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Lord Wallace of Saltaire: My Lords, is the noble Lord equally convinced that trade unions, when they give money to the Labour Party, do not wish for anything in return? It has for many years been the Conservatives' allegation that unions are buying influence through giving money and, indeed, the Conservatives have insisted on strictly regulating that. Can the noble Lord explain the precise difference between those two activities of giving money?
Lord Laing of Dunphail: My Lords, I have no definite reason for knowing why the trade unions give to any political party.
As regards overseas giving, we have gone out of our way to attract and have been extremely successful in attracting billions of pounds in inward capital
investment, which has been very good for our economy and recognised as such. It therefore seems quite rational to me for companies or individuals who invest here to have the right to back the party or government whose policies are likely to give them the best return on that investment. Surely the Committee on Standards in Public Life, or possibly any other committee, has more important matters to look into than this matter, which is in a perfectly healthy state.3.27 p.m.
Baroness Gould of Potternewton: My Lords, I rise to support the noble Lord, Lord Jenkins, and to thank him for raising this very important issue. I support the Motion because it is in line with the declared commitment of the Labour Party that in government the question of funding of political parties, including state funding, will be referred to the Committee on Standards in Public Life or to some other appropriate committee.
The continual refusal by the Prime Minister to take such action can lead only to the inevitable question: why not? What has the governing party got to hide? The wall of secrecy that surrounds the funding of the Conservative Party makes it inevitable that it should be singled out for particular scrutiny. Indeed, it has singled itself out. The Conservative Manifesto at the last election stated that:
- "we will be less secretive about the workings of government".
It is not axiomatic that good government requires the existence of political parties, but it is difficult to conceive any change, at least in the near future, in our political system. If we believe that democracy depends crucially on the vitality and the integrity of political parties, the principle of transparency in the financial affairs of politicians and political parties should automatically follow.
There is a powerful democratic case for the financial affairs of political parties to be open to public inspection. A representative democracy cannot function without political parties, and political parties cannot survive without money. Political parties are vehicles for social and political action and people who want to effect political change will express their support for parties not just in votes and in voluntary effort but by giving money. Political donations have now become very important and it is a pity that they have become such a controversial part of our political life. The law cannot alter that; nor should it attempt to do so. It can determine, however, whether the process is transparent and accountable or concealed and corrupt.
There has been a long historical struggle for fairness and equity in our electoral process, be it by extending the franchise or in the financing of elections. From the earliest days of the universal franchise, it was seen as an essential principle of a democracy that economic power should not be able to buy political power. The passing of the Secret Ballot Act 1872 protected voters from intimidation but made no attempt to deal with the question of bribery. And with the removal of intimidation, in the election of 1880, bribery came to the
fore when it is estimated that at current prices, candidates spent more than £114 million to bribe the electorate to vote for them.As a consequence, it was felt necessary to curb the spending of candidates by the introduction of the Corrupt and Illegal Practices Prevention Act. That Act still remains the basis of our election law, at least at constituency level. But the main failing of the Act was that it referred only to expenses incurred by:
- "a candidate or his election agent".
In that 100 years, the law has never been amended. There is still a free-for-all when it comes to national spending by political parties. No legislative framework has been established to regulate their financial affairs; no legal obligation to publish accounts; no law requiring disclosure of donors, be they individuals or companies; no restrictions on money from abroad; and no determination of a maximum for election expenses.
It is that vacuum of legal principle which has led to the general level of public disquiet about the financial affairs of political parties and given rise to important proposals for reform, reforms that are supported in principle by all the political parties bar the governing party, and by independent committees of inquiry such as the Hansard Society.
It was a pity that the Home Office Select Committee, no doubt for political reasons, in 1994 failed to take the opportunity to look at reform. It produced a code of conduct on which the Government have relied heavily in justification of their non-action, but that fails absolutely to deal with the real issues of public disquiet, the lack of financial disclosure, donations from abroad and the need for democratisation of company donations.
All those points are dealt with in the Labour Party's legislative proposals to clean up political funding. Every political party will have to declare the source of donations of more than £5,000. No company will make a political donation without first balloting to set up a political fund, with shareholders having the right to opt out. And no party shall accept donations from foreign sources.
It would clearly be an unwarranted intrusion into individual privacy to argue that every financial contribution to a political party is made public. Demands for disclosure do not refer to small contributions to party funds, but there must come a point on the scale where the concern for individual privacy gives way to a concern about influence and secrecy. The Labour Party puts that disclosure limit at £5,000 but, whatever the limit, the legislation must be watertight and must apply not only to donations but also to loans, collateral and the money value of gifts, advertising or sponsorship. Would that not be consistent with the existing principle and practice of MPs having to declare their financial interests?
We shall no doubt be asked to believe, in our naivety, that the £40 million to £50 million which the Conservatives have raised over the last three years has
in the main come from summer fetes and wine and cheese parties. I only wish that I could have raised that sort of money from the events which I organised. But in reality, the Conservative Party has always relied on substantial donations from commercial companies and wealthy industrialists. It is not the giving of such donations which is wrong; it is the method of their receipt and the lack of public declaration that raises concern. As the noble Lord, Lord Jenkins of Hillhead, said, we need to know from where the money comes.Following the revelation last year of the Tory fund-raising Premier Club, the Prime Minister insisted that no one can buy access to Ministers and that no one can buy favours. But suspicion will remain wherever there is reliance on secret financial gifts and fund-raising activities which are not open to public scrutiny. In spite of the comments of the noble Lord, Lord Laing of Dunphail, it allows for the widespread perception that there is a connection between financial contributions to Conservative Party funds and the award of honours.
Again, I am sure that we shall be told that the responsibility for honours is that of the Political Honours Scrutiny Committee. However, I would refer your Lordships' House to the words of Lord Shackleton, a former chairman of the committee, in the Observer when he said:
- "There is an obvious gap here. It is highly likely that secret donations are by-passing the scrutiny system and that honours are effectively being bought".
Of equal concern must be the allegation that the Premier Club had been advising its members to conceal their political donations in company accounts as entertainment, even though the members were told that the money, possibly up to £100,000, would go to Conservative Party funds. That must be in contravention of the Companies Act which states that:
- "companies must declare direct or indirect donations in their Annual Accounts".
The eminent commercial lawyer, Robin Potts, in the Observer on 21st July said--and I paraphrase--'it is plainly the indirect making of a contribution; it seems to me to be plainly wrong'.
Equally, the issue raised by foreign donations is not only ethical but constitutional. Why should people who are not entitled to vote in a UK election be entitled to influence its outcome? At the last election the Conservative Party apparently received £7 million in overseas donations. Although the noble Lord, Lord McAlpine, has stated on the record that that money was paid to the Conservative Party through "tons" of offshore and overseas accounts, none of that information is in the public domain. That is another aspect of the mystery which surrounds the financing of the governing party.
In 1989 your Lordships' House carried an amendment to the Companies Act requiring that donations for political purposes should be proposed at annual general meetings of companies. In the other place, the Government rejected that amendment as they opposed also the draft legislation Political Parties (Income and Expenditure) Bill. That freedom of companies, so
stoutly defended by Conservative MPs, stands in stark contrast to the battery of legislative restrictions on trade union contributions to the Labour Party.Company donations are subject to no such restrictions. There is no political fund; there is no reference to shareholders; there is no ballot; there is no opt-out facility; and the donations are not recorded in Tory Party accounts.
If time allowed, one could also explore the question of offshore accounts, donations to privatised utilities, the alleged role of Ministers as fundraisers or the alleged use of Downing Street for fund-raising events. All of those issues on the way in which the governing party raises money need to be addressed and until they are, there will continue to be suspicions and unfounded allegations about improper influences operating in public life which damage overall the public credibility of the political and electoral system in the eyes of the voters. That will be removed only by new legislation based on an open and frank examination of party financing.
3.38 p.m.
Lord Holme of Cheltenham: My Lords, it is probably very dangerous to try to cap one's leader's funny stories. However, on to my doormat yesterday fell a white envelope with very striking blue ink addressed to me from the right honourable John Major. Of course, I was curious to receive that letter. It was soliciting my support. But the noble Viscount's explanation of why that skilfully targeted direct mail campaign had been sent to me personally was that the envelope was addressed to Mr. Holme. No doubt it was in pursuit of the classless society which the noble Viscount mentioned earlier.
Of course, that is an extremely sensitive issue everywhere, not just in Britain. This is an issue with which every democratic society must grapple. It is not in some way unique to us or a special British cross that we have to bear. In every democratic country, people want to scrutinise the relationship between money and political parties. That is quite natural and healthy. One way of attempting to do this, which may be doomed because we are close to a general election when partisan spirits rise high, is in terms of what the public interest would suggest rather than the partisan interest. If I may, I shall try to do so for a few minutes and I shall start by trying to define the nature of the issue.
I do not believe that the issue is how the political parties can get hold of more money. That may sound odd coming from a spokesman for one of the poorer parties, but I do not believe that that is the issue. The issue is, first, one of the good name and reputation of the political and parliamentary system; and, secondly, it is an issue of how we encourage participation in our politics, rather than further extending the alienation which has now become a problem in Britain. If we cannot define the public interest in the House of Lords, I do not quite know where we can.
There is probably a third public interest issue; namely, how do we deny special access to institutions and people with a great deal of money which would
trump the access of the ordinary citizen? If we live in a civic democracy, the first requirement is that each citizen should not only be equal under the law but also feel that he or she has equal access to the political process. If that equal access is interfered with by large institutions, not claiming preferment--and I entirely accept what the noble Lord, Lord Laing, said--but seeking special access through their donations, that is at someone's expense. It is at the expense of the ordinary citizen, the ordinary voter, who is denied the very same access.Therefore, rather than taking a view of the question of party funds--that is, if it is to be referred to the noble and learned Lord, Lord Nolan--based on the late Wilfred Pickles' notion of "Give 'em the money", or "Let's have some state funding", I should like to suggest another way of speaking about it. I do not believe that we should discuss it that way.
Let us start with the demand side of the equation. For example, why do parties want money and what do they want it for? Of course, there are perfectly proper purposes for which parties need money: they need money for research; they need money to sustain their organisations; they need money to fight elections; and they need money to help them work with public opinion and express it.
However, I wonder whether the public interest is served by massive expenditure on poster advertising of the type that we see at present. How can it be in the public interest to have floods of red crocodile tears pouring on to the streets of Britain because one party or another chooses to spend millions of pounds on poster advertising? I can recommend to your Lordships a book by Mr. Rodney Tyler about the 1987 campaign. He described a great row in the Conservative Party about the last half million pounds that it decided to spend on advertising in that campaign. He concluded that everyone concerned agreed that the last half million pounds was wasted. It may well be that all this political poster advertising is wasted. But if it is, it is at the expense of very great public irritation with its effect on the tone and level of political discourse in Britain. Do parties need to fight general elections, and the run up to them, as if they were engaged in the competitive marketing of, say, soap powder or baked beans?
I suggest that one of the issues that the noble and learned Lord, Lord Nolan, might consider is the question of limits on national expenditure at general elections. In the last years of the last century limits were introduced on constituency expenditure. Noble Lords will recall the Eatanswill by-election in the Pickwick Papers with the gross spectacle of money spent to buy votes in constituencies. That was unacceptable and was stopped. Now we live in a media world and elections have moved on. We all know that the general election takes place as much nationally as in the constituencies. Does not the same logic apply? Should there not be limits on national expenditure? I do not ask that from a self-interested Liberal Democrat point of view; indeed, I accept that the limits might be very much higher than my party is able to spend.
However, it is not right that there should be no limit whatever on plutocracy in the pursuit of votes. There should be a limit, and it could be a sensible one upon which I believe the parties could find agreement. It would force the parties to do what they should do in any event--namely, to think harder about how to address the electorate rather than simply overwhelming them with quasi-commercial propaganda. Some people object to that modest proposal by saying, "Yes, but the parties would simply start advertising in advance of the election", just as they are doing now. That situation could be caught quite easily. You could catch governments up to clever tricks about the date of the election by saying that all expenditure for three months before the general election would be caught by those limits. Therefore, any party which chose to start its advertising early would simply find that it had less to spend during the election. Therefore, clever games with the date of the election would not serve at all.
I believe that there is something to be done on the demand side of the equation rather than automatically assuming that the more money that is around for the parties the better. However, on the supply side of the equation, I very much accept the point made by the former treasurer of the Conservative Party about personal probity not only on his part but also in the motives of those who gave. There is no point in implying otherwise. However, I question the latter part of his proposition and would ask him whether he is really satisfied that it is a freedom not to declare that.
Just as every business would declare its source and use of funds in its accounts, I believe that it would be entirely appropriate for parties to declare their sources and use of funds. Why should parties occupy a special place in the law that clubs, associations, and companies certainly do not occupy? Why should they not be required to disclose the names of their donors? If people then decided in those circumstances that they did not want to give, that would be their decision. But if they are proud of the party that they support, why should they not be prepared to come out in public and say, "We support them". I do not think that one would have to take that down to very small donations but, let us say, every donation of £5,000 and above might be declared.
The second aspect to which I have already referred is the transparency and publication of full accounts. I think that there is a particular problem with the party opposite in that respect because, historically, there is not quite an entity that you can get hold of called "the Conservative Party". If I understand correctly, there is the national union, the parliamentary party and the leader of the party, but the Conservative Party itself is almost a metaphysical concept and does not correspond to a legal entity that is easy to nail down. I see that the noble Baroness sitting opposite, who knows a great deal about these things, is nodding her head, so that must be the case.
I should like to suggest that it would be a good start and quite a good idea if the Conservative Party, like any club or association which wants to carry on trade and pursue its humble objectives, were to exist legally. Then we could say to it, "Well, why don't you publish your accounts and let us know where the money comes
from?" I know that there is an admirable group in the Conservative Party--namely, the Conservative Reform Group--which seeks to do precisely that. It seeks to encourage its fellow Conservative Party members to publish full accounts like any other responsible body.The third question on the supply side of the equation is the desirability of having more small supporters; that is to say, more real people getting engaged in the political process rather than it simply being large institutions which pay the piper. That bears on the criteria of participation, of enthusiasm and of voluntarism upon which civic society depends. That would be a great thing. Indeed, in Canada small donations are encouraged by having a matching tax break for such donations. Therefore, if you wanted to have state funding into parties, that would be a way to do it. You could match small contributions by a matching contribution from the taxman and, in that way, you would encourage people in what all parties depend upon--people's private and enthusiastic activity.
In brief, on the supply side I would say that undeclared donations, overseas donations and very large donations must all at least see the light of day. I personally suggest that it is inappropriate for people who do not live and vote in this country to contribute to the British political process. That is also something that the noble and learned Lord, Lord Nolan, could consider if he is charged with looking into the matter.
In summary, therefore, I think desirable features of a reformed political financing system would not depend on vast state handouts but on economy and frugality on the part of the parties; transparency in the system so we could all understand what was going on; and a greater reliance on the donations of private individuals and less dependence on large scale institutions to finance the political system.
3.50 p.m.
Lord Campbell of Alloway: My Lords, it is a pleasure to follow the noble Lord and at last to know what I am: I am a member of a metaphysical body and that gives me tremendous fortitude to address your Lordships' House.
The noble Lord was dealing with matters really beyond the Motion. As I am about to be critical of the Motion, I, with respect, draw attention to the fact that we are concerned with the funding of political parties but not with the limits of expenditure of political parties, although that is another matter which might be considered.
My noble friend Lord Laing of Dunphail rightly suggested that the only reason for a reference, as proposed by this Motion, could be the issues of secrecy, disclosure and transparency, which are all issues of great importance leading up to the election. But, as my noble friend suggested, there really has to be concern that the present system is flawed, and that is not so. There has to be evidence of corruption or preferment. There is no such evidence. So what is the object of this exercise? Assuredly this is not an appropriate occasion on which to consider suggestions as to misconduct of any political
party in the context of funding. No allegation may be substantiated, answered or fairly decided within the compass of this debate.To refer to the Premier Club or to the Institute of Public Policy Research as a new front for Labour, or to refer to certain other matters such as the arcane financial relationships between the Labour Party and the trade unions is quite beside the point. There is therefore mere suggestion, mere assertion, no evidence, no firm basis on which your Lordships are invited to refer this question to the Nolan Committee--I see the noble and learned Lord is present--which the noble and learned Lord has wisely declined to entertain before the election. At all events to make a sane, quasi judicial decision in a committee of that kind, one needs time, patience and a considerable amount of care.
Much may be said about the suggestion in the Motion that this should be referred to some other body. What worries me is not that we should debate and discuss--that is fair enough and is usually beneficial--but that we have a resolution to seek in effect to enjoin the Prime Minister to refer this question. It is not only premature; it is utterly pointless. To what profit or purpose are we so to resolve and divide? The hope is that we may as usual follow the Wednesday custom to discuss, debate and then move for the withdrawal of Papers and that we may not be asked to divide. Surely this is not the occasion on which to depart from convention and establish an unwelcome precedent--a departure from a convention which could well one day invite imposed reform.
Why should your Lordships be asked to indulge in this extraordinary exercise? It would seem--I may be wrong--that it is because of something that was said by Dr. Brian Mawhinney last November concerning openness about the sources of opposition funding which touched a raw nerve, as inevitably it would. This appears from the correspondence to which I shall refer but not quote verbatim. A letter was written on 20th November by the Leader of the Labour Party, the Leader of the Liberal Democrats and various other opposition parties to my right honourable friend the Prime Minister. They referred to Dr. Mawhinney's remarks. The suggestion to the Prime Minister was that he would remove his objection to the Nolan Committee investigating party funding and that if the Prime Minister did not agree they would assume that he believed there was something to hide over the sources of Tory funding.
My right honourable friend replied in substance on 22nd November suggesting that Dr. Mawhinney had been misunderstood, there was a certain amount of hypocrisy on the part of the Labour Party, and that it had apparently been forgotten that these matters had already been investigated by the Home Affairs Select Committee in 1994, which set down the guidelines that parties should not accept money with strings attached. He referred to the receipts of the Labour Party from the trade unions--more than half the party's income--in return for 50 per cent. of the votes at the annual conference. Then reference was made to the position of the party which I support.
These matters seem to have been, or may have been the reason why this matter has been brought before us today. In the final paragraph it was suggested that this request was an attempt to pave the way for the state funding of political parties. To be perfectly fair, the noble Lord, Lord Jenkins of Hillhead, made no reference at all to state funding. I know not whether that is in any sense involved in this debate.
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