Mr.
Turner: Will the hon. Gentleman explain how people are
disabled, or whatever it was that he said. He said that in Canada and
some of the United
States
David
Howarth: I am sorry, but the hon. Gentleman misheard me.
Corporate donations of all types are not allowed in those
jurisdictions, and under one interpretation, new clause 22 would have
the same effect. The argument against such a system is that it would
require great dollops of state funding for political partiesthe
Minister made the same argument against a donation capwhich
would not be acceptable to the public in present, or any,
circumstances. But is that really the case? Should we not set out a
long-term goal, perhaps with a date or a power for the Secretary of
State to introduce an order with that radical effect, and say to
parties, You have a certain amount of time to sort yourselves
out, because we are moving to a system of funding radically different
from the one that we have now? In that interim period, some
state funding might be necessary. My party has always been more in
favour of state funding than I have, but that could be a requirement,
although it would not be necessary to have vast state funding of
political parties forever.
The campaigns
in the United States that have just been completed used a very
different model of party funding that we could not introduce in this
country nowI agree with thatbut if all parties knew
that eventually we would have to move to such a system, we would all do
it. That is similar to what happened in Canada where the four main
parties were dramatically affected by the reforms. The Liberal
partythe equivalent
of my partywas dependent on large donations, and the New
Democrats were dependent on trade union funding. The Conservatives and
their predecessors were rather less dependent on big donations than the
Liberals, but there was a similar
problem.
All three
parties in Canada have now adapted to a radically different, far more
restrictive and individual system. It seems to me that we should be
thinking about doing that here and weaning ourselves off the way we do
things now, because it produces, rather than public confidence,
intermittent scandals and, more than that, long-term, low-level
distrust of the political class, so we have to think about radical
reform.
Martin
Linton: The hon. Gentleman forgets the fourth party in
Canada, the Bloc QuĂ(c)bĂ(c)cois, which was the origin of that
policy simply because it did not get funding from trade unions or
business but invented what they called le financement populaire to do
away with all business funding.
David
Howarth: I am tempted to answer the hon. Gentleman,
Cest exact. That is an interpretation of new
clause 22 that I did not intend, but it is a possible interpretation
and I hope that the hon. Gentleman and other members will make clear
their views on what the long-term goal should be and their support for
the idea of moving away from institutional funding
entirely. Our
original intention in tabling new clause 22 was to raise the question
of whether it is proper for Members of the House of Lords to be donors
to political parties. All parties represented hereobviously the
Scottish National party would be in a different
positionregularly receive donations from Members of the House
of Lords, which can be substantial, and in certain cases very
substantial. I do not want to cast any aspersions on Members of their
lordships House at all.
Mr.
Djanogly: Is the hon. Gentleman saying that people can
give money before they are made Members of the House of Lords but not
after?
David
Howarth: The hon. Gentleman raises a point that I will get
to later, because that is at the heart of the intention behind the new
clause. That is what will change the nature of donations to political
parties by people who later become
lords.
Mr.
Djanogly: I am trying to understand where the hon.
Gentleman is coming from. Presumably he is trying to stop money being
related to peerages, but is he suggesting under his solution that
people would have to give their money up front rather than
afterwards?
David
Howarth: I will get to that point later, but I think that
the hon. Gentleman is thinking about that the wrong way round. He needs
to think about the question from the point of view of the political
parties and whether they would want major donors to be nominated to the
House of Lords, were the new clause to be adopted. I will get to that
clause in a moment.
I do not want
to cast aspersions on those of their lordships who make donations, but
the question is whether an individual, who already has great access and
influence over politics by virtue of their appointment to the
legislature under this extraordinary system that we
have, should have the additional opportunity to influence the political
process via donations, and that is a question that we ought to raise.
It is a question of perception.
I fully
accept that many of their lordships who give donations do so because of
their desire to further the causes that they believe in, and that is
true of their lordships in all three parties. As the hon. Member for
Huntingdon hinted, if we are talking about the problem raised by the
hon. Member for Chichester about captains of industry who gave large
donations to the Conservative party and then miraculously appeared in
the House of Lords, this new clause on the face of it does not have
much to do with that. They had given their donations and then appeared
later, so no further advantage of that sort could be looked for. There
is, however, the subsidiary question of ministerial office. Again, this
is entirely a question of perception but Members of the House of Lords
are eligible for ministerial office in a way in which ordinary members
of the public are not. That might be another reason for restricting
donations from them.
Let me turn
to the point raised by the hon. Member for Huntingdon. How does this
new clause affect the serious problem of perceptionin some
cases perhaps beyond thatthat large donations lead to
ennoblement, to becoming a Member of the House of Lords? The answer is
simple. Imagine a political partynot one of those
presentthat found itself with a very generous donor who was
giving that party large amounts of money. The rulenew clause 22
having passedwould be that if that person were to be appointed
to the House of Lords they would no longer be able to make these large
donations to that party, so what interest would there be for that party
to suggest that that person should become a Member of Lords? It would
remove any incentive that a party had for making its large donors
peers. It would introduce into the system an interference in the way in
which this has been done and talked about for a long time, going back,
I confess, to the days of David Lloyd George.
David Lloyd
Georges approach was based on his view that he did not like
aristocrats and if he could do anything to discredit them by selling
peerages that was all right by him. But the problem has carried on
beyond that for a long time. We are still in a position where members
of the public are quite cynical about what happens in politics. People
frequently mention to me the fact that of the people who have recently
given £1 million to the Labour party only two are not
Members of the House of Lords. One of those is J. K. Rowling and I am
sure she does not want to be. Nevertheless, only one of the others is
not. We need to look for ways of getting out of that problem. We have
looked at strengthening legislation, directly saying there should be no
sale of honours. That legislation has serious weaknesses, as anyone who
has tried to raise a possible problem with the police has
found.
I am
suggesting a different approach aimed at the incentives the parties
have in the first place to raise their donors to the peerage. That is
the central intention of new clause 22. It raises a second point. There
might or might not be an opportunity later to discuss this point
directly under new clause 10, but new clause 22 does refer to new
clause 10, and I am sure it is legitimate to discuss the issues raised
there in this debate. The issue is whether someone who is not a
permissible donor should be allowed to use the corporate form to evade
the
regulation that makes them a non-permissible donor. New clause 22 says
that, with regard to this particular form of impermissible donor, that
will not be allowed. It refers to new clause 10, which does the same
thing for a different class of impermissible donor, namely foreign
donors. 2.45
pm This
goes back to the debate on unincorporated associations, although here
we are talking about corporated bodies. The question is, should it be
allowed to use the corporate form to make a donation in a way that
would not be allowed were the individuals to do it themselves? We have
seen cases of this being reported in the media recentlythat
concerning Lord Ashcroft, and the potential one concerning
Mr. Deripaska and LDV, which raise the issue directly. If
people who are not allowed to make donations are allowed to get through
that by using the corporate form, we must ask whether we should raise
the veil of the corporation to see who the real donor is.
The hon.
Member for Huntingdon and I spent many days, possibly in this room, or
perhaps it was next door, on the Companies Bill. During the course of
that debate we talked about the issue of the corporate veil and the
extent to which people should be allowed to set up their businesses in
whatever way they want, using the corporate veil to separate their
various businesses and the debts and obligations that those businesses
might create. Never, in the course of those debates, did anyone make
the point that people should be allowed to use the corporate form to
evade the law on donations to political parties. It seems that we
should make an exception to the rule in Salomon v.
Salomon that companies should be treated legally as separate
people. New
clause 22 says that a company that is controlled by an impermissible
donor shall, itself, count as an impermissible donor. That is the way
to do it. The question then is who counts as controlling the company?
Going back to the debates that the hon. Gentleman and I had on the
Companies Bill, now Act, there is an answer to that question in company
law and we should use it. There are three ways in which people control
companies and we should catch all of them in trying to stop the evasion
of the law. The first, which is the most obvious, is where a
shareholder owns 75 per cent. or more, of the shares in a company, that
shareholder can give the company an instruction by resolution; it can
tell the company what to do. If the shareholder has less than 75 per
cent. they cannot do that. They might be able to elect the board, but
they cannot tell the company what to do; the board runs the company.
The first condition, therefore, is that anyone who owns 75 per cent. or
more of the company should, for donation purposes, be counted as
controlling the company.
The second
concerns boards of directors. If there is a board of directors,
itrather than the shareholderswill run the company. If
the board of directors is dominated by impermissible donors, the
company itself should count as an impermissible donor. That seems to be
quite straightforward. The third, and perhaps most important, concerns
shadow directors. A company that is controlled indirectly by someone
should count as well for these purposes. Section 251 of the Companies
Act 2006 says that a shadow director is
a person in
accordance with whose directions or instructions the directors of the
company are accustomed to act.
The normal circumstance
is where there is a dominant shareholder with enough votes to make
anyone a director or not a director at that persons will. But
there are other circumstances where this applies. Were we to adopt this
rule, we could remove the possibility of people setting up shell
companies in various ways to make donations that would not otherwise be
lawful.
That is the
overall intention of the new clause: to remove the possibility of
making donations to Members of the House of Lords and to make sure that
that intention cannot be evaded or got round by the creation of
companies. I know that many members of the Committee are uncomfortable
discussing this kind of issue. I can see it in their faces as I look
round. [Interruption.] I certainly was not looking
at the Government Whip. He was not one of the people I had in mind. But
this is the central issue in the Bill. It should be about donations,
expenditure and the nature of our political system where it is now,
which is not good and not well respected, and where it should be going.
If we do not discuss it now,
when?
Mr.
Djanogly: We are in favour of transparency, but we do not
want to prevent people from donating. When I read the amendment I was
not entirely sure what the hon. Gentleman was aiming at. Having heard
him I am slightly the wiser. He is basically looking at the laws.
First, I thought of foreigners, but they are already banned. Then I
thought of people under 18: 17-year-olds. Then I thought of mental
health cases. Then I thought of prisoners and thought it had something
to do with Liberals wanting prisoners to get the vote.
Basically,
the new clause needs a bit more work, even to achieve the objective
that the hon. Gentleman wishes for it. The other point that jumped out
was how to define someone who is not qualified to vote. Does a person
who ought to be on a register, but who is not, count as someone who is
not qualified to vote? Could a non-registered person who is an
anarchist give money to an anarchist party? It was all quite confusing,
but I see where the hon. Gentleman is coming from. However, we do not
agree with it.
Mr.
Tyrie: There are three types of amendment or new clause.
There is one that seeks to change the law, there is one that seeks to
probe what the law might mean and there is a third, into which category
this new clause falls, which is to make a point, which may or may not
appear initially relevant to the clause, come what may, whatever the
procedure of the institution one happens to be sitting in. The hon.
Gentleman is a clever lawyer. He has found a wheeze to debate new
clause 10 and get all his points in, just in case we do not reach it. I
take my hat off to him for
that. As
it happens, having heard the hon. Gentlemans description of new
clause 22, although I certainly think that it would need a great deal
of work, I agree with what he described as its intention, which is, in
summary, to exclude all institutional donations, including trade unions
and corporate donations from party funding and to force parties to rely
on local activism. That is where we have to go. I strongly agreed with
his description that it should be a long-term goal and that we should
not try to implement something like this overnight, which would have
huge implications for all political parties, but particularly the
Labour party. It would be
unfair and damaging to any party that tried to introduce it in that way.
We should mark out that territory, recognising that many other
jurisdictions have also tried to go down that roadhe made that
point about Canada, and the Canadian point is well
taken. I
also agreed with the hon. Gentleman that, if there is to be state
funding, it should be considered transitionalin order to help
bring in such a scheme, while parties adjust and find a way of
establishing and broadening their local base. There is a stench in the
nostrils of the electorate about how parties are funded at the moment.
People have heard me say that on numerous occasions. I feel strongly
that we need to deal with that. I regret that the Government have been
unable to take forward the key measures required to enable something
substantive to be done about it, which was a consequence of the
breakdown of the Hayden Phillips
talks.
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