Dear, Our Ref: FOI 61/08

Transcription

1 FOI 61/08 Please supply all correspondence and documentation (including, but not restricted to s, letters, minutes of meetings, transcriptions of telephone conversations) relating to the investigation into the identities of the lenders of 5m worth of loans to the conservative party that were returned by the party in March 2006 and the investigation as to whether the terms of these loans were commercial or not.

2 Dear, Our Ref: FOI 61/08 Thank you for your request under the Freedom of Information Act dated 30 May The Commission aims to respond to requests for information promptly and within the statutory timeframe of twenty working days. You have requested: All correspondence and documentation (including, but not restricted to s, letters, minutes of meetings, transcriptions of telephone conversations) relating to the investigation into the identities of the lenders of 5m worth of loans to the Conservative Party that were returned by the party in March 2006 and the investigation as to whether the terms of these loans were commercial or not. The Commission did not conduct a formal investigation into this matter. However, the Commission was in contact with the Conservative Party and other parties on the subject of loans and their terms in March 2006, and the relevant documentation is attached, along with general documentation from that period on the issue of loans. I trust that this information satisfies your request. If you are not satisfied with this response, please note that the Commission operates a review procedure, details of which are attached. Please also note that if you have exhausted all internal Commission review procedures and you are still not satisfied you have the right to appeal to the Information Commissioner. Details of this procedure can be found on the ICO website: Yours sincerely Michelanne Calhoun Wilson Legal Officer Tel: Fax: MWilson@electoralcommission.org.uk

3 Party lender_f orenam e lender _surna me lender_status Conservative Kenneth Carter Individual Conservative Ronald Lee Individual lender_co_reg no Conservative Company NI Conservative Company NI lender_to wn_or_cit lender_co lender_po y unty_id stcode loan_amount lender_ad lender_ad loan start loan end received_ dress1 dress2 date date by name_of_body Manton Marlborou Grange gh SN8 4HQ 7, /05/ /07/2006 Devizes Conservatives Yes 41 Blackland s Road London SE6 3AE 5, /06/ /01/2008 East Lewisham Conservatives Yes AIB Group (UK) Plc AIB Group (UK) Plc P.O. Box 4 P.O. Box 4 4 Queens Square Belfast BT1 3DJ 300, /04/ /12/2006 Conservative HQ Yes 4 Queens Square Belfast BT1 3DJ 2,500, /04/ /03/2006 Conservative HQ Yes Permissib le Comment Website showing activity, also on Companies House (NI) Website showing activity, also on Companies House (NI)

4 Party Name Loans on commercial terms Loans converted to donations Names of donors Amounts listed Notional interest reported Other information reported Conservative Party Yes No No No No No English Democrats Yes No No Total of 68,350 Yes in SOA. No Green Party None declared No N/A No N/A Loans received under 5000, currently checking AU's for more loan details Labour Yes No Yes - See Letter Total of 13,950,000 No No Liberal Democrats Only overdraft facility No Yes - See Letter No Respect No No No Less than 5000 Yes in SOA. SNP Yes No No No No SSP Yes No Listed in SOA UKIP Yes Yes - Will be reported late to the Commission No To be declared in SOA 20,000 to West Midlands Accounting Unit Yes in donation returns and campaign expenditure Yes - But below donation reporting limit, maybe as aggregation from 2 of the 3 lenders In past donation returns notional interest has been reported Loans received under 5000, currently checking AU's for more loan details Loans received under 5000 Loans recored in SOA No Non commercial loans report - benefit under donation reporting threshold.

5 Loans to political parties ( ) This is our interpretation of S.50 of PPERA (Political Parties Elections and Referendums Act 2000). If a loan is made on commercial terms (i.e. with interest charged at the market rate) then no donation has been made. The loan should, however, appear on the party's balance sheet if it is outstanding at the year end. Interest payments will be shown in the Income and Expenditure account for the year. If the loan is interest free, or at a rate lower than the market rate, then a donation has been made. The value of the donation is the difference between the amount of interest actually paid and the amount that would have been paid if the loan had been made on commercial terms. If this value were to exceed our reporting thresholds then it would have to be reported to the Commission. The loan itself should still appear on the balance sheet and the value of the donation shown in the Income and Expenditure account. Q. Do you consider this to be adequate and in the spirit of legislation which seeks to provide transparency? This area of legislation has not been raised as an issue before but if it is raised in the light of this election, we will look at it in our statutory report which we will publish after the election. Q. Why have you not looked at this before? This is legislation and the areas that we are currently reviewing are, for example, civil and criminal penalties and charges. Quote from Sam Younger: The law does not currently require a loan made to a political party on commercial terms to be declared as a donation. However, given that the thrust of the legislation is to provide transparency, we will be reviewing this as part of our statutory report after the election. Wednesday 20 April 2005

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16 Loans website page: Address: Regulatory Services; Political Parties; Loans. Content: PPERA requires parties to report to the Commission as a donation the difference between the actual cost of a loan to the party, and the cost it would have borne had the loan been made on commercial terms. The Commission s experience to date has been that it is in fact difficult to define precisely the circumstances in which money has been lent otherwise than on commercial terms. The Commission believes that the current requirements are not sufficient to ensure that the spirit of full public disclosure is met hence we have called for parties to declare full details of all loans, on the same basis as donations. The Commission wrote two letters to parties, one to larger parties on 20 March and one to all other parties with income or expenditure above 5000 on 24 March asking them to confirm that all loans not otherwise reported were on commercial terms. The Commission is drafting a code of conduct which sets out that any loans of over 5000 to head office or 1000 to an accounting unit should be disclosed to the Commission. Once finalised, the full code of conduct will appear on this page. The list below shows responses from parties. Income or Expenditure over 250,000 Party Name Conservative Party Labour Party Liberal Democrats Response Link Link Link Income or Expenditure of 5,000 to 250,000 Party Name Response Link Link Link

17 News release Wednesday 23 August 2006 For immediate use Donations and loans for second quarter 2006 published Donations and loans to political parties during the second quarter of 2006 are published today by the Electoral Commission. Donations and loans from 1 April to 30 June 2006 will be listed on the Commission's website ( from 11:00. Political parties are required to make four quarterly returns to the Commission each year, providing details of cash and noncash donations received. The Electoral Commission has called for parties to declare details of all the loans they receive on the same basis as donations, and parties have reported loans on a voluntary basis for the first time this quarter. Parties will have a statutory duty to report loans from 11 September 2006 under provisions in the Electoral Administration Act Donations 16 political parties (shown below) have reported donations totalling over 10.7 million this quarter: Party Donations total British National Party 5, Christian Peoples Alliance 13, Conservative And Unionist Party [The] 5,882, Co-operative Party [The] 245, Green Party [The] 13, Independent Kidderminster Hospital and Health Concern 6, Labour Party [The] 3,403, Liberal Democrats 782, Mum's Army 10, New Party [The] 67,497.88

18 Plaid Cymru- Party of Wales [The] 37, Scottish Green Party 24, Scottish National Party 138, Scottish Socialist Party 49, Socialist Party of Great Britain 36, United Kingdom Independence Party 37, In July this year the Commission received the 2005 Statement of Accounts from the main political parties and their accounting units, and began a process of checking the donations information contained in the accounts against the four quarterly donation reports made by the parties to the Commission in The Commission identified some significant differences and wrote to the relevant accounting units. As a result, a considerable number of donations that were received in and should have been reported in previous quarters have been reported this quarter. Some parties have also told the Commission that there are further donations which should have been reported but which do not appear in today s figure. The Commission has given the parties until 30th September 2006 to report these further donations. In total, 310,000 of donations has been reported late alongside the most recent returns (see notes to editors for a full breakdown). Whilst the vast majority of donations are reported on time, the Commission believes that late reporting of donations is not acceptable. We will continue to highlight the instances where donations are reported late and we expect the parties to improve their reporting systems. The Party reported that it returned two impermissible donations to the donors, with a total value of 700. Loans In March 2006 the Commission called on parties to voluntarily report loans on the same basis as donations. This was the first quarter to which this voluntary agreement applied and three parties reported loans totalling over 31.5 million: Party Loans total Conservative And Unionist Party [The] 2,812, Labour Party [The] 28,200, Liberal Democrats 584, More details of these loans are available on the Commission s website.

19 The Commission is disappointed that, despite public commitments, not all parties have made sufficient efforts to provide details of loans made to their accounting units, and in some cases to their national headquarters. Given this situation, it is clear that all parties will need to make immediate efforts if they are to be in a position to comply with the requirement in the Electoral Administration Act to report loans on the same basis as donations from September. Peter Wardle, Chief Executive of the Electoral Commission, said: Full disclosure of both donations and loans is vital to address public concern about the transparency of political party funding. The fact that the main parties seem to be struggling with the level of disclosure we have called for on a voluntary basis suggests that they are ill-prepared to comply with the new laws that Parliament has put in place. We will do all we can to ensure the parties understand the new requirements, but they need to take them seriously to restore public confidence. /ends For further information contact: Anna McGlynn on or Elizabeth Hutchinson on Out of office hours press@electoralcommission.org.uk Notes to editors: 1. The Political Parties, Elections and Referendums Act 2000 (PPERA) came into force on 16 February 2001 and requires registered political parties to submit quarterly donation reports to the Commission. These reports must include all donations over 5,000 to main political party offices and over 1,000 to constituency or local party offices. 2. Parties may accept donations of over 200 only if they are deemed 'permissible' under the terms of PPERA. 'Permissible' donors include individuals who are listed on the UK electoral register, or for a company to be a permissible donor, it must be registered under the Companies Act 1985 and incorporated within the UK or another member State, and carrying on business in the UK at the time the donation was made. 3. Parties on the Northern Ireland register of political parties are exempt from the donation controls until 15 February The Northern Ireland (Miscellaneous Provisions) Act received Royal Assent on 25 July 2006 and will require political parties in Northern Ireland to notify the Commission of donations over 5,000, but provides for donor details to be kept confidential. The current exemption from donation controls will be extended from February 2007 to October 2007 in order to give the political parties and the Commission time to prepare for the new regime. 4. The Political Parties, Elections and Referendums Act 2000 (PPERA) requires parties to report the difference between the actual cost of a loan to the party, and the cost it would have borne had the loan been made on commercial terms where this is above the reporting threshold. On the 3 May 2006 the Commission wrote to all parties asking them to voluntarily report to the Commission all loans they have received above a certain threshold, ( 5,000 for loans to head office and 1,000 for loans to accounting units), including details of the lender, the amount of the loan and the period of the loan. 5. Parties will have a statutory duty to report loans on the same basis as donations from 11 September 2006 under provisions in the Electoral Administration Act The Electoral Commission is an independent body set up by the UK Parliament. Our mission is to foster public confidence and participation by promoting integrity, involvement and effectiveness in the democratic process.

20 7. To search the register, visit the Commission s website and go to 'Register of donations to political parties using the 'donations' link on the home page. 8. Late donations that should have been reported in previous quarters (shown below). Full details can be found at Party Party [The] Party [The] Donor Date received Amount/value Received by Bearwood Corporate Services Ltd 21/03/ , Bedford Association of Conservative Clubs Ltd 28/03/ , Bedford Party [The] Iain Evans 21/02/ , Bedford Party [The] Richard Fuller 17/01/2005 6, Bedford Party [The] Ali Habbas 01/03/2005 4, Bedford Party [The] New Milton Conservative Club 17/03/2005 3, New Forest West Party [The] Richard Frampton 15/03/2005 2, New Forest West Party [The] Association of Conservative Clubs Ltd 22/02/ , Party [The] Noreen V Southby 29/03/ , Poole Party [The] North East Bedfordshire Bearwood Corporate Services Ltd 21/03/ , Shipley Party [The] Midlands Industrial Council 29/03/ , Wellingborough Party [The] Midlands Industrial Council 21/03/2005 7, Wellingborough Party [The] Robert Fleming 22/04/2005 5, Party [The] Chippendale Keswick 22/04/2005 1, Party [The] Conservative Central Office Conservative Central Office Bearwood Corporate Services Ltd 27/05/2005 1, Bedford Party [The] David A Ledsom 11/04/2005 5, Bedford Party [The] Bearwood Corporate Services Ltd 05/04/2005 5, Clywd West Party [The] Bearwood Corporate Services Ltd 15/04/2005 5, Tamworth Party [The] John M Menzies 21/09/ Conservative Central Office Party [The] Richard Fuller 06/06/2005 1, Bedford Party [The] Fresh Start 27/11/2005 1, Conservative Central Office Party [The] Michael A Pass 17/11/ West Derbyshire Party [The] Christopher CG Trafford 17/11/2005 1, West Derbyshire Party [The] Michael Hintze 12/09/2005 1, Conservative Central Office Party [The] Reginald Goodwin 01/02/2006 1, Tamworth Party [The] total 216,933

21 Green Party [The] Christopher Simpson 14/02/2005 1,200 Ceredigion Green Party [The] total 1,200 Labour Party [The] Labour Party [The] Labour Party [The] Communication Workers Union 25/01/2006 1,500 Communication Workers Union 27/10/2005 2,000 Communication Workers Union 27/01/2006 2,000 Labour Party [The] H G Wells Centre 01/03/2006 2,000 Trinity Mirror Shared Labour Party [The] Services Ltd 31/03/2006 2,000 National Labour Party National Labour Party National Labour Party Bromley Local Government Committee London Borough of Croydon LGC Labour Party [The] total 9,500 Liberal Democrats Education Data Surveys Ltd 31/12/ ,000 Falmouth & Lamborne Liberal Democrats Mr Charles Skene 09/02/2005 5,000 Scottish State Party Liberal Democrats Branksome Liberal Club Trust 31/12/2001 3, Poole Liberal Democrats Branksome Liberal Club Trust 31/12/2002 3, Poole Liberal Democrats Branksome Liberal Club Trust 31/12/2003 4, Poole Liberal Democrats Branksome Liberal Club Trust 31/12/2004 4, Poole Liberal Democrats Branksome Liberal Club Trust 31/12/2005 5, Poole Liberal Democrats Newtown Hall Trust 31/12/2005 1, Poole Liberal Democrats House of Lords Fees Office 07/03/ , Parliamentary office of the Liberal Democrats Liberal Democrats Mr John K Stevens 18/01/2006 2, Colchester Liberal Democrats total 54,464 United Kingdom Independence Party Mr Alan Bown 20/03/ South West United Kingdom Independence Party Mr Alan Bown 10/01/2006 2,000 Wales United Kingdom Independence Party Mr Alan Bown 16/01/ Scotland United Kingdom Independence Party Mr Alan Bown 28/01/ Scotland United Kingdom Independence Party Mr Alan Bown 10/02/2006 2,795 Head Office United Kingdom Independence Party Mr Alan Bown 23/03/ ,000 Head Office United Kingdom Independence Party Mr Alan Bown 31/03/2006 1,560 Head Office United Kingdom Independence Party total 27,543 Total 309,639

22 Dear Registered Treasurer, Loans As you know, one of the responsibilities of a political party s registered treasurer is to ensure that the benefit from any loans to the party which are not on commercial terms is declared to the Electoral Commission on the same terms as donations. This means that the benefit of loans should be reported to the Commission within the quarterly reporting period (and more frequently during a general election period). The Electoral Commission s role is to monitor compliance with statutory requirements, including these requirements on loans. We do not have full details of any loans given to political parties unless you give them to us. There has been sufficient comment in the media in recent days about loans to parties to cause us to write to you to ask you to confirm, as the registered treasurer, that you are entirely satisfied that any loans that the party has received and not so far reported are on fully commercial terms and that they involved no benefit to the party which should have been declared and has not been declared. As you know, we have previously given guidance in relation to the interest rate paid on a loan Where a loan is made available to a political party and the difference between the following is positive: the interest that would have been paid had that loan been made on commercial terms; and the interest actually accrued during the financial year, this difference should be recorded as notional expenditure in the income and expenditure account. But the interest rate is not the only term of a loan. In deciding whether or not a loan is on commercial terms, you would also need to consider, for example, any requirement for security, the repayment terms and flexibility - including a clear understanding that a loan may be converted into a donation at a later stage. The overall test must be the extent to which similar terms would have been available at the time of the loan from a commercial lender.

23 If after considering these points you feel that any loans ought to be reported to the Commission now, please do so. I should be grateful if you would respond to this letter by 29 March I am endeavouring to arrange for a meeting to be held with the registered treasurers of the main political parties within the next two weeks; although the aim of that meeting is to focus on future reporting arrangements for loans, we may also want to pick up on the points raised in this letter. I am writing in similar terms to all the major political parties. Yours sincerely, Hilary Mundella Director of Operations hmundella@electoralcommission.org.uk

24 Donations Q Briefing for spokespeople relevant extracts of Communication Lines 12. How does the Commission feel about the level of reporting of loans? In March 2006 the Commission called on parties to disclose loans voluntarily and is disappointed that, despite public commitments, not all parties have made sufficient efforts to provide details of loans to their accounting units, and, in some cases, to their national headquarters. Given this situation, it is clear that all parties will need to make immediate efforts if they are to be in a position to comply the Electoral Administration Act which requires them to report loans on the same basis as donations. However, we will do all that we can to make sure the parties understand the new requirements so that they are able to fully comply with them from September. 13. If it s only voluntary to report loans at the moment, what s the current law on reporting loans? The Commission called for the law to be changed to ensure that loans were reported on the same basis as donations, and from September, this will be a legal requirement. The current law says that if a loan is made on commercial terms then no donation has been made. However, if the loan is made other than on commercial terms, a party must report the benefit to the Commission as a donation, if it exceeds the reporting threshold ( 5k for a donation to a national party). However, full disclosure of both donations and loans is vital to address public concern about the transparency of political party funding. 14. What would you consider to be commercial terms? In the past, the Commission has published guidance for the parties on this. In March 2006, the Commission wrote to all parties asking them to look at factors such as the requirement for security, repayment terms and flexibility as well as interest rates when deciding if a loan was on commercial terms. [If pressed: We can't comment further given the ongoing police investigation.] 15. Are you still looking into whether previous loans should have been reported as donations because they were not on commercial terms? Following discussions with the Metropolitan Police, we decided to suspend our enquiries into past loans to political parties pending the outcome of the related police investigation.

25 We are postponing further discussions with the parties on this matter and are liaising with the Metropolitan Police. 17. Is the huge increase in the donations the Conservative party has received due to them converting their loans into donations? Given that parties have not been required to identify lenders in the past, it is not possible to tell whether this is the case. [If pressed: we are not in a position to make any comment on current loans due to the ongoing police investigation.]

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29 Donations Q Briefing for spokespeople Background Under PPERA registered political parties on the GB register must record donations over 200, and report donations of over 1000 to constituency or local offices or over 5000 to main party offices. 330 parties were required to submit returns 16 parties have reported receiving donations totalling 10,756,489 3 parties have reported receiving loans totalling 31,600, parties have submitted nil returns 88 parties failed to submit a return Parties also reported loans on a voluntary basis for the first time this quarter at the request of the Commission Parties will have a statutory duty to report loans on the same basis as donations from 11 September 2006 following provision in the Electoral Administration Act There are several significant donations which may generate some media interest. It s not our role to comment on the donations but to check whether they come from permissible donors. See table at the end of this document for background. Q & As Donations 1. The Conservatives, Labour, Lib Dems and UKIP have reported late donations again. What is the Commission doing about it? It is not acceptable that donations are reported late. The political parties especially the larger parties, should by now have procedures in place which will enable them to comply with the financial reporting requirements of PPERA. The majority of the late donations reported alongside this quarter s returns were to constituency offices. However it is the responsibility of the central party to ensure that their accounting units comply with the donation reporting requirements introduced by PPERA five years ago. Moreover, many of the donations reported alongside this quarter s returns were received in 2005, and in those cases the Commission s view is that there is little justification for the delay which has occurred. We are contacting the parties concerned for an explanation of the reasons for the delay and will want to be satisfied that the party has robust plans in place to address any significant difficulties which led to late submission this quarter. 1

30 2. There has been a large increase in the reporting of late donations. Why is this? Is it in response to the letter from Brian Jenkins (see attached)? In July this year the Commission received the 2005 Statement of Accounts from the main political parties and their accounting units, and began a process of checking the donations information contained in the accounts against the four quarterly donation reports made by the parties to the Commission in The Commission identified some significant differences and wrote to the relevant accounting units. As a result, a considerable number of donations that were received in, and should have been reported in previous quarters, have been reported this quarter. Some parties have also told the Commission that there are further donations which should have been reported but which do not appear in today s figure. The Commission has given the parties until 30th September 2006 to report these donations. We will be publishing them shortly after. [For information: three accounting units identified in Brian Jenkins letter have still not reported late donations. These are Monmouth, Calderdale and Brighton Kemptown. The Commission has contacted the accounting units involved and is expecting a response by 30th September.] 3. Who is the worst offender? All the main parties have reported some donations late, and we believe that accounting units of all the parties have failed to report some donations on time. [If pressed: Based on the evidence, it appears that the Conservative party is struggling to report all donations on time] The Commission has become impatient with the argument that it is difficult for the parties to report all donations on time: it is the law and parties must comply with the legislation set by parliament. 4. How many late reported donations are still outstanding? And from which parties? At the moment, we don t have the information which details exactly how many late reported donations are outstanding. However, both the Conservative and Labour parties have let us know that since we raised the issue of differences in the donations total in their annual statement of accounts and their quarterly donation returns, they have more donations to report to us. 5. Why doesn t the Commission prosecute parties for late donation reports? At present, what we are doing is drawing public attention to these failures to comply. We have made it clear that five years on, we cannot continue to 2

31 accept failures to comply to this extent. The law sets out civil and criminal penalties. However, at the moment, we expect the parties to urgently get their house in order. [If pressed: The Commission does not have the power to impose penalties itself, but where individuals and organisations are found to have breached the reporting requirements they may be referred to the police and CPS who will consider whether a civil or criminal offence has been committed. There is no specific offence in PPERA for reporting a donation late. There are penalties for submitting a quarterly donations return late (detailed below). In addition it is an offence for a party s registered treasurer to submit a donation return that he knowingly or recklessly knows to be false. However, there is a problem with the existing penalties in that it s difficult to prove criminal intent; and the cost of levying, and the impact, of civil fines may arguably be disproportionate. We want a more flexible penalty regime. [We ve been conscious of this problem for a while and have said so but now we ve just begun a formal review of the Political Parties Elections and Referendums Act 2000 (PPERA). This will consider whether the Commission has the right powers to regulate political parties and candidates finances, and whether the penalties and criminal sanctions available are appropriate and workable. We will also consider whether there is enough transparency for effective regulation of party finances and to secure public confidence.] In the mean time we will continue to work with parties to improve their reporting systems, because without good reporting, transparency will never be achieved. (Background - civil penalties: Length of delay in submission Penalty Not more than 3 months 500 More than 3 but not more than 6 months 1,000 More than 6 but not more than 12 months 2,000 More than 12 months 5,000 - criminal penalties Non-submission of statutory returns is an offence and can lead to a criminal penalty for the treasurer).] 6. Why aren t late donations highlighted separately on the EC website? Late donation returns are added to the register in the reporting period to which they relate, but they are highlighted in our news releases which can be found on the Commission s website. Editor s note 6 to today s news release gives a full breakdown of the late returns received this time. 3

32 7. A number of parties have not submitted a return at all. What reasons have the parties given for non-submission and what does the Commission intend to do about it? PPERA requires any registered political party to submit a return of donations, even if it is a nil return. For this quarter 242 parties submitted returns, 226 of them nil returns. 88 registered parties all of them at the small end of the scale like residents associations and single issue groups failed to submit a return at all. We have written to those parties. In our experience, none of these parties are likely to have received any reportable donations. It s not easy for the Commission to strike the right balance here: on the one hand it s quite likely that none of these parties received reportable donations, so taking heavy-handed enforcement action would be inappropriate; but on the other hand, political parties need to play by the rules. On the recommendation of the Commission, the Electoral Administration Act (EAA) changes the law so that parties will not have to submit a quarterly donation return once they have submitted four consecutive nil quarterly donation returns, until such time as they receive a reportable donation. It is anticipated that this should help ease the administrative burden of PPERA for smaller political parties. Also on the Commission s recommendation the EAA also changes the law so that parties failing to submit their annual confirmation of registered details (RP8) to the Commission within six months of the due date will automatically be de-registered. 8. What are the rules in terms of impermissible donations? Political parties can not accept donations of more than 200 other than from permissible sources (listed below). Any donations of more than 200 from impermissible sources must be returned, and donations from unidentifiable sources cannot be accepted. (Background: Registered political parties are only legally allowed to accept donations of more than 200 from 'permissible donors'. Permissible donors are defined by the Political Parties, Elections and Referendums Act (PPERA) as: an individual registered on a UK electoral register; a UK registered political party; a UK registered company; a UK registered trade union; a UK registered building society; a UK registered limited liability partnership; a UK registered friendly/building society; a UK based unincorporated association) 4

33 9. What is a Section 62 donation? A Section 62 donation is where a donor has made small donations over the course of a calendar year whose aggregate value goes over the reporting threshold. 10. Why are parties reporting public funds they have received, and what are they? Under PPERA, political parties are also required to report donations received through direct public funding including Short and Cranborne money and money given to parties by devolved bodies. Short money is given to opposition parties to assist with the performance of their parliamentary duties. Cranborne money is the equivalent given to opposition parties in the House of Lords. Loans 11. What s the relationship between the Commission s enquiries and the police investigation are you looking into the same things? The Electoral Commission has a responsibility to monitor the political parties compliance with the financial reporting requirements set out in the Political Parties, Elections and Referendums Act Our role is to ensure that the parties have complied with this law. The police have made clear that there may be an overlap between this and the criminal investigation into allegations that there may have been a contravention of the Honours (Prevention of Abuses) Act How does the Commission feel about the level of reporting of loans? In March 2006 the Commission called on parties to disclose loans voluntarily and is disappointed that, despite public commitments, not all parties have made sufficient efforts to provide details of loans to their accounting units, and, in some cases, to their national headquarters. Given this situation, it is clear that all parties will need to make immediate efforts if they are to be in a position to comply the Electoral Administration Act which requires them to report loans on the same basis as donations. However, we will do all that we can to make sure the parties understand the new requirements so that they are able to fully comply with them from September. 13. If it s only voluntary to report loans at the moment, what s the current law on reporting loans? The Commission called for the law to be changed to ensure that loans were reported on the same basis as donations, and from September, this will be a legal requirement. The current law says that if a loan is made on commercial terms then no donation has been made. However, if the loan is made other than on 5

34 commercial terms, a party must report the benefit to the Commission as a donation, if it exceeds the reporting threshold ( 5k for a donation to a national party). However, full disclosure of both donations and loans is vital to address public concern about the transparency of political party funding. 14. What would you consider to be commercial terms? In the past, the Commission has published guidance for the parties on this. In March 2006, the Commission wrote to all parties asking them to look at factors such as the requirement for security, repayment terms and flexibility as well as interest rates when deciding if a loan was on commercial terms. [If pressed: We can't comment further given the ongoing police investigation.] 15. Are you still looking into whether previous loans should have been reported as donations because they were not on commercial terms? Following discussions with the Metropolitan Police, we decided to suspend our enquiries into past loans to political parties pending the outcome of the related police investigation. We are postponing further discussions with the parties on this matter and are liaising with the Metropolitan Police. 16. What s the relationship between the Commission s enquiries and the police investigation are you looking into the same things? The Electoral Commission has responsibility to monitor the political parties compliance with the financial reporting requirements set out in the Political Parties, Elections and Referendums Act Our role is to ensure that the parties have complied with this law. The Metropolitan Police have made it clear that the investigation is currently considering matters under the Honours (Prevention of Abuses) Act 1925 and the Political Parties, Elections and Referendums Act 2000, although does not discount other legislation should it become relevant to the case. 17. Is the huge increase in the donations the Conservative party has received due to them converting their loans into donations? Given that parties have not been required to identify lenders in the past, it is not possible to tell whether this is the case. [If pressed: we are not in a position to make any comment on current loans due to the ongoing police investigation.] 16. The SNP/Plaid Cymru/SSP/UKIP have substantial loans but have not reported them to the Commission. What does the Commission think of this? In March 2006 the Commission called on parties to disclose loans voluntarily and is disappointed that not all parties have disclosed details of loans. From 6

35 our correspondence with SNP/SSP/Plaid Cymru/UKIP in March and looking at their statement of accounts for 2005, we have reason to believe that they do currently have loans outstanding. Any loans still outstanding after September 11 th will have to be reported to the Commission in order to comply with new legislation in the Electoral Administration Act requiring them to report all loans. However, we will do all that we can to make sure the parties understand the new requirements so that they are able to fully comply with them from September. Party Funding 18. Does the Commission think there should be a cap on donations? What level does the Commission think a cap on donations should be set at? Does the Commission think that there should be a total ban on donations / Would the Commission be against an outright ban on private donations? The Commission has set out a series of principles on the subject of party funding (see appendix ii). Further work is being carried out in this area including that of Sir Hayden Philips. The Commission is holding a series of events including a programme of research with the public over the coming weeks. We will consider our views further as the discussions move forward. We will be submitting our views to Sir Hayden Philips review. 19. Shouldn t the Commission be carrying out the party funding review, rather than Sir Hayden Philips? We welcomed the Government s announcement to launch the review and it is a matter for the Government to decide how it wishes to undertake the review of political party funding. However, we expect to make a significant contribution to Sir Hayden Philips work, and the terms of reference for the review makes clear that he is expected to work closely with us. We have already had several meetings to discuss how we can contribute Statement of Accounts 20. What are the statement of accounts and when do they have to be submitted to the Commission? Parties and accounting units with income and expenditure of more than 250,000 were required to submit their statements of accounts (for the year to 31 st December 2005) to the Commission by 7 July Parties and accounting units with income and expenditure of less than 250,000 were required to submit their statements of accounts by 31 st March. 7

36 21. What is an accounting unit? An accounting unit is an administrative arm of a political party, which is financially separate from the main party. It manages its own finances and is responsible for reporting its accounts to the Commission. Parties can decide where to set up accounting units and they tend to do this on a parliamentary constituency basis. 22. Have UKIP submitted their statement of accounts for 2005? UKIP have still not submitted their statement of accounts, in spite of having been granted an extension until 18 th August. The Commission has repeatedly contacted the party to establish the reason why they have failed to submit their accounts and to provide an explanation for the delay. We not yet had a satisfactory response and we are considering next steps. Appendix i. Significant donations - for information (i) Significant donations of 100,000 and over: Received by Donor Address Date accepted Value Conservatives Conservative And Unionist Party [The] Conservative Central Office David J Coldman status: Individual 09/05/06 100, Conservative And Unionist Party [The] Conservative Central Office Ian R Taylor status: Individual 31/05/06 100, Conservative And Unionist Party [The] Conservative Central Office William Cook Ltd status: Company company reg no: Parkway Avenue Sheffield S9 4UL 21/06/06 100, Conservative And Unionist Party [The] Conservative Central Office George M Magan status: Individual 11/04/06 375, Conservative And Unionist Party [The] Thomas Scott status: Individual 03/04/06 500,

37 Conservative Central Office Conservative And Unionist Party [The] Conservative Central Office IPGL Ltd status: Company company reg no: c/o City Index06/04/06 1,000, Moorgate London EC2M 6XB Conservative And Unionist Party [The] Conservative Central Office RF Trustee Co Ltd Ely House status: Company 37 Dover company reg no: Street London W1S 4NJ 13/04/06 1,020, Labour Labour Party [The] National Labour Party Labour Party [The] National Labour Party Labour Party [The] National Labour Party Labour Party [The] National Labour Party Union of Shop Distributive and Allied Workers status: Trade Union Mr Nigel Doughty status: Individual Sir Ronald Cohen status: Individual GMB status: Trade Union 188 Wilmslow 10/04/06 234, Road Fallowfield Manchester M14 6LJ 22/24 Worple Road London SW19 4DD 02/05/06 250, /06/06 250, /05/06 290, Labour Party [The] National Labour Party Transport and General Workers Union status: Trade Union Transport House 128 Theobald's Road London WC1X 8TN 26/06/06 290, Labour Party [The] National Labour Party Transport and General Workers Union status: Trade Union Transport House 128 Theobald's Road London WC1X 8TN 19/04/06 290,

38 Labour Party [The] National Labour Party UNISON status: Trade Union 1 Mabledon Place London WC1H 9AJ 03/05/06 362, Labour Party [The] National Labour Party Amicus status: Trade Union Hayes Court West Common Road Bromley BR2 7AU 19/05/06 456, Appendix ii. Party funding principles Political parties have for 150 years been essential to the functioning of a sustainable representative democracy. They serve as a channel through which individuals and groups are integrated into the political system, organise campaigns in order to mobilise voters to express their wishes at elections and make possible the effective conduct of government. There is accordingly a vital public interest in ensuring that parties operate in a framework that enables them to carry out these functions effectively and enjoy public confidence in doing so. In terms of the funding system, that public interest can be expressed through quantitative and/or process controls on expenditure, or income, or both. For the purposes of the current review, three key questions need to be addressed: 1. Should there be new limits on how much individuals and organisations can contribute to parties? 2. If so, how and to what extent should the state bridge the gap between the voluntary income parties can attract and the expenditure they incur? 3. Should there be tighter limits on what parties can spend, especially in order to keep any call on public funds to a minimum? In addressing these questions two key dimensions need to be borne in mind: the need for parties to remain based on the broadest voluntary individual participation the need for public confidence in the integrity of the system Any system for the funding of political parties must therefore: encourage smaller contributions from a larger number of people rather than small numbers of high value contributions ensure that no single funding source can exert undue influence ensure that parties continue to generate a significant proportion of their income from voluntary contributions 10

39 neither entrench the existing party system nor inhibit the development of new parties be based on clear and fair rules for how parties qualify for any public funds be simple and practicable in terms of implementation be open and transparent so that the public can see clearly the sources and uses of funds take account of the needs of parties at all levels and in all parts of the United Kingdom 11

40 Gavin Barwell Registered Treasurer Conservative Party 25 Victoria Street London SE1H 0DL X March 2006 Dear Mr Barwell, Reporting of donations under PPERA Thank you for your letter of 28 March regarding loans made to the Conservative party. We have noted that you are satisfied that the loans to the party are made on commercial terms falling within the scope of the relevant legislation. As the Commission does not have any information about particular loans, we would appreciate if you could explain the logic that you used in coming to the view that all loans accepted by the party were on commercial terms, including any supporting evidence that would be helpful in clarifying our understanding. I should be grateful if you would respond to this letter by 7 April Yours sincerely, Hilary Mundella Director of Operations hmundella@electoralcommission.org.uk

41 From: Stephen Rooney Sent: 22 August :17 To: Glyn Mathias; Karamjit Singh; Neil McIntosh; Pamela Gordon; Sam Younger; Ann Kelly; Colin Mellors; Joan Jones; Robin Gray Cc: Tabitha Cunniffe; Peter Wardle; Hilary Mundella; Linda Hews; Andy O'Neill; Kay Jenkins Subject: Press release - quarter two donations and loans published tomorrow Dear all Tomorrow (Wednesday 23 August) we will be publishing details of donations and loans to political parties during the second quarter of These will be available on the Commission's website from 11am. The parties have reported loans on a voluntary basis for the first time this quarter at the request of the Commission. They will have a statutory duty to report loans on the same basis as donations from 11 September 2006 under provisions in the Electoral Administration Act. Sam Younger will be available for interview tomorrow morning. A spokesperson's briefing is also attached for you information. Please note that the attached release is for your information, and will not be issued until 11am Wednesday morning. Please treat as confidential until then. Q FINAL.doc Donations Q (208 KB) FINAL.doc (1... Stephen Rooney Acting Director of Communication The Electoral Commission Trevelyan House Great Peter Street London SW1P 2HW Tel: Fax: Democracy matters

42 To peter & gavin Voluntary reporting of loans I am writing to express my deep disappointment at the level of loans that you have reported under the voluntary code that you agreed to abide by in your letter to Hilary Mundella dated xx. The Commission worked closely with the main parties to ensure that the voluntary code for reporting loans would make it possible for parties to provide maximum transparency in this matter. I can only assume that the level of commitment to this principle is not as it should be. Whilst I understand the difficulties parties face in collating information from accounting units, the voluntary code was issued in May and its intention was known in XX. The lack of parties ability to comply with a voluntary system only strengthens the case for the requirements to be statutorily mandated, which is of concern. I should therefore remind you that the third quarterly returns, due 30 October 2006, must include all relevant information on loans, credit facilities and regulated transactions for outstanding on or taken out after 11 September 2006 for the central party and all its accounting units. I should encourage you to contact xx if you are experiencing difficulties. YS PW CE