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2 Mar 2009 : Column 616

(1B) Subsection (1A) does not apply to donations to which subsections (1) and (2) of section 55 apply.”.

(2) In section 56 of the 2000 Act, after subsection (2) there is inserted—

“(2A) If a registered party receives a donation which it is prohibited from accepting by virtue of section 54(1A), subsection (2) applies to that donation only in so far as the amount of that donation and of any other donations accepted by the party from that donor during the same calendar year exceeds £50,000.”.

(3) In subsection 58(1)(a) of the 2000 Act, after “(b)”, there is inserted “or (1A)”’.— (David Howarth.)

Brought up, and read the First time.

David Howarth: I beg to move, That the clause be read a Second time.

New clause 1 simply introduces a £50,000 cap on donations to political parties by any particular person in any calendar year. In the long discussions about the Bill, which is supposed to be about political parties and their funding, this is the first time that we have been able to debate the central issue of whether transparency in donations—as we have discussed over the last hour and a half—is enough, or whether, as I and my party believe, there should be far stricter control than just knowing who donated money, as we need to limit the amount donated itself.

Our proposals in this new clause were part of the compromise package put forward as a result of talks under the chairmanship of Sir Hayden Phillips—talks that seemed fruitful for a while, but in the end failed to produce proposals that all parties supported. However, while those talks were going on, this particular proposal for a donation cap at around £50,000 gained support on all sides, so I would be astonished if it were opposed today by parties and politicians who previously supported it.

Mr. Straw: I hope to expand on this point if I catch your eye, Madam Deputy Speaker, but does the hon. Gentleman accept that Hayden Phillips made his proposal for a donation limit of £50,000 as part of a comprehensive package, which included state funding, and that he said words to the effect, “You cannot have one without the other”? I think he used the phrase, “There can be no cherry-picking; this is a comprehensive package.”

David Howarth: Sir Hayden Phillips did say that it was a comprehensive package, but I understand that the talks never got to the discussion of state funding. Later in my speech, I shall get to precisely that point, because it is important to understand exactly what effect a £50,000 cap would have on the existing parties, the extent to which it would produce a funding gap for the parties and the extent to which state funding would be required to fill that gap, if at all. If the Secretary of State will forgive me, I shall return to that.

The point of a donation cap is to undermine the perception and the reality that big money buys access to political power. There is no point going through all the examples that have been thrown by one party against other parties over the past 10 or 15 years—cash or donations for peerages, changes in policy, support for this initiative or that. The bandying about of names, on all sides, gets us nowhere.

Mr. Mark Field (Cities of London and Westminster) (Con): I am listening with great interest to what the hon. Gentleman has to say. Given his concern in relation
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about the perception that big money, as he puts it, is buying influence, why set the cap at £50,000? Surely it should be considerably lower, although the great British public at large would think even such a sum one that could influence decision making or give access to politicians.

David Howarth: I was going to come to that point later, too, because my view—as well as that of my party and my party leader, my right hon. Friend the Member for Sheffield, Hallam (Mr. Clegg)—is that to restore public confidence we will have to set the cap much lower than £50,000. We tabled an amendment in Committee, which was never discussed, that the limit should be £10,000. We have suggested £50,000 because it is what the Conservative party and its leader proposed. If the hon. Member for Cities of London and Westminster (Mr. Field) wants to oppose his party leader’s view, so be it, but we are trying to operate within a rough consensus that previously existed.

Mr. Field: The issue, in part, is that we, as Members of Parliament, have a limit set of 1 per cent. of our salary. We have to be transparent about any donations we have or any moneys that come in relation to any entertainment—in other words, about £620. I fail to understand why—other than purely for party political advantage to the Liberal Democrats—the hon. Gentleman wants to set a limit of £50,000, or as he now desires, £10,000. Surely the issue here is transparency, as we discussed earlier in the debate. Provided everything is transparent, surely that is the right way forward that will reassure the public that there is openness on those matters.

David Howarth: No, the issue is not only transparency, but whether public confidence can be maintained solely by transparency. The conclusion that all the parties reached as part of the Hayden Phillips process was that transparency by itself was not enough. The perception that access could be bought and that donations were being given with strings could be challenged only by having a cap on the size of the donation.

Throughout the debates in Committee, the Minister said—this is right—that some people give money to political parties without strings and for the good of the cause, and that that is a good thing. The trouble with that is that everyone knows that sometimes the money is given, or offered, not for that purpose but in return for the prospect of access or in return for influence. The question of perception is vital to the issue before us.

Tony Lloyd (Manchester, Central) (Lab): The hon. Gentleman will be aware that I have an interest as chair of the trade union group of Labour MPs, but does he not recognise that there is a fundamental difference between the donations of an individual and the donations of a corporate body such as a trade union that operates collectively, which consist of small contributions from many people? The passing of the new clause would thus do real damage to the historic relationship—of which, admittedly, the hon. Gentleman may not approve—between my party and the trade unions.

David Howarth: I was going to deal with that point later, but let me make something absolutely clear now. Hayden Phillips also said that there must be a fair way of dealing with the relationship between the Labour
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party and the unions. I do not seek to undermine the existence of the Labour party through any measure that I propose today. A later group contains a new clause which I hope will deal with the question in a fair way by distinguishing between donations from trade unions and affiliation fees that are in reality—this meets the hon. Gentleman’s point at least to some extent—the agglomeration of many small donations. I am perfectly happy to allow that situation to continue, as long as the trade union itself makes clear to its members that they can choose whether or not to donate to a political party.

Tony Lloyd rose—

Hilary Armstrong (North-West Durham) (Lab) rose—

David Howarth: If I can be allowed to finish this point, I will let hon. Members intervene afterwards.

I propose that the trade unions follow a code of practice issued by the Electoral Commission relating to information that they give their members about their ability to opt out of the political fund, including information about what members must do to opt out, and what was done with the money paid into the fund in recent years. As long as the code of practice was followed, I should be happy to allow affiliation fees to continue to be paid as they are now.

5.30 pm

Beyond affiliation fees are donations from trade unions, which are a different matter. A donation from a trade union should be treated in the same way as a donation from a plc or other limited company to the Conservative or, indeed, the Labour party. Let me return to my central point: I am not proposing measures that would destroy the funding base of the Labour party. That is not my intention.

Tony Lloyd: This goes to the heart of the debate. Although the hon. Gentleman—supported by the Scottish nationalists, incidentally—says that he does not wish to attack the link between the unions and the Labour party, his new clause would have precisely that effect.

The hon. Gentleman may honestly argue that he sees a distinction, but he should bear in mind that many trade union members, even those affiliated to the Labour party, do not contribute to the political fund and thus do not contribute to the Labour party, because union membership is not synonymous with support for the Labour party, either political or financial. The distinction that the hon. Gentleman thinks he draws does not exist, and, what is more, his new clause in its present form would damage the Labour party. He may say that that is not his intention, but he should understand that the new clause would do precisely what he claims that he does not want to do.

David Howarth: If the hon. Gentleman looks at new clause 8, he will see the overall intention of the Liberal Democrats. To some extent, it is unfortunate that the grouping of the new clauses means that new clause 1 is being considered alone, so I concede the technical point that new clause 1 without new clause 8 would indeed have the effect of stopping donations of any sort, including affiliation fees, by a trade union to the Labour party. However, the hon. Gentleman needs to look at
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new clause 8 as well as new clause 1 to see our overall intention, which is not to undermine in any radical way the relationship between the trade unions and the Labour party, but to control that relationship in a way that is fair and equitable across the other political parties and their financial relationships.

Mr. Djanogly: The debate is becoming more complicated, but does the hon. Gentleman accept the basic premise that new clause 1 is unacceptable without at the same time putting in place provisions for dealing with trade unions?

David Howarth: One of the fundamental points from the Hayden Phillips talks was that we need to come together on three issues: donation caps, how they specifically affect trade unions and the relationship between the unions and the Labour party, and spending caps—it is a shame that the grouping does not allow us to talk about them all in one go. The national situation with regard to spending needs to be controlled as part of the whole package.

Pete Wishart: Does the hon. Gentleman agree that the Labour party’s attempt to evade unions being part of the whole settlement solution stretches credibility to the absolute limit? More than anything else, the measure is about transparency and choice—individual trade union members having choice about where their political fund money goes and transparency in the process so that they can see throughout exactly what contribution that money makes.

David Howarth: That is precisely right and it is what we are trying to achieve. The hon. Member for Manchester, Central (Tony Lloyd) is correct in that trade union members who do not contribute to the political fund should not in any way be contributing to a political party, because donations other than those from a political fund are not allowed in law. Nevertheless, the political fund is not limited to affiliations; it can spend on donations as well as affiliations, so it does not follow, as the hon. Gentleman seems to think, that if a union makes a payment from the political fund it is automatically an affiliation. That is not the case.

Martin Linton: Does the hon. Gentleman not accept that any money that finds its way into the political fund of a union affiliated to the Labour party or any other party has done so only after the union has collectively voted to set up or continue a political fund and only after individual members have used, or not used, the procedure for individually opting out? I support the general concept of a cap on donations, but surely the hon. Gentleman is doing precisely the opposite of what he proposed—he is bringing forward one element of the package without resolving the key issue of the status of donations from trade unions, which I maintain should not be captured by the limit.

David Howarth: The hon. Gentleman must forgive me. I am not bringing forward the single element of the package; the House authorities have managed to do that by not grouping new clauses 1 and 8 together as I would have done if I had had my way.

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The hon. Gentleman makes a crucial point about individual affiliation and payments to a political fund. The key point is that individuals know what is happening and are clearly able to opt out if that is what they want. All Members who have had anything to do with unions in the course of their lives—I have had a lot to do with them from my early childhood—know that some unions are more open and their political fund is easier to opt out of than others. As I mentioned at Second Reading, when my wife tried to join the union Unite she found it very difficult to opt out of the political levy, even though in the circumstances she did not feel like donating money to a party that was trying to oust me from my seat—[Hon. Members: “She might have.”] She might, but I can assure the House that she did not. The point is that the Electoral Commission should lay down clear guidelines about what counts as sufficient clarity in union rules and documentation to satisfy the commission that the union is giving its members a clear, open and transparent choice.

Bob Spink: The hon. Gentleman is right to say that public perception is the acid test. I tend to support the direction of new clause 1, provided that it is linked to new clause 8, as he explained it was. It achieves the balance for which Labour Front Benchers called in an earlier debate. On the Hayden Phillips spending-caps pillar, can the hon. Gentleman advise the House? If there were a £50,000 limit, except for trade unions in certain circumstances, what would that give the main political parties? Has he done any research on that? I congratulate him on the way in which he has brought the debate forward; it is excellent.

David Howarth: A set of figures available from the Electoral Commission and on the parties’ websites gives us a clue as to what might happen if there were a £50,000 cap. We have to make certain assumptions. One of them is that a donation of more than £50,000 would become a donation of £50,000—that is, that the whole donation would not be lost, and that only anything above £50,000 would be lost. We also have to make assumptions about how a scheme like that in new clause 8 would apply, because there is a distinction between affiliation, which would continue to be allowed, and donations to which the cap would apply.

With all those caveats, I suggest that the situation would be as follows. The three main English parties, if I may put it that way in the presence of the hon. Member for Perth and North Perthshire (Pete Wishart)—the British parties, or, as the First Minister of Scotland says, the London parties—spend about £62 million in a typical non-election year, if we take 2008 as a typical year. However, it is worth saying that in a non-election year, they often have, between them, a surplus of about £10 million, so they actually raise about £72 million. If a £50,000 cap or something similar were in place—I think that this goes some way towards answering the question that the Secretary of State posed—it would have the effect of reducing the total income of the parties by some £10 million. Of course, that £10 million would not be distributed evenly among the three parties, but then the Labour party spends about £25 million a year, and the Conservatives about £32 million. The Liberal Democrats spend about £3 million or £4 million a year. The losses for the Liberal Democrats would be proportionately small, but at about the same sort of level as the losses of the other parties.

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To come back to the point that the Secretary of State raised, the question is whether that would be such a devastating loss for the political parties that they would have to go cap in hand to the Government and ask for state funding. For a number of reasons, I do not think that they would necessarily be in that bad a position. The first reason is the surplus. The loss is about the same as the annual surplus, although the counter-argument is that the surplus is accumulated in non-election years and spent in election years. Even if we put the surplus to one side, a reduction of 15 or 16 per cent., although difficult to make in one go, is not, in my view, entirely out of the question for the political parties, especially the two bigger parties.

Dr. Alan Whitehead (Southampton, Test) (Lab): Is not the hon. Gentleman making the case that new clause 1 is unfortunately detached not only from new clause 8, but from new clause 10, which his party put forward? As Hayden Phillips—and, indeed, Select Committees—suggested, such arrangements need to lean on each other and cannot be separated from each other, if the logic is to work. Proposing an amendment that is entirely separated from a number of others as though it stood on its own appears to defeat the logic, which is to show how things might work overall.

David Howarth: My view is that those three elements stand together. I would never have separated new clause 1 from new clause 10 either. The spending cap goes along with the donation cap, because it would remove part of the problem of parties trying to outspend one another for the sake of it.

It is right that the effect on the parties of a £50,000 cap should be seen in the context of having a spending cap as well. What could the parties do in the medium term to deal with the gap that would be created by such a cap? It seems to me that they could do a lot of things. First, the Conservative party employs several very highly paid people, whose salaries are said to be in the region of a quarter or a third of a million pounds a year. Certain economies are therefore quite easy. Secondly, we all know that parties waste a lot of money on campaign techniques whose efficacy is far from established. The best example is billboards, which are massively expensive and do not seem to shift any votes at all.

Thirdly—I suppose I would say this, as a Liberal Democrat—the Government are fond of benchmarking public services. They say, “Let’s look at an area of the country that provides a service the most cheaply and ask the other parts of the country, which supply the same thing more expensively, why they are so expensive.” As a Liberal Democrat, all that I can say is that we manage to run a national political party with £3 million, and the other parties should be asked why they need 10 times that amount to run their parties.

Mr. Straw: The other parties have rather more seats, and they aspire to Government, which makes a difference. If the hon. Gentleman wants benchmarking, I would be delighted for the Advertising Standards Authority to be given the role of benchmarking “Focus” leaflets.

May I press the hon. Gentleman on state funding? Hayden Phillips was clear that state funding should be part of any donation limit package, but so too was the hon. Gentleman when he signed up to the Select Committee on Constitutional Affairs report, which stated, at paragraph 109:

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on donations—

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