Political Party Finance: ending the big donor culture

(see also Recommendation 23) A cap of £10,000 should be placed on donations to a political party or regulated donee from any individual or organisation in any year.

Private companies donating to political parties should declare their ultimate ownership and be able to demonstrate that their owners would be permissible donors if they had given the same money directly. A controlling shareholder’s share of any corporate donations, when added to any personal donations, should not be allowed to exceed the £10,000 cap.

To be a permissible donor all companies, whether publicly or privately owned, should have to be able to demonstrate that they are trading in the UK and earning sufficient income here to fund any donations.

If they continue to be collected and paid as now, affiliation fees paid to the Labour Party by trade unions and other affiliated bodies should be subject to the £10,000 cap. But the affiliated union or other body could, if they wish, change their procedures so the fees could be regarded as an aggregation of individual payments, to which the cap applies individually and not collectively, if: • The individual members of the affiliated body make a positive decision to contribute to the Labour Party by opting in to the affiliation payment when they join the body in question. Existing members should be asked to make a decision when any changes come into effect. • The arrangements for opting in, the amount of the affiliation fee and the different rate payable when not opting in are clearly set out in the information given to members at the point of joining and prominently on the organisation’s website in a form set and monitored by the Electoral Commission. • The members of an affiliated union are able to contribute to their union’s political fund even if they choose not to pay that part of the levy which represents the affiliation fee. • The fees paid accurately reflect the number of members opting in, are handed over automatically and are not capable of being held back for any reason.

Additional public support should be provided to the parties in the form of: • Tax relief at the basic rate on donations up to £1,000 and on membership fees, with an equivalent tax credit for donations from non-taxpayers. • Public funding calculated as so many pence for every vote received at the last election, the amount to be determined when the new arrangements come into force. Parties should not be eligible to receive either form of support unless they meet the minimum qualifications for Policy Development Grants, or any equivalent introduced in the devolved legislatures, and are therefore subject to the donation cap.

The existing limits on campaign spending during elections to the Westminster Parliament and devolved legislatures should be reduced. The amount of the reduction should be determined when the new arrangements come into force, but should be around 15 per cent.

The cap on donations, the additional state funding and the reduction in campaign spending limits should not be introduced until immediately after the next Westminster election, due in 2015.

The financial impact of the arrangements we have proposed should be reviewed shortly before implementation to consider whether any fine-tuning is required to ensure fairness between the parties. The level of the Labour Party affiliation fee should be suitably constrained until then. This Committee should carry out a further, post-implementation review two years after the new regime comes into force, to assess how well the regime is delivering its objectives in light of the principles set out in Chapter 2, including fairness, and to consider whether any further regulatory changes are required.

The Electoral Commission should consider how it can best operate under a capped regime and review the powers it needs to regulate the new arrangements effectively.

The Electoral Commission should pay particular attention to the risk of third parties being used to avoid the cap. It should review the definition of third parties and the registration and reporting requirements for third parties and other organisations engaged in wider political activities, including think tanks. The Government should legislate to give the Commission any additional powers required, including powers of investigation outside the regulated period. The extent to which third parties are becoming used as an avoidance mechanism should be one of the main issues for the proposed post-implementation review.

The need for continuing central reporting and publication of donations should be reconsidered as part of the post-implementation review. The Electoral Commission should consult on the best way of ensuring continued effective transparency under the new regime. Initially, the threshold for reporting donations to central parties should be reduced to £5,000. Reporting of donations above £1,500 to accounting units and regulated donees should continue.

The political parties should set out their sources and uses of funds in an easily intelligible way. To do so, they should immediately begin producing their accounts according to a set of common, publicly available standards, before the new regime comes into force.

Political Parties Elections and Referendums Act 2000 that only donors on an approved electoral register can donate to a UK political party should be put beyond doubt. 13 POLITICAL party FINANCE

On making a donation above the permissibility threshold donors should be asked to certify: • If an individual, that they are on a permitted electoral register and that the donation is their own money and does not breach the donation cap. • If a company, that they are carrying out business in the UK and have generated enough income from UK trading to cover the donation. If part of a group of companies, they should also certify that the donation would not breach the cap when added to donations from any other company within their group.

There should be a review of the current structure of offences under the legislation governing elections and party funding and of the ability of the Electoral Commission to apply effectively the civil sanctions it now possesses.