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Bridget Prentice: Amendments Nos. 61 to 63 were introduced following pressure from both Houses for an increase in the number of descriptions that a party can register with the Electoral Commission. The original number was five, which was the number recommended by the Electoral Commission. That would allow, for example, one description for each of England, Northern Ireland, Scotland and Wales, and one for the United Kingdom as a whole. The Liberal Democrats introduced the amendments in another place. They sought to increase the number of descriptions to 12 because that equals the number of nations and regions in the United Kingdom, and so that parties could register descriptions such as London Liberal Democrats, East Anglian Conservatives, or Yorkshire and Humberside Labour. I therefore recommend that the House accept those amendments.
Amendments Nos. 64 to 72 fulfil the commitment made by my hon. Friend the Under-Secretary of State for Scotland on Third Reading in this House. Members may recall that amendments moved then became clause 59, and that they removed the need for duplication in reporting of donations, but for MPs only.
By way of brief background, schedule 7 of the Political Parties, Elections and Referendums Act 2000 sets out, among other things, the requirement that holders of elective office should report the donations that they have received to the Electoral Commission, which then publishes them. That has the effect that MPs, MEPs, Members of devolved Administrations and local councillors throughout the UK have to report donations both to the Electoral Commission and to the relevant register of members interests of the body of which they are a member. The Select Committee on Standards and Privileges, chaired by the right hon. Member for North-West Hampshire (Sir George Young)to whom I express my gratitude for his help in this matterexpressed concern about the duplication, referring to it in a report published on 20 July 2005.
Lords amendments Nos. 64 to 72 remove the requirement of dual reporting for holders of relevant elective office. That means that holders of the relevant elected office would not have to report any donations received to the Electoral Commission, whether the
donations were received in their role as the relevant elected officer or in their role as a member of a registered political party. Of course, as with the provisions already included in clause 58, the Electoral Commission will retain the obligation to record any details it receives from the relevant registers of members interests. The commission will continue to supervise compliance with the regulatory system as set out in the Political Parties, Elections and Referendums Act 2000.
The House should note that this provision can be commenced only once the Electoral Commission is content that the relevant authorities have arrangements in place to ensure that the commission is still able to maintain an accurate register. I hope that hon. Members will see that as an appropriate balance between requiring transparency and removing bureaucratic duplication. The amendments are supported by the Electoral Commission, as well as relevant bodies, including the Scottish Executive and the Standards Board for England.
Lords amendments Nos. 73 to 75, 103, 110 to 122 and 126 to 129, on the reporting regime for loans, fulfil the commitment that I made to the House on 20 March that the Government would table amendments to the Bill to make it compulsory for political parties to disclose any loans that they receive. There are issues relating to the funding of political parties that go beyond the disclosure of loans and the review by Sir Hayden Phillips will deal with those. We have tabled these amendments now because there is broad agreement between the political parties and the Electoral Commission as to what should be done. This Bill presented us with an opportunity to act immediately in seeking to deliver the same openness for loans as currently exists for donations. I was heartened by the consensus on the principles of seeking to achieve greater openness and transparency in relation to significant loans afforded to political parties, individual members, members associations and holders of relevant elective office.
Mr. David Winnick (Walsall, North) (Lab): The position on loans was a glaring loophole for which we are all responsible, not only the Government. It should have been recognised at the time, but all Labour Members are very pleased that it will at last be closed.
Bridget Prentice: My hon. Friend is right. All hon. Members need to take some responsibility for this, and the right hon. Member for North-West Hampshire recognised that on behalf of the Standards and Privileges Committee. That is one reason why we have had such openness and consensus on the issue.
Part 4 of and schedule 6 to PPERA provide a system for the regulation of donations to political parties. That regime requires all donations over £5,000 to a political party to be reported to the Electoral Commission, and ensures that donations can be made only by individuals or organisations with a sufficient connection to the United Kingdom. It has been accepted that those requirements have brought
transparency and openness to the making of donations, which is why we have chosen the same regime for loans. Indeed the new provisions deviate from the requirements for donations only where necessary to reflect the difference between a loan and a donation. I am sure that hon. Members will agree that it makes sense to build on the success of the existing regime to try to achieve the same level of openness regarding loans.
Before coming to the more detailed aspects of the regime as set out in the new sections and schedule, it might be useful to remind the House of the four main features. First, the reporting requirement is triggered when a loan exceeds the initial reporting threshold of £5,000 or the subsequent reporting threshold of £1,000. Such loans, whether made on commercial or less than commercial terms, will have to be reported to the Electoral Commission. That will be at quarterly intervals, and at weekly intervals during a general election period. Secondly, all loans extant on the day that the provisions come into force would have to be disclosed, and any taken out thereafter. Thirdly, a party would be permitted to take out a loan only from the same sources from which it is permitted to receive donations, although existing loans will not be subject to that permissibility requirement. Fourthly, the regime would cover not only loans, but all credit facilities and the provision by third parties of guarantees and securities.
On 20 March, the Lord Chancellor wrote to all the parties represented at Westminster and he has since held meetings with many of them. Each has shared our concern that we should act quickly and recognised that a scheme similar to that now well established for donations would be a proportionate response to the need for transparency. We have also taken the views of Sam Younger, chairman of the Electoral Commission, who has welcomed the proposals, and consulted the British Banking Association.
Mr. Andrew Turner: I appreciate, as I am sure do hon. Members on both sides of the House, the efforts that have been made to secure consensus on this point. Is there anything to prohibit foreign nationals or others making large donations to campaigning organisations that are not registered as political parties, such as the Countryside Alliance or the League Against Cruel Sports?
Bridget Prentice: If a loan already exists and is ongoing, it will not have to be reported, but any loan made subsequently will be reported. I will cover issues such as capitalisation later. It is a complex and technical part of the Bill, but I hope that I will answer the hon. Gentlemans question as I continue.
The scope of the regime is not merely restricted to straightforward loans. The regime also includes credit facilities, such as overdrafts, and arrangements where a third party offers a guarantee or security in respect of
the liabilities of a political party. If security agreements were not included in the new regime, a wealthy backer could offer guarantees to all of a partys commercial suppliers, and enable the party to obtain anything that it might need at any given time, even though the partys own credit rating would mean that it could not otherwise do so.
One of the key issues in deciding whether a regulated transaction has to be disclosed will be its value. Disclosure will not be required for loans of £5,000 or under, unless the combined lending from the same authorised participant exceeds £5,000 during the course of a reporting year, and the regime does not apply at all to loans of £200 or under.
New section 71G specifies that the value of a loan is the total amount to be lentthat is, the interest charged is not included. For a credit facility, the valuation is the maximum amount that may be borrowed under the arrangement. For an arrangement involving any form of security, it will be the contingent liability assumed by the person who gives the security.
A question arose in the other place about loans that contain capitalisation provisionsthat is, a facility for outstanding interest to be rolled up into the total sum of the loan. These amendments provide that, where a regulated transaction provides for capitalisation at the outset, the potential for capitalisation is not considered in the valuation of a loan. That would be a matter of particular importance in the case of loans whose face value is just below the reporting threshold and which contain capitalisation provisions that might cause the initial value of the loan to exceed the reporting threshold.
We have intentionally steered away from imposing on political parties the rather inexact science of having to ascertain whether capitalisation provisions might cause a loan to cross the reporting threshold. However, where the face value of the loan crosses the reporting requirement, the existence of capitalisation provisions would have to be recorded in the report to the Electoral Commission. We believe that that approach strikes the right balance between practicability and transparency.
Proposed new section 71H deals with the important question of permissibility. We believe that, as happens with donations, a lender should be either an individual whose name is on the electoral roll or an organisation with a sufficient connection to the UK. Proposed new section 71H prevents a party from entering into a regulated transaction with anyone other than authorised participants, the latter being defined by reference to the existing list of permissible donors in section 54(2) of PPERA. The restriction will not apply to regulated transactions entered into before the new provision commences.
The permissibility requirement is enforced by a range of criminal offences. For example, when a party takes out loans with unauthorised participants, the party and its treasurer may commit criminal offences.
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