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It did not say “could” be introduced; it is explicit on the point, which is repeated in the annex to the White Paper on party funding that I published last June as a precursor to this Bill. The truth is that unless one is willing to accept gratuitously a major shortfall in party funding, one cannot —[Interruption.] The extent to which this would fall on one party as opposed to another depends on where one sets the limit, but it would never have an equal effect on all three parties, or even on the two main parties; at some levels it would hurt the Conservative party more than the Labour party and at other levels the opposite would be the case. I admire the way in which the hon. Member for Cambridge, in a spirit of alleged liberal non-partisanship, says that the Liberal Democrats will not be affected and that the fact that the Conservatives and Labour party will between them lose about £5 million or £6 million is neither here or there, because they would just cut their spending, thank you very much. That is not the way to achieve a consensus.

Philip Davies (Shipley) (Con): Perhaps the Secretary of State has hit the nail on the head. Does he agree that the problem we face in this debate is that the outside world probably thinks that each party’s position depends on its own self-interest and that the bigger picture is lost? I believe that anybody, including trade unions, should be able to give whatever money they have freely. If trade unions wish to give their money, they should be free to do so—it is their decision. Does he agree that this subject often gets bogged down in the fact that most people think that each party is simply arguing a point on the basis of its own self-interest?

Mr. Straw: I agree with that. May I say something else on the issue of donation limits? I shall do so briefly, as I know other hon. Members wish to contribute. There is no doubt that the proposals from the Constitutional Affairs Committee, which were agreed by all sides, were predicated on the basis of state funding, as were the Hayden Phillips proposals and those that were discussed in the Hayden Phillips all-party talks. A donation limit would make any sense—and could gain my support and the Government’s, for similar reasons to those that I believe have been expressed on many occasions by the hon. Member for Huntingdon (Mr. Djanogly)—only if it were part of a comprehensive package.

That then prompts the question about whether the time is now ripe for state funding. It would have been difficult to introduce in 2007, but in the midst of the worst recession we have seen since the war and when there is great demand on public finances and will be for some years to come, we would need to take leave of our senses to propose that hard-earned taxpayers’ money should be used to support our political parties. If we wanted to make one decision that would ensure that the esteem in which we are held—which is not that high anyway—rocketed through the floor, it would be to introduce extensive state funding.

Andrew Mackinlay (Thurrock) (Lab): In Committee and earlier, I have been trying to follow the impact of the Bill on Northern Ireland political parties. In their
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terms, £50,000 would be a very large amount. For example, is Sinn Fein required under existing legislation to have a separate cocoa tin for their moneys for Northern Ireland? If not, and it is a national party in terms of the whole of Ireland and can raise money in the Republic of Ireland—not to mention the US—how can we measure the cut-off point? If the national organisation in Dublin donates money to the north, is that seen as money from a donor? It is important that we know how all that will work, because Northern Ireland is a critical area for elections.

Mr. Straw: My hon. Friend raises a further issue of complexity, and we would have to think very hard before we went down that route. If he will forgive me, I will try to provide him with a more detailed answer should I catch your eye, Mr. Deputy Speaker, later to sum up the debate.

One last point that I wish to make about state funding and donation caps is something of a gypsy’s warning. The Constitutional Affairs Committee waxed eloquent about the Canadian example, and how Prime Minister Chrétien had introduced a system of state funding with low spending and donation caps. This was the future, it said, and so it was—for a period. However, if political parties were to be significantly funded by the state, we should all remember the temptation for a Government who might be under pressure in terms of public finance to seek to use the money going to their opponents to political advantage.

Last year in Canada, notwithstanding the clear all-party agreement about state funding for political parties, Stephen Harper, the Prime Minister, decided—as part of an austerity package and without consulting the other parties—to propose that the state funding should be significantly cut. He was entitled to do that, but it led to paralysis in the Canadian Parliament. Had he not then prorogued Parliament peremptorily, it would have led to a motion of no confidence in him. It led to Parliament being suspended for many weeks, and he has now had to withdraw the proposal. That vulnerability to partisan advantage shows that not much good may flow from extensive state funding.

Pete Wishart: That was an interesting lesson from Canada, but the Secretary of State suggests that we should make no change in this critical and crucial part of this Bill, and continue with business as usual. The public will find that staggering, because it means that people will still be able to buy political influence by donating to political parties. It will be back to cash for honours and people giving £1 million to the Labour party so that they end up in the other place.

6.15 pm

Mr. Straw: First, the hon. Gentleman knows very well that there is not a shred of evidence in those allegations. Secondly, to the extent that the public know about donations, they do so because of legislation that we introduced. Unless there were good reasons for introducing donation caps, they would lead to less transparency, not more. That is not just my argument, or the Conservative party’s. It was made, independently, by the Neill committee. Thirdly, if the hon. Gentleman wants donation caps, he will have to explain to Scottish electors why their taxes should be increased to pay for
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political parties. Finally, it is an insult to donors small and large to all political parties to suggest, imply or insinuate that the overwhelming majority do it to curry favour or to buy advantage. They do not. They do it because—and this may be a surprise to the SNP, which has only one, negative policy—they believe in the values of the party.

Mr. Djanogly: New clause 1, tabled by the hon. Member for Cambridge (David Howarth), proposes a cap on donations set at £50,000, which would be an annual limit. It would insert a new subsection 1A into section 54 of PPERA requiring that parties do not accept donations from a permissible donor if that donor had already donated £50,000 in the same calendar year.

Taken by itself, the new clause looks fairly straightforward, so I agree with the hon. Member for Cambridge that taking this new clause on its own is somewhat misleading, because it is of course a very complicated issue, as the Secretary of State set out. It is the unfortunate backdrop to the debate on new clause 1 and other new clauses tabled by the Liberal Democrats that secrecy and suspicion have long tainted the donation regime. However, as the Secretary of State pointed out, most people who make donations are honest and want to contribute to the societies in which they live through their donations to political parties.

As the Secretary of State said, the process started with Lord Neill’s Committee on Standards in Public Life, and the subsequent inquiry, “The Funding of Political Parties in the United Kingdom”. The Neill report was published in October 1998 and suggested, among other things, greater transparency in donations. While the Committee’s report is relevant to the new clause, it did also pave the way for further work in the area of electoral reform, and the gauntlet was recently taken up by Sir Hayden Phillips. His report, published in March 2007, made several suggestions intended to breathe life into the democratic system and revive political engagement. Indeed, by his calculations, party membership had sunk from one in every 11 citizens 50 years ago to about one in 88 in 2007. That is a grave statistic that we should all think long and hard about.

Whatever Hayden Phillips thought about individual caps—and I heard a difference of opinion between the Secretary of State and the hon. Gentleman—we can accept for the purposes of this debate that his suggestions are, as a package, behind the new clause and others that the Liberal Democrats have tabled. However, we are concerned about the timing and whether this Bill is the correct forum in which to discuss such wide-scale reforms that have, for better or worse, been discounted so far.

David Howarth: The hon. Gentleman asked about the timing of the proposal. If not now, when? The Bill is about party political funding and comes after the Hayden Phillips talks. I cannot think of a better time to discuss caps.

Mr. Djanogly: The Hayden Phillips talks took place and, for one reason or another, were not completed. As far as we are concerned, they are ongoing business, but for the purposes of the Bill, they are not on the table. We can debate for ever and a day why the Hayden Phillips process failed. I hope my hon. Friend the Member for Chichester (Mr. Tyrie), who was present, will give us
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the benefit of his experience. The harsh reality, which the Liberal Democrats seem to fail to recognise, is that what is on the table today is a Bill that, I agree, is somewhat lacklustre. The debate surrounding individual and collective caps is therefore a debate for another day.

In the report Hayden Phillips was keen to emphasise that a common approach cannot be delivered in the short term, and that consensus must be reached in finding a long-term solution. The Bill is designed to ensure that that Electoral Commission has adequate powers to deal with the provisions of PPERA. It introduces some transparency through reporting requirements and adjustments to thresholds. Yes, the Bill is a tinkering exercise rather than an overhaul, but the Conservative party will remain willing to seek that overhaul, even if that means moving back to the Hayden Phillips process or, as seems probable, beyond it.

Let us be clear that when we have that further debate we shall require a thorough review of the relationship between the trade unions and the Labour party. If we were to review the need for caps, we maintain that any legislation must address the whole spectrum of donations. We need to ensure that thorough coverage of all equivalent sources of funding is guaranteed. That, of course, includes donations from trade unions.

We understand and agree that limits on funding and spending should be up for debate, but implementing them in the Bill and allowing the union funding of Labour to remain unreformed—including, as the hon. Member for Cambridge said, the use of opt-out rather than opt-in to political funds and the inability to choose the party destination of political funds—would be very damaging.

There is a self-perpetuating cycle, and if we are to address comprehensively the issue of party funding, we need to deal with it in the same way as the Companies Act 2006 rightly provided for companies to have member votes to enable the company to give stated amounts to stated recipients. If any Labour Member thinks that we conceded that only to allow unions to vote on having a political fund every 10 years, they should think again. The hon. Member for Cambridge will not have our support for his amendment, although we recognise his position as a matter to be included in the wider debate on party funding that will take place in due course.

Mr. Tyrie: This has been a very interesting debate. The proceedings of the Neill committee have been set out in some detail, so I shall not repeat them.

The intentions of new clause 1 go to the heart of what we are trying to achieve in any reform of party funding, which is to restore trust in the source of donations. I would like to support new clause 1 in principle, as my Front-Bench team probably would, but not without qualification, as the hon. Member for Cambridge (David Howarth) agreed when he referred to a number of other clauses that he had tabled and other points that were not in those clauses. That is why he wanted to speak about trade union affiliation fees, state funding and other issues.

This is an area that we must clean up. The means by which parties fund themselves have contributed substantially to the loss of trust in them on the part of the electorate. The plain fact is that people believe that parties can be
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bought, and they may be right. Access, influence and even changes to legislation all appear to have been tradable over the past decade, not to mention the honours system. Those seem to have been traded for party cash by many parties for a long time, Lloyd George being the most salient example.

Allegations about my own party’s activities and the relationship between the award of honours and senior corporate directorships at times in the 1980s did not always look 16 annas to the rupee to me. Then we have had Labour’s recent crop of life peers, with a fair sprinkling of big donors among them. The big donor culture has created a perception of corruption and we must do something about it. No debate on the subject should fail to mention Michael Brown’s millions donated to the Liberal party—he is now in jail—and the trade unions’ donations, with which they appear to have bought considerable influence, in the Warwick agreement and in other ways.

The clause would end the big donor culture at a stroke. Some may argue for a cap of less than £50,000. I notice that the Liberal Democrats started to do that today. That, as the Lord Chancellor pointed out, is a flat contradiction of the Liberal party policy that has been around for several years.

Mr. Heath: The hon. Gentleman’s memory deserts him. He must remember that during the talks I made it clear that I would have preferred a lower limit, but that I thought the £50,000 to which his party had agreed was a workable compromise. He must remember that.

Mr. Tyrie: I am on the record as saying many times that I would have preferred a lower limit, but my party’s position is £50,000, and the hon. Gentleman’s party’s position was £50,000 at the time of the talks, in published documents. It seems now that that has gone, and the Liberal party has another public position.

It is a sad irony that while the issue has led to the public perception of corruption in politics to a higher level than I can remember, that has taken place at a time when politics has probably been less corrupt than in any previous era. One has only to cast one’s mind back to Gladstone and the trading of consols in 1870s, his trading of Suez canal stock, and Lloyd George and the honours sales, which I have mentioned before. I am sorry that I keep going on about the Liberals. No doubt other parties were at it as well.

If we agree to new clause 1, we are still left with a crucial question: can parties fund themselves on so much less? The hon. Member for Cambridge started to discuss that. Could Labour do without trade unions, the Liberal party without its Browns or the Conservatives without their big donors? I think so, provided that several conditions are fulfilled. One is that there should be an overall spending cap nationally at a lower level than we have at present for general elections. The general election cap is £20 million and should be reduced to £15 million. That is Conservative party policy. I do not know whether it is Labour party policy; I could not tell after what I heard today. That is a cut of a third in real terms, which is a reasonable step.

Secondly, if we go ahead with the proposals, we must have some state funding, but I agree with those who said today that at a time of financial stringency, the public opposition to more state funding would be enormous,
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and my sympathies would be with the public on that. We would do well to recall that existing levels of state funding for political parties are already very high. Roughly half of our party politics is funded by the state directly or indirectly—a much higher figure than is commonly supposed.

If there were more state funding along the lines set out in new clause 1, however, it would have to be based on a principle that the electorate could accept. It would have to be designed to encourage very local campaigning and a regeneration of grass-roots politics, and that would mean tax relief or match funding. It would also mean that cash-per-vote schemes, such as the Liberals have supported and the Conservatives considered in the 2005 proposals, and which were published at that time, would not be serious runners again for some time. I was never enthusiastic about those schemes, and I do not support them now. However, I do support match funding.

6.30 pm

Could the Conservative party cope without its big donors? It probably could; any campaigning benefits that parties pick up from the use of such money have to be offset against the negative publicity that comes with it. Something must also be made of the Lord Chancellor’s point that a very high proportion of donations are honourably intended. It should be—and is, I think—a mark of a healthy democracy and polity that donors big and small should be prepared to donate money. It would be wrong to assume that all big donors are in it for access, honours and influence, although unfortunately a few of them are.

Any answer to the question whether parties can cope with the donations cap must also address the special and unique needs of the Labour party. As it stands, new clause 1 would limit trade unions to £50,000, because affiliation fees—rightly, in my view; there are also many supporters of the same view on the Labour side of the House—are treated as collective donations in law. The consolidation of the trade union movement would make the new clause particularly punitive for the Labour party, because that consolidation would reduce even further the number of donations that the trade unions could make to it. The trade unions are, of course, the Labour party’s paymasters, directly and indirectly, on a huge scale. As I mentioned, the unions make no secret of their desire to influence Government policy; they often boast about their successes in print and in public.

We have to decide whether it is in the interests of British politics for us to carry on in that way. In my view, it cannot be right that in the 21st century a pressure group, or a collection of them, however steeped in tradition, should retain such an influential place in the life of a major political party. Parties, like democracy itself, must be aggregations of the decisions and will of individuals. The age of corporatism should be long gone. New clause 1 would end it, and that key ingredient of it attracts me.

Philip Davies: For me, the most important thing is transparency rather than a cap. My hon. Friend said that some people give donations to political parties seeking influence or something else in return. That may be so, but he seems to be suggesting that political parties are incapable of taking people’s money without offering something in return. Surely the onus is on the
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political parties to take people’s money but make it clear that absolutely nothing will be given in return.

Mr. Tyrie: There are two problems with that. First, we do not need to look in a crystal ball. We can read the book: we can see that political parties—this Government and previous ones—do appear to have given things in return for money, and on a sizeable scale. Secondly, even if the problem is only one of perception, it will not go away, and we need to deal with it.

I want to allude to the Hayden Phillips negotiations, which centred on the treatment of affiliation fees. Throughout that period, the Conservative position was absolutely clear, as it still is. Special treatment of affiliation fees can be considered as part of the introduction of a £50,000 cap. I mean “special” treatment, because logically a £50,000 cap should be accompanied by a complete restriction, meaning that only direct payments by individuals should be permitted as a legitimate source of funding for political parties. Corporate donations and donations from institutions and intermediaries, including trade unions, in which the individual is subsumed, should in the long run be restricted—and brought to an end after an interval. That point was set out in the Conservative party’s proposals published in 2005.

Incidentally, this is also the view of many in the Labour party, although only a few are bold enough to speak up and say so. Matt Taylor, former adviser to Tony Blair, has set out in detail in print and in a number of speeches exactly the position that I have described. A good number of Blairites on the Government Benches have told me privately that they agree, although very few are prepared to put their heads above the parapet.

We are left with a crucial question. How could affiliation fees be allowed to cheat the logic of the £50,000 cap while upholding the principle that those donations are matters of individual choice? There are three requirements. First, there should be a genuine choice for an affiliated member. In the course of the Hayden Phillips investigations, we discovered that many affiliated members scarcely knew that they had made a donation to the Labour party. That, no doubt, accounts for the absurdity that, when polled, a majority of affiliated trade union members turn out to vote for political parties other than Labour. It beggars belief that they should want to donate to Labour while voting for the Scottish National party, the Liberal party or the Conservative party.

The second requirement must be that the choice should be extended to donations from other parties. Therefore the means by which the choice is presented to the affiliated member as he joins the trade union must enable him not only to choose not to give to one party, but to choose to give to another. The third requirement must be that the individual must periodically be given an opportunity to review his decision—in practice, that does not happen in many trade unions. That opportunity should be provided annually.

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