1. The Electoral Commission (the Commission)
was established under the Political Parties, Elections and Referendums
Act 2000 (PPERA) as the regulator of party and election finance
in the United Kingdom. It is responsible for overseeing funding
and spending activities by registered political parties. Its remit
includes providing advice and guidance on how to comply with the
law on party and election finance, maintaining the UK Registers
of political parties and donations, and investigating suspected
breaches of the law. It has a statutory duty to be transparent
in this area of its work, and plays an important role in the development
of policy in this area. The Commission spends around £1.15m
annually on the direct costs of the Party and Election Finance
directorate, compared to £1.329m when we last reported on
this topic in 2008-09, although a direct comparison is not straightforward.
2. This year, our annual value for money report
examines whether the Commission is acting as an effective regulator
of party and election finance in accordance with relevant principles
of good regulatory practice, as set out in the 2005 Hampton Report
and subsequent guidance (see Appendix A). The report looks
at the progress the Commission has made in responding to the recommendations
made in our last report on this topic in 2009, and also examines
whether new powers and sanctions granted to the Commission in
December 2010 have had an impact on its effectiveness as a regulator.
3. We carried out our fieldwork during August
and September 2012. This included interviews with Commission staff,
analysis of Commission data and review of relevant documents.
Our report is divided into four parts:
- Advice and Guidance (Part One)
- Monitoring of Compliance, Audit and Enforcement
- Transparency (Part Three)
- Learning Lessons (Part Four).
Progress since our 2009 Report on Party and Election
4. The Commission's approach to regulation
now places much greater emphasis on encouraging compliance. Wherever
possible, it does this through the provision of better, more effective
advice and guidance, taking enforcement measures where it considers
it is necessary and proportionate to do so. In taking this
approach, the Commission demonstrates compliance with the better
regulation principles outlined in the 2005 Hampton review, and
subsequent guidance on regulatory good practice.
5. The Commission has worked hard to improve
the advice and guidance it provides to those it regulates. The
Commission's guidance is now much clearer and easier to navigate.
Further improvements are planned. The Commission offers authoritative,
accessible advice through a variety of different methods, and
engages proactively with those it regulates, to ensure all are
aware of their responsibilities.
6. The Commission has introduced and continues
to develop a transparent, risk-based approach to monitoring compliance
in line with principles of good regulatory practice. The Commission
has developed risk profiles for each party it regulates, which
enable it to target the majority of its audit and monitoring activities
more effectively towards parties or individuals at greatest risk
of failing to meet their statutory obligations. The Commission
has, however, decided to continue checking all donations to ensure
they are from a permissible source, rather than move to a sample-based
7. The Commission is meeting its statutory
obligation to ensure transparency of party and election finance.
The Commission places a large amount of information in the
public domain on the financing and campaign spending of political
parties and candidates, including access to the raw data and its
own analysis of headline figures and key trends.
8. The Commission has successfully implemented
an online system for parties to submit their information electronically,
PEF online. This system has helped the Commission to meet its
statutory transparency obligations more efficiently and to become
a more accessible and transparent regulator. The system has
received positive feedback from key stakeholders, and has improved
the quality and analysis of the information published on the Commission's
9. The Commission is keen to improve its performance
as a regulator and makes changes to its internal processes and
policies as a result of lessons learned from regulatory experience
and feedback from key stakeholders. The Commission now has
a framework of performance indicators in place to measure its
effectiveness as a regulator. The Commission also uses its knowledge
and experience to inform wider policy and developments in party
and election finance.
Impact of new powers on effectiveness as a regulator
10. The Commission was given a more proportionate
and flexible range of sanctions in December 2010, which has increased
the effectiveness of its enforcement activity, and the Commission
plans to make further use of these powers to improve the effectiveness
of its regulatory activity. The Commission has not yet had
to apply its new investigatory powers, since these largely help
it to obtain cooperation voluntarily. The increased flexibility
of the sanctions the Commission can impose means it is now able
to take enforcement action which is more meaningful and appropriate
for each individual case. The Commission is currently exploring
ways to make better use of its new supervisory powers to check
the robustness of parties' controls and compliance processes.
11. The Commission's new emphasis on advice
and guidance and risk-based monitoring, together with the introduction
of new powers and sanctions, has had a positive impact on compliance
rates. For example, the percentage of parties that failed
to submit loans and returns on time has fallen from around five
per cent in December 2010 to less than one per cent in March 2012.
CONCLUSION ON VALUE FOR MONEY
12. To demonstrate that it is delivering value
for money, a regulator should achieve its objectives as cost effectively
as possible. In addition, to demonstrate adherence to the Hampton
principles, a regulator should also aim to minimise the costs
and burdens to those it regulates.
13. The Electoral Commission is delivering value
for money in its regulation of Party and Election Finance. Against
a background of diminishing resources, the Commission has become
a more proportionate, effective and accessible regulator in line
with the relevant principles of good regulatory practice, drawing
on the recommendations made in our last report, and this is reflected
in improved compliance rates. The Commission has significantly
changed the way it regulates compared to four years ago when we
last reported. It now operates a risk-based approach, focussing
on encouraging compliance through improved advice and guidance,
a proactive approach to assisting stakeholders, a tailored approach
to monitoring and more effective enforcement activity using its
new more flexible powers and sanctions. The Commission is meeting
its statutory obligation to ensure transparency of party and election
finance, and the successful introduction of the PEF online system
has improved the accessibility of this information. Overall the
Commission is delivering value for money in this area of expenditure.
14. The Commission plans to obtain further feedback
from users and stakeholders on its advice and guidance, in order
to make guidance as accessible as possible. It should include
specific questions on which advice and guidance formats users
and stakeholders find most helpful, and should reduce further
the volume and cost of the guidance it produces.
15. The Commission should develop a "spheres
of influence" model to assess where it is exerting most influence
and whether there are areas which need further attention, which
would also help it develop more outcome focused performance measures.
16. The Commission should keep its processes
for checking the permissibility of donations under review, to
ensure that they accurately reflect the risks involved. Currently
the Commission undertakes a full check of all such donations but
it should keep under review the balance of risk and benefits in
moving to a sample-based approach.
4 This is the projected year end figure for 2012-13 Back
Report by the Comptroller & Auditor General, Ofcom: The effectiveness of converged regulation,
HC 490 2010-11, November 2010 Back