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The Chilling Effect of the Law on Election Finance

Updated: Sep 16

‘Democracy cannot succeed unless those who express their choice are prepared to choose wisely. The real safeguard of democracy, therefore, is education’. Franklin D Roosevelt (1882-1945)

 

Introduction

 

The importance of education to democracy cannot be overstated. Central to that education is the interchange of ideas and policies across the political spectrum. Many of the organisations and individuals well placed to deliver that education are bodies known as non-party campaigners (NPCs). These are individuals and interest groups who campaign for and against parties, candidates, issues, and policies, without themselves seeking election. Many pressure groups, charities, and trade unions are NPCs (for example, HOPE not hate Ltd and Greenpeace Limited).

 

Yet the rules governing donations and campaign spending for NPCs are complex and unclear. This may lead to a scenario in which the very people seeking to educate electors are often unable to fully grasp the laws regulating them. This is notwithstanding the fact that the punishments for contravening campaign finance laws are severe.

 

The importance of transparency and accountability in election finance has been brought to the fore on a number of occasions. Perhaps the most recent internationally is Donald Trump’s ‘hush money’ trial. However, the complexity of the laws in UK may risk making politics inaccessible, in the name of transparency.

 

Have we gone too far? Has the law become so complex that current and future educators are likely to dismiss politics as more hassle than it's worth?

 

A broad overview of the regime

 

NPCs are defined by the Electoral Commission (EC) as ‘individuals or organisations that campaign for or against a candidate at an election or referendum without standing as a candidate themselves’.[1] The Political Parties, Elections and Referendums Act 2000 (PPERA) refers to such organisations or individuals as ‘third parties’. There are two types of NPC—a local campaigner and a general campaigner.

 

The laws regulating the spending of NPCs, in the lead up to an election or referendum, are far from straightforward. The law is spread across three statutes: primarily PPERA and the Transparency in Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 (TUAA). If an NPC is campaigning in support of a specific candidate, it must also comply with its obligations under the Representation of the People Act 1983 (RPA). TUAA was passed by Cameron’s Conservative government, following a series of high-profile corporate lobbying scandals. It amended PPERA and introduced the requirement for NPCs to register if they intended to spend more than a certain amount on regulated campaign activities. TUAA was opposed by 160 charities, including the Royal British Legion, Save the Children, and the Salvation Army.

 

In this article, I outline some of the issues an NPC must consider in the lead up to a general election to give readers an insight into the complexity of the regime, and why so many organisations condemned the further complexity added by TUAA.

 

1. The regulated period

 

Central to the law governing the spending of NPCs is the ‘regulated period’. Expenditure is only controlled by the law if it is incurred during the regulated period. The regulated period is 365 days before a general election. This means that all expenditure on ‘regulated campaign activities’, in the 365 days before a general election, must be accounted for. There are limits on how much an NPC can spend during the regulated period.

 

In the case of a snap general election (as in 2017 and 2019, for instance), the regulated period is applied retrospectively. Money spent by parties and NPCs in the preceding 365 days was liable to be accounted for retrospectively. Thus, even when an election is neither anticipated nor foreseeable, an NPC may be required to account for its spending. This can cause issues for NPCs who have spent significant amounts on activities that may meet the definition of a ‘regulated campaigning activity’. Even where an election takes place on a predicable schedule, the regulated period will limit the amount an NPC can spend in the lead up to election day.[2]

 

2. ‘Regulated campaign activity’

 

To determine whether an activity is controlled by the law, an NPC must decide whether an activity is a ‘regulated campaign activity’. An NPC must consider the list of activities (outlined at schedule 8A of PPERA) and determine whether the activity meets the ‘purpose’ and ‘public’ tests.

 

  1. The purpose test will be satisfied if an activity can reasonably be regarded as intended to promote or procure the electoral success of (a) one or more political parties; (b) particular parties or candidates that do, or do not support a particular policy; or (c) a category of candidates, by influencing voters to vote in a certain way at the election.

  2. Only activities ‘made available to the public’ are regulated. For example, canvassing and market research, or the production of material (all Schedule 8A activities) will be regulated only if made available to the public. The ‘public’ has been given its ‘ordinary’ meaning by the EC.

 

Only if an activity is (a) listed in Schedule 8A and (b) meets both tests will it be a regulated campaign activity.

 

The tests are not easy to apply. Taking the example of the public test, the changes to the ways people communicate have blurred the boundaries between what is private and public. To determine whether the test is met, one must undertake an assessment of the tone, timing, context of the campaign, and whether it is a ‘call to action’ to voters.

 

3. Spending limits

 

Under PPERA there are four categories of spending limits that NPCs must be aware of:

 

  1. Registration thresholds. An NPC spending more than £20,000 in England or £10,000 in each of Scotland, Wales and NI must register with the EC. If an NPC fails to register before spending more than £20,000 (or £10,000 in the other parts of the UK), it will commit an offence.

  2. The national spending limits. There is one for each part of the UK: England—£586,548; Scotland—£81,571; Wales—£54,566; and Northern Ireland—£39,443.

  3. Focused constituency campaigning. Regulated campaign activity which primarily impacts a particular constituency, or constituencies, is known as ‘focused constituency campaigning’. There are limits on how much an NPC can spend in one constituency (£17,553). This can cause issues in light of the attribution rules (see below).

  4. Targeted spending. Spending on regulated campaign activity intended to influence voters to vote for a specific party or its candidates is known as ‘targeted spending’. There are limits on a NPCs targeted spending where the relevant political party (whom the NPC is supporting) has not authorised the expenditure. The limits are as follows: England—£58,654; Scotland—£6,157; Wales—£3,456; and Northern Ireland—£1,944.

 

There is an additional spending limit for campaigns in support of a candidate in a constituency, under the RPA.

 

4. Attribution rules

 

The purpose of the attribution rules is to allocate the spending of an NPC on regulated campaign activity to each part of the UK and each constituency in which it has an effect.

 

The spending attributed to each part of the UK will count towards the spending limit for that part (ie within the national limits). The spending attributed to each constituency will also count towards the spending limit for that constituency (ie it will form part of the focused constituency spending). Therefore, all spending will count towards the limits for at least one part of the UK and at least one constituency. If an NPC is campaigning across the whole of England, Scotland, Wales, or NI, it must attribute spending equally to each constituency in that part. However, if it spends the entire limit for a particular constituency (£17,553), for example, in a swing seat, it will breach the constituency spending limit if it then incurs any other expenditure that it is required to attribute partly to that constituency under the honest and reasonable assessment principle.

 

The honest and reasonable assessment principle is the ‘guiding principle’ that should be applied in all situations in which an NPC has to apportion spending. It simply requires NPCs to make an ‘honest and reasonable assessment, based on the facts, of the proportion of spending that should be fairly attributed’ to regulated campaign activities (as opposed to non-regulated activities). Once this assessment has been made, the NPC will need to use the same guiding principle to apportion its spending to the correct part of the UK, or constituency, for the purposes of complying with the spending limits. What constitutes an honest and reasonable assessment is not clear, partly because it is subjective and dependent on having fully grasped the law outlined above.

 

5. Reporting obligations

 

If an NPC is required to register with the EC and intends to spend more than £20,000 (the reporting threshold) during the regulated period, it must comply with onerous reporting obligations. It must:


  1. Report spending on regulated campaign activities in its spending return after the election; and

  2. Report donations at three different times. A donation received by an NPC for the purposes of funding its regulated campaign activity will need to be reported if it is over a certain threshold. All NPCs are obliged to submit these reports unless they have declared that they will spend below the reporting threshold. The reporting obligations are as follows:

    1. during the pre-dissolution period, an NPC is required to make quarterly pre-poll reports;

    2. between the dissolution of Parliament and polling day, it will be required to make weekly pre-poll reports; and

    3. after the election, it must report its donations in its spending return.

 

The content of each report will differ (ie pre-dissolution reports require a report of the total value of all donations with a value between £500—£7,500, whereas post-dissolution reports do not).

 

To further confuse matters, many NPCs may also be ‘members associations’, and subject to an additional regime in which they are required to report donations received to fund its ‘political activities’. The reporting threshold for an NPC during a regulated period is different to the reporting threshold for a members association outside of the regulated period.

 

The chilling effect

 

Grey areas

 

As is evident from the very brief outline above, the law regulating this area is not black and white. The honest assessment principle in relation to the attribution rules is difficult to apply, as are the purpose and public tests.

 

Since the law is unclear, a prudent NPC will feel it necessary to consult experienced and expensive lawyers specialising in this area. Therein lies the problem. When faced with the expense that comes with compliance, coupled with the penalties and reputational impact of making a mistake, smaller NPCs may be forced to abandon politics altogether.

 

Compliance burden

 

Even when an NPC gets it right (it has registered, made the correct judgments as to which activities meet the relevant tests, and attributed its spending appropriately) it is obliged to make a series of reports to the EC as to its spending and donations. The closer an NPC gets to an election, the more frequent and burdensome the obligations become. It will have to incur further expense to accurately report its expenditure.

 

Consequences of contravention

 

In any arena, breaches of the law are newsworthy. If an NPC breaches the law, even inadvertently, it may suffer reputational damage. Organisations engaged in politics stand to suffer more than most, as their opponents will seek to capitalise on any missteps to tarnish their reputation and gain political advantage.

 

Some breaches of the relevant law will amount to a criminal offence. The penalties range from an unlimited fine to one year imprisonment. For example, in some circumstances, an NPC is required to submit, with its spending return, a statement of accounts. A failure (by the nominated responsible person) to comply with the requirement for a statement of accounts is a criminal offence attracting, on summary conviction, a fine up to the statutory maximum, or six months imprisonment, or on indictment, a fine or one year imprisonment. Other breaches may give rise to both criminal and civil sanctions.

 

Greenpeace and Friends of the Earth were fined for breaking the rules in the lead up to the 2015 general election. Greenpeace was fined £30,000 for failing to register with the EC, and Friends of the Earth was fined £1,000 for late registration. Interestingly, Greenpeace deliberately failed to register, as an ‘act of civil disobedience’ and to highlight that the law, as it stands, is unworkable.[3] John Sauven, Greenpeace UK’s then Executive Director, stated:

 

Now Britain is going into a second general election regulated by a law that does little to stop powerful companies exerting secret influence in the corridors of power while gagging charities and campaign groups with millions of members. If the last election is anything to go by it will have a chilling effect on groups trying to raise important issues.[4] 

 

It is for this reason that the House of Commons Public Administration and Constitutional Affairs Committee stated: ‘The uncertainty about some aspects of Electoral Law leaves even the most professional agents in fear of falling foul of the law through no fault of their own’.[5]

 

Smaller NPCs

 

In July 2021, the Committee on Standards in Public Life undertook a review into the law regulating election finance. It acknowledged that

 

there is nothing wrong with individuals and organisations sending out explicitly political messages in advance of and during election campaigns […] On the contrary, a free society demands that they should be able to do so, indeed that they should be encouraged to do so.[6]

 

In the context of a proposal to lower the registration threshold, Friends of the Earth reported:

 

There are many, smaller NPCs where the burden of compliance requirements means they either must stop substantial amounts of work to redirect resources, or simply avoid undertaking regulated activity to avoid the possibility of registering…[7]

 

In the view of the Committee, campaigning by NPCs should:

 

  1. ‘be transparent, so that the audience knows who is funding the adverts they see and can assess the credibility of the message;

  2. respect the right to participate on equal terms with others;

  3. not be dependent on a campaigner’s level of wealth and access to money (that is, it should be open to all)

  4. be regulated in a way that is proportionate and administratively practical (campaigners should be accountable)’.[8]

 

The challenge is to make sure all the above can coexist. At present, they do not.

 

Transparency is important, but at what cost? How do we improve the law to ensure that transparency does not have the chilling effect of ousting out, or preventing the entry of, crucial participants in democracy?

 

The Committee recommended that ‘the updating and simplification of electoral law must be seen as a pressing priority for the Government’.[9] With an election on the horizon, it seems this advice has not yet been heeded, leading to ongoing complexity for NPCs.



 

Grace Houghton, Mishcon de Reya


Grace Houghton is a trainee solicitor at Mishcon de Reya LLP, due to qualify in September 2024. During her training contract, she gained experience of acting for both individuals and companies in a wide range of areas including commercial litigation (particularly high-profile disputes involving allegations of dishonesty); public law; employment; and education law. In the area of public law, she has advised a number of clients as to the rules governing political donations and campaign finance. She has an interest in the overlap between politics and the law, having studied Politics, Philosophy and Law at King's College London

 

Mishcon de Reya is an independent law firm, which now employs over 1400 people with more than 650 lawyers offering a wide range of legal services to companies and individuals. The firm has grown rapidly in recent years, showing more than 40% revenue growth in the past five years alone.


With presence in London, Oxford, Cambridge, Singapore, and Hong Kong (through its association with Karas So LLP), the firm services an international community of clients and provides advice in situations where the constraints of geography often do not apply. 


The work the firm undertakes is cross-border, multi-jurisdictional and complex, spanning six core practice areas: CorporateDispute ResolutionEmploymentInnovationPrivate; and Real Estate.

 

[1] Electoral Commission ‘UK Parliamentary general election 2019: Non-party campaigners’ (2019) <https://www.electoralcommission.org.uk/sites/default/files/2019-11/Non-party%20campaigner%20UKPGE%202019.pdf> accessed 10 April 2024.

[2] George Greenwood, ‘Snap election raises concerns for non-party campaigners’ (BBC News, 25 April 2017) <https://www.bbc.co.uk/news/uk-politics-39695085> accessed 10 April 2024.

[3] Kirsty Weakley, ‘Friends of the Earth and Greenpeace fined for breaches of ‘unworkable’ Lobbying Act’ (Civil Society, 19 April 2017) <https://www.civilsociety.co.uk/news/friends-of-the-earth-and-greenpeace-fined-for-breaches-of-unworkable-lobbying-act.html> accessed 10 April 2024.

[4] Matthew Taylor, ‘Greenpeace fined under Lobbying Act in ‘act of civil disobedience’’ Guardian (London, 18 April 2017) <https://www.theguardian.com/politics/2017/apr/18/greenpeace-first-organisation-fined-lobbying-act> accessed 10 April 2024.

[5] House of Commons Public Administration and Constitutional Affairs Committee (PACAC), ‘Electoral Law: The Urgent Need for Review’ (31 October 2019) 9 <https://publications.parliament.uk/pa/cm201919/cmselect/cmpubadm/244/244.pdf> accessed 10 April 2024.

[6] Committee on Standards in Public Life, ‘Regulating Election Finance’ (July 2021) 89 <https://assets.publishing.service.gov.uk/media/60e460b1d3bf7f56801f3bf6/CSPL_Regulating_Election_Finance_Review_Final_Web.pdf> accessed 10 April 2024.

[7] ibid.

[8] ibid 94.

[9] PACAC (n 5) 14, paragraph 41.

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