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Lord Boyd-Carpenter: My Lords, if the noble Lord will allow me to intervene, I believe that he has misunderstood me. It was simply because that report was so full and excellent that I regarded it as a waste of time to have another.

Lord Holme of Cheltenham: My Lords, I am glad that the noble Lord said that because I shall remind the House of a few conclusions of that report and ask why nothing has been done.

One of the best ways of approaching these tricky matters is to consider what principles are involved. One of the conclusions of the Hansard Society report, and its successor report—it was a joint report between the Constitutional Reform Centre and the Hansard Society—

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was that large companies should seek the positive approval of their shareholders on a basis comparable with that which now exists for donations for trade unions.

It is interesting to note in parenthesis that most large companies are now giving up political donations. The arrangement is becoming less common; the trend is not to do so. Large international companies with headquarters in Britain increasingly do not make political donations. The reason sometimes appears in their statement of corporate ethics. Sometimes they do not do so because they do not wish to establish a precedent by donations in this country whereby every politician in every country in which the companies operate will solicit for funds. That is one of the reasons why multinationals on the whole do not make political donations.

Perhaps I may refer to the scheme that I should like to adopt, and outline the general principles. First, I shall refer to what an economist might call the supply side, then the demand side, and the process. By supply side I mean income donations. Let us consider what is involved in the supply side of the equation and what principles might be desirable. Perhaps some of those issues will find agreement across the House.

The first principle reiterates what the noble Lord, Lord Houghton, said. It would be in the interest of our parliamentary democracy at least to reduce institutional dependence. The second principle—I believe that it will find agreement—is that on the whole British people and British institutions should pay for British politics rather than foreign people and foreign institutions. The third principle is that democracy is healthier if there are many small donations rather than a few large donations. There are ways of securing that. In Canada, for instance, matching tax relief is given to gear up the donation of the small donor. Incidentally, if we go down the route of state funding—I have great reservations about that; I shall say a word on it in a moment—matching tax relief to small donors is surely an intelligent way to achieve that. It accelerates something that is desirable: participation in the process.

I believe that the massive subventions, for instance, in the Federal Republic of Germany have done great damage to its political system where virtually the whole of the political class is sucking off the teat of the state. If there were to be some state funding "in the mix", it would be far better for that to be achieved through the tax system. It would be an expansion of the principle of Short money: that money is applied, and meant to be applied, for parliamentary purposes.

Those are a few thoughts on the supply side. Let me now move to the demand side. What is the money needed for? We must not assume that the political parties necessarily should have vast sums of money. Why should they? What will they do with it? It is a striking paradox that we limit expenditure for constituencies, for good reasons. Those were introduced in Victorian times to stop the basic corruption and sleaze of people buying beer for everyone in the constituencies. Therefore we have constituency expenditure limits but no national expenditure limits. There is a very interesting book written about the Conservative campaign, I believe two elections ago, by a Mr. Tyler discussing the decision whether at the last moment to spend vast sums of money

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on advertising. The conclusion was that the money was spent but did no good at all. One of the questions that parties ought to ask themselves is whether they really need to spend tens of millions of pounds on general elections. That is what the money is raised for.

In this country we have one great boon and blessing compared to the United States, where every political office has a price tag on it and all those who stand for office know that they have to raise massive sums of money and are indebted for the whole of the time that they serve as a senator or congressman. The boon that we have is the inability of people to buy television and radio time. That boon is inestimable. It is one of the great merits of the British system. I have one question for the noble Viscount who will reply, one which I believe will interest him. It is whether in the new liberal and deregulated era of television, and extra-terrestrial television of one sort and another, he sees it possible to hold the line on the very important principle that people cannot buy radio and television time to fight elections.

To return to the nub of my thinking, we should have limits on national election campaign expenditure. There is no logical reason not to have it. People will object in this way. They will say, "What about the period running up to the election? In our system, where the Prime Minister can choose the date of the election and nobody else knows what it is, would not the governing party spend money in the period before the campaign, and therefore how could you limit it?". It would be perfectly easy to deal with that difficulty. It could be stated that expenditure during the campaign, and for three months or six months before, would be caught by whatever the limit was.

Finally, I said that I would talk for a moment about the process rather than the supply and demand equation. The key issue on process, one that the Hansard Society recommended and which I believe is unanswerable on democratic grounds, is that parties should declare the source and uses of their funds. It is an extraordinary anomaly that a party can organise itself to become the Government of this country, and is yet not subject to the basic reporting requirements to which every club, association and company is subject. I do not think that the voters, the people of this country, understand why it is that political parties are somehow special and should not have to present accounts which declare in full where they received their money and how they spent it.

I suppose that a case could be made that there are shy, shrinking violets who do not want their goodness revealed to the public. Then in that case, let us say that the report would relate to donations over £5,000. If the noble Lord, Lord Boyd-Carpenter, is right and people are giving because they believe—not because they hope for influence or access but because they believe in the cause of the party—then why on earth should they be ashamed of having their names revealed in the accounts? What is there to be ashamed of? Why should the issue of secrecy be allowed to outweigh the public interest; namely, for people to see in an open way where the money comes from, and what it is spent on?

Having tried, at great strain, to be relatively non-partisan—because I believe the issue of public interest to be important—I would mention one aspect that causes particular problems. As I understand it, one of the

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difficulties for the Conservative Party is that it is not in the fullest sense an identifiable organisation. There is the national union, there are Conservative MPs and there is the Leader. But the party itself is slightly difficult to get hold of. Is there a party? And if we were to say that accounts should be produced every year, what would be the party that produced them? I find myself thinking about this issue in the context of the most regrettable overdraft which I understand company opposite hold with the Royal Bank of Scotland. I understand that the sum is not unadjacent to £16 million. It is an extraordinary thing that a government committed to fiscal prudence should allow themselves to get into debt to the tune of £16 million. They must have an exceptionally friendly bank manager. The first thing that any bank manager I have ever come across says is, "I'd like to see your article of memorandum, your constitution and who the accountable officers are"; and that is quite apart from trivial matters such as security. So we must assume that the Government are very blessed in their banking relationships to be able to have such a massive overdraft.

In summary, three points are important if we want to keep our eye on the ball of public interest. First, there must be more small supporters of our political system, more individuals of modest means, fewer companies and fewer millionaires. Secondly, it is in the public interest that we reduce the limits on expenditure at elections. Thirdly, it is incontestable, particularly in the present atmosphere of reduced confidence, that we should open the system up to the light of day and to fresh air.

4.35 p.m.

Lord Beloff: My Lords, I find myself in the unusual position of agreeing with a great deal that was said by the noble Lord, Lord Holme of Cheltenham. I shall have to read Hansard to make sure that I got it right. That agreement does not, however, extend to the noble Lord, Lord Jenkins of Hillhead. I agreed only with his first sentence; namely, that there was a declining respect in the public at large in our political institutions, and particularly our Parliament. The trouble is that I could find no relation between that statement and any concentration on the subject of the financing of political parties.

On the contrary, I should think that one would have to look at other matters, unsusceptible to committees of inquiry, however powerful, such as the observed decline in the calibre of many Members of another place. Those who remember the Parliaments of the inter-war years know that they made many errors. But one has only to occupy one's seat in the Peer's Gallery in another place to see that they were a great deal better than much that is on offer now. Many reasons could be adduced for that. But the one that has not been referred to, although it is relevant in broad terms to the subject of our debate, is the growing influence and importance of political parties themselves—and in particular of their central organisations.

The Parliament that we knew, which grew out of changes in the 19th century, was a locally based Parliament. Members of Parliament either had their own financial resources or—and many great statesmen owe their origins to this—were in receipt of private patronage.

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It was possible to make one's way without the assent of whatever then corresponded to Smith Square, Walworth Road or Cowley Street.

On the contrary, it seems to me now that we have come to a pass in which political careers are largely dictated and determined by service to central political parties. There is a sort of apprenticeship, a ladder towards office and leadership, which is political in the narrowest sense. That would seem to me to be the case whether or not the political parties are supported financially in one way or another. My own hope would be that if there were to be changes—this is where I think I agree with the noble Lord, Lord Holme—they would be concentrated on assisting in the constituencies and on assisting individual Members of Parliament or those who wished to become Members of Parliament; that any change would not go to fill the coffers of the central organisations. Once they have power, the officials, executives, or whatever name they may go by in different parties—our three parties are so different in character and composition that it is very hard to talk about them in a single context—begin to feel the need to exert their authority.

We have at the moment a prime example of this in the Labour Party. It may or may not be a good idea that there should be more women in another place. But the idea that that should be achieved by forcing constituencies to nominate only women for winnable seats is a departure from democratic principle of any kind which would have horrified politicians a generation ago.

It must be enormously galling for someone who has fought his way up through active politics, let us say in a trade union or a local council—a genuine horny handed son of toil, which is what the Labour Party was meant to be about—to be replaced by one of the perfumed denizens of the salons of Islington. It is that kind of thing which makes me feel that we should be discussing not how we should get more money to political parties but how they should be deprived of it.

As for the way in which political parties raise their funds, in this case I do not share the strictures against the Labour Party. It is perfectly natural and sensible that the Labour Party should receive the bulk of its finance from trade unions. After all, it came into existence as the political arm of the trade union movement. It has no other rationale. It is impossible, and ought to be impossible, to distinguish between the trade union movement and the Labour Party, in the way that it is almost impossible to distinguish between Sinn Fein and the IRA. There are examples of organisations in which the overlap is fundamental. Therefore, I was very surprised to hear the remarks of the noble Lord, Lord Houghton of Sowerby, who appeared to believe that what was an asset to the Labour Party was in fact a handicap.

Turning to the Conservative Party, there appears still to be a measure of surprise that men of business consider that it is a good idea from time to time to give some money to the Conservative Party. Surely, that is a natural form of insurance. No businessman who had at heart the interests of his own pocket or his shareholders could possibly do anything but blench at the thought, let us say, of Mr. Gordon Brown as Chancellor of the Exchequer. Therefore, a small contribution, anonymous or public, to

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the Conservative Party is no different from any other form of insurance that a businessman might take out for any of the risks which the world of business normally entails.

To me, it is a perfectly understandable reaction. It used to be the case that other interests were represented. In Disraeli's time it was the landed interest. That has now shrunk, for all the efforts of Brussels to put more money into it. Parties are parties of interest. If they were not parties of interest, they would fade and die.

The problem for the party led in this House by the noble Lord, Lord Jenkins of Hillhead, is that it is not a party of interest. It is a party of individuals. Obviously, therefore, to raise finance or to get people to stand for office it depends upon exciting a degree of ideological sympathy. It is perhaps understandable that, with the wise exception of the noble Lord, Lord Holme of Cheltenham, the idea of a certain amount of state money should be appealing to a party of that kind. I keep remembering that, like the noble Lords, Lord Houghton of Sowerby and Lord Boyd-Carpenter, I was born under a Liberal Prime Minister. I want to see the Liberal Party, the party of my youth, retained for what may remain to me of this life.

So I am in favour of the parties going on. I see no great reason for asking that anything should be changed. The only thing in favour of having a committee of the great and the good, which would look at finance, is that, like all committees, there would no doubt be leaks from it. One can image the kind of leaks that would occur: the committee—it is said—has discovered that there is a body called the Transport and General Workers' Union, which appears to pay a great deal of money to the Labour Party; and so forth. The leaks would keep the press going and the committee could sail on its way, as the noble Lord, Lord Boyd-Carpenter, said, spending a great deal of our money but doing no great harm. There is something to be said for tying up those people who like to sit on committees and look into things to which, in the end, they can make no difference.

I do not know what, if any, Papers will be moved for at the end of this debate. I am in favour of letting the noble Lord, Lord Jenkins of Hillhead, have them.

4.48 p.m.

Lord Mayhew: My Lords, we on these Benches warmly welcome the support of the noble Lord, Lord Beloff. He introduced a new note in mentioning interests as basic to funds for the Conservative Party. Before he spoke we had a different picture of the average donor to the Conservative Party from the noble Baroness, Lady Young, and the noble Lord, Lord Boyd-Carpenter. We were introduced to the Conservative supporter who is a humble individual; one who wishes to see the party that he prefers flourish and succeed; and who does not want other people to know that he supports it. There must be many people like that.

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