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Political Parties: Funding

5.35 p.m.

The Minister of State, Home Office (Lord Williams of Mostyn): My Lords, with the leave of the House, I shall repeat a Statement made in another place by my right honourable friend the Secretary of State for Home Affairs. The Statement is as follows:

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    should cover this. We would welcome views on whether the obligation to report such donations should fall on the party in question or on the person who receives them and/or whether such donations which at present are recorded in the Register of Members' Interests should be put on to a statutory basis.

    "I turn now to referendums. The Neill committee made a number of suggestions for change in this area. The Government accept them all. It is important to ensure that the two sides in a referendum campaign have a fair opportunity to put their case. We therefore propose to include cash state support on an equal basis for the two umbrella campaign organisations, with free mailing and access to referendum broadcasts, as the committee suggested.

    "The committee also made a set of recommendations concerning the position of the government of the day in a referendum campaign. As the committee indicates, a government are almost bound to be closely engaged in the subject matter of a referendum. There is, however, a point where the Government should step back and leave it to the political parties and other campaign groups to make their case to the electorate. The draft Bill therefore provides for a 28-day period running up to the referendum poll in which the government of the day will not issue material to the public on the subject matter of the referendum, and other rules similar to election purdah periods will apply.

    "There is, however, one area where the Government have gone further than the Neill committee's recommendations. It would plainly be unfair and inconsistent with everything else proposed if referendum campaigns could be skewed by the injection of disproportionately large funds which happen to be at the disposal of a particular party or campaign group. We are therefore proposing to set limits on all organisations involved in referendum campaigns. In the draft Bill they are £5 million for the two designated 'umbrella' organisations and for political parties with two or more Members in this House, and £500,000 for other political parties and campaign organisations. These restrictions would run from shortly after the date when a Bill providing for a referendum is introduced in Parliament. Referendum organisations will also, as Neill recommended, be subject to the same requirements as political parties on foreign donations and so on.

    "I have left until last one of the most important provisions of the draft Bill. The Neill committee recommended, as have many others, the establishment of an electoral commission. The Government agree. The commission's first function will be to oversee observance by political parties and others of the new regulatory regime. But I want to go further.

    "The commission will therefore be charged with making recommendations on changes to electoral law and we also see the commission having, in the wider sense, an important role to play in 'voter education'.

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    I want the commission to encourage people to vote in elections and referendums and to help to explain the democratic system in a wholly non-partisan way.

    "The draft Bill also provides for the electoral commission to take over, at a later date, the functions of the Parliamentary Boundary Commissions and of the Local Government Commission for England.

    "It is of paramount importance that the electoral commission should be wholly independent of the government of the day. The draft Bill provides the strongest safeguards of this kind which our constitution can provide. The commissioners would be appointed by Her Majesty on an address from this House, and a Speaker's Committee would be established to oversee the commission's budget.

    "The Neill committee's report rightly emphasises the vital contribution which political parties make to this country's democratic life.

    "For too long public confidence in the political system has been undermined by the absence of clear, fair and open statutory controls on how political parties are funded. All of us here want to encourage citizens to play a full part in this country's political system and that must include encouragement of voluntary donations to political parties.

    "The report of the Neill committee gives us all the chance to make significant improvements in this vital area of our national life. The publication today of the draft Bill and White Paper provide the detail of the Government's intentions. By providing honesty and openness to our political system, we hope to restore public trust and to promote greater confidence in our democracy".

    My Lords, that concludes the Statement.

5.45 p.m.

Viscount Astor : My Lords, I thank the Minister for repeating the Statement. From the outset, perhaps I may say that we support the main thrust of the recommendations of the Neill committee, the White Paper and the proposed Bill.

We support the principle of state funding for referendums. I have had only a brief opportunity to see the White Paper. It was available to my colleagues in another place this morning, but I managed to see it only in the past half-hour. The key is: is the question posed in the referendum fair? I believe that the referendum commission should consider that issue also. Can the Minister say whether the referendum commission will look at the question to be asked in the referendum?

In the light of the proposal in the draft Bill, will the Minister give an undertaking that there will be no more referendums in this country until the Bill is in place? The Government should be neutral. The White Paper recommends that, but limits the requirement for such neutrality to a period of 28 days before a referendum. We feel that that is very short and gives an enormous advantage to the Government. I realise that that 28-day limit is taken from similar limits in elections. However, in the case of referendums, where there is a long

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build-up, we shall certainly want to consider that point carefully when the Bill comes before your Lordships' House.

We support the proposal of the creation of an electoral commission which will be charged with making recommendations on changes to electoral law. It is interesting that the Government supported all the main recommendations of the Neill report except one; that is, tax relief on donations. It is interesting to speculate on why that was not agreed, particularly when, by the Government's own admission, it would cost less than the amount that the Government currently spend on special advisers. There are twice as many as there have ever been before.

It is somewhat extraordinary that the unions can use money, which is given to them under favourable tax regimes, to fund the Labour Party, but that individuals who want to fund any other party will not be able to obtain tax relief.

I turn to another area of concern; namely, Northern Ireland, which I recognise is addressed in the White Paper. I note that citizens of the Republic will be able to make donations to political parties in Northern Ireland. That is intriguing. That makes them entirely separate from any other citizens. The Government are saying that foreign nationals--citizens of another country--should not be allowed to make donations to political parties, yet citizens of the Republic may be allowed to do so. There may or may not be good reasons for that. However, what worries us is what checks will be made. How will that work? Will Sinn Fein be considered as a political party? How will we know whether money which comes from the Republic is coming from the right place and what it is buying? What special provisions will be put in force?

We welcome the Government's views on blind trusts. I believe that this is a U-turn for the Government. Prior to the election, they used blind trusts in a way in which they had never been used before in this country. I do not seem to be able to find the relevant clause in the draft Bill. I understand that parliamentary counsel ran out of time. I am not sure whether they ran out of time or enthusiasm. Blind trusts were a pretty disgraceful way of giving secret funding to political parties. It would be interesting to know how many Ministers in this House benefited from funding from blind trusts.

As I have said, we support all the recommendations in this report. It is a pity that the Government do not support all the recommendations in the Neill report. We support the premise on which the Neill report is based; that is, that if you can vote in this country, you should be able to donate money to a political party.

We have concerns about whether the £50 limit above which donations have to be registered is too small, but that is a minor point that we shall discuss in the future.

The Conservative Party has been accused in the past about political donations, but there is one major difference between us and the Labour Party. We have never changed our policy or attempted to change government policy because of a £1 million donation from Bernie Ecclestone. We have never brought forward a commitment because of lobbying from the

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International Fund for Animal Welfare. We have never given positions in government to major donors to our party.

I welcome the Neill report and the fact that the Government have accepted almost all the recommendations. It is a pity that they have not accepted the others, but we look forward to dealing with the Bill carefully.

5.50 p.m.

Lord McNally: My Lords, with those words from repenting sinners echoing in our ears we can look forward. I assure the Minister that we welcome the Government's response to the report of the noble and learned Lord, Lord Neill. We particularly welcome the role given to the electoral commission. Democracy needs democrats to make it work. The Government's response is an active rather than a passive way of revitalising our democracy. After 20 years of slamming stable doors, the proposals allow Parliament, politicians and political parties to get ahead of the game.

Hitherto, state funding has been based on expediency or opportunism. I well remember that when the short money was introduced in 1974, a lot of the debate revolved around how money could be given to political parties without it getting into the hands of Mr Wedgwood Benn, who was then operating an unofficial opposition at Transport House. We have tinkered with allowances, increased expenses and increased Opposition support for parliamentary purposes. All of those measures were good in their way, but they were piecemeal and ad hoc. This response is more coherent and wide ranging, but it still refuses to bite the bullet of state funding for political parties.

Does the Minister agree that the £40 million fund-raising cap for the two main political parties still represents a substantial sum to be raised by voluntary means? Let us not forget that money will have to be raised against a background of limits on company and individual donations. The treatment given to companies and individuals by the media for their donations to political parties in recent months will not make it a popular exercise. If parties are forced to raise funds from private sources, they are forced into temptation. Should not the electoral commission be charged in its review with looking at specific proposals for the state funding of political parties? We believe that that is the best way of cleaning up our democracy.

The income tax check-off is only one way of introducing state funding. There are many other systems, including matching funding and cash on the basis of votes in elections. Many countries have state funding and operate it perfectly well. It makes for a healthier democracy.

I should like to raise one or two specific points about the Statement. Clause 52 of the draft Bill refers to political activity by those on the electoral register. Does that imply that donations or political activity by those under 18 will be restricted? It would be a pity if people under 18 were not encouraged to give to political parties. I gave my first donation to a political party at the age of 16. It was not my last donation or my last political party, but that is another story.

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Is there sufficient recognition in the structure set out by the Minister of the devolved nature of British politics? A lot of the funding seems to go to the central London-based party machines. Is there a need to look at the nature of control over expenditure by individual candidates at constituency level? I have long believed that the provisions are too nit-picking and too open to genuine mistakes, and that the system could be simplified.

I welcome what the White Paper says about the control of party political broadcasts. It is very important that we retain party political broadcasts and that they remain under party control; otherwise, the door is open to the grotesque expenditure on television broadcasting that we see in other countries.

The activities of the Government's propaganda machine could usefully be referred to the electoral commission. Does the Minister agree that the Government's annual report comes very close to party political propaganda? I wonder whether it would benefit the electoral commission to look at government publications. Do the Government plan to publish an annual report in general election year? That would certainly be an abuse of public funds.

How do the Government intend to reflect the views of policy holders in insurance companies, who may use their vote to influence political donations by public companies in which they hold shares? Insurance companies have a responsibility to policy holders who do not wish their money to go to political parties.

Finally, why is there to be no cap on personal donations? Surely the Minister agrees that there comes a point at which an individual donation ceases to be public-spirited and becomes obscene. We shall be looking for a cap on individual donations.

Overall, it would be churlish not to say that the proposals are an imaginative and forward-looking response to the problem of sleaze that has bedevilled our politics for a decade or more. They will do much to restore public confidence in our political process.

6 p.m.

Lord Williams of Mostyn: My Lords, I am grateful to the noble Viscount, Lord Astor, and the noble Lord, Lord McNally, for their general welcome. The noble Viscount said that his party supported the main thrust of the proposals and the noble Lord, Lord McNally, was very generous in his concluding remarks. He and his party are entitled to a good deal of the credit for the outcome. They have agitated for proposals such as those on electoral commissions for a long time. Being as objective as I can, I think that it is fair to say that we have given full effect to the proposals of the noble and learned Lord, Lord Neill.

The £40 million cap for the two main political parties is substantial, but election expenses are very high and if we want elections in a modern democracy to be educative as well as soliciting people's votes, the cap that we are considering is not out of kilter with what most large parties would recognise as legitimate expenditure for election purposes.

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I want to stress again what I said in repeating Jack Straw's Statement. We have put this out with a view to receiving comments by 15th October. I repeat again what was said in the Statement. Any suggestions consistent with the general thrust of the draft Bill we genuinely welcome. But I do not pretend that there may not be room for some improvement on detail.

Under-18s can still be members of political parties and therefore they could contribute. The maximum prohibition on them would be £50. For most under-18s--I say "most" in deference to the noble Lord, Lord McNally--that is a good deal more than they would want to contribute to a political party, even one such as New Labour which I am sure will have many children of 16 wanting to contribute perhaps £75 or more.

The noble and learned Lord, Lord Neill, said, rightly if I may say with respect to the quality of his report, that one has to look differently at Northern Ireland. The circumstances there are different. At the moment people genuinely fear that if they make donations and their identities are known, there may be dangerous consequences. In relation to Northern Ireland--we specifically dealt with this in Clause 63--parties will still need to report donations to the electoral commission, but the details will not be disclosed. That is because of the sad truth which we all recognised in our recent debates that Northern Ireland and its political arrangements are not the same as those that we are fortunate enough to have in England, Wales and Scotland.

The annual report is a reasonable document. For instance, the one produced this week concedes that, despite outward appearance, the Government have not been perfect on every occasion. It says what we have and have not achieved and that is part of the legitimate, educative process in which any government are entitled to indulge, as are any opposition.

The question of policy holders in insurance companies is rather remote. I do not see that, if one is a policy holder with, for instance, Norwich Union which has a portfolio of perhaps 500 different shares, adverse consequences would necessarily follow if one were not able to say to Norwich Union, "By the way, you must examine the accounts of every one of these 500 share companies and see whether or not they are making donations". The way to deal with this is the direct route; namely, shareholder approval of political donations.

I take the noble Lord's point about no cap on overall personal donations. I simply say that to some--I cannot put my finger on a name at the moment--a donation of £3 million is not of great significance, whereas a donation of £3,000 would be of considerably more significance if I were to make it.

Those were the points helpfully raised by the noble Lord, Lord McNally, and I turn to the points raised by the noble Viscount, with which I found it difficult to credit him. He said that blind trusts were always pretty disgraceful. How strange that is. The evidence that the

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Conservative Party gave to the committee of the noble and learned Lord, Lord Neill, on 27th February 1998 was,

    "We believe there is an argument in favour of a form of blind trust. That should be examined by the committee".

Were those words "pretty disgraceful"? Perhaps I misheard. Then the noble Viscount, to my pleasure as well as surprise, raised the question of donations. He said that the Labour Party was given £1 million by Mr. Ecclestone. That is true. And it was returned. My noble friend Lord Sawyer wrote to the committee. He received the advice that return would be more suitable, more scrupulous, and the money was returned. I contrast that with the case of Mr Ma. Jack Straw wrote on 21st January 1998 to the Leader of the Conservative Party saying,

    "Dear William, you have accepted that the Conservative Party received £1 million from Mr. C. K. Ma in 1994. Let me ask some questions. Why did Mr. Ma give the money? Who negotiated it? Was he promised that charges against Mr. Ma for drug trafficking would be dropped? Why is he now saying he wants his money back because expectations had not been met? Were you or your party aware of the Ma family's alleged links with drug trafficking? In the light of this information do you think it is appropriate for the Tory Party to keep this money? Would not the best outcome be for the Tory Party to donate the £1 million to anti-drug charities?".

It will not surprise anyone in this House that we are still waiting for any sort of substantive reply to those questions. But Jack Straw, being diligent, did not leave it there. He sent a letter which your Lordships will relish. It is dated 20th March 1998 and concludes with these prescient words:

    "The Tory Party will continue to be dogged by the scandals and sleaze that characterised it in government".

It is true that PAL gave the Labour Party £1.1 million, which is public knowledge. It is true also, as I reminded your Lordships, that up until two or three years ago it gave a figure of around £170,000. The question is openness, reportability, accountability and an outside objective body such as the electoral commission. I repeat what Jack Straw said in his Statement: we have built in every possible, copper-bottomed constitutional guarantee of that body's independence. It is fair to say that we have produced an open, candid response to an extremely powerful authoritative report. The next time the noble Viscount raises complaints about the Labour Party--I do not blame him; there was not much to complain about--I shall have a few more bits of correspondence available.

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