Section 25 : Parties with campaigns officers

75.     Under section 25 a registered party may elect to register a campaigns officer who would be responsible (in place of the registered treasurer) for compliance on the part of the party with the controls on election and referendum expenditure in PartsV to VII. Relevant provisions of the Act, particularly those in PartsV to VII, are modified so that references to a party's registered treasurer are to be read as references to a party's campaigns officer.

Section 26 : Financial structure of registered parties : adoption of scheme

76.     It is intended that the registration process should serve to identify exactly what constitutes a particular registered party for the purposes of these controls. Parties in the United Kingdom are constituted in different ways. Some have a federal structure while others are more centralised. Party structures may also feature relationships between a central organisation and affiliated or associated bodies which may also have a separate and independent existence of their own and which may not necessarily be wholly comprised of members of the party in question. In some instances it may be more appropriate to regard such affiliates or associated bodies, for the purposes of the controls on party funding, as donors to the party rather than as a constituent part of the party apparatus.

77.     Section 26 is, therefore, intended to enable the Electoral Commission to pin down those constituent parts of a registered party's organisation which are to be required to comply, whether separately or through the party's central organisation, with the controls set out in Parts III to VII of the Act. Each party applying for registration must propose a scheme setting out the arrangements for regulating the financial affairs of the party and the scheme must be approved by the Electoral Commission before the application is granted. Where the Commission is not satisfied that the proposed scheme properly reflects the organisation of the party it may request that the proposed scheme be modified. The arrangements for the adoption of schemes in relation to those parties which are already registered under the Registration of Political Parties Act 1998 are set out in Part I of Schedule 23.

78.     Under subsection (8), certain organisations (namely, trade unions, friendly societies, industrial and provident societies and other bodies which may be specified by order) are not to be regarded as forming a constituent part of a party for the purposes of a scheme adopted under this section. As a result, money donated to such an organisation which is affiliated to a registered party would not be treated as a donation to that party. But a donation from such an organisation to the registered party (including an affiliation fee) would have to be treated as a donation to the party and not simply as an internal party transaction. The Registered Parties (Non-constituent and Non-affiliated Organisations) Order 2000 (SI2000/3183) adds to the list of organisations which are not to be treated as part of a party for the purposes of this section.

79     Subsection (2) provides for a distinction to be drawn between parties which are to be regarded for the purposes of the Act as a single unitary organisation and parties which are to be regarded as consisting both of a central organisation and of other units or organisations (for example constituency associations, local branches and women and youth organisations) which will have separate responsibility for their accounts. These subsidiary units or organisations are described as "accounting units". If a party scheme falls into the latter category the party will be required to adopt a scheme clearly identifying which parts of its organisation constitute its central organisation and which constitute its accounting units (subsection (3)).

80.     Subsection (7) provides for the adoption of a replacement scheme, for example following changes to a party's structure. A replacement scheme cannot take effect until approved by the Electoral Commission.

Section 27 : Financial structure of registered party : accounting units

81.     This section provides that where a party is a party with accounting units, the party is required to register a person as the treasurer of each separate accounting unit. A second officer of each accounting unit must also be registered; it will fall to that officer to take over the responsibilities of the treasurer of the accounting unit in the event of a vacancy arising in the post of treasurer.

Section 28 to 33 : Registration

82.     Sections 28 to 33 re-enact, with modifications, sections 2, 3, 4, 5 and 6(1) to (4) of the Registration of Political Parties Act 1998. Together with Parts I and II of Schedule 4, they set out the procedure for applying for the registration of parties and of their emblems and for making changes to the register. Section28 deals with the registration of parties. An application for registration will need to include a declaration which identifies that the party is seeking registration:

(a) in both the Great Britain register and Northern Ireland register;

(b) in the Great Britain register only;

(c) in the Northern Ireland register only; or

(d) in the Great Britain register only as a minor party.

A declaration within paragraphs (a), (b) or (d) must specify the part or parts of Great Britain in respect of which the party is seeking to be registered.

83.     Subsection (4) of section 28 sets out the grounds on which the Commission may refuse an application for registration. The first such ground (section 28(4)(a)) is that the applicant party's proposed registered name is, in the opinion of the Commission, either the same as that of a party which is already registered in the relevant register or likely to result in electors confusing that party with a party which is already registered in respect of the relevant part of the United Kingdom. If, for example, the Progressive Party was already registered in the Great Britain register but with its registration confined to England, the Commission would be obliged to refuse an application from another party seeking to be registered under the same name in any part of the Great Britain register, but could accept an application from a party applying to register in respect of Scotland alone as the 'Scottish Progressive Party'.

84.     Section 28(4)(f) provides for an application to be refused if the applicant party proposes a name which includes any word or expression prohibited by an order made by the Secretary of State (see the Registration of Political Parties (Prohibited Words and Expressions) Order 2001 (SI 2001/82)).

85.     Sections 32(5) and 34(6), paragraph 1(2) and 8(2) of Schedule4 and paragraph11(2)(b) of Schedule23 provide for the payment of fees in respect of an application for registration, an application to have a party's registered entry altered or an annual confirmation by a party of its registered particulars. The level of fees is prescribed by the Registration of Political Parties (Fees) Order 2001 (SI2001/83).

86.     A party's entry in the Great Britain or Northern Ireland register will now contain the following information:

     i)     the registered name of the party;

     ii)     the address of the party's headquarters;

     iii)     the name of the party's registered leader, registered nominating officer registered treasurer and, if applicable, registered campaigns officer. If one person holds all three (or, as the case may be, four) offices, the party must name the holder of some other specified office in the party.

     iv)     where a party is a party with accounting units, the name and headquarters address of each accounting unit and the name of the treasurer and one other officer of each such unit;

     v)     the registered emblems of the party;

     vi)     the name and office address of up to twelve deputy treasurers (or deputy campaigns officers) (see section 74);

     vii)     the date of registration;

     viii)      any other information prescribed by the Electoral Commission in accordance with paragraph 6 of Schedule 4.

In the case of the Great Britain register the register will also show whether the party is a minor party and the part or parts of Great Britain in respect of which the party is registered.

87.     Section 31 requires the registered treasurer to notify the Commission of changes to the name or address of any of the party's registered officers, the address of the party's headquarters, the name of either of the registered officers of any accounting unit and the name and address of any accounting unit. Any change in the registered officers of the party must be notified within 14 days of the termination of the appointment (by death or otherwise) of the incumbent. All other changes must be notified to the Commission within 28 days of the change occurring. A party may apply for the other registered particulars of the party to be altered in accordance with the provisions of section 30.

88.     Section 32 requires the registered treasurer of a party to provide the Electoral Commission with an annual notification that the particulars of a party's entry in the register remain accurate and complete. The annual notification must also provide details of any changes to the party's constitution. This must be provided with the annual statement of accounts (see section 45).

89.     It is possible, under the provisions of section 33, for a party to apply to be removed from the register. But removal is conditional upon the party declaring that it does not intend to have any candidates at any relevant election, as defined by section 22(5), and there is the additional safeguard that a party (other than a minor party) which is removed from the register in accordance with this section will nevertheless remain subject to the requirements of Parts III and IV of the Act in relation to its accounts and donations until the end of the financial year following the removal of the party's entry in the register.

Section 34 : Registration of minor parties

90.     Section 34 makes provision for the registration of minor parties, that is parties which have made a declaration to the effect that they intend only to contest parish or community council elections. Subsection (2) disapplies in respect of a minor party those provisions in PartII relating to the registration of a treasurer or campaigns officer, together with sections 26, 27 and 36. The provisions of Parts III, IV and V are separately disapplied in the case of minor parties by sections 41(9), 50(9) and 72(10) respectively.

Section 35 : Request by Secretary of State

91.     Section 35 re-enacts section 12 of the Registration of Political Parties Act 1998. Under section12 of the 1998 Act the Registrar of Companies has been requested to send a copy of the register to returning officers at the time of a relevant election so that they can verify the names of registered parties.

Section 36 : Assistance by Commission for existing registered parties

92.     Section 36 enables the Commission to provide financial and other assistance to existing registered parties to help them meet the initial costs involved in complying with the provisions of Parts III and IV. Up to £700,000, in aggregate, may be allocated to existing registered parties whether in grants or benefits in kind (for example, a computer software programme for recording donations). The method of apportioning this sum to parties will be determined by the Commission in accordance with a scheme prepared by them.

Clauses 37 to 40 : Supplemental

93.     Sections 37 and 39 re-enact sections 14 and 19 of the Registration of Political Parties Act 1998 respectively. They prevent broadcasters from transmitting a party political broadcast on behalf of a party which is not a registered party, and make it a criminal offence for any person knowingly or recklessly to provide the Electoral Commission with a false statement for the purpose of this Part of the Act. Section 38 makes consequential amendments to the parliamentary elections rules set out in Schedule 1 to the Representation of the People Act 1983. Section 39 defines terms used in Part II. The section re-enacts, with modifications, the interpretation section (section 22) of the Registration of Political Parties Act 1998.

Part III: Accounting requirements

94.     In paragraph 4.42 of their report, the Neill Committee recommended that the public should be entitled to have access to the annual accounts of income and expenditure of every political party and that this should be put on a statutory basis. Part III of the Act establishes a statutory scheme for this purpose. Many political parties already prepare, and some of them publish, annual accounts. A statutory scheme has, however, to start from scratch and quite detailed provisions are therefore required. Elements of the scheme are drawn from provisions of Part VI of the Charities Act 1993, which in turn are partly modelled on the Companies Act 1985.

Section 41 : Duty to keep accounting records

95.     Section 41 requires the treasurer of a registered party to keep proper accounting records, as a basis for the preparation of an annual statement of accounts. The records must cover both the transactions which the party enters into and its assets and liabilities. They must be preserved for at least six years from the end of the financial year in which they are made (subsection (4)), or until the Electoral Commission has consented to their disposal following de-registration of the party (subsection (5)).

96.     Political parties in the United Kingdom do not at present share a common accounting year. The Neill Committee recommended (recommendation 4) that the Commission should be able to prescribe a common accounting period. Subsections(6) and (7) confers the necessary power on the Electoral Commission to specify a common financial year, but it may also specify different financial years for different parties, which might be done so as to enable parties to retain their existing financial year.

Section 42 : Annual statement of accounts

97.     Section 42 establishes a requirement to prepare an annual statement of accounts. Subsection (2) empowers the Electoral Commission to make regulations specifying the form and contents of a statement of accounts. The intention is that, over time, the Commission should be able to require best practice to be followed and ensure that the parties' accounts can be fairly compared with each other. The regulation-making power may be used, in particular, to specify information which is to be provided by way of notes to the accounts. The Commission could exercise this power to require, for example, that the notes to the accounts list all disclosable donations to the party in the period covered by the accounts.

98.     The Commission may prescribe different requirements according to whether the income or expenditure of a party falls into one of three bands (up to £5,000; between £5,000 and £250,000; over £250,000). The intention is that, where a party has only a small turnover, the Electoral Commission should be able to apply a 'light touch' regime requiring only a simple annual statement.

Section 43 : Annual audits

99.     Section 43 requires a party which has an annual income or expenditure exceeding £250,000 in any financial year (this threshold parallels that which applies to charities) must have its accounts audited within six months of the end of the financial year. The Electoral Commission may also require the accounts of any other party to be similarly audited within three months of it so directing. If a party fails to comply with an auditing requirement, the Commission may appoint a qualified auditor to audit the party's accounts and the cost will be recoverable by the Commission from the party concerned. Subsection (6) enables the Electoral Commission to make regulations about the appointment and removal of auditors and specifying the duties of auditors carrying out an audit in accordance with this section.

Section 44 : Supplementary provisions about auditors

100.     Section 44 provides for an auditor to have access to the party's records and to be entitled to require the party's treasurer or other party officers to provide necessary information and explanations. If access or information is denied, the Electoral Commission may give written directions requiring a person to provide an auditor with access or information and, if those directions are not complied with, the Commission can in the last resort apply to the High Court for the offending person to be dealt with as if he were in contempt of court.

Section 45 : Submission of statements of accounts etc. to Commission

101.     Section 45 requires the treasurer of a registered party to submit its statement of accounts (and, in appropriate cases, the auditor's report) to the Electoral Commission. Statements of accounts must be submitted within three months of the end of a party's financial year or, where the party's accounts are required to be audited, within six months and seven days of the end of the financial year. Subsection (3) allows the Commission to extend the period for submission of these documents in particular cases for any special reason. A party's registered treasurer must submit with the annual statement of accounts the notification (required under section32(1)) detailing any changes which are needed to the party's entry in the relevant register of political parties.

Section 46 : Public inspection of parties' statements of accounts

102.     Section 46 requires the Electoral Commission to make parties' statements of accounts available for public inspection as soon as practicable following their receipt.

Section 47 : Criminal penalty for failure to submit proper statements of accounts

103.     Section 47 creates criminal offences for failure to comply with the provisions of Part III. The offences are intended to catch a failure to duly prepare, as well as a failure to duly deliver, a statement of accounts. Subsections (2) and (3) contain defences.

Section 48 : Revision of defective statement of accounts

104.     Section 48 makes provision for the revision of statements of accounts which do not comply with the Commission's regulations. The section is based on like provisions as to companies' accounts in sections 245 to 245B of the Companies Act 1985, as substituted by the Companies Act 1989.

Section 49 and Schedule 5 : Division of responsibilities in case of party with accounting units

105.     Section 49 has the result that where a party is a party with accounting units (as defined in section 26), the central organisation of the party and each of the party's accounting units are independently responsible for complying with the accounting requirements as set out in Part III. This means that, in the case of a national party with a network of constituency associations and ward-level branches, each association and branch will maintain their own accounting records and produce their own annual statements of accounts, thereby absolving the central organisation from having to produce omnibus accounts for the whole party. The provisions of sections 41 to 48 are applied, with adaptations, to accounting units by Schedule 5. Under paragraph 6(1) of Schedule 5 the requirement to submit an annual statement of accounts to the Electoral Commission will only apply automatically to accounting units which have an income or expenditure exceeding £25,000. However, paragraph 6(2) enables the Electoral Commission to require any other accounting unit to send to the Commission its statement of accounts and any auditor's report. Only those statements of accounts submitted to the Commission are open for public inspection under the Act.

Part IV: Control of donations to registered parties and their members etc.

Chapter I (Sections 50 to 53) : Donations to registered parties

106.     These sections, as a preliminary to the restrictions on the receipt of donations imposed under Chapter II and the reporting requirements imposed by Chapter III, define what does and does not constitute a "donation".

Section 50 : Donations for the purposes of Part IV

107.     "Donation" is defined in subsection (2) as gifts of money and property (including money or property transferred to a party for consideration which is less than its value); the provision of any sponsorship in relation to the party; subscriptions and affiliation fees; money spent (other than by or on behalf of the party) to meet expenses incurred by the party; and loans, property, services and other facilities provided to the party on other than commercial terms. Anything given or transferred to an officer, agent, trustee or member of the party in that capacity will be regarded as having been given or transferred to the party, unless it is given solely for his own use or benefit (subsection (6)). A donation to a member or officer of a party for use otherwise than on the business of the party as such - for example, in assisting him or her in standing for an internal election - is subject to the separate controls in section 71 and Schedule 7. The definition of a "donation" applies to anything given or transferred to the party either directly or indirectly through a third person (section 50(8)(a)).

Section 51 : Sponsorship

108.     Section 51 defines what constitutes sponsorship for the purpose of Part IV. The definition covers any money or other property transferred to a party for the purpose of helping the party with meeting any defined expenses. Subsection (2) defines "defined expenses" as expenses incurred in connection with:

(a) any conference, meeting or other event organised by or on behalf of the party;

(b) the preparation, production or dissemination of any publication; or

(c) any study or research.

109.     However, by virtue of subsection (3), the payment of an admission charge to any conference, meeting or other event, or the purchase price of any publication, does not constitute sponsorship. Subsection (4) confers power to amend by order the definition of "defined expenses" in subsection (2) or the list of exempted items in subsection (3). Such an order may only be made on the recommendation of the Electoral Commission.

Section 52 : Payments, services etc. not to be regarded as donations

110.     Section 52 specifies those payments or services to a party which are not to be regarded as a "donation". Any donation whose value is £200 or less is to be disregarded (subsection (2)(b)). Also to be disregarded are policy development grants made to parties (under the provisions of section 12) and grants for security costs at party conferences. In addition, the definition of "donation" excludes the notional benefit to parties of air time for political party broadcasts, the use of public rooms at elections and the distribution of election addresses to electors, all of which facilities are provided free of charge. The definition also excludes the provision by an individual of his own services provided these are provided freely and in his own time (subsection (1)(g)). It is not intended that, for example, a voluntary officer of the party should be regarded as making a donation if, in their own time, they contribute professional services (such as accountancy) within their personal sphere of expertise. However, services provided free of charge by an individual who was nevertheless paid by his employer while providing those services will fall within section 50(2)(f) and thus count as a donation by the employer.

111.     Subsection (2)(a) also excludes donations made for the purpose of meeting a candidate's election expenses (which will continue to be the subject of a separate statutory return under the relevant provisions of the Representation of the People Act 1983, as augmented by section 130 and Schedule 16, and other enactments relating to elections).

Section 53: Value of donations

112.     Section 53 deals with the valuation of donations. Gifts of property are required to be valued at their market value, that is at the price they would fetch on their sale in the open market (see section 160(1)). Where money or property is transferred to a party for a consideration less than the market value of the property, the value of the donation is the difference between the value of the money or the market value of the property and the consideration provided by the party (subsection (2)). Similarly, where loans, property, services and other facilities are provided on other than commercial terms, their value will be taken to be the difference between their actual cost to the party and the cost which the party would have incurred if they had been provided on commercial terms (subsection (4)). In the case of any sponsorship, the value of the donation is to be taken to be the value of the money or property transferred to the party; the value of any benefit conferred on the sponsor is to be disregarded (subsection (3)).

Chapter II (Sections 54 to 61) : Restrictions on donations to registered parties

Section 54 : Permissible donors

113.     This section introduces the concept of a "permissible donor", as a means of prohibiting the foreign funding of political parties. Subsection (1) provides that a party may accept a donation only from a permissible donor and where the identity of the donor is known. The latter requirement is intended to cover not only cases where a donation is made anonymously but also where an identity has been given but is clearly fictional (and it is therefore impossible to establish that the donor is a permissible donor).

114.     Subsection (2) specifies those sources of funding which are to be regarded as permissible. They include individuals registered in an electoral register; a company registered in the United Kingdom and incorporated in a member state of the European Union and which carries on business in the United Kingdom; a registered political party; a trade union; a building society; a limited liability partnership; a friendly society or industrial and provident society and any other unincorporated association which is carrying on business or other activities, and has its main office, in the United Kingdom. Where a donation is in the form of a bequest it is sufficient that the deceased was on the electoral register at any time in the last five years prior to his death (subsection (3)).

115.     Subsections (4) and (5) provide that where a person ("the principal donor") makes a donation on behalf of two or more other persons the individual contribution of each will be treated as a separate donation for the purposes of controls on donations under this Part. The recipient party will therefore need to establish the identity of each separate donor (and to this end the principal donor will be under a duty to provide such information) and whether each constitutes a permissible source.

Section 55 : Payments etc. which are (or are not) to be treated as donations by permissible donors.

116.     Section 55 makes special provision in respect of donations from certain specified sources. By virtue of subsection (2) any payment to a party out of public funds (other than one of the payments listed in section 52(1)(a) and (b), which do not constitute donations) is to be regarded as a donation from a permissible donor. Such payments will include the financial assistance paid to opposition parties in the House of Commons ('Short money') and House of Lords ('Cranborne money'). Subsections (3) and (4) provides that where a party receives a donation to meet the reasonable travel and subsistence expenses of a member or officer of the party for the purpose of undertaking an overseas visit, such a donation is to be regarded as being from a permissible donor, irrespective of whether the donor is one of those listed in section 54(2). By virtue of subsection (5) an "exempt trust donation" is to be regarded as a donation from a permissible source; the term is defined in section 162. Subsection (6) provides that a donation by a trustee, acting in his capacity as such, is to be regarded as a donation from an impermissible source unless the donation satisfies one of the criteria set out in the subsection. The inclusion of the reference to an unincorporated association, in subsection(6)(b)(ii), reflects the fact that such an association cannot hold property in its own right, so its assets are commonly held in and disbursed from a trust.

Sections 56 and 57: Acceptance or return of donations

117.     Upon receipt of a donation it will be incumbent upon the party to take all reasonable steps to identify the donor and determine whether the donor constitutes a permissible source (section 56(1)). This may require that the party makes some enquiries and it is perfectly possible that a donation will remain in a party's account while those enquiries are carried out. The Act therefore distinguishes between the receipt and the acceptance of a donation and makes provision for a period of 30 days during which the status of the donation may be determined and appropriate action taken before the party is to be regarded as having accepted the donation. Sections 56(2) and 57(1) provide for the return of a donation to its source where that source is an impermissible donor or where it proves impossible to ascertain the donor's identity. In the latter instance, if it is not possible to return the donation to its source, it is to be surrendered to the Electoral Commission for payment into the Consolidated Fund.

Sections 58 to 60 : Forfeiture of certain donations

118.     Sections 58 to 60 apply sanctions to the acceptance of donations from an impermissible source, or where the identity of the donor is not known. These provisions should be read in conjunction with section 66 which requires the treasurer of a party to declare (and makes it an offence falsely to declare) that the party has not accepted any donations from an impermissible source.

119.     Section 58 enables the Electoral Commission to apply to a court to order the forfeiture of a donation which a party has accepted from a source which is either impermissible or not known. Section 59 provides for appeals against such an order. Section 60 enables rules of court to be made in respect of applications or appeals under sections 58 and 59. It also provides that any sums forfeited under these provisions shall be paid into the Consolidated Fund. Subsection (5) of section 60 specifies that, where a registered party is not a body corporate, forfeiture proceedings will be brought against the party in its own name and not in that of any of its members and that any sums forfeited will be paid out of the funds of the party.

Section 61 : Offences concerned with evasion of restrictions on donations

120.     In addition to a party's civil liability under section 58, section 61 makes it a criminal offence for any person knowingly to participate in an arrangement or to withhold information, or supply false information, so as to evade the restrictions on the sources of donations. The bringing of criminal proceedings does not preclude the Commission from also applying for forfeiture of the donation in question (see section 58(4)).