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Lords Demand Political Parties Launch Tougher Checks on Foreign Donations – But Ministers Set to Block Move

There are fears that foreign powers can use proxies to channel cash into UK political parties

Photo: Justin Kase/Alamy

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Members of the House of Lords have defeated the government by passing an amendment to the National Security Bill that will require political parties to do proper checks on whether donations might come from foreign powers.

The motion to approve an amendment moved by Lord Carlile of Berriew passed by 219 votes to 172. Labour and Lib Dem peers joined with their crossbench counterparts and a single Tory rebel – Lord Balfe – to inflict a heavy defeat on the government. 

In the debate ahead of the vote, Lord Carlile said: “Donations from foreign powers are a significant threat to the UK’s national security and undermine the integrity and credibility of our democratic processes. There is plenty of evidence to support that,” he said.

“One of the most noble things this unelected house does is protect democracy from itself – this is what this amendment does.” 

A report in 2020 by the Intelligence and Security Committee identified that members of the Russian elite linked to Putin had donated to UK political parties.

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Only this week it was revealed that two Chinese nationals had been excluded from the UK for seeking to make illegal donations to UK political parties on behalf of the Chinese Communist Party.

This is the second time the government has lost a vote on this issue in the House of Lords, having lost a previous vote in early March on a similar amendment. The bill will now return to the Commons for another round of ‘ping-pong’, unless the government accepts the amendment. Byline Times has asked No 10 if it intends to over-rule the move again. 

Dr Susan Hawley, Executive Director of Spotlight on Corruption, said: “The Lords are effectively giving the government one final chance to take action to secure the integrity of our political system. 

“No one can doubt that this is a real issue…Rather than further delay this important piece of national security legislation, the government should accept Lord Carlile’s modest amendment or produce their own version that can satisfy the deeply-held concerns of parliamentarians from all parties and independent expert bodies.”

Speaking for the government, Lord Sharpe told peers on Wednesday (June 21) the amendment “does nothing” to assist parties in identifying illegal donations. “Taken together, this renders the reporting of such activity to the Electoral Commission as an annually submitted blank page. This is not a helpful addition to the transparency framework surrounding political donations and, on that principle, we oppose its inclusion,” he said.

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He added that the requirement to publish an annual policy statement on what parties are doing to tackle donations “lacks utility”: “Political parties are already required by law to take all reasonable steps to verify the identity of a donor and whether they are permissible. To reiterate, foreign powers are not permissible donors. 

“The existing law also prohibits impermissible donors seeking to direct money through permissible proxies, and it is an offence knowingly to facilitate the making of an impermissible donation. The legal framework is clear, and requiring the publication of a policy statement adds nothing.”

Ministers claim that separate reforms to Companies House will deliver “more reliably accurate information” on the companies register for political donations via private firms. Companies House will have more powers to “query and challenge” the information it receives. The Economic Crime and Corporate Transparency Bill also contains plans to enhance data sharing between Companies House and public authorities, “including the Electoral Commission,” Lord Sharpe said. 

The National Security Bill introduces “substantially higher” maximum penalties where a foreign power is involved in the commission of existing electoral offences, including those related to the making of political donations. 

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“The Bill also provides for a new offence of foreign interference, which includes manipulating whether or how any person participates in political processes,” the government spokesperson added.

But there are fears that foreign donations by parties are going undetected under the current regime. A Spotlight on Corruption spokesperson told Byline Times foreign donations to parties – including via proxies – are indeed banned but “as there’s no realistic possibility of getting caught – because the parties don’t want to find out – they can still happen with impunity.”

They added: “It’s a bit like bike theft – it’s a crime but the police essentially ignore it.”

Crossbencher Lord Carlisle also rebutted the government’s claim that the current system is effective: “The rules that are supposed to prohibit foreign donations in the Political Parties, Elections and Referendums Act 2000 are absolutely riddled with loopholes. They enable foreign money to be channelled to political parties and MPs through what appear to be lawful donors, such as UK-registered businesses and unincorporated associations.” The Act requires UK political parties only to check the status of donors but does not require them to have a risk-based approach to donations.

The Electoral Commission referred eight cases of potential foreign donations to the Metropolitan Police in the period 2011 to 2021. There have been “absolutely no” prosecutions following it. “It is completely unreasonable to ask the police to suddenly move into this complex area to carry out the detective work and do the due diligence that any company, whether significant or relatively insignificant, should carry out,” Lord Carlisle added. 

Spotlight on Corruption (SoC) is currently consulting with the Royal United Services Institute and experts in electoral law to devise a draft policy that parties could adopt to meet the requirements set out in the amendment. SoC is a charity that shines a light on the UK’s role in corruption at home and abroad. 

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