Regulating Election Finance A Review by the Committee on Standards in Public Life The Committee on Standards in Public Life July 2021 Regulating Election Finance A Review by the Committee on Standards in Public Life Chair, Lord Evans of Weardale July 2021 Chair’s foreword Dear Prime Minister, I am pleased to present the 22nd report of the Committee on Standards in Public Life on the regulation of election finance. Digital campaigning is revolutionising the way parties and campaigners engage with voters. But it has also made it harder to track how much is being spent, on what, where and by whom. Questions have been raised, both by those with direct experience of the system and by the public, as to whether the current framework for regulating campaign finance is coherent and proportionate. In regulating election finance it is vital to have effective rules that ensure fairness without designing a system so complex and demanding that it deters those who cannot rely on the support of well-resourced party machinery. Some will think that the recommendations in this report don’t go far enough. Others will think they are too radical. We have sought to take into account the diversity of views that we heard, and make practical recommendations that will lead to tangible improvements to the current system, both for those who must understand and comply with it and for the public, who are entitled to know how money is being spent to influence their vote. We have been guided by the principles that people have told us should underpin the regulation of election finance. These include fairness, transparency and accountability. Participation is also crucial: elections should be open to all and we have sought to ensure that our recommendations would not penalise smaller political parties and campaigners who are not supported by professional compliance teams. Our report focuses on practical proposals that seek to modernise and reform aspects of the regime. We recommend tightening the requirement to identify the true source of donations and reduce the potential for foreign money to influence UK elections. We also make recommendations to increase voter access to information about how money is spent at elections and referendums in the age of digital campaigning. We look at the issue of non- party campaigning and what changes can be made to improve regulation in this area. A main area of focus is on compliance with the law. Criminal sanctions remain necessary for serious breaches, such as deliberate attempts to circumvent the system. However, where there has been a breach of the rules as the result of an inadvertent error, we believe a civil sanction is the more appropriate route. 1 This is why we have proposed a package of recommendations to enhance the civil sanctions regime. These include the decriminalisation of criminal offences that relate to essentially administrative requirements; extending the civil sanctions regime to include candidate finance laws (to end the cliff edge for candidates where the only enforcement action that can be taken is either criminal prosecution or nothing); and new time limits for Electoral Commission investigations to encourage timely enforcement action. There are also recommendations to improve provision of guidance and advice. Together, the recommendations we have made in this report will deliver significant improvements to the current framework for regulating election finance, creating a more transparent, proportionate and effective system. Lord Evans of Weardale Chair, Committee on Standards in Public Life 2 Contents Executive summary 4 List of recommendations 11 Introduction 18 Chapter 1 What principles should underpin the regulation of election finance? 21 Chapter 2 Electoral law 30 Chapter 3 The Electoral Commission 38 Chapter 4 Donations 47 Chapter 5 Regulated periods and campaign expenditure 61 Chapter 6 Digital campaigning and election finance 68 Chapter 7 Reporting timeframes 78 Chapter 8 Non-party campaigning 84 Chapter 9 Compliance part 1 - the criminal and civil regimes 99 Chapter 10 Compliance part 2 - candidates 129 Appendix 1 140 Appendix 2 146 Appendix 3 154 Appendix 4 156 Appendix 5 157 3 Executive summary Proportionate and effective regulation of the money spent to influence the outcome of elections and referendums is vital to the operation of a functioning democracy. A little over twenty years since the regime for regulating party expenditure was established, we have taken the opportunity to review whether the current system continues to live up to the principles demanded of it. While we believe that the case for consolidation and simplification of electoral law, as proposed by the Law Commission, is unarguable, we believe that additional reforms are needed and these can be made in advance of any wholesale consolidation of the law. The majority of our recommendations are designed to deliver practical reforms to address modern campaign practices, meet emerging threats around the source of donations, deliver greater transparency and enhance compliance with election finance law. Taken together, the package of recommendations in this report will modernise the current system and increase the effectiveness of electoral regulation. Chapter summaries Chapter 1 - What principles should underpin the regulation of election finance? In this chapter, we set out the principles that contributors to our review told us should matter the most when seeking to regulate the money that is spent to influence the outcome of election and referendum campaigns. We group these principles into seven categories: Fairness The outcome of an election should be based on the electorate freely choosing and voting for their preferred candidate and policies. Electoral rules should be fair and coherent. Open to all Democratic engagement should be open to all and the regulatory system should support this. Participation should not be limited to those with deep pockets. Transparency The amount of money received by political parties, campaigners and candidates, where that money comes from and what it is spent on, are legitimate matters of public interest. Journalists and academics must have access to this information to enable them to analyse and interpret the data for voters. 4 Confidence and trust The voting public must be confident that donations and campaign expenditure are being regulated fairly. Simplicity and clarity Campaign finance laws should be clear and easy to comply with. Accountability Those involved in raising and spending money in elections need to be accountable for their actions. There needs to be a proportionate response to breaches of the law. An independent regulator The majority of contributors to the review told us they believe in the principle of a strong, independent regulator of election finance, free from the influence of any particular political party or group. Chapter 2 - Electoral law This chapter discusses the complexity of electoral law. It sets out the evidence we heard about the negative impact that this complexity may have on the willingness of people to participate in the democratic process by becoming treasurers, candidates and campaigners and on the effectiveness of electoral administration and regulation. We also examine the legal framework for party (national) and candidate (local) expenditure. Some contributors to the review expressed concern that digital campaigning has helped larger parties to focus their spending on marginal constituencies, blurring the regulatory division between expenditure intended to secure the success of the party, recorded against (high) party spending limits, and that intended to secure the success of the candidate, recorded against (relatively low) candidate spending limits. The principle of candidate spending limits is undermined if national parties are able to target expenditure heavily in particular constituencies. We signpost the recommendations in our report that will increase transparency and allow for closer monitoring of whether expenditure is correctly allocated against party or candidate spending limits. We also call on the government to bring forward a bill to simplify and consolidate electoral law as proposed by the Law Commission. Chapter 3 - The Electoral Commission The focus of our review is the Electoral Commission’s role as a regulator of donations and campaign finance laws. However, contributors were keen to share their perspectives on the Electoral Commission more broadly. 5 In this chapter we set out the Electoral Commission’s governance structure and accountability framework, before moving on to discuss the evidence we heard about the Commission’s mandate, its effectiveness and its status as an independent regulator. The majority of contributors expressed confidence in the Commission as an independent, non-partisan regulator, including those who see room for improvement in how the Commission carries out its role. However, we also heard from some MPs and campaigners who believe the Commission is institutionally biased, and cited their personal experiences to support their case. We set out our strongly-held belief in the value of an independent regulator, insulated from political pressures and at arm’s length from the government. The Electoral Commission needs to command the confidence of political parties, campaigners and the public through effective delivery and assiduous impartiality. The Commission performs an important role in our democratic system and it should be respected but also open to scrutiny and challenge. Chapter 4 - Donations In