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Lord Chelmer: My Lords, I should have made a speech but I am not well. Directors refer the donation to the shareholders and that appears on the agenda of the meeting. I gave evidence to the committee to which the noble Baroness referred as producing the standard work on this subject. With two exceptions that Committee consisted either of Labour Party members or trade union members.

I was a treasurer of the Conservative Party for 17 years. During that time no one person gave me any money in connection with some benefit that he or she might receive. One man—and it is greatly to his dishonour—entered into a deed to give me £1 million under certain circumstances, which I was not able to fulfil. When he died, on his gravestone he was still "Mr".

Baroness Gould of Potternewton: My Lords, I thank the noble Lord for his intervention. It is correct to say that directors report to their shareholders, but that is after the event and not before it; therefore they are not taking the decision. It was a matter of humour in the newspapers recently that the Labour Party turned down a proposed donation of £5 million because there were strings attached to it, and the Labour Party is not prepared in any way to allow strings to be attached to a donation in the way that has been mentioned.

There is no political fund and no reference to shareholders, no ballot and no opt-out facility.

Even this minimal requirement is rendered ineffectual by the provision that company accounts can take up to two years before they are lodged at Companies House. If shareholders were to challenge the decision of the directors, they would no doubt be defeated by the block proxy votes of the institutions.

Occasionally, however, voices can be heard. A donation by Thames Water of £5,000 to the Conservative Party before the last general election caused a major outcry and a considerable negative response from customers and shareholders alike. That raises the issue of whether or not there should be a period of time between privatisation and the ability to make donations.

A survey in the Sunday Telegraph of 7th May indicates that the boards of many of Britain's top companies are providing cash to alleviate the Conservative Party's overdraft, ignoring calls from active investors that donations be subject to shareholder approval. In the past five years that money has amounted to £10.85 million, with virtually all of it going to the Conservative Party or organisations that channel funds to it.

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However, there are indications of change. The Local Authority Pension Funds Forum, which covers 15 schemes, is stepping up pressure to make donations by boards subject to a shareholders vote. Local council funds are now drawing up a hit list of companies that make big donations but refuse to allow them to be put to the vote. The latest move comes from the GMB union which has launched a campaign to challenge that abuse of democracy.

Although I suspect that I know the reason, I should like to ask why the Government cannot accept that trade unions and companies should operate to democratic parallel positions. Why should there not be ballots of shareholders? Why should companies not have to establish a political fund?

The Labour Party has made it absolutely clear that all donations over £5,000 will be disclosed and that political parties should refuse any donations from individuals who are neither British residents nor British nationals. We shall take unilateral or bilateral action to achieve that aim.

The Conservative Party takes a different view, as did the Select Committee, which did not believe that a case had been made out for requiring disclosure of the identity of donors or see any reason for refusing foreign donations.

Labour Research, a trade union research organisation, in an analysis of Conservative Party funding, found that the fall in corporate donations to the Tory Party means that an ever increasing proportion of the party's funds come from undisclosed sources. The £2.5 million traced as donations represents only 27 per cent. of those shown in Conservative Central Office accounts.

Where do those mysterious donations come from? Some of them will be from foreign countries. Some have been identified as coming from individual supporters of the party. However, there must be many more that remain anonymous. Those donations certainly do not come from cheese and wine mornings.

It is interesting to note that the figure of £7 million that the Labour Party received from trade unions is exactly the amount which foreign bankers are reported to have donated to the Conservative Party before the last general election.

Another matter of particular interest are those areas raised by witnesses to the Home Affairs Committee, but which were not followed through in either the conclusions or the recommendations. They include, for example, the question of offshore accounts, donations from privatised utilities, the role of Ministers as fundraisers while on ministerial visits abroad, or the use of Downing Street for fundraising events. If the allegations raised are correct, surely there should be rules governing such ministerial conduct. If they are not, then we really ought to have an independent inquiry to prove that that is the case.

It is also surprising that the Select Committee failed to address the question of a national, maximum expenditure for elections—first, because it is the time of increased activity in fundraising and expenditure by the political parties; and, secondly, because it has been the subject of a considerable number of studies.

In 1991, following a consultation initiated by the then Home Secretary, of which I was part, the Home Office said that all parties, with the exception of the

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Conservative Party, agreed that consideration should be given to a system of controls on national expenditure. The arguments against are that it would be difficult to monitor and difficult to control; it would also be unavoidable to give political parties statutory existence which they at present lack. However, I would ask: what have the Government to fear from the registration of political parties? Is it that it would be easier to introduce financial controls and procedures for disclosure of both income and expenditure?

Finally, all those issues remain outstanding, are a source of concern and need to be addressed; and addressed by an independent inquiry unfettered by ideological interests. The lack of transparency and unequal distribution of party funding undermines the democratic process and it reduces the confidence and trust of the electorate in the political system. Is it not in the best interests of all political parties, and perhaps especially those of the Government and the Conservative Party, to support an independent inquiry and some further form or measure of state funding?

3.52 p.m.

Lord Rodgers of Quarry Bank: My Lords, the Motion before your Lordships' House is quite explicit: it calls for an independent inquiry, neither more nor less. Therefore, there is no need for anyone to rehearse the convictions held by some of us that a strong case has already been made out for such funding; nor, for that matter, to endorse the strictures, elegant and balanced though they were, of my noble friend about the present position. The only need—and I thought that it was put very well by the noble Baroness, Lady Gould, in her closing remarks—is to recognise that there are issues to be discussed and examined. I should have thought that enough has been said already in today's debate, and certainly more will be said before it is closed, to justify the argument that something should be done. My noble friend said that there is plenty to inquire into. Moreover, whether it was said in the speech made by the noble Baroness, Lady Young, or in that made by the noble Baroness, Lady Gould, or, indeed, whether it will be said in the following speeches, the issue is there. It will not go away. Therefore, why not examine it now?

The noble Baroness, Lady Young, started her speech with a very spirited and partisan attack on my noble friend, which she was entirely free to do. At the end of her remarks, she returned to a rather partisan defence of the status quo. However, in between those two stages, the noble Baroness referred to a consensus and used the word "denigration". I have to say that I do not believe that there is a consensus, unless, of course, the noble Baroness would like to explain herself further.

I believe that the noble Baroness was arguing that the problem with which those in public life are faced today is entirely external to performance. In other words, it is something thought up by the press: it is a deep worm in the wood of society which makes people sceptical about all institutions. Of course, we recognise that social change means that institutions must be examined. If Parliament cannot accept that fact then who can? In my view—and this is where I certainly depart from the noble Baroness, Lady Young—we have brought that, at least in part, upon

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ourselves. Therefore, to pretend that no problem exists is simply a form of self-deceit. I see that the noble Baroness wishes to respond. I give way.

Baroness Young: My Lords, I am much obliged. I entirely agree with the noble Lord's interpretation of much of what I said. However, the serious point that I was making is that, so far as concerns the public perception of Parliament, what actually goes on—the real work of Parliament, the hard slog on legislation in Committee, and so on—never gets reported and is not heard of. Therefore, the picture which people have of parliamentary life is neither a complete nor a full one.

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