Mismatch in MP donation reporting process leaves gaping loophole for abuse

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Political donations are currently a major news topic because of large sums given to Labour MP Tom Watson by Max Mosley – and allegations by Channel 4 News and a newspaper that Mosley may have ‘misled’ a court about a 56-year-old ‘fascist’ document.

But there appears to be a worryingly universal loophole that potentially allows any MP to receive large sums of money from effectively unknown sources – and never even report them, because of a mismatch between the requirements of the statute governing political donations and the way in which donations to MPs are handled in practice.

PPERA

Schedule 7 of the PPERA (Political Parties, Elections and Referendums Act) provides details of how donations to ‘regulated donees’ must be accounted:

2
(1) “Donation”, in relation to a regulated donee, means (subject to paragraph 4)—
(a) any gift to the donee of money or other property;
(b) any sponsorship provided in relation to the donee (as defined by paragraph3);
(c) any money spent (otherwise than by or on behalf of the donee) in paying any expenses incurred directly or indirectly by the donee;

SCHEDULE 7 – Control of donations to individuals and members associations
Document Generated: 2017-12-18

According to legal advice, ‘any gift to the donee‘ means exactly what it says: ‘any gift’ of money or other property – there are no exemptions, except for things that are not ‘gifts’, such as loans at commercial rates. Even sponsorship, services or benefits in kind must be included.

The Electoral Commission (EC) publishes details of such donations in a searchable register, so that members of the public can check the money received by politicians and political organisations.

ANY gift?

Except, that is, for MPs – where a gaping hole exists in the process that means many donations are never recorded.

According to an Electoral Commission response to an enquiry by the SKWAWKBOX:

MPs do not report to the Electoral Commission. Members report directly donations to the Registrar’s Office for inclusion in the RMFI (Register of Members’ Financial Interests). We then update our register of donations by taking the information from the RMFI.

In other words, MPs do not have to report any donations directly to the EC. They report to the Parliamentary Commissioner for Standards (PCS), who records them in the RMFI.

Rather than itself receiving and maintain details of donations according to PPERA, the Electoral Commission merely ‘hoovers up’ the details recorded in the RMFI – and uses those records as its definitive ‘bible’ of donations received by MPs.

PPERA or CoC?

That might be all well and good as long as the RMFI is maintained strictly according to PPERA – but it isn’t.

The Parliamentary Commissioner for Standards records donations reported by MPs, not according to PPERA but according to the ‘Code of Conduct for members – and even though MPs are ‘registered donees’ according to PPERA, the Code of Conduct does not require MPs to record ‘any gift’.

Instead, it exempts – under Chapter 1/point 18/section A – a whole category of donations made to MPs:

18. Members should not register under this category:

a) Direct support from the Member’s own party organisation;
b) Trade union support for a constituency party organisation, where this is linked to the constituency and would be provided irrespective of the identity of the Member;
c) Facilities, equipment or services provided by Parliament, or for which the Member claimed under a scheme for parliamentary expenses; and loans or credit arrangements taken out in order to fund activities for which the Member may claim expenses under a scheme for parliamentary expenses;
d) Hospitality from UK public bodies, including for example devolved administrations, government departments, the armed services or the police, or local or health authorities. If there is any doubt as to the permissibility of such donors, Members should consult the Electoral Commission

An undefined entity

But what counts as the ‘Member’s own party or organisation’? The national party HQ? The regional HQ? An MPs own local constituency party? Individual members? All of the above?

Nobody will say.

We asked the office of the Parliamentary Commissioner for Standards whether a definition is published somewhere of what counts as ‘own party organisation‘.

A spokesperson told us that no such definition exists and that they would not answer any questions about what might qualify or not qualify – or even look at any donations after they have been made unless someone reports or queries a specific donation as problematic.

We asked the Electoral Commission. The EC told us it’s none of their business and we would have to ask the Parliamentary Commissioner for Standards.

And remember, the PPERA itself includes no exemption for ‘own party organisations’ in the first place – but the EC is treating a register that includes exemptions – not mentioned in the statute – as the comprehensive record for MPs, on which it bases its own PPERA-defined record.

The loophole

This means that an MP can receive a donation and never report it, as long as it can be routed through the often-scanty records of a constituency party or even a ward-based branch.

The SKWAWKBOX discovered this hole in the process while investigating donations received by a well-known Labour MP – who had received several donations of thousands of pounds each, over a short time period, without reporting them.

Which is all fine, according to the Code of Conduct – but not according to PPERA.

Constituency parties/associations and their sub-units do have to report donations received above a certain size – but donations made are just included in their annual accounts. These accounts are submitted to their party’s central organisation for consolidation, but only have to be submitted directly to the EC if the local party unit’s annual income or expenditure exceeds £25,000.

Donation thresholds

Donations received are only reported to the party HQ if they exceed £500 from the same individual or entity in a calendar year – and only have to be reported to the Electoral Commission if they exceed £1,500.

But those limits only apply to individual local parties. If an individual or entity makes donations to numerous ‘accounting units’ (constituency parties or associations) below the reporting threshold, they only have to be reported if they exceed the £7,500 national party limit.

As the EC’s guidance shows, this means substantial donations can easily pass ‘under the radar’ if they are spread around different CLPs or associations:

ec report chart

Not only that, but local party treasurers change regularly – and the quality of information kept can, in spite of EC and party guidance, be sketchy and incomplete, leaving plenty of room for details of donations to be missed or misreported, with little chance of identification.

‘Brown envelopes’

And of course, if a wealthy individual – for example – wanted to route funds to an MP with almost no chance of it being identified it would be easy, in local parties that may have long been under the control of a faction or family, to give money to numerous individuals to ‘donate’ to a local party for routing to an MP under the Code of Conduct reporting exemption.

It’s an offence to make a false declaration about the source of donated funds – but in practice, it’s very difficult to prove if cash is handed out to individuals to donate as their own.

In areas with entrenched MPs and party officers, opportunities for corruption could easily abound.

Because of the absence of any definition under the Code of Conduct of what constitutes an ‘own party organisation’, a particularly bold MP could even accept donations directly from individual party members and hope to hide behind the Code of Conduct exemption if exposed.

In short, under the current process, the Electoral Commission delegates its responsibility to gather information on MP donations to the Parliamentary Commissioner for Standards – and the PCS applies the Code of Conduct to its reporting rather than PPERA – leaving huge room for MPs and their allies to use local party processes to receive and make donations with little or no accountability.

And MPs can receive many thousands of pounds in donations – via party structures but potentially from donors identified sketchily or not at all – that PPERA gives them a legal responsibility to report – but be allowed by a procedural mismatch not to report them.

All while the EC and IPSA, the Parliamentary Standards Authority, point at each other and don’t apply PPERA as it is written.

Every CLP treasurer the SKWAWKBOX spoke to in the preparation of this article has been amazed to find that this exemption applies. But it does and where a loophole exists, it’s almost inevitable that someone – perhaps many someones – will be exploiting or even abusing it.

And under the current, mismatched system – and the Electoral Commission’s decision to simply accept the RMFI as complete – we’ve got no way of knowing about it and few steps we can take if we find out.

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4 responses to “Mismatch in MP donation reporting process leaves gaping loophole for abuse

  1. Two points.

    It is critical that the Labour Party is beyond suspicion on the issue of donations. This will require applying relentless pressure to address the flaws in the current system highlighted by Skwawkbox. It will also require the party to introduce internal processes to prevent this void regarding recording donations.

    Secondly, Tom Watson must return the payments his office has received from Max Mosley.

    If he does not return that money then he is not fit to remain deputy leader of the Labour Party and should resign.

    .

  2. Until Politicians behave in the way the public expect them to behave they will continue to become less trustworthy, if that’s even possible barring a few notable exceptions, and will therefore become even further detached from the ordinary person than they already have done.

  3. “in local parties that may have long been under the control of a faction or family, ”

    I wonder why the name of a certain RW London MP instantly sprung to mind when I read this?

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