2000 Chapter 41

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These notes refer to the Political Parties, Elections and Referendums Act 2000 (c.41)
which received Royal Assent on 30th November 2000

Political Parties, Elections And Referendums Act 2000

EXPLANATORY NOTES

INTRODUCTION

1.     These explanatory notes relate to the Political Parties, Elections and Referendums Act 2000 which received Royal Assent on 30th November 2000. They have been prepared by the Home Office in order to assist the reader in understanding the Act. They do not form part of the Act and have not been endorsed by Parliament.

2.     These notes need to be read in conjunction with the Act. They are not, and are not meant to be, a comprehensive description of the Act. So where a section or part of a section does not seem to require any explanation or comment, none is given.

SUMMARY

Part I : The Electoral Commission

3.     Part I of the Act establishes the Electoral Commission and sets out the general functions that it is to have, other than those functions relating to the registration of political parties, the scrutiny of political parties' and third parties' income and expenditure and the administration of referendums which are covered in Parts II to VII and X. The general functions of the Commission include: reporting on particular elections and referendums; the review of electoral law; the provision of policy development grants to qualifying political parties; and promoting understanding of electoral and political matters. Part I also provides for the transfer to the Electoral Commission of the functions of the four Parliamentary Boundary Commissions and of the Local Government Commission for England and the Local Government Boundary Commissions for Scotland and Wales.

Part II : Registration of Political Parties

4.     Part II of the Act is concerned with the registration of political parties. It re-enacts the Registration of Political Parties Act 1998 but with significant modifications. The modifications are for the purpose of establishing a scheme of registration which brings political parties within the controls on accounting and funding set out in Parts III and IV and the controls on campaign expenditure set out in Part V of the Act .

Part III : Accounting requirements for registered parties

5.     Part III requires registered parties to maintain accounts of their income and expenditure and to submit annual statements of accounts to the Electoral Commission.

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

6.     Part IV imposes restrictions on the sources of donations so as to prohibit foreign and anonymous donations to political parties and make registered parties subject to reporting requirements in respect of donations above a certain value.

Part V : Control of campaign expenditure

7.     Part V applies restrictions on campaign expenditure incurred by political parties in respect of Westminster Parliamentary elections, European Parliamentary elections and elections to the devolved legislatures. These limits are distinct from the separate restrictions under the Representation of the People Act 1983 and other enactments relating to elections, which continue to apply to candidates' election expenses.

Part VI : Controls relating to third party national election campaigns

8.     Part VI sets out controls on national election expenditure by individuals and organisations other than political parties. The controls seek to limit national expenditure by third parties in support of or in opposition to political parties, in the same way as the controls in section 75 of the Representation of the People Act 1983 seek to control expenditure by third parties in support of or in opposition to individual candidates.

Part VII : Referendums

9.     Part VII of the Act introduces generic provisions designed to ensure the fair conduct of referendums. It provides for the designation of campaign bodies which will be entitled to particular forms of assistance, including a grant from public funds of up to £600,000, the free mailing of referendum addresses and free air time for referendum campaign broadcasts. Part VII also provides for restrictions on the publication of promotional material by central and local government in the 28 days prior to the holding of a referendum and restrictions on referendum campaign expenditure by political parties and by other campaigning individuals and organisations.

Part VIII : Election campaigns and proceedings

10.     Part VIII of the Act makes a number of amendments to the Representation of the People Act 1983. It imposes controls on donations to candidates, increases the limit on expenses which may be incurred by a candidate at a parliamentary by-election, clarifies the meaning of "election expenses", amends the law in relation to election petitions and clarifies the law in respect of the consequences of the commission of corrupt and illegal practices.

Part IX : Political donations and expenditure by companies

11.     Part IX introduces a requirement that shareholder consent must be obtained before a company makes a donation to a political party or incurs political expenditure. It also requires the disclosure of political expenditure in directors' annual reports to shareholders.

Part X : Miscellaneous and general

12.     Part X includes provision for the enforcement of the Act by the Electoral Commission and the civil and criminal courts. It also reduces the qualifying period for registration as an overseas elector and introduces new provisions concerning broadcasting of local items during an election period.

BACKGROUND

13.     The Prime Minister announced, on 12 November 1997, extended terms of reference for the Committee on Standards in Public Life, chaired by Lord Neill of Bladen QC (the 'Neill Committee'), to enable the Committee to study the funding of political parties. These additional terms of reference were:

To review issues in relation to the funding of political parties, and to make recommendations as to any changes in present arrangements.

14.     In a submission from the Home Office dated 6 March 1998, the Government sought the Neill Committee's advice on the following specific topics:

     a)     How should 'foreign' funding be defined? Should personal donations be restricted to persons on the electoral register eligible to vote in the United Kingdom? How should foreign donations in relation to companies and voluntary associations be defined? How can circumvention of the ban on foreign funding be prevented?

     b)     What should be the mechanics for disclosure of donations? Should there be a separate threshold for the acceptance or rejection of anonymous donations? What should be the timing of disclosure?

     c)     What are the implications of the Bowman judgment? (This was a judgment in February 1998 by the European Court of Human Rights about how far third-party individuals and organisations should be free to spend money on promoting a particular cause during election campaigns.)

     d)     What new rules on limits on election expenditure should be introduced to accommodate the new electoral systems?

     e)     How should the future financial arrangements for the political parties be linked with the Government's proposed legislation on the registration of political parties (which became the Registration of Political Parties Act 1998)?

15.     The Neill Committee addressed these points, and others, in their Fifth Report on the Funding of Political Parties in the United Kingdom published in October 1998 (Cm 4057). Altogether the report contained one hundred recommendations dealing with the reporting of donations, the banning of foreign donations, shareholder approval for donations by companies, financing political parties in Parliament, limits on election campaign expenditure, the conduct of referendums, media and advertising, and the Honours system.

16.     The Government's response to the Neill Committee's report was set out in a White Paper (Cm 4413) published on 27 July 1999. The White Paper included a draft Political Parties, Elections and Referendums Bill which set out legislative proposals for giving effect to the Neill Committee's recommendations.

Overview of the Neill Committee report and the Government's response

The role of political parties

17.     Electoral procedures are described in considerable detail in legislation. The principal legislation is the Representation of the People Act 1983 together with regulations made under that Act. The 1983 Act is a consolidation of legislation dating back to the nineteenth century. Its general thrust, and a good deal of the detail, date from 1883. The legislation contains extensive provisions concerning candidates' election expenses. These provisions limit the maximum levels of expenditure by or on behalf of candidates at parliamentary elections and require detailed returns to be delivered to the returning officer. They also control, very tightly, expenditure by "third parties" (that is, people or organisations other than candidates) who wish to issue material which bears on a particular person's candidature. But there is currently no legislation or other legal requirement relating to the funding of political parties generally. Nor is there any limit on the expenditure which political parties may incur in connection with elections otherwise than on behalf of candidates in constituencies. The 1983 Act simply does not recognise the role of political parties in elections.

18.     The situation now is very different from what it was in 1883. The political parties, operating at national level, play a much larger role. It is the national party as well as the local organisation which assumes the responsibility for getting its candidates elected. Above all, spending by or on behalf of candidates now forms only a proportion of what a party spends on contesting an election. Restrictions on candidates' expenses at a constituency level no longer serve as an effective control of what the political parties as a whole spend on fighting elections.

19.     The Neill Committee's report addressed this point by recommending limits on what political parties can spend in connection with elections, additional to the amounts spent by or on behalf of candidates themselves. To enforce this control, they proposed a detailed set of requirements, along similar lines to those already in operation at constituency level, on the political parties.

Donations to political parties

20.     The Committee's report endorsed and developed the Government's proposals for a ban on foreign donations to political parties and for open declaration of donations at the level of £5,000 or above. The Act follows the Neill Committee report in using the concept of a "permissible donor". The principal target is to require political parties to reject donations which are anonymous or which do not appear to be either from a person registered to vote in the United Kingdom or from a company incorporated in a member state of the European Union and carrying on business in the United Kingdom or from an unincorporated association having its main office and its principal sphere of operation in the United Kingdom.

21.     The Neill Committee recommended, in general, against attracting any form of liability to donors or would-be donors themselves, except to the extent that they conspire with recipients to evade the recommended restrictions on receipts. There is, however, one significant exception to this general rule. The Committee recommended that, before a company makes a donation, it should be required to obtain the approval of its shareholders. The Government announced its general acceptance of this recommendation, but sought comment on how it should be implemented, in a separate consultation document published by the Department of Trade and Industry in March 1999 (DTI reference URN 99/757). This matter is now dealt with in Part IX of the Act. One further provision relating to donors is also now to be found in section 68 of the Act. This is to deal with a situation in which a donor makes a large number of donations at a level below that at which the recipient has to record and check them.

Third parties

22.     Some organisations which are not political parties in the sense of sponsoring candidates nevertheless incur expenditure directly on advertising etc., in connection with elections. The Neill report made recommendations for regulating the expenditure of such organisations and donations to them on a similar basis as for political parties. Organisations of this kind are referred to in the Neill report and in the Act as "third parties".

An Electoral Commission

23.     To supervise the restrictions on spending by and donations to the political parties (and third parties), the Neill Committee proposed the establishment of an independent Electoral Commission. The provisions of the Act give the Electoral Commission a somewhat broader remit than the one proposed by the Neill Committee, to include a responsibility for promoting participation in the democratic process and to assume, after an interval, the functions of the Parliamentary and Local Government Boundary Commissions. The Electoral Commission is also, as recommended by the Neill Committee, to assume the role of registrar of political parties. It is to have the function of receiving accounts, reports of disclosable donations and returns as to election expenses from political parties (and third parties), and a duty to monitor compliance (but not to mount criminal prosecutions). But it is also to have the wider role of reporting on the conduct of elections and referendums and of advising the Government on any necessary changes to the law. It will take over a number of functions from the Home Office and act as a general reference point for advice for the parties, the broadcasting organisations and others on the conduct of elections and referendums.

Referendums

24.     The Neill Committee's report extended beyond the funding of political parties and spending in election campaign and made a number of recommendations concerning referendums. These recommendations were directed principally at ensuring that the two sides in a referendum campaign each have a fair opportunity to put their views to the public and that referendum campaigns are not skewed by the intervention of the government of the day. Hitherto there have been no standing statutory arrangements for the conduct of referendums.

THE ACT : OVERVIEW

Part I : The Electoral Commission

25.     Part I of the Act contains twenty-one sections. Sections 1 to 3 and Schedules 1 and 2 establish the Electoral Commission and an oversight body, the Speaker's Committee. Section4 establishes the Parliamentary Parties Panel. Sections5 to 13 set out the Commission's general functions. These include the functions of reporting on elections and referendums, reviewing electoral law, allocating policy development grants to parties and promoting participation and understanding of our democratic systems of government. Sections14 to 20 and Schedule3 provide for the transfer to the Commission of the functions of the Parliamentary and Local Government Boundary Commissions.

Part II : Registration of political parties

26.     Part II of the Act contains nineteen sections. These sections substantially re-enact, with modifications, the Registration of Political Parties Act 1998. Schedule 4 contains further details in respect of the registration of parties and alterations to the register.

Part III : Accounting requirements for registered parties

27.     Part III contains nine sections. These set out requirements on political parties in respect of their accounting records and the preparation of annual statements of accounts. Schedule5 modifies the accounting requirements contained in Part III to fit the circumstances of parties with separate 'accounting units'.

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

28.     Part IV, which contains twenty-two sections, is divided into five Chapters. Chapter I (sections 50 to 53) defines donations for the purposes of this Part. ChapterII (sections 54 to 61) gives effect to the prohibition on foreign donations. ChapterIII (sections 62 to 69 and Schedule 6) sets out the requirements as to the reporting of donations to the Electoral Commission. ChapterIV (section70) makes special provision for Northern Ireland parties. ChapterV (section71 and Schedule 7) controls donations to individual members of a political party, groups composed of party members and holders of elective office.

Part V : Control of campaign expenditure

29.     This Part contains thirteen sections which, together with Schedules 8 and 9, place limits on the campaign expenditure which may be incurred by registered political parties. Four of these sections introduce a regime for the authorisation and payment of campaign expenditure and the settlement of claims. A further five sections provide for the submission to the Electoral Commission of returns by parties as to their campaign expenditure, the auditing of such returns and their public inspection.

Part VI : Controls relating to third party national election campaigns

30.     Part VI, which contains sixteen sections and Schedules 10 and 11, limits expenditure by third parties designed to promote or oppose the election of a political party or its candidates. The provisions are in many respects similar to those in Part V dealing with expenditure by political parties.

Part VII : Referendums

31.     The four Chapters in Part VII, which contain twenty-nine sections and Schedules 12 to 15, set out the framework for the conduct of referendums. ChapterI (sections101 to 110) provides for the registration of campaign organisations and for financial and other assistance to be given to designated umbrella organisations. This chapter also provides for a role for the Electoral Commission to comment on the intelligibility of a referendum question. ChapterII (sections111 to 124) imposes financial controls on campaign organisations. ChapterIII (sections125 to 127) places controls on referendum publications by government and others. ChapterIV (sections128 and 129) makes provision for the conduct of a referendum poll and for the counting of ballot papers.

Part VIII : Election campaigns and proceedings

32.     Part VIII contains nine sections, and Schedules 16 to 18, which together make miscellaneous amendments to the Representation of the People Act 1983.

Part IX : Political donations and expenditure by companies

33.     Part IX, which contains two sections and Schedule 19, amends the Companies Act 1985 so as to require companies to obtain prior shareholder consent for donations to registered parties and other political expenditure.

Part X : Miscellaneous and general

34.     Part X contains twenty-three sections and Schedules 20 to 23. Sections141 and 144 make further amendments to the Representation of the People Acts. Section142 make pre-consolidation amendments to the European Parliamentary Elections Act 1978. Section143 specifies details which must be included in election material published by or on behalf of political parties and third parties. Sections145 to 148 make provision for enforcement of the Act by the Electoral Commission and the civil and criminal courts. Section149 provides for the public inspection of registers, statements of accounts and expenditure returns held by the Electoral Commission. Sections150 to 154 contain provisions relating to offences. Section155 contains a power to vary the various monetary limits set out in the Act. Sections156 to 163 and Schedules21 to 23 include various supplementary provisions including transitional provisions for the transfer of parties' registration under the Registration of Political Parties Act 1998 to the new registers maintained by the Electoral Commission under PartII of this Act.

COMMENTARY ON SECTIONS

Part 1: The Electoral Commission

Sections 1 to 4 and Schedules 1 and 2 : Establishment of Electoral Commission and bodies with related functions

35.     Sections1 to 4, together with Schedules 1 and 2, make provision for the establishment and constitution of the Electoral Commission, the Speaker's Committee and the Parliamentary Parties Panel. The Electoral Commission will be a body corporate independent of any government department and will report directly to Parliament. The National Audit Office (established under section 3 of the National Audit Act 1983) is an example of a body which has a similar relationship to government and Parliament. The arrangements for the appointment of Commissioners are modelled upon those for the appointment of the Comptroller and Auditor General under section 1 of the 1983 Act.

36.     Electoral Commissioners are to be appointed by Her Majesty on the presentation of an Address from the House of Commons. The procedure for their appointment also requires consultation with the leaders of each registered political party with two or more sitting Members of the House of Commons. The number of Commissioners is to be from five to nine. It is envisaged that the Commission's membership will rise to nine when the functions of the Parliamentary and Local Government Boundary Commissions are transferred to the Commission under sections16 and 18 to 20 of the Act. The Commissioners will enjoy substantial security of tenure. Under subsection (3) of section3 appointments will be for up to ten years with, under subsection (5), the possibility of re-appointment. An Electoral Commissioner may only be removed from office on an Address of the House of Commons to that effect and such an Address may only be moved if the Speaker's Committee has presented a report stating that the Committee is satisfied that one or more of the grounds for removal, specified in paragraph 3(5) of Schedule 1, has or have been made out.

37.     To ensure the independence of the Electoral Commission from political parties subsection(4) of section3 provides that no person may be appointed as an Electoral Commissioner if he is a member of a registered party or, in the last ten years, has been an officer or employee of a party, or held a relevant elective office, or been named as a donor in a register of donations maintained by the Commission. A Commissioner will cease to hold office is he is nominated as a candidate at a relevant election; takes up any office or employment with a registered party, recognised third party or permitted participant; is named as a donor to one of the aforementioned organisations; or becomes a member of a registered party (paragraph3(3) of Schedule1).

38.     Section2 establishes the Speaker's Committee which will have general oversight of the exercise of the Commission's functions and, in particular, responsibility for approving its budget and five-year corporate plan. Its role will be similar to that of the Public Accounts Commission (established by section 2 of the National Audit Act 1983) in relation to the National Audit Office. The Committee will be chaired by the Speaker of the House of Commons. There will be eight other members, namely, the Home Secretary, a Minister for Local Government, the Chairman of the Home Affairs Select Committee and five Members of the House of Commons appointed by the Speaker.

39.     The Act's provisions in relation to the funding and financial accountability of the Electoral Commission are intended to balance the need to ensure the Commission's financial independence from the government of the day with appropriate safeguards for ensuring proper financial control. Under paragraphs 14 and 15 of Schedule 1 the Commission will be required to produce both an annual estimate of its income and expenditure and, each year, a five-year plan covering its aims, objectives and resource requirements over that period. Both will be subject to the approval of the Speaker's Committee which, in examining the estimate and five-year plan, will have regard to whether they are consistent with the economical, efficient and effective discharge by the Commission of its functions. The Committee may make modifications to the estimate or plan insofar as they are appropriate in achieving those objectives.

40.     In examining the Commission's annual estimate and five-year plan, the Speaker's Committee will be required both to consult and to have regard to the advice of the Treasury and also to have regard to reports on examinations which the Comptroller and Auditor General will be required to undertake annually (under paragraph 16 of Schedule 1). It is intended that it should be possible for the Comptroller and Auditor General in any particular year to examine only selected aspects of the Commission's work, for example its voter education functions.

41.     Both the estimate and the five-year plan will be laid before Parliament. The Electoral Commission will also be required to prepare annual accounts in accordance with Treasury directions. These accounts will be examined and certified by the Comptroller and Auditor General before being laid before Parliament.

42.     Parliament's scrutiny of the work of the Commission will also be facilitated by the requirement that the Commission must lay before Parliament an annual report on the performance of its functions (paragraph 20 of Schedule 1). The Speaker's Committee, too, will be under an obligation to report at least annually to the House of Commons on the exercise of its functions (paragraph 1 of Schedule 2). Such reports will include the Committee's reasons for making any modifications to the annual estimates or five-year plan submitted by the Commission.

43.     Section4 establishes the Parliamentary Parties Panel. The panel will be composed of a representative from each of those political parties with two or more sitting MPs (in the current Parliament there are eight such parties: Labour, Conservative, Liberal Democrat, Ulster Unionist, Scottish National Party, Plaid Cymru, Social Democratic and Labour Party and Democratic Unionist Party). Subsection(2) specifies that the function of the panel shall be to submit representations or information to the Electoral Commission about such matters affecting political parties as the panel think fit. The Commission is required to consider any representations or information they receive from the Panel but is not obliged to act on them (subsection(3)).