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There is nothing there about reducing overall funding. I have checked the minutes, and he did not demur from that recommendation, so why has he changed his mind now?

David Howarth: As the Secretary of State says, the conclusion was that a donations limit should be considered in the context of state funding and other forms of funding. One obvious form of funding is to raise money in small amounts, as Barack Obama’s campaign in the US did. One of the great attractions to party fundraisers of the possibility of very large donations is that only a few big donations are needed for the required money to be raised. In the United States, where the donation cap is very low, techniques have been developed to raise money in smaller amounts but in large numbers.

The question to consider is whether it would be necessary for parties to receive large amounts of state funding on a permanent basis, which the Government keep implying would be the inevitable result of a donation cap. I do not believe that it would be necessary. The amount of state funding required would be quite modest, and whether there would be any need for it to be provided on a permanent basis is an open question. We must therefore ask whether it is true that we could not introduce a donation cap without already having worked out some elaborate and permanent state funding scheme. I do not believe that that would be necessary, because in the context of the spending cap and the relationship between the Labour party and the unions, the donation cap stands by itself. It does not need those further measures.

5.45 pm

Martin Linton: Surely, the hon. Gentleman knows that we already have a system in this country that long pre-dates what is now current in the United States or Canada and that involves marshalling a large number of small donations—it is known as the political levy—and he still has not answered my point. Quite apart from affiliation fees, does he not recognise that the money that ends up in the political funds of trade unions has been put there after a collective decision in the political fund ballot and after a series of individual decisions not to contract out of the political fund levy? The money is there as a result of many small decisions by individuals.

David Howarth: Yes, the money goes in by individual decision, but it comes out by collective decision and, for that precise reason, it should be treated as a donation, unless one can show that it is, indeed, an affiliation fee being passed on individually. That is the whole point of the distinction between affiliation fees and donations that Hayden Phillips was trying to make. I do not want to delay the House much further.

Hilary Armstrong: Will the hon. Gentleman give way?

David Howarth: Yes, I will give way, because the right hon. Lady probably wants to deal with the point that I am making.

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Hilary Armstrong: No, my intervention is not on that point, although I should like to debate it with the hon. Gentleman at some stage. He started off by saying that the main thrust of the new clause came from the wish to change the public’s perception of political giving and raising money for political parties. Has he any evidence that his proposed cap would have any effect on public perception?

David Howarth: Any cap would make such a big gesture in the direction of self-control by those of us in politics that it would have an enormous effect, simply by saying that we are willing at long last to control ourselves in a way that we have never been willing to do until now.

Tony Lloyd: I am grateful to the hon. Gentleman; he is being very generous with interventions. Many people—I am one of them—believe that the public really want restraint on spending and transparency about donations. Clearly, that is almost the opposite of what he is proposing and of what the Liberal Democrats believe in.

David Howarth: I cannot understand how the hon. Gentleman thinks that our proposal is the opposite, because we want both an effective national spending limit all year, every year, not just sometimes, and an effective local spending limit all the time as well, in combination with a cap. The restoration of public confidence depends on having both those things, not just one of them. We often hear arguments that one side wants transparency on donations but is willing to have a cap on spending and that the other side wants things the other way around, depending on what is to its short-term advantage. That is not good enough; we need both spending and donation caps simultaneously all the time.

Pete Wishart: I agree wholeheartedly with what the hon. Gentleman is trying to achieve. Is not one of the good things about his proposal that we would end the obscene situation whereby individuals gave the Labour party £1 million and found themselves sitting in the House of Lords?

David Howarth: We would also end the situation whereby individuals gave the Labour party £1 million to change a policy and it all came out in public, so the Labour party gave back the money, but the policy still stayed changed. That seems to me to be the best-value donation of all time. However, it does not do a lot of good for any of us to bandy around the names of individuals in one party or another who have been found to have done something of no credit to politics. The question is whether what we are allowing is a credit to politics and to our democracy.

James Brokenshire: Before the hon. Gentleman draws his comments to a conclusion, I just want to make sure I fully understand what he is saying about the funding gap and the interrelationship between his proposal and the need for state funding or other sorts of funding. I think he was implying that he felt that that was not necessary. However, when he and I sat on the Constitutional Affairs Committee and produced the report on party funding, it was accepted that there would be a funding gap, and that, in essence, the sorts of individualised
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funding that could come through would do so only after a time, and that something would be required for that transition period.

David Howarth: Yes, I concede that there would be a gap, but it is a gap in time rather than a permanent gap in terms of money. I agree that there might well be an interim period when something will be needed, but that would not have to be on a straightforward Treasury grant model, as the Government seem to assume.

Mr. Winnick: I hope I am not making a party point here—heaven forbid!—but although the hon. Gentleman, whom I respect, was speaking about not bandying names around, may I ask him whether he feels it would be appropriate for his party to return money given by Michael Brown, who, as the hon. Gentleman knows, was convicted of criminal offences? Should not that money be returned, and would that not help the Liberal Democrats, in the sense that it would demonstrate—

Madam Deputy Speaker (Sylvia Heal): Order. We are discussing a specific amendment, and the hon. Gentleman must be careful in what he says.

David Howarth: I do not want to stray from the subject of the debate, Madam Deputy Speaker, but in that particular case if the authorities were to say that the money ought to be given to the Electoral Commission—rather than back to the individual concerned as that would be inappropriate in the circumstances—I am sure my party would comply immediately. I might add that the parallels between that situation and what has happened in the cricket world are very striking.

Let me cover the final argument that the Government have used for not going ahead with the Hayden Phillips compromise: that there is no consensus in favour of it. That is simply a cop-out. What we should be doing is looking at where the public are at, not at where the individual parties are at, and we should be going to where the public want us to go. On the specific question of consensus, I would be surprised if there were consensus today about the unincorporated bodies issue—there is agreement between my party and the Labour party, but I would be surprised if the Conservative party were massively enthusiastic about the proposed regulation of unincorporated bodies—yet the Government have decided to move on that. My party’s view is that they should move on the reform of this whole area, not just on individual items of it.

Mr. Straw: I am glad that we have an opportunity to discuss the crucial issue of the role, if any, of donation caps in a properly transparent system of party funding that commands the greatest degree of public acceptability. This issue was first considered at great length by the Committee on Standards in Public Life, which examined it in 1997, after the general election of that year; and in its landmark report of 1998, under its then chairman, Lord Neill, it set out its view of the case for and against donation caps, because—surprise, surprise!—the Liberal Democrats were at that time urging on the Neill committee donation caps of £50,000. At least on this occasion, therefore, the Liberal Democrats have the benefit of consistency on their side. That is an accusation that can rarely be made against them, but I do so today, although it also suggests that they might have been somewhat immune to experience in the meantime.

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The Neill report placed the burden of its recommendations on the crucial issue of transparency. On that issue, the hon. Member for Cambridge (David Howarth) made a very bad point for himself, but a good point for the rest of us, when he referred—in rather delphic terms, but we might as well refer to it publicly—to the Ecclestone donation to the Labour party, which emerged, with a certain amount of excitement, in the autumn of 1997. That donation was made under the old regime—the untransparent regime—whereby donors were entitled to request confidentiality for their donation, and I recollect, although I am open to correction, that that is what happened. The profound change made by the Political Parties, Elections and Referendums Act 2000 was that that donation, which was well above the £5,000 limit, would have had to be on the record and be declared by the Labour party. People could then have made up their own minds about whether undue influence was being brought to bear. If the purpose of giving the money was, as it were, to purchase a policy, the donor might well have decided that, as there would be total transparency, it might not be such a good idea. I am pretty certain that none of the problems that arose would have arisen had the provisions of the 2000 Act been in force in 1997. Therefore, this is a point for those of us who believe above all in transparency, and in doing nothing that might undermine a transparent regime.

Neill considered the whole issue of transparency and donation caps. He was very clear about the need for transparency and the caps, which have broadly stood the test of time, notwithstanding the fact that we and the Opposition accept that the limits must be increased. The committee came down against a donation cap, however, and I ask the House to weigh its words with great care:

Hilary Armstrong: I intervened on the hon. Member for Cambridge (David Howarth) precisely because his new clause would create such diffusion and lack of clarity about who had given a donation that, far from public confidence being improved, public cynicism would be increased.

Mr. Straw: I agree with that, and there is a nice paradox, which I am sure political scientists will exercise themselves in exploring in years to come: the more, quite properly, the public know about our activities, the less they appear to like them, even if they are entirely legitimate and above board. I think that Members will be aware of the very nice passage in Roy Jenkins’s biography of Churchill, in which he records all the money Winston Churchill hoovered up from various nefarious sources, and suggests, with good evidence, that Churchill’s career would never have got to the starting line had the degree of undue influence to which he was subject, and the extent of the donations that would now be regarded as wholly unacceptable, come out publicly. My right hon. Friend is absolutely right in what she says. There was a logical flaw in what the hon.
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Member for Cambridge was arguing: there is a balance to be achieved between transparency and complexity and artificiality, and the more there is the

to which the Neill committee referred, the less likely there is to be true transparency, and the more likely there is simply to be avoidance.

Mr. David Heath (Somerton and Frome) (LD): I am very disappointed by the position that the Lord Chancellor is now adopting, because the position that he and the then general secretary of the Labour party took in Sir Hayden Phillips’ committee, on which I also served, seemed to accept the broad consensus on the need for caps on donations and on expenditure, on a recognition of the difference between affiliation fees and donations outside those fees on the part of trade unions, and on some of the abuses among what I accept is a small number of unions. They were affiliating more members than they had and were paying over a greater amount than they were collecting in affiliation fees, and that needed to be addressed. I am sad that the Lord Chancellor seems to be resiling from that broad consensus that we reached, albeit that the Conservatives, for reasons of their own, walked out at a later stage.

6 pm

Mr. Straw: The hon. Gentleman was a very participative member of the Hayden Phillips working party over many months. I did, indeed, on behalf of my party—I do not apologise for this—accept a number of compromises for the greater good. However, I have always made it clear that my starting point—I do not think that there is any dubiety about this—was that, in principle, I am not in favour of donation caps.

I shall deal with the hon. Member for Cambridge’s dismissal of the idea of seeking a consensus between the parties—such a consensus is more essential in the area of party funding than in almost any other area. If there is no consensus, those who happen to be in the majority end up using their majority for partisan advantage, and that is completely antithetical to the idea of democracy. As both the hon. Member for Hornchurch (James Brokenshire) and I have mentioned, this idea of a donation cap was reconsidered when the Select Committee on Constitutional Affairs considered party funding in the 2006-07 Session. I was struck by the hon. Member for Cambridge’s amnesia about what had happened in that Committee. I was not a member of it then and I am not now, but I do remember what it said—it made it clear that it was proposing a donation cap and state funding as part of a “package”. Indeed, that was exactly how Hayden Phillips read those proposals, because he was considering the matter in parallel to the Constitutional Affairs Committee and, in a sense, took as his starting point for his proposals what was in its report, to which the hon. Member for Cambridge signed up.

James Brokenshire: Before the Secretary of State leaves that report, I just wish to understand why the Government’s response to the Constitutional Affairs Committee report stated:

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He seemed to suggest that he was not in favour of that in principle and was, therefore, in some way, demurring. It would be helpful to understand why that statement was made in those terms.

Mr. Straw: As I say, my starting point has always been the position that was taken by Neill and by my party, and by the Conservative party, its Front-Bench spokesman, the shadow Home Secretary and a panoply of Conservative Uncle Tom Cobleighs, who all said that they are not so keen on donation limits, for perfectly sound reasons. What we were involved with at the same time as Hayden Phillips—the hon. Member for Hornchurch will recall that the interim report was published in October 2006—was seeking a compromise with the other parties. We were not so keen on donation limits, but we were keen on spending limits—I have always been keen on those—and other parties were keen on other elements of this, and we came together to agree what I thought was a comprehensive package. Inevitably, in a negotiation, for a greater good, both for oneself and the purpose being served by the negotiation, one gets some things one wants and one has to accept some things one does not want—there has never been any dubiety about that.

When Hayden Phillips reported on 15 March 2007, he said:

chapter 5—

He set out a number of reasons, all of which the hon. Member for Cambridge appeared to dismiss. Sir Hayden stated:

As I said to the hon. Member for Hornchurch, everybody accepted that in the spirit of compromise.

Hayden Phillips reflected those principles in his proposals at the end of July. It is simply inaccurate for the hon. Member for Cambridge to assert, as he did in his speech, that Hayden Phillips did not make specific proposals on party funding, because he did so in his report in March and again in the draft all-party agreement. The Liberal Democrats and the Labour party had initialled it but, for reasons that we need not go into at length, the Conservative party was unable to support it.

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The agreement contained a great chunk on public funding with two linked schemes, stating:

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