Investigation: Conservative and Unionist Party campaign spending returns for the 2014 European Parliamentary Election, 2015 UK Parliamentary General Election, and the 2014 parliamentary by-elections in Clacton, Newark and Rochester and Strood

The Conservative and Unionist Party (GB)

The Conservative and Unionist Party (“the Party”) is a registered political party in Great Britain. Prior to 11 April 2016, when the events under investigation occurred, it was registered as the Conservative Party.

The 2015 United Kingdom Parliamentary General Election (“the 2015 UKPGE”) took place on 7 May 2015. Under PPERA and given that the Party’s campaign spending exceeded £250,000, the registered treasurer of the Party, Mr Simon Day1 , was required to deliver to us a financial return of all campaign spending incurred by the Party during the 2015 UKPGE campaign period, by 7 November 2015. Mr Day delivered this return in advance of the statutory deadline. We published this return on 20 January 2016.

During the preparation for, and following, publication, we engaged in its routine scrutiny of all the returns for the 2015 UKPGE, looking at their completeness and accuracy. Whilst carrying out this work, it noted reports, most notably by Channel 4 News in January and February 2016, that raised concerns that the Party’s spending return for the 2015 UKPGE may have been incomplete. We were concerned that the Party’s 2015 UKPGE return may have been missing items of Party campaign spending and may have included items that were not Party campaign spending. These reports also indicated that the Party’s spending return for the 2014 European Parliamentary Election (“the 2014 EPE”) may not have been complete.

Following enquiries with the Party, we opened an investigation on 15 February 2016. This is a report of that investigation. It is being published alongside the publication of the outcome of the investigation and the sanctions imposed.

      Summary of findings

      In summary, we found that:

      • there was no evidence that the Party’s spending return for the 2014 EPE was incomplete
      • it is likely that expense returns delivered by Party candidates at three by-elections during 2014 understated the value of the Party’s spending on their campaigns
      • on three instances in 2014, relating to the said three by-elections, Mr Day as registered treasurer failed to ensure that the Party’s accounting records were sufficient to adequately show and explain the Party’s transactions with the candidates and/or their agents, as required by section 41 of PPERA
      • the Party’s 2015 UKPGE spending return was not a complete statement of its campaign spending payments, as required by section 80(3) of PPERA. Mr Day had included payments that were not Party campaign spending and omitted other Party campaign payments
      • the Party’s 2015 UKPGE spending return also failed to include all the required invoices and receipts associated with the Party’s campaign spending that were required by section 80(3) of PPERA

      Summary of findings

      Accordingly we determined that Mr Day committed three contraventions under section 41 of PPERA and two offences under section 82(4)(b) of PPERA.

      The Party has been fined £70,000 in total as a result of these contraventions and offences.

      In addition, we identified information which raised doubt about whether Mr Day took reasonable steps to ensure that he could make a proper declaration that the Party’s 2015 UKPGE spending return was complete.

      Knowingly or recklessly making a false declaration would be an offence under section 83(3) of PPERA. We do not have the 5 power to sanction this offence and therefore, having identified it during its investigation, it referred Mr Day to the Metropolitan Police Service.

      Legal framework

      By-election issues outcome

      Having considered the role the individuals based in the by-election constituencies had and the evidence of their work during that time, we are satisfied that they were not campaigning on behalf of the Party in respect of the 2014 EPE or the 2015 UKPGE. Consequently, the Party’s spending returns for those elections were not incomplete in this regard.

      The accounting records issue

      The accounting records issues

      As explained above, at each of the three 2014 by-elections contested by the Party’s candidates, the Party located staff and volunteers in those constituencies. Its employees both campaigned for the Party candidates and continued with their routine work for the Party.

      The Party therefore incurred spending on these activities by way of accommodation costs and volunteer expenses, and by allocating staff time to these campaigns. In each case the Party provided its candidate with an invoice of an amount it calculated to be its spending on these campaigns. The candidate then reported this as a donation from the Party and as notional spending in his or her candidate return. This is an acceptable way to report Party spending in candidate returns.

      The amounts reported by the candidates were as follows3 :

      • In Newark the Conservative candidate declared a total election spend of £96,190.98. Of this £23,596 relates to spending on agent and other staff costs and was invoiced by the Party.
      • In Clacton the Conservative candidate declared a total election spend of £84,049.22. Of this £12,314 relates to spending on agent and other staff costs and was invoiced by the Party. Of this, £3,894.39 relates to spending on accommodation and administration.
      • In Rochester and Strood the Conservative candidate declared total election spending of £96,793.08. Of this £23,724 relates to spending on agent and other staff costs and was invoiced by the Party. Of this, £17,873.08 relates to spending on accommodation and administration.

      In this manner the Party entered into a specific transaction with each of the three candidates and agents; it incurred spending on behalf of each candidate, and then provided an invoice to each candidate and agent. Whilst investigating the by-election issues set out above, we asked the Party to explain how the transactions were calculated.

      The Party explained that it applied a formula to calculate the value of the costs it incurred on election expenses for its candidates. This formula was, according to the Party, used for each of the three 2014 by-elections. The Party explained that the formula was based on the full costs of locating volunteers in the constituencies, and a proportion of the salary and accommodation costs incurred by its employees while based in the constituencies.

      Having considered the role those employees had and the evidence of their work during that time, we are satisfied that it was reasonable for the Party to invoice only a proportion of the staffing costs of those employees based in the by-election constituencies to the candidates’ campaigns. However, it was unclear how the proportion was calculated.

      Further, in relation to the costs of accommodating those staff, the only credible purpose for which the individuals were located to the relevant constituencies was to facilitate their campaign work in the by-elections. Consequently, we were not satisfied that only a proportion of these costs being invoiced to the candidates alone were a true reflection of the spending incurred by the Party on the candidates’ behalves.

      Under section 41(1) of PPERA, Mr Day was required to ensure that records were kept sufficient to both show and explain the transactions. However, the Party could provide no record of how those proportions were determined for any of the by-elections. It did not have any written record of the formula at all, either generally or in relation to any of the three by elections, other than the outline provided in its correspondence of the three elements used.

      The Party argued that: “The notional invoice supplied by the Party to a candidate or his agent is for notional expenditure. It does not show actual expenditure and therefore does not show transactions as defined by PPERA.” The Party explained that it did not “…keep records of the estimated time spent by party staff or volunteers which are included in the notional invoice”, and that records were not required because “…no money is received from the agent or his candidate…” 

      This is not the position under PPERA. In each of the by-elections the Party entered into a transaction with its candidate and agent to provide services. It incurred spending on accommodation and volunteer expenses and on staff salaries where it allocated time from those staff members to the by-election campaigns. Those services cost the Party money and resources and thereby affected its financial position by depleting its resources. Mr Day was under an obligation to keep appropriate accounting records to explain each of the transactions entered into with the candidates and agents in the three by-elections. He was required by PPERA to be able to show the financial position of the Party taking them into account. 

      In an interview we asked Mr Day why there were no records of the formula for calculating the amounts included in the invoices for the three 2014 by-elections. Mr Day did not offer an explanation, saying: “It’s not something that I was involved in.” 

      Outcome

      Accordingly, the Commission has found that Mr Day committed three contraventions of section 41(1) of PPERA during 2014. These contraventions relate to the three transactions entered into between the Party and the candidates and agents in the Newark, Clacton and Rochester and Strood by-elections in 2014, for which Mr Day failed to ensure that the Party maintained accounting records to explain them.

      In furtherance

      In furtherance of our duty under section 145 of PPERA, we note that the absence of records of this formula make it impossible to establish how the amounts invoiced by the Party to each of the three candidates and agents were calculated. From the general terms in which the Party described the calculations, we consider that the invoices were likely to be inaccurate.

      The Party told us in general terms the elements of the formula 20 used to calculate the value stated in each notional invoice, including a proportion of the cost of accommodation for staff based in each constituency.

      We can understand why staff time would be apportioned between that spent on the by-election campaign and that spent on routine Party work, but the lack of records means the Party cannot explain how it determined that the apportionment in these instances was correct.

      Furthermore, there is no reason why we can see as to why only an unspecified proportion of the accommodation costs for staff was included in the invoices to candidates. We are satisfied that the entire accommodation costs, for staff and volunteers, were incurred for the purpose of basing individuals in Newark, Clacton and Rochester and Strood, to facilitate those individuals’ work on the respective by-election campaigns. This money would not have been spent otherwise.

      Outcome

      Accordingly we are satisfied that a proportion of the costs included in the Party’s campaign spending return associated with the team based in South Thanet did not relate to Party campaign spending and should not have been included in the Party’s spending return. In particular, a proportion of the £15,641 included in the Party’s 2015 UKPGE spending return in relation to the Royal Harbour Hotel constituted candidate campaign expenses and should not have been included in the return.

      Additionally, we are satisfied that a proportion of the £3,809 spent by the Party on accommodating its staff in the Premier Inn Margate was Party campaign spending. This proportion should have been included in the Party’s return, and was not.

      Summary

      We cannot determine precisely what proportion of spending on the Party’s team in South Thanet should have been apportioned to Mr Mackinlay’s campaign. This is largely as a result of the Party failing to keep records sufficient to establish the appropriate apportionment. However, we note that as a consequence of the Party reporting these costs, they were missing from Mr Mackinlay’s candidate campaign expenses return. Consequently it appears that the Party understated the spending it incurred on Mr Mackinlay’s campaign, and as a result there is doubt as to the accuracy and completeness of his election expenses return.

      Other spending in relation to South Thanet

      During the course of the investigation, we reviewed examples of advertising, including advertising placed in a local Thanet newspaper. We assessed the material in order to decide whether spending on them had been properly included in the Party’s return, or was in fact candidate campaign expenses.

      After careful consideration, we were satisfied that the spending on the advertisements it considered was Party campaign spending. The advertisements promoted the Party on a national level, referring to national policies, the national political landscape, and making no reference to local issues or local candidates. They had been properly reported in the Party’s 2015 UKPGE spending return.

      The UKPGE spending return battlebus issues

      Battlebus2015 was a Conservative Party campaign which involved transporting activists by coach to campaign or canvass in target seats across England. It took place in the last two weeks of the 2015 UKPGE campaign period, and comprised coach tours to three geographical areas in England – the North, the Midlands and the South West. Each of the three tours included the coach transport of around 50 activists to approximately 10 constituencies in the area over a period of between six and 10 days, with hotel accommodation provided for the activists.

      The Party funded the campaign’s costs, including the volunteers’ accommodation, the coach travel and subsistence. The total spending associated with Battlebus2015 reported in the Party’s return was £38,996.06.

      Reporting in the Party spending return

      We investigated whether some or all of the Battlebus2015 spending reported by the Party was in fact incurred in promoting the electoral success of Party candidates for the constituencies visited by the tour. Other parties operated similar activities during the UKPGE campaign period and had already been the subject of consideration by us, but the scale of Battlebus2015 and the potential for candidate campaigning was significantly larger than these.

      According to the Party, the decision to incur spending on this activity was made by its Executive Senior Management Team (ESMT). It said that this activity was part of its national campaign, focussing on marginal seats as a strategy to procure the electoral success of the Party overall.

      From its analysis of the evidence obtained during its investigation, we noted the following:

      • There were extensive social media posts from the time of the Battlebus2015 campaign activity that show activists from the coaches holding campaign material promoting individual candidates as opposed to the Party. Whilst the social media posts cannot show the true scale of the candidate campaigning that was taking place on the Battlebus2015 activity, viewed as a body of evidence they are consistent with candidate campaigning having been taking place across a number of constituencies.
      • The Party kept no records of ESMT meetings or decisions relating to the Battlebus2015 campaign activity. Despite this, from voluntary interviews with members of the ESMT, it is clear that the risk of activists campaigning to promote or procure the electoral success of individual candidates while participating in the Battlebus2015 campaign activity was not identified or considered, and little or no monitoring or supervision was put in place to mitigate the risk. This risk, as shown by the social media posts, clearly materialised.

      We have found no evidence to suggest that the Party had funded the Battlebus2015 campaign with the intention that it would promote or procure the electoral success of candidates.

      Nevertheless, coaches of activists were transported to marginal constituencies to campaign alongside or in close proximity to local campaigners. In our view, there was a clear and inherent risk that activists might engage in candidate campaigning. Further, it is apparent that candidate campaigning did take place during the Battlebus2015 campaign.

      There is no evidence to show that either during the campaign or during the compilation of the spending return consideration was given to whether this had occurred. Instead, the Party stated that it was “assumed, but not expressly discussed,” that spending on the activity would be reported in the Party’s campaign spending return. Consequently an inaccurate assumption was made that the full spending should be reported by the Party.

      We cannot determine from the available evidence what proportion of spending on the Battlebus2015 campaign activity was properly Party spending and what was candidate campaign expenditure. This is in large part because no records were kept to show how spending was apportioned, despite the fact that PPERA required spending on the Party campaign to be reported separately from any spending the Party undertook on behalf of its candidate. Nonetheless we are satisfied that a proportion of the reported spending was candidate campaign spending and should not have been included in the Party’s return. That proportion was also, as a result of this, not included in any relevant candidate’s campaign expenses return, casting doubt on the accuracy of those returns.

      Mr Day was under a duty under PPERA to provide us with the Party’s campaign spending return which included a statement of all payments made in respect of the Party’s campaign. An offence may occur where this statement includes payments not related to Party campaign spending. Mr Day has provided no excuse for candidate campaign expenses being included. Rather, their inclusion appears a consequence of a lack of consideration given to Battlebus2015 and whether candidate campaigning might take place.

      We have not sought to identify the extent to which any affected candidates may have underreported their campaign spending, which is an RPA matter and therefore a matter for the police.

      Omitted spending in respect of the Battlebus2015 campaign activity

      During the investigation the Party identified further spending of £63,487 on Battlebus2015 campaign activity that had not been reported in its campaign spending return.

      Mr Day and the Party explained that the omission happened because, during the compilation of the return, spending on a particular budget code was not coded properly and not properly reviewed in accordance with the Party’s financial systems. Consequently, they stated, as a result of human error the Party did not identify this spending as campaign spending and did not include it in the return.

      This does not represent evidence of unforeseen or exceptional circumstances beyond the Party’s control that prevented it from reporting this spending. Consequently it is not a reasonable excuse for the omissions.

      Conclusions in respect of the UKPGE spending return Battlebus2015 issues

      The Party reported spending of £38,996 incurred in relation to Battlebus2015. In addition, during the investigation the Party identified spending of £63,486.83 on the Battlebus2015 campaign activity that was not reported in its return due to human error. In total, we therefore understands that the Party spent approximately £102,483 on this activity.

      For the reasons given above, we do not consider that the full cost of the Battlebus2015 campaign activity constituted Party campaign spending. A proportion constituted candidate campaign expenditure incurred on behalf of those candidates who benefitted from the activity.

      Outcome

      Consequently, we are satisfied that a proportion of the reported £38,996 was not in fact Party campaign spending and should not have been included in the Party’s spending return. 

      Further, we are satisfied that a proportion of the missing £63,486.83 spent on the Battlebus2015 campaign was Party campaign spending. This proportion should have been included in the Party’s return and was not.

      UKPGE spending return

      UKPGE spending return – further omitted payments issue

      During the investigation a further five items of spending to the value of £104,765 were identified that were omitted from the return, as follows:

      • Two payments to St Ives Management Services Ltd that were apportioned between the Party and candidates. The Party’s apportionment of the first payment was £69,012 and of the second payment was £32,693.
      • A payment of £2,400 to Coach Miles.
      • A payment of £555 in respect of accommodation booked at the Alpha Hostel Margate.
      • A payment of £105 in respect of accommodation booked at the Premier Inn Ramsgate (Marsden Airport).

      The Party accepted that these payments should have been included within the return and attributed their omissions to administrative failures. We are satisfied that the explanations do not constitute a reasonable excuse; however, given the low value of the two accommodation payments, we chose to accept the Party’s statement that they were omitted from the return and not undertake further enquiry in relation to them.

      Outcome

      Accordingly, we are satisfied that five campaign spending payments to the value of £104,764 should have been included in the Party’s return and were not.

      Offence under section 82(4)(b) of PPERA

      Offence under section 82(4)(b) of PPERA

      We are satisfied beyond reasonable doubt that the then registered treasurer of the Party, Mr Simon Day, in respect of the Party’s campaign spending return for the 2015 UKPGE and without reasonable excuse:

      • failed to include all payments, and associated invoices and receipts, made in respect of Party campaign spending relating to accommodation costs at the Premier Inn in Margate;
      • included payments in the Party’s campaign spending return that were candidate campaign expenses incurred in respect of the Party’s candidate in South Thanet;
      • failed to include all payments, and associated invoices and receipts, made in respect of Party campaign spending relating to the Battlebus2015 campaign activity;
      • included payments in the Party’s campaign spending return that were candidate campaign expenses incurred in respect of the Battlebus2015 campaign activity; and
      • failed to include five further payments, and associated invoices and receipts, to the value of £104,765;

      Outcome

      Accordingly, Mr Day committed an offence in that he failed to deliver, without reasonable excuse, a spending return that was a complete statement of campaign spending payments as required under section 82(4)(b) of PPERA.

      Outcome

      Accordingly, Mr Day committed an offence under section 82(4)(b) of PPERA in that he delivered, without reasonable excuse, a spending return of which payments totalling £52,924 were not accompanied by the required invoice or receipt.

      Diweddarwyd ddiwethaf:
      Adolygiad nesaf: 18 Tachwedd 2021