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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