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Political Parties (Funding)

12.30 pm

Mr. Andrew Tyrie (Chichester): I am grateful for the opportunity to speak on this subject. I shall begin with a few observations about the state of politics, and particularly party politics in Britain today.

By general agreement there is a crisis of trust in politicians and of respect for parties. In a MORI poll published today, 85 per cent. of the British people say that they do not trust a Minister to tell the truth. Lest hon. Members think that I am making a partisan point, the figures are scarcely better for the Conservative and Liberal Democrat spokesmen. Trust in political parties is also at rock bottom. In 1974, 39 per cent. of people trusted Governments to put the interests of the nation above the party. According to a long-running survey of British social attitudes, which has asked the same question every couple of years since 1974, the figure has now fallen to 16 per cent.

My first observation about the loss of trust makes my second observation particularly ironic. During my five years as an MP, I have come to the conclusion that, contrary to public perception, it would be difficult to find a group of 659 people more dedicated and less corrupt than my fellow MPs. I doubt that any country in the world is less corruptly served by its elected politicians.

My subsequent observations will try to explain the paradox of the first two. The behaviour of parties, particularly the way in which they fund themselves, is a major cause of mistrust in politics. Allocations of cash for favours predate the election of Labour, but the latest rash has been especially severe: Bernie Ecclestone with his £1 million donation; the Mittal scandal; the Hinduja affair; the Enron donation; and now, PowderJect and Richard Desmond.

Then there is the trafficking of honours, which we all know is happening. Perhaps the Conservatives were at it too, but I thought that Labour was going to clean it up, that is until their lordships Bragg, Gavron, Haskins and the rest collected their red cloaks—all are big Labour donors. No wonder that the public think that politics stinks; perhaps it does.

One reason why the parties need to find money, and why the stench has got stronger, is that the once broad base of party funding from individual membership is collapsing. Mass parties are dying. In their 1950s heyday, 4 million people made an annual sub to one of the major parties, and that excluded subs paid through unions. Today, the number is 400,000, which is one tenth. The plain fact is that the major parties are bust, skint and in debt. Both businesses and individuals have simply stopped giving to, or even joining, parties.

I am led to several broad conclusions. First, British party politics, as we have known it—based on mass party activism and having a broad funding base—is history. Both the major parties, but particularly Labour, have to scrape around in unsavoury barrels to make ends meet. Accepting tainted donations has put a stench into the nostrils of the electorate. Party politics simply cannot carry on in that way. We must clean up our act.

I am saying nothing new, although I have not heard our respective party leaders making these points so starkly. None the less, both the previous Conservative

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Government and the Labour Government have tried to do something about it. They have responded in the same way with two sorts of measure.

First, they have introduced more transparency of donations, the so-called shareholder requirements for corporate donations and the disclosure provisions. Secondly, they have sought to bolster public confidence in politicians by creating respectable, independent-minded, sleaze-busting committees. There is a long list: Downey gave way to Filkin; Nolan gave way to Neill; and we now have Wicks. There is also the Electoral Commission. The trouble, which is not commonly perceived, is that all those initiatives are making the problem worse.

Taking the disclosure provisions first, it is often said that sunlight is the best disinfectant, but in this case disinfectant is killing the patient. Very few public companies even try to obtain shareholder approval for a donation to a political party, so that source of funds is drying up. That leaves parties in the hands a very few, rich, individual donors, which takes us back to Bernie Ecclestone, Mittal and all the rest. Is any hon. Member here prepared to stand up and say that those donations were wholly altruistic? No. So why on earth do we expect the public to believe that they were?

As for the sleazebusters, they certainly constitute a thoughtful, worthy and well-intentioned crew. That is what Britain does well—the best of the good and the great in action. Their problem is that, far from assuaging public concern, everything they say tends only to inflame it. That is not their fault. They make balanced comments and produce considered and worthy reports, but if they so much as hint at a problem with party funding and so on, the press have a feeding frenzy and the public's perception of politics declines further. Far from being part of the solution, the sleazebusters are part of the problem.

What is to be done? I shall not try to cut the canker out of the body politic in five minutes flat and I shall leave the sleazebuster problem, which is particularly difficult, for another day. However, we can do something about the funding of political parties, and we must act decisively to quench the impression that parties can be bought and that influence in government is for sale. Several basic measures are needed.

First, big donations, whether from rich individuals, their companies or trade unions, should be banned entirely. Institutional funding, as it is called, should be ended. I would put a cap on individual donations of £1,000—some say that it should be more and perhaps we could wear £5,000, but it should be low.

Secondly, parties need cash because that measure would remove the last remaining source of funds. A matching funding scheme is the best way forward. I suggest that state funding should provide that by matching donations from individual members of political parties up to a specific limit.

An alternative, which many countries have, is a scheme based on the number of votes cast at the previous election. It looks reasonable, but a severe drawback is readily apparent when looking at the way in which politics operate on the continent. It would almost certainly lead to further centralisation in the selection of Members of Parliament and, therefore, the erosion of that endangered species, the independent Back Bencher.

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An even more presidential style of politics would result and I do not like that. We already have a system of government that is too centralised and a system of politics that is too presidential. Payments made by the state on the basis of votes cast would only make the situation worse.

There are objections of principle to state funding, and I shall go through one or two very briefly. They are well rehearsed, and they are almost entirely bogus. The first is the argument that it forces people to give money to causes in which they do not believe. That is a complete straw man. We do not exempt pacifists from tax, even though we know that it is used partly to fund defence spending. In any case, and I think this is a much more important knock-down point, state funding is already here in a big way. About 40 per cent. of the cost of political parties between elections comes in cash or kind from the state already. About 60 per cent. of the cost of fighting general election campaigns is also state-funded one way or another. Those figures may strike some people as surprisingly high. I will put a couple of tables that I have prepared showing how I arrived at those figures in the Library and give them to the Lobby and the Minister after my speech.

What is at stake is not the principle of state funding, but the degree. There is another purist argument against state funding, which is that it would snuff out private civic engagement in the political process and ossify the party structure, turning parties into a unique form of nationalised industry. That is the best rhetoric I can find to justify that argument because I think rhetoric is all that it is, for several reasons. First, the public are already disengaged from party politics. That is the 4 million to 400,000 point with which I began.

Secondly, broader civic engagement is thriving in Britain. Let us look at the vibrancy of pressure groups. There is a huge amount of political activity going on in Britain today, but it is not channelled through the traditional system of party politics. It is mainly boring old politicians such as us, and institutions such as Parliament that find the fact that there is so much of this novel, unusual form of politics going on so concerning. They might be giving us the bird, but people are more informed and attentive to political life in Britain in the widest sense than they have ever been. I am particularly struck when I go to schools in my constituency and find how well informed young people are about politics today, and that they are often already engaged in interest groups. That is quite the opposite from the rhetoric that comes from the main parties about how sad it is that we cannot get the young to vote. The young are deeply engaged in politics, but not the form that we would like them to be engaged in.

The third reason why I think that the purist argument against state funding—that it would lead to civil disengagement—is nonsense is that we are where we are. At least, matching funding will encourage parties to increase their membership and that might revive just a little the type of civic engagement that many want to see. Of course, matching funding will not assuage the public's mistrust of politics and parties at a stroke. State funding has not spared several continental countries from scandals of their own. However, I am confident that we cannot stay as we are.

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Politics cannot function without parties, and parties cannot be forever struggling to find the cash to enable them to perform essential functions while struggling to fend off allegations of improper funds brought to them from sources that they would rather not know about. That cannot go on. It will carry on eroding the public's trust in the body politic itself unless we take action. Action is available—the sooner we take it, the better.

12.43 pm

The Parliamentary Under-Secretary of State for Transport, Local Government and the Regions (Dr. Alan Whitehead) : I congratulate the hon. Member for Chichester (Mr. Tyrie) on securing a debate on a topical issue—the funding of political parties. I commend him on a thoughtful and carefully reasoned contribution to the debate, which the Government welcome. Equally, we do recognise that at the moment there is no consensus on the issue. Indeed, that is reflected by the fact that I suspect that the hon. Gentleman's contributions are, for the present at least, at odds with the leadership of his party in Parliament and the country.

The hon. Gentleman is right to reflect on a conundrum in public perceptions. Hon. Members on all sides of the party divide—they are represented in the Chamber—have entirely honourable intentions, although they may not agree about how to implement them. In that regard, I share the hon. Gentleman's view of our colleagues, which certainly reflects my overwhelming impression after five years in Parliament.

It is also a conundrum that many members of the public may take a low view of MPs, but a high view of their MP. The way in which they think about their MP differs from the way in which they think about Parliament and MPs in general, because they know him, what he does, how he got there and what his aims and intentions are.

To respond to the hon. Gentleman's points, it would be wrong not to recognise that a carefully developed and robust regime is already in place to deal with the funding of political parties, and the hon. Gentleman mentioned sleazebusters. The Government did not dream up that regime to suit their own ends, and it flows directly from the recommendations in the fifth report of the Committee on Standards in Public Life. The Committee discussed the funding of political parties in the United Kingdom, and was chaired by Lord Neill of Bladen. The policies and practices that the Government follow today are square with its recommendations. The hon. Member for Chichester said that that might be part of the problem when it comes to dealing with the longer-term consequences of any changes, but it is important to recognise the Government's position.

The core values of the existing regime are openness and transparency. When the Neill Committee reported in 1998, it took the view that it would be wrong to limit the amount that any individual company or institution could contribute to a political party, and there were clear arguments in support of that view. It was argued to the Committee that limits on the expenditure of political parties would tend to lessen the need for large donations, and prevent parties from becoming too dependent on a narrow income basis. The Committee felt, however, that that argument was outweighed by the

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threat that such restrictions would represent to individuals' freedom to contribute to parties, which is an essential feature of a healthy democracy. At the same time, the recommendation for limits on campaign expenditure would have a regulating effect on levels of donations.

Equally, the Committee saw that openness and transparency were central to ensuring that the public had confidence in politicians and to the effective operation of any democracy. Openness and transparency were seen as the best way of tackling concerns that undue influence on government decision making might arise from donations to political parties. The Committee therefore recommended introducing a requirement to disclose any donation of £5,000 or more, to remove illegitimate pressure and suspicions that improper influence or access might be gained by making substantial donations.

The Committee noted that further transparency would be obtained by requiring a company to obtain the agreement of its shareholders before making donations, and the hon. Gentleman mentioned one practical outcome of that requirement. Reforms that were introduced in 1984 had already made it a requirement for trade unions to gain their membership's approval for donations, so the new requirement levelled the playing field.

It has been Labour party practice since 1995 to record donations in its annual report, so the Government welcomed the Neill Committee recommendations. Parliament then legislated for such a regime in the Political Parties, Elections and Referendums Act 2000, and new rules on declaring and registering donations have been in place since 16 February 2001.

The Neill Committee did not, however, examine what should happen as regards donations in isolation. It concluded that donations to political parties, if properly regulated, were a vital element in ensuring a buoyant political party system. However, it also considered—this is the nub of the hon. Gentleman's point—whether there was a case for the state funding of parties, either partially or wholly. It considered the arguments both for and against state funding, many of which were mentioned by the hon. Gentleman this morning. As he said, we already have a strong starting point for state funding in the Short money that is provided to enable opposition parties to conduct their business in Parliament. New money will soon be made available by the Electoral Commission and, although it is not generally recognised, there is substantial underwriting of the expenses incurred in taking part in a general election, such as postage in sending out election addresses. I was interested that the hon. Gentleman made a precise calculation of the extent to which state funding already plays a part in our system.

In favour of state funding, the Neill Committee emphasised that it might have a purifying effect, as large donations would no longer be needed; it would allow parties to perform their essential tasks more fully and effectively; and, in some countries, where donations from individuals are matched by state funding—that is a form of the proposal that the hon. Gentleman put

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before us today—overall party funding has increased because the state funding and donations from individuals run side by side.

The Neill Committee also set out some arguments against state funding: taxpayers should not be compelled to contribute to supporting parties with whose policies they may strongly disagree; it is difficult to justify such expenditure against other calls on public expenditure; there is a possibility of parties ossifying and not allowing new blood in. The hon. Gentleman also referred to funding elsewhere in Europe, where, one can argue, the way in which parties are funded means that they exist on the basis of that funding and do not necessarily rise or fall as a result of the more natural processes of their appeal to the public on the basis of their policies.

The arguments are finely balanced, as the Committee on Standards in Public Life recognised. It said that there might be circumstances in which the need for more state funding became imperative, but it was firm in the view that that time might never come and certainly had not arrived in 1998 when its report was published. The hon. Gentleman's arguments may suggest that that debate has already moved on somewhat.

The Committee concluded that no new system should be introduced whereby the state was obliged to provide financial support for political parties for the indefinite future. At the time, the Government agreed with that conclusion.

In conclusion, I want to emphasise two points.

Mr. Tyrie : I wonder whether the Minister would clarify one point. As I recall, although I do not have a copy of it in front of me, in the Labour party's submission to the Neill Committee, the main objection to the argument that a more comprehensive system of state funding should be developed was that the Labour party could think of better ways to spend the money. It was not an objection of principle but of practicality. Is that still the Labour party's principal objection to the Neill Committee's findings?

Dr. Whitehead : It would be difficult for me to speak authoritatively for the whole Labour party on that matter, but the point was made at the time—I have already alluded to it as one of the arguments against state funding that was considered by the Neill Committee—that any substantial expenditure, such as a block grant to the major political parties, might need to be justified against other calls on the public purse for pressing matters of public investment and expenditure. It might be difficult to say that a block grant should go in one direction rather than another that is seen to be a matter of pressing public concern. That argument should be taken seriously. It is interesting, in terms of the recent conduct of the debate, that hon. Members, not just the hon. Member for Chichester, have been considering different ways in which a block grant might be cast—perhaps by using matching funding on membership or on votes cast—and a recent article in The Times by an hon. Member suggested that it might be possible for people to tick a box on their tax returns. Various devices might overcome that objection. Nevertheless, it is a substantial concern that must be

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addressed if hon. Members are thinking about how to make progress where state funding of political parties is concerned.

Mr. Tyrie : I apologise for having intervened twice and I am grateful to the Minister for giving way. It is a political fact that the Labour party is getting hit at the moment, not the Conservative party. We hear one allegation after another. I am not debating any particular case—that is not the issue. It is the public perception that concerns us today. Does the Minister concede that if we are to alter public perceptions, the Government must give a strong lead? It is not enough to hope and to wait for other political parties to weigh in behind.

Dr. Whitehead : My immediate thought is that the lack of consensus among political parties about the way forward has an effect on the extent to which any governing party can declare that it wishes to go down a certain route and expect that to be taken as a valid starting point to a debate. The Government of the day—of any day—is the focus of the spotlight on donations. A unilateral decision about what to do might be seen as the Government's attempt to extricate themselves from a perceived position. It is therefore important that any debate should be conducted in terms of a consensus about what should be done for the health of the body politic, rather than for perceived party advantage.

Mr. Tyrie : I will be very brief. It is a question of saying not "This is what we are going to do", but "This is a direction in which we would like to go". I am not getting that sense of direction from the Minister. I know that he does not want to change party policy right now, but if we are to make progress, there must be a desire to change direction; otherwise, nothing will happen.

Dr. Whitehead : I think that the hon. Gentleman would be surprised if a sudden announcement were made about the future of state funding for political parties during an Adjournment debate in Westminster Hall. I have attempted to set out a number of relevant matters for consideration, and I welcome the fact that the hon. Gentleman has raised his issues in such a thoughtful and careful way.

Stories about donations and whether they have or have not had influence seem to be flavour of the month. No evidence has been produced to indicate that any donations have resulted in their donors receiving improper or preferential treatment, nor is it the case that the Government have closed their ears to any debate on the issue; we welcome the current debate.

Four years have elapsed since the Committee made its recommendations and over a year since the provisions of the 2000 Act came into force. The Electoral Commission has begun a review that will assess the case for a cap on political donations and state funding, and the Select Committee on Transport, Local Government and the Regions has announced that it proposes to look into the matter. The Government look forward to studying both reports.

Mr. John Cummings (in the Chair): Order.

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