Political organisations would face unlimited fines for breaking electoral law under new proposals to protect UK elections and referendums from “dirty money and dodgy data misuse”.

A parliamentary inquiry into how to safeguard the UK’s democratic processes from abuse advocates abolishing the £20,000 cap on fines for breaking spending laws, a penalty considered so minor that some donors are believed to dismiss it as “just the cost of doing business”.

The suggestion is one of 20 recommendations in a landmark report from a cross-party group of MPs who point out that electoral law has not been properly updated since 2001 – when the internet was relatively undeveloped and long before the arrival of social media giants such as Facebook and Twitter.

“The outdated nature of UK election law has pitched us into a battle for the very soul of our democracy,” said the Labour MP Stephen Kinnock, the group’s chair.

The all-party parliamentary group on electoral campaigning transparency was formed last year to act on the fallout of the Cambridge Analytica scandal. The data firm harvested the personal data of millions of Facebook profiles without consent and used it for political advertising purposes.

The Observer story on the scandal was a watershed moment in the public’s awareness of personal data and prompted global demands for tighter regulation of tech companies.

Kinnock added: “Facebook and other digital giants now play a hugely significant role in our elections and referendums, but most of the current legislation was created before the phrase ‘social media’ even existed.”

Facebook, along with the Information Commissioner’s Office and the Electoral Commission, was among more than 70 organisations and experts who submitted evidence to the inquiry. Its recommendations include measures to challenge foreign interference in UK elections, with the report underlining that foreign donor loopholes needed to be closed and that “permissibility check requirements” – the size of donation below which there is no requirement to confirm that the donor is on the electoral roll or registered with Companies House – should be reduced from £500 to 1p.

Moderating the ability of campaigns to “micro-target” voters based on personal data, a concern raised by the Cambridge Analytica saga, also needed to be addressed, the report said.

Other recommendations include giving the Electoral Commission the power to prosecute, as well as establishing a new ‘‘office for election integrity” to stop offenders “slipping through the regulatory gaps”.

Deidre Brock, an SNP MP and a vice-chair of the parliamentary group, said: “This is the campaigning issue of the modern age. It’s a question of how we ensure that people can cast a vote that counts, free from unfair influence and in command of as much information as possible. Restricting that choice is restricting democracy, no matter how that restriction is imposed.”

Kyle Taylor, the director of Fair Vote UK, which acted as secretariat for the MPs’ group, said: “Protecting our sacred democratic institutions isn’t a partisan issue. We hope urgent action follows this report’s publication.”

The Green MP Caroline Lucas, who is also vice-chair of the group, said: “The law-breaking over spending limits during the referendum campaign exposed how vulnerable our electoral system is. The fines available to the Electoral Commission were derisory.”

The campaign group Leave.EU, which received more than £12m of campaign services from a company controlled by the businessman Arron Banks despite its referendum spending being capped at £700,000, was fined for four separate offences totalling £70,000 for breaches of election law during the 2016 EU referendum.


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