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Mr. Frank Haynes (Ashfield) : The Conservatives adopt a one-sided approach to this argument. They made the trade unions consult their members about the political levy and they put that on the statute book. When it comes the other way round, however, they do not want to know. The shareholders are told after the donations have been made and they are not consulted about them. If the Conservatives do not accept what we are suggesting, will my hon. Friend let them know in no uncertain terms that when we get back into office after the next election we shall do it ourselves?

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Mr. Gould : My hon. Friend is right to point to the double standards which the Conservatives apply to this important issue and I endorse the point that he has made.

The onus is on the Government, or more particularly the Conservative party, to say why a sensible reform should not be implemented. Their continued opposition to that sensible reform shows that they are prepared to put self interest above public interest. It shows that their constant espousal of shareholder democracy is a sham and how determined they are to keep from the light of day and from proper scrutiny their grubby relationship with their secret backers. It is an act that needs to be cleaned up and if the Tory party will not do that job, Parliament will, and if we have to wait for a Labour Government, Parliament, under that Government, will do that job.

Mr. Nelson : What we have just witnessed is another death throe of the Labour party. Underneath it all it recognises that it has lost the support of enterprise and industry. The only way in which it can make up for that is to try to prevent that part of the economy from contributing freely to a party that stands for an ideology that it perceives to be in the interests of the economy, employers and company employees.

When my hon. Friend the Member for Beaconsfield (Mr. Smith) moved an amendment on this matter in Committee--it was the first subject to be dealt with--it represented an initiative from Conservative Back Benches and was not at the instigation of the Government. It was universally welcomed in principle by Conservative Members because we believe that the directors of a company should decide what is in the best interests of that company ; indeed, they are required to do so. Their interests are those of their employees, customers, creditors and shareholders.

All companies are affected one way or another by Government policy, but certain major companies, such as those in the oil industry, the financial services industry and in defence are radically affected by the policies adopted by

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political parties and by the Government of the day. I believe that it is proper and above board for those companies to be able to back overtly a party that stands for their interests, be they the interests of their employees, shareholders or interests relating to their specific activities.

The new clause represents an admission by the Labour party that the productive side of the economy knows which political party is backing it. It is only because the Labour party is bereft of the policies that can lead to future stability for companies that it has sought to frustrate the right of those companies to back that party.

Mr. Ian Gow (Eastbourne) : Will my hon. Friend please read out to the House a list of those companies that make political gifts to sustain and strengthen the Labour party?

Mr. Nelson : I fear that I do not have that information to hand. If my hon. Friend is able to catch your eye, Mr. Deputy Speaker, I hope that he will be able to elucidate on that. It is undoubtedly true that the Labour party receives support from a variety of quarters--from the corporate sector, as well as from the trade unions.

The hon. Member for Ashfield (Mr. Haynes) mentioned the requirement that has been placed on trade unions to ballot their members. The difference is that one can opt out of making political contributions through a trade union, whereas, other than by selling the shares, one cannot opt out of a company of which one is a member. The two cases are fundamentally different.

Mr. Gould : The hon. Gentleman has just made a powerful point in support of our contention. I was also interested in a point that he made a moment ago when he appeared to concede that the effect of passing the new clause would be to "frustrate"--to use his word--the making of such donations to the Tory party. May I take it that he concedes that to introduce this element of shareholder democracy would produce decisions that are different from those currently taken by a small minority of directors?

Mr. Nelson : No, I do not concede that because, as my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) has already said, that right is already available to members of a company. Before the annual general meeting, members of a company are given that company's report and accounts and have adequate time in which to table any necessary resolutions and to obtain support for them. Any board of directors worth its salt--most of the boards of directors of this country's public limited companies are certainly that--would take seriously any such resolution passed at an annual general meeting.

Mr. Derek Fatchett (Leeds, Central) : Parallels with trade unions have been drawn several times. From his vast knowledge of industry, the hon. Gentleman must know that trade unions operate on exactly the same basis as companies. Under the law as it has existed from 1913--and as it still exists, with one major change--trade unions publish their political fund accounts. They present them to their annual meetings--their conferences. In those circumstances, there is an exact parallel with companies. Why did the hon. Gentleman vote for the 1984 trade union legislation, which imposed an additional duty on trade unions--to ballot their members--when he opposes such provisions for shareholders?

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Mr. Nelson : Because at that time many members of trade unions could not get out of being members of their trade unions. In many cases, their jobs depended on their trade union membership because of the closed shop. Under that reality, it was essential that there was openness in terms of trade union contributions--I welcome what the hon. Gentleman said on that-- and that people had the right to opt out. In my judgment, that position is not analogous to that of a company, because the opting-out provision does not mean the same thing and cannot operate in the same way.

Mr. Nicholas Baker : Will my hon. Friend give way?

Mr. Nelson : Although I do not wish to prolong the debate, I shall give way briefly to my hon. Friend.

Mr. Baker : My hon. Friend has put his finger on the important point, which is the position of directors of a company that has, by its shareholders, voted to disapprove of such payments. I put the point to the hon. Member for Dagenham (Mr. Gould)--who did not answer it--that any directors who persisted in making such donations in the face of such a resolution would not simply be doing something unwise or immoral, but would be laying themselves open to a legal action, instigated by their shareholders. The existing law is not negligible ; it is powerful and directors are right to take notice of it.

Mr. Nelson : I am obliged to my hon. Friend and agree 100 per cent. with what he has said.

The Labour party has defended every restrictive trade and labour practice that we have tried to sweep away over recent years. The dock labour scheme is just one example. My right hon. Friend the Secretary of State for Trade and Industry is right to seek to liberalise industry and to promote profitability and reinvestment. Why should industry not be allowed to decide who is helping its ambitions, employees and shareholder interests? Companies already provide facilities for their members to question political contributions, so the new clause is redundant and unnecessary and the House should not accept it.

Mr. David Winnick (Walsall, North) : We all know which restrictive practice the hon. Member for Chichester (Mr. Nelson) has defended. I have no doubt in my mind that the new clause and our amendment will be heavily defeated. If it was possible for the Conservative party to have a heavier Whip--perhaps a six-line Whip--it would do so. We can rest assured that there will not be a single Tory rebel on this issue. They will all troop through their Lobby accordingly. I also have no doubt that if people outside the House knew what we were discussing, they would believe that the Opposition have fairness, justice and reason on their side in tabling this new clause. As the beneficiary of donations from companies, the Conservative party is saying, "The law is all right. There is no need to change it." Indeed, even the existing legislation, which was enacted in 1967, was not greeted with any enthusiasm by the Conservative party at that time. The only explanation for all this is that the Conservative party is extremely reluctant to allow undue attention to be paid to the way in which it is so heavily financed by so many companies.

If contributions were made to the Conservative party in a straightforward way, there would perhaps be less reason for tabling the new clause. However, such contributions

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are not made in a straightforward way--they are made in a furtive, underhand and murky way, as my hon. Friend the Member for Dagenham (Mr. Gould) has said.

My hon. Friend referred to the river companies. I did not use to know of their existence and I doubt frankly whether many Tory Members knew either. Indeed, at least one Tory Member is nodding in agreement with that comment. However, the river companies existed for many years and the purpose of those fake companies was quite clear. Incidentally, they were publicised in The Independent when the Sunday Times was not keen to publish the story. Their purpose was to channel large sums of money to the Tory party. Because the river companies were never publicised, until those articles appeared most people--including those in the media as well as many politicians--did not know of their existence. I would imagine that their existence was known to just a few people in the higher reaches of the Conservative party.

British United Industrialists is another Tory front organisation. I have certainly known about it for a number of years. The function of that organisation--very likely, it has no other function--is to act as a financial link between various companies and the Tory party. Indeed, 90 per cent. of the income of British United Industrialists is simply passed on to Conservative Central Office. At one stage in the 1970s it was decided that contributions to the Conservative party should be made out to the "free enterprise account" at Drummonds bank.

The Conservative party does not even publish a properly audited balance sheet of its finances. That is why there is so much concern about the manner in which one of the state's two major parties organises its finances in such an underhand and furtive way. It does so because it is frightened that undue attention might be paid to the sources of its money.

If, as the hon. Member for Chichester said, the Conservative party is proud of the way in which it receives such donations, the question from myself and my hon. Friends is surely obvious--why not publish the full details? Why behave in this underhand way? The explanation is obvious also.

Lord Taylor, the president of Taylor Woodrow, who is a leading light in these financial dealings, and whose own company is so generous to Tory funds, is quoted as saying :

"We had to fight Harold Macmillan to avoid him going socialist. And, but for Aims of Industry, Edward Heath would have agreed to putting union leaders on the boards of companies."

Clearly the present Prime Minister is much more to the liking of Lord Taylor as party leader than were two of her predecessors. Under existing legislation a company needs only list the amount under political donations. It can state that it is making a contribution to BUI, and nothing else. The shareholders will not know how that money will be sent on from BUI to the Conservative party, or perhaps to another front organisation. The new clause would mean that such contributions would be properly and separately debated at general meetings, which explains why Conservatives are so opposed to making the change.

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Sometimes when I study the way in which the Tory party organises its finances I wonder whether Richard Nixon and those associated with him mastermind the arrangements. He knew all about laundering money ; perhaps he could have given the Tory party more advice.

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Money is being laundered--the Minister shakes his head, but it certainly is, and the river companies would not have existed had they not been considered necessary by Tory central office.

We are not talking about peanuts--about donations of £100 or £400 or so. Last year 16 companies alone made donations of £50,000 or more each to the Conservative party or front organisations, and the top 10 donated more than £1.5 million. The largest donation came from Taylor Woodrow, which last year contributed more than £111,000 to the Conservative party.

I want to compare briefly the subject under debate with the way in which this same Government insisted in legislation that unions must hold ballots every ten years on whether to have a political fund. As I said when the legislation was debated, at their annual conferences unions could decide whether they wanted to continue a political fund or to discontinue or start one. The law on that was perfectly clear. Moreover, as the hon. Member for Chichester pointed out, any member of a union with a political fund can opt out--that has been the position since 1913. Any member of any trade union can tell the branch secretary that he does not want to contribute to a political fund and that is that.

Shareholders cannot opt out in the same way. Despite all the safeguards in place at the time, the Conservative party--with no members dissenting-- decided to change the law, and the trade unions had to hold a ballot every 10 years. It so happens that victory went to the trade unions. Not only did all the unions with political funds vote to keep them : one or two that never had one decided to begin one.

However, the purpose of the exercise was quite different--the Government tried to cripple the finances of their major opponents. We have never denied of course that the Labour party's funds have always been far more limited than those of the Conservative party, but the Government were not satisfied and tried to undermine still further the financial position of their political opponents--and that from a party which claims to be in favour of parliamentary democracy. We are not trying in this new clause to cripple the funds of the Tory party. The proposed clause will not be passed, but : if it were, shareholders would be able to approve, or not, donations to the Conservative party. It is likely that they would usually approve them--I would not challenge that.

In case some Conservative Members believe that I am exaggerating--I always try to avoid that--one of the leading members of the Charter movement inside the Tory party, Peter Hardy, is quoted as saying that he has long suspected that the Conservative party has hidden reserves in secret bank accounts. If I or my hon. Friends had said that, we would have been denounced as exaggerating as usual. Presumably, Peter Hardy is as much an active Conservative supporter as any Conservative Member--the difference being that he and others in the Charter movement, such as Eric Chalker, happen to believe that their party should be run in a straightforward and honest manner. I see no reason why they should be criticised for that point of view.

My hon. Friend the Member for Ashfield (Mr. Haynes) told my hon. Friend the Member for Dagenham that he hoped that a Labour Government would effect the sort of changes in the financing of political parties which will never be made as long as the Conservative party has a

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majority in the House. I agree. Perhaps we should have brought about such changes when we were in office : it is regrettable that we did not.

Conservative Members may shrug this off and call it the usual Labour party propaganda, but the more they resist modest reforms along these lines the more determined the Labour party will be when in office to make substantial changes to ensure that the Tory party is put on the same footing as the Labour party. So if trade unions which, to a large extent, finance the Labour party need to hold political fund ballots every 10 years, alongside observing the provisions from before the 1984 Act, it is only right and proper that the same should apply to companies and shareholders.

Either we change the law along the lines being suggested now, or we perhaps should come to the conclusion that the financing of the Conservative party by big business and of my party, in the main, by trade unions is wrong, and that the remedy lies in some form of state funding. There is already state funding of opposition parties, from which the Conservative party benefited when it formed the Opposition. I am not entirely sure that that is the best remedy but I am coming round to that view more and more. Perhaps the real remedy to end many of the present controversies would be for the state to finance political parties in accordance with the number of votes they received at the previous general election. I am not entirely convinced that that is the solution, but perhaps we should consider it further at some stage.

Mr. Richard Shepherd (Aldridge-Brownhills) : The last point made by the hon. Member for Walsall, North (Mr. Winnick) has some merit. The most extraordinary thing about this debate is the sense of de ja vu that it conveys. I had not appreciated that the Opposition had been converted so solidly by the arguments advanced by my party and the Government during the reforms of the trade union movement. What is sauce for the goose is sauce for the gander. All the arguments adduced by the Opposition spokesman, the hon. Member for Dagenham (Mr. Gould), tailor neatly with most of the arguments adduced by the Government when requiring ballots on trade union political funds. It can be argued with a sense of equity that it is not unreasonable that companies should ask their shareholders directly whether they should make a political donation. It must be reasonable.

Some of my Conservative colleagues have said that it does not matter, and that they can be sacked anyway. I have listened to the same arguments from the trade union movement. For 60, 70 or 80 glorious years it had the perfect source of finance, and the leadership did not have to trouble the membership too much about detail. It was the leadership's right to grant funds to the Labour party. Indeed, the Labour party was created by the trade union movement.

Our anxiety is that the public may perceive that we are the creation of big business. Clearly it will be a case of what is sauce for the goose is sauce for the gander if it is exposed that our support comes from big business. There should be a more relaxed atmosphere. The argument that the decision should be put to the shareholders may well not serve us ill, as a party. There is no evidence to suggest that it will. There is a lot of evidence for the argument advanced

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by my hon. Friend the Member for Chichester (Mr. Nelson), that the judgment of the majority of shareholders will be in favour of the continuation of donations.

I remember the Labour party's trepidation at the prospect of change in trade union legislation. There was anxiety. I have to acknowledge that there was also some triumphalism among Conservative Members that that legislation would be the end of the Labour movement as we knew it. It was thought that trade unionists who were deeply disaffected and disappointed by the conduct of the Labour party would withhold funds. In the event, it did not turn out that way. As the hon. Member for Walsall, North has just said, the legislation consolidated Labour's strength and the donations, strangely enough.

I do not see any reason why there should be any mystery. It is not an unreasonable proposition that shareholders should vote directly on donations to political parties. That is why I call this sauce for the goose and sauce for the gander.

There is a sense of equity and fairness in our nation. It looks blindly partisan if we say that we expect rules and regulations to be imposed on our political opponents, but that they must not apply to us. Our arguments have mirrored those made by a nervous Labour party when it had to confront the possibility of unions having to ballot their members on political donations. Companies may decide to donate money to the Labour party or that wealthy individuals, through companies, may make donations to the S whatever it is called--the SDP, I think.

It is important that the Conservative party shows itself to be fair-minded about this matter, particularly these days. The Government should treat this issue with caution for fear that, should we reject a measure that is essentially fair, the public perception will be that we have become so particular in these matters that we want only to reinforce our own finances. We will find it in our interests to do this because the measure would give confidence to company boards, supported by the votes of their shareholders, if that is their wish.

I beg my colleagues on the Front Bench to look at this proposal with a more open mind.

Mr. Charles Kennedy (Ross, Cromarty and Skye) : I support new clause 1. [ Interruption. ] Does the hon. Gentleman wish to intervene?

Mr. D. N. Campbell-Savours (Workington) : I did not want to intervene. I was merely asking my hon. Friend the Member for Walsall, North (Mr. Winnick), from a sedentary position, whether the British School of Motoring contribution has been sorted out yet.

Mr. Kennedy : The hon. Member for Workington (Mr. Campbel-Savours) was kind enough to give me advance warning that he intended to crack that hilarious joke, which has never been heard in this Chamber before. I gather that it refers to a body which was once known as the British Liberal party, of which I was not a member. Therefore, I am not prepared to answer or to take responsibility.

I agree with the new clause although, after listening to the speech of the hon. Member for Walsall, North (Mr. Winnick), I feel that we should go for full state funding of political parties. Ultimately, that will be seen to be the logical step, and it is preferable to what was fairly

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described by the hon. Member for Aldridge- Brownhills (Mr. Shepherd) as the sauce for the goose, sauce for the gander situation with which we have been presented in this debate, and in previous debates on the Bill.

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The frank and straightforward speech of the hon. Member for Walsall, North highlighted what, from the point of view of a third political party, is a basic criticism of the whole system. He rightly said that the bulk of Labour party funding comes from the trade union movement--I say good luck if it wants to use finances in that way--and that the bulk of Conservative party funding comes from the corporate and the private sector.

The hon. Member for Dagenham (Mr. Gould) was critical of the Department of Trade and Industry's response to the Monopolies and Mergers Commission's report on the brewing industry. Conservative Members were critical of the Labour party's attitude to trade union legislation and to the promises in the policy review document that there would be further movement in a direction that the trade unions want. All that underpins the fundamentally unhealthy nature of having a political system that is so directly dependent, on one side of the political divide, on private sector finance and, on the other side, on the trade union movement. That clearly influences Government and Opposition policies to an unhealthy and dangerous extent. That approach has done much legislative damage to the body politic for many generations.

Mr. Michael Brown (Brigg and Cleethorpes) : Can the hon. Gentleman tell the House whether he has arrived at that conclusion because of the experience of his former party--the SDP--which I understand received approximately £9,975 in the year up to 1987? It may be that that £10,000 now goes to the Liberal Democrats. Perhaps the hon. Gentleman is embarrassed by that. [ Hon. Members :-- "From Lonrho."] Yes, from Lonrho--I think that you will have heard of that company, Mr. Deputy Speaker. Is it embarrassment at receiving that sort of donation that has led the hon. Member to the conclusion that he has just put to the House?

Mr. Kennedy : I can assure the hon. Gentleman that the party of which I am a member has not received, and is unlikely to receive, any money from Lonrho, and would turn it down if it were offered. If that party which adheres to the right hon. Member for Plymouth, Devonport (Dr. Owen) receives money from Lonrho, that is a question for him. If money from that source was paid to the then SDP in 1987, I was not aware of it. I would not have supported it, and any questions about it should be directed to the politician who now purports to be the leader of that party.

Mr. Brown : Should the hon. Gentleman not be arguing that it is a question not whether the Conservative party needs to publish its accounts but whether the party of which he was once a member ought to publish its accounts more widely?

Mr. Kennedy : I was once a member of that party, but if the hon. Gentleman studies the legal and constitutional terms of the merger between the Social Democractic party with the British Liberal party, he will find that that party is still within the merged party and therefore those people, to whom I shall refer as provisionals in all this, must speak for themselves. I do not take responsibility for them.

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I shall return to my basic contention--[ Hon. Members :-- "It is the very man--the hon. Member for Caithness and Sutherland (Mr. Maclennan)."] I am sure my hon. Friend will write to the hon. Gentleman to answer his question. I should add that I am sponsored by nobody.

Conservative and Labour Members have criticised each other's parties. However, in defending their own parties they highlighted the weakness and the unsatisfactory nature of the entire system. It cannot be healthy for the body politic of the country for industry to be bound financially to one side of the political divide. That is sure to influence legislation and party political attitudes and it is the mirror image of what happens on the other side of the political divide.

Criticism has been levelled at my party and at some of its members. When the SDP came into being, we said that one cannot build a party that will not be in somebody's pocket unless one is prepared to dig into one's own pocket. The Liberal Democrats adhere to that principle. The present financial arrangements will not be changed by the Bill. The overwhelming bulk of our funding comes from membership subscriptions and through direct mail appeals to members and supporters. At the end of the day, that is healthier and fairer than the funding of political parties related to the proportion of the board of directors that a party has been able to attract at the previous election.

If the Government will not accept the new clause as a small step, I hope they will take an early opportunity to redress the gross injustice, imbalance and incoherence of the political system which arise from our present unsatisfactory arrangements.

Mr. Gow : The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) criticises political parties that receive donations from companies. He said that he did not like money going from trade unions to the Labour party and from companies to the Conservative party. He suggested that such donations, and presumably other voluntary donations, should cease and that the British people should be obliged to finance the Social and Liberal Democrats, the Labour party, the Conservative party and the Scottish National party. So muddled is the hon. Gentleman's thinking that one could conclude that possibly even Sinn Fein should be supported in that way. That proposal does not find much favour among my hon. Friends, although my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) seemed to be flirting with the idea.

Those who wish to support political parties, whether they are members of trade unions or companies, should be free to do so. I am strongly opposed to imposing additional taxation on the British people so that they can finance political parties of whose purposes they may disapprove.

The hon. Member for Ross, Cromarty and Skye is immensely and rightly popular in the House, but his speech contained another sad characteristic. He criticised political parties that receive donations from companies and was asked by my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) about Lonrho. The hon. Gentleman said that he knew nothing about it. Lonrho has extensive trade dealings with the Republic of South Africa. The Financial Times of 23 February 1988, a newspaper well known to the hon. Member for Ross, Cromarty and Skye, said :

"Lonrho, mining, trading and industrial company headed by Mr. Tiny Rowland, donated £9,775 to the Social Democratic Party last year."

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That was in 1987. That means that at one time Lonrho, with its vast interests in South Africa, thought that it might hedge its bets and make a donation to what was then, I think, called the Alliance. The hon. Gentleman will correct me if I have my timing wrong. At that time, some companies and even a few people believed that it was possible for the Alliance to attract some support from the British people. I have news for the hon. Gentleman. No donation will be forthcoming from Lonrho at the next general election to the Social and Liberal Democrats. The support for that party from the trade union movement and companies and from the British people will be very slender.

Dame Elaine Kellett-Bowman (Lancaster) : What about the learner drivers?

Mr. Gow : I shall come to that later.

The hon. Member for Ross, Cromarty and Skye complained about the way in which political parties are funded. We have seen that opportunistic change of mind before by the SLD, because it characterised the abandonment of its previous support for the policy of first past the post. The SLD has grown out of the Liberal party. When the Liberal party was amassing great majorities in the kingdom by means of first past the post, it was in favour of that system. When it discovered that its support was waning and that the only way in which it could have more Members of Parliament was to alter the rules, it was in favour of doing so.

It is a new doctrine for the inheritors of the Liberal party now to say that they are in favour of state funding for political parties and against trade unions, companies or individuals being allowed to support such parties. The reason for that is simple. It is that everybody knows that the SLD is bust. That is why it says that it should be financed by the Government. That is a most dangerous argument and it again reveals that, when the going gets rough and when that party cannot support itself by the existing rules of finance for the electoral system, it will alter course.

Mr. Graham Allen (Nottingham, North) : I support the hon. Gentleman's view about not levying the taxpayer. People should not have to pay into a state fund that finances political parties. Will the hon. Gentleman extend that argument to shareholders? Should they be levied for money for the Conservative party? Would he go further and say that consumers of beer, supermarket goods and insurance and other services should be balloted and consulted before money is taken from them?

Mr. Gow : I propose to deal with that matter, and I shall again give way to the hon. Gentleman if he is dissatisfied with what I have to say.

The new clause contains a proposal that retrospective approval will have to be given at an annual general meeting for donations that have been made by the board of directors. A board of directors should be free to carry out the duties laid upon it by the memorandum and articles of association of the company concerned and, of course, must act within the constraints of the Companies Acts. It should be up to directors to take decisions that fall properly to them. Of course directors are accountable to and removable by shareholders at the annual general

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meeting. If shareholders do not like the decisions taken by the directors, those directors can be and frequently are removed. The new clause seeks to set a dangerous precedent. If retrospective approval has to be given for a political donation, will it also be required if directors enter into a contract with the Republic of South Africa? That question will appeal to Opposition Members. That is an interesting matter that exercised the attention of my right hon. Friend the Prime Minister at Kuala Lumpur.

I am glad that the shadow Chancellor is in his place. I understand that some Opposition Members say that specific approval should be given by shareholders if a company enters into a contract with the Republic of South Africa. Some may say that shareholders should be asked before donations are made to charity, or that specific approval should be required before a donation is made to disaster funds. It is perfectly proper to rely on the protection given in the Companies Act 1967, and I believe that the hon. Member for Wallsend (Mr. Garrett) was in the House at that time. That Act requires disclosure of sums of more than £200.

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The law as presently in force requires full disclosure. It is obvious that shareholders in general meetings can issue an instruction, through resolution, that no further political donations should be made. It is possible for any shareholder who does not like the donations policy of his company to sell his shares, or not to buy them if it has been the practice of the company to make donations. I wish to express my enduring thanks to those excellent and wise British companies and British people who continue to make donations to the Conservative party. Those people and those companies perceive--in my judgment correctly--that their true interests lie in the continuation of a Conservative Government.

Mr. Campbell-Savours : When the current arrangements for payments to political parties by companies were devised conditions were different. Only a small minority of the wider public were in a position to acquire and retain shares. We were not in what is described today as a "shareholder democracy". As one widens share owner-ship, one is required to reconsider the powers that are available to shareholders to influence arrangements in companies. Many of the Government's arguments about widening shareholder democracy, certainly throughout the privatisation debates, were about ensuring that shareholders--the wider public--have a stake in and some influence over the future and the potential for business. If that is the case, surely the matter should not be kept in isolation, and consideration should be given by the House to change.

My hon. Friend the Member for Dagenham (Mr. Gould) has put to the House the proposition that simpler and more equal treatment should be meted out to trade unions, as it is to companies, regarding their political contributions. He has sought only to ensure that trade unions are treated no differently from companies and vice versa. I do not see that it is possible to argue against that. I can concur with every word of the speech of the hon. Member for Aldridge-Brownhills (Mr. Shepherd). If one is being equal in treatment, one must be open-minded about

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those matters. If a political party might lose out by way of that arrangement, it drives us to consider the whole question of state funding of political parties.

The hon. Member for Ross, Cromarty and Skye (Mr. Kennedy) mentioned the British School of Motoring. I will not score any political points by drawing attention to what happened some years ago. The British School of Motoring was making contributions of several hundred thousand pounds to the Liberal party and the Liberal party was receiving them because it has no other way of funding its operation. I do not blame the Liberal party for taking the money. If that is the only way to fund one's political party, one must do it. However, we all know that what happened on that occasion was wrong. When I looked into that matter in some detail I was able to locate a debate in the House of Lords during which a Liberal peer had moved an amendment to legislation on driving schools. In the eyes of the public and Parliament his motive in moving that amendment was related to the political contribution that had been made. It may be that peer moved that amendment for the most altruistic of reasons. However, when the public saw the facts and realised that his political party was being funded by way of a substantial contribution, they naturally drew the conclusion that there must be some connection.

I tell that story only to show that, because of the system as it is presently arranged, the public will inevitably be suspicious. Every contribution of weight that is made to the Conservative party must inevitably lead some members of the public to believe that there may be a connection with the treatment that the Conservative party gives to big business or the way particular Secretaries of State and Departments might handle business that may help companies that make contributions. I am not necessarily saying that that is what happens, but if the public are led to believe that there may be a connection, it further generates suspicion in their minds as to political contribution as against political pay-off.

Mr. Michael Brown : The hon. Gentleman is making a very interesting and sincerely held point. However, by the same token, could it be argued-- although I do not argue it--that any hon. Member who is sponsored by a trade union will be perceived in the same way?

Mr. Allen : They do not make a direct contribution.

Mr. Brown : The hon. Gentleman says that it is not a direct contribution. Nevertheless, the public may still be suspicious. When an hon. Member speaks on behalf of a large mining community in his constituency, and if he happens to be sponsored by a miners' union, nobody in the House disregards his points simply because he is sponsored by that union. The hon. Gentleman's point falls down on those grounds.

Mr. Campbell-Savours : The hon. Gentleman presumes that I will be partisan in my reply, but I do not intend to be so. I accept that inevitably the public will be suspicious. Whether there is a need for that suspicion is another matter. As the House knows, sponsored Members of Parliament do not receive money from trade unions. I am sponsored by the Confederation of Health Service Employees but it pays me nothing and I would accept nothing. I would not draw a penny of expenses from the union. However, I accept that the public might conclude that there was a connection between the way in which I

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conduct myself in the Chamber and the sponsorship arrangement in the background. All I am doing--as did the hon. Member for Aldridge-Brownhills--is trying to be neutral and say that there should be equal treatment. The hon. Gentleman did not talk in terms of suspicion, but we should not rule out the possibility that that might exist. The proof can be found in the case of BSM and the Liberal party.

Other cases have recently come to light. I know that the case of the Westminster cemeteries and Lady Porter is controversial, and I shall try to deal with it neutrally. During the inquiries by Westminster city council into all that happened in Westminster, an argument developed about how the Conservative party was funded during the 1983 election. Many people could not work out where the money to service the Conservative campaign had come from. It may be that all the funding was proper, honourable and above board. However, as the investigations and inquiries developed and as queries about the river companies were raised in the national media, that sparked off the suspicion--wearing a more political hat than I am now, I willingly fostered it--in the minds of the general public that something might be wrong. Such suspicion arises only from the fact that at the moment we have a system that allows companies to allocate money to political parties without any accountability. I would argue that they should not be in a position to make those contributions because I am a supporter of state funding of political parties.

My hon. Friend the Member for Dagenham hinted that the Labour Government may look sympathetically at the need to legislate to introduce such funding. However, I do not see that hint as an attempt to penalise the Conservative party in the way that the Conservative party thought that it was penalising the Labour party in 1985, through employment legislation. Were the Labour party committed to legislate on funding because we have a duty to protect all political parties, irrespective of what they believe, and ensure that they are properly funded, that would spark off the necessary debate that we need on state funding of political parties. The hon. Member for Eastbourne (Mr. Gow) is obviously opposed to this funding, but in such conditions he might look more favourably on what I think is a neutral position to take on funding.

I only wish that the debate were less partisan. Conservative Members seem so defensive about a system that, like the hon. Member for Aldridge- Brownhills, they know is morally and in equity wrong. Instead of locking themselves into a position of inflexibility, a few more charitable gestures on the principles involved should be the order of the day. Perhaps before the end of the debate we shall have some words along those lines.

Mr. Tim Smith : I join the hon. Member of Dagenham (Mr. Gould) in welcoming my hon. Friend the Member for Wokingham (Mr. Redwood) to the Front Bench. I was pleased when he was appointed to his new position in July because I believe that he is peculiarly well qualified to take over this responsibility, and we shall see that as our debates proceed.

I listened carefully to what the hon. Member for Workington (Mr. Campbell- Savours) said, and we understand that he favours state funding of political parties. However, that is not what the debate is about. It is about how companies should determine political

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