Electoral Administration Bill

If a loan already exists and is ongoing, it will not have to be reported, but any loan made subsequently will be reported. I will cover issues such as capitalisation later. It is a complex and technical part of the Bill, but I hope that I will answer the hon. Gentleman’s question as I continue. The scope of the regime is not merely restricted to straightforward loans. The regime also includes credit facilities, such as overdrafts, and arrangements where a third party offers a guarantee or security in respect of the liabilities of a political party. If security agreements were not included in the new regime, a wealthy backer could offer guarantees to all of a party’s commercial suppliers, and enable the party to obtain anything that it might need at any given time, even though the party’s own credit rating would mean that it could not otherwise do so. One of the key issues in deciding whether a regulated transaction has to be disclosed will be its value. Disclosure will not be required for loans of £5,000 or under, unless the combined lending from the same authorised participant exceeds £5,000 during the course of a reporting year, and the regime does not apply at all to loans of £200 or under. New section 71G specifies that the value of a loan is the total amount to be lent––that is, the ““interest charged”” is not included. For a credit facility, the valuation is the maximum amount that may be borrowed under the arrangement. For an arrangement involving any form of security, it will be the contingent liability assumed by the person who gives the security. A question arose in the other place about loans that contain capitalisation provisions—that is, a facility for outstanding interest to be rolled up into the total sum of the loan. These amendments provide that, where a regulated transaction provides for capitalisation at the outset, the potential for capitalisation is not considered in the valuation of a loan. That would be a matter of particular importance in the case of loans whose face value is just below the reporting threshold and which contain capitalisation provisions that might cause the initial value of the loan to exceed the reporting threshold. We have intentionally steered away from imposing on political parties the rather inexact science of having to ascertain whether capitalisation provisions might cause a loan to cross the reporting threshold. However, where the face value of the loan crosses the reporting requirement, the existence of capitalisation provisions would have to be recorded in the report to the Electoral Commission. We believe that that approach strikes the right balance between practicability and transparency. Proposed new section 71H deals with the important question of permissibility. We believe that, as happens with donations, a lender should be either an individual whose name is on the electoral roll or an organisation with a sufficient connection to the UK. Proposed new section 71H prevents a party from entering into a regulated transaction with anyone other than authorised participants, the latter being defined by reference to the existing list of permissible donors in section 54(2) of PPERA. The restriction will not apply to regulated transactions entered into before the new provision commences. The permissibility requirement is enforced by a range of criminal offences. For example, when a party takes out loans with unauthorised participants, the party and its treasurer may commit criminal offences.