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Mr. Winnick: I am listening to the hon. Gentleman's speech with interest. I do not want to rehearse the entire argument now, but would not a restriction on the amount that an individual may give to a political party not only help in addressing the issue that he has been describing, but provide a means of restricting the sums that political parties are able to spend at general elections?

Mr. Bell: I am grateful for that intervention and agree absolutely. I recommended such a limit to the Neill committee, but it was not accepted.

We have to devise a system of politics that is more honest, cheaper, and wins the trust of the people. I am arguing not for a community of saints and angels, but for a system in which the crooks, charlatans and the sharp operators so often attracted to the honeypots of politics lose their rights of privileged access.

7.48 pm

Mr. Martin Linton (Battersea): It is a great honour to follow the hon. Member for Tatton (Mr. Bell), whose very presence in the House symbolises the reasons why the Bill is so necessary. He also made a very good case for why the Bill does not go as far as it might.

I welcome the Bill, and believe that, for the past 25 years, there has been a crying need for reform of party funding. My right hon. Friend the Home Secretary had trouble remembering the exact date--or even the existence--of the Houghton committee report. I remind him that the committee reported in August 1976--which was very much the date on which the United Kingdom and the House took a wrong turning on the issue of party funding. We missed the great chance that we had then of reforming the party funding system, as every other European and north American country did in the 1970s or 1980s.

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We missed the opportunity then mainly because the then official Opposition party--under its then new leader, now Lady Thatcher--turned its back on any reform whatsoever of the party funding system and pursued what one can only describe as a beggar-my-neighbour policy. Although the then Opposition were themselves bankrupt, they knew that the Labour party would always be worse off than they were.

The Conservative party continued that policy for the next 20 years, eventually leading to its own undoing at the 1997 general election, amid accusations--in many cases, realities--of sleaze. The Conservative party has now had a change of heart and I welcome its new approach to party funding.

Compared with some of my hon. Friends, particularly my hon. Friend the Member for Walsall, North (Mr. Winnick), I am a relative novice to the subject, but in 1994, I produced a report for the Institute for Public Policy Research on the subject. While I was preparing the report, I visited Germany, Canada and Quebec--by chance, the same places that the Neill committee visited last year. My report had only 18 recommendations compared with the 100 made by the Neill committee, but I am glad that many of those 18 were repeated by the Neill committee and have found their way into the Bill. I am delighted that the Bill delivers some of the reforms that I argued for, including the disclosure of donations over £5,000, the ban on overseas donations, the introduction of national spending limits for elections and referendums, the requirement to hold shareholder ballots and, last but not least, the establishment of an Electoral Commission.

However, I agree with the hon. Member for Tatton that there are some points on which the Bill does not go anything like far enough. Once we get through the arithmetic, clause 72 and schedule 8 set the limit on national campaign spending at £20 million for a party that puts up candidates everywhere in the UK, or £19 million for a party that has candidates throughout Britain. That is far too high and will not achieve the primary goal of reducing the amount spent by political parties at general elections.

The Neill committee's report estimated that the main parties spend £26 million and £28 million respectively at the 1997 election. The widely drawn definition of campaign expenditure in clause 65 and schedule 7 shows that the system can never be so watertight that there is no scope for parties to pass off some election-related expenditure as administrative overheads. That was the experience in Canada, on whose system our proposals are largely based. There was endless argument between the parties and the director of elections about what counted as expenses. There are bound to be grey areas where it is impossible to decide whether something is election expenditure, such as opinion polls commissioned by parties before an election.

The right hon. Member for South Norfolk (Mr. MacGregor), who is back in his seat, referred to the difficulty of defining election expenditure and therefore opposed the idea of capping. I think that he drew the wrong conclusion. Of course it is difficult to distinguish election expenditure from other expenditure, but that does not mean that we should give up on the Bill's central ambition of capping election expenditure. If we are to have a downward step change in election spending, it would make more sense to adopt the Labour party's proposal to the Neill committee of a £15 million limit.

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Lord Sawyer, who was then the general secretary of the Labour party and gave the evidence, said of the party's £26 million spending at the 1997 election:

    "To raise that kind of finance . . . we have had to seek donations up to £1 million, and we would need to continue that sort of fundraising programme in the absence of any substantial state aid."

A limit of more than £15 million is bound to result in a party's seeking large donors, beyond its members and smaller donors.

A related point is whether there should be two limits--one for constituency spending and one for national spending--or a single limit. In my evidence to the Neill committee, I argued in favour of a single limit encompassing constituency and national spending. The Neill committee seems to have got that the wrong way round. It believed that an integrated limit would allow parties to concentrate their spending even more on marginal seats; on the contrary, it would prevent parties from doing that because, once they had spent up to their limit in marginal seats, they could spend only in non-marginal seats. Applying the limit constituency by constituency would prevent the use of all the resources in 100 marginal seats. That would have the advantage of introducing the principle of equity between voters. Parties would have to treat the voters the same in every constituency. That point was made by the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan)--it sounds as though he represents three constituencies, but it is only one.

The Bill has missed an opportunity on individual donations. The main concerns have been about the source of donations, particularly overseas or undisclosed donations. However, people are equally concerned about the size of donations. We have only to look back a few years to the concern that was felt about donations to the Conservatives of £500,000 from Asil Nadir, a couple of million pounds from John Latsis and £5 million from Lord Kirkham. To match those sums, my party could not but accept donations of a similar magnitude. I am sure that Conservative Members will point out if I fail to do so that we accepted a £1 million donation from Bernie Ecclestone and, I believe, £2 million from Lord Sainsbury.

No matter how well intentioned, a party that relies on large individual donations will always feel beholden to the big donors, nervous of offending them and anxious not to jeopardise a repeat donation. If not in the minds of the party then in the minds of the public, that reliance will inevitably compromise the party's integrity. My right hon. Friend the Home Secretary referred in his speech to an unhealthy reliance on a handful of wealthy donors. The way to avoid that is to ensure that the limit of what parties can spend is within the reach of what their supporters can raise without recourse to million pound donations. That is why the definition of permissible donations under clause 48 onwards should be tightened through the application of an upper limit on individual donations of £250,000.

The Neill report argues against an upper limit on two grounds. The first is that disclosure should contain the arms race between the main parties. Disclosure will deter a few would-be donors, but there is no evidence from other countries that it will stop, or even contain, the arms race. Disclosure is important, but it does not go far enough.

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The second argument is that it would be easy to evade the limit by spreading resources among friends or setting up subsidiary companies. My hon. Friend the Member for Rotherham (Mr. MacShane) made that point. That ignores the simple counter-measures that can be taken to enforce limits on donations. Quebec has successfully enforced its $3,000 limit on donations by insisting that every donation must be made by personal cheque and making it an offence to hand on a donation from somebody else. There are stories about lobster parties at which one firm buys up a table and gives every executive £3,000 to donate, but it is difficult to get round such limits.

The main argument against a limit on donations in the past has been that, whereas one might want to limit individual donations, one might not want to limit donations from companies, trade unions or other political parties. At that time, it would have been difficult to make the distinction. Now, company donations are subject to shareholder ballots, parties are subject to the Registration of Political Parties Act 1998 and trade unions are subject to political fund ballots. There is no longer a difficulty in isolating individual donations and applying a limit to them that does not apply to other categories.

Clause 63, the Northern Ireland exemption, must be considered carefully by Ministers because it could drive a coach and horses through the Bill. If a list of permissible donors were to include registered voters in the Republic of Ireland--to which I have no objection--those voters would not be subject to clause 54, on the evasion of restrictions. The clause could be used as a channel for donations from abroad--or from within the UK--which would then become anonymous donations.

The definition of a Northern Ireland party in the Bill would mean that donations could be made only to parties represented at Stormont or representing Northern Ireland seats at Westminster. That would exclude some parties. However, we should remember that the Conservative party and the Green party contest elections in Northern Ireland, and that the Conservative party came within 2,000 votes of winning a seat in Northern Ireland in 1992. There is every possibility that it will win enough seats to qualify as a Northern Ireland party in the future.

I have no reason to believe that anyone is planning to use the loophole. However, if donations can be made which are not subject to the registration of donors, it is clear that it will be easy to evade the effects of the Bill--not only by Irish people overseas, but by donors of all kinds who will use it as a way into the British political system.

On overseas voters, clause 48 says that any individual is a permissible donor provided that he or she is

The Neill committee is rather contradictory on this point. On the one hand, it has put forward a much looser definition--that anyone can give money if he or she is a registered voter or eligible to be put on an electoral register. That would include millions of people overseas. On the other hand, the committee has enunciated exactly the right principle--that it is right to take the opportunity to lay down the principle that those who live, work and carry on business in the UK should be the persons exclusively entitled to support financially the operation of the political process here. In other words, only people who live and work in this country should be allowed to fund

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our elections. That would mean that tax exiles who do not live here would not be entitled to give money to political parties in Britain.

I welcome clause 130, which reduces the qualifying period for overseas voters from 20 years to 10. The Home Affairs Committee--of which I am a member--recommended that the figure be reduced to five years, and the Home Secretary has met us more than half way. Having listened to the representations of some of those who currently register as overseas voters and who may still have close links with this country, I think that the reduction is probably far enough.

Under the new rolling register provisions of the Representation of the People Bill, whereas in the past it would take anything between four and 16 months to register as a voter in this country, it will take in future between two and four weeks. It will be much easier for people who live for brief periods in this country between foreign postings to re-establish their connection as voters.

I still question whether it is right to make being registered to vote a sufficient qualification for giving money to political parties. After all, it is possible to be registered as a voter in this country and at the same time to be a foreign resident, a foreign dual national, a foreign taxpayer and even--as we have seen recently--a representative of a foreign Government.

It seems anomalous to allow people to fund political parties in this country if they are not liable to pay tax here. Why should they be able to influence the tax that we pay if they do not pay tax themselves? I would support an amendment that separated the issue of making declarable donations from overseas from the issue of voting, and I would introduce a second qualification--that permissible donors should be ordinarily resident in this county. That is the main criterion used by the Inland Revenue for deciding whether someone is resident in this country, and the same is true of the health service.

Clause 10 allows the commission to make policy development grants of up to £2 million a year. I agree with my hon. Friend the Member for Rotherham that that limit is far too low. I would suggest that it should be at least £10 million if it is to be in any way meaningful. Clause 10 also allows grants to be made only to parties with two Members who have taken the oath or the affirmation. It is not clear why that should be so, and it seems to be a mean-spirited attempt to make sure that one particular party from Northern Ireland does not benefit in any way from what is offered.

We must take a longer view on party funding. The Home Secretary referred to the law in Quebec, which is one of the only places in the world which really applies, and has developed, the spirit of our Corrupt Practices Act 1883 and turned it into something meaningful. Quebec applies the measure with unusual vigour. I have said that individual donations are limited, and what the press can and cannot do during an election is strictly controlled. There is, to be sure, an exemption for the press, but it is interpreted much more narrowly than in this country. Quebec has shown that that it is possible to control spending even in referendums, so that both sides of the argument feel that they cannot take advantage of having more money. Quebec has shown what it is to insist that politics should be conducted on a level playing field.

Those who refer to third parties must decide how they view elections. To my mind, elections are, by their very nature, periods during which those who are not candidates

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must accept a certain temporary restraint on their freedom of speech; otherwise, money will always be able to buy elections. The whole purpose of the Bill is to try to avoid that.

In my report for the IPPR, I made some other suggestions for ways in which we could ensure a level playing field in politics without introducing direct state funding. Those ideas included: state aid in kind; poster space to be allocated to the parties in a fair way at the beginning of elections; that that should be paid for; that newspaper advertising should be allocated in a fair way also; and that there should be more free postal deliveries. There are many ways in which we can improve the system.

We must remember that it was the beggar- my-neighbour policies of parties in the 1970s, who thought that it would be an advantage to do without any reform of party funding, that led them to scrape the bottom of the barrel for funding because their own sources of funding were drying up. That has so discredited all political parties and their funding that the public would find it unacceptable to have state funding in terms of cash donations from their taxes to political parties--a reluctance that one can well understand.

This country is practically the only country in Europe or north America that does not have state funding of parties, and that has led indirectly to the discrediting of politics. I do not advocate state funding now, but we must move towards a situation where people in this country have more faith in the political system and in the integrity of their political parties. Perhaps one day in the future the House will be able to introduce what is needed--a much more secure financial basis for political parties that will make the sleaze and corruption of recent years unnecessary.

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