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Mr. Corbyn: I apologise for having missed part of my hon. Friend's speech: I had to pop out briefly.

In the case of a business involved in multiple operations and performing a number of different functions, how would the clerk decide on the sector to which that business should be allocated?

Mr. McDonnell: I think that it would be open to the business to opt for a sector, and to demonstrate that it was opting for the sector in which most of its activity lay, by reference to its accounts. Its trading practices could point to the operational constituency in which it would fit.

Mr. Corbyn: I take the point, but the profitability of one sector or another might well not be synonymous with the labour-intensity involved--the number of people employed. The Bill might give more votes to fewer people because those people produced more cash for the company, rather than giving more votes to a larger

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number constituting, essentially, a service within the company. The latter group might well be disfranchised, or at least have a reduced franchise.

Mr. McDonnell: Registration in the business electoral college is based on status as a business, not as an employer. Employees will be eligible for the employees' electoral college under the proposed system.

Mr. Skinner: What happens when there is a takeover? We know that business is global now. That means that foreign firms become involved, but presumably they will not have votes at the outset. How will they get votes distributed once they have taken over British firms? This sort of thing is happening all the time. Moreover, banking firms are moving into production, consumerism and so forth.

The more I hear about this proposal, the more I perceive that it contains the seeds of its own destruction. I am not all together happy with the great effort that my hon. Friend is making in regard to the electoral college. Furthermore, I want to know whether there will be a cap on political spending in the so-called constituencies, because I envisage a lot of fiddling.

Mr. McDonnell: I would expect the normal rules pertaining to local government elections to apply to expenditure controls. As for takeovers, mergers and the like, they are an inevitable part of commercial life. In the event of a takeover, if a business changed its operation it would move into another category at a subsequent election.

Mr. Dismore: What worries me is the possibility that a business would plump to go into an operational group that was under-represented, thus maximising its vote, perhaps out of all proportion to its real operational activity.

My hon. Friend the Member for Bolsover (Mr. Skinner) mentioned election spending. Election spending is calculated, per voter, on the basis of residential qualification. How can that possibly work in terms of employees, of whom there may be a million? Will there be a million 10 pences to be spent, or will the system be run in a different way?

Mr. McDonnell: That could well come within the remit of the new Electoral Commission, which is examining electoral practices overall. I think that the calculation should be done on the basis of a straightforward single amount for a business, rather than a quota basis relating to employment or turnover, but that is a matter for subsequent discussion.

Certainly the issue of plumping between business operational constituencies needs to be tackled. I think the town clerk should be responsible for ensuring the appropriateness of a location within a business operational constituency, although that is open to challenge. A business might try to disguise its overall operation illegally: it might apparently be operating in one field but plumping in another. That would be a matter for the town clerk to investigate.

Mr. Hopkins: Is there not a striking similarity between the system proposed by my hon. Friend and the system

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adopted by the TUC general council in regard to industrial groups? The difference is that the earlier arrangement was determined by a democratic set-up, elected by ordinary people year on year. Any irregularities or changes were monitored, and voted on democratically. This proposed system, however, is open to abuse: that is suggested by all that has been said so far. The problem is that the City corporation, rather than an external, independent body, will determine the arrangements.

Mr. McDonnell: As we are both ex-TUC apparatchiks, my hon. Friend and I understand the flaws in the TUC system. However, when I deal with the employees' electoral college my hon. Friend will note that it strongly reflects the TUC's voting structure and occupational groupings.

Mr. Dismore: My hon. Friend said that the town clerk would determine whether a business was plumping. Would the determination be on the basis of the town clerk's own inquisitorial powers to look into the matter following a complaint from an aggrieved person, and would a business feeling that it had been ruled against unjustly have the right of appeal?

Mr. McDonnell: According to normal practice in local government, when a matter is drawn to the attention of the chief executive or the monitoring officer--in this case, the town clerk--that is done on the basis of a complaint. Generally, however, that person will have powers of inquiry. Any further appeal is normally made either to the courts or, in some instances, to the Secretary of State. I think there is an opportunity here at least to instigate some form of appeal.

Mr. Corbyn: I am sorry to return to the issue of the Human Rights Act 1998, but my hon. Friend will be aware that under that Act every citizen who feels aggrieved about any matter has a right to have the matter determined by an independent body--independent, that is, of those making the decision in the first place. Clearly the town clerk, as an employee of the council, can hardly be deemed independent of his own decisions and therefore able to take an objective view of them. There must either be recourse to the courts, or recourse to a similarly constituted, duly independent body. That is now a provision in the European convention on human rights, and in the 1998 Act, with which the Bill must comply.

Mr. McDonnell: Any business person, any employee and any resident could, under the amendments, challenge the wrongful registration of a business within a business operational constituency. The town clerk would operate in the same way as the monitoring officer within local councils. The monitoring officer is seen to be independent, not operating at the behest of the political officers of the council or on behalf of the council itself, in undertaking a review and therefore a decision. My hon. Friend is right, however: there is a right of appeal to courts of law under the amendments, as there would be in other circumstances.

Votes in the business electoral college will be allocated to each operational constituency on the basis of the proportion of registrations for each business operational constituency.

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I was tempted to introduce a market performance incentive to the system by suggesting that the allocation of votes could be based upon the financial contribution of that particular sector to the City economy, or even more radically upon how many staff the businesses or a particular sector employed--but economically incentivising democratic participation was rejected as being too challenging and almost too Thatcherite.

8 pm

Amendment No. 23 limits the number of voters elected from the business electoral college to no more than 2,000. There will be about 5,000 residential voters--residents qualify under clause 3(1)(b) of the Bill. They will still continue to qualify for votes in City corporation elections. It is important that we protect the residents from being swamped by either business or employee voters, or a combination of the two. The amendment would cap the number of business voters elected from the business electoral college at 2,000, but I emphasise that it would not cap the number of voters eligible to be nominated by qualifying bodies to the business electoral college itself at the first stage of the indirect elections.

Mr. Skinner: Will those be recorded votes? If so, people with tons of money will be buying them. It only needs someone like, say, Maxwell to come on the scene and to buy votes and all the rest of it. If they are recorded votes, he has got them in his pocket. He could be switching pension funds left, right and centre; he could be running the show before we could say Jack Robinson.

Mr. McDonnell: I have not addressed in these amendments the issue of whether the votes will be recorded, or whether they will be by secret ballot. I have taken it as inherent in the democratic system of this country that all elections for a section of local governance of any nature would be by secret ballot, although that matter may be addressed in subsequent amendments. Alternatively, if we pass the Bill tonight, it may be addressed in the subsequent first report that is instigated under the legislation to review the operation of the new system.

Mr. Dismore: I pick up my hon. Friend's point about the balance between the business vote, the employee vote and the residential vote. It was my impression that the residents would still continue to work in the historic wards that go back to mediaeval times, with those wonderful ancient names. Is he effectively saying that the amendments would sweep away all those great traditions of history and that residents would have to vote as part of the overall amorphous square mile mass, breaking down the historic traditions of the little wards in which they live?

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