Political Parties and Elections Bill

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The Chairman: Proceed with the clause 8 interrogation. Mr. Tyrie has already indicated that he wants to come on to the triggering clause, so we can roll those together later.
Mr. Straw: I will ask one of my excellent officials to comment on clause 8 as well. By way of background, there is a consensus that there has to be greater transparency; that was the whole purpose of the 2000 Act. As far as I can see, no one is arguing on the issue of transparency. You can argue about levels of total spending and how it has happened but these days, subject to the minimum limit which I know parties have concerns about, there ought to be transparency about who is giving what. There have been concerns about some of the unincorporated associations. The leaders of all parties have said that they want the source to be made clear. That has been the aim of the parliamentary draftsperson in producing the Bill.
Can I say with absolutely certainty that it will work as we intend? No, because I am afraid that Acts are subject to interpretation and sometimes subject to error—including mine. You can get gaps—as happened unintentionally in this Act. I do not know whether Mr. Sweeney or Mr. Smith wishes to add anything.
Mark Sweeney: Clause 8 is not intended to add any additional requirements, in terms of who may or may not donate, or the way in which they may do so. It is intended to amplify the existing requirements in sections 54(4) and (6) of the Political Parties, Elections and Referendums Act, which deal with agency, or the true source of a donation. The new clause requires that somebody has consciously to consider whether, if they are giving money, those bits of the original legislation are engaged—that is to say whether they are acting as an agent for somebody else. The precise circumstances of whether somebody is acting as an agent will vary from case to case.
You asked specifically about unincorporated association, for example. Where somebody gives money to an unincorporated association and says, “Here you are. I would like you to give this to x party” and that is duly handed on, so that the unincorporated association acts as an intermediary, we would expect that to be “agency”, under the terms of the existing legislation. A declaration under this clause would therefore say, “I have acted as an agent.” The circumstances may not always be as clear cut as that. Somebody may not give an explicit instruction for what they wish to be done with the money and a court might then wish to look at contextual factors, such as the purpose of an unincorporated association and whether the person giving the money would have reasonably expected that anything else would be done with it once it was handed over.
In relation to your specific point about donations by companies that have foreign ownership, the clause does nothing to change the rules in relation to donations by those companies. I shall pause at that point. Matthew, do you want to add to or subtract from anything I have said?
Matthew Smith: No, just to say that on the companies point, the Act is clear at the moment that if a company is carrying out business in the UK and is registered here, it can give money regardless of ownership, but of course, that takes effect subject to the agency provision that Mark has outlined.
Q 28Martin Linton: If a foreign-owned company gives a large donation to a political party, is that not regarded as an overseas donation?
Mark Sweeney: Not if the company is carrying on business within the United Kingdom, as PPERA currently requires.
Q 29Martin Linton: Is that not a loophole in the legislation?
Mark Sweeney: One could take that view, but that is what Parliament settled on in 2000, and it is not something that clause 8 seeks to address directly.
Q 30Martin Linton: But if we were concerned to close the loopholes in the legislation, we should perhaps close that one as well.
Mark Sweeney: Certainly, this provision would not deal with that particular type of donation, so further legislation would be required.
Matthew Smith: In that sort of circumstance the question would come down to whether the UK company was being used purely as a vehicle through which to channel money, and if that were so, there would then be a question about whether there was an agency relationship. If there is an agency relationship, the Act requires that to be declared, and our provisions will require a declaration to be made about that.
Q 31Martin Linton: The company may be carrying on legitimate business, but a foreign shareholder might phone up the chief executive and say, “Will you please make a donation of £50,000 to this party?” and the chief executive would be in a poor position to say no.
Mark Sweeney: Subject to anything that Matthew wants to say, without speculating on what would happen in an individual case, the greater the degree to which somebody’s wishes are being followed through by an entity, the more there might be a case for saying that there is agency. In the example you gave, if somebody who wholly owns a company that carries on business in the United Kingdom rings up the chief executive and says, “I command you to give £X,000 to a political party,” it might be the case that that is agency, although it has not been tested in the courts since 2000. Is that fair?
Matthew Smith: I would say that is fair.
Q 32Martin Linton: Who has to make the judgment about whether an unincorporated association is a conduit for money to political parties or a legitimate organisation? For instance, the East Surrey Business Club, the Billericay Westminster dining club and the Midlands Industrial Council just happen to have addresses that are the same as local Conservative associations, but apart from that, nothing in their titles specifically suggests that they are acting as conduits. However, it is well established that they are. Who makes that decision about whether they are conduits?
I do not want to use one of the organisations that you mentioned, but if there was an unincorporated association that was, for the sake of argument, just called “The Committee”, and some money was given to it by an individual, if the individual said “I want you to pass this to x political party,” that would be agency. If all that the committee did was collect donations and give them to a political party, and that was the only thing on which it spent money, but there was no spoken transaction or contract between it and an individual giving it money stating that that would happen, that would potentially be agency as well. The further that you move away from a direct instruction and an unincorporated association having that as its sole purpose, the less likely it is that a court will find that that is an agency relationship.
Matthew Smith: We have to stress that at the moment the precise confines of agency as given in the 2000 Act—whether something is given
“by or on behalf of”
the donor, for example by an unincorporated association—has yet to be tested by the courts, so it is inherently quite uncertain.
Q 33Martin Linton: But they would have to make a declaration under clause 8 of the Bill.
Matthew Smith: Absolutely. You talk about who is responsible, and in fact in the first instance it is for the person giving money over to declare whether they are the donor or whether they are giving it on behalf of someone else. The clause is designed to focus the minds of both the person handing the money to the political party and the recipient political party, so that they must consider whether there is agency and so that there is a dialogue between those two individuals or organisations about that very point.
Q 34Martin Linton: And the declaration would have to give a list of all donations of more than £200, and who they came from.
Matthew Smith: They would have to declare whether anyone had given them £200 with a view to the making of the eventual donation to a political party. So if the money has been handed over on the understanding that it will be passed on, under the new provisions one would expect someone to make a declaration about that. The declaration has to say whether there is an agency relationship, and if there is not, it has to explain why not.
Q 35Martin Linton: Would the declaration be just to the donor, or would it be a public document?
Mark Sweeney: It would be made to the donor. It is not required to be published, although the Electoral Commission would be able to access it using its powers.
Martin Linton: But not publish it?
Mark Sweeney: Currently, it is not required for either the donor or the Electoral Commission to publish the declaration.
Matthew Smith: To fill in on that point, as part of its donation report, when the political party records the donation it has to pass on to the Electoral Commission the fact that a declaration has been made. That will form part of its donation report, which will itself be a public document.
Q 36Pete Wishart: May I gently remind the Secretary of State that there are more than three parties in the UK political process? In fact, some of those political parties are now the Government of some nations, and one of them is also looking to increase its number by a quarter in the course of the next few days.
I have been very disappointed by the way in which the Secretary of State, and probably all the other political parties in the House, have tried to engage the minority parties in the House. Our involvement has been pretty woeful, and the failure to invite us to the discussions with Hayden Phillips was a big omission. However, we will leave that aside just now, especially given our particular role. I am sure that the Secretary of State is eternally grateful to the Scottish National party for highlighting the practice of people being ennobled to the House of Lords for making donations to political parties. I am sure that he is grateful also for the robust and thorough police investigations to challenge whether that was legal.
May I ask the Secretary of State where in the Bill there is any indication that that type of practice could be dealt with efficiently and effectively, and will never be allowed to happen again?
Mr. Straw: I appreciate your concern and your perception of the way that smaller parties in the Westminster Parliament have been treated. Let me say that no offence was intended at all.
I know that you are to hear from Sir Hayden Phillips later, Mr. Cook, but may I say on his behalf that I am absolutely certain that no offence was meant by him either?
Mr. Wishart, you will probably find what I am about to say offensive, too, but there is a practical problem in trying to reach agreement with a very large number of parties. I am not thinking about the Scottish National party in that respect, but I shall leave that point there.
As far as allegations of favours are concerned, you will note that no prosecutions took place notwithstanding what, as you say, was a very thorough and proper inquiry. I hope that no false conclusions are being drawn from that process. I have had no representations that the basic law on the matter—which goes back to the Honours (Prevention of Abuses) Act 1925, as well as much wider law—needs to be changed, although if it does, I am happy to consider it.
Q 37Pete Wishart: There was a recent issue in the Scottish Parliament when one of Mr. Straw’s party colleagues was found guilty of securing a foreign donation for part of a leadership campaign. A number of us in Scotland believe that foreign donations—or outside donations, if we want to term them as such—should be included in the Bill to cover Scottish elections. Surely it is right and proper that elections fought and contested in Scotland should be contested only with Scottish money. Why should money from London and Westminster, for example, be used to contest Scottish elections?
Mr. Straw: The proposition now is this: if I had a relative living in Scotland, and as it happens I do, who was married—sadly, the person has now passed away—to someone as truly Scottish as you, Mr. Wishart, and they were standing in an election, because I happen to be domiciled in England, I would be banned from making a donation to that person’s campaign. That is an interesting idea, but it is not one that I share.
Q 38Pete Wishart: The same applies in European elections, so the same criteria could be applied, too. It would be easy to resolve. If you were registered to vote in Scotland, that would be the defining rule that allowed contributions to be made.
Mr. Straw: I understand entirely. Your approach to the future of the United Kingdom and mine—indeed, that of all the other parties represented around this table—are different. We have no such proposals.
Mr. Cook, Mr. Djanogly asked me a factual question earlier, to which I now have the answer thanks to my excellent officials. Would it be appropriate to read it to the Committee? It is short. It gives the number of convictions.
The Chairman: As long as it is pertinent, Secretary of State.
Mr. Straw: It is pertinent to Mr. Djanogly’s question. The answer is that, as at 16 June 2008, 29 people had been prosecuted under the 2000 Act, resulting in 23 convictions. That was shown at paragraph 2.8 of the White Paper. I apologise to Mr. Djanogly for not remembering that, although it was my White Paper.
Q 39Mr. Djanogly: The point that I wanted to make, which I think you have made for me, Secretary of State, was that, compared with the relevant prosecutions for electoral fraud, this is a relatively small issue, yet electoral fraud is ignored by the Bill. You say 29, which compares with 450 for electoral fraud.
Mr. Straw: I do not recognise those figures, but I note that the Electoral Commission evaluation reports on the 2007-08 local elections show that allegations of electoral fraud are decreasing. That is certainly my own perception.
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