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13 Jun 2006 : Column 698

Bridget Prentice: The hon. Gentleman’s colleague, the hon. Member for Banff and Buchan (Mr. Salmond), was invited to meet the Lord Chancellor and put his views on that matter, which he did robustly. I understand that the hon. Gentleman is concerned about not having representation in the other place, but I am not the person with whom he needs to raise that matter. However, I can reassure him that his hon. Friend put his case to the Lord Chancellor very forcefully.

Mr. MacNeil: My point is not about my party having representation in the House of Lords. It is about installing a mechanism to ensure that Parliament is beyond reproach with loans and donations to political parties, and that the people who make that money available do not find themselves in the House of Lords soon afterwards.

7.15 pm

Bridget Prentice: I hope that the amendments from the other place will reassure the hon. Gentleman. As far as possible, we have tried to duplicate the donations regime and apply it to loans, although I have set out the technical reasons for any differences. The amendments should reassure hon. Members and the public that the process will be transparent, and that a robust reporting regime will apply.

As I said, those who do not follow the rules set out in the Bill could be found guilty of criminal offences. We have also made provision to ensure that, where a party has entered into a regulated transaction with an unauthorised participant, it should be required to repay the moneys or benefits that it derives from the transaction as soon as they come to light.

If the party refuses to repay the loan, a broad power is conferred on the courts, exercisable on application by the Electoral Commission, to restore the parties to the position that they were in before the transaction was entered into, if that is possible. That mirrors a similar provision of PPERA that allows the Electoral Commission to apply to the court for the forfeiture of impermissible donations. The same principles will apply in the case of a guarantee or security given by an unauthorised participant, again with some necessary adjustments.

I turn now to the reporting requirements, which follow the same structure as those for donations. Proposed new section 71M requires regulated transactions to be reported on a quarterly basis to the Electoral Commission. The requirement to report a regulated transaction is triggered when the value of that transaction exceeds £5,000—either in its own right, or taken together with the value of other transactions with the same authorised participant. Thereafter, transactions exceeding £1,000 with the same participant must be reported.

What happens where a person makes a loan of £5,000 and a donation of £5,000? The principle that we have adopted is that any combination of loans and donations that exceed the reporting requirements of £5,000 and £1,000 should be disclosed. The approach
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that we have taken is that it should not matter whether a donation, a regulated transaction, or a combination of donations and regulated transactions, is made. If the aggregate value of any combination of relevant benefits exceeds the initial reporting threshold of £5,000 or the subsequent reporting threshold of £1,000, then the requirement to report is triggered.

Weekly reports are required in the period immediately before general elections, just as happens with donations. The Electoral Commission will maintain a register of regulated transactions so reported, and it will be made available to the public.

Mr. MacNeil: Is there anything in the amendments that would have prevented the recent scandals and the subsequent involvement of the Metropolitan police, or are we back where we were a few months ago?

Bridget Prentice: As I have said, the events of a few months ago showed that we needed transparency. My hon. Friend the Member for Walsall, North (Mr. Winnick) pointed out that there was a loophole that no one in this House recognised. Our discussions with the various parties represented here have led us to come up with what we think are sensible, coherent and transparent proposals. I shall not comment on any Metropolitan police investigation that may be under way, but I believe that the amendments will reassure the House and the general public about how political parties will be funded.

Mr. Andrew Turner: The Minister said that no one in this House recognised the loophole that existed. Does that mean that the then chairman of the Labour party and the Prime Minister—as well as Lord Levy, who I accept is not a Member of this House—did not recognise the loophole?

Bridget Prentice: As I said in my statement of 20 March—and I have said it again at least twice this evening—no one was aware that the donations regime did not apply in the same way to loans. The result was that loans were not as transparent as donations. We are rectifying that now. Everyone in this House recognises that the new regime should apply to every party in this House and that we all have to take some responsibility for making the position as transparent as possible.

The particulars that need to be reported about regulated transactions will be different. We think that transparency requires that the principal features of the transaction should be required to be reported and disclosed to the public. New schedule 6A requires the identity of the participants to be reported, as well as the nature and value of the transaction, details of the rate of interest, if any, to be paid on any sums lent, the length of the loan, and other particulars. Provision is made for the particulars to be varied should it become apparent that transparency requires different or additional matters to be reported about regulated transactions.

Mr. MacNeil: Will the Minister give way?

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Bridget Prentice: I will give way once more to the hon. Gentleman, but if he repeats the questions that he has asked already, I doubt that I shall be able to help him any further.

Mr. MacNeil: The Minister refers to loopholes, but is not the biggest loophole of all still wide open—the one that allows someone to give a substantial amount of money to a political party and then to pass through that very loophole into the legislature, this Parliament?

Bridget Prentice: Let me make it absolutely clear that no one who gives money to a political party is given some sort of favour, either in this House or in the other place. I hope that the hon. Gentleman accepts that. I am disappointed that he does not understand that no one who has supported a political party, whether my party, the Conservative party or the Liberal Democrats, should be accused in the House of such behaviour.

Mr. MacNeil rose—

Bridget Prentice: I will not give way again to the hon. Gentleman. I have made my position clear.

Mr. Bone: Will the hon. Lady give way?

Bridget Prentice: If I can make a little progress, I shall deal with the question of third-party loans.

The other major difference that requires a different approach is the continuing nature of a regulated transaction. Because regulated transactions involve an ongoing relationship, it is necessary to require the reporting of variations in the terms of the transaction. We have done that in new section 71N. Whenever one of the particulars that are required initially to be reported about a regulated transaction is varied, the party is obliged to record the change in the next transaction report. We believe that that will ensure proper transparency. Otherwise, regulated transactions could, for example, be varied to permit the making of further advances or be put on a zero-interest basis in a way that would not be apparent. We have also imposed a requirement to report when a regulated transaction finally comes to an end.

As for third-party loans, third parties are already covered during a general election and we have an order-making power in the Bill to deal with third-party loans and donations outside that period. I hope that that the hon. Member for Wellingborough (Mr. Bone) is satisfied that such matters are covered by the amendments.

Mr. Bone: Given the Minister’s earlier comments, I wanted to point out that the House should not give the impression that someone who gives money to a political party should be barred from going to the other place. That, too, would be wrong.

We want transparency. Does the hon. Lady agree that, if we are not careful, soft money or issue money could be lent or given, which would have the same effect, but would not have to be declared?

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Bridget Prentice: I agree wholeheartedly with the hon. Gentleman that someone who donates to a political party should not as a result be barred from being in the other House. That would clearly be nonsense. People have the right to express their political views in their own way and there is no bar on appointing a donor to the other place. People are appointed to the other place on merit. I hope that hon. Members in this place accept that. [ Interruption. ] Noises off from the Liberal Democrats ought to be kept a lot quieter, given their own situation. They have no right to pretend to be any better than any other party in the House in dealing with these matters.

The hon. Gentleman mentioned his concern about soft money, which is something that we have to look at. Later, I shall speak about issues relating to candidates’ expenses, where such money sometimes appears. We have views on how we might make progress in that respect.

The new regime will apply not only to the political parties, but to individual members of political parties, their associations and holders of relevant elective office. The amendments also make provision for an order-making power to extend the loans regime to third parties during national election campaigns, permitted participants at referendums and election candidates in parliamentary, local government and London assembly elections. An order-making power to extend the loans regime to Gibraltar during European elections has also been provided for, mirroring once again the approach taken in respect of donations.

We have also considered in the amendments the most appropriate means of extending the provisions to Northern Ireland. The House will know that the donations regime has been disapplied in Northern Ireland since 2000 by orders made under PPERA. However, the Northern Ireland (Miscellaneous Provisions) Bill that has recently been debated in this place and is now before the House of Lords contains provisions that mean that the disapplication of the regime will expire on 31 October 2007. Thereafter, the donations regime will apply in Northern Ireland, with both temporary and permanent modifications. An order-making power will allow the loans regime to be modified as it applies in Northern Ireland in a way that allows it to mirror the approach to be adopted in relation to donations as provided for in the Northern Ireland (Miscellaneous Provisions) Bill.

The measures also bring about a number of consequential amendments to PPERA to reflect the introduction of the new regime for regulated transactions and to tie the two regimes together. The changes include an amendment to section 3 of PPERA so that those people who have made loans to political parties are excluded from being eligible to be electoral commissioners, reflecting the regime that currently applies to donations. Similarly, the amendments establish that an electoral commissioner shall cease to hold office if he is named as a participant in the register of recordable transactions—that is, if he gives a loan or other donation to a political party.

In accordance with the commitment that I gave the House 20 March, the amendments represent a comprehensive package of measures to make it compulsory for political parties to disclose any loans that they receive. Our intention has been to achieve as
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great a transparency for loans made to political parties as applies to donations. We believe that the measures now provide a robust and workable framework to ensure greater transparency in respect of significant financial benefits afforded to political parties, members of political parties and holders of relevant elective office. I commend them to the House.

Mr. Heald: Openness and transparency are important. If someone makes what amounts to a gift to a political party, or even improves its financial position, that should be known. If it is not known that a person has given a large amount of money or other substantial financial benefit to a political party and that person then becomes a peer, there will be grounds for suspicion about why that has happened. I shall say nothing about the circumstances that brought the subject to light recently, but it is a fair principle that when people give money or other financial benefits to political parties, that should be known when the sums involved are substantial.

Mr. Winnick: The hon. Gentleman was in no way responsible, so my question is not personal, but why was there no disclosure prior to 1997? When the Committee on Standards in Public Life—originally known as the Nolan Committee—was set up, John Major made it perfectly clear that political donations and contributions would be excluded from its remit.

Mr. Heald: As I think the hon. Gentleman would agree, that was a different era. We all accept things now that we might not have accepted years ago. I am sure that that is true for him as much as it is for me.

7.30 pm

David Taylor: Will the hon. Gentleman give way?

Mr. Heald: Let me just make a bit of progress.

The point that I was going to make is that, from the moment that this issue became important—in recent months—we have co-operated fully with the Government and we agree with the proposals that the Government outlined in the other place and again this evening. We are also contributing to the Phillips review, which we welcome. My hon. Friend the Member for Chichester (Mr. Tyrie) has put forward what we call a green paper, which sets out a whole range of protections that would take matters forward.

It is true that when the legislation was going through the House in 1999 and 2000, following the recommendations of the Committee on Standards in Public Life, it was thought that an element of giving or providing a financial advantage to a political party should be the trigger for reporting. It was thought that it was reasonable to exempt loans on commercial terms because they were commercial transactions, where a profit was to be made by the company. There was not that element of a gift or donation. However, as we know, that has turned out to be something of a grey area and so we accept that the law should be changed.
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We welcome the various proposals that the Minister has outlined and we will support them today.

Mr. Heath: I broadly welcome the amendments in this group. I am a little disappointed that the Leader of the House is not here, because this area is specifically one of his responsibilities. That is one of the reasons why I retain responsibility from the Liberal Democrat Benches for the issue. However, he is not here. No doubt we will have an opportunity to discuss the matter with him in the future.

May I deal first with amendments Nos. 61 to 63, which were moved in another place by Lord Goodhart? This is a perfectly sensible compromise—or a proportionate response to what had become an issue. The figure 12 was not simply plucked out of the air. It accords with the nations and regions of the United Kingdom and enables the political parties to describe themselves as they wish and as they feel is appropriate. The previous figure of five was arbitrary and was perhaps over-restrictive. I am grateful to the Government for recognising that there was some strength in that argument and for accepting the fact that what was proposed was a sensible move.

I also entirely welcome amendments Nos. 64 to 72, which build on the point that I originally made on Second Reading about the dual reporting procedure that applied to Members of this House. That gave rise to inconsistencies and additional bureaucracy—to no end in terms of better transparency or regularity. The Government accepted the principle and I share the Minister’s view that a critical part of that process involved the deliberations of the Standards and Privileges Committee, of which I used to be a member, and the contribution to the debate of its Chairman, the right hon. Member for North-West Hampshire (Sir George Young). The fact that the Government have been able to go to the Scottish Parliament, the European Parliament and the Welsh Assembly and come up with positions that are consonant with what is being proposed for Members of this House seems entirely rational and right. I welcome those amendments.

We are dealing with the issue of the funding of political parties. We should not forget the genesis of these proposals. They were born out of a certain degree of panic at the very adverse comments in the press when it came to light that various parties were indulging in the practice of taking loans. The clear link in the public mind—I make no comment at this stage about whether it is a real position or a perception—between the provision of loans and the acquisition of preferment and particularly entrance to our legislature in the upper House, is something that we simply cannot afford to allow to continue. It is right that, as far as we can, we should reach a consensus between the political parties to ensure that that perception is no longer allowed to prevail.

Mr. MacNeil: Transparency International has said that Parliament must be beyond reproach and be seen to be beyond reproach. Unfortunately, it has not given Westminster a clean bill of health. Does the hon. Gentleman agree that, as yet, nothing has appeared, especially in the Bill, that will put this Parliament beyond reproach and give it a clean bill of health?

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Mr. Heath: I agree to an extent with the hon. Gentleman. It is still incumbent on us to break that connection. I have a simple way of breaking the connection: having Members of the upper House up for election in a democratic process. However, given that there is a view—

Mr. Ronnie Campbell (Blyth Valley) (Lab): Or abolish them.

Mr. Heath: There is a perfectly respectable unicameralist view; it is not one that I share, but it has its own logic, although this House would have to do a much better job of scrutinising legislation and holding the Government to account if we were to move to a single Chamber. What is surely unacceptable is to have a wholly appointed House when it is so clearly prey to the whims of individuals in high office and the perception that there is a connection between providing funds for political parties and entering the legislature. We simply must not accept that in the British Parliament, and we must be absolutely clear that we will not accept it.

The matter of loans is a small sideshow in the process that we must now undertake to cleanse the Augean stables of party political funding, but it is necessary and I welcome it. The Minister said in her opening remarks that none of us perceived the loophole when the Political Parties, Elections and Referendums Act 2000 was going through. That is absolutely right. None of us did. But somebody certainly did subsequently. It was clearly subsequently noticed that this was a way in which political parties could acquire funds without that being properly reported. There is anecdotal evidence that people were pressed to change their intended gift into a loan. We can only guess at what the motive for such a change might be.

David Taylor: Is it not the case that the ingenious and the unprincipled will always try to evade frameworks, even though they may be a sideshow? Should not the real focus be on things such as the period during which donations and loans can be registered—not just restricting it to the election period? For instance, in the final few months prior to the last general election, in four constituencies—Lancaster and Wyre, Welwyn Hatfield, The Wrekin, and Northampton, South—substantial amounts of money were spent following donations from rich individuals and organisations, which duly secured sizeable swings in those constituencies, which went from Labour to Conservative. Is it not there that we ought to have tighter controls that will give a fair impression to the electorate at large?

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