Examination of Witnesses (Questions 40-58)
LORD RAZZALL
CBE, LORD MARLAND
AND LORD
LEVY
22 JUNE 2006
Q40 Mr Tyrie: I think we have agreed
there has been a collapse of trust in the way parties are funded
and, of course, the transparency you were referring to being introduced.
I think that is, more or less, what you said in your opening remarks,
Lord Levy. Lord Razzall, you used the phrase: "We are in
a mess" right at the beginning. I would like to carry on
looking to the future and thinking about what we are going to
do to clear it up, because I think that is the overriding interest.
In doing so, my questions are mainly addressed to Lord Levy and
Lord Razzall, partly because I already know what Lord Marland
thinks and partly because the party, in any case, has already
published its proposals. Do you think that we should have a cap
on large, individual donations?
Lord Levy: I actually have been
thinking on this subject for some considerable time and prepared
a paper last September—nine months ago—in which I
felt that, yes, caps should be introduced on individual donations.
However, let me also add to that, if I may, another dimension,
in that one understands what it would mean by capping donations.
If the Committee would indulge me for a few moments, again just
to draw on my much longer experience in the charitable world going
back nearly 40 years. I have often sat around meetings of charities
where there has always been concern that the charity is dependent
on a small number of large donors: "What if something happens
to them? What if their offspring decides they do not want to support
that particular charity?" One has often said: "Can one
not widen the net and get many more gifts at a lower level?"
Regrettably, I have to say, in theory this has been a very good
basis of dialogue but when it has come to practice and practical
implementation it has been extraordinarily difficult. In other
words, to widen that net is very, very difficult indeed. If you
take a cap of, let us say, £10,000, the number of gifts we
would have to get at £10,000 to substitute for a donor giving,
let us say, £100,000, half-a-million, or even the very large
donors at a million pounds, is going to be very, very difficult
for political parties to attract. So, therefore, I do not think
one can just look at capping gifts in isolation. My paper that
I prepared was supportive of capping gifts but I think one has
to dovetail that with: how do you bring in that extra money?
Q41 Mr Tyrie: Tell us more.
Lord Levy: I believe that that
has to be furthering the element that is coming in from state
funding. Currently, I think, over the last three years, the element
has been at just over £20 million—£14 million
of that money has gone to the Tories; about £6 million, I
think I am right in saying, to the Lib Dems and just over 1 million
to the Labour Party. So there is already a relatively serious
amount of funding coming in under the umbrella of Short money,
if one can put it under that umbrella. I think if one goes along
the route of putting a cap on donations, which I would absolutely
support, one has to decide on the amount of that cap and has to
(I used the word "dovetail") consider that in terms
of where does the shortfall, if there is such a shortfall, come
from? I believe, and I can only draw on my experience which is
far longer in the world of charity, that there would be a shortfall—and
it would be my absolute, solid opinion that there would be a shortfall—and
therefore how does one deal with that shortfall?
Q42 Mr Tyrie: You have clearly thought
about it deeply and written a paper. Can you give us some indication
of where you think the cap might be pitched and what kind of dovetailing
you would like to see?
Lord Levy: The paper I prepared,
I think from memory, had a cap of £10,000 and I understand
the Power Commission came up with that same number. I, perhaps,
have rethought that subsequently and I think that that cap could
be lifted. The maximum, certainly in my opinion, it should be
would be £50,000. I think one could take, if you like, any
number between £10,000 and a maximum of £50,000. It
would not be in my gift to decide on this cap but if I were asked
to recommend the cap I would certainly put the number between
£10,000 and £50,000.
Q43 Mr Tyrie: How would you structure
the dovetailing? What do you suggest as dovetailing? Tax relief?
Match funding? Funding to help parties run general elections?
Lord Levy: I understand your point,
Mr Tyrie. My September paper also recommended that there be an
element of tax relief. I think it is very difficult to take political
parties and put them under an umbrella of charitable status in
totality. I do not think that is a route that should be pursued.
However, in terms of smaller gifts, perhaps gifts of up to £1,000,
I do believe by having a similar tax relief to a charitable payment
this will hopefully—and I do not think it will happen with
immediacy but over a period of time—attract more people
to give at that level knowing they are getting that tax break.
Q44 Mr Tyrie: So we may need transitional
state funding before your new dovetailing system builds up?
Lord Levy: I believe you may need
a larger degree of state funding and I would not like to predict
whether that level would need to be maintained or gradually one
will attract more donors at the lower level so one can then dilute
the amount of state funding subsequently. I would not like to
make that prediction but it is possible that it will be in a staged
way.
Q45 Mr Tyrie: Do you think it is
possible or reasonable to introduce a cap on individual donations
with tax relief without also introducing a cap on all forms of
institutional, corporate and trade union donation?
Lord Levy: This is a decision
for the Labour Party. The Labour Party is a democratic party,
it is going to take soundings from its membership on this subject
and it is going to decide at conference what is going to happen.
Therefore the best I can do to this Committee is proffer a personal
opinion on this subject.
Q46 Mr Tyrie: That is all I am asking
for, I understand.
Lord Levy: First of all, the history
of the Labour Party with the union movement is a long history
of association and bond and affiliation, and certainly there would
never be any intention of that association—I do not think
it would ever be on the agenda—being broken in any way,
nor do I think it should. That is a matter of history, affiliation
and I do not think it should. So therefore one has to look at
the specific aspect of unions and their methodology with regard
to helping to support fund the Labour Party. Again I must really
emphasise the point I am now just giving a personal opinion. I
see that in, if you like, two categories. You and I realise you
are a Tory member but, as you are putting the question, you are
a union, you are the head of that union, your union has let us
say 100,000 members, those 100,000 members pay a subscription
to your union and part of that is the element that they want to
attribute as their individual membership to the Labour Party.
I think it would be wholly inappropriate and wrong for that not
to continue to happen, so therefore if that union, and their individual
members by affiliation to that union and that union by affiliation
to the Labour Party, were passing over the 100,000 times the subscription
amount, that to me is tantamount to those individual members paying
their subscription to the Labour Party but doing it through their
affiliated body they choose to do it through, the union.
Q47 Mr Tyrie: Even though polling
suggests, and there has been extensive polling of this, that 40%
on average of those who donate money to the Labour Party in that
way vote for other political parties?
Lord Levy: That is their decision
with regard to their membership of the union and their affiliation.
If I may, I want to try and answer specifically your question.
If that union then chooses to top up those fees which have been
collected, which have been passed over, by an additional gift—let
us take this example, that the amount of that would be 100,000
at £20, by my maths I think that is £2 million and that
is what the union would pass over—I absolutely do not think
there can be any argument on that at all. But if that union chose
to pass over £2½ million, because that half million
was coming out of other sources or out of reserves or wherever,
and a cap had definitively been agreed at £50,000, I believe
that gift of funds passed over should be limited to £2,050,000
and not £2,500,000.
Q48 Mr Tyrie: I think that is an
extremely interesting answer.
Lord Levy: This is a personal
opinion, I must preface again this is my opinion.
Q49 Mr Tyrie: I understand. I have
one very simple remaining question. I realise the paper you are
describing was an internal paper, the paper you wrote last September,
would you be prepared to look at it, excise such sections which
you feel may be compromising to the Labour Party, and make the
remainder available to the Committee?
Lord Levy: That is a question
I would have to ask internally. It was an internal, I would describe
it, confidential paper, and I would have to seek clearance and
an opinion on whether I could do that. It was an internal paper.
Q50 Mr Tyrie: I understand.
Lord Levy: I will certainly check.
Q51 Mr Tyrie: Can I ask Lord Razzall
if he has any comments to make?
Lord Razzall: Our position has
really been the same since the first inquiry I gave evidence to
which was chaired by Lord Neill when he was chair of the Committee
on Standards in Public Life when he looked at all these issues
in great detail. The most important thing which Lord Levy said
which I fundamentally agree with is that all proposals for change
have to be a package. You cannot pick out one item like, "Do
you believe there should be a cap on donations?" to which
the answer is, "Yes, I do but only if the other elements
of the package are put in place." Indeed those of us who
have done interviews on this subject will have often found people
saying to you the Paxman line, "Well, you said you were in
favour of a cap of £50,000 and you have taken £100,000
from Donor X, don't you think that is hypocritical?" to which
the answer is, "We are in favour of a cap but only if the
other elements of the package are in place which they are not."
To briefly summarise, we think, as there seems to be a general
consensus moving to the fact, that we should reduce the limit
people should spend to £15 million, which is I think the
same as the Tories have suggested. We think there should be a
cap on individual donations of £50,000. We think that should
be compensated for, and I entirely agree with Michael Levy if
you put the cap on that leaves a great hole in how parties get
their money and that should be compensated for by a combination
of some state funding. The easiest way to do state funding is
to increase the scope of the Policy Development Fund to enable
parties to spend it on things they are not allowed to spend it
on now, and you could fund that extra amount by reducing the Government
advertising budget so the taxpayer would not be paying anything
extra. Then you could also look at tax concessions as we are talking
about. The slight problem with tax concessions is of course that
they do benefit people who are better off rather than non-taxpayers,
so you might have to adjust the matching state funding to compensate
people for that. As far as trade unions are concerned, our position
has always been that companies and trade unions should be subject
to the 50,000 cap. Like you, Lord Levy's distinction between the
union acting as a collecting agency for the members is something
I have never really thought about and would want to reflect on.
One of the problems I have with the whole trade union concept
of course is that unless Labour is prepared to make some concession
on trade unions I cannot see the Tories agreeing to the overall
package and the Government's position is that they want unanimity.
Q52 Mr Tyrie: Neither can I!
Lord Razzall: They want unanimity
of all three political parties, so nothing will happen, which
is a shame because this is the moment we can seize to have change.
In a way what to do about the trade unions is the driver of this
because of trying to get consensus between the three parties,
but it is an interesting point that Michael has made.
Lord Levy: This is absolutely
my individual analysis.
Q53 Mr Tyrie: It is most fun when
our witnesses go off piste! Did you want to add anything on this,
Lord Marland?
Lord Marland: I agree the package
has to be fair to all parties and there cannot be any sort of
back gates, otherwise it will not work, and we could not possibly
volunteer to do otherwise. The really important thing I think
about the future is that we all have the same problem—Tim
and Michael would hopefully agree with that—we have a declining
interest in political parties, we have a population who think
giving money to political parties has a bad odour, we have a view
that most politicians are not attractive to the general public
and somehow anything we do has to reverse that trend. We have
to encourage people back to participating in politics, we have
to find ways of engaging them and we have to develop transparency,
and all those things have to be taken into account in the equation
as we go forward. The Conservative Party proposals, which of course
I have been involved in creating, have got elements of that, not
everything is relevant to perhaps everybody but there seems to
be a common thread going through them, and I think the discussions
we had with Sir Hayden Phillips will hopefully produce something
which is fair to all sides which recognises the fundamental points
which are those three issues I mentioned earlier. One of the issues
we have to dispel is that if someone gives £50,000 to a political
party he is not hung out to dry by the press and every part of
his social life is written about in the diary columns, because
that is one of the most discouraging things for anyone giving
money genuinely to a political party. £50,000 is a lot of
money but it is not in relevance to the £30 million we have
to raise for an election or the £10-12 million we have to
raise during a year or whatever case it may be; so it is not a
hugely large figure.
Mr Khabra: If state funding is extended,
do you think it would be necessary to cap political donations?
Would you also agree this dual system of funding will still be
open to political corruption?
Q54 Chairman: I do not think the
second part of that question would be useful to answer in the
circumstances in which we currently find ourselves. I think the
first part you have really answered, because you have given us
an indication that it has to be a package.
Lord Razzall: Yes.
Lord Levy: Absolutely.
Q55 Chairman: Corporate donations,
personal donations, state aid, there is some package the balance
of which we do not know.
Lord Marland: It has to be a package.
We have suffered from the fact corporations find it almost impossible
to give us money, and they were our largest donors, because the
Government imposed a regulation that it had to be approved at
an AGM of in many cases several thousand voters and that has had
a huge effect on our historical donor base.
Q56 Chairman: It has had a very significant
effect.
Lord Marland: We have adjusted
through very difficult circumstances, being in opposition, to
that and that is why anything we do going forward has to have
a level playing field.
Lord Razzall: It is not only the
company law legislation which has been responsible for that, I
would have thought primarily it was the creation of New Labour
which meant that no longer could the Party Treasurer of the Tory
Party go along to the captains of industry and say, "You
really do have to get your company to make a corporation donation
because otherwise it will be nationalised." That is what
used to happen as a result of which millions of pounds were divvied
up by the FTSE-100 companies. Look at how much the brewers used
to put in to the Tories to try and stop the march of red hot socialism.
Q57 Mr Tyrie: And the trade unions
signed up saying, "If you do not sign up, your industry will
be privatised"!
Lord Razzall: Quite.
Q58 Chairman: One last question. All
sorts of schemes have been advanced for how you link party finances
to various things—the number of votes which the party received
at the last election, a check off on somebody's tax form, an actual
form of tax relief—but what these schemes tend to have in
common is an attempt to find some objective basis on which to
decide how much parties should get, and some of the schemes raise
issues about those who are on the outside knocking on the door
trying to get in, who maybe do not have seats in Parliament already,
or they believe they have an entitlement to some support to put
an alternative case to the electorate. Do any of these fancy schemes,
if I can call them that, appeal to you, whether it is an individual
check off, relating state finance to parties' membership or relating
it to the number of votes they got at the last election, or somebody
tying it to how much local campaigning they do? All these schemes
try to find an objective basis and in some cases perhaps to reward
a party if it is genuinely campaigning locally. Any thoughts?
Lord Marland: My response is easy
because we have documented how we think it should be done, which
is based upon our share of the vote. Curiously enough, and it
may be a coincidence, it does add up almost to the matched funding
in terms of the annual running costs of the party. But we are
open to suggestions at the end of the day.
Lord Levy: We currently are in
the process of taking soundings on this and really I cannot comment
more than that.
Lord Razzall: There is an existing
problem, is there not, with the way that the Policy Development
Fund is divided up in that there are parties benefiting from that
who do not fight UK-wide elections who are getting significant
benefits from the Policy Development Fund. These are quite complicated
issues. What do you do to the Scottish Nationalists, Plaid Cymru,
who are not UK-wide parties yet this is UK-wide expenditure? The
issues are quite tricky.
Chairman: We are very grateful to the
three of you. It has been extremely helpful. I am personally convinced
it has in no way compromised other matters going on outside that
we have had this session. It has been of real value to us. You
will see the evidence on the basis I described earlier, so you
can check it is an accurate representation of what you said to
us. I think there are probably fewer people outside than when
you came in, so you might find it easier to leave. Thank you very
much.
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