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Sir George Young (North-West Hampshire): Before I move to the more substantive issues, I wish to press the Minister about Government amendment No. 110. It applies to the exclusion on direct expenses in schedule 12. He pointed out that paragraph 2 of schedule 12 bears a remarkable similarity to paragraph 2 of schedule 7, which is about exclusions on direct expenses in an election. He pointed out that that was not entirely appropriate, particularly because paragraph 2 of schedule 7 refers to expenses in respect of giving electors information about

He made the point that, although that provision was appropriate for a general election, it was obviously not appropriate for a referendum.

Government amendment No. 110. goes slightly further. It will delete paragraph 2(b) of schedule 12. That means that any expenses incurred in sending unsolicited material to supporters of a referendum campaign will no longer be excluded. However, it seems to me that, under the provisions of paragraph 2(b) of schedule 7, identical expenditure seems to be excluded, because it refers to

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    It is not immediately clear why it is right to exclude the expenses when one sends unsolicited material to party members, but include them when one sends unsolicited material to supporters of a referendum campaign.

The Minister may be able to tell us why he wants to delete paragraph 2(b) of schedule 12, and I have no argument about knocking out sub-paragraph (a). However, the reasons for the Government's approach are not immediately clear.

The debate revisits familiar territory, but it would be wrong to let Report stage pass without reference to the most fundamental divergence from the recommendations of the Neill committee. At an appropriate time, the Opposition hope to move formally amendments Nos. 182 and 146 and take the temperature of the House on these constitutional issues. I shall talk to amendments Nos. 182 and 151 and my hon. Friend the Member for South Staffordshire (Sir P. Cormack) wishes to talk to amendment No. 146.

The Minister and the House know our views, which I set out in Committee on 16 February when I was ably assisted by my right hon. and hon. Friends, and in particular by my right hon. Friend the Member for South Norfolk (Mr. MacGregor). I do not want to repeat that case, but I want to advance the argument by considering the two principal reasons given by the Minister when he resisted our amendment. First, he argued that

I leave unanswered the question about what might be a minor general election.

I want to address the key argument that the Minister has used time and again, and which he has repeated this evening. He argues that if one can cap spending at a general election, one can cap spending in a referendum. That argument was demolished by Lord Neill, and nothing that the Minister has said in the two months since Second Reading has addressed the fundamental point that Lord Neill made. He considered the Government's case and rejected it in paragraphs 12.20 to 12.22 of his report.

Referendum campaigns are not, as the Minister tells us time and again, the same as general election campaigns. Everyone in the House knows that they are different. In a referendum, we are not choosing a Government, the parties may be split and other organisations are involved. In paragraph 12.30 of his report, Lord Neill concluded:

We have heard that case repeated this evening, without Lord Neill's objection being addressed. The Government's case for limits is based on that false premise.

At no time have the Government begun to answer a related question. Why should one base what might be spent in a referendum campaign on, for example, proportional representation for Westminster on how many votes the Labour party received at a general election in which it was neutral on the issue of proportional representation? Trying to base referendum spending limits on votes at the previous general election has no argument of principle whatever to sustain it, and nor has the Minister advanced any.

As we have heard in many debates today and in Committee, the limits are shot to shreds by loopholes. Foreign residents can take space in newspaper

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advertisements without restrictions thanks to the European convention on human rights. The 24 trade unions that are affiliated to the Labour party can each spend £500,000, lifting the Labour party limit from £5 million to £17 million at a stroke. As we have just heard, one can buy a newspaper--as long as it is the right newspaper--without the limits applying. The argument that one can cap spending in a referendum campaign in the same way that one can cap spending in a general election campaign simply does not stand up to scrutiny.

The Minister's second argument was that our amendments were a Conservative ploy--a devious attempt by my party somehow to secure advantage. We propose what the Neill committee proposed unanimously. The rules that we want are those that the Government have already applied themselves. The Minister said:

However, all that he is doing is substituting that undesirability with another one. Referendums will be bought by those who are allowed to pay the largest sum. We have explained time and again how, in a referendum on the euro, the scales might be tipped in favour of one side.

The Home Secretary defended those limits by saying that the Liberal Democrats would not be able to spend up to that limit. That is not a powerful argument, not least because, under the Bill, the Labour party could, if it wanted to, give the Liberal Democrats the money to support a campaign for the euro.

Mr. Stunell: The right hon. Gentleman's scenario is improbable. Should he be successful in deleting clause 111, the Labour party could send us an even bigger cheque.

Sir George Young: I am not sure of the logic of that suggestion. However, I am disappointed that the Conservative party does not feature in any way in that important financial transaction. Perhaps we could receive a commission for facilitating such a transaction between the two main parties.

Mr. Stunell: The right hon. Gentleman is at least right about the two main parties. The point that I did not make more explicit--I apologise for that--is that all the things that he has described could happen several times over in a regime with no limits. The restrictions provide some limitation.

Sir George Young: The hon. Gentleman has to address at some point the recommendations of the Neill committee and why it unanimously came to the conclusion that it was impractical to impose limits on referendum campaigns. Although I noticed on the previous occasion we debated this issue that the Liberal Democrats supported the Government, I hope that they will consider the arguments that Neill advanced and the criticisms of the Government's proposal. Perhaps, in another place, they will have second thoughts.

I regret that the Government will not see reason on our suggestion. The scheme that they are persisting with is based on a flawed policy. It has no basis in principle and

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it will be impossible to implement in practice. At the appropriate time, I shall invite my hon. Friends to express that view in the Lobby.

Mr. Stunell: Three separate issues have come to the fore, and I shall comment briefly on each of them.

I, too, would like to hear from the Minister about the detail of the practical effect of Government amendment No. 110. As I understand it, in the first formulation, leaflets distributed during a campaign are exempt because they will be included elsewhere in the election expenses of individual campaigns. Perhaps the Minister could confirm that. In a referendum, where there is not an individual campaign as such, those leaflets will be included in the global figure.

8 pm

If that is the basis on which we are proceeding, that is fine, but there is potentially a category that is exempted in the first case and now will not be exempted in the second case. I refer to wider campaign literature that does not specifically advocate the case of particular candidates. I seek clarification on that point.

We debated expenditure limits in a Committee of the whole House, and I thought that the intellectual case made by several Conservative spokesmen did not stand the test of the debate, and the hon. Member for New Forest, West (Mr. Swayne) as good as conceded the case. The argument is straightforward: the rules and procedures set out in the Bill mean that each political party has a ceiling on the contribution that it can make to a referendum campaign. That ceiling is effectively £5 million each for the Conservative and Labour parties, a lesser amount for the Liberal Democrats, and £500,000 for any other party with representation in this House.

If one took the gloomiest view from the Conservatives' perspective, which is that every other party in the House was opposed to the Conservatives' case in a referendum on proportional representation or the euro--they are on the losing side of those arguments, in their perception at least--and spent up to its limit, the total ceiling would be under £20 million. If there were no financial limits and every party in the House other than the Conservatives chose to invest in a referendum campaign the amount that the Conservatives invested in the general election, they would spend some £260 million.

The Conservatives' choice is between no limits, which may mean that some £300 million or even £400 million is spent, or spending that is regulated, however inadequately in their view, which would mean that the disadvantage suffered by them or by minority parties in a referendum campaign--I do not necessarily mean political parties--would not be so great.

The right hon. Member for North-West Hampshire (Sir G. Young) suggested that perhaps I had not addressed the intellectual case set out in the Neill report. I put it to him that he has not addressed the intellectual case of the sheer mathematics of the Bill's provisions, as opposed to the alternative of having no limits at all.

Having no spending limits would mean no constraints on the spending of the parties, and therefore on the side of the argument with the biggest and deepest pockets.

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Sometimes that will suit cases that the right hon. Gentleman wishes to advocate, sometimes it will suit those that I want to advocate, and there may be occasions when we are on the same side, but that is not the best way to reach decisions in a democracy. While we are introducing a formal process for the general regulation of referendums, we should introduce financial controls as well.

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