Political Parties and Elections Bill

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The Chairman: I call Hilary Stephenson, if that was directed to her?
David Howarth: It was directed to the other two witnesses, because I was taking up what she said and putting it back to them.
The Chairman: Let us start with Mr. McIsaac.
Ian McIsaac: Can you just clarify the precise question?
Q 23David Howarth: Is it the experience of your party that campaigning is constant and undifferentiated between elections? If so, is it the case that if we are to control campaign spending, we must control it all the time?
Ian McIsaac: I assume that that must be right, because the same people are doing the campaigning and they are campaigning for all the elections that are relevant. There are the European elections coming up, the local government elections, parliamentary by-elections, general elections and so on, so what you say has to be correct. As for the way in which the money is divided up, I understand that the current system is fairly straightforward. Not being a candidate, I would not know about the Representation of the People Act, but I am aware of it. We know about that and that is how we manage it. I do not know whether the money could be divided up into different pots. Already, there are different limits on, for example, the European elections and by-elections and so on, but you are quite right that there is a degree of artificiality about it. Unless people keep timesheets, you will never find out what they are getting up to and even then, from my experience of timesheets, you cannot necessarily agree with them.
Roy Kennedy: The point made earlier was that there is an unregulated period local spend but a national cap of £30,000 per constituency, which is roughly £90 million. You then have the local candidate limit at the election time itself, which has been in force for many years, but then you have a whole period that is not regulated at all, so your campaigning goes on. People are now campaigning constantly for elections that could be many years in advance and for all sorts of different elections that take place each year. That period is unregulated and it should be regulated.
Q 24Mr. Tyrie: It might be helpful if people amplified their answers to one part of David’s question, which is: in practice, is it feasible to try to divvy up a global cap that might run for the life of a Parliament between hundreds of individual associations—646 constituencies, or whatever—given the scope for being active in one period but in fact being active in another? I ask that because I know that this was discussed as part of the Hayden Phillips process, which I participated in. Hayden himself became sceptical about the feasibility, which is why he was seriously discussing only the development of a global cap.
Roy Kennedy: I do not know. We should look for a way of controlling regular local spend. We could find a system. We have the national spend, as you know, at the time of the election. Perhaps we could find a way of doing the regular spend—there may be other ways. I think that we can work together and find a formula or a procedure that deals with that, so that we control spending in a constituency year on year. That must be a good thing, if we can get there.
Ian McIsaac: Andrew Tyrie knows that I was present at those discussions as well, and all the parties agreed that it was impractical to seek to control spending constituency by constituency, without changing the constitution of the parties concerned—obviously the Conservative party—and bringing in accounting systems of some sophistication to deal with that. It is a complicated beast, when you think about it—a party of several hundred autonomous associations having to march together, be individually controlled, and then controlled as a group. So, who is going to do the controlling? Who is going to be responsible if it goes wrong? The chairman and the officers change every three years—it is not an even cycle. Who do you point the finger at when somebody has overspent? Who is going to take responsibility for that? As I say, we came to the conclusion that although theoretically it may seem an attractive solution, it is practically impossible to do it in a way that can be implemented.
Q 25Tony Lloyd: I want to pick up on a couple of comments that have been made by the different party representatives about the difficulty of policing donations. I think that Roy Kennedy said that there is a good argument for raising the limit from the current £200 to £1,000.
Roy Kennedy: It is £1,000 locally and £5,000 nationally. That is really important.
Tony Lloyd: So, the first part of my question is whether there would be rough agreement across the political parties for that kind of approach. Ian McIsaac mentioned the difficulty at local level, which most of us who have had practical experience of local parties would understand. At the other extreme is the more contentious policing of the irregular donor—the foreign donation, or whatever. Those donations do not tend to be the £201 ones; they tend to be significantly more. Is there any reason to believe that the political parties have a problem checking out the eligibility of donors regarding their taxation and residency status, and their registration on our electoral registers? In essence, there are clear concerns that foreign donations still come into our system. Do the political parties adequately police at that top level? So, the small issue is whether we should be raising the limits and whether the parties can agree on what they should be, and the big one is why we cannot get our collective houses in order and stop the irregular donors coming through.
Ian McIsaac: I think that your question is about the bottom-up and the top-down. I will deal with the bottom-up first. The larger the limit, the smaller the number of donations involved and therefore the smaller the problem. The principle remains exactly the same. The principle is that volunteers out in their constituency associations are not equipped to verify the origins of donations or to know to the point of being able to challenge a declaration whether someone is giving their own money or someone else’s. That is the real problem.
With regard to large amounts and tax residence, which you mentioned, I am not aware of any way you could find out a company’s tax residence without going to the Inland Revenue, and obviously its information is confidential. I also have bitter personal experience of trying to find out who controls companies when you go way up the line. In one sense, the only way to do that is by checking against the information available, which is the companies registry. I do not know, for example, whether BP is a British company. How would you define that? Are the majority of the shareholders British or foreign, or are they a mixture? That is a very difficult problem. Tracing money through major insolvencies, which I have had a lot of experience of, is very difficult. It is hard enough for a large firm of forensic accountants to track that down, but to put that sort of burden on a volunteer or a registered treasurer is very difficult.
Hilary Stephenson: On the bottom-up question on the extra burden of verifying donations, I think that a higher limit of £1,000 or £5,000 would help to minimise the problem. From the point of view of local treasurers, I understand that the main thing they are required to do is to require extra verification from the donor, rather than to do a huge investigative job. It would be helpful if there were fewer occasions when they have to do that, but in principle I do not see that as a huge problem.
At the top end, I am not a party treasurer or financial expert on that part, so I acknowledge how difficult that verification is. However, if we simplified things so that it was clear that donations from a company controlled by an impermissible or foreign donor were impermissible, regardless of whether that company was arguably in the UK, that might help to clarify the situation, reassure the public and make it easier to administer.
Roy Kennedy: Obviously, I would like to see the local limit raised. We made the point several times about our volunteers being able to do that properly, so I think that raising the limit is important. With regard to being able to comply with the legislation, we also need clarity and certainty on the sources we are using to verify it. Every party has to submit its return every quarter and be confident, when things are being checked and looked at, that they have gone to sources that can be relied on, and then it can be accepted that they have done those checks. In terms of big amounts of money, we again need certainty that we can go to the source to confirm that the money has come from where it is said to have come from. So we need certainty and clarity.
Q 26Tony Lloyd: In terms of the large national donors, I take Ian McIsaac’s point, which the other witnesses generally concurred with, that there are difficulties in tracing things through. I appreciate the genuine problems in that. Do the parties now routinely ask those large donors to assert their ability to make a donation under existing law?
Ian McIsaac: We know our donors over a certain level—it is obviously a reasonably high level because we cannot know them all. So we are aware of the sort of people we are dealing with and their background. By and large, we have personal knowledge of our donors, which is helpful, certainly when it comes to individuals. We are quite satisfied, for example, that we are getting money from the business man, rather than his chauffeur.
When it comes to companies, however, we have to stick to the law, which means being satisfied that the company is incorporated in the European Union, registered in the UK and carrying on business in the UK. “Carrying on business” is a term of art rather than science. Sometimes we can be satisfied by checking the company accounts. If they appear to show trading activity, that will satisfy the requirement, and that is the final tick in the box. Where we cannot see company accounts, whether that is because a company is a start-up or it has not finished its first year or they are late, or whatever, we would, for example, take a statement from the independent auditors saying that they are carrying on business. So the answer to your question is, yes, we take the matter very seriously indeed, but we do not routinely check back through some chain of ownership, because we do not have the ability to do that, nor does the law, at the moment, require it.
Hilary Stephenson: This is not my field, in detail, but I know that we take serious steps to do the things that the law requires us to do at the moment. Of course, it does not require us to backtrack through the various layers; that is the point I was making. That could, perhaps, be clarified.
Roy Kennedy: We take our responsibilities on this matter seriously, as well. We know, nationally, about donors at a certain level and we take responsibility and acknowledge them. We check what we need to check there to ensure that we are meeting our responsibilities seriously and properly so that we are submitting a proper return each quarter.
Q 27Mrs. Laing: Can I take you to triggering and spending money rather than raising it? I appreciate that Mr. McIsaac has said that this is not his expert area, so perhaps I had better address my question to the other people before us.
We have spoken a bit during these Committee proceedings about the lack of clarity in the Bill and the uncertainty as far as triggering is concerned. I wonder if you have had any chance to consider the disproportionate effect that the Bill might have on a candidate, as opposed to a Member of Parliament?
I put it to the Secretary of State two days ago that, in my constituency, for example, I am the MP and am represented as the MP: I get coverage in the papers, and so on, and I can send out literature as a Member of Parliament. Could a candidate standing against me find that he or she has spent to the limit of the election expenses and, discovering that this Bill applies, therefore not be able to campaign in the period immediately before a general election?
Roy Kennedy: Assuming this Bill becomes law, yes, we will have to go through the processes. It is not retrospective, but will be going forward, so I assume that what will happen then is that the commission would give advice and guidance to parties and candidates on how to operate. So anything that has happened in the past would not count and everyone would have the advice on how to operate, moving forward. I do not see the point you are making.
Q 28Mrs. Laing: You are assuming that it will not have a retrospective effect.
Roy Kennedy: Yes.
Q 29Mrs. Laing: But we have advice that it could have a retrospective effect; that was my concern. Would you then be concerned for your candidates? I know that that is not a fair question.
Q 30The Chairman: Do any of the other witnesses—Hilary Stephenson or Ian McIsaac, wish to comment on what Eleanor Laing has said? Do they foresee a problem?
Hilary Stephenson: If it was retrospective, most certainly I see a problem. I do not think that there is an intrinsic problem with the triggering in respect of inequality in any case between incumbents and candidates. That would be much worse, should it be retrospective.
Roy Kennedy: It could happen, of course. With triggering, it would be in force and I assume it would be retrospective, although I would not want it to be retrospective. We would seek advice from the commission and other partners would do the same. Then we would give that advice to our candidates and parties. We would do training as well to make sure that people did not get themselves caught there. Potentially, if the trigger is brought in, somebody might, at some point, trigger themselves.
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Prepared 7 November 2008