The
Committee consisted of the following
Members:
Chairman:
Mr.
David
Marshall
Baron,
Mr. John
(Billericay)
(Con)
Brown,
Lyn
(West Ham)
(Lab)
Burt,
Lorely
(Solihull)
(LD)
Campbell,
Mr. Ronnie
(Blyth Valley)
(Lab)
Davies,
Mr. Quentin
(Grantham and Stamford)
(Lab)
Duncan,
Alan
(Rutland and Melton)
(Con)
Gardiner,
Barry
(Brent, North)
(Lab)
Gerrard,
Mr. Neil
(Walthamstow)
(Lab)
Gilroy,
Linda
(Plymouth, Sutton)
(Lab/Co-op)
Jenkin,
Mr. Bernard
(North Essex)
(Con)
Joyce,
Mr. Eric
(Falkirk)
(Lab)
Kawczynski,
Daniel
(Shrewsbury and Atcham)
(Con)
McCarthy-Fry,
Sarah
(Portsmouth, North)
(Lab/Co-op)
Öpik,
Lembit
(Montgomeryshire)
(LD)
Seabeck,
Alison
(Plymouth, Devonport)
(Lab)
Timms,
Mr. Stephen
(Minister for
Competitiveness)
Tyrie,
Mr. Andrew
(Chichester)
(Con)
John
Benger, Committee
Clerk
attended the
Committee
The
following also attended, pursuant to Standing Order No.
118(2):
Jackson,
Mr. Stewart
(Peterborough)
(Con)
Prisk,
Mr. Mark
(Hertford and Stortford)
(Con)
Tenth
Delegated Legislation
Committee
Thursday 12
July
2007
[Mr.
David Marshall
in the
Chair]
Draft Companies (Political Expenditure Exemption) Order 2007
2.30
pm
The
Minister for Competitiveness (Mr. Stephen
Timms):
I beg to
move,
That the
Committee has considered the draft Companies (Political Expenditure
Exemption) Order 2007.
May I begin by bidding a warm
welcome to you, Mr. Marshall, and to all members of the
Committee?
The order
is being made under section 377 of the Companies Act 2006. Under
section 366 of that Act, companies need to seek prior authorisation
from their shareholders for political expenditure.
The order exempts from having to seek authorisation companies such as
newspapers and others whose ordinary business includes the preparation,
publication or dissemination of news material. I should clarify that
the subject of party funding and governance is a different matter,
outside the scope of the order. The title of the order might have
caused some excitement, so I think that I need to make that point
clear.
The order
relates to corporate governance and the relationship between
shareholders and directors in the management of a company. We
need to replace the existing orderstatutory instrument
2001/445for two reasons. First, we need to extend the exemption
to independent election candidates, which is the only substantive
change from the existing order. Political expenditure under the 2006
Act is defined as any expenditure incurred on any publicity material or
activities that may be intended to affect public support
for certain persons. That will now include public
support for independent candidates as well as for political parties and
organisations. Secondly, the order is drafted in simpler language to
correspond with the format and drafting of the 2006 Act.
The exemption applies only to
political expenditure; companies that fall under it will remain subject
to the full requirements of the Act in respect of political donations.
The draft order is due to come into force at the same time as
provisions on the control of political donations and expenditure in the
Acton 1 October 2007 for Great Britain and 1 November for
Northern Ireland.
The
2006 Act has simplified and modernised company law, and it has
substantially rewritten company law, making it easier to understand and
more flexible. It has also made a significant contribution to better
regulation. It would clearly be impractical to expect companies in
journalism and news to pass resolutions about the publication of
editorials or comment of a political nature. The
draft order maintains a framework of company law that is proportionate
and avoids unnecessary burdens. It also clearly supports press freedom,
and I commend it to the Committee.
2.33
pm
Mr.
Mark Prisk (Hertford and Stortford) (Con): I, too, welcome
you to the Chair, Mr. Marshall. I do not think that I have
been under your guidance before when in this role, so I look forward to
you ensuring that we fulfil our roles appropriately. May I also take
this opportunity to welcome the Minister to his role? He is the third
Minister to have that role in the 18 months that I have been in my
current job, and I genuinely hope that he lasts longer than his
predecessors. He is a decent man and I look forward to our discussions
in the coming weeks and months.
The order is perhaps not as
exciting as political donations, as the Minister said, but although it
is uncontentious, it is still important. After all, its aim is to help
companies that routinely publish news from having to seek authorisation
from shareholders on each occasion when they seek to prepare,
publish and disseminate matters that may be defined as political. That
would, as I understand it, include print and broadcast media and,
presumably, new media. As the Minister said, it would be frankly
impractical for such businesses to have to seek a separate resolution
every time they wish to publish something that falls under the
definition of political expenditure.
The order stems from the
Companies Act 2006, which, as the Minister said, has made a number of
important improvements to the nature of company law. In that sense, the
essence of the measure is not new, because it was already in law; it
merely updates the position because of new primary
legislation. He did not mentionhe was not in his current post
at the timethat the order ties up an issue that was overlooked
when the Companies Bill was in Committee. In addition, the order
includes political expenditure for an independent election
candidate.
As I said a
moment ago, Opposition Members support the principle of the order, but
I would like clarification on one or two details. First, will the
Minister confirm that new media, as well as conventional media, are
included in the definition of preparing, publishing and, most
importantly, disseminating information? Secondly, on consultation, the
explanatory notes state frankly that there were very few responses. How
many organisations did the Department consult and what proportion
responded? Thirdly, at what point does a media company become a
non-independent political organisation to which the exemption should
not apply? Lastly, if that media company is owned by a political
organisation or trade union, would the exemption apply? I look forward
to the Ministers
response.
2.36
pm
Lembit
Öpik (Montgomeryshire) (LD): I welcome you to your
position, Mr. Marshall, and welcome the Minister to his.
There is no telling how many Secretary of States I worked with in my
previous incarnation as shadow Secretary of State for Northern Ireland,
but I counted them in and counted them out. I
realise now that each of them was preparation for working
opposite the Minister presentprobably my highest attainment in
my dealings with the
Government.
The order
seems logical within the constraints that it sets for itself. The
ordinary business of publication includes the dissemination of opinions
as well as facts.
I agree that it is impractical for newspapers to seek
every day the approval of shareholders on their
editorials. Nevertheless, in parenthesis, it is my recent experience
that the papers sometimes show a lamentable lack of commitment to the
editors code of practice, which covers matters of accuracy,
privacy and harassment. It is to be hoped that they will show greater
respect for this legislation than they have showed for individuals on a
daily basis, in putting forward what they claim to be
news.
I have a few
specific questions about the order. I may have misunderstood it, but it
seems that although it will be effective from 1 October 2007,
it applies to independent candidates only from 1 October
2008. I seek the Ministers clarification of whether my
understanding of the timing in respect of independent election
candidates is correct. If there is a year-long gap, I wonder why that
is the case. However, I am fully willing to accept that I may have
misinterpreted that part of the provision.
It is also worth pointing out
that some publications are not based on news. For example, if the
directors of a newspaper company wanted to publish a special
edition of some sort to advance the views of a
particular party, they would have to consider whether they were acting
in good faith and in accordance with this measure and their other,
general duties as per the guidance from the former Department for Trade
and Industry.
There may be
publications that are not news providers, and as such the distinction
in the order is pretty clear: they should not be looking to support
political parties and candidates without shareholder approval. I do not
feel there is too much of a grey area in that regard, but I assume that
if organisations were unclear about their status, it would be
reasonable for them to seek an opinion from the Department to determine
whether they qualify under the order as news
publications.
On
a separate note, we must re-emphasise that political reporting is
intended always to be in the public interest, and the order does
nothing to exonerate published news reporters from running away from
their responsibilities to the editors code of
practice.
In summary,
this seems a reasonable order, especially with regard
to the Ministers stated intention of defending the tenets of a
free press. I hope that he will be able to clarify the matters I have
asked about. Assuming that he can, I see no obstacle to supporting the
order.
2.40
pm
Mr.
Timms:
I thank both hon. Gentlemen for their kind welcome
and I look forward to debating many topics with them in lively
exchanges in the months
ahead.
I can confirm
that the exemption applies to new as well as paper-based media, and
that the terms of the order deal with that point. The hon. Member for
Hertford and Stortford (Mr. Prisk) asked about consultation.
The policy content was consulted on as part of the implementation of
the Companies Act 2006 DTI consultative document, which was launched
on 28 February 2007. On this order specifically, the comments
that we received were largely to do with drafting or were made in
support of the order. In total, there were seven responses, all of
which supported the
draft. We plan to publish them shortly, except in cases where the
respondents wanted their responses to remain
confidential.
I
welcome the support expressed by both hon. Gentlemen for the order. I
also confirm, in response to the hon. Member for Montgomeryshire, that
the date on which the order takes effect will be the same for all those
affectedno, I am sorry, I cannot confirm that.
The revisions relating to independent
election candidates will not come into force until 1 October
2008, as he rightly said. That is in order to grant companies another
year in which to pass a new resolution, should they need to do so,
given that a change is being made. I congratulate him on his
attentiveness in spotting that that is the
case.
The hon. Member
for Montgomeryshire also asked about guidance.
Responses to frequently asked questions are available on my
Departments website in relation to the draft order as well as
to the provisions on political donations and expenditure, and when they
come into force. The hon. Gentleman is right that the scope of the
order is pretty narrow, in addressing an important corporate governance
issue.
Lembit
Öpik:
I am grateful for the Ministers
clarification and relieved, to an extent, that my interpretation of the
legislation is correct. The statutory instrument is my first on my new
brief.
I want to raise
one concern: the London mayoral election will take place on 1 May 2008,
and it is quite conceivable that an independent candidate or a number
of independent candidates will run in that election. Given that the
commencement date is different for party candidates and non-party
candidates, could not independent candidates be at a disadvantage as a
result of the different commencement
time?
Mr.
Timms:
The hon. Gentleman raises an interesting question.
I suppose that it depends on the precise status of those candidates. In
previous mayoral elections, there have been independent candidates, in
the normal sense, but who have been linked with a political
organisation. Perhaps I can reflect on that
point.
Mr.
Prisk:
The Minister may have omitted
unintentionally the question of the relationship
between a media company and a political organisation. There are
instanceswe will all be aware of themin which a
political organisation owns a publishing house, for example, so there
are grey areas. Will the Minister set outhe can do so by
writing to the Committee if he cannot explain in detail
nowexactly where those grey areas lie and how they are bounded?
This is an important issue on which we will want
clarity.
Mr.
Timms:
I am grateful to the hon. Gentleman, and I
apologise that I did not address that point. I am not quite sure of the
situation that he envisages, but ownership of a news company does not
necessarily affect the exemption, and in most cases that I can think
of, it would not do so. It is conceivable that if the organisation in
question were run such in a political way, it could
itself be considered a political organisation, but I would not have
thought that that would cause difficulties in
practice.
Mr.
Prisk:
What would be the position if the British National
party had a printing output? I seek some clarity as to the relationship
between a company and political organisations. I suspect that all the
political parties represented here today have companies
in some form or otherentirely
benignly, I am sure. Nevertheless, clarity is important, given that the
exemption that the order seeks to apply relates to political
expenditure and not to news per se.
Mr.
Timms:
The hon. Gentleman seems to envisage a difficulty,
but it is not clear from what he said that there is one. If he thinks
there is, perhaps he would drop me a line setting it out, and I will
happily
respond.
Question
put and agreed to.
Committee rose at fourteen
minutes to Three
o
clock.