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The refusal of the donations by the Prime Minister’s campaign team is a matter of public interest. Given the climate of opinion following the cash for peerages affair, did the Labour party’s treasurer, chairman, secretary or chief fundraiser—or indeed anyone in a position of responsibility in the party—ask about the processes in place for clearing donations? Was guidance given to anyone who might be in receipt of such a donation? Were systems in place to apply the guidance given by the Electoral Commission? Does the Lord Chancellor seriously want the House to believe
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that the general secretary of the Labour party, who not only received the guidance from the Electoral Commission but was asked to comment on it, was ignorant of the meaning of the words that he read on the paper? He struck me as a very intelligent man who purported to have some integrity, yet he apparently did not understand the words that were put in front of him. I find that difficult to believe.

Was any guidance given to the candidates in the deputy leadership election about what their donation rules should be? If so, why did several candidates apparently not declare donations given, in clear contravention of the rules? What role did Mr. Chris Leslie play? Why did he put the Leader of the House’s campaign team in touch with Mrs. Kidd? Why did he turn down the money? Did he know the connection with Mr. David Abrahams? Baroness Jay apparently did know that a proxy donor was involved. How did she know that? Did she know the connection with Mr. Abrahams? Did she know Mr. Abrahams? Did she tell anybody else?

What precisely led Mr. Abrahams to want anonymity in the first place, given that he gave many donations with no recourse to anonymity in many other areas of public life? He was not reticent in his pattern of donations, so why was it only in the case of the Labour party that he wanted to hide a donation? Is it true that Wendy Alexander has been advised not to resign because to do so might have a knock-on consequence for the Leader of the House’s position? If so, who gave that advice and why?

These serious issues will not go away, but we have had many other donation rows—on cash for peerages, on the Bernie Ecclestone affair, on the Midlands Industrial Council, which has been mentioned, and on several other issues. Labour Members can cite several examples from a sedentary position; I am sure that it all helps the argument.

Clive Efford rose—

Mr. Spellar rose—

Mr. Heath: I give way to the hon. Member for Eltham (Clive Efford).

Clive Efford: I have listened carefully to the hon. Gentleman’s speech, but he really cannot get away with the answer that he gave earlier about the Michael Brown money. Has he been approached by any of the people who have suffered from the fraud by Michael Brown, and has the Liberal party given any consideration to how he came by that money and whether it is morally obliged to give it back?

Mr. Heath: The hon. Gentleman raises an interesting question, but I have not been so approached. Does he propose that the money be returned to Mr. Michael Brown, pending the court cases, or to some other person or persons unknown? The hon. Gentleman needs to think through his position.

On the broader issue of rich donors, I have to say that they are nothing but trouble, whether they give to my party, the Conservative party or the Labour party. That is demonstrably true and it demeans the political process when so much effort is made to woo people
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with large amounts of money. Apart from any due diligence that is required under the law, there are two key questions that the parties should ask. The first is how, and the second is why. How did the donors become as rich as they are? Was it by ethical means, and did it happen in this country?

Mr. Gordon Prentice: On the point about rich individuals bankrolling political parties, is it not scandalous that the Conservative peer Lord Laidlaw, who is a tax exile, gave £6 million in gifts, loans and donations to the Conservatives, they brush that to one side as yet though it were of no consequence?

Mr. Heath: It is scandalous. It is also scandalous that any member of the legislature—of either House of Parliament—should choose not to be domiciled in the UK for tax purposes. The law should be changed to that effect. I listened to the circumlocutions adopted by the right hon. Member for Horsham and I fail to understand why he did not answer the perfectly proper question that was put to him about the position of Lord Ashcroft. However, the right hon. Gentleman was following in the footsteps of the right hon. Member for Witney (Mr. Cameron), who also found himself strangely tongue-tied on the subject in a press conference earlier.

When we are considering ethical issues and investments, I can give another example. I invite the Conservatives to take this one seriously, because it relates to them. They have received a series of donations from a company called Fidelity. The last such donation was for £25,000 in July. Fidelity deals with those who are creating the circumstances of genocide in Darfur. Darfur is a matter of great interest to hon. Members on both sides of the House and the Leader of the Opposition has often spoken about that issue—

Mr. Graham Stuart: Fidelity is an investment company.

Mr. Heath: So it is all right, then, to invest in the murderers in Darfur— [ Interruption. ] It is politics, someone suggests. Well, it may be the politics of the Conservative party, but it is not the politics of some of us. I hope that it will not be our politics in the future.

The second question that we need to ask about the big donors is why. Why are they giving money? Is it for preferment—

Mr. Spellar: Did you ask Michael Brown that question?

Mr. Heath: If Michael Brown thought that he was going to get preferment from the Liberal Democrats, he was delusional. [ Laughter. ] The right hon. Gentleman underlines the fact that if people give large donations, they seek preferment, baubles, influence, policy changes or something even worse that comes under the heading of corrupt practice. The political process can do without that. That is why it is so important that we have effective caps on donations.

Paul Farrelly (Newcastle-under-Lyme) (Lab): The Prime Minister has made it clear that the Labour party has apologised for what happened with the donations
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in question. Indeed, many of us wonder how the general secretary could have been so stupid. However, the hon. Gentleman must realise that he is on a very sticky wicket in talking about ethics and procedures, when it comes to Michael Brown. It is not every day that someone gives £2.4 million to the Liberal Democrats. Checks on the probity and sanity of that individual were clearly not made.

Mr. Heath: The Electoral Commission looked into the matter and said that the checks were all right, whereas it has said that the latest Labour party debacle was all wrong, and that is why it has been passed to the police for investigation.

I turn now to what we need in the future. It seems to me to be transparently obvious that caps on donations are only one side of the coin, and that we also need caps on expenditure. The third element that we must secure is stronger powers of scrutiny and investigation for the Electoral Commission.

That is why the talks with Sir Hayden Phillips, in which I participated, are the firm ground on which all parties can stand. There is no other, and it is no good for each of us, separately, to set out our own prescription and expect that to pass any test of objectivity. The importance of Sir Hayden Phillips’s proposals appeared to be recognised by the right hon. and learned Member for Rushcliffe (Mr. Clarke)—

Mr. Clelland: Will the hon. Gentleman give way?

Mr. Stuart: Will the hon. Gentleman give way?

Mr. Heath: No, no. I am extraordinarily pleased that the right hon. and learned Member for Rushcliffe stood up to ask, from the Conservative Back Benches, why on earth the parties were not working together to adopt Sir Hayden Phillips’s proposals. I accept that they are not perfect: for example, I should prefer lower caps than the ones that have been proposed. The Lord Chancellor was right that my party has a long record of wanting caps on donations, and I think that the Phillips proposals do not go far enough. Neither do I like the time scale, which I believe is far too elongated, although I think that that displays the natural caution of a senior civil servant more than anything else. I should prefer an accelerated procedure, but it is a matter of enormous regret to me that the Conservatives walked away from the deal.

Mr. Stuart: Talk about the unions.

Mr. Heath: The hon. Gentleman, from a sedentary position, invites me to talk about the unions, but we did so and in fact reached a broad consensus about them. That was fine until June, but then something happened in central office—I do not know what it was; perhaps someone came in and said something—and then for some reason the attitude of the Conservative party’s negotiators changed and we were not able to have the meeting in July. When we came back, it was clear that there would be no conclusion to the talks.

Mr. Maude: I am grateful to the hon. Gentleman for giving way, but what he suggests is simply not the case.
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We had reservations about the proposals all the way through the negotiations. We wanted an agreement so that that long-term, sustainable reform could be put in place, but from the outset we said that the question of union funding had to be addressed. During the course of the discussions, it transpired that the system of affiliation fees was far more backward, and far more of a racket, than we had realised. In those circumstances, the reforms needed to be more radical than was originally envisaged, although their goal—that is, genuinely individual donations—needed to remain the same.

Mr. Heath: That is where I do not understand what the right hon. Gentleman is saying. It is true that we found disgraceful abuses in the way in which some unions administered their political funds, and we dealt with them in the negotiations. We asked people to go away and work on those problems: they came back with recommendations and, as a result, the proposals from Sir Hayden Phillips contain ways to deal with egregious abuses of the system. For example, unions will not be able to affiliate more members than they actually have, or pay over money that they have not received.

Ms Butler rose—

Martin Linton (Battersea) (Lab) rose—

Mr. Heath: Such abuses would no longer be possible, because the system would be even more transparent than the present regime, which was introduced by the previous Conservative Government to control union finances. Unless we recognise that the Labour party has had to move some distance to accept those changes towards greater transparency—and to accept the cap on donations from unions outside of affiliation fees, which is also an important part of the equation—we will not make progress.

Mr. Hugo Swire (East Devon) (Con): Will the hon. Gentleman give way?

Mr. Heath: No. I am not going to give way again, and I hope that saying so will save a lot of time. The right hon. Member for Horsham negotiated with us and he knows that my account is correct, although I still do not understand what caused the Conservative party to change its position.

Mr. Stuart: We wanted quality, not quantity.

Mr. Heath: From a sedentary position, the hon. Gentleman tells me something that we knew from day one of the inquiry.

Mr. Swire: Will the hon. Gentleman give way?

Mr. Heath: No, I have just said I will not give way.

Mr. Swire: This is meant to be a debate.

Mr. Heath: The hon. Gentleman tries me. I have given way to Members on both sides of the Chamber throughout my remarks, so it really is not acceptable to say “This is meant to be a debate” because I have not given way to him.

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Mr. Swire rose—

Ms Butler rose—

Martin Linton rose—

Madam Deputy Speaker (Sylvia Heal): Order. It is very apparent that at the moment the hon. Member for Somerton and Frome (Mr. Heath) is not prepared to give way to anyone.

Mr. Heath: I am grateful, Madam Deputy Speaker.

We must have proposals that we all agree will take us away from the culture of big donors. We must have proposals to deal with transparency and linkage in respect of trade union affiliation fees. We must accept that trade union donations beyond affiliation fees come within the rules on donors. We need real caps on expenditure, which need to be both local and national and both between and during elections. We need to end the abuse that has been growing over recent years, and which I tried to address in previous legislation that the Government did not support, whereby central parties spend large amounts in certain marginal seats on material that does not specifically refer to a candidate and thus falls outside the existing expenditure limits, but which is clear abuse of the spirit of the legislation. We need to give the Electoral Commission real teeth so that it actually becomes an investigating body rather than merely a reactive one.

The matter is urgent and we will not accept any party reverting to tribal type and simply trying to get the best deal in its own interest. We will not accept partisan legislation that deals with only part of the problem and not the whole. Consensus is possible and it should embrace all the parties in the House. I include the minority parties, which have an important locus in the matter. Throughout the course of the negotiations so far, I have said regularly that we must include not only the minority parties in the House, but also parties not represented in the House because they, too, have a legitimate voice.

Mr. MacNeil rose—

Mr. Heath: I give way because the hon. Gentleman is from a minority party.

Mr. MacNeil: The hon. Gentleman has made a raft of suggestions. Does he think we need an anti-corruption Bill with teeth, which would separate donations to political parties from places in the House of Lords, or vice versa?

Mr. Heath: There is scope for all sorts of legislation. In the last Session, I introduced a Bill on corruption and there is a case for strengthening the legislation. I do not want legislation that could be construed as partisan, but something that will pass the test of time. Perhaps something good can emerge from the demeaning and disgraceful episodes of the past few weeks.

We need a solution that is fair, transparent, sustainable and effective. We need parties that subscribe to the spirit as well as the letter of the law. Nothing less will be satisfactory to an increasingly disaffected electorate or for the health of our democracy.

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5.54 pm

Tony Lloyd (Manchester, Central) (Lab): As chair of the parliamentary Labour party, let me begin by saying—

Mr. Graham Stuart: Sorry.

Tony Lloyd: Yes. Of course, we are sorry. There is a degree of synthetic anger among Opposition Members, but there is not a Member on the Labour Benches who is not rightly angry and annoyed at being so badly let down during recent events. There is no doubt that puts us in a difficult position before the British electorate.

People watching in the Gallery and on television are probably dismayed by the tone of parts of the debate, which descended into mutual cat-calling—I may do the same in a moment—but it is worth reminding the House that none the less the public are entitled to expect that we clean up our political act and do so in a non-partisan way that is not seen to be in the interests of any one party or any grouping of parties. That is why, like others, I regret the fact that the Conservative party chose to pull out of the Hayden Phillips process at a late stage, having previously made a public commitment in the Chamber, which we thought at the time was a genuine attempt to be constructive. Sadly, that proved not to be the case because in the end the Conservatives’ vested interest outweighed the need to reach a proper conclusion.

As the hon. Member for Somerton and Frome (Mr. Heath) is not a leadership candidate, it will not be to his detriment when I say that I normally have a lot of respect for him. However, I think he dissembled a little on the question of Michael Brown. He said there were two questions to be asked—how and why. How did a rich donor become so rich? In the case of Mr. Brown, that question was not asked. Why was the donation made—what did the donor seek to gain? That question, too, was not properly addressed by the hon. Gentleman today.

More important, the Liberal Democrats should be considering not simply whether they complied with the spirit of the legislation in accepting the donation—I recognise that it was accepted in good faith—but whether it was legitimate to hold on to it when the money obviously came from crooked sources. They must consider whether their position on the matter is consistent with the cleanness and openness they now propose.

Mr. Swire: Does the hon. Gentleman agree that the Liberal Democrat spokesman might have sounded a little less sanctimonious if his party were committed to pay back other creditors of Mr. Michael Brown from the donation it received rather than waiting for the outcome of a court case?

Tony Lloyd: The hon. Gentleman makes an interesting point. In fact, the hon. Member for Somerton and Frome said it would be unreasonable for the money to go back to Mr. Brown. He also said that he had not been approached by any of Mr. Brown’s creditors. Should they come forward, I hope that the hon. Gentleman will say that it is right and proper that those who were defrauded will be recompensed from Liberal Democrat sources.

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