There has been significant coverage in the media of our changes to political finances.
These tough new rules will protect our democracy against foreign interference and respond to longstanding stakeholder recommendations, including from the Ethics and Integrity Commission (formerly the Committee on Standards in Public Life) and the Electoral Commission.
Some stakeholders have called for a single test to determine eligibility for company donations. We have gone beyond this by introducing three new tests a company must meet. Here is some more on what the new changes propose:
What are the three new tests?
- Our first test tackles the use of shell companies being used to channel foreign money into UK politics, by requiring companies to have made sufficient revenue to demonstrate legitimate business activity. We do not consider it fair to use a profit-based test because there are legitimate UK businesses which are genuinely trading in the UK and are owned by UK electors but might be going through a period of non-profitability. For example, a business may have more revenue but lower profits because they are focusing on expanding their business by investing in a warehouse or in their workforce.
- Our second test ensures that a company is genuinely connected to the UK or Ireland by requiring the headquarters to be based in the UK.
- The third will ensure the majority ownership or control of the company is by UK electors or citizens.
Together, these three new tests provide a much more robust framework to ensure only companies with a legitimate connection to the UK can influence UK politics.
What else is changing?
To go even further, under our new Know Your Donor requirements recipients of significant donations from companies will also need to conduct a risk assessment to judge the likelihood of foreign or illicit sources of funding. We are also requiring donors to declare any benefits linked to their donation, improving the transparency around the true source of a donation.
These measures work together to close loopholes and strengthen rules at all stages in the political donations process, providing stronger safeguards against malign foreign actors who seek to undermine our democracy.
This is all part of the biggest expansion of democratic participation in a generation being delivered through the Representation of the People Bill – extending voting rights in all UK elections to 16 and 17 year olds and reinforcing the government’s zero-tolerance approach to foreign interference in UK democracy.