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One of those crises would be bad enough, but the combination of the two—the crisis of confidence in democracy and the economic crisis—gives me a sense of foreboding, and we should take the issue more seriously than we have so far in this debate. We need to act as decisively to restore confidence in our democracy as we have to restore confidence in our banks. If we do not, we will open the door to a situation in which populist extremists can exploit the economic situation while
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declaring that conventional, democratic politics has failed. That is what happened in the 1930s, and we must do everything we can to ensure that it does not happen again.

The problem with party funding scandals is their cumulative effect on how people see politics. In a way, the details are not important. As we have seen here tonight, there is a tendency for a kind of card game to be played in how we debate things: one party plays Michael Brown, another plays Lord Ashcroft; one plays the Midlands Industrial Council, another plays the trade union card. We could talk about the £1 million donors to the Labour party, Bernie Ecclestone or David Abrahams, but none of them is the real point. The short-term advantages to any of us of having an opportunity to pin something discreditable on a political opponent are massively outweighed by the damage done to democracy itself by a constant message that politics is not about values and ideas but about buying power and access, and that politics has nothing to offer except to rich donors or powerful interest groups.

All that is entirely exacerbated by the rise of nationally funded and nationally controlled modern campaigning techniques: the direct mail, the phone banks, the mass texting, the e-mailing, the push polling and so on. All that gives people outside this place the impression that politics is now a matter of mass manipulation, not of mass participation.

Dr. Tony Wright: I am interested in what the hon. Gentleman is saying, but may I put to him a point that a number of hon. Members have made? If we turn large numbers of local volunteers into unintentional law breakers, that will exacerbate mistrust in our political arrangements, not enhance it.

David Howarth: I have a great deal of sympathy with that point. Although it is important to get big money out of politics and protect the political process from the economy and from money, we should not go down the route of treating politics merely as an activity of the state. It is an activity of everybody. To that extent, I agree with the right hon. Member for Horsham (Mr. Maude). The voluntary aspect of politics is immensely important; it is part of our democratic tradition.

However, we have to do something about the rising cynicism about politics in our country, and the Bill is inadequate for the task. There are some useful reforms. I shall not go through all the aspects of the Bill that I happen to agree with. I think that it is a good idea for there to be better regulation of donations by unincorporated bodies. However, we need not tinkering, but comprehensive reform. This is the time not for tactics, but for a clear, statesman-like strategy for rescuing the reputation of the political system.

One can see precisely such a strategy, at least in outline, in the Constitutional Affairs Committee report and the Hayden Phillips proposals for a draft agreement. Those reports do not go far enough for me in many ways, but they propose big enough steps in the right direction—steps that imply sacrifices by all parties which would give people confidence that the proposals are serious and provide a chance for starting the process of rebuilding public confidence.

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I want to mention three aspects of a possible strategy and way forward in what the Constitutional Affairs Committee and Hayden Phillips proposed; that is all that I want to do tonight. First, they proposed a £50,000 cap on donations. That was far too high for me personally and other people, but it was a start. As the right hon. Member for Horsham said, we have to prevent any real or apparent possibility of buying policies, elections or access. We all know that upward flickers for any party in the opinion polls suddenly result in the arrival of new and surprising friends, just as lottery winners suddenly find themselves popular. We all know what that is about. There are also dangers in large donations from more principled sources—those who give in support of a particular point of view. All parties are coalitions that have internal debates, and money should not play any real or apparent role in policy formation within parties.

There is also the question of the so-called arms race. I do not want to enter the debate about whether total spending by all the parties is rising or not, although it seems a bit odd to try to calculate total party spending by missing out the Ashcroft money or completely ignoring the spending of my own party. However, the real problem with the arms race is that each party is obsessed not with its total spending, but with the gap between its spending and that of the other parties; parties are always trying to catch up with or stay ahead of other parties’ spending. That is one reason why they become so obsessed with large donations for centralised national campaigning. It is easier to raise a large amount from a few big cheques than from lots of small donors. That is one reason why the influence of large donors is seen as having risen.

On the subject of small donors and in reference to the point made by the hon. Member for Cannock Chase (Dr. Wright), I should say that I was glad that the Lord Chancellor said that he was willing to think again about clause 8. It seems wrong to impose bureaucratically on small donations while doing nothing at all to cap large ones. The priorities seem entirely wrong.

Sir Alan Beith: Does my hon. Friend want to reiterate the value of promoting small donations from very large numbers of people? I am sure that he does, because he has been involved in it. Such donations are now a significant part of the financing of parties in the United States, and that is welcome. Some of the ideas put forward by the Constitutional Affairs Committee, including a tax advantage for political donations and a scheme to assist non-taxpayers, should be promoted as part of the package. In that way, large numbers of people will see supporting political parties as worth while, and not the preserve of a few.

David Howarth: Yes, indeed. As my right hon. Friend knows, I am a late and reluctant convert to the idea of any sort of state funding of political parties, but if there is to be any, it needs to be of that nature. It must be based on matching the small contributions of a great number of people, not handing over dollops of taxpayers’ money unrelated to the popularity of the party concerned.

The second main proposal by the Constitutional Affairs Committee and Hayden Phillips was for a global limit on campaign spending that would apply all year round, every year, throughout the electoral cycle, not only at election times. Campaigning is now a permanent
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feature of political life—it happens all the time. There is no close season any more, and money matters throughout the cycle. One of the things that we learned during the Committee’s visits was that, if there are limits that apply only to particular times or localities, that is an open invitation to create mechanisms for evasion. There must be a global limit—even if there are other limits within it—that applies all the time to all sorts of spending.

That is crucial to control party spending, not just candidate spending. Many Labour Members are concerned about the Ashcroft problem of targeted campaigning outside elections. As the Lord Chancellor said, that is currently not regulated even when the candidate is mentioned. However, that is not the essence of the Ashcroft problem—the essence is out-of-election targeted campaigning. That is why, whatever the Government’s intention—the right hon. Member for Horsham says that it is a partisan intention; no doubt the Government will deny that—bringing back the trigger will not work. It will not control the Ashcroft spending, because that is party spending, not candidate spending. As my hon. Friend the Member for Argyll and Bute (Mr. Reid) said, the only constraint that the trigger will produce is that the people spending that money will have to avoid mentioning the candidate’s name; they will be able to do absolutely everything else. Only by controlling party spending on a national basis can we get anywhere near controlling that sort of spending.

Martin Linton: The hon. Gentleman will find on closer reading of the 2000 Act that national spending is defined as anything that is not chargeable as candidate spending. Therefore, if candidate spending is limited, party spending that is not candidate spending will fall below the national £20 million limit.

David Howarth: It does not actually say that, and that is the problem. Local spending is not covered by national spending. That loophole needs to be closed. It is right for the Government to say that it needs to be closed by new legislation, but simply extending the restrictions on candidates does not work. We have to extend the restrictions on party spending to include that spending as well.

Martin Linton: I think that the hon. Gentleman will find that he is wrong, but if he is right would not that be an argument for tabling an amendment in Committee? It is extraordinary that we have not heard from him one word criticising any specific proposal in the Bill, yet he proposes to vote against it. Why is that?

David Howarth: Simply because it is an appalling wasted opportunity to do something very important that we need to do now. The hon. Gentleman does not seem to take the problem seriously. He should stop playing the internal game and listen to what is going on outside this House. The Bill is an opportunity for the Government to put on record that they think that the situation is in crisis. They have not done so, and that is why we should not support it.

Before I leave the trigger, I want to emphasise a point made by the right hon. Member for Horsham and urge the Government to come forward with an explanation. Why is the trigger retrospective? Under clause 10(5), expenditure is not retrospective, so one cannot count expenditure before the Bill is passed as part of election
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expenses. However, it does not say the same thing about who counts as a candidate, with the extraordinary effect that things that Members might already have done, including what we have put into our communications allowance-funded literature, will turn out to be events that have triggered the start of our election expenses. In other words, as soon as the Bill becomes law, our election expenses start. The Bill does not rule that out, so I would like the Government to explain why we should not interpret it in that way.

Dr. Whitehead: If the hon. Gentleman looks at the cases that have come before the Standards and Privileges Committee in this regard, he will see that there are careful limits on what may be said in literature that goes out under the communications allowance. In a number of instances, hon. Members who have breached the agreed definitions of what is party political content have been referred to the Committee and reported to the House for breaches of those arrangements, and action has been taken. The definition therefore relates to something that would not fall foul of an amended trigger mechanism in the way that he describes. Does he accept that that is objectively the case as regards such literature?

David Howarth: There are two possibilities. First, someone might breach the rules and trigger their candidacy in that way. Secondly, the two sets of rules may not fit together. Since there has been no attempt to ensure that they do fit together, I would not be entirely confident of what the hon. Gentleman says. It is an issue for the Government to sort out. The fundamental point is that things that we might have done—for example, putting out press releases, whether or not using the communications allowance—might trigger our own candidacies. The clock starts ticking against us as soon as the Bill goes through.

John Hemming: I have here a copy of a newspaper dated 14 October in which Chuka Umunna is described as the

What will the Labour party say to him if the Bill becomes law?

David Howarth: There is a problem as regards whether that person will now be a candidate following Royal Assent. If that is not what the Government intend, they must say so.

We need a global capping of expenditure, because that is the only sort of cap on expenditure that has a chance of working. I am puzzled by the position of the Conservatives. Democracy and the market are different things; in the market, it is £1, one vote; in a democracy, it is one person, one vote. The right hon. Member for Horsham talks as if the two things should be confused, but if we do that, we end up undermining the basic equality that lies at the heart of democracy. The Conservative amendment does not mention, as ours does, a global cap on expenditure. I would be interested to know whether the Conservatives have abandoned that aspect of the Hayden Phillips compromise. As the hon. Member for Rugby and Kenilworth (Jeremy Wright), who is sadly not in his place, said, the Committee and Hayden Phillips proposed a package deal, and that
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package includes the global expenditure limit that the Conservatives should not renege from—I hope that they have not done so.

Mr. Maude: I can help the hon. Gentleman with that. Spending caps were not within Sir Hayden Phillips’s terms of reference, which were explicitly about limiting donations. In a spirit of wanting to be as helpful as possible and to build a consensus, we were willing to agree to a global cap on spending, if it was necessary to achieve an overall long-term sustainable package. However, I repeat that we do not consider the level of spending to be the problem. Indeed, Dr. Pinto-Duschinsky’s recent research makes it clear that much of the methodology used to show that there is some kind of arms race is flawed.

David Howarth: That is one of the reasons why I mentioned the rather odd nature of Dr. Pinto-Duschinsky’s own methodology, which missed out my party’s entire spending and, because of the years that he chose, most of the Ashcroft money. Nevertheless, I am still confused about whether the Conservative party does not think that total spending is a big problem but is willing to go along with a cap, or whether the right hon. Gentleman does not think that there ought to be a cap at all.

Mr. Maude: I thought that I had made the position very clear. We do not think that that is the problem, and neither do we think that just having a cap on spending will solve the big donor culture, because by definition only a donation cap will solve that problem. However, if it is necessary to have an overall spending cap that is not overly bureaucratic and burdensome, particularly for volunteers, we would, in an irenic spirit, go along with it. I am not going to pretend that we are enthusiastic about that—we are not—but we want to get it done on an agreed basis that is sustainable for the long term.

David Howarth: I thank the right hon. Gentleman for that. At least it was some progress.

The third and final thing that the Constitutional Affairs Committee and Hayden Phillips dealt with was the vexed issue of the relationship between the Labour party and the unions. Both the Committee and Hayden Phillips were clear that there should be a compromise that would take us from where we are now, so that the Labour party cannot just stay where it is, but not be a threat to the fundamental link between the Labour party and the unions. It would be quite inappropriate to try to destroy another political party’s historical method of operation by changing party funding law. There should therefore be a compromise—the Boston compromise, for those members of the Committee who were there.

It is important to distinguish between donations by the unions as organisations, which should be subject to the same donation cap as anything else, and contributions by individual members to the Labour party made via the political levy. From the point of view of the law, the best way to see the issue—the Labour party can see it differently if it wants to—is that the union is, to use an American phrase, bundling the small contributions of individuals. Each contribution does not violate the cap. They might in total violate the cap, but such contributions are treated not as a single donation, but as the bundling of individual donations.

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However, if that distinction is to be made and if the unions are to be treated as bundlers in respect of at least some of the money that they give—indeed, perhaps the vast bulk of it—there must be some extra regulation, so that regulators can tell whether a payment is a donation by the organisation or is bundled individual contributions. There must be the possibility of a clear audit trail from the individual contribution through to the party. It must be clear that the money was in fact a contribution to the party via the union, not something else.

John Mann: I appreciate that the unions split from the Liberal party in 1906, which is some time back, but the 1984 law, as amended, is quite precise about the audit trail. Indeed, there is a bureaucracy, paid for by the taxpayer, to oversee it. The certification officer is backed by statute. The position in this country is unique, in that the law dictates how political involvement should take place, thereby creating that precise audit trail.

David Howarth: I think that the hon. Gentleman is talking about the political fund, which I should remind him was created by a Liberal Government, in the Trade Union Act 1913, not the Trade Union Act 1984. I am talking about the audit trail back to the individual contribution, where I believe there is a problem.

I agree with the right hon. Member for Horsham that there are serious difficulties with how things work now. We have already heard from my hon. Friend the Member for Birmingham, Yardley (John Hemming) about his situation. I have here an application form to become a member of Unite that was sent to a member of my family. Nowhere in the application form is the political levy mentioned. We have in law an opting-out system, so there should at least be something in the application form that people can tick to say that they wish to opt out. However, that does not exist in this form. As far as I know, Unite is an affiliated union and has a political fund, according to the 1913 and 1984 Acts. Nevertheless, only someone who is very well informed about that sort of thing—perhaps a student of 1980s labour law or a student of Professor Keith Ewing—will know about the opportunities to opt out, unless they are set out in the form.

Mr. Maude: The hon. Gentleman is on to a very important point, which was at the heart of why we failed to reach an agreement. The Labour representatives— the Justice Secretary and Peter Watt, who was then general secretary of the Labour party—would not contemplate a requirement for even an opt-out box to be on the application form. Will the hon. Gentleman confirm the other astonishing fact that emerged during our discussions, which is that even if someone manages to go the extra 10 miles and discover how to opt out, most unions will not let them pay any less money?

David Howarth: That is sometimes the case, but not with Unite, on which I do not want to cast any aspersions. If someone persuades Unite that they do not want to pay the political levy, it will let them off 20p a week.

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