The UK’s election watchdog should be given the power to hand out larger fines to deter shadowy donations and foreign interference, an influential standards committee has said.

Loopholes in the law risk allowing secretive groups to act as “a route for foreign money to influence UK elections”, according to a report published today by the Committee on Standards in Public Life.

The watchdog's review of electoral finance calls for stronger regulation and enforcement around political donations to tackle potential “vulnerabilities”.

The report also calls for the Electoral Commission’s maximum fines for breaking electoral law to be raised to £500,000. The current limit is just £20,000.

Lord Evans of Weardale, the committee’s chair, said the rise of digital campaigning has made it “harder to track how much is being spent, on what, where and by whom”.

In particular, the report warns about so-called “unincorporated associations”. These groups are not listed on Companies House, meaning their financial backers can remain anonymous. But they are still allowed to donate money to political parties.

Speaking on BBC Radio 4 this morning, Lord Evans – who is the former head of MI5 – said these groups “can sometimes look slightly shadowy, because you don’t know who has given money to them but they can then contribute funds to campaigns”.

Last month, openDemocracy revealed how a group of anti-lockdown MPs had received £10,000 from the Recovery Alliance, a secretive unincorporated organisation whose funders are unknown.

The committee’s report added that such groups represent “a weak point in the regime” and proposed new rules to improve transparency.

And, to reduce the risk of foreign interference, it says political donations should only be made from profits generated in the UK.

Responding to today’s report, Daniel Bruce, chief executive of Transparency International UK said: “There is a clear and growing consensus that the current rules controlling the money in British politics are out-of-date and in need of urgent reform.

He added: “Ignoring this problem would provide an open door to malign foreign forces. If the government wants to protect the integrity of our elections, then it must start by addressing the gaping holes in the rules governing how they are financed.”

But he warned: “Rules alone are not sufficient to also tackle the corrupting influence of money in UK politics. Some parties still remain unhealthily dependent on a relatively small number of big donors, which opens up the risk of cash for access and even favours.”

It is questionable whether the committee’s recommendations will be taken up by the government.

Many in the Conservative Party are critical of the election watchdog. Last year, Tory party co-chair Amanda Milling said the Electoral Commission’s powers should be reined in or it should be abolished completely.

But while the committee acknowledged that improvements could be made to the regulator’s effectiveness, it did not find evidence of bias. Instead, the report highlighted the disproportionate number of Conservative MPs that sit on the regulator’s oversight committee and warned that its independence requires “cross-party consensus”.

"The UK's top ethics body's frank assessment that the Electoral Commission needs more robust powers to protect the UK's democratic processes from foreign influence shows just how dangerous the government's plans to hobble its prosecution function really are,” said Susan Hawley, executive director of transparency group Spotlight on Corruption.

Russian interference

The recommendations follow warnings by the Intelligence and Security Committee last year about the risk of political interference by Russia.

It found the Putin regime “is using a range of methods to seek to disrupt and exert influence on the UK, including political financing and the spread of disinformation.” As openDemocracy previously highlighted, much of that Russian funding is aimed at the Conservatives, and has increased in recent years.

Today’s report seeks to close several major loopholes. Political donors will now have to explicitly be on the UK’s electoral register and greater checks will be needed to identify the original source of funds.

New rules on donations from businesses will make it harder for overseas donors to anonymously give through shell companies to political campaigns – which has been possible until now.

Also included in the committee’s 47 recommendations are new guidelines for social media advert libraries in the UK, requiring political campaigns to supply more details about how they are being financed – and a new ban on foreign organisations and individuals from buying UK campaigning adverts.

More than £7m was spent on digital campaigning in the last general election, accounting for just over half of the total spend on political advertising.

“You can’t necessarily tell who is saying what to which group of voters,” Lord Evans told the BBC. “We’re saying that the financial regulation is a good way of getting access to this.”