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Baroness Young: My Lords, perhaps the noble Lord would be good enough to give way. I should like to make an important point. Seventy per cent. of the money that comes to the Conservative Party comes through the constituencies and, I can assure him from many years of personal experience, from a lot of people of relatively small means.

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Lord Mayhew: That may be true between elections, but not at a general election at all. We should not argue about this. We entirely agree about the individual contributions of a man who supports the Conservative Party but does not want anybody to know. He has a right to privacy. There are probably increasing numbers of people like that at the present time. However, if the size of the donation increases sufficiently, there comes a time when the donor's right to privacy comes into conflict with the elector's right to know.

I do not know where that precise point comes. My noble friend mentioned the sum of £5,000. In my view, in a healthy democracy, any donation of a five-figure kind, either to a political party or to the private office, party leaders, an MP or a Peer, is a matter which should be in the public domain.

What is more, there is another picture, which has not been mentioned, of the donors to the Conservative Party. We might contrast the picture given by the noble Baroness, Lady Young, with the description which I read a few days ago in the Sunday Times, written by a former editor:

    "We now know, thanks to the investigative reporting of this newspaper, that the governing party has been at various times secretly bankrolled by a nefarious collection of foreigners, from dodgy Greek shipping millionaires, to shady Arab middlemen, to dubious Hong Kong tycoons, to fugitive Cypriot business men".

Those people are donors to the Conservative Party and we know about them not because the Conservative Party told us, but simply because their rather energetic efforts of secrecy have broken down. For example, we know that Mr. Asil Nadir paid £440,000 to the Conservative Party, not because it appears in the party's accounts, but because the tell-tale cheque stubs were found by the Fraud Squad during its investigations. Is that the kind of secrecy which noble Lords opposite support? It seems impossible to me.

I venture to ask something of the noble Viscount. We know that he will not tell us the names of donors; we know that he will not tell us how much the donations are; but perhaps he will tell us what proportion of major donors to the Conservative Party are wanted by the police. That would help. It may take him a little time to work out but we should look into that. It is not a matter of indifference. Whether or not Mr. Asil Nadir contributes huge sums to the Conservative Party is not a matter for secrecy. The electors are entitled to know. Indeed, in relation to Hong Kong businessmen, important tycoons such as Mr. Li Kashing and Mr. See Sin Tong are major donors to the Conservative Party.

The Conservative Party says that that is no affair of the British electorate; that it is no affair of the Hong Kong electorate or the Hong Kong Government. It does not matter that those people are critics of the government and members of the shadow government for Hong Kong which the Chinese Government prepared. That is also part of the problem to which noble Lords opposite have not addressed their minds. But it is a matter of grave importance. The Government are incapable of taking decisions without affecting vast companies and huge interests of that kind in one way or the other. As the Conservative Party keeps the whole question of donations secret it is not possible to judge whether a government decision is taken strictly on its merits or because of warm feelings towards a major donor. The donations are secret

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and in my view that situation is quite improper and must be reformed. We know that some donors to the Conservative Party have gone sadly unrewarded. For example, the poor Al Fayed brothers.

Lord Boyd-Carpenter: Poor?

Lord Mayhew: My Lords, they were not even asking for a peerage or a knighthood; they were only asking for British citizenship. One would have thought that they had earned it. But no, presumably the Conservative high-ups thought the donations were not high enough or well enough concealed, so they go without. To achieve results donations to the Conservative Party should be not only large, but also discreetly advanced.

I have a question in relation to the Labour Party. Labour Party members will agree that if substantial donations to a political party should be made public, so also—even more—should substantial donations to the political work of individual political leaders. That goes without saying. Noble Lords may remember that many years ago eyebrows were raised when it was revealed that the private office of the late Lord Wilson was being bankrolled by a secret trust. I know that Mr. Blair, Mr. Brown and Mr. Cook are fully aware of the need for complete openness about the Industrial Research Trust in which they registered an interest. In my view they would be wise to let the public know the names of the trustees and major donors, and also of another institution called Common Campaign Limited.

However, it is the secrecy surrounding donations to the Conservative Party which is rightly the main focus of public concern. Secrecy is the mother of sleaze, which is the mother of corruption. That has been the experience of Italy, France and many other countries. While the Conservatives stick to their doctrine of secrecy at all costs, that experience may spread to this country as well.

4.55 p.m.

Lord Hooson: My Lords, reference has been made today to the fact that parliamentarians, political parties and politicians generally are in disrepute. One of the reasons for that, in addition to those suggested by the noble Lord, Lord Beloff, is that our political system is so partisan. I have said this about the legal system and I say it about the political system. The essentially adversarial system that we follow in both spheres has outlived its usefulness.

The general public is amazed that intelligent people cannot find consensus to resolve many of the acute problems that face our country today. That is why I say, in response to the noble Lord, Lord Boyd-Carpenter, that it is right to raise this subject here. Whether there are overtones or undertones of partisanship in this debate, they are as nothing compared with what would have been raised in another place. Of course, if effective action is to be taken, it must be taken in another place. But this is the right forum to ventilate feelings and have a slightly more detached debate than would be available in the other place.

I shall not go over the arguments about the present funding system, save to say I cannot understand why any party could possibly object to insisting that every

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contribution to a party over a certain sum should be disclosed. I entirely agree with the noble Lord, Lord Boyd-Carpenter, and his noble friend Lady Young that probably the majority of contributions to the Conservative Party come from individuals who are voluntarily contributing. I accept totally that it is probably true that the Labour Party has more individual contributors today than it has ever had in its experience. But why should contributions of the size about which we heard from my noble friend Lord Mayhew not be disclosed to the public? There cannot be a case for that at all.

Likewise, I do not believe that a public company, in particular a privatised public utility, has the voluntary sense to which the noble Lord, Lord Boyd-Carpenter, referred. It is investing in its own public interest, as it sees it, and it is wrong that it should do so. I would incline to ban all contributions from publicly accountable companies.

I want to make, briefly, the case for change. Political parties play an essential role in a democratic society, though I agree with the noble Baroness, Lady Young, that they receive much ill-informed abuse, as do all parties. It was in 1872 that Disraeli said,

    "I believe that without party, Parliamentary Government is impossible".

I agree with that. Over the past 25 years or so the responsibilities of political parties have increased dramatically both with the expanding politicisation of local elections, which I personally deplore, and the advent of European elections. If we have elected assemblies in Scotland and Wales that would also add to the responsibilities where they come into existence.

The need for efficient and adequately funded political parties has never been greater. None of the political parties, including the Conservative Party in Britain, has sufficient income to perform all its responsibilities adequately. The strain on resources is aggravated by the fact that political costs have risen far faster than inflation. The traditional solutions of a membership drive or seeking greater support from institutional backers, produce patchy and sometimes highly risky results and divert the attention of party workers from more important matters such as policy formulation. It is also in the nature of such funding to be erratic, while many of the administrative costs of running a political party are fixed costs.

The most immediate consequence of inadequate funding is that staffing levels are too low and that those who are on the payroll tend to be overworked and underpaid. I entirely take the point made by the noble Lord, Lord Beloff, that in fact political parties at headquarters have become too strong. In many ways I would far rather see any state finance advanced to the parliamentary parties and possibly into the constituencies, rather than to the headquarters.

The cost to the British people of the underfunding of political parties is either seen in avoidable mistakes made by every incoming administration because it has not prepared sufficiently—there is a lack of detail in policy, and so on—or in the excessive dependence of Ministers on the Civil Service for advice on policy.

The advantage of state subsidy in some form is that we would have more competition because state funding of political parties should lead to more and fairer

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competition. However, equality of electoral opportunity can only be achieved if the mechanism chosen for such a scheme includes safeguards against a misuse of power by the governing party.

Both the Labour and Conservative Parties would be freed from institutional dependence, either completely or at least to a large extent. It is the extent of the dependence which is the fear. That is the governing fear exercising the minds of the public at the moment in relation to the Conservative Party. There is nothing wrong with the principle of interest groups financing political parties provided that the payments are made transparently and voluntarily, with the proviso that public limited companies do not indulge in it at all.

There is no evidence in this country that payments made by interest groups are generally made with a view to a specific quid pro quo. I do not believe that we are that kind of country. Naturally, for example, business has, rightly or wrongly, traditionally expected a general bias in its favour from the Conservative Party. Similarly, the trade unions quite naturally expect a natural bias from the Labour Party when it is in government. Thankfully British politics is free of the corruption endemic in many countries around the world. However, what also matters is the appearance that such sponsorship generates. Parties should feel completely free to act independently and to be seen to have such freedom.

Perhaps I may take the position of the Prime Minister in the "winter of discontent". He was faced with the enormous problem of his financial backers indulging in the most irresponsible behaviour. He was leading a government that was largely financed by the very unions who were causing the trouble. Therefore, stability of income would be very important because a system of party political subsidy would ensure that income would not fluctuate wildly with varying economic conditions and with the ebb and flow of a party's political fortune. Also, party leaders would not have to waste their time attending fundraising events when they could employ their time more fruitfully elsewhere.

Perhaps I may now refer very briefly to the drawbacks of state funding because there are, admittedly, drawbacks to a system of public funding of political parties. It could maintain current parties in existence after their support had long diminished. It could lock out new or emerging parties and most systems have a bias towards the status quo. However, all these defects can be mitigated or avoided by the careful construction of the system.

I refer very briefly to foreign experience. In the past few years there have been not only reports in this country. There was a report from the Council of Europe on the financing of political parties in 1989. There was a list published in the House of Commons Hansard of 17th July 1990 at col. 496, with the information then available of funding in different parts of the world. There was the Congress Report prepared by the staff of the Law Library of Congress in 1991 on Campaign Financing of National Elections in Foreign Countries. There was the European Parliament report called The Funding of Political Parties in European Community Member States in 1991. The Home Affairs Committee published in one of its indices in its second report in House of Commons Paper 301, a list of 19 countries, including three Commonwealth

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countries, 13 European and an additional three elsewhere, of the funding arrangements in those countries. So the problems are not special to this country, but in every democratic country in the world at the present time.

I suggest to noble Lords that whatever partisan background we have—and it is natural in our democracy that we indulge in it—nevertheless there is a case for consensus here. There is a case for an inquiry no doubt developing from a report made 20 years ago by the noble Lord, Lord Houghton. I read that report 19 or 20 years ago and I cannot recall its precise terms now, but it was a very important report. It is in the interests of all parties to investigate this matter now and to see whether a more sensible arrangement can be achieved.

At the end of it all I say that the bulk of support for any political party should come from the individual subscriptions of those who believe in the policies of that party. But that is not to say that there is not a very good case now for investigating the importance of a state contribution at certain levels.

5.7 p.m.

Lord Harris of Greenwich: My Lords, the Prime Minister announced on 25th October the establishment of the Nolan Committee of Inquiry. In the course of the Statement he made in the House of Commons he said,

    "It is important that the public have confidence in our system of public administration, our methods in making public appointments, the conduct of people in authority and the financial and commercial activities of public figures".

He added:

    "In the present atmosphere, there is public disquiet about standards of public life, and I have concluded that action is imperative".—[Official Report, Commons, 25/10/94; cols. 757-8.]

Yet it now appears, as we all know, that the one area in which there is most clearly public disquiet about standards in public life is not to be investigated by the noble and learned Lord's inquiry. That is the subject of the debate initiated by my noble friend Lord Jenkins of Hillhead. As a result of the fierce opposition of Ministers, the issue of the manner in which political parties raise their funds will not be examined by this committee until certainly the next general election.

The Leader of the House who will be replying in a few moments is, I believe, required to justify that decision by his colleagues. He can hardly deny that there is public disquiet. Indeed, it would be remarkable if he made any serious effort to attempt to do so.

Let us consider what has been revealed in recent months and years. First, it has been estimated that between 1984 and 1992 there were £71 million of unexplained donations to the Conservative Party. If the object of the exercise is, as the noble Lord, Lord Beloff, told us a few moments ago, to deny money to central party headquarters, he must, I am sure, be disappointed that quite such a large sum was raised during that period for the party of which he is of course a member. No one knows, of course, from where that £71 million came; the exception being a small group of people at Conservative Central Office in Smith Square.

One of the people excluded from having any knowledge was Mr. Eric Chalker who was a member of the Conservative Board of Finance between 1989 and

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1993. He told the Home Affairs Select Committee of another place that while members of his board received a partial breakdown of donations by UK region, value and number, more complete information was kept from him. He added that when press reports were published of specific and very large individual donations, including some from abroad, he asked the chairman of the Conservative Board of Finance for detailed information. Despite the fact that he was a member of that board of finance he was denied that information.

Secondly, we have the revelations concerning the Conservative Party's offshore bank accounts. Mr. John Strafford, another former member of the Conservative Board of Finance, said in a letter to The Times:

    "everyone is now clear that the Conservative Party uses offshore accounts ... and that a large amount of funds raised on behalf of the Conservative Party goes into accounts which are not in the name of the party".

The noble Lord, Lord McAlpine, a former treasurer of the party, is quoted in the minority report of the Home Affairs Select Committee as saying on ITN that the party had tons of offshore accounts. Before the debate I wrote to the noble Lord, Lord McAlpine, indicating to him that I proposed to refer to him. I am sure that many of us are deeply disappointed that we have not had the good fortune of having the noble Lord assisting us during the course of the debate.

We then come to the consequences of that climate of secrecy. As the result of the investigations of a number of national newspapers, and due also to disclosures in the civil and criminal courts, we have begun to learn of the identity of some of the donors of party funds. There is for instance Mr. Octav Botnar, a former head of Nissan (UK) who channelled donations of £150,000 through an offshore account in Jersey. Mr. Botnar is now wanted in this country on allegations that he was involved in large-scale fraud. However, he is presently resident in Switzerland, and showing no immediate sign of being anxious to return to the UK.

There is then Mr. John Latsis, a Greek shipowner, associated closely with the military regime which destroyed democracy in Greece—a regime which, as the House will recall, thought it appropriate to torture its opponents. He is said to have contributed £2 million to the Conservative Party.

There is also, as my noble friend Lord Mayhew mentioned, the Hong Kong connection. A number of very large donations have been reported in the press as coming from named individuals. That is a matter which should awaken some interest in us. That indeed no doubt explains why no fewer than 14 Ministers of the Crown who travelled to Hong Kong on public business and at public expense took time off while in Hong Kong to involve themselves in political activities, including fund raising.

The noble Lord, Lord Boyd-Carpenter, is worried about keeping down the level of public expenditure. It might be a good idea if the Conservative Party repaid some of the assets of those gentlemen to the taxpayer who had the privilege of financing those trips to Hong Kong.

I come now to a number of other cases which have attracted a fair degree of public interest. First is another case referred to by my noble friend Lord Mayhew—Mr.

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Asil Nadir, the former head of Polly Peck, a fugitive from justice who fled to northern Cyprus while awaiting trial on charges of theft and false accounting. As has been indicated, cheques of £440,000 were sent by Polly Peck to the Conservative Party between 1985 and 1990. None of them appeared in the accounts which were submitted by Polly Peck. In addition, further donations were sent by Mr. Nadir to overseas firms, presumably using some of those offshore accounts.

There is also the case of the Fayeds, to which my noble friend Lord Mayhew again referred. It is unnecessary to go through that but it seems to be a matter of some passing interest. I assume that the Conservative Party would not have received money from those gentlemen if it had any doubts about their moral character. That being so, it makes it even more puzzling that they have apparently been denied British citizenship by Ministers who belong to the same political party which was perfectly prepared to accept their money.

There is then the question of political honours to which my noble friend Lord Jenkins of Hillhead referred. That was dealt with in the report of the Home Affairs Select Committee. When the noble Baroness, Lady Young, referred to that report, if I may say so, a slight note of reverence crept into her voice. It was as though the Home Affairs Select Committee of the other place was a cross between the Appellate Committee of your Lordships' House and the United States Supreme Court. Unhappily, it was not quite like that, as my noble friend Lord Jenkins of Hillhead pointed out. The report was passed by that committee only on the casting vote of the chairman.

In the course of that report—my noble friend referred to this, and I hope that the noble Viscount the Leader of the House will reply to the point—comes the comment made by Lord Shackleton, a distinguished former Leader of the House who was of course chairman of the Political Honours Scrutiny Committee. He referred to secret donations to Conservative Party front organisations which he indicated could enable honours to escape scrutiny by that committee. He is quoted as saying:

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

That in my view requires a specific reply from the noble Viscount the Leader of the House. There is no way a charge of such gravity from a former chairman of the Political Honours Scrutiny Committee can possibly be ignored.

The cases I have raised this evening demonstrate an overwhelming argument for an independent inquiry into the fund-raising of all British political parties. I would emphasise, of course, all political parties. I would find it hard to believe that anyone who has been involved in any way to any significant extent in the management of British political parties over the past 35 years or so could possibly suggest that they had never received a donation which, looking back on it, made them feel altogether at ease. The difference between us in this House is a clear one. The opposition parties believe that there should be an independent inquiry, and Ministers are determined that there should not be. Given the sort of evidence that has been put before the House this evening, it is fairly obvious why they take that view.

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Yet if the Prime Minister is genuinely concerned about the level of public disquiet, and about standards in public life, as I am sure he is, how can he possibly believe that that will be diminished without an examination of those issues by the Nolan Committee? Consider, for a moment, the views of a distinguished member of the Conservative Party, and former Leader of the House, Mr. John Biffen, who said:

    "In the present mood of scepticism about British politics the Conservative Party should open its financial books and demonstrate that its accounts are not padded by big business and shady entrepreneurs".

In my view, that is absolutely right.

That being so, what is the Government's case against an independent inquiry? First, we have the noble Lord, Lord McAlpine, writing in the Independent, that in Britain people have the right to give money privately to the political party of their choice. He also stated that to change that would be an affront to democracy. That sounds a little odd because today we are talking not only about the rights of British people to give their money away privately but about the rights of foreign companies and individuals from outside this country to make secret donations into offshore accounts held on behalf of the Conservative Party. Those money are not even disclosed to their own central boards of finance.

Secondly, there is the claim of the noble Lord, Lord McAlpine, that to introduce transparency would be an affront to democracy. Perhaps on this occasion the noble Lord has been guilty of a slight degree of exaggeration. I suspect that it would be a matter of surprise to the United States to discover that it had apparently connived at just such an affront to democracy, because there all significant contributions to campaign funds must be declared. And why? It is because of the scandals of the past; because of the consequences of secret donations to candidates for public office, which affects the integrity of public life. What is true of the United States is true of every advanced industrial nation in the world.

All I say in conclusion is that an inquiry on the lines suggested today is inescapable. The Government should be under no illusion that ultimately an inquiry will take place whether they want it or not. As my noble friend asked at the outset of the debate, why do they not just for once behave with good sense and allow the Nolan Committee to undertake its work forthwith?

5.22 p.m.

Lord Richard: My Lords, we have had an interesting and on occasions entertaining debate. I greatly appreciated the contribution of the noble Lord, Lord Beloff. It reminded me of a report that I once had when I was studying biology at school. I was not a good biologist and at one stage I received a report which read, "Sets himself a lamentably low standard and rarely manages to attain it". I received a subsequent report which came to my mind when I heard the noble Lord, Lord Beloff. It read, "As an entertainer he is much appreciated by the form, but as a biologist I fear that his work is somewhat negligible".

The noble Lord, Lord Beloff, entertained us greatly and I enjoyed it. However, it is interesting to note that the one issue to which he did not refer was disclosure. According

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to the noble Lord, everything in the garden is lovely and we can get people to beaver away on things that do not really matter. But the one issue more than any other single issue with which the debate has dealt has been disclosure. On that the noble Lord, Lord Beloff, was silent.

I fear that I shall upset the noble Baroness, Lady Young, who was upset by what was said by the noble Lord, Lord Jenkins of Hillhead. I fear that I may do the same. My noble friend Lord Houghton made a remarkable speech. His report is now some 20 years old and it may be that all we need to do is to reinstate the Houghton Committee and give it powers of revision and the job will be done. That is one possibility but I have no doubt whatever that at some stage the job will be done. There will be an inquiry and as a result there will be greater transparency in relation to the funding of political parties in this country.

Let us first see whether we can agree about anything and then see where we disagree. Broadly, we can accept the terms of the Motion. There is a case for an inquiry of some form into the present arrangements for the funding of political parties. I am open as to the precise nature and scope of such an inquiry, but I have no doubt that one should take place.

I believe that everyone can agree with two basic propositions. First, that anyone in our democracy should be able, if he wishes, to participate financially as well as practically in the working of that democracy. In other words, people should be perfectly entitled to support political parties if they so wish. But the corollary of that argument is that the support should be given in such a way that it does not call into question the integrity and validity of the very political process that is being participated in. Therefore, the second proposition, which I suspect not quite so many people will accept, is that that participation in the political process, if it is of any major kind, should be publicly acknowledged and therefore transparent.

I believe that the present system is flawed in that, first, those who participate are not always stakeholders in our democracy. Several noble Lords—and in particular the noble Lords, Lord Harris and Lord Mayhew—have had something to say about foreign participation and foreign donations to the Conservative Party. I do not propose to go over that ground again. However, I believe that there is an inherent danger in having major contributions to a political party from people who do not have a basic interest in our democracy. The danger is that they are not participating in the democratic process but are buying government policy. I hope that most Members of this House will agree that that is wrong.

Secondly, the system is flawed because it is not transparent and it is therefore not accountable. I can see no reason why that should be so. For the sake of precision, perhaps I may state precisely the Labour Party's position on the matter. I shall quote from the text which was part of the Labour Party's evidence to the Nolan Committee. We stated that we were in favour of:

    "a new regime for the funding of political parties to include: full disclosure of their accounts".

I hope that that deals with the point made by noble Lords on the Liberal Democrat Benches. The new regime should also include:

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    "proscriptions on overseas and large secret donations; limits on election spending at national as well as constituency level; new requirements for shareholder agreement, and contracting out, in respect of donations by companies".

I have listened to the whole debate but I have not heard one word from the other side that is capable of justifying the situation, which my noble friend Lady Gould set out at the beginning of the debate. It is that a trade union donation must go through a whole series of hoops which are designed to ensure, first, that the members of the trade union are in favour of it, because the political fund must be set up after a ballot and, secondly, that the donation is public and everyone knows about it. I heard from the other side not one word of justification that trade unions should be under those burdens but companies should not. Why on earth not? Why should not the shareholders of a company have just as much right to know what the company is doing in relation to the political activities of that company as a trade union member has the right to know what his leaders are doing in relation to his trade union's political activities? There exists a basic unfairness which ought to be dealt with.

As regards transparency, what is the position of the Conservative Party? I can give many figures, some of which are well known. Some of them have had to be ferreted out from perhaps 150 or 200 different company accounts. We can trace donations of £2.51 million to the Conservative Party in the financial year ending March 1994. From the latest accounts for Conservative Central Office, we know that donations from companies and individuals totalled £9,372,000 in the financial year ending March 1994. One knows where £2.5 million came from but one does not know where the remaining £7 million came from. Therefore, we can account for about 27 per cent. of what the Conservatives have revealed as donations and contributions. That compares with being able to account for 36 per cent. in 1991, 54 per cent. in 1990 and 52 per cent. in 1989. Therefore, there is a shortfall. In a democratic society I do not think that it is unreasonable to ask the Conservative Party where that money has come from. People know where Labour Party cash comes from and they also know that in relation to the Liberal Democrat Party. It is not unreasonable to demand the same degree of transparency from the Conservative Party. Otherwise, there is bound to be suspicion as to the way in which the money is obtained; secondly, the way in which it is used; and, thirdly, the pay off for those people who are making contributions.

I have managed to extract some figures of the top 10 corporate donors to the Conservative Party to date. I shall merely give the list and your Lordships can draw the necessary conclusions. At the top of the list is United Biscuits which donated £1,004,500—one peerage and one knighthood went to the leaders of United Biscuits; Hanson donated £852,000—two peerages; Taylor Woodrow £837,362—one peerage, one knighthood; British & Commonwealth donated £823,560—one peerage; George Weston Holdings donated £820,000—no peerages and no knighthood but I am told that he is Canadian and is therefore not in this country; P&O donated £727,500—one peerage, three knighthoods; Western United Investment donated £620,900—no peerage but the noble Lord, Lord Vestey, is with us

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already; Glaxo donated £600,000—two knighthoods; and Trafalgar House donated £590,000—one peerage, one knighthood.

It may be that if I were a man with a suspicious mind, I should think that there might conceivably be a causal connection between one side of that balance sheet and the other. But being the generous-minded, naive individual that I am, who, after all, has only been involved in British politics for some 35 years, I am quite prepared to accept that all those who came to this House from the list that I have just read are well qualified and would have come to this House had they been giving donations to this party or the party of the noble Lord, Lord Jenkins of Hillhead. I am quite prepared to accept that all those who received knighthoods received them because of the shining qualities of their characters and that it had nothing whatever to do with the fact that their cheques arrived on that side of the House rather than any other.

Of course I am prepared to accept that, as is the noble Lord, Lord Jenkins of Hillhead; and even his suspicious colleague the noble Lord, Lord Harris of Greenwich, might be able to accept that. But I can tell the House that the general great British public does not accept that and does not believe that that is pure coincidence. That rubs off not only on the party opposite, which frankly I do not really care about, but it rubs off on all those who are engaged in politics. If sleaze is pouring over that party, some of the stench unfortunately falls on the rest of us.

Therefore, there is a problem which needs to be solved. The present position is not satisfactory; it is unreasonable. Question-marks are raised over the way in which the governing party of this country raises its money; where it comes from; and what is the pay off for the people paying it. In those circumstances I believe that the demand for an inquiry is more than thoroughly justified.

5.33 p.m.

Viscount Cranborne: My Lords, like the noble Lord, Lord Richard, I too am extremely grateful to the noble Lord, Lord Jenkins, for introducing what we can all agree has been a useful and important debate.

In passing I must say to the noble Lord, Lord Richard, that for a man who tells us that there is inadequate transparency in the matter that we are discussing today he seems to be remarkably informed. Indeed, I should say to him further on the question of honours that it might be worth asking himself a further question in all his innocence and mere 35 years' experience; namely, what is the contribution to the national prosperity made by the names that he has read out? Indeed, I go so far along the road of the advocacy of the Liberal Democrat Party that when I return to this matter I shall not do so on a sheet of lavender writing paper.

We can all agree about one matter. The noble Lords, Lord Jenkins and Lord Holme, my noble friend Lady Young, who made a remarkable speech, and even the noble and learned Lord, Lord Nolan, agree that the authority and respect for MPs and all those who take part in British political life has increasingly been called into question in recent years. Therefore, it seems to me that a vacuum of authority has begun to appear and people like

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the noble Lord increasingly turn to one source to fill it. That source tends to be one-headed and composed of the great and the good.

It is as though we are beginning to live in a rather crude neo-Platonist age in which the country relies on a race of disinterested guardians to resolve matters of ethics, government and public morals. I have noticed that the Liberal Democrat Party is particularly addicted to that approach, as we have heard this afternoon. Not so long ago, a much higher proportion of those matters would have been decided by Parliament, often with the guidance of the Church, although that is less fashionable in places other than your Lordships' House. Those guardians may nominally report to government or Parliament but my, how the press howls if an individual or institution dares to reject those recommendations.

Now, of course none of that means that I do not have the greatest respect for the great and good, or indeed that I hold that inquiries conducted by the great and good are not often useful. However, like my noble friend Lord Boyd-Carpenter, I hold that we must be careful in general that inquiries conducted by committees, however eminent, do not become so much of a habit that they begin to usurp the proper functions of Parliament. That danger became all too apparent in the 1960s when the government of which the noble Lord was such a distinguished member, in their desire to avoid taking a decision about anything, spawned Royal Commissions like a rabbit on the South Downs. I am glad to say that my noble friend Lady Thatcher and my right honourable friend the Prime Minister have resisted that temptation to the great benefit of the common weal. We should be especially careful to preserve the role of Parliament when addressing matters that concern the nature and organisation of Parliament itself and of those who organise the sending of Members of Parliament to Parliament. In our system the funding of political parties is surely and emphatically such a matter.

So, if the inquiry which the noble Lord is calling for is a Select Committee inquiry by either House of Parliament, of course I have no objection in principle to what he advocates. If, on the other hand, he is advocating the appointment of a commission of neo-Platonist guardians—and I collect from what he has said this afternoon that that is what he has in mind—then in principle I am against him for the reason I have just given.

Even if the noble Lord were advocating a Select Committee inquiry, I am not sure that I could support him at this moment. It might not be a wholly suitable subject for a Select Committee of your Lordships' House, although I am open to persuasion on that score; but even if it were, a Select Committee in another place produced a thorough report on this very question as recently as 16th March 1994, as my noble friend Lady Young pointed out. We try, as your Lordships know, not to duplicate the work of Select Committees in another place in this House—and, of course, as my noble friend Lord Boyd-Carpenter pointed out, even on such an important subject as this, it may be a little much to expect from another place an annual inquiry of this kind.

Nevertheless, I am aware of the suggestion from some quarters that the noble and learned Lord, Lord Nolan, and his committee should undertake an inquiry on this subject

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as part of its next phase of work. As the House will know from answers I gave after my Statement to the House on 25th October last, my right honourable friend specifically excluded the funding of political parties from the noble and learned Lord's remit. The noble Lord, Lord Jenkins, cross-questioned me most assiduously on the subject. For the reasons I have given noble Lords this afternoon I continue to think that my right honourable friend was right to do so. The more we undermine Parliament's ability to regulate matters which most closely concern it, the more we lessen the authority of Parliament and the respect in which it is held. It is for that reason that I was relieved to read the recommendation of the noble and learned Lord, Lord Nolan, that his parliamentary commissioner for standards should report to a sub-committee of another place rather than be independent and free-standing with no responsibility to Parliament or another place.

Nevertheless, I recognise what motivates the noble Lord in initiating the debate. His concern above all is to try and ensure that the votes that elect Members of another place are secured in as unbiased and equitable a fashion as possible. I and the entire House would expect no less from the noble Lord.

Furthermore, I am sure that in the present atmosphere, when allegations about standards in public life abound, the noble Lord feels that now is not a bad time to remove all taint of interest from politics and, as the noble Lord, Lord Rodgers of Quarry Bank, advocated, free from ideological influences.

If that is what both noble Lords would like, that strikes me as a dangerous ambition. We agree that the authority of Parliament must derive ultimately from the ballot box. I hope that neither noble Lord feels that it is either possible or even desirable for interest, whether charitable, commercial, moral or sectional, to be divorced from Parliament and politics. What is politics about other than ideology and interest? The whole of the Liberal and socialist case today has been based on ideology and interest, and that has been the inescapable conclusion of at least all noble Lords who sit beside and behind me. If we attempted so to divorce it and succeeded we would be divorcing politicians from those very matters which should be their constant concern. It would be more difficult for Parliament to act as the forum where ultimate power must rest and where interest should be controlled when it becomes overmighty.

I would be worried if the great interests, commercial or sectional, did not want to support political parties, and I would be equally worried if they were forbidden to do so. We have seen the rapid growth in recent years of single issue pressure groups which, if they become too powerful, can unbalance the entire political debate. Parties in our system are, almost by definition, coalitions. That may be said about the Liberal Democrat Party, which is the result of one of the most recent and obvious open coalitions of political post-war times—mould breakers. They have a bias towards balance which helps control interest.

I do not have the time this afternoon, and I am sure that your Lordships do not have the inclination, to rehearse all the elements of a highly complex subject. I do not think that the noble Lord's Motion encourages any of us to do so.

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I am more than a little tempted to follow my noble friend Lord Beloff down the extraordinarily attractive and entertaining road down which he tempted us. When we return to these matters we shall explore a little further the importance of interest of Lord George Bentick and of Disraeli.

However, I should like to touch on two matters which are relevant to what the noble Lord had to say: state funding and the anonymity or otherwise of donors to political party funds.

The Home Affairs Select Committee in another place discussed the question of state funding of political parties in some detail. Unlike the noble Lord, Lord Jenkins, and the committee chaired by the noble Lord, Lord Houghton of Sowerby, which reported in 1976, the committee in another place was not attracted to the idea of any extension of existing subsidy. As did the noble Baroness, Lady Gould, the committee acknowledged the existence of the "Short money" and the value of benefits in kind in the form of party political broadcasts, free postage at election time, and so on; but in terms of straight cash they remained sceptical.

I particularly enjoyed the speech of the noble Lord, Lord Houghton of Sowerby. I understand that he would not support the contention of the noble Lord, Lord Jenkins, that there should be a new inquiry on the grounds that his was perfectly sufficient for the purposes. Our experience of the noble Lord's thoroughness and capacity to understand the nub of any matter, whether or not we agree with him, leads us to suspect that that is not bad advice.

I should like to say to the noble Lord, Lord Holme of Cheltenham, that I hope it will be possible to hold the line on free political broadcasting, although I am not sure who watches the broadcasts apart from the entire political classes and aspirant boy racers at various central offices.

I share the scepticism of the committee. It is true that other countries subsidise their political parties from public funds. As the table on pages xii and xiii of the Select Committee report makes clear, there is no distinct pattern or practice.

A large number of the countries listed there do not give state funding and a number of them would appear to all of us to be entirely democratic in their theory and practice. It is tempting to wonder to what extent public political funding encourages the proliferation of small parties. Except for the Liberal Democrats, I suspect that most noble Lords feel that that is an undesirable development that is already encouraged by certain kinds of proportional representation. Furthermore, as my noble friend Lady Young pointed out, one could argue that state subsidy encourages corruption rather than the reverse.

My noble friend Lord Boyd-Carpenter pointed out that in this country political activity is voluntary. The Government, like the noble Lord, Lord Holme of Cheltenham, who appears in this instance to disagree with the noble Lord, Lord Jenkins, the leader of his party in this House, believes that it should remain so. Raising money for parties and devoting time to political parties is an activity of civil virtue and one that is to be encouraged in a state whose government is based on representative

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principles. We all know that such activity involves, above all, hard work and demands great enthusiasm for the cause at the expense of shoe leather and sometimes one's digestion. Should that enthusiasm flag, it seems curious and perhaps socialistic to argue that the state should make up for the deficiency by public subsidy. It reminds me of the nationalised industries. We know that the private sector had to rescue them and restore them to prosperity. It is no wonder that the noble Baroness, Lady Gould, and the noble Lord, Lord Richard, supported the idea of public funding, just as they in their party have supported every measure designed to increase national prosperity and to reduce individual self-reliance, which is the secret of national survival.

Even those systems of subsidy, for which such learned commentators as Dr. Pinto Duschinsky argue and which link the level of subsidy to the number of votes cast, risk institutionalising political parties. As the noble Lord, Lord Hooson, acknowledged, they thus preserve them beyond their sell-by date. In view of what has happened to the Liberals since 1917 I can understand the noble Lord's enthusiasm for state subsidy in that context. His magnificent biography of Asquith demonstrates his mastery over the period.

In parenthesis I should like to remind the noble Lord that his interpretation of the history of the time was not universally shared by Lloyd George's political opponents. I quote from the memoirs of Mr. J. C. C. Davidson who was a most distinguished political fixer in his time in the Conservative interest. Mr. Davidson's attitude to the matter of raising party funds was in marked contrast to that of Lloyd George, who was endearingly frank about his methods. In a memorandum written in 1927, Davidson recorded:

    "In the course of a conversation with Mr. Lloyd George yesterday in which the use of Party funds for philanthropic purposes came under discussion, I"—

that is, Davidson—

    "dropped the remark that Mr. Lloyd George was fortunate in being much better situated with regard to Party funds than the Conservative Party. He laughed at the remark, and with his characteristic flair for altering his ground, burst into an enthusiastic defence of the system of raising Party funds by the sale of honours. 'You and I', he said, 'know perfectly well it is a far cleaner method of filling the Party chest than the methods used in the United States or the Socialist Party'. He complained that the Socialist Party was a trade union party solely because of the power of the trade unions to withhold funds. 'In America the steel trusts supported one political party, and the cotton people supported another. This placed political parties under the domination of great financial interests and trusts'.—

I believe that the noble Lord would agree with that.

    "'Here', said Mr. Lloyd George 'a man gives £40,000 to the Party and gets a baronetcy. If he comes to the Leader of the Party and says I subscribe largely to the Party funds, you must do this or that, we can tell him to go to the devil. The attachment of the brewers to the Conservative Party was the closest approach', said Mr. Lloyd George, 'to political corruption in this country. The worst of it is that you cannot defend it in public, but it keeps politics far cleaner than any other method of raising funds'".

I wonder how a measure which would begin to nationalise political parties would appeal to an earlier and more laissez-faire school of Liberalism.

Finally, my Lords, I would like to say a word about donations to political parties. As far as I can ascertain no one has suggested that the individual small donor should not be encouraged. Some have argued that donations

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should be tax allowable in other fora. I believe that one noble Lord—and I hope he will forgive me because I cannot remember who it was—mentioned that during today's debate. As noble Lords will know, that is the position in the Netherlands and, to a lesser extent, in Germany. It is an idea which might be worth exploring. But, ultimately, it is a matter for my right honourable friend the Chancellor of the Exchequer and another place.

The difficulty arises when we consider contributions to political parties from commercial enterprises, trade unions and other bodies corporate or unincorporate. I find it difficult to argue against allowing such bodies to make donations to political parties. I must ask the noble Lord, Lord Hooson, why they should be at a greater disadvantage than any individual?. Some corporations are not as rich as individuals. The fact that they are corporations does not seem to me to be an argument for disbarring them from contributing to the political party whose interests they think most closely represent their own. They have their interests like individuals and the present rules of corporate disclosure seem to me to be perfectly adequate; indeed, the remarkable catalogue put forward this afternoon by the noble Lord, Lord Richard, provides evidence to support that claim. A company giving more than £200 in aggregate must disclose the donations under the Companies Act 1985—legislation passed by a Conservative Government—and its actions are open to challenge by shareholders.

Incidentally, I should emphasise the fact that my party has accepted the code of practice set out in Recommendation 15 of the Select Committee's report.

As my noble friend Lady Young emphasised, my party has been the recipient of sustained innuendo this afternoon. In that context, I would merely draw your Lordships' attention to the line on page 35 of the Select Committee's report where the code of practice makes it clear to donors that illegally obtained money would not be acceptable and, if discovered to be so obtained, would be returned. My party subscribes to that view; and, indeed, puts it into practice. I give way to the noble Lord.

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