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Mr. Wigley: I agree that, where good will exists, the system can be made to work. However, I seek some clarification from the Minister. Orders may occasionally need to be made, and I was asking about the facility that exists to enable the National Assembly for Wales to make them. Given that the local government legislation has transferred powers to the Assembly, will provisions equivalent to those that apply to Scotland be made?

Mr. O'Brien: The Government do not at present propose to transfer to the Welsh Assembly matters relating to council elections. They are not devolved matters, but there is no reason why the Welsh Assembly should not refer a matter to the Electoral Commission for

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advice. I am not sure that I have got the drift of the right hon. Gentleman's point--or perhaps I have and have answered it.

Mr. Wigley: I shall try and clarify my question. On several occasions, order-making facilities have been added to Bills going through Westminster, with the result that the National Assembly is able to undertake extra functions. Will the Minister bear in mind the possibility of making such provision for Wales in future, where it seems appropriate that orders should come from the Assembly?

Mr. O'Brien: I certainly agree to bear that in mind. If matters are best dealt with in Wales, it is appropriate that they are dealt with there, just as it is right that matters best dealt with here are dealt with here. There may well be occasions in the future when we will be able to act as the right hon. Gentleman suggests.

Mr. Grieve: I am sorry if I gave the impression that I was seeking to curtail the debate. Opposition Members are usually accused of trying to spin out debate on their amendments for longer than is justified.

I thank the Minister for his comments. I note that the Scottish National party is not represented here today, and assume from that that its members felt reassured by comments that they had heard previously that the new clause would not fetter the powers devolved to the Scottish Parliament. I am grateful to the right hon. Member for Caernarfon (Mr. Wigley) for giving us the Welsh dimension.

I look forward to seeing what progress has been made when the Bill eventually returns here from the other place. On that basis, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 4

Tax relief for donations to political parties

'.--The following shall be inserted after section 379 of the Income and Corporation Taxes Act 1988 (interpretation of sections 369 to 378)--

"Relief for donations to political parties
379AA.--(1) Tax relief shall be available to an individual (the donor) in accordance with this section on qualifying political donations made by him of up to £500 in any year of assessment.
(2) A donation is a qualifying political donation for the purposes of this section if it is made to an eligible political party and--
(a) it takes the form of the payment of a sum of money,
(b) it is not subject to a condition as to repayment,
(c) it is not conditional on or associated with, or part of an arrangement involving, the acquisition of property by the political party, otherwise than by way of gift, from the donor or a person connected with him, and
(d) the donor is resident in the United Kingdom at the time the donation is made.
(3) For the purposes of this section a political party is an eligible political party if, at the last general election preceding the donation in question--
(a) two members of that party were elected to the House of Commons, or

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(b) one member of that party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.
(4) If an individual makes a qualifying donation he shall be entitled, on making the payment, to deduct and retain out of it a sum equal to basic rate tax thereon.
(5) Where a sum is deducted under subsection (4) above the sum deducted shall be treated as income tax paid by the person to whom the payment is made.
(6) Any person by whom a qualifying donation is received shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (5) above is treated as income tax paid by him; and any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the qualifying political donation to which it relates.
(7) The following provisions of the Management Act, namely--
(a) section 29(1)(c) (excessive relief) as it has effect apart from section 29(2) to (10) of that Act,
(b) section 30 (tax repaid in error, etc) apart from subsection (1B),
(c) section 86 (interest), and
(d) section 95 (incorrect return or accounts),
shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable in accordance with regulations made by virtue of subsection (6) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.
(8) In the application of section 86 of the Management Act by virtue of section (7) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment ('the relevant year of assessment') under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date--
(a) is 1 January in the relevant year of assessment in a case where the person falling within subsection (5) above has made a relevant interim claim; and
(b) in any other case is the later of the following dates, that is to say--
(i) 1 January in the relevant year of assessment; or
(ii) the date of the making of the payment by the Board which gives rise to the assessment.
(9) The Board may by regulations make provision--
(a) for the purposes of any provision of this section which relates to any matter or thing to be specified by or done in accordance with regulations;
(b) with respect to the furnishing of information by donors or recipients, including, in the case of recipients, the inspection of books, documents and other records on behalf of the Board; and
(c) generally for giving effect to this section.
(10) In this section--
'financial year' in relation to any person means a financial year of that person for the purposes of the relevant regulations;
'interim claim' means an interim claim within the meaning of the relevant regulations;
'relevant interim claim' means, in relation to an assessment made for a period coterminous with, or falling wholly within, a person's financial year, an interim claim made for a period falling wholly or partly within that financial year; and
'the relevant regulations' means regulations made under subsection (9) above.

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(11) Section 839 of this Act shall apply for the purposes of this section to determine whether one person is connected with another".'.--[Mr. Walter.]

Brought up, and read the First time.

Mr. Walter: I beg to move, That the clause be read a Second time.

We consider this proposal important, because it goes to the heart of our democratic process and the party system. It would introduce a tax relief at the basic rate of tax on political donations up to £500 a year. The wording is based on the mortgage interest relief at source--MIRAS--scheme and the charities gift aid schemes, so it has some tax precedents.

Opposition Members have never believed that we should cherry-pick the Neill recommendations. We think that, as far as possible, they should be implemented in full, and that is what the new clause would bring about. We must make what is, perhaps, a philosophical choice about whether we want our political parties to be directly funded by taxpayers--I know some hon. Members would sympathise with that view--or whether we want to implement a procedure to encourage more voluntary donations to political parties. The new clause would encourage voluntary donations.

In evidence to the Neill committee, the Conservative party said:

Rather than call for state funding we would welcome the Committee's views about how more individuals could be encouraged to donate. We note that in some countries individuals are offered tax relief for political donations, elsewhere tax credits or matching grants are provided. We believe that the Committee should give serious consideration to the practicalities of these approaches in the context of the United Kingdom's voluntary system.

The Neill committee's recommendations are set out in our new clause. It is important, in the interests of democracy, for the funding of political parties to be as broadly based as possible. The Neill report cites evidence from Germany about a system of tax relief introduced in 1974, under which the pattern of donations to political parties has changed from significantly large donations to many small ones. That is in keeping with the spirit of the new clause and, we believe, with the Bill.

The new clause is identical to a proposal tabled by my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) on 22 June last year in the Standing Committee considering the Finance Bill. It would amend section 379 of the Income and Corporation Taxes Act 1988 by inserting a new section 379AA.

Lord Neill's recommendation 38 states:

Tax relief by deduction at source should be introduced, limited to the basic rate, on donations of up to £500 a year to eligible registered political parties.

Recommendation 39 states:

Political parties should be eligible to claim under the tax relief scheme if at the last general election two members of the party were elected to the House of Commons or one member was elected and the party won at least 150,000 votes.

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