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Public Bill Committee Debates

Draft Companies (Political Expenditure Exemption) Order 2007



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 order—statutory instrument 2001/445—for 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 Act—on 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 mention—he was not in his current post at the time—that 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 Minister’s 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 present—probably my highest attainment in my dealings with the Government.
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 Minister’s 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 Minister’s 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 affected—no, 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 Department’s 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 Minister’s 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 instances—we will all be aware of them—in which a political organisation owns a publishing house, for example, so there are grey areas. Will the Minister set out—he can do so by writing to the Committee if he cannot explain in detail now—exactly 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 other—entirely 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.
 
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Prepared 13 July 2007