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Mr. Edward Vaizey (Wantage) (Con): Will the right hon. Gentleman give way?

Mr. Straw: I will in a moment, but let me first make some progress.

We had committed to introducing legislation to oblige political parties to declare the sources of all donations above a minimum figure and to banning foreign funding. When we came to government in 1997, the then Prime Minister, Tony Blair, widened the terms of reference of the Committee on Standards in Public Life. I point out to Conservative Members that throughout the 1990s we were seeking a full-scale inquiry into party funding in the face of the substantial scandals that were emerging among those on their Benches. A full-scale independent inquiry was consistently refused.

As I said, when we came in, the committee’s terms of reference were widened so that it could conduct a major inquiry on those matters. Under the chairmanship of Lord Neill of Bladen, it reported in October 1998. I worked closely with other parties to achieve broad agreement on its recommendations, and the legislative result was the Political Party, Elections and Referendums Act 2000. The 2000 Act was the first comprehensive reform of the regulation of political parties for more than a century, and I am proud that it fell to that Administration to achieve it. On the whole, as subsequent reviews have shown, it has worked well, although not as well as we had hoped. In one key area—that of local spending—it has had unintended consequences.

Mr. Redwood: Will the Secretary of State say why the Prime Minister’s campaign tore up the cheque from Mrs. Kidd, but recommended her as a possible donor to the right hon. and learned Member for Camberwell and Peckham (Ms Harman)?

Mr. Straw: I shall be happy to tell the Electoral Commission and the police should they ask that. We will wait until the inquiry is made.

Mr. Burns rose—

Mr. Spellar: On a point of order, Mr. Speaker.

Mr. Speaker: I hope that it is a point of order.

Mr. Spellar: On a point of order, Mr. Speaker. Is it in order for Conservative Members to make interjections without declaring an interest in respect of donations from secretive patrons’ clubs and others?

Mr. Speaker: It is up to Members what declarations they make.

Mr. Burns: Do the Lord Chancellor and the Government anticipate making acting in good faith a reasonable defence in the next criminal justice Bill?

Mr. Straw: I notice that the Conservative party has adopted a holier-than-thou approach on this issue. Its Members are now saying that there is one approach for the Labour party and another for them. Yesterday, the leader of the Conservative party was asked about some
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of these matters and said, “You know, that was a completely innocent mistake. The rules are quite complex in some places and when you are asking, say, every Conservative association to make sure that every donation it gets has got to be properly declared to the Electoral Commission and all the rest of it, you are going to get mistakes.” So there are mistakes by the Conservative party, but, apparently, much more egregious errors by us.

Mr. Simon: It is gracious of my right hon. Friend to give way. On innocent mistakes, Lord Ashcroft promised in 2000 that he would clarify his tax domiciliary status, his residence and where he pays tax. It is now 2007 and the matter has still not been clarified by him or by the right hon. Member for Horsham (Mr. Maude), who ducked the question disgracefully. Is that an honest mistake or something rather more sinister?

Mr. Straw: That is not a question that I can answer, but I noticed that, when the right hon. Member for Horsham was asked about the matter, he had carefully rehearsed replies, which failed to answer the direct question.

As the right hon. Gentleman said, the Government decided, with all-party support, to establish in March 2006 a further review of the funding of political parties, led by Sir Hayden Phillips. Along with the right hon. Member for Horsham, the hon. Members for Chichester (Mr. Tyrie) and for Somerton and Frome (Mr. Heath) and others, I have been heavily involved in that review. I express my admiration of Sir Hayden for the skill, professionalism and patience that he brought to the task.

Sir Gerald Kaufman: Consequent to the intervention of my hon. Friend the Member for Birmingham, Erdington (Mr. Simon), may I draw my right hon. Friend’s attention to Rachel Sylvester’s comments in The Daily Telegraph today? She wrote:

Mr. Straw: As I said to my hon. Friend the Member for Birmingham, Erdington (Mr. Simon), we noted that the answers from the right hon. Member for Horsham were carefully phrased.

Jim Sheridan (Paisley and Renfrewshire, North) (Lab): Will my right hon. Friend assure the House that any reforms that he introduces ensure that no rich business people can buy a party’s manifesto? I refer to the fact that Brian Souter, the owner of Stagecoach buses, gave the Scottish National party £500,000, only to find that the party dropped its proposal to reregulate the bus industry. My question will not cost £1 million, but the incident seems to me to be one of cash for favours.

Mr. Straw: Yes is the answer to the question.

Several hon. Members rose

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Mr. Straw: Of course, I will give way, but I want to make some progress first.

Sir Hayden published an interim report in October 2006 and a final set of proposals in March 2007, which formed the basis for intensive discussions led by him, with a view to securing detailed, all-party agreement on the way forward. In that, we were helped by an agreed, unanimous report by the Constitutional Affairs Committee in December last year.

Sir Hayden’s report dealt with four sets of issues: the Electoral Commission and the regulatory framework; spending limits; donation limits; and state funding. On the first, there is all-party agreement, backed by the Constitutional Affairs Committee and the recent report of the Committee on Standards in Public Life. All agree that the Electoral Commission should have a tighter focus on the regulation of political parties and the conduct of elections, and that it should be more proactive in policing the system overall. Reforms to that end will be included in legislation.

The second issue is spending limits. When the original reforms were introduced in 1883, election campaigns were conducted over a relatively short period, and almost exclusively locally. However, huge sums were spent—equivalent to well over £100 million at today’s prices. Those limits worked well so long as campaigning was mainly confined to local constituency campaigns, but with the development of national campaigning from the late 1950s onwards, the old regulatory system became very defective.

Stephen Pound: On the subject of the complicated mechanism that my right hon. Friend mentions, I am sure that the right hon. Member for Horsham did not mean to mislead the House earlier when he stated, in reply to my intervention, that all members of the Midlands Industrial Council had had their names published, given that we hear that the names were still emerging as recently as two hours ago. Does my right hon. Friend agree that that is either confusion or just coincidence?

Mr. Straw: The simple truth on unincorporated associations such as the Midlands Industrial Council is that they have been used, albeit lawfully, as a means of avoiding disclosing the identity of the original donors. That is why Hayden Phillips’s Committee recommended—and we will do this—that the identity of beneficial donors to unincorporated associations should be made clear.

Mr. Stephen O'Brien (Eddisbury) (Con): To help the House in relation to what the right hon. Gentleman has just said, could he confirm the tax status of Lord Mittal and of Sir Ronald Cohen?

Mr. Straw: An individual’s tax status is a matter for them and for the Inland Revenue and the Electoral Commission.

Mr. Gordon Prentice (Pendle) (Lab) rose—

Mr. Straw: Neill looked very carefully at the question of overall spending limits and said that the majority of his Committee had concluded—

Mr. Prentice rose—

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Mr. Speaker: Order. The Secretary of State is not giving way. I ask again for calm.

Mr. Straw: Neill said that the majority of his Committee had concluded, at paragraph 10.31 that

It must be a self-evident truth that the overall level of spending is the key driver of the demand for donations and of the problems that may arise over those donations. The Constitutional Affairs Committee was eloquent in warning about an escalating arms race between the parties, stating correctly that

The Committee recommended that there should be a

In his March report, Sir Hayden Phillips commented:

It is true that, as the right hon. Member for Horsham said, spending had come down from the ludicrous levels that were reached in the early 1990s—that is thanks to our Act, not the Conservatives’ proposals. However, as Hayden Phillips recited, spending between the two parties at the last election stood at some £90 million in the year of the election, when it should have been a combined limit of £40 million, and some £60 million the year before leaving aside local expenditure. He went on to say:

He concluded:

He added:

Mr. Graham Stuart (Beverley and Holderness) (Con): Does the Secretary of State accept that it is ludicrous for an inquiry is to report to someone—the Leader of the House—who is herself under investigation for the receipt of illegal donations?

Mr. Straw: No. The Labour party inquiry will report to the national executive committee.

Martin Salter (Reading, West) (Lab): My right hon. Friend is rightly considering further legislation, but when he brought in the Political Parties, Elections and
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Referendums Act 2000, what prompted him to conclude that that legislation was necessary? We have heard about Chinese heroin barons and about Asil Nadir, but was it the research that revealed that 50 per cent. of peerages and knighthoods went to directors of companies that had given donations to the Conservative party?

Mr. Straw: My hon. Friend is entirely right. There was widespread concern, and Conservative Members have extremely short memories about unacceptable practices that took place in the Conservative party, above all, at that time. That was why we set up the inquiry under the chairmanship of Lord Neill, and we delivered on it on an all-party basis.

Mr. Vaizey: On Sunday, Labour Ministers said that the money from David Abrahams had been paid back. The Secretary of State says that he does not know whether it has been paid back. Labour Back Benchers have been free to smear Lord Ashcroft on his tax status, but the Secretary of State says that he does not know the tax status of Lakshmi Mittal or Sir Ronald Cohen. Does the Secretary of State feel that he has come to this debate properly prepared?

Mr. Straw: I was answering a specific question about two donors whose tax status had never been an issue. It is Lord Ashcroft who has clearly raised questions about his own tax status that so far he has refused to answer.

Mr. Kenneth Clarke (Rushcliffe) (Con): The right hon. Gentleman is going through the Hayden Phillips recommendations and it must be obvious to all reasonable people that the three political parties should feel obliged to reach an agreement along the lines of those recommendations as quickly as possible in order to restore some confidence in our political system. Would he move on to the key point of how trade union block grants should be treated under any system? Is he content to say that members of trade unions should be allowed to contribute like anyone else, giving voluntary contributions, and subject to the same overall limits that every other individual ought to be subject to?

Mr. Straw: I am extremely grateful to the right hon. and learned Gentleman for what he has just said. He said that it is important that all parties move ahead to implement the Hayden Phillips recommendations. That is exactly our position and that of the Liberal Democrats, but it is not the position of the Conservative party. What is absolutely clear is that donation limits are an issue, and I shall come to the issue of trade union contributions. However, the fundamental issue that Hayden Phillips raised alongside those two was that of spending limits. The Conservative party was signed up to overall spending limits. When I made my oral statement on 15 March on the publication of Hayden Phillips’s report, the right hon. Member for Maidenhead (Mrs. May), speaking for the Conservative party, said:

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The right hon. Member for Horsham endorsed that. It is, therefore, something of a surprise to all of us engaged in those negotiations—I am glad to hear that the right hon. and learned Member for Rushcliffe (Mr. Clarke) does not take the view of his party leader—to hear the Leader of the Opposition say that he does not believe

If the right hon. Member for Horsham is now ready to stand up and say that he accepts what he and the right hon. Member for Maidenhead accepted on 15 March, and not the position of the Leader of the Opposition, we can make good and consensual progress on this issue.

Mr. Shailesh Vara (North-West Cambridgeshire) (Con) rose—

Mr. Straw: No, no. I want the right hon. Member for Horsham to intervene.

Let me say to the right hon. Gentleman about this stuff on Government press offices, the communications allowance and so on, that if the only issue between us is whether there should be a discount for incumbency, we are happy to talk about it, but the truth is very different.

Mr. Kenneth Clarke: I do not mind the right hon. Gentleman dilating on this matter because I am a general supporter of the Hayden Phillips recommendations. However, the right hon. Gentleman has to answer the point about trade unions. It seems to most people in the country that that is the principal obstacle standing in the way of what is otherwise an obviously desirable agreement.

Mr. Straw: I said that I would come to that and I will. But I will also say to the right hon. and learned Gentleman that he understands the point, which the Conservative party leadership now does not—it had a different point of view six months ago—which is that the key driver of donations is the totality of spending. [ Interruption. ] Of course there is an arms race, and there has been one for many years. We sought better to control that in the 2000 Act. We controlled it somewhat, but not sufficiently. Unless we accept what the Constitutional Affairs Committee recommended and what is explicit in Hayden Phillips’s proposal, we shall not be able to secure far better control of overall spending and donations, which is what the whole House and, I hope, the whole country wishes.

Mr. Vara: Will the Secretary of State give way?

Mr. Straw: No.

Let me come to the issue of donation limits. Neill considered whether donation limits should be established back in his 1998 report, but came down firmly against them. The Liberal Democrats have consistently argued for them, but Neill’s view was shared by both the Conservative and Labour parties, so no provision was made in the 2000 legislation. In the light of Sir Hayden Phillips’s review, both parties now accept the case for such limits. Sir Hayden recommended that limits should initially be set at £250,000, reducing over a number of years to £50,000.

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