House of Commons - Explanatory Note
Political Parties, Elections And Referendums Bill - continued          House of Commons

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Part II: Registration of political parties

60.     The purpose of Part II of the Bill is to put in place arrangements for bringing political parties within the scheme of control set out in Parts III to V for regulating their income and expenditure. These arrangements take the form of a scheme of registration, building upon the existing registration arrangements established under the Registration of Political Parties Act 1998. This Bill would repeal much of that Act (see Schedule 21), and this Part of the Bill re-enacts its provisions but with significant modifications.

Clause 19 : Parties to be registered in order to field candidates at elections

61.     The registration scheme established by the Registration of Political Parties Act 1998 is voluntary in nature. If the controls on income and expenditure set out in the Bill are to be effective, however, then the means by which parties are brought within the ambit of those controls must, to all intents and purposes, be binding upon those parties which it is intended should be subject to those controls. The intention is that the controls on political parties' income and expenditure should apply to any organisation that has a candidate at a relevant election. The purpose of clause 19 is to provide the mechanism by which such organisations are brought within the registration scheme. Its effect is to require that an organisation wishing to put up candidates at a relevant election, as defined in subsection (3), must be registered as a political party with the Electoral Commission. It does so by providing that a person may only stand as a candidate at a relevant election if his nomination paper is accompanied by a certificate authorising his candidature issued by, or on behalf of, the nominating officer of a registered party or if his nomination paper either gives the description "Independent" or gives no description whatsoever. In the case of elections to the Scottish Parliament, the National Assembly for Wales or the Greater London Assembly under the additional member system, a party will only be able to be nominated to stand if it is a registered party; this rule also applies to elections to the European Parliament in Great Britain under the regional list system of election (see subsection (1)(c)).

Clause 20 : The register

62.     Responsibility for maintaining the register of political parties will transfer from the Registrar of Companies (as currently provided for under section 1 of the Registration of Political Parties Act 1998) to the Electoral Commission. But an existing entry in the register made under the 1998 Act will continue to have effect as if made under this Part of the Bill (subsection (2)).

Clause 21 : Office-holders to be registered

63.     Subsection (1) requires each registered party to have three registered office-holders, namely a registered leader, registered nominating officer and registered treasurer. The same person may be registered as the holder of two or three of these offices. Subsections (2) and (3), which relate to the registered leader and registered nominating officer respectively, reproduce the provisions in paragraphs 4(2) and 5(2) of Schedule 1 to the Registration of Political Parties Act 1998. The requirement on registered parties to have a registered treasurer is new. Subsection (4) provides that the registered treasurer must have overall responsibility for the financial affairs of the party and for ensuring compliance with the control on income and expenditure set out in Parts III to V and VII of the Bill. It is made an offence to register as the treasurer of a party a person who, within the past five years, has been convicted of an offence under the provisions of this Bill or in connection with a relevant election.

Clause 22 : Financial structure of registered parties : adoption of scheme

64.     It is intended that the registration process should serve to identify exactly what constitutes a particular registered party for the purposes of these controls. Parties in the United Kingdom are constituted in different ways. Some have a federal structure while others are more centralised. Party structures may also feature relationships between a central organisation and affiliated or associated bodies which may also have a separate and independent existence of their own and which may not necessarily be wholly comprised of members of the party in question. In some instances it may be more appropriate to regard such affiliates or associated bodies, for the purposes of the controls on party funding, as donors to the party rather than a constituent part of the party apparatus.

65.     The purpose of clause 22, therefore, is to enable the Electoral Commission to pin down those constituent parts of a registered party's organisation which are to be required to comply, whether separately or through the party's central organisation, with the controls set out in Parts III to V and VII of this Bill. Each party applying for registration must propose a scheme setting out the arrangements for regulating the financial affairs of the party and the scheme must be approved by the Electoral Commission before the application is granted. Where the Commission is not satisfied that the proposed scheme properly reflects the organisation of the party it may request that the proposed scheme be modified. The arrangements for the adoption of schemes in relation to those parties which are already registered under the Registration of Political Parties Act 1998 are set out at clause 30.

66.     Under subsection (8), certain organisations (namely, trade unions, friendly societies, industrial and provident societies and other bodies which may be specified by order) are not to be regarded as forming a constituent part of a party for the purposes of a scheme adopted under this clause. As a result, money donated to such an organisation which is affiliated to a registered party would not be treated as a donation to that party. But a donation from such an organisation to the registered party (including an affiliation fee) would have to be treated as a donation to the party and not simply as an internal party transaction.

67.     Subsection (2) provides for a distinction to be drawn between parties which are to be regarded for the purposes of the Bill as a single unitary organisation and parties which are to be regarded as consisting both of a central organisation and of other units or organisations (for example constituency associations, local branches and women and youth organisations) which will have separate responsibility for their accounts. These subsidiary units or organisations are described as "accounting units". If a party scheme falls into the latter category the party will be required to adopt a scheme clearly identifying which parts of its organisation constitute its central organisation and which constitute its accounting units and will also be required to register a person as the treasurer for each separate accounting unit (subsection (3) and clause 23(2).

68.     Subsection (7) provides for the adoption of a replacement scheme, for example following changes to a party's structure. A replacement scheme cannot take effect until approved by the Electoral Commission.

Clauses 24 to 28 : Registration

69.     Clauses 24 to 26 re-enact, with necessary modifications, sections 2, 3, 4, 5 and 6(1) to (4) of the Registration of Political Parties Act 1998. Together with Parts I and II of Schedule 3, they set out the procedure for applying for the registration of parties and of their emblems and for making changes to the register. Clause 27 requires the registered treasurer of a party to provide the Electoral Commission with an annual notification that the particulars of a party's entry in the register remain accurate and complete. The annual notification must also provide details of any changes to the party's constitution. This must be provided with the annual statement of accounts (see clause 40).

70.     A party's entry in the register will now contain the following information:

i) the registered name of the party;

ii) the address of the party's headquarters;

iii) the name of the party's registered leader, registered nominating officer and registered treasurer. If one person holds all three offices, the party must name the holder of some other specified office in the party.

iv) where a party is a party with accounting units, the name and headquarters address of each accounting unit and the name of the treasurer of each such unit;

v) the registered emblems of the party;

vi) the name and office address of up to twelve deputy treasurers (see clause 67);

vii) the date of registration;

viii) any other information prescribed by the Electoral Commission in accordance with paragraph 6 of Schedule 3.

71.     It is possible, under the provisions of clause 28, for a party to apply to be removed from the register. But removal is conditional upon the party declaring that it does not intend to have any candidates at any relevant election, as defined by clause 19(3), and there is the additional safeguard that a party which is removed from the register in accordance with this clause will nevertheless remain subject to the requirements of Parts III and IV of the Bill in relation to its accounts and donations until the end of the financial year following the removal of the party's entry in the register.

Clause 29 : Request by Secretary of State

72.     Clause 29 re-enacts section 12 of the Registration of Political Parties Act 1998. The Commission will normally be requested to send a copy of specified parts of the register to returning officers at the time of a relevant election so that they can verify the names of registered parties.

Clause 30 : Financial structure of existing registered parties

73.     The purpose of clause 30 is to ensure that parties already registered under the Registration of Political Parties Act 1998 (of which there were 94 as of 13 December 1999) make the necessary arrangements to comply with the registration scheme established under the provisions of the Bill. In particular, those parties will be required to submit, within six weeks of commencement of this Part, a draft scheme as required under clause 22. In order that the time taken to consider and approve these schemes (and the work involved in doing so is likely to form a considerable part of the Commission's initial workload) does not delay the application of the requirements of Parts III to V of this Bill, subsection (3) provides that a draft scheme will have effect as if it had been approved by the Commission either until it is in fact approved or until the end of the period of nine months beginning with the date of commencement. If the Commission is not able to approve a draft scheme within that nine-month period it will be able impose a scheme incorporating such modifications to the proposed scheme as it considers appropriate.

74.     An existing registered party will also be required to submit, again within the six-week period following commencement, details of its registered treasurer (subsection (6)) and, where the party is a party with accounting units, details of the treasurer of each of these units (subsection (7)). Where a party fails to provide either a draft scheme or the other information required under this clause within the time allowed, its registration will be suspended (subsection (10)); the party could not then field candidates at an election.

Clause 31 : Assistance by Commission for existing registered parties

75.     Clause 31 enables the Commission to provide financial and other assistance to existing registered parties to help them meet the initial costs involved in complying with the provisions of Parts III and IV. Up to £500,000, in aggregate, may be allocated to existing registered parties whether in grants or benefits in kind (for example, a computer software programme for recording donations). The method of apportioning this sum to parties will be determined by the Commission in accordance with a scheme prepared by them.

Clauses 32 to 35 : Supplemental

76.     Clauses 32 and 34 re-enact sections 14 and 19 of the Registration of Political Parties Act 1998 respectively. They prevent broadcasters from transmitting a party political broadcast on behalf of a party which is not a registered party, and make it a criminal offence for any person knowingly or recklessly to provide the Electoral Commission with false statement for the purpose of this Part of the Bill. Clause 33 makes consequential amendments to the parliamentary elections rules set out in Schedule 1 to the Representation of the People Act 1983. Clause 35 defines terms used in Part II (and limits its scope in respect of parties contesting only parish or community council elections). The clause re-enacts, with modifications, the interpretation section (section 22) of the Registration of Political Parties Act 1998.

Part III: Accounting requirements

77.     In paragraph 4.42 of their report, the Neill Committee recommended that the public should be entitled to have access to the annual accounts of income and expenditure of every political party and that this should be put on a statutory basis. Part III of the Bill establishes a statutory scheme for this purpose. Many political parties already prepare, and some of them publish, annual accounts. A statutory scheme has, however, to start from scratch and quite detailed provisions are therefore required. Elements of the proposed scheme are drawn from provisions of Part VI of the Charities Act 1993, which in turn are partly modelled on the Companies Act 1985.

Clause 36 : Duty to keep accounting records

78.     Clause 36 requires the treasurer of a registered party to keep proper accounting records, as a basis for the preparation of an annual statement of accounts. The records must cover both the transactions which the party enters into and its assets and liabilities. They must be preserved for at least six years from the end of the financial year in which they are made (subsection (4)), or until the Electoral Commission has consented to their disposal following de-registration of the party (subsection (5)).

79.     Political parties in the United Kingdom do not at present share a common accounting year. The Neill Committee recommended (recommendation 4) that the Commission should be able to prescribe a common accounting period. Subsection (6) confers the necessary power on the Electoral Commission to specify a common financial year, but it may also specify different financial years for different parties, in effect enabling parties to retain their existing financial year.

Clause 37 : Annual statement of accounts

80.     Clause 37 establishes a requirement to prepare an annual statement of accounts. Subsection (2) empowers the Electoral Commission to make regulations specifying the form and contents of a statement of accounts. The intention is that, over time, the Commission should be able to require best practice to be followed and ensure that the parties' accounts can be fairly compared with each other. The regulation-making power may be used, in particular, to specify information which is to be provided by way of notes to the accounts. The Commission could exercise this power to require, for example, that the notes to the accounts list all disclosable donations to the party in the period covered by the accounts.

81.     The Commission may prescribe different requirements according to whether the income or expenditure of a party falls into one of three bands (up to £1,000, between £1,000 and £250,000; over £250,000). The intention is that, where a party has only a small turnover, the Electoral Commission will be able to apply a 'light touch' regime requiring only a simple annual statement.

Clause 38 : Annual audits

82.      Clause 38 requires a party which has an annual income or expenditure exceeding £250,000 in any financial year (this threshold parallels that which applies to charities) must have its accounts audited within six months of the end of the financial year. The Electoral Commission may also require the accounts of any other party to be similarly audited within three months of it so directing. If a party fails to comply with an auditing requirement, the Commission may appoint a qualified auditor to audit the party's accounts and the cost will be recoverable by the Commission from the party concerned. Subsection (6) enables the Electoral Commission to make regulations about the appointment and removal of auditors and specifying the duties of auditors carrying out an audit in accordance with this clause.

Clause 39 : Supplementary provisions about auditors

83.     Clause 39 provides for an auditor to have access to the party's records and to be entitled to require the party's treasurer or other party officers to provide necessary information and explanations. If access or information is denied, the Electoral Commission may give written directions requiring a person to provide an auditor with access or information and, if those directions are not complied with, the Commission can in the last resort apply to the High Court for the offending person to be held in contempt of court and treated accordingly.

Clause 40 : Submission of statements of accounts etc. to Commission

84.     Clause 40 requires the treasurer of a registered party to submit its statement of accounts (and, in appropriate cases, the auditor's report) to the Electoral Commission. Statements of accounts must be submitted within three months of the end of a party's financial year or, where the party's accounts are required to be audited, within six months of the end of the financial year. Subsection (3) allows the Commission to extend the period for submission of these documents in particular cases for any special reason. A party's registered treasurer must submit with the annual statement of accounts the notification (required under clause 27(1)) detailing any changes to the party's entry in the register of political parties.

Clause 41 : Public inspection of parties' statements of accounts

85.     Clause 41 requires the Electoral Commission to make parties' statements of accounts available for public inspection as soon as practicable following their receipt.

Clause 42 : Criminal penalty for failure to submit proper statements of accounts

86.     Clause 42 creates criminal offences for failure to comply with the provisions of Part III. The offences are intended to catch a failure to duly prepare, as well as a failure to duly deliver, a statement of accounts. Subsections (2) and (3) contain a "due diligence" defence.

Clause 43 : Revision of statement of accounts

87.     Clause 43 makes provision for the revision of statements of accounts which do not comply with the Commission's regulations. The clause is based on like provisions as to companies' accounts in sections 245 to 245B of the Companies Act 1985, as substituted by the Companies Act 1989.

Clause 44 and Schedule 4 : Division of responsibilities in case of party with accounting units

88.     Clause 44 provides that where a party is a party with accounting units (as defined in clause 22), the central organisation of the party and each of the party's accounting units are independently responsible for complying with the accounting requirements as set out in Part III. This means that, in the case of a national party with a network of constituency associations and ward-level branches, each association and branch will maintain their own accounting records and produce their own annual statements of accounts, thereby absolving the central organisation from having to produce omnibus accounts for the whole party. The provisions of clauses 36 to 43 are applied, with adaptations, to accounting units by Schedule 4. Under paragraph 6(1) of Schedule 4 the requirement to submit an annual statement of accounts to the Electoral Commission will only apply automatically to accounting units which have an income or expenditure exceeding £25,000. However, paragraph 6(2) enables the Electoral Commission to require any other accounting unit to send to the Commission their statement of accounts and any auditor's report. Only those statements of accounts submitted to the Commission are open for public inspection under the Bill.

Part IV: Control of donations

Chapter I (Clauses 45 to 47) : Donations to registered parties

89.     These clauses, as a preliminary to the restrictions on their receipt imposed under Chapter II and the reporting requirements imposed by Chapter III, define what does and does not constitutes a "donation".

Clause 45 : Donations for the purposes of Part IV

90.     "Donation" is defined in subsection (2) as gifts of money and property (including money or property transferred to a party for consideration which is less than its value); subscriptions and affiliation fees; money spent (other than by the party) to meet expenses incurred by the party; loans, property, services and other facilities provided to the party on other than commercial terms; and the provision of any sponsorship in relation to the party. Anything given or transferred to an officer, agent or member of the party in that capacity will be regarded as having been given or transferred to the party, unless it is given solely for his own use or benefit (subsection (4)). A donation to a member or officer of a party for use otherwise than on the business of the party as such - for example, in assisting him or her in standing for an internal election - is subject to the separate controls in clause 64 and Schedule 6. The definition of a "donation" applies to anything given or transferred to the party either directly or indirectly through a third person (clause 45(6)(a)).

Clause 46 : Payments, services etc. not to be regarded as donations

91.     Clause 46 specifies those payments or services to a party which are not to be regarded as a "donation". Any donation whose value is less than £200 is to be disregarded (subsection (2)(b)). Also to be disregarded are policy development grants made to parties (under the provisions of clause 10) and grants for security costs at party conferences. In addition, the definition of "donation" excludes the national benefit to parties of air time for political party broadcasts, the use of public rooms at elections and the distribution of election addresses to electors, all of which facilities are provided free of charge. The definition also excludes the provision by an individual of his own services provided these are provided freely and in his own time (subsection (1)(f)). It is not intended that, for example, a voluntary officer of the party should be regarded as making a donation if, in their own time, they contribute professional services (such as accountancy) within their personal sphere of expertise. However, services which were provided free of charge by an individual who was nevertheless paid by his employer while providing those services would be regarded as a donation by the employer.

92.     Subsection (2)(a) also excludes donations made for the purpose of meeting a candidate's election expenses (which will continue to be the subject of a separate statutory return under the relevant provisions of the Representation of the People Act 1983 (as augmented by clause 121 and Schedule 15) and other enactments relating to elections).

Clause 47 : Value of donations

93.     Clause 47 deals with the valuation of donations. Gifts or property are required to be valued at their market value, that is at the price they would fetch on their sale in the open market. Where money or property is transferred to a party for a consideration less than the market value of the property, the value of the donation is the difference between the value of the money or the market value of the property and the consideration provided by the party. Similarly, where loans, property, services and other facilities are provided on other than commercial terms, their value will be taken to be the difference between their actual cost to the party and the cost which the party would have incurred if they had been provided on commercial terms.

Chapter II (Clauses 48 to 54) : Restrictions on donations to registered parties

Clause 48 : Permissible donors

94.     This clause introduces the concept of a "permissible donor", as a means of prohibiting the foreign funding of political parties. Subsection (1) provides that a party may accept a donation only from a permissible donor and where the identity of the donor is known. The latter requirement is intended to cover not only cases where a donation is made anonymously but also where an identity has been given but is clearly fictional (and it is therefore impossible to establish that the donor is a permissible donor).

95.     Subsection (2) specifies those sources of funding which are to be regarded as permissible. They include individuals registered in an electoral register; a company registered in the United Kingdom and incorporated in the European Union and which carries on business in the United Kingdom; a registered political party; a trade union; a friendly society or industrial and provident society and any other unincorporated association which is carrying on business or other activities and has its main office in the United Kingdom.

96. By virtue of subsection (4) any payment in cash or in kind to a party out of public funds (other than one of the payments listed in clause 46(1)(a) and (b), which do not constitute donations) is to be regarded as a donation from a permissible donor. Such payments will include the financial assistance paid to opposition parties in the House of Commons ('Short money') and House of Lords ('Cranborne money'). Subsection (4) also provides that any donation by a trustee, acting in his capacity as such, shall be regarded as a donation from an impermissible source.

97.     Subsections (5) and (6) provides that where a person ("the principal donor") makes a donation on behalf of two or more other persons the individual contribution of each will be treated as a separate donation for the purposes of controls on donations under this Part. The recipient party will therefore need to establish the identity of each separate donor (and to this end the principal donor will be under a duty to provide such information) and whether each constitutes a permissible source.

Clauses 49 and 50: Acceptance or return of donations

98.     Upon receipt of a donation it will be incumbent upon the party to take all reasonable steps to identify the donor and determine whether the donor constitutes a permissible source (clause 49(1)). This may require that the party makes some enquiries and it is perfectly possible that a donation will remain in a party's account while those enquiries are carried out. The Bill therefore distinguishes between the receipt and the acceptance of a donation and makes provision for a period of 30 days during which the status of the donation may be determined and appropriate action taken before the party is to be regarded as having accepted the donation. Clauses 49(2) and 50(1) provide for the return of a donation to its source where that source is an impermissible donor or where it proves impossible to ascertain the donor's identity. In the latter instance, if it is not possible to return the donation to its source, it is to be surrendered to the Electoral Commission for payment into the Consolidated Fund.

Clauses 51 to 53 : Forfeiture of certain donations

99.     Clauses 51 to 53 apply sanctions to the acceptance of donations from an impermissible source, or where the identity of the donor is not known. These provisions should be read in conjunction with clause 59 which requires the treasurer of a party to declare (and makes it an offence falsely to declare) that the party has not accepted any donations from an impermissible source.

100.     Clause 51 enables the Electoral Commission to apply to a court to order the forfeiture of a donation which a party has accepted from a source which is either impermissible or not known. Clause 52 provides for appeals against such an order. Clause 53 enables rules of court to be made in respect of applications or appeals under clauses 51 and 52. It also provides that any sums forfeited under these provisions shall be paid into the Consolidated Fund. Subsection (5) of clause 53 specifies that, where a registered party is not a body corporate, forfeiture proceedings will be brought against the party in its own name and not in that of any of its members and that any sums forfeited will be paid out of the funds of the party.

Clause 54 : Offences concerned with evasion of restrictions on donations

101.     In addition to a party's civil liability under clause 51, clause 54 makes it a criminal offence for any person knowingly to participate in an arrangement or to withhold information, or supply false information, so as to evade the restrictions on the sources of donations. The bringing of criminal proceedings would not preclude the Commission from also applying for forfeiture of the donation in question (see clause 51(2)).

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Prepared: 21 December 1999