It ought to be an exhilarating time for public affairs consultants.
With an election campaign drawing to a close, one certainty - whoever
wins - is that ministers will move, taking their advisers with them, and
reshuffling influence in Whitehall.
But instead of looking forward to the challenge of making new contacts
at the heart of government, a black cloud of uncertainty hangs over
consultants and in-house public affairs specialists.
Since February, a new rule-book covering political donations has caused
consternation, mostly due to the fact the definitions of many of the
terms in the Political Parties, Elections and Referendums Act (PPERA)
have yet to be determined.
GBC public affairs director Dorothea Hodge sums up the concerns of many:
'For the industry as a whole, I think the issue is clarity of
The result is that public affairs professionals are concerned that they
may inadvertently step outside the rules, leaving them open to both
financial penalties and a public relations disaster. 'No one wants to be
the Ian Greer of the new millennium,' observes John Fraser, August.One
Communications head of public affairs.
'The media will take some examples and they may be technical breaches of
the act, but they will be blown up somehow as indications of
corruption,' warns Consolidated Communications board director Ed
It's certainly clear that the presence of the new act won't persuade
journalists that the system is now 100 per cent clean.
'We live in a post-Nolan, anti-sleaze era where there's emphasis on
transparency and accountability, and voters should know who's funding
what. But my experience of money politics in the US, which is far worse
than here because the system allows for paid-TV advertising in politics,
has left me pretty confident that covert money will always find its way
into the system,' observes The Guardian political editor Michael
The PPERA is the progeny of the Committee on Standards in Public Life
and was designed to create a more transparent climate for donors and
political parties and reassure the public that no one was buying
influence or policy decisions in Westminster.
While in the long-term the PPERA, and the body that enforces it, the
Electoral Commission, may achieve all those goals, in the short-term the
new rule-book is making the industry extremely cautious. Given that
company directors can be forced to refund donations and pay for the
damage caused to a company's reputation if shareholder approval hasn't
been agreed, that caution is understandable.
'I think the principle is that consultancies want as much clarity as
possible as quickly as possible and that's what they are anxious to
achieve,' says Association of Professional Political Consultants
chairman Michael Burrell. 'I do not think it's remarkably surprising
that where individuals are at risk of being found to have broken the law
they are anxious - that's only human.'
It's a view echoed by PricewaterhouseCoopers head of public affairs
Chris Lowe. 'Corporate affairs lawyers are advising corporate affairs
directors to be very cautious. It's very unclear what's within the scope
of the law,' he says.
The key issue in determining whether a company needs to declare itself
as a donor is determining what counts as a donation. Under the new
regime, donations in kind such as staff time should be counted but there
are many grey areas where the situation is unclear (see panel, p16).
The most immediate effect of the act has been to stem the flow of
consultancy staff who have traditionally gone to help the political
parties during the election.
'Normally we would have let them have the time off but now it's going to
be holiday,' says Vaizey. 'Most consultancies do not want anyone going
to work for political parties at the election.'
One issue for consultancies may be how to present their position if they
end up on one party's donor list but not another. Fishburn Hedges
director Martin Le Jeune says that in his opinion a consultancy in this
situation will have some explaining to do: 'You will want to demonstrate
to present and potential clients you would work with all political
Burrell takes the view that ultimately most will cover themselves by
ensuring that they qualify with everyone if they breach the threshold
with anyone. 'If you have got to make a donation, consultancies will
make a donation to all five of the major political parties,' he
The other major change is the need for shareholder approval for any
At its April AGM, BP received shareholder approval for a motion that
allowed it to make up to pounds 200,000 in 'political donations' across
Observers describe the move as a 'belt and braces' attempt to ensure the
company is covered however donations end up being defined by the
Electoral Commission or the politicians.
BP press officer David Nicholas says consisely: 'We want the ability to
carry on behaving as we have done in the past.'
However, with the corporate climate very much against traditional cash
donations, public affairs specialists may have a tough time justifying
the need to pass such resolutions - especially when shareholders will
think it means cash rather than conference passes, seats at gala dinners
and sponsorship of party events.
'We, as a company, have a fairly clear position that we do not donate to
political parties and I can think of a number of clients who have the
same position. But they would think that would be writing a cheque not
hiring a stand or attending a dinner,' says Gavin Grant,
Burson-Marsteller European chairman (public affairs).
IPR president Ian Wright goes further and argues that the requirements
of the new law will act as a massive disincentive for companies to
engage with politicians.
'Politicians know so little of the commercial world and do not
understand its intricacies. And because they are so concerned about
accusations of sleaze, they've created a system which actually repels
the engagement of companies in the political process,' he says. 'What we
need now is relevant and appropriate regulation. The danger with what
we've got at the moment is something that will force the disengagement
of medium-sized businesses from the political process.'
Part of the problem is that the body charged with clarifying and running
the new system only formally came into being in February. It is perhaps
unfortunate that an election is being held so early in its life.
That's certainly a view shared by Vaizey: 'Speaking personally, this act
should not have been brought into effect until next year when some of
the problems had been worked out.'
Before the election was called, Commission chairman Sam Younger conceded
that when it came to the most pressing issue, campaign spending, there
were grey areas. 'Definitions of exactly what must be included in
campaign expenditure returns, and complex issues such as how gifts in
kind should be valued for the purposes of the return, remain under
discussion. The Act empowers the Commission to issue a Code of Conduct
on campaign expenditure,' he said.
'However, given the short amount of time if a spring general election is
called and the need to consult thoroughly with the parties on any such
code, the Commission has decided not to come forward with a Code of
Conduct,' Younger added.
Despite such uncertainty, Chris Welford, the commission director of
registrations and compliance, says that the early election will tease
the issues out of the woodwork far faster than a long period of bedding
Since the campaign started, the Commission has had to advise on whether
providing transport in the form of planes and helicopters counts as a
His advice is that companies should take the prudent view and declare a
donation if they are unsure. 'If people are in doubt, the easiest way to
deal with the situation is to declare a donation and base it on what is
the true and fair reflection of the market rate,' he says. 'It's this
prudent approach, you can't be criticised because the threshold's so low
you have to be realistic about it.'
In any case, even when the Commission does deliver a verdict on issues
such as conference passes, these opinions could be overturned if an
issue ever got to court.
'Our interpretation may be at this end of the spectrum and someone
else's interpretation, say the court's, could be at the other end of the
spectrum,' admits Welford. 'The problem with the grey areas is that they
remain grey areas until there's been a ruling in the courts.'
Amid the hothouse of concern, Weber Shandwick Public Affairs senior
director Jon McLeod says the industry needs to take a more relaxed view
of the act.
'The first point to make is that the act is not designed to in any way
inhibit or prevent the legitimate pursuit of lobbying aims,' he
He believes that companies should monitor the Commission and any
ministerial comments on the act but they should be careful not to apply
'proscriptive shackles' to their businesses.
'We are not presently expecting to have to declare anything on the basis
of our interpretation of the act,' he says. 'I think what a lot of
people are doing is tieing themselves up in knots for no particular
reasons pre-empting a more restrictive regime that doesn't actually
All of which raises the issue of whether the public affairs industry has
pushed its own case hard enough. Ask if the lobbying industry has
provided itself with the quality of service that clients receive and
more often than not, the result is embarrassed laughter.
However, many concede that the industry could have done more to clarify
the issues before the legislation. 'The industry should ask itself where
did this go wrong and how can we make sure it doesn't happen again,'
says one senior public affairs chief.
'PR companies are often accused of failing to do their marketing very
well and lobby companies don't lobby very well on their own behalf,'
It seems that the political parties have also noted the confusion, which
could ultimately have an impact on their finances if potential
supporters decide not to attend their dinners or go to their conferences
out of fear of the new regulatory regime.
'I have heard, for what it's worth, that some people within the
political parties themselves have also wondered aloud whether a more
active involvement at the stage when the act was going through might
have worked out some of these ambiguities,' adds Le Jeune.
ELECTORAL COMMISSION PROMOTING AWARENESS
The Electoral Commission was set up by the Political Parties, Elections
and Referendums Act to provide an independent framework to monitor
The Commission defines its role as 'to ensure openness and transparency
in the financial affairs of Britain's political parties, and to increase
public confidence and participation in the democratic process.'
In addition to regulating the finances of political parties, it will
also be charged with modernising the voting process, reviewing electoral
law and practice and participating in pilot schemes promoting innovation
in electoral matters. The Commission will promote awareness of electoral
and democratic systems.
In 2002, it is expected to take on the functions of the Local Government
Commission for England, which reviews local electoral matters. Long-term
it will also take on responsibility for reviewing parliamentary
boundaries in 2005, subject to parliamentary approval.
Six commissioners were appointed earlier this year to oversee the body,
including chairman Sam Younger.
Younger, who was chief executive of the British Red Cross for two years,
has spent most of his career at the BBC. In his 20 years at the
Corporation he rose to become managing director of the BBC World Service
in 1994, a role he held until 1998.
Although not a member of a political party himself, his family has been
centre stage in the political process. His father, Kenneth, was a Labour
MP and Minister in the Labour government of 1945-51 and his cousin,
George Younger, was a Cabinet Minister under Margaret Thatcher.
The other commissioners are former Sheffield City Council chief
executive Pamela Gordon, journalist Glyn Mathias, the convener of the
Scottish Council for Voluntary Organisations Sir Neil McIntosh, Criminal
Cases Review Commission member Karamjit Singh and University of London
vice-chancellor and president professor Graham Zellick.
PPERA AND HOW IT IS ACTING ON POLITICAL DONATIONS
The Committee for Standards in Public Life's Political Parties,
Elections and Referendum's Act (PPERA) came into force earlier this year
and established the Electoral Commission.
Its two main principles are that the public should know the names of
those who have donated more than pounds 5,000 to political parties and
that foreign companies should not be allowed to make donations to UK
Limits for donations to local parties are set much at pounds 1,000.
Company annual reports should contain details of any donations to
Firms that make donations worth more than pounds 5,000 over a year need
to secure the approval of their shareholders. For UK companies, motions
passed at an AGM may be valid for up to four years.
However, for companies based outside the EU the situation is a little
more complex. The DTI advice suggests wholly-owned subsidiaries will
need 'the resolution of the holding company', if a company is not
wholly-owned then both the holding company and the subsidiary should
gain approval at a general meeting.
For many, the key question is what counts as a donation. As well as cash
considerations, the PPERA adjudges fundraising dinners, sponsorship and
subscription, affiliation and membership fees as donations.
Paying expenses incurred by a political party or organisation, loaning
money, property and providing services on anything other than commercial
terms also counts as a donation.
Where such services are provided they should be accounted for at a
'commercial rate'. If the service is non-specialist, such as stuffing
envelopes, then only the salary cost of the employee should be
Consultancies should also be aware that where 'donations'are made by
consultancy and charged to a client, the client will have to declare
Hiring a stand at a conference does not count as a donation, as long as
the cost does not exceed maximum rates to be set by the Electoral
A decision on what the maximum rate should be is expected before the
autumn's party conference season.
There is, however, some uncertainty as to whether the cost of a pass to
a conference counts as a donation. The Commission is currently arguing
that the price difference between the cost of party member's pass and a
commercial pass is effectively a donation.
Staff taking holiday to work for political parties, or working outside
office hours, do not count. However, the Commission is also still
considering whether a person who stands as a candidate counts as a
donation, if the time they take off to campaign is not holiday. A spouse
of a candidate attending political events in company time may also count
as a donation.
Another area of concern, is the question of donations to third
There's some concern that this category may include think-tanks,
particularly those that are very closely aligned to a single political
party. If this is found to be the case, a company sponsoring research
done by a think-tank, for example, could potentially be in breech of the
act, if the support hasn't been approved by shareholders.
So far six organisations have registered as third parties, two unions,
Charter 88, Democracy Movement, Yes Campaign, Tacticalvoter.Net and The
South Molton Declaration.
A parliamentary answer from Stephen Byers attempted to lay this issue to
rest. 'The Government does not believe, for example, that charities that
campaign on issues of general public interest or political
think-tanks ... are likely to be caused by the definition,' he said.
The key issue is clearly one of definition. According to a BKSH Insight
paper the PPERA definitions of 'political donations' and 'political
organisations' were designed, on the advice of the Neill Committee, to
be broad in scope to prevent evasion.
It is these broad definitions that have caused and seem likely to
continue to cause uncertainty.