Policy Background Political Finance
The UK has a comprehensive regulatory framework which governs the spending and funding (political finance) of candidates, political parties, third-party campaigners and other campaigners. The political finance proposals in the Act largely act as an expansion and strengthening of the existing rules outlined in the PPERA and the RPA 1983.
	In 2018, the Electoral Commission published the report Digital Campaigning - increasing transparency for voters , recommending the introduction of a requirement for political parties to declare any assets and liabilities above £500 upon registration. This Act provides an increased level of transparency regarding a political party's financial position prior to registration. A record of assets and liabilities is already a requirement of the duty to keep accounting records under electoral law. This Act l brings forward this transparency to the point of registration.
	Electoral law allows groups to register as both a political party (who may field candidates) and a third-party campaigner (campaigners that do not field candidates). Through this they can potentially increase their spending limit during a regulated period leading up to an election, as they would receive a separate spending limit for each registration. Groups not on both registers would not have access to this increased spending limit. The Act narrows the criteria for registering as a political party, preventing third-party campaigners from registering as a political party. As a result of this change, registered political parties will not be able to access third party campaign spending limits. This will maintain the integrity of spending limits by ensuring that campaigners attempting to bypass their spending limits by appearing on both registers cannot do so.
	"Notional expenditure" describes benefits in kind (property, goods, services or facilities) which are supplied free of charge or at a discount to election candidates, political parties and other campaigners which, if paid for, would constitute an election or campaign expense.
	In July 2018, the Supreme Court ruled in the case of  R v Mackinlay and others [2018] UKSC 42 that there is no requirement that the provision of these benefits has to be authorised by the candidate or his election agent. This has led to concerns from across the political spectrum that candidates and their agents could be liable for spending they were unaware of or not involved in, but were seen to have benefited from. This widespread uncertainty risks a democratic chilling effect by discouraging parties from campaigning in marginal constituencies.
	This Act clarifies the law so that candidates only need to report benefits in kind which they have actually used, or directed or encouraged someone else to use during a reserved regulated period, and do not need to fear being responsible for benefits in kind of which they had no knowledge. This clarification will also be extended to other campaigners who are subject to notional expenditure controls. Expenditure which promotes an individual candidature would continue to count towards a candidate’s own spending limit during a reserved regulated period.
	Currently foreign third-party campaigners can legally spend on UK elections under the recognised third-party campaigner registration thresholds, and this activity only becomes illegal once the thresholds are passed. Only UK-based groups/individuals or registered overseas electors are permitted to register with the Electoral Commission as third-party campaigners. This Act removes the scope for any legal spending by foreign third-party campaigners underneath the registration threshold but above a £700 ‘de minimis’ during reserved regulated periods. Inclusion of such a provision will balance the desire to prohibit spending by foreign entities without criminalising low-level, potentially inadvertent, breaches which are unlikely to adversely impact an election. This will support the Government’s 2019 manifesto commitment to "protect the integrity of our democracy, by introducing [...] measures to prevent any foreign interference in elections". It will also address some of the concerns raised in the 2019, Digital, Culture, Media and Sport (DCMS) Committee report Disinformation and ‘fake news’ regarding foreign interference in UK elections.
	In June 2020, the House of Lords, Report of Session 2019-21: Digital Technology and the Resurrection of Trust recommended the introduction of a secondary registration scheme for third-party campaigners who would otherwise fall below current spending limits. This Act requires third-party campaigners to give a notification to the Electoral Commission at a lower level of spending than is currently required, effectively creating a two tier system for registration. This new ‘lower’ tier will apply when a third-party campaigner intends to spend in excess of £10,000 on controlled expenditure during a reserved regulated period across, or in any constituent part/s of, the UK, but below the existing country specific thresholds for registration, which acts as their upper limit. All of these measures only apply to qualifying expenditure (i.e., expenditure that can reasonably be regarded as intended to promote or procure electoral success at any relevant election), not wider, non-electoral, campaigning that groups may undertake. The lower tier third-party campaigners will be subject to the minimum of regulation necessary to ensure that they are UK-based or an eligible overseas entity.
	In March 2016, following the statutory review of the operation of Part 6 of PPERA, Lord Hodgson published the independent report Third Party Election Campaigning - Getting the Balance Right .  The report  recommended that the Electoral Commission consider issuing codes of practice in relation to third party campaigning. This Act replaces the Electoral Commission’s discretionary power to prepare a code of practice on the application of expenditure controls for third party campaigners contained within PPERA with a duty to produce a statutory code; sets out consultation and procedural requirements relevant to the production of the code; and creates a defence for third parties, who can demonstrate they have complied with the code, charged with offences under Part 6 of PPERA.