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Before describing the amendments in more detail, I briefly remind the House of the current structure relating to donations under the Political Parties, Elections and Referendums Act 2000. Under the system that that Act introduced, political parties are not permitted to accept what are called "impermissible" donations of above £200, although the Bill raises that threshold to £500. When a party receives a donation above the threshold, it must take "all reasonable steps" to verify that it has been received from a permissible source. If it receives a donation from an impermissible source, it is required to return it in 30 days. It is an offence not to do so. The party must also report receipt of any impermissible donation to the Electoral Commission. Additionally, if
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a party accepts an impermissible donation, the Electoral Commission may apply to a court to seek forfeiture of an amount equal to the donation.

Amendment (a) would add to the existing requirement for an individual to be registered on an electoral register by requiring that a registered party may not accept a donation from an individual unless that person is resident, ordinarily resident and domiciled in the United Kingdom in the previous year. Colleagues will know that an individual's tax status-particularly their residence status-can change from year to year. It is therefore almost impossible to establish somebody's tax status, and particularly residence status, in the middle of a tax year. For that reason, we have alighted on the previous year, although we are open to arguments about whether that approach is correct.

Bob Spink: Has the Justice Secretary considered making that requirement more onerous, by requiring registration for tax purposes to have taken place, say, in the previous three or five years?

Mr. Straw: We have not, and I think that there would be objections to that. There is the category of resident, ordinarily resident and domiciled, but people may have been domiciled here but resident abroad, and may then have returned. I understand what the other place was driving at and what this place is driving at, but we have to ensure that the regime that we put in place is proportionate, although I will come to that in a second.

Mr. Geoffrey Cox (Torridge and West Devon) (Con): I wonder whether the Secretary of State could help me. Is it correct that amendment (a) will mean that people who are British citizens and entitled to vote in a British general election may not donate to a political party for which they intend to vote?

Mr. Straw: It is certainly the case that the effect of amendment (a) could be that somebody registered as an overseas voter under the provisions of the Representation of the People Act 1983, as further endorsed, would be able to vote in an election but not give donations.

Pete Wishart (Perth and North Perthshire) (SNP): Does the Secretary of State believe that there is any merit in applying the same principle to elections in Scotland? If it is not right and proper for those who are not on the electoral register in the UK to buy elections or influence results, surely the same principle applies to elections in Scotland. I know that the Secretary of State will say that this is all about the UK, but surely the same principle must apply to Scottish elections.

Mr. Straw: The same principle will apply to Scottish elections. I do not follow the hon. Gentleman's point, unless he is seeking to erect an iron curtain between us and Scotland. [ Interruption. ] The right hon. Member for Wokingham (Mr. Redwood) says that the hon. Gentleman wants to exclude English donations. I suspect that there is an element of that-perhaps he would have an ethnic test as well.

Pete Wishart: Just to clarify for the Secretary of State, the point is quite straightforward: the same principle that he is trying to apply to the rest of the UK should also apply to Scotland. If someone is not served by the Scottish Parliament-if they are not registered to vote
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and not domiciled in Scotland for the purposes of Scottish elections-why should they be able to influence or buy election results in Scottish elections?

Mr. Straw: That is like suggesting that unless one is domiciled, resident, ordinarily resident and registered to vote in Blackburn, it is not possible- [ Interruption. ] Hang on, it is exactly the same- [ Interruption. ] The hon. Member for Ribble Valley (Mr. Evans) mentions his constituency. In fact, I do get donations from Ribble Valley, because that is where the people who have done really well move to. They cannot buy houses expensive enough in my constituency, but they carry on wishing to support me, and I am very happy to take their support, including their money.

Pete Wishart: That is trivialising it.

Mr. Straw: It is not trivialising it-in fact, someone might move, surprisingly enough, south across the border to Carlisle. Why on earth should they not be allowed to donate- [ Interruption. ]

Madam Deputy Speaker: Order. Could we apply the usual rules of debate?

Mr. Straw: I will draw this exchange to a close, but just say that it illustrates that the hon. Member for Perth and North Perthshire (Pete Wishart) does not even concede the idea of a Union. He simply wants Scotland to be a foreign country. That is his business, but it is not where the majority of the Scots are on that matter, and it is certainly not where the majority of those who live in the United Kingdom are.

On residence, we looked closely at whether the wording, which seeks to right the technical defects in Lords amendments 11 and 12, provides the right results. We would want to be sure in finalising the drafting of the relevant clauses that the overall approach was proportionate-a point that I was trying to reflect in my answer to the hon. and learned Member for Torridge and West Devon (Mr. Cox). Domicile is a common-law concept. Our understanding is that large numbers of people may be non-domiciled in those terms, but still pay full UK income tax. If Lords amendments 11 and 12 were aimed not at such a category, but more at those who seek to restrict their tax liabilities through their residence or domicile status, we would need to think about whether amendment (a) should be revised with that aim in mind. We will certainly listen carefully to the debate today. Given that a person's right to freedom of association, as enshrined in article 11, is in play, we should not be complacent about the potential ECHR implications of any proposals in this area.

One potential option to address that issue-it is only one option-would be to specify that recipients of donations would be required only to satisfy themselves as to an individual's taxation status for donations above £7,500, rather than the £500 threshold. The result would be that the restriction would target only those who donate significant sums of money-that is, amounts that require that the fact of the donation be made public. Anyone wanting to make a smaller contribution would not be subject to the new requirement, with the result that the proposal would not operate as an absolute bar on a potentially large category of donor. Also,
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setting the permissibility threshold in relation to taxation status only at the level of the amount at which donations must be reported to the Electoral Commission would plainly be much easier for political parties to operate.

There is a consensus on that, and long may it continue. We have sought throughout to ensure that the changes made to the Bill take account of the impact that the regime for party funding has on the volunteers who staff our parties. Our very good officials and the Electoral Commission sometimes forget this, but as I have told them, our political parties are not staffed by career civil servants, but by volunteers. They are not paid and they do not get expenses; they do what they do because they believe in it. We need to honour them and respect that.

Mr. Cox: I wonder whether the Secretary of State has considered not only article 11, which he mentioned, but article 10, which guarantees freedom of political expression. If a British citizen entitled to vote in a general election is not also entitled to donate to the party of his choice, that raises serious questions about whether he is being denied the opportunity freely to express and implement his political opinions.

Mr. Straw: I think that we are going to have quite a good argument about that one. I heard what the hon. Member for Huntingdon (Mr. Djanogly) said about a consensus, and we have achieved a high level of consensus. People have criticised the time that the Bill has taken, but at least it is a lot better than it was when it started. I hope that we can continue in that vein.

Mr. Evans: There seems to be a lot of thinking on the hoof here, and I am not sure how well thought through any of this is. However, the Lord Chancellor just mentioned the figure of £7,500. Is that in totality-that is, the amount that goes to the centre-or could an individual give £7,500 to 646 constituencies?

Mr. Straw: Typically, those sums are aggregated over a year. If I am wrong, I will let the hon. Gentleman and the House know, but the limits cannot easily be evaded, so that if the limit is £7,500, it is £7,500 given by one donor in any one year to a party.

Mr. Evans: To a party?

Mr. Straw: Yes, I think that that is correct. Otherwise, it would be very easy to evade the limit.

6 pm

Bob Spink: I recall that when we debated the Bill a few months ago, I argued that even £500 was too liberal and too high a limit for reporting. Surely the Secretary of State cannot now be arguing that £7,500 is the right level or that it is an amount that volunteers might give to the party without having a personal agenda of seeking to influence policy or buy elections.

Mr. Straw: We are seeking to deal with the issue of proportionality. My view is that setting the minimum limit at £7,500 will deal with the issues that were of concern, as it turned out, to Members on almost all sides in the other place, without imposing an unnecessarily stringent burden on individual parties that is difficult to enforce. The lower the limit, the greater would be the
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likelihood of administrative headaches for parties, and the greater the risk of potentially damaging mistakes. That is where I am coming from on this issue.

May I also say to the hon. Gentleman that, at the moment, what a local party treasurer has to do is relatively straightforward? They simply need to check that the person in question is registered to vote or, in the case of a company, to check that it is registered in this country. Even in that context, there was a complaint against my party and, therefore, indirectly against me, although the Electoral Commission did not find that we had acted dishonestly or dishonourably in any way. An error was made by my party treasurer, and such errors are made by others as well.

The inherent difficulty-there is nothing that we can do about this-is that, at the moment, the information that a treasurer needs to check is on a public record. They need to check whether someone is on the electoral register. Having established someone's identity, it is relatively straightforward to check whether they are on the electoral register or the name of the company. People's tax records, however, are confidential to Her Majesty's Revenue and Customs. Moreover, I recall that the Revenue holds tax records for only 9 million people, out of an adult population of about 40 million. It does not keep the other people's records. Why should it? Only about 9 million people complete an income tax return. The rest pay their taxes through the pay-as-you-earn system. There are overwhelming objections to providing access to the Revenue's database, but even if there were none, that database would not reveal whether someone was resident, ordinarily resident and domiciled in this country.

The only way is to impose a requirement on the donor to self-declare. The party can then check that they have filled in that box. We are also looking actively at tabling amendments in the other place to ensure that, when a party treasurer has acted reasonably to check those things, they cannot then be found guilty of an offence, save in exceptional circumstances when there is evidence that they have been acting in collusion to perpetrate a fraud.

John Mann (Bassetlaw) (Lab): I am a little bemused about where all the treasurers with these problems will be. I have examined every set of accounts for the past four years for every constituency party on the Electoral Commission's website, and I can inform my right hon. Friend that there are very few local parties across the House that receive such large donations, either from abroad or from this country. This is not a problem that my treasurer has faced. It is not a problem in any Labour constituencies or for the smaller Opposition parties. There is only one party that has this problem: the Conservative party. Is not the point of the measure that it is about democracy and fairness in our system? My right hon. Friend is being far too generous to these people who are undemocratically funded by overseas donors.

Mr. Straw: I am sorry to disagree with my hon. Friend, but the issue of proportionality- [ Interruption. ] I also apologise for my cough. The issue of proportionality affects all the parties. I have not been through every declaration made by all the parties, but, at the last election, as in previous ones, my party self-evidently declared donations above the declarable limit.

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Mr. Francis Maude (Horsham) (Con): Does the Justice Secretary share my gratitude to the hon. Member for Bassetlaw (John Mann) for making it absolutely, nakedly clear that this is a blatant piece of partisanship, which the Justice Secretary has been bounced into accepting by his Back-Bench colleagues? After all, he was reported in The Guardian only at the beginning of last week as having told members of the parliamentary Labour party that they were going to be whipped to vote against these amendments tonight. Just what has happened in the meantime to make him change his mind?

Mr. Straw: The right hon. Gentleman should not always believe everything that he reads in the newspapers. In fact, that is not what I said, but let us leave that aside. It is perfectly plain that the Government position on this has changed, and I have sought to set out the reasons why.

I do not agree with my hon. Friend the Member for Bassetlaw (John Mann) that this is just about one party. It palpably is not, which is why I find the approach of the Conservative party slightly surprising. It is about trying to get a regime for party funding settled and straight. We have made a lot of progress on this, but we need to make a little more. My right hon. Friend the Minister of State made the point to the House-and, indirectly, to the right hon. Member for Horsham (Mr. Maude)-that, if the Conservatives had been that exercised about this matter in the other place, they might have ensured that rather more than 40 of their party's 200 Members there had turned up to vote. As I understand it, they were on a free vote for most of that evening. The truth is that a wide range of Cross Benchers, members of no party and others, voted for the amendment moved by Lord Campbell-Savours.

Mr. John Redwood (Wokingham) (Con): Will the right hon. Gentleman give way?

Mr. Straw: Of course-not least so that I can have a cough.

Mr. Redwood: I am pleased to give the Secretary of State an opportunity to sort out his cough; I hope that he will soon feel better. Will he tell the House the position in European law? Presumably, the Bill means that in European elections-and a European referendum, if we held one-no one could intervene to fund the campaigns from the continent, for example. That does not cause me any trouble, but I wonder how it squares with European law.

Mr. Straw: I shall have to come back to the right hon. Gentleman on the question of European law, and I will do so. My recollection is that the same rules on donations apply to elections for the European Parliament as to any other elections, notwithstanding the fact that there is some difference in the franchise, as he will be well aware.

The legislation governing donations to political parties and regulated donees in Northern Ireland rightly enables Irish citizens to make political donations to those parties and donees. We would not want to alter that arrangement, and the intention of subsection (b) of proposed new subsection (2ZA) is therefore to make clear our desire that Irish citizens will retain the ability to donate to
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political parties and other authorised recipients in Northern Ireland. The Government will table further amendments to clarify the intention underlying the subsection in due course.

Amendment (a) would also insert new section 54B into the Political Parties, Elections and Referendums Act 2000. That would require an individual making a donation above £7,500 in any given year to provide to the donee a declaration affirming that they satisfy the requirement to be resident, ordinarily resident and domiciled in the UK for tax purposes in the preceding year. That declaration requirement will sit alongside the requirement to provide a declaration as to the source of the donation, as required by proposed new section 54A of the 2000 Act.

Amendments (b) to (f) are consequential amendments. They ensure that the permissibility and declaration requirements relating to residence, ordinary residence and domicile that I have described are carried through to regulated transactions such as loans, and to donations to other regulated donees under the 2000 Act-that is, regulated individuals such as MPs, members associations, third parties and permitted participants in a referendum.

Any change to the requirements regarding permissibility of donors is significant, as parties are under a duty to comply with any new restriction. The current requirement for an individual to be registered on an electoral register offers a simple test. If the amendments were accepted, political parties and the Electoral Commission would need to be able to satisfy themselves that a donor met a new permissibility requirement. I have already explained the problems inherent in trying to ascertain someone's tax status.

I note that the Electoral Commission, in its briefing ahead of these debates, has commented in detail on the difficulties of enforcing the permissibility requirement set out in Lords amendments 11 and 12. It commented on a particular effect of those amendments-that

or not. Other concerns were set out and the Electoral Commission ended by saying that the Government "should address these issues".

Dr. Nick Palmer (Broxtowe) (Lab): I am grateful to the Justice Secretary both for giving way so frequently and for his willingness to help in the effort to clean up our political system. It is surely an important principle that British politics should not be substantially funded from overseas. Does he agree that the Electoral Commission does not oppose the change, as is sometimes reported, but says simply that the House will need to consider the consequences carefully? That could be addressed by requiring, for instance, the donor to give a legally binding declaration.

Mr. Straw: It is a matter of record that the commission has said that its role is to apply the law in carrying out its regulatory remit and to advise Parliament and others whether the proposals for changes to the law are workable. It sets out its concerns on page 5 of the latest briefing. It goes on to state:

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