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Viscount Cranborne: My Lords, that comes well from a member of the Liberal Party!

Lord Jenkins of Hillhead: My Lords, no, there is a common misapprehension about that. I believe that at the time when Lloyd George was Prime Minister certain issues of that sort arose. But that was not when he was Prime Minister of a Liberal Government; it was when he was Prime Minister of an overwhelmingly Conservative coalition, with the Conservative Chief Whip being every bit as much involved in those arrangements as anyone

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else. However, we are not debating 1921 to 1922. I shall leave that aspect of the matter, but not the matter itself, there.

I said that I do not want to make too much of it. There is thought to be the safeguard of the Political Honours Scrutiny Committee. But there is a considerable coincidence between the generosity of companies and the advancement in rank of their chairmen or managing directors. There are also the striking, the memorable, words of the late Lord Shackleton. He was a member of that small committee for many years, and, as I think will be generally agreed, a notably unabrasive, and, in a slightly different sense of the word, generous Member of your Lordships' House.

He, in 1993—quite recently—was worried about roundabout donations through Conservative-front organisations, not to the party itself. He said:

    "There is an obvious gap here. It is highly likely that these secret donations are by-passing the scrutiny system and that honours are effectively being bought".

So, there are a lot of complicated and difficult issues here. There is plenty to inquire into.

No doubt the noble Viscount the Leader of the House will seek to hold the line and will do so rumbustiously and maybe ingeniously as well. But I would ask him and his supporters to take one thought away from the debate. They are defending a perimeter which will not hold even over the next five years. It will clearly not survive a change of government. But even without such a change, and everything is possible, I have sufficient faith—just—in the eventual responsiveness of the Conservative Party to an overwhelming current of opinion to believe that, nonetheless, there will be an inquiry; there will be a change; there will be a reform.

The question is: how and when? The Prime Minister is one of the most experienced evacuators of untenable positions. The trouble is that he often evacuates tenable ones as well. But how much better it would be for him, and maybe ultimately for his party, if for once, instead of waiting to be pushed by the eruption of some new scandal into a panic setting up of an ill-thought-out inquiry, he were to be ahead of the game and with proper deliberation either, preferably, let Nolan look into this field or, if he preferred, set up another appropriate body. I beg to move for Papers.

3.22 p.m.

Baroness Young: My Lords, I thank the noble Lord, Lord Jenkins of Hillhead, for introducing the debate today. Clearly, the funding of political parties is an important issue and it is most relevant in a democratic society; therefore, I welcome the fact that he has raised the issue today. However, I am afraid that I do not agree with the purpose of his Motion, which is, of course, to set up yet another inquiry on the subject.

When I first looked at the Motion and considered what the noble Lord might say, I believed in my innocence that he would offer alternatives to the present situation. Having listened to the noble Lord, I realise that he has made a good party political speech designed to do down the Conservatives. Now that we all know exactly where we stand we can have a good go at the subject.

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I was delighted that the noble Lord complained about the present Government because, after all, at the time of the last Liberal Government everyone knew the old adage, "Lloyd George knew my father and my father knew Lloyd George", and what fell from that. However, people then lived in a much more fortunate society because, although I am the first to say that, as Prime Minister, Lloyd George did many good things for the country, no one would believe that he had an impeccable private life. Before we start criticising everyone we should recognise that everyone is human and is prone to sin. We might all remember that.

I was most surprised that the noble Lord's speech boiled down to a criticism of the Select Committee which reported in March last year. In preparation for the debate, I read that report, as I am sure have all noble Lords who are to speak in the debate. It goes into a great deal of detail about the funding of political parties, including the possible state funding of parties, and makes a series of recommendations. All of them have been accepted by my party. If the committee behaved as the noble Lord, Lord Jenkins, described I cannot imagine why those who did not agree with the result did not provide a minority report, which they have not done—

Lord Jenkins of Hillhead: My Lords, I allowed the noble Baroness to go on with her fantasies about Lloyd George presiding over a Liberal Government when it was 80 per cent. Conservative supported, but I cannot allow the last comment. There was a minority report, which appears in the report of the Select Committee. That was voted upon and defeated by the casting vote of the chairman—and only by the casting vote of the chairman—as was every single decision of that non-partisan committee.

Baroness Young: My Lords, the minority report was not from a Liberal member of the committee—

Lord Jenkins of Hillhead: My Lords, there was no Liberal member on the committee.

Baroness Young: My Lords, there is nothing undemocratic about exercising a casting vote; it is done frequently in committees. If we are going to pick and choose which aspects of constitutional procedure can be used, we can criticise any report at any time.

I agree with the noble Lord, Lord Jenkins, that politics and politicians have been denigrated generally. He is right about that and makes a serious point. It is a very serious situation. Democracy is being downgraded the whole time and I believe that the result of the Nolan Report will be a worsening effect on political life because we shall increasingly find that people will not want to stand for Parliament. That will be a most serious outcome, but I hope that I shall be proved to be wrong. It is certainly a possible conclusion to draw.

One must ask oneself why Parliament is being denigrated—and it is not just Parliament and politicians. When one looks around society one can see that it applies to the Royal Family, the Church and so forth. Every British institution is now subject to denigration of one kind or another. It is a serious matter for this country that all those well-established institutions are held in such disregard.

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Much of it stems from the media. As regards Parliament, one of the great tragedies is that within living memory—I cannot remember the exact time—Parliament was reported fully in what was then called the "quality press". The House of Lords was reported fully. What do we get now? We get at most some clever political correspondent giving us about 10 inches of column saying, "Wasn't it clever that so and so knocked off the Minister and the Minister knocked off the Back-Bencher?". The whole thing is reduced to the level of farce. Therefore, is it surprising that politicians are denigrated? It is a most serious matter. On that I agree with the noble Lord, Lord Jenkins.

I turn to the setting up of the Nolan Committee. The reason that it came about was that two Conservative MPs were, in fact, set up. All right, they behaved foolishly, unwisely and, quite possibly, very wrongly. I accept all of that and I do not intend to defend it. But what is equally wrong is to set people up. I well recall that when I became a Minister one of the first things that happened to me was a visit from members of MI5 warning me of the dangers of talking to communists. There was a little more to it than that but that was the purport of the visit.

It so happened that at that time my husband was about to attend a conference in East Germany and I was told to warn him about the dangers too. People were set up, which was regarded as despicable. Why it should suddenly become less despicable because the press does it I simply do not know, but it is a good example of today's double standards. No wonder that young people in particular see Parliament and politicians as appearing to be endlessly arguing with one another, self-seeking and usually self-righteous. The only people to gain from all that are those who want to do down democracy. The point of today's debate is to discuss the funding of political parties.

Noble Lords: Hear, hear!

Baroness Young: Noble Lords may well say, "Hear, hear!", because it is important. The alternative way to fund parties will be some form of state funding because nobody has reached any other conclusion. Of course, the report of the noble Lord, Lord Houghton, in 1976 recommended that there should be a certain amount of state funding but that was not taken up by the then Labour Government. There was a subsequent report in 1981 by the Hansard Society which took a slightly different line but, again, that was not accepted. The Nolan Committee is not looking into that matter because it is outside its terms of reference. There is now the latest report from the Home Affairs Select Committee which makes various recommendations about the funding of political parties.

It is just as well to rehearse the reasons why people are concerned about state funding of political parties. It seems to me that the most important reason is that it will undermine the voluntary principle in British politics. That is an extremely important matter. Voluntary organisations of any sort function when individuals contribute to them. Although it is useful to have some state money, once there is too much, the organisation ceases to be voluntary and becomes something quite different.

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It is very important that the thousands of people who contribute to different political parties should do so. That is the measure of the strength of democracy and it is one of the few measures which shows that democracy is still strong in this country.

Quite apart from that, many taxpayers would resent deeply paying taxes to parties with which they do not agree. Some would even feel that it was a waste of taxpayers' money to be spending it on political parties rather than on policies which they wished to see implemented. But there is no evidence that I can find that either controls on political contributions or state financing of political parties prevents political corruption. Indeed, in some countries where there have been elaborate systems of control and state funding, widespread allegations of political corruption have occurred. Therefore, there is no evidence that such measures improve matters.

The noble Lord, Lord Jenkins, very unfairly and unkindly attacked the Conservative Party and what it is doing. Therefore, it may be just as well to remind the House that in the financial year 1992-93, which is the last year for which there are full accounts, 70 per cent. of all Conservative Party income was raised in the constituencies. I am quite certain there is no one sitting on this side of the House who has not been involved in that activity many times over. Of the remaining 30 per cent., 60 per cent. came from companies. Those donations are subject to statutory disclosure under the Companies Act 1985 and it falls to the company, not to the party, to make that disclosure. Individual donations and direct mail make up the remainder. The fact that individuals choose to support a party is, after all, a matter of private choice.

I have been involved, as I am sure have all your Lordships, in a great deal of fundraising for many causes. No matter what the cause, there are always many individuals who wish to remain anonymous; and why should they not do so? We are free to give our money to the causes of our choice, but we do not necessarily want everyone to know that. I see no reason why that should not apply in party politics as in other areas of life.

It is extremely important to note that the Conservative Party has accepted the recommendations of the Select Committee, including its code of practice. Perhaps I should remind your Lordships of that because there seems to be some doubt about it. First, it provides that money does not buy or influence honours; illegally obtained money should not be acceptable and, if discovered to be so obtained, should be returned; substantial anonymous donations should be refused; donations from foreign governments and rulers should be refused; and benefits received in kind and income over which the party has control, such as sales and fund-raising events, should be itemised; and there should be published accounts and an independent audit.

Anybody who has been involved, as I have, for a long time in the Conservative Party, knows that at local level, where most of the money is raised, accounts are published and audited independently. Anybody is welcome to go to an annual general meeting and wade through them. There is nothing secret about that.

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I deeply resent the purport of what the noble Lord, Lord Jenkins, was saying; namely, that there are many people who are somehow conniving to defeat the system and who are taking bribes of one sort or another. There is no foundation whatever for that suggestion. The noble Lord has not produced a shred of evidence, but has just made a lot of unpleasant allegations which I think he should withdraw. I think that they are a disgrace.

One of the most dangerous aspects of politics nowadays is that such allegations are made unsubstantiated by any evidence whatever and they are then assumed to be true. In my view, that is one of the most dangerous things that is happening today.

Perhaps I may conclude by saying something about what I personally believe to be very important. One of the most significant statements made by the committee is:

    "We accordingly conclude that trust in the integrity of the party concerned must suffice and that there is no need for precise and binding rules to be laid down for the contents of a party's accounts".

Once there ceases to be a measure of trust in people, society becomes involved in a very dangerous position. Individual responsibility is undermined by suggestions that everybody is on the make in a way that I do not believe they are. If such unnecessary suggestions are accepted, they further damage democracy.

3.36 p.m.

Baroness Gould of Potternewton: My Lords, I too thank the noble Lord, Lord Jenkins of Hillhead, for initiating the debate. On these Benches we fully support the need for an independent inquiry into the funding of political parties.

Democracy depends crucially on the vitality and real and perceived integrity of political parties. The principle of transparency in the financial affairs of politicians and political parties should not be controversial in a mature democracy, and it is a great shame that it is necessary to have this debate today.

The Government argue that politics is a private affair; that donating to a political party is a personal matter; that disclosure of corporate or individual donations is not necessary. Politics can never be a private affair. Political parties are vehicles for political and social action and are for people who wish to effect change. A representative democracy cannot function well without political parties and political parties cannot survive well without money.

The aim of any independent inquiry would not be to prevent political parties raising money; it would be to ensure that it is raised in an open and democratic way. The Labour Party has made it clear that the Nolan Inquiry should have had the opportunity to look at how political parties raise their funds and there should not have been left the hole that was referred to by the noble Lord, Lord Jenkins of Hillhead. But we should not be surprised that that was resisted by the Government, considering that the Prime Minister, in response to a Question for Written Answer on 31st October on whether the Nolan Committee should look at political funding, gave a categorical "No", referring rather to the investigation by the Home Affairs Select Committee.

What was important and what worries me about the findings of the Select Committee is that the committee had to accept that there was a lack of openness and that

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that lack of openness feeds suspicion; that the current legal position is both unsatisfactory and unfair; that the electorate is entitled to expect accountability by political parties for their sources of funding; and that all parties should have an adequate level of funding consistent with their level of popular support.

As the noble Lord, Lord Jenkins, said, it would appear that it did not identify areas of cross-party agreement and rejected a number of key and fundamental factors which would have satisfied those anxieties. The committee's terms of reference included the question of state funding. I am sure that my noble friend Lord Houghton will elaborate on the detail of the 1976 Houghton Report, which is still the definitive work on state funding.

I shall confine my remarks to indicating that the Labour Party believes that there should be an extension of state funding, particularly in the area of political education. That might assist with some of the problems that the public currently experiences in understanding politics and politicians. It would not in any way detract from the voluntary principles mentioned by the noble Baroness, Lady Young, which are absolutely crucial.

The principle of state provision was introduced by the decision to draw up electoral registers, to fund political party broadcasts, to build into election law the production and distribution of polling cards, free post and the free use of public halls.

There is also financial assistance to Opposition parties in order to help them pursue their parliamentary functions; and the state provides an estimated £1.2 million to political advisers of Ministers. The question has been asked as to how far we wish to push that principle. An independent inquiry would help to solve that problem. There are questions that need to be asked and answered, which is why an independent inquiry is so important.

In 1989 your Lordships' House passed an amendment to equate the position of company donations with that of trade unions. That was unfortunately rejected in the other place. The Select Committee also saw no reason to change the rules. I should like to compare that situation with the accusations that are levelled at trade union support of the Labour Party. Those accusations have not been made, I hasten to add, by any noble Lord who has spoken today.

Pejorative and misleading statements have been made and they are used as a political ploy. The reality of the situation is that the affiliated trade unions are an integral part of the federal nature of the Labour Party. The monies that are received are subject to the established rules and are disclosed by the unions in their accounts and by the Labour Party. The often deliberate attempt to mislead ignores the fact that every delegate to conference—I am referring to 70 per cent. of the trade unions—must be an individual member of the Labour Party. Under the new rules every delegate will vote individually.

The open and above-board relationship between the Labour Party and the trade unions contrasts sharply with the obscurity of Conservative Party finances and the very limited regulations of company donations as compared with those applying to trade unions.

The political involvement of trade unions is more highly regulated than any other institution and is strictly supervised by the certification officer. The unions are

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required to hold a ballot to create a political fund, which is reviewed every 10 years, and members can opt out of that fund. They are required to have separate accounting. Union donations derive from decisions made by their members.

Company donations are subject to no such restrictions and, therefore, that is something that should be looked at. The only requirement under the Companies Act 1985 is that donations are post facto reported in the directors' report if they are over £200. There is no political fund; there is no reference to shareholders; there is no ballot; they do not have an opt-out facility and the donations are not recorded in Tory Party accounts.

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