herefordshire—

--- Later in debate ---

[Paul Holmes]

I thank the Minister for her remarks. Once again, I would like to say on the record that the Government are making great strides in this area and are trying to strengthen the legislation and the regulatory regime around donations. We agree with her that the amendments—particularly amendment 88—for the reduction to £500 on the reporting threshold for donations from unincorporated associations is simply too low. There could be a debate on whether it should be lowered from what the Government are proposing; I think actually unifying the regulations between companies and unincorporated associations is a sensible thing to do. It removes ambiguity and creates a more uniform system. The burden placed at £500 would create an unnecessary reporting regime.

[Lloyd Hatton]

It has already been outlined by the hon. Member for North Herefordshire, but I am interested to know whether the official Opposition spokesperson agrees that the previous Government’s decision in the Elections Act 2022 to inexplicably increase the threshold for UAs was wrong, and that the intention of this Bill, which is to reduce it, is the right way forward?

[Paul Holmes]

I have already said that I think the Government are being sensible in creating a unified or level playing field between companies and unincorporated associations. I was not an expert on the previous Act when it was passed, but in my view it is sensible for the Government to be taking this action, now that its consequences are clear, because the Act obviously did not work. If Members across the House look at some of my previous remarks on some of the proposals brought forward by the last Government, I am not ashamed to say that sometimes—I only say sometimes—we got it wrong. That is the nature of democracy.

The changes that the Government are making are sensible and my contention is that some of the amendments—especially amendments 88 and 90—use a sledgehammer to crack a nut. They create an overburden compared with the Government’s good intentions and what they want to get out of the proposals.

We would not support amendment 88 and we certainly would not support amendment 90, but we do welcome the strides that the Government, and the Minister, are trying to take in tightening up the regime.

--- Later in debate ---

[Lisa Smart]

I should start by reminding the Committee that I am a member of the Speaker’s Committee on the Electoral Commission, so I have been a part of some of the discussions the Minister mentioned. I also met the chief exec of the Electoral Commission to talk about what is in the Bill, what the Electoral Commission welcomed and worked with officials on, and what it would have liked to have seen more on. That was a useful and productive meeting. The commission made some public comments, and I cannot remember the exact wording used, but it was underwhelmed at some elements, I think.

I am particularly keen to speak to new clause 46 and new clause 53, which is in the name of my hon. Friend the Member for Guildford. New clause 46, in the name of the hon. Member for Warwick and Leamington (Matt Western), has drawn attention to Electoral Commission comments about a Catch-22 in its powers to investigate suspicious transactions:

“Despite our statutory duty to monitor and take all reasonable steps to ensure compliance…we currently have no ability to obtain any information from financial institutions that we can use to monitor and independently verify provenance or the permissibility of funds, unless we open a full investigation. This is a weakness: to open such an investigation needs clear evidence—but we can’t always obtain that in the first place.”

The Government said that they would keep the Electoral Commission’s powers under review, and noted that they were increasing planning powers per offence to provide a greater deterrent. However, the report emphasised that the Electoral Commission can impose fines only if it can prove an offence has occurred in the first place. The fact that it often cannot do so is precisely the problem and underpins the need for stronger information-gathering powers. New clause 46 would increase the commission’s powers to require financial institutions to provide it with information in relation to the permissibility of donations.

New clause 53 is complementary to new clause 46. It would enable the Electoral Commission to require information before launching a formal investigation. When I met the commission’s chief executive with my hon. Friend the Member for Guildford, who tabled the new clause, we talked about exactly that issue. The Rycroft review, which has been mentioned many times today, states that the Electoral Commission, unlike the other regulators, cannot demand information outside a formal investigation, meaning that it cannot work in real time to head off offences. The review recommends extending powers so that the commission can require information from relevant bodies and persons.

By comparison, the Charity Commission has the option of a regulatory inquiry, which gives information-obtaining powers without the necessity of enacting a lengthy statutory inquiry. The Joint Committee on the National Security Strategy report, describing the Catch-22, recommends powers for the Electoral Commission to compel information, deployable in appropriate cases outside formal investigations. The Committee on Standards in Public Life’s 2021 review recommended extending the commission’s powers to compel document information and explanation outside an investigation.

Election-related harms are increasingly amplified online. The Electoral Commission evidence to the Speaker’s Conference explicitly links disinformation and platform algorithms to harassment and intimidation, and it describes concrete candidate harms, including deterrence and avoidance. The Speaker’s Commission earlier called for electoral law review, including addressing the disinformation that can fuel abuse and intimidation, and a number of people involved in the democracy sector and the implementation of the enforcement of electoral law would welcome looking at a review of all the many Representation of the People Acts that have taken place over time, so that we can look at where they complement one another and where, on occasion, they do less than that.

The last point to make is that if platforms can micro-target voters in real time, surely the regulator must be able to obtain basic information in real time. On that note, I commend new clauses 46 and 53 to the Committee.

[Lloyd Hatton]

I will keep my remarks brief in the interests of avoiding repetition. It is important to put on the record the changes in the Bill, which are hugely welcome. One of those is massively improving the information sharing and investigatory powers of the Electoral Commission to ensure closer working with regulators and law enforcement.

It should go without saying that the commission is the key watchdog in our democratic process and that it ensures that our elections and our political parties operate with integrity day to day. That is why it is particularly important that we look at some of the points being made as part of new clause 46. As has been said often today, that is touched on in some detail as part of Philip Rycroft’s review; the need to ensure that the information-sharing and investigatory powers of the Electoral Commission are as effective as they need to be, and that they work in a two-way direction to ensure that that work is undertaken.

I note that the Minister already touched on this at the start of this grouping, and that her and her officials will be wanting to look at it in more detail. I look forward to that, because it is important that we get this right as we make these positive steps forward in this part of the Bill. We must ensure that the Electoral Commission, as our key national watchdog for elections and the democratic process, has the powers and information at its fingertips to operate as effectively as possible.

[Dr Chowns]

I strongly support measures to strengthen the capacities and powers of the Electoral Commission, which plays a crucial role in regulating our politics. I will speak briefly to new clauses 46 and 53. As has already been highlighted, they are basically fully in line with Philip Rycroft’s recommendations 9 and 10, so I hope that Government amendments will be tabled in due course to address those recommendations, the justification for which has been clearly outlined.

My new clause 57 concerns the Electoral Commission’s fining power. I very much welcome the Government’s announcement that they will bring forward secondary legislation to increase the commission’s maximum fine to £500,000 from £20,000, which is clearly peanuts and no disincentive at all. That will be a significant improvement, and of course will bring the measure in line with the penalty that can be imposed for breaches of electoral finance rules in relation to referendums in Scotland.

[Lloyd Hatton]

Does the hon. Member share my view that the old system that we inherited meant that foul play by a political party was essentially priced into the system, because the fine was so small? What the Government are doing, by increasing the fine to £500,000 for a single offence via secondary legislation, means that that type of culture, in any political party, will come to an end—no party can simply say that these fines are the cost of doing business.

[Dr Chowns]

Absolutely. It is clear that the previous level, £20,000, was utterly inadequate, so I welcome the Government’s commitment to strengthen that. The purpose of my new clause 57 is to suggest ways in which it could be strengthened further, namely by putting the maximum fine into primary legislation, and by providing that the maximum fine would be £500,000 or 4% of campaign spending, whichever was the higher. I will explain why.

Most other regulators in the UK can impose unlimited fines, a high multimillion-pound fine or a fine as a percentage—for Ofcom, for example, 10%—of annual turnover. In its 2021 review of electoral finance, the Committee on Standards in Public Life recommended that the fine should be 4% of the value of campaign spending or £500,000, whichever was the higher. My new clause simply calls for what the Committee on Standards in Public Life argued for.

Analysis from Spotlight on Corruption has shown that the currently proposed increase to a £500,000 maximum fine would amount to a mere 1.5% and 2.1% of the campaign spending of the Labour and Conservative parties respectively, as the two largest-spending parties. If those parties had committed an egregious offence during the 2024 general election and the 4% measure had been in place, the maximum fines would have been £1.2 million or £955,000 respectively—double the current maximum. Arguably, it should be even higher—Ofcom can fine 10%—but my new clause simply puts forward the recommendation of the Committee on Standards in Public Life.

The Minister touched on the question of whether to have the limit in primary or secondary legislation. She argued—I think I am paraphrasing accurately—that one of the advantages of having it in secondary legislation is that it can be easily updated. However, the previous level of the fine, which was £20,000, was set out in secondary legislation—it was in the Political Parties, Elections and Referendums (Civil Sanctions) Order 2010—and it was never updated. The Minister said that the level of the fine might need to be set out in secondary legislation so that it could be more easily updated to make it higher, but the historical record shows us that we have had fines that are far too low and that they are not adapted.