Select Committee on Constitutional Affairs Minutes of Evidence


Examination of Witness (Questions 262-279)

RT HON JACK STRAW MP

4 JULY 2006

  Q262 Chairman: Mr Straw, it is very difficult to avoid calling you Foreign Secretary. We welcome you in your new role. This is the first time you have appeared before the Committee and we extend a genuine welcome to you. You have taken on two matters for which our earlier witness had former responsibility. We were teasing him about that earlier. Let us start with party funding. We all have an interest in this matter and have formally declared it because we are all beneficiaries of party funding in some way or other. You have said that this is a once-in-a-generation opportunity to reform party funding. What is wrong with it and why is it a once-in-a-generation opportunity?

  Mr Straw: I sought to set out in a lecture that I gave to the Fabian Society six days ago what I believe is wrong with it, which is that the number of members of political parties has declined—it has halved approximately over the past 25 years—while the amount of spending by political parties has trebled in real terms. I gave the detailed figures in my lecture. I do not believe that that is healthy for our democracy where parties have responded to a decline in membership and activist base by spending more money in a sense to achieve the same end. The other matter is that, notwithstanding the spending of significantly larger sums of money, turnouts have been going down. Any one election turnout may be higher or lower than the previous one for particular reasons. Self-evidently, if it is a tighter contest turnouts are likely to be higher than if it appears to be a foregone conclusion, but there is still a seminal decline from the 84 to 85% peak in 1950 to 60 or 61% at the previous election. There have been similar declines at a local level from above 50% in borough elections after the war to around 34 or 35% now. That is the problem. I introduced a series of changes in the law, as you will recall, with the publication of a White Paper and draft Bill in 1998, and finally the enactment of the Political Parties, Elections and Referendums Act 2000. That was designed pretty faithfully to implement the Neill Committee report. That made significant changes. I think it was the most significant improvement in the regime of party funding that we had seen certainly since the war, but it has left some quite big gaps. I think the biggest one is that the controls on spending are inadequate. Controls were put on spending at national level which was analysed as being the principal mischief in terms of the arms race. There is quite an elaborate formula in the Act to work out what an election period is, but that does not cover the whole of a party's national campaign and election expenditure. Meanwhile, for good reasons we all agreed to make clearer when the clock started to tick at local level. You will recall that before it started to tick as soon as someone declared himself to be a parliamentary candidate. That was a rather uncertain date. It now starts to tick more or less when the election is declared, which is a very short space of time in circumstances in modern elections where people are campaigning most of the time. That is what I see as the challenge before us. The opportunity is there to try to get it right. I think we got it half-right in 2000 but we have to complete the other half.

  Q263  Chairman: We are almost into continuous elections, are we not? We have general, local, European, regional, devolved assembly, mayoral elections and maybe even House of Lords elections.

  Mr Straw: Many areas, not all, have been used to elections by thirds. That is true for the old county borough areas and for my area. You got pretty continuous campaigning, but these days with the other bodies, the answer is yes. The notion that there are fallow periods for political parties when they are not using their money for electioneering is, I think, incorrect. The truth is that almost all parties' active spending is for election purposes. Obviously, they have to have an infrastructure, but that is also for election purposes.

  Q264  Chairman: But there are kinds of expenditure which the state contributes to which are seen as not to do with elections, particularly activities in Parliament and policy development. Those roles do have state support, so is this a realistic distinction any more, or ought we to recognise that all these matters flow into each other—parliamentary work, campaigning, policy development and so on?

  Mr Straw: I think both are true. You can make distinctions about these different activities. Plainly, there is a distinction between what a Member of Parliament does or should be doing out of his or her secretarial allowance, but when MPs do things they will have an eye on whether or not they will gain support for it. That is how democracy operates. Short money is there better to support opposition parties against the strength of government. As you know, we have provided for dramatic increases in Short money both for your party, Chairman, and the Conservative Party. I think that is entirely justified, but it is hard to say that at least indirectly that is not for any purpose other than party purposes. The same with policy development funds. In the public mind there is probably a distinction between money spent in this way on political education, policy development and running opposition parties in Parliament and moneys that are spent, say, on negative advertising where I think there would be less of an appetite on the part of the public to have its taxpayer money spent on it.

  Q265  Mr Tyrie: I should like to clarify the Labour Party's position with respect to any change that there may be to party funding rules and the unions. As I am sure you appreciate a lot of people, including in particular the Conservative and Liberal Parties, believe that that is essential.

  Mr Straw: Essential?

  Q266  Mr Tyrie: It is central and essential that this issue should be addressed. Can you give your view about what changes would need to be made if a cap were imposed generally on individual donations, say, £50,000? What kind of reciprocal arrangement would need to be put in place to cater for unions?

  Mr Straw: It begs the prior question as to what case there is for departing from the status quo.

  Q267  Mr Tyrie: But this is a once-in-a-lifetime opportunity?

  Mr Straw: I was talking about the overall issue of party funding. My principal concern as I spelt out in my Fabian Society lecture was to see the total amount of money spent by political parties reduced, because it is essential that we end the arms race. Parenthetically, from our party's point of view it is not a coincidence that it was not until controls on spending began in the 1880s that we were able to begin to see a relatively level playing field from which we could then secure the election of then Members of the Labour Representation Committee. You will be very familiar with the history. Before that, effectively candidates and electorates were bought and sold and the total amount spent in elections up until the Corrupt Practices Act was higher in real terms than it is even today. To reply directly to your question, Neill looked at this in detail. I am sure you are familiar with his chapter 6 headed "Donations: other issues."

  Q268  Mr Tyrie: I am after your view rather than Lord Neill's. I know his view; it has been out for many years.

  Mr Straw: Just allow me to conclude with Neill. He recites all the many changes in the regime for trade union funding, which were introduced by your party when in government, between 1979 and 1997, and also sets out that trade unions over their history have been active politically. He then goes on to say in paragraph 6.23: "We have received no evidence to suggest that the legislation is not working satisfactorily and no case has been made out for any reform. We do not propose any change in the law in this respect." As I recall—I am open to correction—from the debates in 1998 to 2000 I do not believe that your party made any proposals for change. We are waiting to see what Sir Hayden Phillips says on the issue. But it is incumbent on those who believe that something has changed since 1998 and this report to bring forward the evidence. Mr Tyrie, you have not done so. I understand that the Electoral Commission has received no evidence whatsoever of any suggestion that the legislation is not working satisfactorily.

  Q269  Mr Tyrie: This is not the issue.

  Mr Straw: With great respect, it is the issue.

  Mr Tyrie: The issue is that the Labour Party was being funded roughly 50-50 by individual donations and donations and loans from the trade unions and now the lion's share of the individual donations may well dry up. This point was made very clearly by Lord Levy when he came to see us.

  Chairman: I ask my colleague not to disclose the evidence given in that session.

  Q270  Mr Tyrie: That is quite true. He may have made a few remarks but I cannot quite remember what they are. We now know that clearly the trade unions will become very influential in funding Labour in the run-up to the next election—far more than they were in the previous one?

  Mr Straw: I am sure that if that is the case it will be perfectly public and the Conservative Party will seek to advertise many reasons why Conservative voters should not vote for us. That is democracy. Obviously, I have read your contribution to this issue with great care. First, since the starting point for all parties was Lord Neill's very rigorous assessment of the legislation and how it was working, if there is a case for change there must be evidence for it, and it is incumbent upon those seeking the change to bring forward the evidence. So far there has been none. Second, there is a distinction between the fees paid to the Labour Party by trade unions by way of affiliation and donations which they make and donations made by other people. You are familiar with the way political funds operate. There must be ballots for those political funds every 10 years. When people join a trade union they are given information that the levy will be used for political purposes and they can opt out. According to Neill, 18% do opt out. On the overall issue of caps on donations, I have said that I am sceptical about them. I do not rule them out, but I believe that the far more important issue is caps on spending. If one wants to control the arms race one deals with it, which means controlling spending at all times rather than simply controlling donations. There may be other arguments for limiting donations, but if one goes down the route of the United States where because of a Supreme Court judgment spending cannot be controlled and instead donations are controlled, in the end donations are not controlled; one simply pays a lot of lawyers a lot of money to evade the rules.

  Q271  Dr Whitehead: I take you back to your Fabian Society lecture which was very interesting and wide-ranging. The point you made in that lecture about limits on spending was very specific. You said "by all parties at all times". I understand that to be a considerable advance on the Electoral Commission's idea of a general election cap on spending, but I also take it to mean you suggest that the funds of all parties which raise money locally and nationally should be aggregated up and capped overall at all times during the cycle between elections. Is that what you say?

  Mr Straw: Yes. I have thought about it a great deal. Let me say for the sake of clarity that these are my provisional conclusions because it is possible that Sir Hayden Phillips or others may come through with arguments which suggest that my conclusion is in error, but the choice we have to make is whether or not we control spending. Unless one deals with spending from all sources in all ways one does not control it. What has happened recently is that, having set national controls which extend over a period, there has been a concentration of spending at local level. It is understandable; it is lawful, but that will go on. One also sees different patterns and striking differences in fund-raising and, therefore, spending between the parties. The Labour Party gets a lot of money from trade unions both by way of affiliation fees and donations; the Conservative Party gets a lot of money raised by way of local associations and other affiliated organisations. I think that the Liberals are somewhere in the middle. But we need to make a choice about whether we go on with a diminishing activist base and more and more spending, which is there to try to buy our way out of the democratic difficulty that we have got at the moment. I do not think that it will work for any of us.

  Q272  Dr Whitehead: There is a general acceptance about capping national spending, but your position goes beyond that in terms of capping the quantum of spending at all levels.

  Mr Straw: The distinction between what is national and what is local is arbitrary and varies between one party and another. With the experience of the 1980s and early 1990s, what was seen as the mischief by all parties and by Neill was national spending, particularly on advertising. We now have a situation, which I tried to bring out in my Fabian Society lecture, where national advertising is less effective and salient. The point has been made by the chief executive of Channel 4, Lord Saatchi and many others that with the atomisation of media you do not get the same impact as you used to even by, say, 48-sheet posters. The wheel is turning a little back to where it started with much greater emphasis on local and personalised campaigning. That will shift spending back to a local level. It seems to me that you have to put all of this into one pot.

  Q273  Dr Whitehead: What has been suggested is that a national cap would lead to individual candidates' spending limits rising, which would make politics more local again?

  Mr Straw: Allow me also to say that an awful lot of national spending by parties is now directed very locally. The days when it was prohibitively expensive to make a trunk telephone call have gone. We now have automated, customised phone calls. All parties employ celebrities. They will phone up and say to Mrs Whitehead or whoever that so and so from Coronation Street is calling—I do not know what the equivalents are for the Conservatives and Liberals—and ask, "Will you vote for us?" These are very local but they are organised nationally. The distinction there is also becoming rather illusory.

  Q274  Dr Whitehead: Presumably, you would include in that definition where national money is, as it were, parcelled out for what look like local purposes?

  Mr Straw: All parties have call centres which they use to sell a very distinctive local message. Is it national or local spending?

  Q275  Dr Whitehead: The second sentence in your Fabian Society lecture reads: "If and when we do that, as a result of the current view parties will be forced, if they want to survive and flourish, to recruit, retain and involve more members and supporters." How does an overall cap produce that result? I can imagine that parties may well say that since they have an overall target to reach and do not know how they will do it with jumble sales, bring-and-buy sales and so on, maybe they will just do it through a number of individual donors which will get to the cap and they will tell the local parties not to go with those other activities.

  Mr Straw: You may be asking whether my prayer and expectation in that second sentence is justified. It probably is, but how these rather extraordinary voluntary organisations called political parties, of which we are all members, actually operate is a matter of judgment. It is about how you motivate people. Of course, there are ones which have many foot soldiers and raise a lot of money, but I am talking about changing the culture that the parties have got into. As I said in the lecture, at any one time for certain the market share of one party as opposed to another will be changing. One party will be up and another will be down in terms of membership and ability to raise funds. But we must all recognise that the overall market or public space for politics is shrinking, and in my judgment that cannot be a good thing.

  Mr Khabra: Recently there has been a lot of public discussion about party funding and donations by rich people. Previously, it appeared to me and many other people that it was the rich people who liked to give money to the Conservative Party and corrupt the political system, but lately all the other parties have been tarnished because of the latest case involving such donations.

  Chairman: Perhaps I may make clear that we are not referring to any individual current cases that may be under discussion.

  Q276  Mr Khabra: Why do you think that the large donations from rich people have become such an important part of party fund-raising? In your opinion, should an individual be free to make donations to political parties of whatever sum he wishes as long as it is disclosed and declared?

  Mr Straw: Why has it become attractive? It has become attractive for the very obvious reason that if there is somebody who has half a million or a million pounds to give to a political party it is simpler and easier to raise that sum from one person than if you have to run 1,000 jumble sales. That is the attraction. I am not here referring to any current case, but those who give and make money available to political parties do so in my experience out of a sense of civic duty and not other reasons. Our democracy could not operate without people who are willing to give large and small sums to our political parties. I certainly do not think, therefore, that those people should be criticised for it. Indeed, we should find some means of moral recognition of the importance of that activity. As to whether there should be a cap on the overall level of donations, I sought to answer that question when responding to Mr Tyrie. Significantly, Neill said that we should analyse the evidence and look to overseas examples. He then came out with the following delicious phrase in paragraph 6.8: "We have looked at the practice overseas to see how far and how well limits on donations operate there. The position is described in Appendix 1. Most countries which we have surveyed do not have such limits. Of those few which do, the United States of America strikes us as an example of a well-developed system which nonetheless suffers from frequent incidence of evasion." Then it says: "No limit should be introduced on the amount which an individual company or institution may contribute to a political party." I should say, for the sake of completeness, my understanding is that a few more countries have since introduced limits on donations. I am happy to make the evidence I have available to the Committee. I also accept that the public mood may have changed on this matter, but I believe that the arguments in favour of the Neill position are strong; namely, if there are no limits on donations there can be no incentive whatsoever to avoidance. Obviously, there is no excuse for evasion in any case, but there is then no incentive for avoidance. What the American experience has produced has been a high level of avoidance. Russia also has a limit on donations. I may have to rest my case on that.

  Chairman: I do not think we should have a visit to see how their system is working. Given the pressure of time and the possibility of divisions later, I ask Dr Whitehead to move to the subject covered in Q12.

  Q277  Mr Tyrie: Before we go to that, perhaps I may ask Mr Straw to make available the evidence on the experience of other countries to which he referred.

  Mr Straw: You may have it already. It may be a circular point, but of course you shall have it.

  Q278  Dr Whitehead: This section of the brief concerns, in the context of the Fabian Society lecture, the dog that did not bark. You suggest that politics have to move from a spectator experience to a contact sport. How might that be done in the context of the state funding of political parties? If we have such funding how might that operate in practice? Is it to do with that contact sport, ie the activities of parties, or with a certain number of seats in general elections, or a percentage of votes, or a combination of activity and representational votes?

  Mr Straw: Dr Whitehead, you have been good enough to read all of my lecture. You will I think acknowledge that its purpose was to talk about the future of party-politics, or, as I called it, politics in a spectator society. The section on party funding was an important one but not the whole theme of the lecture. I was making a wider point about the need for us first to recognise the dangers of a spectator society where our activity is seen as distant from those who are citizens, not consumers, of it and ought to be key participants in it. But there is a sense of detachment and alienation from it, which I believe is often, paradoxically, exacerbated by the fact that people gain most of their direct knowledge of political activity from the television. That puts a barrier between people rather than brings them closer together. I was making what I regarded as both the prosaic and very important point that we have to get back to engaging with voters directly by meetings and personal contact. Many of us do it already, but the rather antiseptic and stylised party rallies and all that do not, I believe, necessarily give a proper flavour of politics. My own style is slightly different and includes open-air meetings, where anybody by definition can and does turn up, and ditto residence meetings. I think that the important issue for all of us is that we engage in argument with citizens and voters on the same level and give them confidence that they will not be put down by what is seen as the political elite. In terms of spending, one of the most important areas is not counted as party funding at all: spending on citizenship education. The House of Commons and the Department for Education and Skills are doing more on this. When I talk to young people I am more and more struck that they are interested in political issues and have political opinions, but often they lack confidence about how they will exercise or follow through that interest. I believe that there is a duty on all of us to deal with that.

  Q279  Dr Whitehead: Would they be taken further away from rather than closer to the arena by the introduction of state funding which perhaps is based on the previous position of parties? If the public is engaging in contact sport will it not want to form new political parties?

  Mr Straw: The level of state funding, not support, up to now is justified. There may be Short money, and money for policy development work and so on. It will include things like free envelopes and a good deal of the assumed cost of party electoral and party-political broadcasts which can add up to a lot of money. I believe that that is justified and there is party consensus for it. It may be there is a case of expanding that a little or to quite a degree. Personally, I do not believe there is any case for the state to take over the funding of political parties. In a democracy it must be people's democratic right to get together and put money into the formation of a party. The Conservative Party has more or less been there for ever, but even that party was formed out of the tories who formed a parliamentary association; ditto the Liberals and the whigs. In our case we began as a new political party. There was not a party and then we became one. If we think of this House post-war, there are now parties represented in it which 50 years ago no one had ever heard of. One certainly cannot freeze the structure of political parties in time; one cannot ban people from spending money on politics.


 
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