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Lord McNally: My Lords, the last time the Minister addressed the House he had spent his evening reading the local government journal. Last Saturday, it was the funeral directors. For his own good, the Minister really has to give up life in the fast lane.

Lord Bassam of Brighton: My Lords, at least I have succeeded in one respect: I have brought some added levity to the proceedings.

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I take great encouragement from the debate. I enjoyed all the contributions in their different way. I enjoyed particularly that of the noble Lord, Lord Mackay of Ardbrecknish. It was witty and ingenious and up to his usual standard. We heard many important comments from the noble Lord, Lord Neill, who made a telling contribution. The noble Lord, Lord Jopling, displayed his command of the issues. The noble Lord, Lord Goodhart, helped greatly to advance the debate as a result of his work on the Neill committee, as did the noble Lords, Lord Rennard, Lord McNally and Lord Norton of Louth. I enjoyed also the contributions of the noble Baroness, Lady Fookes, and my noble friend Lady Gould of Potternewton. It is invidious to single people out, and wrong to do so, but all noble Lords made separate points and I shall try to deal with them as best I can.

The debate was positive and constructive, reflecting what happened in another place. With some notable exceptions, particularly on tax relief, there was a large measure of support on all sides of the House. I stopped writing down the number of welcomes given to the broad swathe of measures set out in the Bill. That is as it should be for a Bill dealing with the regulation of political parties and with electoral matters. One consistent criticism, essentially from the Benches opposite but reflected in comments from other parts of the House, was that the Bill is elaborate. The noble Baroness, Lady Fookes, said that it was too much at once and other noble Lords said it was very detailed.

There has been a failure to regulate in this area over many years. That is why we have a long, detailed, and, in some regards, complex piece of legislation to consider. No doubt the House, with its reputation for giving matters very close inspection and scrutiny, particularly in Committee and on Report, will seek to sort out many of the problems that we have perhaps imagined at this early stage in our discussions.

The noble Lord, Lord Mackay, described the Bill as too bureaucratic. We recognise that there is a lot of detail in the Bill. It is an inevitable consequence of the Neill scheme. I remind the House of what the Neill committee said in response to our initial White Paper. It said:

    "We congratulate you, Home Secretary, on its clarity and conciseness. We appreciate the effort required to translate recommendations into legislative form and are impressed by your success in doing so".

That is a tribute to our efforts to reflect the majority of the 100 recommendations set out by the committee.

The noble Lord, Lord Mackay, raised a number of other important questions and political points. He asked how we can expect political parties, and third parties, to comply with controls on expenditure in the 12 months' run-up to an election, the date of which cannot possibly be known in advance. It was claimed that this was in some sense skewing the way in which politics would go. We believe that the provision ought to be on the face of the Bill in the interests of clarity and effective enforcement. It is important that political parties should know the period during which controls on campaign expenditure are to apply. In the case of parliamentary general elections, recent experience

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suggests that the main political parties begin campaigning in earnest about a year in advance of the expected date of the election. In spite of the fact that the precise state of a general election is not known well in advance, there is no hindrance to the operation of the scheme set out in the Bill. In practice, a political party can ensure that its campaign expenditure remains within the prescribed limits by adhering to those limits during any 365-day period. Parties will, in any event--

Lord Mackay of Ardbrecknish: My Lords, will the noble Lord give way? If that is the case, why do the Government not come clean and write into the Bill a provision to control the expenditure of political parties every month of every year? If they are always having to look over their shoulder, as it were, in an attempt to work out their expenditure in relation to a date in the future, surely it would be far better just to impose that limit on them. Secondly, will the limits apply to the expenditure of constituency parties as well?

Lord Bassam of Brighton: My Lords, I shall reflect on the second point. On the noble Lord's first point, it is inevitable in a scheme of regulation such as is envisaged and described in the Bill that there will be increased regulation of the day-to-day expenditure of political parties. It is an implication that follows as a consequence--

The Earl of Onslow: My Lords, this point is important. Let us assume, for the sake of argument, perfectly reasonably, that the Government say, "We are doing so well, we want another big bite of the cherry. We love being in government and bossing people about, and we therefore want to go to the country in October of this year", which is well within the year in which the expenditure of political parties should be controlled. How on earth is anyone to know whether the Government are likely to call a snap election, say, three and a half years into a Parliament? It is a perfectly legal thing to do, and it has been done many times. It presents terrible complications.

Lord Bassam of Brighton: My Lords, I thank the noble Earl for his point. Clearly, it is a matter that political parties will have to consider seriously in planning their expenditure over the years which--

The Earl of Onslow: They cannot.

Lord Bassam of Brighton: With respect, it is a matter to which political parties will have to give more thought. That will apply to all of us.

Parties will, in any event, want to keep in reserve a significant proportion of their expenditure allowance for the formal campaign period during and following the announcement of the date of the poll.

The noble Lord, Lord Mackay, made the point: why not apply expenditure controls just over the period when the election is called? The Neill committee's objective was to reduce significantly the level of campaign expenditure that was evident at the

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last election. It seemed to me that there was a consensus on the issue. The figures quoted were £28 million for the Conservative Party, £26 million for Labour, and £3 million for our colleagues in the Liberal Democrat Party. The figures were for expenditure over a 12 to 16-month period. If we want to end the arms race in election spending we must control expenditure over a period of about 12 months. To control spending only during the four or five weeks before the date of the poll would leave the parties free to spend millions in the run-up to the final election period.

The noble Lord, Lord Mackay of Ardbrecknish, quite rightly, questioned the effect of the Bill on foreign funding because EU and Commonwealth nationals are permissible donors. In the Bill we have linked the definition of a permissible donor to those cases in which individuals are entitled to vote. We believe that this is a simple test which will be relatively easy for parties to follow. Our electoral law allows for Commonwealth citizens to register and vote in all elections and for EU citizens to vote in local and European parliamentary elections, as we have debated in the past. If a person is entitled to vote it must be right that he or she is also allowed to donate to a political party.

The noble Lord also raised the question of third party expenditure in elections. The provisions in Part VI of the Bill reflect the recommendations of the Neill committee in this respect. The committee proposed that third parties should be allowed to spend up to 5 per cent of the limit for political parties, and the Bill makes clear provision for that. We cannot prevent third parties spending money in an election campaign or impose unrealistic limits. We are already aware, from the judgment in Bowman, of the view that the European Court of Human Rights would take of such restrictions. While we must allow third parties to have their say, nevertheless we recognise that the political parties are the main players.

The noble Lords, Lord Mackay of Ardbrecknish and Lord Marsh, referred to the position of third parties in referendums. The spending controls in Part VII will apply to all organisations, not just political parties, that campaign in a referendum. The Bill provides that an organisation registered with the electoral commission may spend up to £500,000 in a UK-wide referendum. That trade unions and others should be allowed to campaign is simply a matter of free speech, which many Members of your Lordships' House have defended over the years. To prevent them spending money in a campaign would be contrary to Article 10 of the ECHR in the same way as the £5 limit on third parties under the 1983 Act has been held by the European Court to be contrary to convention rights.

The noble Lord, Lord Mackay of Ardbrecknish, referred to shareholder approval of donations by EU companies. The provisions of Part IX reflect the relevant recommendations of the Neill committee. The requirement to obtain the prior consent of shareholders for political donations will, and can, apply only to companies incorporated in Great Britain

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and registered under the Companies Act. The fact is that we cannot legislate here in respect of companies incorporated in another member state of the European Union. I am afraid that, imperfect as it is, this is a situation with which we must live.

The noble Lord, Lord McNally, dealt with an issue which I always expect noble Lords on the Liberal Democrat Benches to raise: state funding of political parties in this country. That issue is related to the question of tax relief, which was also raised in the debate. We believe that that is a form of state aid by the back door. Although we are always open to argument, it is our consistent view that it is wrong to use that form of subsidy for major political parties, particularly when there are many other calls for the funding of important public services. That is a well-rehearsed and understood argument.

My noble friend Lady Gould asked a number of important questions, not least whether it was realistic to expect central party organisations to supervise and account for the expenditure of each and every constituent branch or association. That matter was also touched upon by the noble Viscount, Lord Astor. That must be done if the controls set out in Part V are to apply to all campaign expenditure incurred by a political party. Expenditure incurred on behalf of individual candidates will continue to be regulated by the 1983 Act, and the party centrally will need to concern itself with that issue. My noble friend Lady Gould also asked about the list of items to be counted against expenditure limits. The Neill committee suggested that any list of items to be set against expenditure limits needed to be comprehensive. For that reason the list has been placed on the face of the legislation.

The Bill also provides for the electoral commission to produce a code of practice to give guidance as to what kinds of expenses are to be covered by the list and the allocation of overall costs. If we adopted a less comprehensive approach by setting aside the costs of staff and premises a reassessment in general terms of the appropriate limits of expenditure might be required.

A number of noble Lords focused on trade unions. In particular, my noble friend Lady Gould asked about their role and status. It is our understanding that they are incorporated associations and, therefore, are capable of becoming recognised third parties under the terms of Part VI of the Bill. However, I undertake to investigate the matter further since it has importance and will no doubt be reflected in our further deliberations.

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