From Democracywiki

Following on from the recommendations of the Neill Committee on Standards in Public Life, this act was the first to regulate funding of political parties. Until it came into force in February 2001, parties had no obligation to release details of who funded them and to what degree. The act also established the Electoral Commission to oversee the regulations.

Parties must now:

• Refuse donations over £200 that are anonymous or from foreign sources.
• Report all donations above £5000 to national parties, £1000 for donations to branches or individual candidates and office holders.
• Keep campaign spending in a general election within a limit of £30,000 per seat contested (about £20 million nationally) and shareholders must consent for political donations by companies

The act also regulates organisations other than political parties that want to campaign on behalf of parties or candidates during elections. By registering with the Electoral Commission and accepting the same reporting requirements as political parties, they can now spend almost £1 million nationwide. Unregistered third parties can only spend up to £25,000.

Details of donations have to be sent to the Electoral Commission every quarter, or every week during the period of a general election. Parties also have to settle all bills incurred within 42 days of an election. This last rule forced Labour to extend its overdraft with the Cooperative Bank to £7.2 million in 2001, as it could not otherwise raise the money to comply with the rules.

Issues

• There is nothing, in principle, to stop an overseas donor from buying a UK limited company and making donations in that way (this happened in the case of 5th Avenue Partners Ltd although in fairness the donor in question there was a UK citizen, albeit not on the electoral roll).
• There appears to be nothing to stop a group of donors from establishing an Unincorporated Association and anonymously donating through it. This is believed to be the case of the Midlands Industrial Council.
• There is currently nothing to stop a donation being counted as a loan, so long as the party is charged a commercial rate of interest. Repayments can of course be donated straight back to the party, meaning that a single large one-off donation could be listed as a number of small annual donations over a number of years.