Memorandum submitted by the Electoral Commission (PPE 04)

 

 

Follow up memorandum to oral evidence

During the Commission's oral evidence to the Committee Peter Wardle made a commitment to write to the Committee on a number of issues detailed below.

 

1. Definition of election spending

 

The Commission's guidance for candidates and agents states the following about definitions of candidate expenses during the regulated period:

 

'A candidate's election spending is defined as:

 

any expenses incurred at any time in respect of any matter specified [below] which is used for the purposes of the candidate's election after the date when he becomes a candidate at the election.[6]

 

It is important to note that money that was spent before a person becomes a candidate counts against the spending limit if the goods or services purchased are used after the person becomes a candidate. In other words, money spent before the regulated period on goods or services that are used for the purpose of the candidate's election during the regulated period should be included within the candidate's election expenses return. This ensures that anything spent on items paid for some time in advance of the election is accounted for.

Example: Money spent before the start of the regulated period

A local election was held on 1 May 2008. In March 2008, an individual spent 1,000 on leaflets in relation to their election campaign. They distributed half of them in the first three weeks of March. They legally became a candidate on 27 March 2008. In April they distributed the other half of the leaflets.

 

The regulated period runs from the date a person becomes a candidate until the date of the poll. In this example, the election spending was therefore the proportion that related to the leaflets distributed in April, after the person had become a candidate (because it was spent on materials distributed during the regulated period). Therefore, half of the spending should be treated as election expenses and count against the candidate's spending limit, i.e. 500'

 

A full copy of our guidance can be downloaded from our website at:

http://www.electoralcommission.org.uk/__data/assets/pdf_file/0020/60482/Candidates-and-agents-guidance-non-date-specific-Final.pdf

 

 

 

2. Triggering - administrative impact

 

2.1 As discussed at the Committee, the changes proposed in Clauses 10 and 11 will lead to an expectation that the Commission will draft, consult on and finalise guidance on the practical effect of the new provisions. We expect to resource this work by re-prioritising the work of our existing guidance team. The changes are also likely to lead to increased demand for advice and guidance from the Commission. Again, we plan to deal with this within our existing resources.

 

2.2 In terms of the Commission's compliance, investigation and enforcement activity, we would not expect the administrative impact to be substantial. Under section 145 of the Political Parties Elections and Referendums Act 2000 (PPERA), the Commission currently has a monitoring role in respect of alleged offences under the Representation of the People Act 1983 (RPA), which governs the candidate spending regime. Clause 1 of the Political Parties and Elections Bill would clarify that our role includes taking steps to secure compliance with that regime, but would not give the Commission any sanctioning role in respect of offences under the RPA candidate spending regime, which would remain the role of the police, Director of Public Prosecutions (or the Procurator Fiscal) and/or the courts.

 

2.3 Under the wider remit proposed in the Bill, the Commission could undertake investigations into allegations of offences under the candidate spending rules, in cases where the allegation is supported by evidence or information and appears sufficiently serious to justify investigation in the public interest. We would also as may be appropriate refer substantiated allegations to the police. In costing the implications of the Bill, we have assumed that the Commission will carry out this role in a risk-based way and will not undertake a material number of investigations into allegations over allegations relating to local elections.

 

2.4 The Commission has made an initial estimate of the likely overall impact on its resources of the changes proposed in the Bill, including the potential for additional guidance and compliance work in relation to candidate spending. This estimate is reflected in paragraph 98 of the Explanatory Notes to the Bill prepared by the Ministry of Justice.

 

 

 

 


3. Unincorporated associations, agency and related issues

 

Donations from unincorporated associations

 

3.1 A donation from an unincorporated association is permissible when the association fits the definition in section 54 of PPERA -

 

'any unincorporated association of two or more persons which does not fall within any of the preceding paragraphs [defining permissible companies, registered political parties, trade unions, Limited Liability Partnerships, building societies, friendly societies] but which carries on business or other activities wholly or mainly in the UK and whose main office is there. '

 

3.2 In cases where the unincorporated association acts as the agent, s.54 of PPERA applies and the agent is required to tell the party the identity of the original donor. The new clause 8 will not expand the law on agency, but will provide a procedural reminder of it, since the unincorporated association will be required to provide a declaration and the party will be required to return the donation if a declaration is not provided.

 

3.3 If money from an impermissible donor is channelled through an unincorporated association acting as agent there are possible offences under s.61 of PPERA concerned with evasion of restrictions of donations

 

Transparency of current provisions on unincorporated associations

 

3.5 The current requirements of s.54 in respect of unincorporated associations provide less transparency than for other non-individual donors such as companies and trade unions, since the identities of the people controlling those bodies are already in the public domain via other regulatory requirements outside PPERA. However, the new investigatory powers that the Bill provides to the Commission will make it easier for us to find information about compliance with the law, in cases where we have reason to believe there may have been a breach.

 

3.6 We can see some benefits in requiring donation reports about money from unincorporated associations to contain more information about those in the unincorporated association who have made the decision to donate. These would need to be balanced against the consequent new administrative burdens of such changes. More generally, as Peter Wardle said in our oral evidence to the Committee, potential changes to the level of transparency currently provided by PPERA need to be considered in the wider context of the underlying framework.

 

Donations from companies

 

3.7 A company is a permissible donor if it is registered in the UK, incorporated in the EU and carries on business in the UK. The definition of 'carries on business' is untested by the court but we have produced guidance on it in our 'Donations and Loans: guidance for political parties in Great Britain' which states:

 

'Carrying on business

In order to be a permissible donor or lender, a company must also be carrying on business in the UK. The question of whether or not a company 'carries on business' is not entirely straightforward, and the PPERA donation controls are untested in court[7]. Where parties remain uncertain about the permissibility of a donation they are advised to seek their own legal advice or advice from the Commission within the first 30 days of receiving the donation. If they are uncertain about whether a lender is permissible, they should seek legal advice or contact the Commission before entering into the loan.

 

The Commission considers that parties should bear in mind the following

points:

 

The term 'business' includes trades, professions and occupations. This includes all commercial activity such as the buying and selling of goods or the provision of services.

The phrase does not require any element of profit: a charity or non-profit making organisation may be 'carrying on business'.

Although the phrase implies a continued series of transactions, a single transaction may constitute 'carrying on business' where it is intended that further transactions will follow. If it seems that a company might be in this position, a party might ask the company for evidence that it intends to continue carrying on business. This might include a business plan or contracts with suppliers.

 

Inevitably, some cases will be less clear-cut than others. For example, a new company starting up may have performed acts in preparation for trading. The question of whether preparatory acts such as leasing premises and hiring staff are 'carrying on business' when the entity itself has yet to enter into its first contract, take its first order or buy stock has not been considered by the courts, to the best of the Commission's knowledge. On balance, based on the courts' approach to other case law on the meaning of the phrase in other contexts, it seems likely that a court would find such preparatory acts to be 'carrying on business', provided that there is a genuine intention to engage in business on an ongoing basis and those preparatory acts are necessary for that business to occur. Similar proofs to those mentioned in the above paragraph might be sought by a party to establish the intention of the company.

 

Registered companies file accounts with Companies House which are available on payment of a fee. The information in a company's accounts can provide an indication as to whether a company is carrying on business. This will, however, only confirm the company's status at the end of the previous financial year and will not necessarily constitute proof that the company was carrying on business at the time the donation was made. For a new company that has yet to file any accounts, a party might obtain from the company a statement signed by a registered director of the company or the company secretary confirming that they are carrying on business. In cases where a party has any doubt about the status of the company, the Commission strongly suggests that they obtain a copy of one or both of these items before accepting the donation or entering into the loan[8]

 

Please note that the Companies House register indicates in the entry whether

a company is dormant or in liquidation. While indication of such a status does not automatically mean that the company is not a permissible donor or lender, recipients are encouraged to be especially careful in making checks on companies whose active company status may be in question.'

 

A full copy of Donations and Loans: guidance for political parties in Great Britain' can be downloaded from our website at:

 

http://www.electoralcommission.org.uk/__data/assets/electoral_commission_pdf_file/0018/13707/DonationsloansguidanceFinal_27536-17297__E__N__S__W__.pdf

 

Transparency of current provisions on companies

 

3.5 There is clearly some scope to tighten the law, but this is a point that needs to be considered in the wider context of the PPERA framework. A number of proposals have been suggested. Any solution that involved redefining acceptable donations from companies would need close attention to ensure it was workable in practice. The new investigatory powers that the Bill provides to the Commission will make it easier for us to find information about compliance with the law, in cases where we have reason to believe there may have been a breach.


4. Transport costs and election campaigning

 

4.1 During the Commission's oral evidence to the Committee there was a brief discussion about how transport costs would be apportioned for in a situation where routine constituency work is combined with election campaigning. Our current guidance does not cover this issue as the regulated period for candidate spending currently starts when Parliament is dissolved, and from that point onwards individuals would no longer be considered as Members of Parliament engaged in routine constituency work, but as candidates engaged in campaigning. We noted in our written evidence to the Committee that if a longer regulated period is introduced, guidance would be needed on what proportion of spending on transport, public meetings etc would count as election expenses.

 

November 2008



[6] Section 90ZA, RPA 1983, as inserted by the EAA.

[7] Note that the Commission is currently waiting High Court judgement on its judicial review application concerning interpretation of provisions under S.56 PPERA for forfeiture of impermissible donations.

[8] While there is nothing in PPERA that would make a charity an impermissible donor if it meets the other requirements, the Charity Commission (in England and Wales), Office of the Scottish Charity Regulator (in Scotland) or the Voluntary and Community Unit of the Department for Social Development (in Northern Ireland) may have other rules. Parties offered donations from charities should inquire to see if the charity has cleared the donation with the relevant regulatory body