Second Standing Committee
on Delegated Legislation
Tuesday 30 January 2001
[Dr. Michael Clark in the Chair]
Companies (EU)
4.30 pm
The Minister for Competition and Consumer Affairs (Dr. Kim Howells): I beg to move,
That the Committee has considered the draft Companies (EU Political Expenditure) Exemption Order 2001.
The draft order would exclude activities such as the publication of newspapers from the definition of ``political expenditure'' under part IX of the Political Parties, Elections and Referendums Act 2000, while at the same time ensuring that the principles of accountability and transparency are properly applied in relation to political donations and expenditure by companies.
I shall briefly remind hon. Members of the background to the draft order. The Neill Committee's report on the funding of United Kingdom political parties recommended that any company intending to make a donation to a political party or organisation should be required to have the prior authority of its shareholders. The Government accepted that recommendation and, with the blessing of the Neill Committee, proposed both that the requirement be extended to cover political expenditure by companies and that the disclosure requirements under the Companies Act 1985 be amended to reflect the Commitee's recommendations.
The definition of ``EU political expenditure'' under the Political Parties, Elections and Referendums Act 2000 covers any expenditure incurred by companies in respect of activities which could reasonably be regarded as intended to affect public support for a political party or organisation, or to influence voters in a referendum. The definition has been widely drawn to ensure that it cannot easily be evaded; for example, companies should be required to seek shareholder authorisation for political expenditure in relation to a national or regional referendum.
At the same time, we are conscious that some companies carry on business activities that may, by their very nature, involve the publication or dissemination of material that is designed to influence the views of the public: journalism is an obvious example. Of course, it was not our intention that engaging in activities such as the publication of newspapers be considered as incurring ``political expenditure'', so we made it clear in debate on the Act in another place that we wanted to exclude such activities of political expenditure under part IX of the Act.
The Government take the view that it would be unwise to risk the rigidity that would arise from putting such an exemption in primary legislation at a time when the modes of delivery of news and comment are developing and changing fast; and that it is important to maintain a level playing field for all relevant forms of media. The Act therefore confers a power on the Secretary of State, by order made by statutory instrument, enabling him to exempt certain categories of company or expenditure from the requirements for the obtaining of approval resolutions in respect of the incurring of political expenditure.
The order-making power has been made subject to the affirmative resolution procedure in both Houses, because we recognise that it is a politically sensitive issue and it is right that Parliament is able to debate the matter. However, we believe that all hon. Members will support the Government's purpose in tabling the draft order.
A copy of the draft statutory instrument has been sent to the Newspaper Society and the Newspaper Publishers Association; the latter forwarded it to the editors of national daily and Sunday newspapers. The response has been entirely positive, with both the Newspaper Society and the Newspaper Publishers Association welcoming the fact that the Government have taken action to ensure that press freedom is not affected by the new controls on political expenditure by companies.
I emphasise that the order-making power under part IX of the 2000 Act does not extend to donations to political parties and organisations. Therefore, companies that may enjoy the benefits of exemption will remain subject to the full requirements of the Act in respect of such donations.
4.35 pm
Mr. Nick Gibb (Bognor Regis and Littlehampton): I welcome you to the Chair, Dr. Clark, and the Committee to Committee Room 10, which has been the home of many an interesting Finance Bill debate. I draw the Committee's attention to the blinds in the Room, which were installed by my constituent company Sun-X, which specialises in the control of visible and ultra-violet light. I thought that the Committee might find that of interest.
We have reached consideration of the draft order by a long and tortuous route. Were it not for the fact that there are so many other examples among which to choose, the draft order would provide a classic example of how not to legislate—that is not to criticise the Minister, although other examples might inspire such criticism, because the current example of poor legislative practice is Home Office-inspired, not the work of the Department of Trade and Industry.
The problem arose from the badly thought through provision in clause 128 and schedule 18 to the original Bill, which became section 139 and schedule 19 to the Political Parties, Elections and Referendums Act 2000. On Second Reading and in the Standing Committee on that legislation, it became clear that the requirement on companies to obtain prior approval from shareholders before making donations or contributions
``to registered parties and other EU political organisations''
was causing acute difficulties because of vague phrase ``EU political organisations''. The definition of an EU political organisation made the phrase even vaguer; it is defined as
``any other organisation which carries on, or proposes to carry on, activities of any political nature in the United King or any member State.''
In Committee, my hon. Friend the Member for North Dorset (Mr. Walter) made the telling point
``That catch-all provision could include all sorts of organisations. What is meant by the phrase `any political nature'? Might the provision include a think tank? Does the Institute for Public Policy research, or the Centre for Policy Studies, constitute an organisation carrying on an activity of `any political nature'?''—[Official Report, Standing Committee G, 10 February 2000; c. 389.]
The Minister promised to consider the point, but the problem persisted as the Bill passed through Committee stage in the other place, where Lord Mackay reiterated the criticism that the definition was
``too wide and too uncertain.''
He asked whether the definition included
``the Industry Forum of the Labour party, the Enterprise forum of the Conservative party, think tanks like the IPPR or the Institute of Economic Affairs''.—[Official Report, House of Lords, 24 October 2000; Vol.618, c. 236-37.]
and raised the issue of all-party parliamentary groups such as the all-party group on energy studies. Some such groups are funded by companies; would such funding constitute a political donation by the company concerned? Lord Blackwell, who is chairman of the Centre for Policy Studies—I have to declare an interest in that my brother Robbie is a deputy director of the CPS; he got the brains and I got the looks—made the important point that
``If the definition is not clear, it will be left to companies and their boards to decide on a case-by-case basis whether they believe that theirs is a political organisation under the terms of the Bill... That creates unhelpful uncertainty and may, on the margins, discourage corporations from giving to organisation to which we might wish them to donate.''—[Official Report, House of Lords, 24 October 2000; Vol. 618, c. 239.]
That is all relevant to today's business, because the Minister promised an amendment on Report in the other place to exclude all-party groups, and he said that he would like to consider the other points about think tanks. It is extraordinary that such points had not been considered before the Bill was brought before Parliament. I sometimes wonder what Ministers do all day in their offices. However, again, my criticism is of the Home Office, not the Department of Trade and Industry.
The Minister in the other place tabled an amendment which was agreed to on Report and which sought to refine the definition of a political organisation to one which intended to affect public support for a political party to influence voters in a referendum. That would exclude most think-tanks. The amendment also specifically excluded donations to all parliamentary groups and subscriptions to trade associations. However, it created a new and greater problem, which the Minister acknowledged. He said:
``The Government are conscious...that some companies carry on business activities which may, by their very nature involve the publication or dissemination of material which seeks to influence the views of members of the public: journalism is an obvious example—[Official Report, House of Lords, 22 November 2000; Vol. 619, c. 913.]
So, in order to deal with a problem, the Government created a bigger problem for themselves and the Minister promised more amendments on Third Reading. On Third Reading, however, the Minister, Lord Bassam said—and the Minister echoed his words today—that while it was not the Government's intention that publication of newspapers should be considered as incurring political expenditure,
``We believe . . . that it would be unwise to risk the rigidity''—
the Minister used the same word—
``which would result from putting such an exemption in primary legislation at a time when the modes of delivery of news and comment are developing and changing fast . . . The amendment would therefore confer a power on the Secretary of State . . . enabling him to exempt certain categories of company or expenditure from the requirement for the obtaining of approval resolutions in relation to the incurring of political expenditure.''—[Official Report, House of Lords, 27 November 2000; Vol. 619, c. 1186.]
So here we have a fundamental issue of freedom of expression. In order to deal with a problem in the original drafting of the Bill, the Government tabled an amendment redefining the definition of a political organisation, that inadvertently included the entire newspaper industry. So to get round that problem, they have now had to produce a statutory instrument specifically exempting newspapers from a restriction introduced in primary legislation. I do not consider it right that such a fundamental exemption should be in secondary legislation. The Government are using secondary legislation to protect the freedom of expression of our newspapers.
I accept that the statutory instrument is subject to affirmative resolution, but I also contend that there is absolutely no reason why the words of the statutory instrument, which must have been drafted at the time of the amendment in the other place that gave the Secretary of State that power, because the words used in the statutory instrument—
``publication or dissemination to the public''—
echo the words of Lord Bassam in that debate. There is absolutely no reason why the provision should not have been included in the Act, particularly as paragraph 3(2) says that
So the notion that such wording would be over-rigid if it were included in primary legislation is nonsense as the wording of the statutory instrument prevents it from becoming rigid by saying that whatever method is used to disseminate the information, whatever technological developments there are in the media industry, the industry will remain exempt from the provisions of the Act. It is alarming that the provision is not in primary legislation.
The present Government are the most partisan and party political Administration ever. They are completely obsessed by the press and media spin and are ruthless in their determination to control the message and manipulate the press. One has only to read Nicholas Jones' book about the 1997 election campaign. The measures in the Political Parties, Elections and Referendums Act 2000 were meant to implement the recommendations of the Neill report in full. Lord Neill explicitly ruled out cherry-picking, yet there are no provisions relating to tax relief on political donations and there is a cap on expenditure on referendums, which Lord Neill also ruled out. The cost of tax relief would be minimal—about £4 million—yet the Government use cost as a reason not to allow it.
I shall not rehearse the arguments of the Political Parties, Elections and Referendums Act, but it was used in a partisan manner. That is why I am worried that putting such an exemption in secondary legislation may also be partisan. It worries me that a fundamental freedom is given by way of an exemption to a piece of primary legislation. The Government do not grant us our freedoms; they are ours by right and the Government has to ask our permission to infringe on those freedoms if we consider it beneficial. The ramshackle way in which schedule 19 to the 2000 Act was amended, and now, by means of this statutory instrument, exempted, may well—and inadvertently, I hope—have undermined a fundamental principle.
Having said that, in view of the fact that without the statutory instrument newspapers would be in the absurd position of having to secure the approval of their shareholders before exhorting their readers to vote one way or another in an election or referendum, the Opposition will not oppose it, although we do not approve of the Government's handling of the matter.
4.45 pm
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