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(a)   the House of Commons has in place arrangements requiring the member to report such donations, and (b)   the Commission think that the arrangements correspond to the requirements of paragraph 10.

(2)   The Commission must make such arrangements as they think appropriate corresponding to section 69 as modified in pursuance of paragraph 15(3) to maintain a register of such information as they receive relating to such donations."

(4)   The Secretary of State must not make an order under section 69 for the purposes of this section as it applies to members of the House of Commons unless he is informed by the Commission that they are satisfied that they will receive the information mentioned in paragraph 15A(2) of that Schedule (as inserted by subsection (3) above) in relation to such members.'. —[David Cairns.]

Brought up, and read the First time.

David Cairns: I beg to move, That the clause be read a Second time.
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Mr. Deputy Speaker: With this it will be convenient to discuss the following amendments: No. 21, in clause 29, page 33, line 36, leave out

'of four months ending with'

and insert

'from Notice of Election until'.

No. 22, in page 33, line 40, leave out

'of four months ending with'

and insert

'from Notice of Election until'.

No. 23, in page 34, line 1, leave out

'starting with the day when the vacancy occurs and ending with'

and insert

'from Notice of Election until'.

No. 20, in page 34, line 17, leave out subsection (6).

No. 3, in clause 30, page 34, line 33, at end insert—

'"(3B)   For the purposes of subsection (3A), any expenses incurred by a registered political party in respect of communicating with an individual elector in that election, at the address at which he is registered, shall be treated as an election expense if that communication makes reference to—

(a)   the constituency in which the elector is registered, or

(b)   any place or person within that constituency, or

(c)   any candidate in that election, irrespective of whether that communication makes reference to the candidate of that party by name.".'.

Government amendment No. 63.

David Cairns: In discussing the new clause, I shall take the opportunity to indicate the Government's attitude to the other amendments in the group.

Schedule 7 to the Political Parties, Elections and Referendums Act 2000 sets out the requirement that holders of elective office should report donations that they receive to the Electoral Commission, which then publishes them. Hon. Members must currently report donations to not only our own Register of Members' Interests, but the Electoral Commission, and many hon. Members take the view that such duplication is unnecessary. The hon. Member for Somerton and Frome (Mr. Heath) made that point on Second Reading.

On Second Reading, I said that we would consider the matter carefully and introduce our proposals. The Standards and Privileges Committee, of which the right hon. Member for North-West Hampshire (Sir George Young) is the Chair, published a report today expressing its support for new clause 15:

the Government's proposals—

The new clause is relatively simple. It means that hon. Members will not have to report donations to the Electoral Commission, whether those donations were received in their role as an MP or in their role as a member of a registered political party. For technical reasons, the new clause retains the requirement for the Electoral Commission to record details of such donations on its register. The commission will also continue to monitor compliance with the regulatory system, as set out in the 2000 Act. However, it will have
11 Jan 2006 : Column 349
no role to play on the non-reporting of donations, and the Register of Members' Interests will retain its functions on that issue. The provision will commence only when the Electoral Commission is content that the House authorities have sufficient arrangements in place to ensure that the commission can still maintain an accurate register, but we do not think that that will be a problem.

We are working on a solution that would remove the requirement for all holders of elected office, which includes MEPs, Members of the devolved Administrations and local councillors throughout the UK, to report donations to the Electoral Commission. The Electoral Commission and the relevant bodies, including the Scottish Executive and the Standards Board for England, support the proposals, but some technical issues remain to be resolved, and we will continue to explore them with the intention of tabling an amendment, which will be introduced later in the Bill's parliamentary passage, covering all holders of relevant elective office.

Amendment No. 21 deals with what has become known as the "four-month issue" or the "relevant period issue". Although the provision concerns only third-party spending, there has been a great deal of discussion about the efficacy of the relevant period concept. I should like to take a moment to explain to the rest of the House the point that we have reached.

All members of the Committee, without exception, accepted that there is a problem in our system. We accept the principle of expenditure limits for national parties; that has been set, agreed to, and adhered to. We also accept the principle of expenditure limits in individual constituencies during general elections. That is a well understood and well adhered to policy. However, a relatively recent and growing phenomenon is that of the third category, as my right hon. and learned Friend the Minister described it in Committee, of unlimited, uncapped local spending in specific constituencies in the run-up period—the proximity period—to a general election. If we accept, as I think we all do, that there is a role for money to play in elections, but that it has to be regulated and limited, now is the opportunity to address the lacuna whereby unlimited spending can be undertaken in individual constituencies, often to the tune of many tens of thousands of pounds.

The Electoral Commission made a proposal, which we incorporated into the Bill and discussed on Second Reading, to introduce a four-month election campaign period, to be dated backwards from polling day, which would in effect spread the spending that takes place during an election across four months. That was an attempt to deal with the third category of spend. That proposal was not without its flaws, which were debated in depth, so I will not rehearse them. One problem is that we would not know when we were in the four-month period, because we cannot know that an election is going to take place until Parliament is dissolved, the Prime Minister goes to the palace and the election kicks off.

Another proposal was to revert to the status quo ante and not have MPs becoming candidates on the dissolution of Parliament, but it was felt that that would
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resurrect the prospective parliamentary candidate system, which also had its flaws—that was why we moved away from that in the first place.

Another major consideration in Committee was that because the spending limit for the four-week campaign—for want of a better phrase, the short campaign—is relatively low, perhaps on average about £10,000, although it obviously varies according to the size of constituency, if it was spread not over four weeks but four months, that would seriously limit the amount of legitimate campaigning that could go on in the run-up period to a general election. We have absolutely no wish to do that. The hon. Member for Somerton and Frome suggested—I do not think that it was his preferred option, but an attempt to explore some of the problems involved—that we should simply double the limit for the election campaign spend. However, that would create other problems. If the limit was put up to £20,000 or £25,000, there would be nothing to stop someone not spending anything in the run-up period but spending it all during the election campaign, which would have a distorting effect.

I hope that I have made it clear that there is no obvious solution to the problem that does not result in other problems. We therefore undertook in Committee to attempt to explore the issue further, in consultation with Front-Bench spokesmen, and to give an outline of how we will proceed.

Another point that was clearly expressed in Committee was that during the run-up period, or proximity period—the three months before the dissolution of Parliament—we will all continue to be MPs and to do our duties as MPs, including communicating with the electorate. Members expressed the fear that if we did that inadvertently during the time that was retrospectively to be part of the election campaign, we would get into trouble. That is a legitimate fear. We have to make it absolutely clear that expenditure by MPs discharging their duty to communicate with their constituents will not, wherever it has been sanctioned by the incidental expenses provision, in any way be counted against election spending after the event. We must be clear about that. Further consultation with the House authorities and the Electoral Commission is required to ensure that such a provision is robust and that Members of Parliament who go about their business will not be caught out by claims that something or other constituted election expenditure.

4.15 pm

Of course, the rule for indicated expenditure provision is that it must not be used for campaigning or party political purposes, irrespective of whether we are in the run-up to a general election. If we maintain the integrity of the IEP rules, that fear can be set aside.

We seek consensus on the issue. The hon. Member for North-East Hertfordshire (Mr. Heald) was probably right to say that all the controversy was likely to be about the first group of amendments. That is not to say that there will be harmony on everything else but we all accept that a problem exists and we are trying to find a solution together.

We want a workable solution that tackles the problem and maintains and strengthens the transparent and accountable regulatory system. To that end, we have
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been consulting the Opposition parties and the Electoral Commission, and have devised what may be—I believe that it will be—a workable alternative. We propose to maintain the concept of a run-up period to the election campaign but to protect the election campaign as it currently stands. In other words, the campaign will kick off at Dissolution and a Member of Parliament will continue to be entitled to spend everything that one is now allowed to spend during the four-week campaign. That money is ring-fenced.

However, we propose to introduce the concept of a run-up period of three months, during which there will be a separate cap on what can be spent locally in a constituency. That period would have an expenditure limit. The definition of election expenditure would take account of the fact that Members of Parliament continue to carry out their parliamentary duties and constituency activities. During the run-up period, election expenses would cover only campaigning costs.

The proposal would create a rolling three-month period with a discrete limit. That will provide greater clarity by setting the rules for what can be spent on campaigning activities in the run-up to the dissolution of Parliament. It would avoid a situation whereby candidates accidentally exceeded the election expenses limit simply because they did not know that they were in the election period. The three-month proximity or run-up period and the current period would apply to all candidates thereby maintaining a level playing field.

The proposal does not resolve all the problems about the concept of a run-up period. Legitimate anxieties remain about the role of election agents and their legal responsibilities. I am sure that the hon. Member for North-East Hertfordshire will want to discuss those further. Problems remain such as precisely what spending should be included in the two different periods. Amendment No. 3 focuses on that. Whatever happens, the election expenses limit will almost certainly need to be increased. Problems remain about communicating with an individual elector and the correct category into which such communication falls.

We therefore propose to table an amendment at a later stage to take a power under the Bill to introduce a scheme through secondary legislation, which will follow full and wide-ranging consultation with all interested parties. We will learn from political parties' expenditure, party lists in Wales and Scotland and the Electoral Commission's current work on expenditure at the previous general election. I want to give a clear assurance that hon. Members will have the opportunity to have their say during any proposed consultation and before any scheme is submitted to Parliament.

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