Memorandum submitted by the Electoral Commission (PPE 01)
1 The Electoral Commission is an independent body set up by the UK Parliament under the Political Parties, Elections and Referendums Act 2000 (PPERA). Our aim is integrity and public confidence in the democratic process.
2 The Commission published its response to the Government's White Paper in July 2008, and a briefing setting out our views on the most important aspects of the Political Parties and Elections (PPE) Bill in September 2008. Since the PPE Bill has significant implications for our governance, functions and powers, as well as for the wider PPERA regulatory regime, we welcome the opportunity to provide a written submission to the Committee setting out in more detail our view of the key issues in the Bill.
The Commission's sanctions and investigation powers (clauses 1-3)
3 The Commission's priority is to promote voluntary compliance with the rules on party and election finance through reliable and timely guidance and training. However, where the rules are broken, it requires the tools to establish the facts in each case, and to take proportionate enforcement action where appropriate. The Commission believes that the proposed changes to its investigation and sanctioning powers will achieve that end, within a well recognised framework of good regulatory practice. We therefore believe they are necessary.
4 The Commission currently has very limited ability to obtain information from certain sources, such as donors and other people and organisations not regulated under PPERA. The proposed changes to investigation powers would allow us to require anyone who has relevant information to disclose it, where we have reasonable grounds to believe that an offence or contravention of the law has taken place. We will then be able to ensure that our regulatory decisions take all relevant evidence into account.
5 The proposed new PPERA Schedule 19A paragraph 1 (in Schedule 1 to the Bill) retains and restates the Commission's existing powers:
· to require information and documentation from regulated entities about their income and expenditure, and
· to enter the premises of a registered political party, third party or permitted participant in a referendum, at a reasonable time, to inspect documents relating to income and expenditure.
Paragraph 1 of the new Schedule also extends this right to enter premises to cover all entities regulated by the Commission, including holders of elective office, members of political parties and members' associations. However, this change will not provide the Commission with an unfettered power to enter premises by force, search the premises or seize documents. If the Commission felt it necessary to take such action in respect of any regulated entity, it would - under Schedule 1 paragraph 3 - need to obtain a warrant from a justice of the peace or sheriff authorising a constable and any other named person to do this; and to obtain a warrant it would have to show reasonable grounds for belief that an offence or contravention of PPERA had occurred.
6 The proposed powers are consistent with those used by other regulators with similar investigative functions, such as investigators or inspectors appointed under the Companies Act. The Commission's use of the powers would be subject to the sorts of controls and safeguards that apply to most regulators e.g. the framework of Codes of Practice under the Police and Criminal Evidence Act 1984 to secure the rights of the individuals affected by them. Nonetheless, the Commission understands the concerns that some Members have expressed about whether the safeguards for access to premises occupied by regulated donees (a category including Members of Parliament and other holders of elective office, individual members of political parties and members' associations) are sufficiently robust. We would be happy to contribute to further consideration of how to ensure these powers are effectively safeguarded while still enabling the Commission to fulfil its regulatory role effectively.
7 In general, the more flexible sanctions proposed in clause 3 would fill the 'compliance deficit' identified by Professor Macrory's review of regulatory sanctions, where regulators such as the Commission have only a limited range of sanctions to deploy in response to many widely varying cases of non-compliance - in most instances either referral of suspected criminal offences to the police for investigation, or a decision to take no further action beyond issuing letters of reprimand.
8 The sanctions, which are based on those to be made available to other regulators through the Regulatory Enforcement and Sanctions Act 2008, will enable us to operate the PPERA regulatory regime in a proportionate way, in line with the principles of good regulation. Examples of how the Commission might expect to use the sanctions made available by the Bill include:
· Where a party reports a donation late because of an administrative oversight, we could impose a fixed financial penalty to encourage future compliance;
· Where a party has not put proper systems in place to meet its legal obligations to report on its donations, we could issue a compliance notice requiring the party make better arrangements;
· Where a party obtains a significant financial benefit by failing to follow the rules, we could impose a variable financial penalty of appropriate size;
· Where a campaigning organisation is about to breach spending limits in order to influence the conduct of an election (e.g. by advertising), we could issue a stop notice that would prevent them from doing so, rather than deferring action until the damage had been done.
9 The Bill rightly applies high thresholds to our use of these sanctions. We can only use most of them if satisfied beyond reasonable doubt that an offence or contravention of PPERA has occurred. This test clearly cannot apply to stop notices, but we can only use such notices where we reasonably believe not only that an offence or contravention is likely, but that the action which is the subject of the notice poses a significant risk of undermining public confidence in the effectiveness of the law on party and election finance.
Commissioners with recent party political involvement (clauses 4-7)
10 The Commission understands and endorses the underlying aim of these proposals, that its work should be informed by a clear and current understanding of how political parties function. We seek to work at all times in a way consistent with that aim. However, we have concerns as to whether the Bill's approach, introducing the appointment of nominated Commissioners with recent party political involvement, is the most appropriate method of ensuring this.
11 Our first concern relates to the appointment process. The Bill proposes four new Commissioners of whom three would be appointed from the three largest 'nominating parties' represented in Westminster, and one from the smaller parties. It also proposes that the Speaker's Committee should establish a procedure for future appointments of Commissioners, although it does not specify the nature of the procedure. The Speaker's Committee currently uses the robust 'Nolan' process for public appointments, and we assume this would continue to apply at least for those Commissioners not nominated by the parties. The Speaker's Committee will decide how the new process is to work, and the Commission understands that the Committee intends to consider this aspect of the Bill at a forthcoming meeting.
12 The Bill would entitle any party with
two or more representatives in the House of Commons to nominate candidates with
recent party political involvement to become Commissioners. Each nominating party must propose more than
one candidate. Since no more than one
Commissioner can be appointed from among those nominated by each party, at
least one Commissioner will be appointed through the Speaker's Committee
process following nomination by a party which is not one of the three largest
parties. This could result in those responsible for the appointment process
only having to choose one of two nominees from each of the three largest
parties, while having to choose the remaining Commissioner from eight or more
candidates from parties with more than two
13 As we have said in earlier briefing, we
are concerned about the implications of this arrangement for the Commission's
UK-wide remit. The proposal for only one
Commissioner to be appointed from among those nominated by the smaller
14 A third concern is the need to preserve the integrity of the Commission's statutory decisions, such as whether and how to impose sanctions for breaches of party finance law or who to designate as a lead organisation to receive significant public funds in a referendum. The Bill already excludes nominated Commissioners from participating in decisions on boundary issues. Our understanding is that if Commissioners who have been nominated by the parties are involved in other statutory decisions, this could give rise to legal challenge to our decisions on procedural grounds of alleged bias. To manage the risk of such a challenge, the Commission would have to be able to demonstrate that decisions of this sort were not influenced by any Commissioners (or staff) who might be seen as biased because of nomination by, and background association with, a political party that could be said to have an interest in the outcome.
15 In view of these concerns, the Commission continues to favour the alternative approach of refocusing the statutory Parliamentary Parties Panel to ensure that our work is informed by a clear and up-to-date understanding of how political parties function. PPERA established the Panel to:
"submit representations or information to the Commission about such matters affecting political parties as the panel thinks fit",
and requires the Commission to consider the Panel's submissions and consider whether and how to act on them. During debate on this provision in 2000 the Government said:
".. the purpose of this clause is designed to meet this point [lack of political involvement] and to meet it head on. It provides a forum and legitimate opportunity for the political parties collectively to put their points to the Electoral Commission and have them considered."
16 Each political party with two or more MPs is entitled to be represented on the Panel by a person appointed by the party's registered treasurer. The current membership of the panel comprises people holding a range of party positions including registered treasurers, chief executives and compliance managers. We believe that on-going advice and scrutiny by a robust Panel will achieve the intended benefits underlying the proposed introduction of nominated Commissioners, without the legal and practical limitations described above.
17 In addition the Commission has reservations about the proposed reduced restriction on involvement in party political activity from ten years to five years for the other, independent Commissioners. A possible outcome could be that of a total ten Commissioners, six could have been actively involved with political parties just five years earlier, and four could have been involved even more recently. This appears a more extreme change than was contemplated in the recommendations of the eleventh report of the Committee on Standards in Public Life.
18 The Commission considers that it could benefit from being able to employ staff with more recent direct party political experience than the current ten-year bar allows. However, we would like to see some flexibility for the Commission to extend the proposed five-year bar to posts other than the Chief Executive. This may apply for instance to decision-making staff in the party and election finance directorate, senior legal staff or staff undertaking boundary review work.
Sources of donations (clauses 8 and 9)
19 These provisions build upon the existing controls in PPERA on making donations via an agent. They place new responsibilities on those making donations over £200 and those receiving such donations. We understand that the changes are intended both to increase transparency in respect of donations from donors who are not individuals, such as companies and unincorporated associations, and to act as a procedural 'reminder' to all donors and donees of the law on agency. The Commission has no objection in principle to either of these aims. We welcome the Government's decision to look beyond unincorporated associations, which were the focus of the equivalent proposals in the June 2008 White Paper, and to deal instead with donor organisations more generally.
20 However, as we have said in previous briefing, the benefits of these proposals may be quite limited, since the law already prohibits concealing the source of a donation by channelling the money through others. The changes will not extend the current legal restrictions on donations via agents, although they will require the donor and donee to establish an audit trail to show those restrictions have been formally acknowledged. Nor will they add materially to transparency, since the new declarations which donors are to be obliged to provide to donees will not be sent to the Commission or made public (although we will be able to obtain the declarations using our investigative powers where appropriate). On the other hand, the changes will impose potentially substantial new administrative burdens on parties and donors. Political parties have expressed reservations to us about the impact of these compliance requirements, particularly on their volunteer officers.
Regulated period for candidate expenses (clauses 10 and 11)
21 The Commission has argued for some time that the current regulated period for candidate spending at general elections is too short. Given the complexity of this subject, we have also said that any change in the rules would need to address the scope for uncertainty and avoidance. We noted in our recent briefing some concerns about the practicality of the 'triggering' provisions in the Bill as they currently stand, but suggested that it may be possible to address these issues with the right combination of statutory rules and Commission guidance.
22 We would expect to issue guidance in this case, as with any material change to the rules on election finance. We will consult formally on draft guidance and seek to finalise it as soon as possible after the new provisions are agreed in Parliament, since we recognise that potential candidates will be keen to have access to guidance.
23 However, it is important that Parliament ensures the legislation is drawn as clearly as possible to minimise the scope for avoidance or confusion. In practice, it will simply not be feasible to produce conclusive guidance covering every eventuality; indeed, this will be an area where legal certainly will only emerge as the courts consider cases. The reasons for this are summarised below.
24 The current legal definition of candidate spending applies to a short and clearly defined regulated period, but is wide in the scope of things covered. It uses a list of categories which count as candidate spending if used "for the purposes of a candidate's election", including spending on advertising, transport, unsolicited material addressed to electors, public meetings of any kind, and accommodation and administrative costs. It also defines the spending in these categories that is "for the purposes of a candidate's election" very widely, as "with a view to, or otherwise in connection with, promoting or procuring the candidate's election".
25 The Bill would maintain this wide definition of spending, while also widening the regulated period during which it applies - so anything "used for the purposes of a candidate's election" would be caught, whether or not the candidate is formally declared when the spending is "used". In practice the trigger for the regulated period for election expenses will be determined by the behaviour and purpose of individual candidates, rather than their declared status or a specified point in time, and will require full consideration of the specific facts in any particular case. Among questions that are likely to arise are:
· Once a person has been selected by a party as its candidate in a constituency, but before they are formally adopted, how would they determine what proportion of their subsequent spending on transport, public meetings etc would count as election expenses?
· Would spending by that person in relation to a campaign on general local issues (as opposed to overt promotion of that person's future candidacy), but that had the effect of publicising their name and role, count as election expenses?
Electoral administration provisions (clauses 12 and 13)
26 The Commission supports the intention behind the proposed changes to elections falling within the canvass period. We would welcome clarification on a number of issues, including (a) whether the clause is intended to apply to referendums conducted under PPERA; (b) the reasoning behind the selection of the 1 July date, which in practice could affect the start date of the annual canvass and increase the risk that information on the register will be incorrect by the time the revised register is actually published.
27 We also note that the intended changes will have resource implications for electoral administrators. We urge the Government to ensure that any funding identified as necessary to support the effective implementation of these revised working practices is made available.
28 We welcome the provision which provides for European
Parliamentary elections in
29 We would, however, make the following point about the
commencement of the clause. We
understand that the Bill is unlikely to receive Royal Assent before the end of
March 2009, which is very close to the European Parliamentary elections in June
that year. The draft Order (currently before Parliament) which moves the date
of the 2009 local elections in England to 4 June, the same day as the European
Parliamentary elections, also provides for the European Parliamentary elections
in England to be run on local authority boundaries. Accordingly, we would not
expect Clause 13 to affect the elections in
30 However, in
31 The Commission has consistently expressed concern about the
problems caused by the late passage of electoral legislation; our view is that
changes to legislation that has an impact on elections should not be applied to
any election held within 6 months of the new provisions coming into force. We
understand that electoral administrators in
32 For these reasons, we would welcome confirmation that the Government will not seek to commence Clause 13 before the June 2009 European Parliamentary elections.
33 We appreciate the opportunity to comment on the provisions in the PPE Bill and would of course be pleased to provide oral evidence to the Committee to supplement and expand on this submission.
 Party finance and expenditure in the United Kingdom: the Government's proposals: The Electoral Commission's response, July 2008, http://www.electoralcommission.org.uk/__data/assets/pdf_file/0018/56430/White-Paper-response.pdf
 Political Parties and Elections Bill: Briefing - September 2008, http://www.electoralcommission.org.uk/__data/assets/pdf_file/0006/64419/Party-Funding-Briefing-Final.pdf
 Professor Richard Macrory, Regulatory Justice: Making Sanctions Effective, November 2006
 Currently these parties include the Scottish National Party; Plaid Cymru; the Democratic Unionist Party; and the Social Democratic and Labour Party
 Lord Bassam of
 Committee on Standards in Public Life Eleventh Report CM 7006, "Review of the Electoral Commission", January 2007
 The Commission has previously advocated a fixed regulated period for candidates' expenses of four months prior to Parliamentary general elections. This provision was initially included in the Electoral Administration Bill (2005) but was rejected by Parliament on the grounds that it would be impractical, particularly in the period before agents were appointed.