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Lord Stoddart of Swindon: My Lords, does my noble friend agree that it is not xenophobia to criticise a foreign firm which failed properly to consult its workers about an action which was a calamity for them and their families and, indeed, the area in which they live? Will my noble friend confirm that the firm did not make proper use of the consultative council machinery which was available to it? I hope that my noble friend will agree that it is not xenophobia to criticise a firm for not doing what it properly should have done. Will he also confirm that it is not the appreciation of the pound against the euro which is at stake, but the depreciation of the euro against the pound? Perhaps he will ask the noble Lord, Lord Razzall, whether he would go into the euro now at the rate of 3.20 marks, because we would not be able to devalue and we would be left with the present exchange rate. Finally, will my noble friend say what is the total number of jobs that are at stake as a result of the action that BMW has taken, both in the car industry itself and in associated industries?

Lord McIntosh of Haringey: My Lords, my noble friend protests too much about xenophobia. I have not used that word except in responding to the noble Lord, Lord Razzall, when I denied that we were xenophobic about the foreign car industry. We are disappointed about what has happened. The Secretary of State said in another place an hour or so ago that we were badly let down by the lack of consultation and the speed with which BMW came to its decision. That is not xenophobia. My noble friend asks me to ask questions of the Liberal Front Bench. I shall not ask questions of the noble Lord, Lord Razzall, any more than the noble Lord, Lord Razzall, will persuade me to ask questions of the Conservative Front Bench. I am not in that business; I am here to do my best to answer questions, not to ask them. My noble friend asked me about the definitive number of jobs that are likely to go. This process is by no means complete. Even if it were complete, I prefer to rely on the ongoing work of the task force to discover the scale of the problem as well as to make suggestions for solving it.

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Lord Monro of Langholm: My Lords, the noble Baroness, Lady O'Cathain, made the good point that if there had been earlier liaison between civil servants and BMW the problem would have showed itself perhaps last year. The civil servants would surely have had to inform the Minister--in fact, the Minister did not know this--that there were 60,000, 70,000 or 80,000 Rovers parked around Britain which were not saleable. That surely must have been a red light to the Government to take earlier action than they did.

Lord McIntosh of Haringey: My Lords, of course civil servants have been in discussion with Rover and they have reported to Ministers the results of their discussions. Among the issues discussed has been the question of the application for European authorisation for funding for Longbridge. But in the face of the clear statements from BMW both in December and in January of its continued commitment, it is difficult to see how we could have said, "We think you are liars".

Lord Shore of Stepney: My Lords, I think my noble friend will agree that BMW is not blameless in this matter but there is here a fundamental problem of the misalignment of the pound with the European euro or European currencies. That situation exists and we cannot just ignore it. Whether it is because the euro is too low, as my noble friend Lord Stoddart suggested, or whether sterling is too high, is in a sense irrelevant. Certainly we cannot just join now at 2.20 marks. To do so would be ridiculous. We would bankrupt the whole of our manufacturing industry.

I put it to my noble friend in the form of a legitimate question that this clearly is not just a matter of BMW. We have Honda at Swindon--which I thought my noble friend would refer to--announcing lay-offs. Are we really to preside over the collapse of Dagenham as well? Something has to be done. If my noble friend agrees that there is a serious misalignment of currency, he must do something to operate through the Chancellor and the Bank of England on the exchange rate. Either he must sell forward and manipulate sterling, or he must give the Bank of England different terms of reference other than internal price stability.

When we think that since the Germans bought Rover in 1995 there has been the largest appreciation--30 per cent--of the pound, are we surprised that they are in great difficulties? They bought Rover when it was losing £150 million a year; last year it was losing £750 million a year. That is not because of lack of productivity in the workforce; they have improved productivity every year. However, not only are we losing our exports, but imports are undercutting demand for our own cars in Britain. Something has to be done.

Lord McIntosh of Haringey: My Lords, my noble friend makes particular reference to Honda and to Ford at Dagenham. He really must not believe the scare stories in the Sun about Honda at Swindon. Honda has not made an announcement of job losses at Swindon. It has said that, having produced something

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like 25,000 to 30,000 below its 150,000 capacity, it proposes to reduce production by another 4,000 or 5,000 vehicles a year as a short-term measure. That is a far cry from what some newspapers have reported. Dagenham is not European-owned. Eurosceptics have insisted, with some justification, that the pound is not as strong against the dollar as it is against the euro. It is no good my noble friend simply saying that something must be done. We had a sensible two-and-a-half hour debate on this subject last week which I recommend my noble friend should read. Otherwise, it is simply like the Duke of York visiting the Welsh valleys; that does not contribute to political debate.

Lord Shaw of Northstead: My Lords, will the Minister tell us what meetings have taken place between the dealerships and the Government?

Lord McIntosh of Haringey: My Lords, any detail which it is possible for the Secretary of State to give within the bounds of commercial confidentiality in advance of and at his meeting with the Trade and Industry Select Committee will be made public. However, it is not for me to do that now.

Political Parties, Elections and Referendums Bill

5.18 p.m.

Second Reading debate resumed.

Lord Neill of Bladen: My Lords, I take the House back to the Political Parties, Elections and Referendums Bill. I have an interest to declare in that I had the honour to be the chairman of the Committee on Standards in Public Life which produced the report we are discussing. My interest is to see that a Bill which carries into effect the recommendations of our report goes on to the statute book.

It is a little intimidating to have so many members of my committee present, two of whom will speak after me and, no doubt, correct me. I refer to them in batting order: my noble friend Lord Shore of Stepney and the noble Lord, Lord Goodhart. I also see in the Chamber the noble Baroness, Lady Warwick. So four out of the 10 members of the committee are present today.

I propose to follow the injunction of the noble Lord, Lord Mackay, for brevity certainly and, I hope, clarity. My colleagues and I have written at considerable length in the report what we believe needs to be done. In the debate on the Queen's Speech on 24th November last year, I spoke in general terms on this matter, welcoming the fact that the Bill was to be introduced and giving a little of the background to the work that the committee had undertaken. I shall refer briefly to that in a moment.

Three general reflections have occurred to me on thinking about the debate. The first reflection is to remind your Lordships of the background. The committee of which I became chairman was about the

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fifth committee to have under consideration the topic of the funding of political parties. The Houghton committee was the first, some 24 years ago in 1976. That committee divided on party lines and nothing followed. There was then a Home Affairs Select Committee of another place in 1994, which met with a similar fate. In the mean time, there had been efforts by the Hansard Society. The only general reflection one draws from this is that it may on occasions be an advantage, in considering what is, in a sense, a highly political issue, to have the matter considered by an independent committee which is not in itself political. As your Lordships are aware, we had one member of each of the three major parties nominated to serve on the committee. They do not serve as spokesmen on the committee, but they have a great importance for the rest of the committee in telling us how the world works. That is one reflection.

Another general reflection--I do not think that this point has been made today--is that great efforts will now be made in the House to perfect and to produce an excellent Bill.

In addition, a change in the political climate and in the climate of thought is required. We do not need to look very far overseas to come across one or more countries which have on their statute books some excellent statutes which provide for the control and regulation of party funding. Those statutes are useless unless there is a general will to comply with their provisions. The only provision in the past of which we have any evidence that there has been some disregard is concerned with by-elections. There was evidence before the committee that in by-elections there was, as it was put by some witnesses, almost a conspiracy between the political parties not to report one another, even though there was some fairly blatant overspending. We shall have a series of extremely detailed rules backed by criminal sanctions, but it is essential that it should become unthinkable for any political party to want to cheat on the rules.

My third general reflection concerns the question of public perception. In our work, my committee is constantly made aware that it is not enough for an institution or for a set of rules to be extremely good; we need to be aware of what the public think is happening on the ground. That was particularly relevant when we came to one of our main points, that there should be disclosure of the sources which give money to political parties. We encountered a great deal of public cynicism about such sources. The argument ran that people do not give large sums of money unless there is something in it for them. So we tried to come up with recommendations that had very much in mind the way in which ordinary people, the voters, will think of the system once it is up and running.

If I were asked to summarise the key points in our report, I would say that there are only about five. First, we were very firm that there should be no state funding. We do not want that here. We visited at least one country where there was a large element of state funding and we did not particularly like what we saw.

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I have already made the second point: for transparency of the sources from which money comes. We thought that that was of prime importance. Any gifts above £5,000 should be publicly declared.

Thirdly, we were against foreign money. We thought that support for political parties in this country should come from people who have an interest and stake here, who are present in this country and entitled to vote here.

The fourth key provision or guiding principle was a limitation on the "arms race", which was referred to earlier. We saw that particularly well demonstrated in our visit to the United States, where we saw a great deal of evidence of that. In that context, perhaps I should mention the point made by the noble and learned Lord, Lord Howe, when he talked about the ban that we currently enjoy here on radio and television advertising. I am not sure that the House fully appreciates just how important and valuable that control is. The human rights convention has been mentioned today: supposing in some nightmare scenario a case was to go to the courts in this country, and ultimately to Strasbourg, in which it was ruled that it was contrary to the freedom of speech principle in the convention for us to have that control. Enormous pressure would then build up for additional funds, way above the £20 million cap that we recommend. The evidence in America was that approximately 80 per cent of the money raised by political parties is spent on short bursts of television and radio advertising, mainly of the negative kind--that is, not advocating a policy but denigrating the particular individual on the other side. That is a route down which we do not wish to go.

My fifth point is that we thought it essential that there should be a body to supervise this new system--an electoral commission. There was some hostility initially in some quarters to that idea, but we did not see how the system could work without it. Having mentioned the electoral commission, perhaps I may add a footnote, again in line with the observation of my noble and learned friend. I am a little worried about overloading the electoral commission, particularly in the early days. There is a reference in Clause 12 to an educational role. In a perfect world, one might say that we should have a commission and that one of its duties should be to inculcate the sound principles of democracy. But that is not wholly compatible alongside the administrative duties, which should be its prime role, of ensuring that the system is up and running and that there is no cheating. That is quite different from going around schools, universities and debating societies and advocating the merits of the system we have in place. I have a concern that too much will be put on the commission--especially with boundary commission responsibilities thrust upon it as well--and that the hard core of what we wanted to do will, in a way, be diluted.

I shall not detain your Lordships' House much longer, but I want to make one or two other points. As regards referendums, interestingly, when we began our work we did not start out thinking that that was a topic that would concern us; but as we went around collecting evidence, it suddenly became apparent that

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we could not tackle the question of the funding of political parties without considering this new instrument of democratic decision making--the referendum--and so we were drawn into it. We had some particularly interesting evidence. We travelled around the country--to Cardiff, to Edinburgh and to Belfast--and we had very recent evidence of how the system had been working.

The most striking case, which has been most commonly cited--I mentioned it myself on the last occasion--was the experience in Wales which concerned the last minute actions of a couple of people. A lady had no money at all, but she borrowed £5,000 from her bank; she managed to get in touch with the son of a wealthy man, who himself had some money. Between them, they put together some £100,000--about 10 per cent of what the other side had--and they began to campaign about a fortnight before the vote. We all remember how close that vote was. It seemed to us self-evident that it is absurd to consult the general population and seek its views on an issue unless there is a machinery in place to ensure a clear statement of the arguments from each side.

They do it differently in Dublin. They have a rather ingenious way of doing it there. They have a body--a referendum commission--which issues a statement giving the best case on each side. We are not proposing to do that here. But one has to have fairness and one must make the playing field as level as possible.

We enunciated the principle that the Government should not spend state money on advocating a particular result in a referendum. In the end, although initially doubtful about it, the Government acceded to that proposition. There will be a period of one month, or 28 days, prior to the referendum when that principle will be observed. My committee thought about that and in the end accepted it as a reasonable "win" for our proposition, although of course it does not go quite the whole way.

Where we are, and remain, unhappy--I wrote to the Minister about it--is on the issue of tax relief, which has been mentioned today. We thought that there was a danger with our proposals in the sense that some large givers would be deterred; and that some people who for reasons good or bad--some possibly very good--would not want their names publicly to be attached to a large gift. Therefore, we thought that a policy of encouraging the maximum number of small gifts should actively by adopted. The proposal was that gifts up to £500 should carry tax relief in order to encourage small people who would like to support political parties to give. We were not intending any bonanza for the wealthy, whereby one could give £500,000 and the state would have to cough up the balance. The overall cost would be minuscule in the scale of what we are talking about. We recommended also some Short money increases and so on--£2 million or £3 million has gone in that direction. It would have been a good thing to encourage democratic support for the political parties by making that concession. I am sorry that it has not proved possible for that to be done.

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The noble Lord, Lord Mackay, has drawn attention to a large number of points of detail on the Bill. We did not draft the Bill. We drafted the ideas which lie behind it. I hope that I shall be forgiven for not following the noble Lord down his ingenious route in looking at possible defects in various clauses. I commend the Bill in principle to the House and hope that it will finally be enacted.

5.32 p.m.

Lord Jopling: My Lords, it is a pleasure to follow the noble Lord, Lord Neill. I particularly agreed with one of the final points he made about the attractions of tax relief. It is a great pity that the Government have not thought fit to include that kind of provision in the Bill.

I have always taken the greatest pride in the British electoral system as it stands today--principally when I visit the United States. I have had the great honour of being the secretary of the British-American Parliamentary Group for the past 13 years. Hence I go quite often to meet members of the House of Representatives or the Senate. I am always overwhelmed by their envy of two particular parts of the British electoral system. The first is that we have only a three week campaign and very tight spending limits. The length of time that potential United States politicians have to spend on the road trying to get elected is quite horrific. I remember going to West Virginia and spending a day with Senator, as he now is, J Rockefeller when he was trying in 1972 for the first time to become the Governor of West Virginia. I remember his wife saying rather despairingly that they had already been on the road for a year and there was still two months to go until the election. In fact, he failed to win that time and he did not become Governor of West Virginia until the next election four years later, so I suppose that they had to spend another 18 months on the road. That does not seem to be a good system.

The second great advantage we have--I come back now to points made by the noble and learned Lord, Lord Howe of Aberavon, and the noble Lord, Lord Neill--is that it is in this country held to be illegal to buy air time on either television or radio. Again, so many politicians in the United States have told me how they would welcome with open arms, although I do not suppose that the owners of the media companies would welcome it, a change in the law to make it impossible for those in the United States to buy air time.

When we are changing our system of elections, as we are in the Bill, I judge it primarily in terms of whether we maintain fully those advantages with regard to a short campaign, tight spending limits and the fact that in this country we cannot buy air time on television or radio. Above all, we must ensure that there is no possibility that in an election or referendum in Britain either parties or individuals can hire air time. In the United States they would love to ban it. However, as I understand the position--the noble Lord, Lord Neill, skirted around this point--it is very likely that that

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would be held to be illegal under the constitution, which says that there should be freedom of speech. I agree with the noble Lord that it would be a tragedy if a human rights court somewhere, perhaps beyond these shores, ruled that in Britain we too must allow our politicians, in the interests of free speech, to be able to buy air time.

The allocation in our three-week campaign of free air time during elections is perfectly fair and adequate. Indeed, anyone who has fought an election would agree that, for the public, three weeks is already a good deal too much for very many of them. With a whole number of new radio and television channels and with international channels like CNN, some companies would undoubtedly be all too ready, given an opportunity, to take cash for selling air time to candidates in British elections. I should very much like to see written on the face of the Bill a clear statement that it is illegal for candidates in elections or those pushing a case in a referendum to be able to buy air time and that they must confine themselves to the free allocation that is agreed.

I say that principally because the new regulations in this huge Bill are much too complicated and go far too deeply into detail. I so agree with a previous speaker who referred to a step-by-step approach. The Bill as it stands will inevitably lead to a new science of keeping the campaign legal and within the law but at the same time taking advantage of all the loopholes in election law that appear as a result of the Bill. The complexity of the Bill and the raft of new offences, running into pages and pages, make it inevitable that not only will parties at local and national level need accountants to look after their finances, but those accountants and those organisers will need a lawyer at their elbow as well in order to ensure that they are kept within this new complexity of election law. The science, which I believe will grow, of finding loopholes in election law will be comparable to that of finding tax loopholes which has proved so profitable to so many professional people. Parties will be forced into trying to find such loopholes. I can hear them now saying, "If we don't take advantage of every loophole, the other parties will, and they will trample all over our backs".

I turn to the issue of foreign funding for political parties. Although I understand the purpose of the Bill's provisions, I do not really understand how one stops the funding of political campaigns from overseas sources during an election. The noble Lord, Lord Marsh, asked a question about this matter during the Minister's introductory statement and we did not receive a satisfactory answer. I hope that we shall receive one. I speak of campaigns that would refer neither to the fact that an election was taking place nor to any election candidates or political parties; but the content of those campaigns would have a clear political message which would be very relevant to the issues surrounding the election or referendum. In the past, it could have been a campaign with regard to anti-nationalisation. Now, it could be a campaign that is either pro- or anti-Europe. It could be done by means of posters, by mass mailing or by the use of

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various IT techniques. This seems a wide open way in which the provisions that the Bill rather laboriously attempts to lay down could be circumvented.

I turn next to the issue of referendums, and begin by expressing a personal prejudice. I believe, as a matter of principle, that referendums are a negation of the parliamentary system. I irritated my constituents over 33 years when I was a Member of another place by always saying that I would never support a referendum for anything. I detest referendums and have always wanted to vote against them. Hence, I should much prefer that there were no referendums, and for us not to have to make rules for their conduct. But if we are to have the wretched things, the terms of the question are crucial. A question set by Parliament, backed by the steamroller effect of the Whips, is the wrong way to decide what the question should be. I hope that the electoral commission will play a bigger part than the Bill seems to suggest in deciding what the question should be. The noble Baroness, Lady Gould, also referred to this matter.

Finally, the Bill is full of over-complications; and it contains too many anomalies and unfairnesses. It will need a long and detailed Committee stage because it needs a great deal of amendment. What is needed, and what we want, is a Minister who is properly briefed, one who is understanding not only of the Bill but of election law and practice, and who is sufficiently flexible to ensure that the finished product is fair and that it can achieve a consensus in this House.

5.43 p.m.

Lord Shore of Stepney: My Lords, I begin by declaring an interest as a member of the Committee on Standards in Public Life whose report underlies most of this legislation. My remarks need to be brief. I certainly do not disagree with what my most distinguished chairman had to say, and indeed said so well. He has been an excellent, and independent, chairman of our committee, unequalled except perhaps by his distinguished predecessor, the noble and learned Lord, Lord Nolan. We have been very fortunate.

I want to pick up the point made by my noble friend Lady Gould, who is no longer in her place. She went to the heart of the matter when she said that the concern is, above all, about doing something to prevent the purchase of political power. That is the underlying thought. It is certainly one that I have had--not necessarily at the top of my mind but it has always been there--since I became interested in politics. The irony is that, when I first entered politics, one of the thoughts that associated itself with the concern about the purchase of political power was the perceived imbalance in purchasing power as between the Conservative Party, our principal rival, and my own party, with its much more limited access to funds. Now, in the curious way that events have of standing everything on its head after 30 or 40 years, we find that disclosure--the naming of names, the identification of where money is coming from--no longer fits the old pattern of the corporate finance of Conservative power, but that New Labour has equal access to

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corporate power. Whether that will remain true in the future, as it undoubtedly has been in the recent past, I do not know; but in the past decade the old imbalance has virtually disappeared. That is healthy for British politics. I am all for a general balance.

What I particularly like about the Bill is that it does two things which we all agree are important and worth while. First, it insists that the parties disclose the sources of their funds. Anything over a small amount must be made clear. That must be healthy; it must be right. We know, in other words, who is contributing and whether the motives for the contribution are entirely above board, or whether they are suspect or open to criticism. We can then develop the case. That knowledge is a great advantage. Frankly, it was not something that we used to know about my old rivals in the Conservative Party, and I welcome the new provision.

Having provided for openness in regard to party finance, the Bill moves to the second stage: exercising some control over it. I am not yet entirely clear in my own mind precisely what the Bill is doing in terms of the regulation of party finance between elections, as it were. I shall need to think about that carefully when we come to the Committee stage. However, I am sure that during the crucial election period--the four weeks, or 33 days on average, which elapse between the Prime Minister announcing an election and polling day--moneys should be strictly controlled. If they can be equalled on one side and the other, that is wholly to our advantage. But the placing of a limit on what can be spent, and the requirement to declare on a weekly basis (if need be) during the election period what is flowing in, is important. It is an enormous advantage.

I could say a great deal more about the Bill's positive features; however, I shall content myself with reference to two matters of concern. The first is the idea of placing a limit on what people can contribute during an election campaign and then saying that it will apply retrospectively over the previous 365 days. That is nonsense, and we know it. I know that the Government will rethink that provision. I cannot believe for a moment that they would be satisfied with such obvious nonsense. So we have to get rid of that.

Another much more serious matter is that touched on by the noble Lord, Lord Jopling, who perhaps did not have sufficient time to develop the point. I refer to control over the foreign funding of British politics. I do not believe that any of us cavil with the general aim of the Bill in that regard. Page 2 of the Explanatory Notes states that,

    "Part IV imposes restrictions on the sources of donations so as to prohibit foreign and anonymous donations".

I wish that it did--as I believe do the Government. However, when one turns to a later paragraph in the same paper one comes to "permitted participants"; that is, those who can spend money in British politics. One finds a reference to those individuals who are registered in an electoral register and to companies

    "incorporated in the European Union",

not the UK. This may be a coach and horses to be driven right through the integrity of British politics. We must not imagine for a moment that vested

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interests on the other side of the Channel do not exist. Does one imagine that in something like a referendum on the single currency money will be withheld from European companies or the agencies of the European Union? This must be stopped. The only reason it has not been stopped so far is not that the Government do not want to do so, but because they fear that they are under the jurisdiction of the European Court of Justice. That must stop, and I shall be interested in all those who, like me, will want to table amendments to bring that about.

Having said that, I conclude on a more optimistic note. I wholly endorse the observations of my old friend the noble Lord, Lord Jopling, about the merits of the British electoral system compared with that of the United States. Gosh, we are lucky! The noble Lord, Lord Neill, referred to the tremendous advantage in being able to control television and radio. That is a real boon. I do not know anyone engaged in American public life who is not in debt, at least to begin with, in order to finance his own political activity as a candidate or member. Just imagine a member of Congress facing an election every two years without any limit on campaigning and the need to raise money to reach his electors. Awful!

The other matter of which we can be proud is that there is a tradition of honesty and fair play in this country which extends to politics and political parties. The noble Lord, Lord Neill, mentioned en passant that it is one thing to have laws but another thing to obey the spirit of them and to wish to see them carried out. Frankly, the revelation about Kohl, Mitterrand and others and the way that they have manipulated and misapplied rules and transferred money across frontiers is something that we do not want to emulate. We have something of which we can be quite pleased and proud. Let us hold on to it and strengthen it, as I believe we can do if we get the Bill right.

5.53 p.m.

Lord Lamont of Lerwick: My Lords, it is always a pleasure to follow the noble Lord, Lord Shore, who is a man of passion. For a moment I thought that his passion would be uncharacteristically modified by the inhibition he felt by being part-author of the Bill. However, towards the end we saw the noble Lord's usual passion, and impressive it was, as always. Like my noble and learned friend Lord Howe, I apologise to the Minister and my Front Bench that I cannot be present for the winding-up speeches tonight owing to a long-standing engagement. That is a practice to be deprecated and it is not one that I normally follow.

I accept the broad thrust of the Bill. When he introduced it the Minister referred, perhaps a trifle heavily, to sleaze. It is right that we should seek to improve and achieve the highest standards in public life in the world, but I wish that we would view the problems in perspective and see that often our so-called sleaze is, as the noble Lord, Lord Shore, said, very small beer compared with what is manifest on the Continent.

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This Bill is the product of the committee chaired by the noble Lord, Lord Neill, to whom I pay tribute. The House is indebted to the noble Lord for his lucid and cogent speech today.

It is always good to be predictable and not to surprise anyone. I should like to concentrate on those aspects of the Bill which deal with referendums. I appreciate that this is not just a Bill about the forthcoming referendum on the single currency, but inevitably that is in many people's minds and we must judge the provisions in that light. It is right to achieve fairness to both sides in a referendum, and that is very important in a referendum on the single currency. That point is illustrated by what is going on at the moment in Denmark, which should be a warning to us. Denmark is holding a referendum on the single currency, and much more money has been spent on the side which favours joining the single currency.

This is a far-reaching Bill. As my noble and learned friend Lord Howe and my noble friend Lord Jopling have said, it is very intrusive, bureaucratic and probably unworkable. We must be careful that in seeking to address one problem we do not affect the rights of the individual to campaign and propagandise. I regard the phrase "permitted participant" as rather chilling. We have come a long way when we write into legislation such an expression as applying to politics.

The electoral commission is a very important body with huge responsibilities. I question the desirability of Clause 12 which enables the commission to carry out programmes of education, including programmes related to the institutions of the European Union. Do we really need this? A vast budget for informing people about the institutions of the European Union is already spent by the EU itself. Could this education programme include the European Central Bank, which is one of the institutions of the European Union that is central to the issue of the single currency yet to be decided in a referendum?

But the main objection is not a European one but the fact that, as the noble Lord, Lord Neill, said, the commission already has a vast range of responsibilities. It is too easy to say that if there is a problem it should be left to the commission. As the Neill Report itself said, the commission cannot solve all problems. If that body is to be involved in educative publicity about electoral reform, or becomes embroiled in the pros and cons of the additional vote versus the single transferable vote, not just proportional representation, it will undermine its authority as a regulator. I believe that the two roles are in conflict.

I turn to the issue of referendums. The report addressed itself manfully to the very difficult issue of trying to ensure fairness. It was not asked to go into that territory but did so. It referred to the experience of the Welsh referendum and expressed unease that the Government had been very active, and all the money had been spent on one side. The result was extremely close and might have been very different if the arrangements had been otherwise. As a consequence, we have the proposals in the Bill.

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Clauses 97 and 98 define the referendum period. That is particularly important because it is the period in which the umbrella organisations have their expenses calculated. The Bill tries to ensure fairness and prevent votes being bought. None the less, I suggest that it ends up giving an advantage to the organisation with the biggest pocket; namely, the Government.

Perhaps I may take as an example a theoretical referendum on the single currency. I accept that the Government cannot shut down for several months their activity on European matters. However, under the Bill any organisation campaigning to retain our national currency will have its affairs and expenses regulated for up to four months in the period between the Bill for the referendum being introduced and polling day. The period between the introduction of the Scottish devolution Bill and the vote on Scottish devolution was 119 days. The umbrella organisation is monitored and its expenses start to tick. But the Government are able, free of scrutiny, to carry on issuing press releases--let us say in favour of the single currency--until 28 days before polling day. That does not seem equitable.

It was argued in another place that that is no different from the practice in previous general elections. The Bill seeks to make different provisions. It seeks to provide that expenditure is controlled in the run-up to elections. But elections are different from referendums. Referendums are about single issues; elections are about many issues. One cannot expect the Government to close down for the whole period leading up to an election, but one could reasonably expect the Government to close down for a longer period than 28 days in the period leading up to a referendum on the single currency. Under the Bill, if the noble Lord, Lord Owen--he was present earlier--were part of an umbrella organisation, his press releases would be costed against his total permitted expenditure. However, there will be no restraint on Ministers until 28 days before polling day. I do not wish to over-emphasise the point, but it is important.

I turn to caps on permitted expenditure by political parties during referendums. The Neill Committee saw no objection to caps in principle but concluded that in practice they were impractical. None the less the Government have put forward Clauses 108 to 111. The key mistake the Government have made is to define the caps by reference to political parties. One reason that we have referendums--notwithstanding the remarks of the noble Lord, Lord Jopling--is to settle issues which cut across party lines. While parties are essential to general elections in order to simplify choice on many different issues, referendums are single issue campaigns. In some referendums in future parties may not even be the main movers in the campaign. By placing caps on the party's expenditure rather than on the umbrella organisation, and by placing caps calculated on the basis of votes cast at the last election, the Government have produced a situation which would be unfair in any referendum relating to the single currency. On the basis of the last election the pro-single currency parties--the Labour and Liberal

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parties--would be able to spend £8 million to £9 million while the anti-single currency campaign would be able to spend only £5 million.

When the Home Secretary was asked about the matter in another place he replied, "Well, of course, there is no way that the Liberals will ever be able to raise their £3.5 million, or anything like that". I do not know about that. But it seems bad law to put down on the statute book arrangements which are manifestly unfair and then say, "It doesn't matter because it won't work out like that in practice". How does he know that money cannot be transferred to the Liberal Party? From debates in another place there appears to be nothing to stop other organisations channelling their money to the Liberal Party. I refer to the European Union. The question was put to the Minister today about how caps affected the European Union and the Commission. I do not wish to be harsh but the Minister gave a somewhat lame answer. My noble friend Lord Jopling is right. We need an answer to the question of how the caps bite, if at all, on the European Union. How will its expenditure be controlled in a referendum on the single currency?

In the debate in another place, Ministers gave a rather pathetic impression of simply appealing to the European Union not to interfere in the single currency referendum because it might well boomerang and be counter-productive. That slight note of panic in their voices merely fuelled further suspicions.

Then there is the question of whether caps can work. There is a limit of £0.5 million for other organisations which are not the umbrella organisations referred to in Schedule 13. It was confirmed in debates in another place that organisations can split themselves into two, three, four or five bodies, all with different names. Each body will be entitled to spend £0.5 million if it can raise that sum. I do not see how the caps can work. The provision is futile and self-defeating.

The same argument applies to caps at the other end of the scale, to the individual. Clause 112 states that no individual can spend more than £10,000. But individuals can band together and create campaigns in specific areas. It would be next to impossible for the commission to stop that; and it would be questionable whether it would be right to do so.

I understand the Government's problem. They fear that if there are no limits money may dominate the campaign. On the other hand, it is important not to prevent individuals expressing themselves and communicating their views. Therefore they believe that they must strike a balance. However, I fear that in pursuing that elusive balance, they have merely produced bias. What they have produced is unlikely to be effective. In their efforts to be effective, they have produced a system which in the single currency referendum will favour the Government.

The Government have one other overwhelming advantage. They can choose the date of the referendum. Any anti-single currency organisation may fritter away its money, not knowing whether or not the Bill to trigger the referendum is about to be introduced next week. The Government have a huge advantage through timing.

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In trying to control spending, the Government have made the wrong choice. There are three alternatives. To cap umbrella organisations is difficult. A cap on each participant is difficult. I am inclined to favour no cap on spending as the Neill Committee recommended. In pursuing perfection we are out of touch with reality. The reality is that the publicity on the matter will be huge and unlimited--in the newspapers and the media. The reality is that any money raised will be spent one way or another and no legislation will stop that.

It is all very well for Ministers in another place to say, "Something has to be done". That is always a poor recipe for policy; it invariably leads to trouble. It is all very well asking, "What is your alternative?" The alternative to jumping out of the window is not to jump out of the window. The Government have gone down the wrong road. I applaud much of the Bill. However, I fear that the proposals applying to referendums are unfair. I shall watch out eagerly for any opportunities to amend the Bill.

6.8 p.m.

Lord Goodhart: My Lords, I am very pleased to be speaking in the debate. I am particularly pleased because I, too, am a member of the Committee on Standards in Public Life. I echo the tribute paid by the noble Lord, Lord Shore, to our chairman, the noble Lord, Lord Neill of Bladen. I was going to say that I am delighted to follow the noble Lord in this debate. Unfortunately, that would not be true as the noble Lord has already said more or less everything I was going to say. Therefore, what I shall say will sound somewhat familiar.

It is gratifying to us on the committee that not only have the Government accepted almost all of our recommendations, but have proceeded to implement them quickly. It is still only 18 months since the publication of our report and this major piece of legislation has reached the half-way stage of its process through Parliament.

Before discussing the Bill in more detail, I should make my position clear. The recommendations in the report and the provisions of the Bill are not wholly consistent with the position of my party. The Liberal Democrats strongly welcome the Bill, but believe that in some respects it does not go far enough. In particular, as my noble friend Lord McNally pointed out, the Liberal Democrats would like a good deal more emphasis on state funding. No doubt my party will want to table amendments on those issues, but it would not be proper for me to move or support amendments which are inconsistent with a report which I signed. Therefore, I shall participate in debates on the Bill from the Back Benches.

There are four central proposals in the report. The first and foremost is transparency. The identity of donors of gifts above a minimum size and the amounts given by them must be disclosed. Money often buys influence and it can certainly buy access. Perhaps I may take a non-controversial and well-known

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example. The influence of the trade unions on the Labour Party, particularly in the past, has been due at least in part to their financial support of that party.

If we know where the money is coming from, we can scrutinise the behaviour of the party which receives it. Is the party going out of its way to take action, or to avoid taking action, in ways that will benefit the donor? Is there a quid pro quo for the donations? If the information about the donations is in the public domain, the press and the other political parties will be watching to see what the donor gets out of it. If the information is kept secret, the watchers do not know where to start.

Secondly, funding must come from those with a real interest in the outcome of the election--that is, from people who are on the electoral register or from companies carrying on business in the United Kingdom--not from long-term tax exiles. In that, I disagree with my colleague on the committee, the noble Lord, Lord Shore. Overseas companies usually carry on business in the United Kingdom through subsidiary companies incorporated in the United Kingdom. Under our original proposals, such companies would be permitted donors. The only extension made by the Bill is to a business carried on in the United Kingdom which is carried on by a branch rather than a subsidiary of a company incorporated elsewhere in the European Union. There must still be a business carried on in the United Kingdom. That seems to me to be a relatively minor extension and a perfectly acceptable one. In any event, wherever quoted companies are incorporated, their shareholdings are increasingly international.

The third central element is the limit on national campaign expenditure. The fund-raising "arms race" increased greatly at the previous election. Vast sums were spent on billboard advertising by both Labour and Conservative Parties. Those, as a member of the Conservative Party later admitted, were almost certainly wasted, but each party felt that it had to keep up with the other. An uncontrolled "arms race" means that parties become ever more willing to solicit and accept dodgy donations and ever more dependent on finding and keeping supporters who can give them individually millions of pounds.

The fourth essential element is the electoral commission, whose role will be central to the enforcement of rules under the Bill. The commission will also enable existing rules on local spending limits to be enforced more effectively and will enable election rules to be updated much more regularly than at present. Indeed, it is necessary to say that the other reforms proposed in the Bill would not work without an electoral commission.

On all of those central issues, the Government have accepted the recommendations of our report more or less as they stand. Indeed, in one respect, I believe that the Government have improved on our proposals. We proposed an exemption of £50 for anonymous gifts. The Government propose to exempt from the reporting obligations, and therefore from a considerable amount of record keeping, donations whether anonymous or not up to £200. That will

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reduce the burden of record keeping for parties, particularly at constituency level, without opening a substantial loophole. There are anti-avoidance provisions to prevent people giving more than £5,000 by means of a large number of small donations. That change also remedies an unintended defect in our proposals. It was that those too young to be on an electoral register could not pay membership subscriptions to parties and therefore could not be party members.

I turn to other issues. The Government have dealt sensibly with the difficult issue of the political activities of third parties, in particular various single-issue pressure groups. The decision of the European Court of Human Rights in the Bowman case shows that denying such groups the right to intervene in elections or referendums is an unacceptable infringement of freedom of speech. I have to say that having read that judgment I am persuaded by it. However, experience in the USA shows that some limits on third-party spending are essential. The Bowman judgment makes it clear that the courts would be prepared to accept reasonable limits on third-party spending.

I do not want to discuss the special treatment of Northern Ireland parties in detail, but I believe that it is a regrettable necessity.

The treatment of referendums has been one of the more controversial issues in the Bill. The Neill committee did not recommend spending limits because we thought them impracticable. However, as we made clear in subsequent correspondence, we have no objection in principle. The Government differed from our view and decided to impose spending limits. On reflection, I believe that they were right to do so. The problem with the Government's original proposals was that the limits were entirely based on parties. The spending limit for each party represented in the House of Commons in a national referendum was to be £5 million. I believe--and slightly to my surprise I find myself in agreement with the noble Lord, Lord Lamont--that the party-based ceiling produces unfair results where most parties are on the same side. That was the case in, for example, the Welsh referendum, in which Labour, the Liberal Democrats and Plaid Cymru were on one side, and the Conservatives effectively played no part.

It is fair to say that the preference of the committee was to direct spending much more through umbrella groups, where it was possible to form them, than through the parties. In the Bill the Government have moved a little way towards that by scaling down spending limits for parties with less than 30 per cent of the national vote, but it is questionable whether they have gone far enough.

Finally, there is one major issue on which I believe the Government got it seriously wrong. I refer to the question of tax relief on political donations. There is a precedent for giving tax relief on political donations; there is, and has been for many years, relief from inheritance tax on donations to political parties, if those political parties either have two Members in the House of Commons or have one Member and the

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party received a total of at least 150,000 votes. The proposal of the Neill committee was modest and was targeted on smaller donations in order to avoid giving disproportionate advantages to parties with wealthy supporters.

We proposed a limit of £500 a year on donations on which relief can be claimed. To ensure that there was no extra benefit to wealthier donors, we proposed that relief should be given only at the basic rate of tax and not, as in the case of gifts to charities, at the higher rate of tax as well. I believe that it is in the interests of democracy that parties should be funded by a large number of small donations rather than by a small number of large donations. I believe that anything that increases the value to political parties of small donations is to be encouraged. Further, the giving of tax relief on small donations sends out the message that, for ordinary people, giving to political parties, like giving to charities, is good. It is to be encouraged because it contributes to the democratic process.

What, therefore, are the Government's objections? Originally, the Government objected on the ground of administrative burden. It seems that that objection has now been dropped. Of course, the administrative burden of dealing with claims for relief from a handful of political parties is as nothing compared with the administrative burden of dealing with claims for relief from literally thousands of charities. Charities are now able to claim relief on one-off gifts of any amount because the £250 floor on gifts that are eligible for gift-aid relief is no longer applicable.

However, the main argument, which we heard again in the Minister's opening speech, is that the giving of tax relief reduces tax receipts and therefore less money is available for schools and hospitals. That has been argued time and time again--and it remains totally absurd, as it always has been. Let us compare £4 million or £5 million with, say, the £92 million which, I believe, was the Government's advertising budget last year; the Government estimate the cost of tax relief to be only £4 million or £5 million a year. That amounts to 0.001 per cent of government revenues. In other words, tax relief on donations to political parties will reduce the revenue by approximately £1 in every £100,000. It seems to me to be a total absurdity to complain about that on the ground that it will make less money available for schools and hospitals. Plainly, it is a price that is worth paying for the protection of democracy.

Of course, tax relief is a matter for the Budget and would not in any event have been dealt with in this Bill. However, I hope that the Government will reconsider their objections and that there will be such tax relief in next year's Budget. With regard to what is in the Bill, I can welcome it virtually without reservation. Democracy is about the power of people, not about the power of money. The power of money thrives on secrecy and darkness. I believe that throwing light on the funding of political parties will weaken the power of money and thereby strengthen democracy.

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6.23 p.m.

Lord Norton of Louth: My Lords, I wish to make a general comment about the Bill and then to focus on its particular parts. There is much to welcome in the Bill. However, I believe that there is a problem in terms of what it does not do and what it seeks to do, and that there is a danger of missing the broader picture.

When he introduced the Bill at Second Reading in another place, the Home Secretary said that parties were vital to the functioning of any representative democracy. He was absolutely right and I can fault nothing in his comments about the role of parties. However, I am not sure that the Bill goes quite as far as he suggests in addressing the problem that now faces political parties and, indeed, the political system.

People are now less likely than they were 30 or 40 years ago to join a political party. Fewer people become involved in political activity. The MORI Omnibus polls show that young people between the ages of 16 and 24 are less politically active now than they were at the beginning of the 1970s. Voting among that group has fallen by almost one-third.

The Home Secretary said that we should celebrate the fact that so many supporters of political parties recognise their civic responsibilities by contributing to their party's financial well-being. I agree. However, the real issue that needs to be addressed is why so few people contribute to political parties and, indeed, why so few people join and are actively involved in political parties.

The Bill seeks to restore public confidence in the political process by providing for greater transparency and accountability in funding and for limited campaign spending. It is difficult to disagree with the aim of the Bill. However, I am not altogether certain that it is as well crafted as it might be for fulfilling that particular aim. Nor am I sure that it does a great deal to address the wider problem that I have identified. As some noble Lords have mentioned, some of the provisions may serve as a disincentive to political activity.

That is not to argue against the Bill but rather to call attention to the fact that we should be looking at the causes of political alienation and why people do not become involved in the political system. I believe that there is a danger of placing too much reliance on the Bill, and also the Representation of the People Bill, to improve the health of the political system. Such measures may help but, if they do so, it is likely to be at the margins. We need to devote more time and resources to addressing the more fundamental questions.

I turn to what is in the Bill. I welcome many of the provisions but I believe that it contains a number of problems. One concerns the remit of the electoral commission. It is given certain duties to fulfil which are not appropriate, while it is denied a role that I consider central to its existence. Under Clause 12, the commission is empowered to promote public awareness of electoral systems, systems of local and

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national government, and the institutions of the European Union. That takes the Bill beyond what the Neill Committee recommended.

I can see the case for the commission to promote awareness of electoral systems. That is perfectly sensible and proper. However, as do other noble Lords, I fail to see why promoting awareness of systems of government--be it local, national or the European Union--falls within the remit of an electoral commission. That is to confer an educative function that takes it beyond its obvious sphere of competence. Indeed, I shall be interested to hear from the Minister how he reconciles Clause 12(1)(b) and (c) with the Long Title of the Bill.

Therefore, the commission is given things to do that are not appropriate. At the same time, it is not given a role that I would consider fundamental to its existence; that is, to advise on the question to be asked in a referendum. I appreciate that the Neill Committee did not recommend explicitly that it should be given that role. However, I believe that it should be a central function of the commission. Although there is provision for the commission to review and report on the conduct of referendums and to offer advice to relevant bodies, there is nothing on the face of the Bill that requires it to be consulted on the wording of a referendum.

I suggest that the question in any referendum must fulfil two fundamental criteria. It must be unbiased and, equally important, it must be unambiguous. This second criterion has not received the attention that it deserves. If the meaning of a question is not clear, it is possible for voters to cast what, quite simply, are termed "mistaken" votes; that is, voting contrary to what they believed they were voting for. Research has shown that in some state referendums in the US, between 10 and 20 per cent of voters have cast "mistaken" votes.

Surely, the electoral commission has an obvious role in ensuring that both criteria are met. It will have the professional expertise, as well as the organisational capacity, to undertake pilot surveys. However, the fact that a question permits of ambiguity may not be apparent until it has been tried out in such a survey. One needs a body--a qualified body--to undertake such work. I believe that the case for conferring such a responsibility on the electoral commission is compelling. At a minimum, the Bill should embody the requirement that the commission be consulted on the wording of the question.

I turn to the provisions which govern the funding of political parties. I appreciate the argument that motivates this part of the Bill. In the other place, the Home Secretary stressed the need for funding to be transparent. In fact, the Minister said that it should be "open and transparent" and I look to him to explain later the difference between openness and transparency.

However, the Minister missed two other essential criteria. For the Bill to be effective, it has to provide for transparency, enforceability and equity. The regime created by the Bill is overly detailed and bureaucratic.

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It imposes a massive burden, arguably an intolerable burden, on party treasurers, not just nationally but also locally. I am not sure that the parties at local level have the capacity to meet the phenomenal compliance burden. I suspect that the Bill lays down rules that will be difficult to enforce and which, in some areas, can be circumvented. Any wealthy foreigner resident in the United Kingdom could acquire economic citizenship of one of a number of Commonwealth countries and then, by virtue of that status, register to vote in this country, thus becoming a "permissible" donor. There is a serious problem of equity in terms of donations made by companies. That point has already been made and I will not expand upon it.

The provisions governing Northern Ireland--again as we have heard--clearly create an inequitable situation. And what is the justification for a Swedish citizen resident in the United Kingdom being a permissible donor when a Norwegian citizen resident in the United Kingdom is not? There may be a case for re-casting the provisions of the Bill to provide for a much simpler regime. I should be inclined to slim down drastically the excessive degree of regulation, especially in distinguishing between types of donors. To be enforceable, the real need is to be simple and straightforward.

Finally, I turn to the provisions governing referendums. I have spoken already regarding the role of the electoral commission in respect of referendums. I believe that other changes are necessary. Like my noble friend Lord Jopling, I have a principled objection to referendums. I should prefer that we did not have them. However, if we are to have them, then they should be subject to rules that are clear and consistent. We should not have rules which are made up each time a referendum is held. There are two problems with referendums: first, ensuring a fair and unambiguous question; secondly, ensuring an adequate turn-out of electors. I have already addressed the first problem. What about the second problem? The excellent book, Referendums Around the World, edited by David Butler and Austin Ranney, embodies research that shows that turn-out in referendums tends to be lower than that in elections of candidates to public office. Indeed, we have experience of that in the United Kingdom.

A low turn-out in a referendum is not only more likely than in an election to public office, it is often a greater cause for concern. With elections to public office, the candidates who are elected can be removed in a subsequent election. In many cases, the outcomes of referendums are difficult to overturn. Once something has been approved by referendum, it may be set in stone for some time.

There is a powerful case to be made for introducing a threshold requirement, providing that a certain proportion of eligible voters vote yes in order for the vote to be valid. Various countries impose thresholds. Thresholds were, of course, stipulated by statute for the referendums in Scotland and Wales in 1979. I do not think we can chop and change from one referendum to another. Either we have a threshold or we do not. The case for a threshold is compelling.

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Referendums tend to be held on important issues and there is the danger of some irrevocable step being taken on the basis of the votes of a minority of electors. Therefore, I believe that a threshold, including the precise percentage to be reached, should be written into the Bill.

This is something of an omnibus Bill. We must not lose sight of the wider problems that it does not address. In terms of what it does cover, it is clearly a substantial and important Bill. It deserves the most detailed scrutiny in Committee in order to ensure that the various criteria that I have outlined are met. If Government accept those criteria, then I hope that they will respond positively to the proposals that I have put forward.

6.34 p.m.

Lord Harris of High Cross: My Lords, we have heard some good speeches. What interested me especially in the unusually cheerful speech of the noble and learned Lord, Lord Howe, was his outspoken dismissal of seeking salvation through legislation. That encourages me to cast caution to the wind. It seems to me that the case for the Bill takes only a moment's thought. If we accept limits on spending for parliamentary elections, then why not have limits for referendums on an issue of exceptional significance, like the euro, that cuts across party lines? At first blush, equal spending by two sides seems the plainest of fair play. To use the over-worked European slogan, why should we not have a level playing field? A referendum offers two sides. It is either yes or no. I confess that "two sides, equal spend, fair's fair" was my initial reaction at first reading, after only a moment's thought.

Doubts on the application of the Bill to the referendum arise only on a second reading, following more mature thought. It is true that there may be only two sides, but as in geometry there could be three, four or more angles. On the euro, the "Yes" men would range from the European payroll vote--rather well-represented in this House--to the outright federalists who support anything labelled European whether from unfounded optimism about the Continent or equally unfounded pessimism about their own country. We are told that the "No" vote would range from the extreme xenophobic nationalists to the enlightened, internationally-minded, classical liberal economists, such as myself.

Let me come clean at the outset. Old hands in politics say one must never say "Never". Thank heavens I am not in politics--perhaps because no one will have me. But my considered formula, which differs from the Tories' compromise, is that I cannot visualise any circumstances in which I would wish Britain--or, if it comes to it, England--to sign away its economic freedom by submerging the pound into the euro, or, for that matter, into the dollar. Who will present that emphatic opinion?

Should there ever be a referendum on the euro between the baddies and us goodies, how should the permitted limit on spending be allocated between the

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rival factions on both sides? Even if some objective authority could be found to fix quotas for the three main parties, how would the noble Lords, Lord Shore and Lord Stoddart, be able to organise the pro-Labour, anti-euro group, or the noble Lord, Lord Owen, appeal to his distinctive constituency of sophisticates who appear enthusiastically to support all things from Brussels except the euro? Then, I am told, there is at least one discerning Liberal Democrat whose true liberal principles lead him to oppose this example of naked price-fixing of currencies. Is he to be prosecuted for campaigning among his confused colleagues? What is all this about "permitted participants", "responsible persons" and "designated organisations"? I agree with an earlier speaker who said there was some faintly anti-democratic, authoritarian ring about that.

We have heard about the one-sided propaganda from Brussels; we know of it from our own radio and television programmes. And, of course, we have had it for some years from Her Majesty's Government, not least in the schools. As for the British press, I can only say, thank heavens, that the majority, anti-euro voice predominates in the most successful newspapers. I would argue that they provide a better reflection of public opinion simply because they have to take account of their readers' preferences. But do our would-be controllers think that space devoted by newspapers to arguing the pros and cons of Europe should be controlled or influenced by such independent arbiters as, perhaps, Alastair Campbell or Peter Mandelson?

Whatever our first instinctive feelings on the merits of this Bill as it applies to referendums, I believe that more mature reflection leads to serious doubts that a simplistic rationing of the argument is either feasible or necessary. It is not feasible because strict quotas could not in practice be enforced nor arbitrary time limits imposed on campaigning.

How on earth could approved limits on spending be measured or fully monitored? What debit would be charged against a campaign for using up stocks of leaflets or promotional videos which had been deliberately piled up in advance? What is to happen in relation to the CBI or less easily organised small businesses or straightforward patriots spending their own money to air their anxieties? How is it possible to monitor badges or T-shirts with appropriate "Keep out" slogans? Are they chargeable? Do they become chargeable if the noble Lord, Lord Stoddart, buys thousands of them to distribute freely among his trade union supporters?

One noble Lord mentioned the Internet which will plainly play an increasing part in all future campaigns. Is the organisation of tens of thousands of messages to be tracked, counted and charged against the financial quotas of one side or the other?

Fixed budgets are neither feasible nor necessary. The only rough justice must be rigorously to check government spending to prevent the ruling party using

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voters' money to influence the voters' choice. As we have learned recently, that happened on a shameless scale under Ted Heath in the early 1970s.

As the noble Lord, Lord Shore, acknowledged, it is no longer true that the Tories can automatically outspend the rather more furtive moneybags of new Labour and the trade unions. So long as governments do not cheat, we must assume that the ability of both sides to raise campaign funds, not to mention recruit voluntary canvassers and other help in kind, is an approximate reflection of public support for their respective positions.

My conclusion is that we should stop searching in vain--like Tony Blair's army of advisers, dreamers and interfering nannies--for a new deal, a fair deal, an ideal world with a perfectly level playing field. Let us settle for the rough and tumble of the real and admittedly messy world of democratic politics.

6.42 p.m.

Lord Cocks of Hartcliffe: My Lords, I support what was said by the noble Lord, Lord McNally, and my noble friend Lady Gould about the difficulty of finding somebody suitable to be a commissioner who had no recorded views and had never taken a stance on any subject. Such paragons, if they could be found, would not really be suitable for the job. In fact, if someone reaches the age at which he is considered suitable to be a commissioner and it is not possible to detect anything on which he has taken a stance, everyone automatically thinks, "What is wrong with him? What has happened there?" So we really must try to keep in touch with reality in that regard.

The noble Lord, Lord Neill, mentioned the referendum in Wales and the disparity of funds on different sides. But he did not go on to mention that the Rowntree Trust gave money to the "Yes" campaign but not to the "No" campaign. When I asked it why it had not contributed to the "No" campaign, it said it believed in proper democratic debate. At that stage, I gave up.

The noble Lord, Lord McNally, raised the question of state funding. It is not through lack of will by the previous Labour government that that was not introduced because, as Chief Whip, I was charged with implementing the Houghton report which recommended state funding. But I did the arithmetic and I simply could not get it through because several of my Members objected on conscientious grounds. They felt that they could not stomach making the general public pay for the political parties to indulge themselves. I tried to reason with them but I could not do it. That is why we did not get the Houghton report through. I must tell your Lordships in frankness, with my non-conformist background, that had I been a Back-Bencher being approached by the Chief Whip, I should have taken the same stance myself. But in no way did I ever give any idea to the victims that that was my feeling.

The noble and learned Lord, Lord Howe, was quite right when he talked about the plethora of advice which this will generate. We shall almost have a new

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profession of advisers. Those people will advise that in order to be completely free of any possible legal action, in every committee room and every room used by the volunteers, on the wall there should be a list of offences and the penalties so that everyone is clear about the matter. One look at that lot and you could shut up the shop because people simply will not want to be associated with it.

I support the Front Bench on the question of no tax relief on donations. The working classes are already paying for the luxuries and entertainments of the middle classes through the lottery. It is said that the lottery is a voluntary matter and that they do not have to buy tickets. That argument just about stands up but it is touch and go. Why a bus driver--I will not refer to somebody digging holes in the road out of deference to the noble Lord, Lord Peyton--or a manual worker should pay tax in order that the Liberal Democrats, the Conservatives or the Labour Party can thrive is absolutely beyond me. It is so basically inequitable that there would be a massive rebellion by taxpayers who would pay in their money and deduct that portion of it.

I regard this Bill as hybrid, not in the parliamentary sense but in the sense of its origin. I believe that its parents are, first, the chattering classes and, secondly, the spin doctors. I have referred to the chattering classes before in this Chamber. The noble Lord, Lord McNally, put his finger on the issue when he said that the Bill is part of a package. It is part of a plethora of reforms to our constitution which have been pushed by pressure groups, including Charter 88, to which I have alluded before in this Chamber, which has a minority of academics and lawyers as members. It is highly organised. According to its advertisements in the newspapers, it has 80,000 signatures. It was foolish enough on one occasion to reveal that 1.5 per cent of those signatures came from social groups four and five. So we are dealing with a highly organised body which bounced the Labour and Liberal Democrat parties into constitutional change. At the time, I warned that the result of that would be that we should have an increasing amount of litigation. I made that point in particular when the human rights legislation was passing through the House.

In the Daily Telegraph of 30th March the headline was:

    "Warning on Euro rights 'panic'".

Jack Straw was addressing a meeting of the Institute of Public Policy Research. He said:

    "There is no need to get panicked about this".

The article goes on to say that one of the people behind the scenes in Whitehall--we know that there are a few of those--said:

    "It's a litigants' charter. The lawyers will make a fortune".

Private hospitals, schools and security companies are said to be panicking over the introduction of that legislation which will bring a flood of claims.

That is not the only area in which that could happen. In 1995, I spoke in your Lordships' House on the question of single-issue groups. I expressed my fear

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then that the constant working up of grievances in society, with the suggestion that legal action is the answer, will cause us all a great deal of anguish.

I gave the example of an appointments card which I had from the Chelsea and Westminster Hospital. I turned it over and it said:

    "Had an accident? Road accident, accident at work, tripped on the pavement? You may be entitled to compensation",

and it gave the name and address of the firm of solicitors. That was a hospital appointments card. No doubt the hospital had a vested interest in promoting that sort of thing.

But matters are growing worse. That was 1995. Noble Lords have probably watched commercial television and seen the advertisements by Claims Direct which say that if you have had an accident and so on, you may be entitled to get compensation. You telephone and are given examples of successful cases. The financial section of the Mail on Sunday has a "new issue alert", which I read religiously for purely academic interest. Recently, it featured the fact that one of the new issues coming to the market is Claims Direct, the estimated capital value of which was £150 million. That is a value of £150 million for that company whose adverts are seen on television. The figure has been increased over the past two issues to £200 million plus, which comes out of exploiting people's anxieties over such matters.

The other side of the coin is that if the litigation culture grows much worse no one will go into the caring professions. Yesterday's Sunday Telegraph carried the headlines,

    "Old NHS wards used in nurses' homes crisis",

    "Police shortages leave 999 calls unanswered",

and the Times Educational Supplement this week:

    "Recruitment crisis spurs ministers to offer postgraduates up to £10,000 a year".

No one will go into the caring professions if we continue piling on legislation in all areas.

The spin doctors have placed an emphasis on donations, a topic that was all worked up before the last election. One of the subjects which has not been properly explored by the Neill Committee is the abuse of charitable funding for political purposes. I raised the issue in a Question in your Lordships' House about the Pilgrim Trust on 13th March 1997. I asked for an investigation to ascertain:

    "whether the grant by the Pilgrim Trust towards the funding of the Constitution Unit is compatible with the trust's status as a registered charity".--[Official Report, 13/3/97; col. 425.]

The Minister said that he would pass the matter on to the Charity Commission. The noble Lord, Lord Jenkins of Hillhead, then spoke, because he was a trustee. He said that,

    "the implication of the noble Lord's Question that the Pilgrim Trust and the Constitution Unit are politically motivated bodies is an example of the extraordinary malign fantasies which occasionally seize the mind of the noble Lord, Lord Cocks".

I put that unsolicited testimonial beside the two accusations of being like Senator Joe McCarthy which have come from the same Benches, but not from the same noble Lord.

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The Minister went on to say that he would pass the matter on, but I then asked him about my inquiry about the Charter 88 Trust. He replied,

    "The inquiry is soon to be finalised. I understand that emerging findings are that the trust will be required to clarify and, where necessary, review and revise its relationship with other organisations".--[Official Report, 13/3/97; col. 426.]

In other words, to put it bluntly, the trust had been rumbled. It was abusing its position and the matter had to be put right.

A question has recently arisen over the matter. On 20th March this year I received a Written Answer from the Government. I had asked them to,

    "publish in the Official Report a table stating which government departments have used Electoral Reform Ballot Services in each of the past six years".

The Answer I received from my noble and learned friend Lord Falconer stated,

    "Information in the form requested is not held centrally by departments and could only be obtained at significant cost".--[Official Report, 20/3/2000; col. WA10.]

There is the old chestnut about significant costs, but in that case I found it entirely unconvincing. When I was Chief Whip in government in another place, I knew that if I had asked my staff for that information I would have received it within hours. I was extremely concerned about the matter.

What have we found since? The Electoral Reform Ballot Services organisation boasts in its brochure that,

    "The Society has an unrivalled reputation for independence, integrity and impartiality which has been built up over the past 100 years".

It goes on to state that it has won major contracts from the Government and that it has,

    "successfully tendered for a major contract from the Department of Education and Employment to run ballots on the future of Britain's remaining 166 Grammar Schools".

Substantial amounts of money are paid by the balloting services into the Electoral Reform Society's coffers; well into six-figure sums in dividends. It receives also money from two other commercial units in the Electoral Reform Society's structure. That is taxpayers', the general public's and trade unions' money going into the Electoral Reform Society to propagate a massive programme of constitutional change. I feel that that is particularly pertinent because currently, as we know, in Scotland the businessman Souter wished to run a referendum and was in negotiation with the Electoral Reform Ballot Services, which has suddenly pulled out.

The editorial of Friday's Daily Record states,

    "The name of the Electoral Reform Society has become a byword around the world for integrity, fair play and democracy.

    But not any more".

It then goes on to criticise the way in which support for the ballot has been pulled out on grounds which it claims are extremely thin. I shall not weary the House with any more of it. But if a reputable organisation such as that suddenly caves in to what must be some kind of political pressure, it undermines the integrity

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of the entire political system. If we are talking about getting individuals interested in supporting and running our democratic system, that kind of example simply will not do. I hope that we shall keep the Bill as simple as possible and explain to people that it is meant to help them and not to hinder them and threaten them with a lot of penalties.

6.55 p.m.

The Earl of Onslow: My Lords, we have come quite a long way in this country since Lord Holland could, as Paymaster-General for Forces, take the army pay, put it on deposit for his own account and pay the army at the end of the Seven Years' War, having retained the interest to his own benefit. We have come a long way even from Clive of India, who, when surrounded by piles of gold moidores, pieces-of-eight, rubies and diamonds beyond price, lakhs of rupees beyond count and accused of helping himself from Mir Jaffier's treasury, said, "Gentlemen, I stand astonished at my own moderation".

We have even come a long way from, or never went near, Talleyrand who, when appointed French Foreign Secretary, is reputed to have rubbed his hands together and said, "Une fortune immense, une fortune immense". That story was possibly invented by Madame de Staol, who did not like him. We are not at all near to the shenanigans up to which Chancellor Kohl has been seen to be got.

That applies even to Mr Hamilton, who is reputed to have accepted 20 grand from our Egyptian friend. The reason our Egyptian friend got cross with him was not because he accepted the 20 grand, but because he refused to have anything to do with him after he became a Minister. The point I am trying to make is that actually we live in a fairly nice, non-corrupt society. We should always bear that in mind. We should bear it in mind too because we have an active media who keep us politicians more or less up to scratch--although they do not always tell the stories about how badly they behave at media award parties; or of how one member of the press is seen to get rather drunk, which I suppose is human nature. I believe that we can be thankful--I nearly said, "to ourselves", but that is too smug--that we have a rather nice and uncorrupt society.

I accept that the Bill is probably necessary because of the great cries of sleaze, and this and that, and the third thing which went on before. But when we compare that with what happened under Holland or Clive, we see that the element of sleaze was so small. When I was at Eton, there were two members of my house--one was David Sainsbury, the other was me--neither of whom were ever considered a possibility for government office. They were wrong about one and right about the other. But I do not have a supermarket chain behind me.

There have been other examples of people who have handed out money for the privilege of sitting on your Lordships' Benches. It almost always works out that they have spent their money quite well and they have made a contribution. But I am still sure that the Bill is needed because of the climate in which we live.

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I have but two points to make. One is the point made by the noble Lord, Lord Cocks, and other noble Lords, about the commissioner having to be basically someone who cannot have thought anything at all. Three Speakers of the House of Commons were members of my family. They were all to begin with rather gutsy politicians. They then became impartial Speakers. One of them admittedly had to be stopped by the House of Commons for fighting a duel, but then he was made the first Baron Onslow and that is why I am here indirectly, so I thank him for that. Then there was Lord Selwyn-Lloyd, who was hated for his pay pause and for being Foreign Secretary at the time of Suez. Lord Tonypandy was fairly Left-wing in his youth, but he became an excellent Speaker. It is perfectly possible for party politicians to become impartial even when they have had jobs that have required them not to be. There are many examples of that.

I refer, with delicacy, to the fact that since November--when noble Lords were made newly legitimate by Mr Anthony Blair--your Lordships' House has been able to argue more strongly with the Government. I believe that it is right that the House should do that. On this Bill, we must be careful how we argue with the Government for the reasons to which I alluded earlier.

I was encouraged by the noble Lord, Lord Bassam, which is a one-off if ever there was one! In his speech he indicated that he would listen to argument. That is vital if the House is not to be difficult over some of the amendments. I hope that we shall not have to argue seriously with the Commons over anything as it will be difficult for us to argue on this matter.

I have one major reservation. For the sake of argument, let us assume that Mr Reagan--unfortunately, he is not well--or conservative American friends give money to the Conservative Party, but that, however, would be illegal. It would be illegal for Mr Clinton's Labour friends to give money to the Labour Party. Those two parties, which are loyal subjects of the Crown, do not advocate bumping off soldiers or the forcible removal of a border. However, it will be perfectly possible for Noraid to give financial help to Sinn Fein, whose stated aim is to alter the boundaries of the United Kingdom and to force a change of sovereignty.

Are we to allow people who advocate such behaviour to accept foreign donations, when people like Mr Anthony Blair or Mr Hague, who are loyal subjects of the Crown and who wish to work within our system, will not be allowed to receive subsidies from their foreign friends? I have a major difficulty with the fact that those in Northern Ireland who advocate armed rebellion should receive foreign subsidies.

It is not quite within living memory--although nearly within the living memory of the Queen Mother--that an Irish Home-Ruler was elected in Liverpool. Sometimes Irish politics spills over into this country. However, I give this Bill my support. I hope

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that the noble Lord, Lord Bassam, will be as reactive and constructive in the light of criticism as he has been constructive in some of his remarks today.

7.3 p.m.

Lord Beaumont of Whitley : My Lords, I am highly qualified to bore your Lordships into the ground on this Bill. I am an ex-major benefactor of a political party; an ex-treasurer; an ex-full-time organiser of a political party; and the man responsible for having unleashed the rampant national political party spending on election advertising when I sought counsel's opinion as to whether the law was as the other party believed it to be. In addition, like, I imagine, a number of people in your Lordships' House and certainly the noble Lord, Lord Rennard--if I libel him in his absence I am sure that the noble Lord, Lord McNally, will advise him of it--I have cheated on returns of by-election expenses and thereby achieved getting people into Parliament who have served satisfactorily as Members of Parliament for a long time.

I expect that we shall have a long Committee stage and probably a long Report stage when all such matters will come out. I am afraid that we shall be kept very late at night for a long time. There is a great deal to be argued about, and I shall play my part.

Tonight I merely want to touch on a couple of matters which affect my present party. The Green Party welcomes this Bill as part of the loosening up of the constitution which we see as the most obvious benefit that we can acquire from this Government. We have possibly lived too long in,

    "A land of settled government,

A land of just and old renown,

Where Freedom slowly broadens down

From precedent to precedent".

That is all very well in its way, but it is a recipe for the hardening of the arteries. If we want the blood of democracy to flow freely through the veins of the country, those arteries have to be softened.

To say that we give the Bill a general welcome is not to say that it is perfect. I hope noble Lords will forgive me if I reflect for a moment on the two elements that my party finds particularly interesting and which it would like to amend. In Clause 11 a "registered political party" is regarded as,

    "'represented' if there are at least two Members of the House of Commons",

who satisfy the conditions. We would widen that to deem it as represented if there are at least two Members of the European or Scottish Parliaments or the Welsh or regional assemblies. If we can obtain the level of voting that we achieve in fairer systems than the "first past the post" system--two representatives of a very high calibre in the European Parliament--we believe that we should qualify for fair treatment under this Bill, even under the unfair electoral system in place at present. We intend to try to amend Clause 11 and possibly add a new clause after it to that effect.

My party is interested in the debate about donations from Europe. I do not yield even to the noble Lord, Lord Shore, in my opposition to the euro and the

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single currency. I believe that is an absolutely dreadful thing, and I hope that we shall succeed in resisting that for ever. However, while we are in the European Union, I believe that there is little moral reason why there should be a prohibition against various parties of the same persuasion helping each other across national boundaries. I do not understand such a prohibition. There are a large number of representatives of the Green Party in the European Parliament.

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