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Party Political Funding

11 am

Matthew Taylor (Truro and St. Austell) (LD): I welcome the opportunity to raise—for the third time in the past six years—the issue of party funding. I see some of the same faces joining us for the debate.

In the past, the issue has been associated with the review by the Electoral Commission. I shall try to feed into that debate, although it will not surprise anyone that part of the motivation for calling this debate, in which a number of hon. Members will want to participate, is the fact that, despite the changes over the years and the words from previous Ministers about increased openness and transparency, we are back in the mire of—for want of a better phrase—political sleaze. There have been huge doubts about the basis on which donations are given and an even greater fall among the general public in respect for parties across the political spectrum, in terms of how they raise money and the motivations of those who give it, rightly or wrongly.

Mr. John Spellar (Warley) (Lab): I am sure that the hon. Gentleman will help the debate if he can indicate whether Michael Brown was on the electoral register on the date on which he gave a donation to the Liberal Democrats and whether Mr. Brown's company, 5th Avenue Partners, was conducting business in the United Kingdom on that date, which was 10 February 2005. If the hon. Gentleman can do so, perhaps he can, on behalf of the Liberal Democrats, enlighten the Chamber about the business that 5th Avenue Partners was undertaking in the UK.

Matthew Taylor : The right hon. Gentleman intervened marginally before I was about to say that the issue has consumed all three political parties. To put it bluntly, I shall not defend the Liberal Democrats any more than I intend to defend the Conservative party or the Labour party. I am not in a position to give the detailed answers for which he asked; that is a matter for the Electoral Commission.

The episode has done the Liberal Democrats no good at all. The donations that the Conservative party has received have done them no good politically, with the embarrassments ranging from the circumstances in which a previous Conservative leader put peers into the House of Lords to the fact that, in order to maintain anonymity for some of its donors, the party had rapidly to repay £5 million rather than publish the details, let alone the scandals that have engulfed the Labour party. All the political parties have been damaged by the process. I have consistently said in this place that they will continue to be damaged as long as political parties are increasingly reliant on major donors for their funding.

Mr. Andrew Turner (Isle of Wight) (Con): I confess that I was listening to the hon. Gentleman with only half an ear, but I thought that he said that he was not going to defend the Liberal Democrats. Did I hear him right?

Matthew Taylor : It would be slightly odd if I defended the Liberal Democrats, given that I have consistently argued that political parties should not receive such
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major donations. The only defence that I would give is that, as long as we have a political system in which some parties receive major donations from multi-millionaires, all the parties will inevitably seek such donations in order to compete. Otherwise, parties will have to fight elections with many fewer resources than other parties and therefore they will have their arms tied behind their backs. Even as we stand, the Conservative and Labour parties spent some £17 million each in the last general election, let alone in the run-up to it. The Liberal Democrats, with one major donation, were able to spend about one quarter of that. There is an arms race and any arms race will lead to people competing for funds from donors.

I do not know what the Labour or Conservative party's track record is of refusing donations that are felt inappropriate. The Liberal Democrats turned down £1 million in 1997, which was the only major donation that we were offered, because we did not feel it appropriate. The donation would not have been illegal, nor was there any requirement to turn it down—at that stage, we would not even have been required to publish the fact that we had received such a donation. We turned down the offer because we felt that it would not have been right to accept it from Mohamed Al Fayed. That is a matter of public record.

If the question is asked, "Do you believe that it is a good thing for us to accept Michael Brown's donation?" my answer is no. If the question is asked, "Do you believe from what you now know of what happened"—and that is no more than the right hon. Member for Warley (Mr. Spellar) knows—"that it would have been better to refuse it?" my answer is yes. However, the same can be said of the donations to both the other political parties. My hon. Friend the Member for North Southwark and Bermondsey (Simon Hughes) will speak officially on behalf of the Liberal Democrats in a minute, so hon. Members might want to direct questions to him. As long as all the political parties rely on such sources of funding, we shall continue to see such problems.

If I wanted to, I could spend 20 minutes to half an hour talking the Chamber through details of the Labour and Conservative parties' record on such donations, but that would not be helpful. We all know the scale of the problem. It is also noticeable that hon. Members from both sides of the House, many with direct experience of such work at the highest level in their party, say that the present situation is unacceptable and cannot continue.

Mr. Spellar : Fortunately, we have been joined by the hon. Member for North Southwark and Bermondsey (Simon Hughes), who might be able to add some information. The hon. Member for Truro and St. Austell (Matthew Taylor) knew that he would introduce this debate, but he has been remarkably incurious about the obvious questions. There is a difference: both the Conservative and Labour parties are not aware of any suggestion that their current donations have come from improper sources, in that they were potentially illegal owing to the domestic status of either the individual or the company. I return to my question: could the hon. Gentleman say whether Mr. Brown or his companies were legally in the position to make that donation? If not, perhaps the hon. Member for North Southwark
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and Bermondsey, who is president of the Liberal Democrats and therefore at the heart of the party, could enlighten him and the rest of us.

Matthew Taylor : I am sure that my hon. Friend the Member for North Southwark and Bermondsey will do that, but I understand that the Electoral Commission has looked at the issue and has so far been pleased that the answer is yes.

Mr. Spellar : It has not decided.

Matthew Taylor : The position so far is as I described, but the commission continues to investigate. However, my hon. Friend the Member for North Southwark and Bermondsey might want to add some information.

Simon Hughes (North Southwark and Bermondsey) (LD): I am happy to deal with the question, not least so that my hon. Friend can get on with making his argument. The donation was given and checks were carried out. The test was whether the company was trading and it was believed on the evidence that it was. The evidence has been given to the Electoral Commission, which has carried out a check and believes that the test has been satisfied. The commission has not come to a final view, but it has given us a definitive view, which is that the action was perfectly legal from all that it knows.

Hywel Williams (Caernarfon) (PC): For the record, I note that there are four parties represented in the Chamber, not three. Without climbing on too high a horse, I should like to ask the hon. Member for Truro and St. Austell (Matthew Taylor) to confirm that his remarks refer to three and not four parties.

Matthew Taylor : The Scottish National party and Plaid Cymru have received major donations in the past. The same applies across the board, although I do not know whether any donations have been received in illegal circumstances. We have heard public criticism from Members on both sides of the House, including from leading Members who are in a position to know. We have read the Labour party treasurer's comments about the extraordinary fact that he was not informed that such loans were being made. Bluntly, it is inconceivable to suggest that the idea that donations should be given in the form of loans was anything other than an attempt to make secret what was happening. The fact that those donations then led to peerages makes the situation worse.

We have seen, however, the same on the Conservative side. I was pleased that a former chairman of the Conservative party, Lord Fowler, said that it was unacceptable for things to continue as they were. We must remember the comments that were made when a peerage was awarded to Michael Ashcroft. The former leader of the Conservative party in the Lords said that the award was

The former leader of the Conservative party said:

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He went on to say that clearly the £3million donation to the Conservative party must have been for some purpose, and, in his words,

The issue has without doubt lowered the public standing of the political parties and, on those grounds alone, the House should seek an end to it. I depart from the proposals for a cap at 50,000 made both by the Conservative party—its views are now rather different from those argued on its behalf in the last two debates on the subject—and by my own party. It is evident that one family could still make a donation of a size that would be of considerable influence on political parties, particularly if it were a repeat donation year after year.

The rules should be simple. Donations should not be at a level that could conceivably influence a political party. To me, that would suggest a limit of £10,000 rather than £50,000. At least we are talking about a ballpark figure that is different from the donations of £5   million or £3 million that both the other main political parties have received, or even the £2 million or so that the Liberal Democrats have received.

It seems evident that whatever is said, when donations take place on such a scale in a political system in which elections can be closely fought and expenditure by the biggest political parties is on a scale of £10 million, £15 million or £20 million, donations of £5 million will influence or potentially influence those who need them in order to fund their political campaigns.

As I have argued before, an even bigger potential distortion results from such major donations. In 1997, one individual spent £20 million on setting up from scratch and running a political party, the Referendum party, which did not have a base of individual support at the start of the process, at least. He was able to do so in a way that significantly affected the size of the Conservative defeat. In a different election campaign, such as the one in 1992, the result of the general election would have almost certainly changed on the whim of one individual. That cannot be right either. At present, we have nothing that would stop such an individual affecting political outcomes in such a way.

Over the past few weeks, considerable attention has been given to the British National party. It fights elections with little money, few members and little support. It fights nasty, intimidating elections on the doorstep. Just imagine what its campaigns would be like if the person who funded the Referendum party had instead decided to put £20 million into the BNP.

When those who argue against state funding say, "What would happen if the BNP were funded?"—I will talk a little about what I think that we should put in place—let us not forget that on the whim of one individual, the BNP could fight these local elections, the next European elections or the following general election with a fund of £10 million, £15 million, £20   million or £100 million. There is nothing to stop that. In a democracy such as ours, we should be aware that in a world in which increasingly large numbers of people make substantial sums of money, the chances of maverick individuals of one sort or another—not least those maverick individuals who might choose to fund the Liberal Democrats—putting money behind one
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political party or another, or perhaps behind an extreme political force, and changing the outcome by force of cash rather than force of political argument or anything else, should be taken extremely seriously. We should seek to limit that. No system perfectly protects democracy, but the present one clearly does not.

Mr. Andrew Turner : Earlier on, the hon. Gentleman's argument seemed to be that certain people might, through the use of cash, exert influence on those who were likely—or perhaps less, in his case—to form a Government. Now he seems to be saying he objects to the very fact that people with a lot of money can back a political party, even one that stands no prospect of forming a Government. Would he cast his mind back to Saturday, when there was a substantial demonstration in London against the BNP? Does he believe that influencing against a party is as bad as influencing for a party?

Matthew Taylor : I believe that, in a functioning democracy, we should build on the support that we can win from individuals. That obviously needs cash, but it can be done through small donations and small contributions. It should not be in the power of an individual to bias political outcomes because they happen to be able to write a very large cheque.

There are two issues. The first is the power of the individual, on a maverick decision, to make a donation here or there that will affect political outcomes. That could make the difference between winning or losing an election such as the 1992 general election. It is perfectly apparent that had the Referendum party fought in 1992 rather than 1997, we would have had a different general election outcome entirely. It is also about an individual's willingness to support an extreme force. I doubt that the BNP would win any parliamentary seats if it gained £20 million—I certainly hope not—but it could affect the outcome by pulling votes from another political party or by massively increasing the risk of racial tension, racial violence, rioting and so on in the areas where those resources were used to campaign.

The second issue is about the diminution of the respect for, and standing of, political parties and the political process when honours are bought and sold. Honours have always been bought and sold. Few hereditary peers in the House of Lords were there for anything other than a favour at one time or another. The great majority of the appointed peers are there because of the political contribution they have made to one party or another, in one way or another. They may have actively pursued a career of support for their party—they are unlikely to be there for being an active maverick—or have made a major donation. That is the reality. If the House of Lords is elected in the future, as I hope it will be, those favours will still be transferred in other ways.

I will give an example of somebody who has refused any kind of peerage or gong. Stuart Wheeler has made it clear that he has attached his donations to not getting a title. Nevertheless, we know that he sought to influence the political stance of the party and who was its leader. There is no doubt that somebody who has a large chequebook is more likely to exercise that influence than an ordinary member who raises funds for the party by
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boiling up jam and selling it at the local jumble sale. We all know that takes place even though it should not happen in theory.

We have seen that happen even from a Government who came in determined to clean things up. We have seen them fall into exactly the same traps as their predecessors. It is rather a surprise to us all to have this debate in the context of what has emerged from the last general election, because we all probably felt that things had been better cleaned up after 1997. There was a degree of consensus on that and a feeling that transparency would at least change things. We now know that the process has been more transparent, but that the public do not like what they see. When the political parties discovered that the public did not like what they saw, they tried to cover it up again by finding routes around the rules. Let us clear it up.

There is a third, fundamental reason why we should look to change. At the moment, we have the worst of all worlds. We have all the scandal and parties determined to try to find £2 million, £3 million or £5 million donations but, at the same time, we see a creeping increase in state funding. The public are putting in money, but they are not getting anything in return in terms of a cleaner political system. They are just adding to the arms race, a little like mortgage interest relief added to house price increases. As long as more houses are not being built, all such relief does is add to the price and it does not help anyone buy anything, but the state merely subsidises yet more increases in land value.

In this case, state funding has not stopped the political race for funding but added to the level of expenditure by all political parties. It has done so in a way that rewards the status quo. The money is tied to the existing political establishment on the basis of past political performance. In fact, all three parties do quite well out of it, and all will have views on how the other parties do. I know that the Liberal Democrats feel that we are a little hard done by. The Tories have made representations in the past to say that the official Opposition should get more money than other Opposition parties, including the Welsh and Scottish nationalists. Everyone has a view on that, but the truth is that such funding rewards the status quo. Those who have the seats—those who previously received the votes—receive funding through Short money and so on.

I genuinely welcome the fact that the Conservative party has changed its position, because it sometimes used to indulge in the most bizarre hypocrisy. I read an article by a former deputy chairman of the Conservative party a few years ago in which he opposed the principle of state funding, yet in the same year the Conservative party received the majority of its funding from the state when compared with donations—some £4 million in direct funding support from the state and the £3.5 million that the party raised in donations.

We are seeing a growth in donations, but the public are getting nothing in return. We need to watch what happens over the coming months, because I am extremely concerned that we will see another rather cosy deal for the establishment—including the Liberal Democrats—in which the status quo is further rewarded in return for, at last, the cut in the donations and expenditure that has taken place.
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For me, the debate is not about what has happened with the three main parties. I am not saying that one party is better than the others—they are not. Some parties have bigger opportunities than others, and Governments will always be under the spotlight for giving favours because they in a position to do the most favours. Parties such as mine will always be under the spotlight for hypocrisy because we hardly ever receive donations; we seem to be whiter than white until we do, but we are no more able to turn down donations than the others. The same goes for Plaid Cymru and the Scottish National party.

We are all in the same mess, and we need to find a solution. To replace the funding raised by the political parties would probably cost 40p per elector each year. That is what it would cost to clean up the act. The crucial thing is that we should not be given yet more Short money, yet more policy development money or yet more money to reward the established parties. It is crucial in a functioning democracy that politics should be changed by the power of the people.

Support for the parties ebbs and flows; sometimes it goes towards the Conservatives, sometimes towards Labour and sometimes towards others. The political system is in a process of genuine change, and none of us knows what politics or the party structure might look like in 10, 20 or 30 years. It is vital that the parties should follow the public mood rather than dominating it, because the funding of established parties is based on that establishment. I have consistently argued that funding should be tied to the public support of members and supporters who make small-scale donations—match funding at the local level. That is important not only because of the establishment of the political parties, but also because of the fall in electoral turnout and political activity, of which all hon. Members are aware.

For some years, parties have been responding to that   by almost ceasing to campaign in their safest constituencies and concentrating their resources, particularly their manpower, on the marginal seats. At the last election, the Conservative party probably used information technology and direct mail more effectively than any other party. Party activists were replaced with expenditure on phone calls, direct mail and so on; the activists were not really needed. It is therefore hardly surprising that the activist base for all political parties is now about 10 per cent. of what it was in the 1950s. Indeed, the Royal Society for the Protection of Birds has more members than all the political parties put together.

We can see that happening in party headquarters. I shall give as an example the figures cited in a previous debate. I am sure that the more recent figures will not be very different—and they are true for all parties. In 1991, the Conservative party had 147 central staff and 59 in the regions. By 2002, there were 172 central staff but only 18 in the regions. The reason is that political campaigns are fought less through the activist base or through local members; instead, central office is raising cheques for £5 million here and £3 million there, and loans for God knows how much behind the scenes—and spending that centrally to replicate what might otherwise have happened in the constituencies.

If we tied state funding to declared party members and supporters, it would make some fundamental changes. First, we would refocus political parties on
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generating local activity, membership and support in order to raise the money. We could then focus on building up membership and support in the safe seats as well as in the marginals. It is in the safe seats that we can build up the funding support. That will not only start building up the membership as a whole, but it would start to address the fact that political parties neglect whole chunks of the country on the grounds that "We will never win there" or "We are always going to win there."

Secondly, it would ensure a dynamic system that reflected the ebb and flow of support. If the Labour party was as unpopular as it might prove to be on Thursday, it would find it harder to attract members, supporters and donations. Political parties that offered an alternative would find it easier. If the Green party started to build up its membership, it would be able to bring in more support for its campaigns, and rightly so.

Support for the British National party would be based not on the fact that it polled 800,000 votes in the European elections, but on whether it could get people to register publicly that they were members of the party and that they made donations to it. If the BNP were able to get tens of thousands of people to register, it would probably be as entitled as any other party in a democracy to receive funding, but we all know that that is extremely unlikely. The fact is that people do not wish to register their support, and much of the support that the BNP receives is not directly for the party but is an anti-vote against other parties.

Tying support to individuals in that way would answer the big questions. It would ensure that we did not reward the status quo, which is fundamental in a democracy, and it would clean up the act. It would not be perfect. State support for parties would be difficult to enforce, and people would always be trying to get round the rules at the margin, but the tougher the rules—the more clear-cut it is that parties could not accept major donations—the more likely the system is to be successful. It is a little like anything to do with the law; there will always be those who seek to break the law, but if the laws are not put in place, it will be a free-for-all.

At the moment, we have an inglorious free-for-all, which is undermining democratic principles, and taxpayers are spending more and more on political parties and getting nothing in return. We need to clean up the act. If we do not change the system, the bad news that we have seen over recent weeks in the Labour party and to some extent with the Conservatives and the Liberal Democrats will be repeated more often, and political membership, party support and activity and electoral turnout will decline. We have the opportunity to change that, and I hope that the House takes it.

Several hon. Members rose—

Mrs. Joan Humble (in the Chair): Order. I anticipate that the contributions from those on the Front Bench will start at 12 noon, so Back Benchers have just over half an hour. I urge right hon. and hon. Members to be brief.
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11.28 am

Dr. Alan Whitehead (Southampton, Test) (Lab): At present, the country has an increasingly profound sense of anti-politics. Whether that is the fault of the political parties or the result of the predominance of media glosses on political activity is perhaps immaterial.

I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on securing this debate. He said that political party membership is tiny compared with what it used to be a few years ago. That has profound implications for the ability of political parties actively to pursue activities outside the minimum of fighting elections in any part of the country, or even to concentrate their forces on those seats that might be won.

The parties increasingly operate in response to large donations, loans and other forms of funding, rather than in response to the traditional way of raising money from party members. Indeed last year, only 13 per cent. of the Labour party's income and only 6 per cent. of the Conservative party's income came from membership dues. We are not about to become a country where the political party system is liable to break down. However, the system is, in terms of the ability of parties to do very much to engineer the political life of the country, close to tipping point. If that tipping point is reached, we will end up with a country that perhaps has what looks like political parties functioning, but in fact those parties will be elite organisations. Elections will be a parade of two or three elites before a population that otherwise has no involvement whatever in the process.

That will have profound implications for the democratic life of the country. Whether we like them or not, political parties are the guarantee that we have an electoral system that is genuinely competitive, that can involve far more people in the process of not only deciding the outcome of elections but participating in politics between elections, and that can avoid the idea either of us moving to an American system of the capture of parties just for electoral purposes, or of parties that involve merely the elites in London and the other large metropolises and that cease to exist elsewhere.

The second danger that we face—indeed, we have gone a considerable way down this path already—is that the participation with which political parties have historically concerned themselves between elections is replaced by an electoral apartheid whereby parties are responsible only for the representative issues with regard to elections and participation is something else entirely. For example, the only way in which someone can now be appointed to a wide range of public bodies is if they are regarded as representative; it is not that they are a representative. Part of the sine qua non of someone being regarded as representative is that they have had no involvement ever with a political party. Only then can someone be regarded as representative and be appointed to such a body.

It is remarkable and significant that the Electoral Commission has as one of its operating rules that no one who has had any involvement with a political party for the past 10 years can be employed by or in any way involved with the Electoral Commission. The body that regulates how political parties work has by definition an ordinance of denial of any political involvement of
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anyone who is judging political parties. That seems to be the beginning of a strange situation for our political parties.

The almost pathological response of political parties whereby they increasingly rely on donations and loans to fund their activities is a danger that goes beyond the inter-party badinage and debate about who has done worse out of that and who has broken rules or sailed closer to the wind than other parties. The issue underpins the future of how we run our democratic processes as a whole.

People are contemplating a future of either centralised parties competing in the elite way suggested or of what we have seen in recent surveys. One conducted by a former Member of Parliament, Peter Bradley, showed the extent to which funding has been placed in local political parties as a simulacrum of local activity and has enabled activity to take place as if it were local activity but in fact is entirely centrally directed activity. That is a further danger to our political system.

That is the context in which we should consider state funding. We are talking about state funding for the health of our polity, not for the continuation of particular functions that already exist as far as political parties are concerned. It is only recently that political parties have entered the constitution, in the sense of being mentioned in any way in legislation or regulated in any way. It would be ironic if, just as political parties entered the constitution, they ceased to exist in the form for which they were regulated in the constitution.

It is true that political parties already receive a substantial element of state funding. That essentially reinforces the role of elite political parties, rather than dispersing that role. Therefore, when it comes to considering state funding over and above that way of doing things, we must consider the local. How can political parties outside that elite function facilitate political life and political participation—the role that political parties play outside the process of merely securing people for elections? How can that role be strengthened for the health of the polity? The debate must therefore be about how local political funding with state assistance can be secured.

I am attracted to some of the ideas in the report of the Power commission, which might feature in our debate today. There is the idea, for example, that people casting their vote should receive a voucher that they can then—publicly, I hope—exchange for a certain amount of local political funding for the party of their choice. That underpins the value of going to the polls in the first place and relates the popularity of a party, and the way in which it has operated at local level to secure particular votes, to how the party might be funded.

The framework within which I am making my remarks does not enter on trying to preserve a two or three-party system. In countries where state aid has been centralised, there are circumstances in which political parties that in effect have no function whatever in the state continue to receive funding as if they did. It is essential not to fall into that trap with state funding. Funding that enables the ebb and flow of party support to be recognised and that, overall, underpins the essential nature of the party political process for the health of the polity is the right way forward. If we frame
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our debate in that way, perhaps the role of anti-politics in deriding the role of political parties as regards the health of our democracy might recede to the extent that a political state that enables the party political debate to be conducted at both national and local level on the basis of a healthy level of funding, with acceptance of that funding as legitimate by the public, might just be a way forward.

11.38 am

Sir George Young (North-West Hampshire) (Con): I shall respond to your injunction to be brief, Mrs.   Humble, but I want to compliment the hon. Member for Southampton, Test (Dr. Whitehead) on a thoughtful speech on an area on which he has made many contributions. He rightly stressed the importance to our democratic system of political parties. They are often derided, but are a precondition for a healthy system.

I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on his choice of subject. He may have applied for the debate before the more recent sensational developments in the Michael Brown case but, as he said, we all have our crosses to bear on this subject and we have a mutual interest in moving towards a settlement.

Quite a lot has happened since we had the previous debate on the subject on 8 November 2005. The Electoral Commission has proposed changes to the Political Parties, Elections and Referendums Act 2000 in respect of loans, and the Government have suddenly decided that this is an area on which they want to make progress. We understand that discussions have taken place between the Prime Minister and my right hon. Friend the Leader of the Opposition. My hon. Friend the Member for Chichester (Mr. Tyrie) has published his excellent document as a contribution to the debate. I was interested to see the foreword by the Leader of the Opposition, saying that our Green Paper proposals are set out in detail and that there is a shared responsibility on political leaders to ensure clean politics in this country. The Constitutional Affairs Committee has begun an inquiry, as has the Public Administration Committee.

I hope that the hon. Gentleman will get a better response at the end of the debate than the one I received previously from the Minister of State, Department for Constitutional Affairs, the right hon. and learned Member for Camberwell and Peckham (Ms Harman). I asked her:

The answer I got was:

I initiated that debate 11 months after the Electoral Commission published its report on the funding of political parties, and in the intervening period the Government have provided no response, or time for debate on that document. It would appear that six months ago, the Government did not think the matter frightfully important or urgent.
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There was a ray of hope, because in her winding-up speech, the Minister of State said:

Sadly, shortly afterwards, her husband erupted at being excluded from key decisions on Labour party funding, and she is no longer involved in this important debate. I do not blame her for that decision, which I think was sensible, but it meant that a new Minister has had to get up to speed on the subject.

We are dependent yet again on a Back-Bench Opposition MP providing a forum for debate. My views are on the record and I shall not repeat them. My starting point was the Neill committee report on standards in public life—specifically its recommendations 38 and 39, which dealt with tax relief by deduction at source for donations up to £500 a year for parties that received at    least 150,000 votes. That was one of the few recommendations of the report that the Government did not accept. There was all-party support for it in the lower House at the time and, speaking from memory, the Government were defeated on the issue in the upper House, but refused to budge.

In his proposals, my hon. Friend the Member for Chichester has removed a potential objection from the Labour party, which argued that that recommendation penalised parties with large numbers of non-taxpayers. My hon. Friend proposed extending the benefit to non-taxpayers and increasing the cap from £500 to £3,000, making it of greater benefit to political parties. I hope that the Government will indicate that they have abandoned their opposition to such help and are prepared to negotiate.

One recommendation that we should revisit is the one dealing with the cap on national campaign spending. We have had two general elections since the Neill report and there are now good grounds for reviewing that recommendation. Neill proposed a cap of £20 million for the 2001 general election. I ask myself what would have happened last year if the Labour and Conservative parties had spent the same amount on the campaign as the Liberal Democrats. Would it have made much difference? I suspect that the answer is no. We could have a much lower national cap on what is spent at general elections.

Where do we go from here? I have two final points. At the end of the day, all MPs have to make a political judgment. On one hand, the polling evidence tells us that people do not like taxpayers' money going to political activities. On the other hand, they do not like what is happening at the moment, where parties are dependent on large donations.

Matthew Taylor : On that point, it depends on how the question is phrased. Polling has been carried out asking people whether they want state funding in order to clean up the act. There is majority support for state funding if that could be achieved.

Sir George Young : I am relieved to hear that, but if the hon. Gentleman talks to Members of Parliament, he will find that they see it as a question of which side of the argument is more powerful.
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I am more worried about the downside of further disengagement and disenchantment with the political process through the sort of stories we have heard in the past few weeks than I am by the downside of the unpopularity of funding our democratic process with taxpayers' money. We should find offsetting economies, as my hon. Friend has done in his paper. Some may be found in how we run the Palace of Westminster. We should link such support to promote broad-based political parties. My party is a decentralised party; I am sure that that is the way in which we should proceed. We should reduce substantially what can be spent on national campaigns.

What we need from this debate is not a Government statement on their policies—that would be a wild dream. We want a framework and a time scale for taking decisions. It is a scandal that 18 months after the Electoral Commission reported, the Government have not replied. What options are the Government interested in and which, if any, have they ruled out? When will the next step be taken and how will Parliament be involved? An area where decisions are taken in secret has got a lot of people into trouble. I hope that we can have some transparency this afternoon.

11.45 am

Hywel Williams (Caernarfon) (PC): To say that this debate is timely would be an understatement, even for myself—given as I am to understatement. All political parties have to tread very carefully in this matter, and I am certainly not going to climb on my high horse this morning. My party has no outstanding loans, apart from the one that we have for our building from HSBC. It used to be said that Plaid Cymru was not even worth bribing. Apparently, we are no longer worth lending money to, either.

I shall raise two points to contextualise the issue. As the Member representing Caernarfon, there is a direct line from me to Lloyd George, who had a hand in such proceedings in the past. During the debate on the honours system on Thursday, I made the point that Lloyd George took a clear view on the matter. Through his agents, he was a robust salesman of honours, and he used that money to fund his political activities in the 1920s and 1930s. That is rather like the situation today, but contrasts with the situation in the 1990s when individual gain was the motive.

My other point relates to an experience I had in America about three years ago, when I took part in an excellent visit organised by the British-American parliamentary group. I spent a few days with a Republican congressman on the west coast. During the course of a fundraising evening, he asked me how much I had spent on my last election campaign, and I naively said, "About 10". He said, "10 million?", and I said, "10,000". We do not want to go down that road. On that night—a very modest evening—he raised $88,000, but he also told me that 95 per cent. of his spending went on television advertising. If he could put that genie back into the bottle, he would certainly do so, as would the other US political parties.

I hope that those points are useful and that they contextualise some of the debate. I shall raise some points about the Welsh context, which I think will be useful. The hon. Member for Truro and St. Austell
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(Matthew Taylor) referred to extremist parties. The National Front has stood for election in Wales, but its foul ruminations have not attracted much support. However, I refer hon. Members to the European elections, where, in my constituency, the vote was split between Plaid Cymru and the UK Independence party. Now, UKIP is probably not in the same field as the British National party, but as a party that took a strong view on the European situation, it could have attracted a good deal of support throughout Wales, and perhaps even have got a Member elected. That is also the case in respect of the Welsh Assembly. I draw hon. Members' attention to the fact that we have regional list seats, and it is possible that extremist parties that attract a certain amount of support and a great deal of money could get in.

In Wales, we are affected by the political debates in the UK as a whole, which disadvantages parties such as mine that operate in Wales, a country where people turn on their TVs and watch electoral broadcasts from England. Moreover, 85 per cent. of the newspapers in Wales come from England; the local press is very small. I am not complaining, but that is the context. We have seen glossy party political broadcasts, which influence people in Wales in the same way as they influence those in England.

I make this plea: if we are to go down the local and membership-based route, other political parties in Wales must provide a certain amount of transparency. I refer briefly to the fact that the accounts filed by the Labour party no longer distinguish between Wales and England. Rather gleefully, my party has said that the Labour party in Wales does not exist. I understand that the Labour party spent about £1 million in Wales, and it is alleged that about half of that came from England—it was not raised locally. That touches on the point raised by an earlier speaker: local strength and fundraising should be reflected more adequately. The other parties spent large amounts of money: £850,000 by the Conservatives, and £250,000 by the Liberal Democrats. My party spent £38,000.

There should be a national cap on donations—Welsh national as well as UK national. We need a system that recognises the particular local or, in my case, national context. There should be a cap of £5,000 on individual donations, and the state should provide some match funding, but on a sliding scale. If one were to contribute £100, there could be £100 matching; and if one were to contribute £5,000, there could be £150 matching. That is what we commend to the Chamber and to anyone considering these matters, such as Sir Hayden Phillips.

This debate is often presented as a choice between state funding or funding by rich men—and it is usually men. That is usually the offer: either we have large amounts of money or state funding. There is a third way, and I commend the reliance on membership, which is the route that my party takes, and the reliance on local support.

11.51 am

Mr. John Maples (Stratford-on-Avon) (Con): I agree almost entirely with the analysis put forward by the hon. Member for Truro and St. Austell (Matthew Taylor). We could spend this hour and a half scoring party points off each other, but it would be a terrible waste of time.
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We all have this problem, and if we have to raise money to pay for party politics, it is much easier for party treasurers to raise it in large donations. That leads to an unsavoury series of events, whereby Ministers have to turn up at dinners and people think that they have access. It gives at least the appearance of corruption, even if there is none in reality.

Party politics needs funding, however, and where I part company from the hon. Gentleman and, I think, everybody else who has spoken is over the concept of compulsory taxpayer funding. I do not see why people who are uninterested in politics or do not care for a particular party should have to pay through their tax system for its activities.

How does one square that circle? We could go on the way we are, but if we raise funds voluntarily, they will come from big donations. Or, is there an alternative to compulsory taxpayer funding? I think the answer is yes. There is a similar system in the United States. People could in their tax returns or in their tax coding agree entirely voluntarily to give a sum of money to a matching fund administered by the Electoral Commission. I shall come on to how it would be used.

In the United States, one can tick a box on one's tax return and give about $5 to a presidential election fund. Presidential candidates who use it are subject to certain conditions about transparency and the maximum donations that they can accept.

The scheme would be voluntary for political parties, because there is a freedom of speech issue. Much as I resent what James Goldsmith did in the 1997 election, I am not sure that someone should be stopped from doing it, because it is one way in which people from outside the political elite can break into it. To participate in match funding, a party would have to agree that it would not accept any donations over a certain size. In my view, that would be £10,000. I think that £50,000 is far too much. It may not seem a lot to us or a party treasurer, but to most of our constituents, £50,000 is a huge pile of money. I am not sure that they would consider its donation any less corrupt than £100,000 or £200,000. My limit would be £10,000, but if people wanted it to be £15,000 or £5,000, I would not argue.

If the party agreed not to take any donations in excess of £10,000, it would be eligible for the pot of match funding. For all donations it raised under the limit, it would be entitled to one-for-one match funding out of the pot. Few people will give £10,000, but in our constituencies there will be plenty of people who give £10, £20 or whatever. The aggregate of those donations should be matched pound for pound out of the match funding pot.

That proposal is different from taxpayer funding or tax relief on membership subscriptions or donations. Tax relief is compulsory taxpayer funding; it comes out of the other taxpayers' taxes, because less comes from the people making political donations. Both systems represent compulsory taxpayer funding.

Let us say that the figure that one could check on one's tax return or coding and give voluntarily was £2.50. There are 27 million income tax payers in the United Kingdom. If 30 per cent. of them agreed to give £2.50 each, the pot of match funding would amount to about £20 million a year. I realise that the arithmetic may be slightly more complicated, but over an electoral
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cycle that is about what the three main political parties spend every year. It costs the Labour party and the Conservatives about £12 million a year to run their central organisations, and they spend another £20   million in an election year on top of that. The Liberal Democrat figures are less—about £5 million a year over the electoral cycle.

If 30 per cent. of taxpayers were prepared to pay an additional £2.50 on their taxes into a matching fund, £20   million would be available to pay half the total party political bills for running the parties' central organisations and general election campaigns. It would throw back on to the party the need to raise their share—in our case, £10 million a year—of that in small donations, of which most would be much less than £10,000. It would be a good thing, because it would make us go back to our grass roots. It is an alternative to the compulsory taxpayer funding that I sense all parties are drifting towards. Raiding the taxpayers' pot is too comfortable a solution and too easy. My party should be the last to do that, because we are in favour of lower taxes and less public funding and more voluntarism. Indeed, on this matter, we are probably joined by the other two parties.

My solution is worth exploring. Everyone benefits. First, there would be no more large political party donations, which are the cause of the problem. Secondly, there would be no compulsory taxpayer funding, which would be widely resented if not by the taxpayers, at least by the press, who would give us a terrible time about it. Thirdly, it would give a big incentive for us to raise small donations. As a member of the public, it would mean a great deal for me to remove the big donors from politics. Then perhaps peerages could go back to people of genuine distinction.

11.56 am

Jo Swinson (East Dunbartonshire) (LD): I congratulate my hon. Friend the Member for Truro and St. Austell (Matthew Taylor) on securing this timely debate and highlighting a huge problem in the body politic. I shall focus on the relationship between party funding and political engagement.

We cannot separate the issue of party funding from party spending. The amounts spent at general elections seem a complete anathema to most people in the street. Much has been said about the restrictions on television and radio advertising, which are a very good thing in our society. However, the media world has changed over the past few years. In the past decade, there has been a huge increase in outdoor advertising such as billboards, ambient media and print advertising. It may be worth revisiting the restrictions on advertising in order to cover some of those other categories. Otherwise, as has been mentioned, we shall not engage people more in politics, but encourage an arms race in which one party spends £5 million on billboard advertising so the other party feels that it has to buy £5 million of advertising on billboards, too.

I have yet to meet a voter who is convinced by a billboard to vote in a particular way. When I speak to people, I often find that personal engagement is most effective. That was what I found when I was a marketing
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manager. Face-to-face marketing is the most impactful. It is not necessarily the most expensive method either, but if one is going to get volunteers to knock on doors, it is incredibly resource-intensive.

I am sure that other Members in the Chamber have had the same experience as I have of knocking on a door and speaking to a voter who says, "Do you know, you're the first politician that's ever come and knocked on my door?" Although we are delighted to have knocked on their door, equally we feel bad for the thousands of other householders in that constituency to whom we will not be able to speak. Even in my constituency, which was a target seat for the Liberal Democrats, we did not knock on every door. I would be surprised if there were many constituencies where parties are able to do that. That is a result of the decline in political membership and participation that has already been mentioned.

Given that situation, I am attracted by ways in which we could use party funding to put right what is wrong with our political system and to start to engage people better in democracy. The Power report makes a good recommendation, No. 20, which proposes a voter voucher scheme, whereby when casting a vote, one can tick a box to donate £3 each year to the party of one's choice. Interestingly enough, that may not be the party for which one votes. With our rather warped first-past-the-post political system, people in many constituencies will choose to give their vote to a party that has a good chance of winning, though they may have an affiliation with a different party. This would give them the choice to vote for the result that they want but in the meantime to support the development of a party that they may think is not yet ready to govern or to win the election.

Such a system would give an incentive to parties to engage at the local level. It is a great shame that that has been lost from the current system of party funding. The other advantage of such a system is that it would provide voters with a choice. Some people have suggested that there may not be public support for state party funding, but this would at least give people the choice of ticking the box or leaving it blank, with the money going back to the taxpayer.

This is an interesting issue, and the suggestion is worth considering. The match funding ideas that the hon. Member for Stratford-on-Avon (Mr. Maples) suggested are worth looking at, and I hope that the Minister will address them, as it is vital that we deal with the issue properly to encourage more participation and to have a healthy political system.

12 noon

Simon Hughes (North Southwark and Bermondsey) (LD): I am happy to take part in this debate. Unlike my hon. Friend the Member for Truro and St. Austell (Matthew Taylor), I am not a frequent participant in debates of this sort. When he gave me a little file the other day and said, "Now that you have taken on the job of speaking for us on constitutional affairs, you may find this of interest," I had not realised how many speeches he had made. I am persuaded by the approach that he has pursued throughout, which has produced a good-tempered and sensible debate on what is, clearly, a controversial issue. We could all be on the back foot and in difficulties, but instead we all have a common interest.

I also discovered that there are some fairly regular contributors to these debates: the hon. Member for Southampton, Test (Dr. Whitehead) and the right
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hon. Member for North-West Hampshire (Sir George Young) have consistently criticised the present system and made arguments for change, as have the hon. Member for Chichester (Mr. Tyrie) and others. Many people have argued that, first, we must have significant change; secondly, it must come soon; thirdly, we must reduce the influence of big donors; fourthly, we must engage in local political activity; and fifthly, if we get it right, we could refresh our democracy, which is also perceived as being in crisis. I shall say things that support that approach.

This issue has been languishing on a back burner. As the right hon. Member for North-West Hampshire said, the Electoral Commission produced a good report. It went to the Government and sat there. Nothing happened—we have all been waiting. It is one of the ironies of politics that it was the husband of a relevant Minister—the Minister of State, Department for Constitutional Affairs—who opened the box. I pay tribute to Mr. Jack Dromey, a resident of Southwark, who got the debate going again. He never was a quiet man. He made what will probably be remembered as his most significant contribution, and he was right to do so. I do not say that in a partisan sense.

Let me deal with other things that are still up in the air. We are now in the middle of a series of inquiries. My party and the other parties—Plaid Cymru, the Scottish National party, the Conservatives and Labour—will give their views to the two Select Committee inquiries that have been launched. Lord Falconer gave his first evidence the other day to the Constitutional Affairs Committee, which is chaired by my right hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith), and the Public Administration Committee will consider the issue as well. Everybody will give evidence.

Sir Hayden Phillips has been brought back into the picture to consider the matter again. The Minister and I debated the honours system in this very Chamber the other day. We discovered that there had been radical and good Select Committee reports on reforming the honours system, and then Sir Hayden Phillips was asked to come up with some proposals. The Government have been much more willing to accept his proposals, which were less radical than those of the Public Administration Committee. I hope that they will not now be timid about responding. Obviously, we will not get final answers until later this year.

For the record, it is only fair that I explain my party's position. I shall keep within my 10 minutes. We have not debated the matter or formulated policy since 2000, and much water has passed under the bridge since then. At that time, we endorsed the view that UK parties should receive a modest injection of state aid. I note in passing that a great deal of money is already available. My hon. Friend the Member for Truro and St. Austell made that point well, and we all agree about that.

We said that state funding should be broadly related to votes gained in the previous general election and the number of seats to be fought, as is the practice in many other European states. For regional parties—I interpret this to mean parties in Wales and Scotland—it would be based on performance in the relevant area. We believe that funding should go hand in hand with curbs on total national spending by parties on election campaigns, and that the limit for a general election should be £10 million. Finally, payment of state funds to political
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parties must be made conditional on publication of full accounts, particularly the source of all donations over £1,000. My party and the Conservative party said nothing about the issue in our manifestos for the last general election. The Labour party made some general statements, but the debate was not formally taken on.

What are the issues now? I shall identify them and give views expressed in recent days on behalf of my party by my right hon. and learned Friend the Member for North-East Fife (Sir Menzies Campbell), who is the new leader of my party, by me and by other colleagues.

First, we must separate party political donations from seats in Parliament. We made that point in the debate in this Chamber the other day. It is clear that that link and the perception of it must end. Clearly, it is damaging the health of the body politic. My view is that we ought therefore to have no further nominations to the House of Lords until the issue has completely been sorted out; that is, until we receive the Phillips report, see what it recommends, and agree on how we should proceed.

Mr. Andrew Turner : Does the hon. Gentleman agree that if the perception could be removed—and, of course, the reality, where it exists—there would be less objection to people giving large donations to political parties? The perception might be removed if donations were put into a blind trust that could be administered by, for example, the Electoral Commission.

Simon Hughes : That is a constructive and positive suggestion. I know that it is being discussed elsewhere, and my party would welcome such an approach. Of course, there is an argument that people should be free to do with their money what they will. If they want to give it to political parties, they should be able to do so, but such donations should not be seen to influence things. The hon. Gentleman's suggestion would be a way of dealing with that. It does not deal with some of the other criticisms made by my hon. Friend the Member for Truro and St. Austell, but it is a possibility.

For the moment, though, we should not make nominations to the Lords until it is clear that we are all comfortable with the system. The Government made a commitment to trying to get reform of the Lords quickly, and I hope that we can reach agreement. On behalf of my party, I repeat the pledge that we will be constructive in trying to get an agreement. In my view, the Lords must have a majority of elected Members—that is the only ground for consensus—and then there are much more complicated issues to deal with about powers and so on.

Everybody is now agreed that loans as well as gifts must be included. Amendments to the Electoral Administration Bill, which will be debated in the House of Lords later this month, have already been tabled. We must change the code of ministerial conduct. Whatever the truth—I am not suggesting that there has been any impropriety—there appears to be a conflict of interest if Ministers, whether actual or potential, are big donors. We must change that.

The last points that I want to make are about some important linked issues. My hon. Friend was absolutely right to say that, because of the combination of the political, electoral and funding systems, money is spent in only a few places in all elections. That is the case for
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general elections, and he will know, as I do—I have been around the country in the past two months—that it is just the same for local elections. Target seats are fought over, and often the rest of the local authority area is not visited by any politician at all. We must get everybody engaged. We need a system that rewards people who are not in target seats. Of course, that will involve changing the electoral system so that every vote counts. The other parties must deal with this serious issue, or we will not address the malaise.

My hon. Friend the Member for East Dunbartonshire (Jo Swinson) discussed advertising. The costs of literature and campaigning activities were published the other day, as were the costs of e-mails, texts and telephone calls. One has to ask how such spending will be monitored, as in some areas it is much more difficult to monitor than in others. Do we want to go down the road of having a political system that requires people to vote and to pay for parties—compulsory voting and compulsory paying? I do not believe that the public are ready for either of those things, which would discredit the body politic even more.

In conclusion, although a little more public funding may be appropriate—that is my party's position—I am open to the suggestions made by my hon. Friend the Member for Truro and St. Austell and the Power report and mentioned by other Members that we should consider the five things on the list: matching funding to donations; tax relief playing a part; a cap on donations; local contributions to help local campaigning; and lastly, that the reward, if any, obtained from the state should be based not only on donations but on the share of the electoral vote, party membership or a combination of the three. I say simply that such things should be on the agenda. I am keen that we open that agenda this year and with urgency, because the system is not working at the moment.

12.10 pm

Mr. Andrew Tyrie (Chichester) (Con): I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on securing this debate. There have been many thoughtful speeches about this issue on which I and others here have contributed for a number of years. My views are well known; indeed, I have put forward specific proposals—not quite my party's proposals—in previous debates.

As he wound up, the hon. Member for North Southwark and Bermondsey (Simon Hughes) sounded as if he was reading the Conservative party's proposals. I could hardly spot an item of substantial difference, and that cheered me a lot. In a moment, we shall find out from the Minister whether there is tripartite agreement.

There has been near, although not quite full, agreement on six basic points. First, the electorate have a very unfortunate smell in their nostrils and something has to be done about that. We cannot carry on as we are. The electorate believe that money can buy power, access and influence in politics and that honours can be traded. Among other things, this corrodes the reputation of the House of Lords. The hon. Member for Southampton, Test (Dr. Whitehead) said that the health of our polity
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was at stake and my right hon. Friend the Member for North-West Hampshire (Sir George Young) talked about political disengagement.

The second point on which we agree is that all parties have contributed to that impression over the years. I am stumped on the apparent historic connection between the award of honours and business donations during the 1980s and 1990s. The Liberal Democrats are in deep treacle of their own—from a cursory glance, I think it the deepest of the lot, although I shall not go into detail. I shall not go through the litany on the Labour party either. We agree that we are all in the treacle to some degree.

The third thing on which we agree is that the steps taken so far have been insufficient and in some respects counter-productive. In this case, transparency has not been enough and, in some cases, the watchdog reports have fuelled press stories that have eroded further the credibility of politics and politicians. Sometimes that has been warranted, sometimes not.

With the collapse of the Lord Levy loans empire, there will be a return to a focus on the issue of union power and how, historically, unions have funded the Labour party. They are about to appoint the next Prime Minister and were involved in the Warwick agreement during the run-up to the last election; such issues will come back and become central to party political debate. All the steps taken so far, including attempts to moderate union influence over political parties—one party in particular—have failed.

The fourth thing on which we agree is that radical reform is needed to clean things up. The Conservative party has made a number of proposals, such as a cap on big donations, on which there is wide agreement. We can argue about what constitutes "big"; I have proposed between £1,000 and £5,000, while my party proposes an initial cap of £50,000. Such proposals should be the basis for discussion. My party's other proposals include a ban on loans and an end to all corporate, institutional and union financing. I agree with my party that there should be a reduction in the overall cost of politics; part of that might involve a cap on the amount spent in general elections.

There is also agreement on a fifth point: such proposals will leave the parties short of money—with much less money than now. There is near agreement that there should be some modest increase in state support. There is disagreement, or not full agreement, on how that can be delivered, and that issue should be discussed. A number of proposals, or menus of proposals, have been put forward today. One of the Conservative party's proposals is that there should be tax relief at the basic rate, and that has been proposed by the Neill Committee and the Electoral Commission too.

My party has also proposed a match funding scheme for non-taxpayers, an essential corollary if non-taxpayers are to be empowered, and additional funding on top. This could be related to votes cast or an extension of a match funding scheme—possibly a voucher scheme, as is proposed by the Power commission. My hon. Friend the Member for Stratford-on-Avon (Mr. Maples) has put forward an interesting scheme to donate money through tax coding. All such suggestions, however they are dressed up, ultimately involve some form of extension of state support. The question is how best to put them together.
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The sixth measure of broad agreement is that we have to break completely the link between honours and donations. That has not been much discussed this morning, but I know that the majority of Members here strongly support that.

Mr. Andrew Turner : In my hon. Friend's fifth point, he referred to the large measure of support for some additional taxpayer funding; I must say that I do not share in that support. Will he explain what is wrong with somebody giving £5 million to a fund administered, say, by the Electoral Commission, and the commission passing that on to a political party, or more than one, rather than people being forced to give money through taxes?

Mr. Tyrie : If that money were given to a governing party, the risk is that people would think policy might change once the party became aware of who gave it. None the less, there may be other ways, beyond those I have listed, of distancing donations from parties and Government—

Ann Winterton (in the Chair): Order. You have a charming back, Mr. Tyrie, but will you face the Chair now and again? I should like to see your face.

Mr. Tyrie : I shall do my best, Lady Winterton.

Matthew Taylor rose—

Mr. Tyrie : However, I have to look away from you occasionally.

Matthew Taylor : I could have intervened on my hon. Friend the Member for North Southwark and Bermondsey (Simon Hughes) or on the Minister to make this point. Members here support another issue, although perhaps not universally. We should reform funding in a way that increases local activity rather than leads to the centralisation of the parties. That is my big concern about tying funding to past electoral performance. The more parties have to engage supporters and members to access whatever funds there are, the better they will be able to address the other side of this issue—the increase in the political activity of millionaires and the decrease in everybody else's.

Mr. Tyrie : I am grateful for that intervention.

I was going on to say that there are principles that everyone here appears to agree should lie behind any scheme. It just so happens that those five principles have been published by the Conservative party. First, the scheme should be fair and transparent; secondly, it should encourage local participation, which is essential; thirdly, it should be open to all voters, not only to taxpayers, to participate in; and fourthly, it should be voluntary for parties. The hon. Member for Truro and St. Austell disagrees with me and the Conservative party on that. If a party decides not to take the cash, it should not be obliged to obey the rules. There should be freedom of access to the political system; we should not ossify it. The fifth principle is that the amount given should be proportionate to the task. We should spend the minimum required.
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For the sake of clarity, I shall end by mentioning a couple of other points. First, the published proposals are Green Paper proposals, which form a package. The Conservative party will look sympathetically at anything else that is proposed or at a modification of those proposals. Secondly, I am confident that when the Conservative party wins the next election, its leader will act on them. There will be fundamental reform in this area.

I do not have time to go into the freedom argument as I know my hon. Friend the Member for Isle of Wight (Mr. Turner) would have liked to have done in some detail. It is an extremely important issue.

The ball is now firmly in the Government's court. The Conservatives have published their proposals and the   Liberals' proposals have been out since 2000. The Labour party seems trapped in its union entanglements and is unable to provide us with its proposals. It has failed to respond to the Electoral Commission. Last week, the Lord Chancellor said that the Labour party would publish its proposals within a month. Will the Minister tell us whether that is correct? Will she assure us that they will be published? Will they address the key outstanding issue: the financial relationship between the unions and the Labour party?

12.21 pm

The Parliamentary Under-Secretary of State for Constitutional Affairs (Bridget Prentice) : I shall try to rattle through things so as to respond to as many contributions as possible. Should I not manage to respond to points, I shall write to all hon. Members.

I endorse the comment made by the hon. Member for North Southwark and Bermondsey (Simon Hughes) that this has been a good-tempered and sensible debate. I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on securing it. Good-tempered and sensible as it is, it struck me yet again that there are almost as many opinions on the subject as there are Members of Parliament and, possibly, as there are Members of the other place and people in the media.

Nevertheless, one or two themes came through with some consistency. One was the idea of some kind of cap on national funding and an increase in state funding, albeit there are a variety of views about how that could be achieved. In addition, we would all welcome enthusiasm for more activity locally and an engagement with local communities and local members. Such activity has not been as lively as it might have been in recent years.

I also want to outline some of the things that have taken place and, in so doing, perhaps respond to the point raised by the right hon. Member for North-West Hampshire (Sir George Young) about the Electoral Commission report. The Government welcomed that report. Although I shall not be able to give him the full answer, any more than my right hon. and learned Friend the Minister of State, Department for Constitutional Affairs was able to in November, perhaps I can move things on a little.

We have been in detailed internal discussions with the Electoral Commission, because it recognised within those discussions that further work needed to be done. Some of that has now been subsumed in the Hayden Phillips review. That will not make the right hon.
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Gentleman too happy. The Electoral Commission will be working with Sir Hayden Phillips closely so that his review, which will come out at the end of the year, will be able to be progressed fairly quickly. In a sense, because we did not respond in the way that the right hon. Gentleman wanted within the past 18 months, things have now been overtaken by events. Whether that is a good thing is for him to reflect on. It will now be part of that review.

The hon. Member for Chichester (Mr. Tyrie) mentioned the Labour party's views. I am not here today to speak on behalf of the Labour party because it would not be appropriate for me to do so. I can endorse what my noble Friend Lord Falconer said at the Constitutional Affairs Committee the other week. It is our understanding that the Labour party will publish its response by the end of the month. We all look forward to seeing it.

A comment was made about blind trusts administered by the Electoral Commission. The Committee on Standards in Public Life said some time ago that the problem is that their dominant feature is that the beneficiaries do not know who has contributed. That is obviously what blind trusts are about. However, it felt that that made them inappropriate because it moves away from the policy of transparency and openness that several hon. Members have tried to encourage.

My hon. Friend the Member for Southampton, Test (Dr. Whitehead) made a thoughtful contribution. He mentioned the Electoral Commission not having the involvement of politicians for a period of 10 years. The Committee on Standards in Public Life is reviewing the commission's work and that is an aspect of its work that will be examined closely. In defence of the commission, it has a group of great and good ex-Members of the House that advises it from time to time. We need to wait to hear what the Committee on Standards in Public Life has to say about whether that will be made into a formal process.
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I want to make it clear that thriving political parties are an essential part of not just a functioning democracy but a vibrant one. I think we would all endorse that, although no one has said it so far. We should not be afraid to stand up and say that. Several factors affect the legitimacy of the party system. We must make it clear that political parties are an important part of our form of democracy and we need them if we are to have vibrancy in our democratic system.

The increasing reliance on big donors poses two risks: the appearance of the capture of a political party by that donor and the appearance of the irrelevance of individual members. The hon. Member for Truro and St. Austell made that a central part of his contribution. We have moved quite far already, although much more needs to be done. We have put in place a transparent regime for the reporting of donations and have created the independent Electoral Commission. As I announced to the House on 20 March, we are now bringing forward amendments to the Electoral Administration Bill to introduce a regime to apply to loans, which will be similar to the donations system in respect of transparency and permissibility.

We are all responsible for the current situation. Speaking in the Grand Committee on that Bill, Lord Goodhart said:

We all accept the position as we now find it.

I hope that we can use this debate as an opportunity to raise the questions that we need to ask Sir Hayden Phillips. There are difficult issues. We, as politicians and representatives of our parties, must continue to engage in them. I hope that we will use this debate as part of the contribution to his review. I look forward to further debates of this nature so that I, too, can hear the different views of Members about how we best move forward to sustain a vibrant and participatory democracy in this country.
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