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Lord Hayhoe: I also support the amendment. I first became involved in politics in campaigning in the North Croydon and Hammersmith by-elections before the 1950 general election, and I have been involved ever since. That rather dates me. One of the worries about the present situation is that the growth in cynicism about politics and politicians and lack of interest in the political process have led to a steady decline in the average turn-out in general elections during the period to which I have referred. This amendment may help in a small way to redress the balance.

A person may become a little more interested in politics if he knows that in making a donation the political party will benefit from some tax relief. The benefit goes to the party, not the individual. One would have thought that interest in politics generally would benefit from that. If we continue as we have, our precious system of democracy which we have built up over the years will gradually erode. We saw an indication of that perhaps recently when some of our

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fellow citizens believed that it was more appropriate to demonstrate and blockade the streets than to seek their political ends through the normal political processes.

Having listened to powerful speeches by members of the Neill committee in support of the recommendation of that body--only the noble Baroness, Lady Gould, was critical of it--the balance of argument in favour of the amendment is overwhelming. One can never have a proposal that is not susceptible to nit-picking at the edges. Having been in a somewhat similar position to that of the noble Lord, Lord Bassam--I have had to defend government decisions which are fairly indefensible--I hope that when the Minister comes to reply he will hold out the hope that he and his colleagues will give further consideration to this sensible, useful and important amendment.

Lord Clinton-Davis: I support the noble Lord, Lord Hayhoe, in one respect. I believe that the Minister should give more careful thought to this matter. I do not know whether this is the right kind of amendment, but I have come to this debate with an open mind and have listened carefully to my noble friend Lord Shore. He was my first Secretary of State, but that is no reason for supporting him today. As one who has looked carefully at the propositions advanced over the years, first as an opposition spokesman and then as a government Minister in this House, I know that the most that we can expect of the Minister today is an emphatic statement that he will think about it. I do not believe that we can ask him to do anything more.

I hope that the Minister has listened carefully to the representations made today on behalf of the Conservative, Liberal Democrat and Labour Parties. This is not a matter of party advantage or disadvantage, but it should be thought about carefully. I beg the Minister to think about this amendment most carefully rather than to reject the idea, which I suspect is indicated in his brief. The proposition has been well advanced from all quarters of the Committee today.

Lord Rennard: In this debate I should like to strike a rather different tone from that of a number of Members of the Committee who have argued enthusiastically in favour of the amendment. The argument that I make indicates that I support the amendment with slight reluctance rather than that I am totally convinced by it. When I looked at the proposition in the report of the Neill committee I was reminded of the words of Winston Churchill, who described democracy as the worst possible system of government apart from all others.

Lord Renton: Sir Winston Churchill added that one could not have any other system.

Lord Rennard: Indeed he did, and perhaps that is the conclusion to which I shall come in a few moments. I do not believe that the amendment puts forward a good scheme. However, it is not the worst possible system for the financing of political parties and it is better than the status quo. I understand some of the

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Government's reservations about the scheme, in particular those voiced a few moments ago by the noble Baroness, Lady Gould. I find it somewhat strange to hear the Government hiding behind the Neill committee in defence of other proposals but ignoring its conclusions on this issue.

I do not believe that the Government's objections can be based on expense. The estimated cost of £4 million, which is less than one-hundredth of 1 per cent of the additional £43 billion that the Government propose to spend on public services--the "schools and hospitals" argument--will not break the bank. I do not believe that the Government's objections can be the size of the sum involved or other priorities. The Government's objection must simply be that the £4 million would go disproportionately to parties with supporters able and willing to donate up to £500. I understand their legitimate concern that there is already an uneven playing field in our democracy and that this scheme may make the slope steeper in the Labour half of the pitch.

There is an easy answer to this problem. The election commission could distribute the estimated £4 million fairly on the basis of levels of support for the parties. That would address the objections made from the government side. It will not be a great additional burden on the commission as it will also be distributing the £2 million fund to the political parties for policy development. But in the absence of such a scheme based on fairness, I shall have to support a tax concession scheme in spite of its drawbacks.

4.30 p.m.

Lord Bassam of Brighton: I feel like I am encircled by the debate and put into a very interesting position. Before I get to the heart of the issue I must say that this has been a very wide-ranging debate. I have been very impressed by the breadth of the debate and many of the contributions made. I enjoyed the last contribution. I thought it was very helpful. I also took very careful note of the contribution of the noble Lord, Lord Norton of Louth. I thought he made a very useful and telling point. As ever, I pay great respect to the noble Lord, Lord Clinton-Davis, for his very careful political advice and guidance.

Of course, the Government will have to listen and reflect on all that has been said in this important debate. Members of the Committee have made some very telling points. I want to advance the case against giving this tax concession because I think it is important that that case be heard. The purpose of the new clause is to introduce, as the Neill committee recommended, tax relief on donations to political parties of up to £500. The Government have sought to implement the Neill committee's recommendations, as the committee intended, as a package. However, the Government remain unpersuaded of the case for tax relief on political donations.

In chapter 7 of its report, the Neill committee came down squarely against any general system of financial support for political parties. The Government agree with that conclusion. A tax relief scheme for political

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donations would, in our view, amount to general state aid by another route, one which the noble Lord, Lord Rennard, fully grasped and acknowledged in his contribution. If the case has not been made for direct grants to political parties paid for out of public funds, nor has it been made for a tax relief scheme. When it comes down to it, a scheme of this kind is simply another method of securing the same undesirable end.

In its report the Neill committee reviewed the arguments against state aid. It is perhaps worth spending a little time examining those various arguments. A number of the arguments were put succinctly by the Conservative Party in its written evidence to the Neill committee. In its memorandum of evidence it indicated that its view on public funding had not changed since the party gave evidence to the Home Affairs Select Committee inquiry in 1993. In its evidence to that inquiry the Conservative Party's memorandum stated:

    "The Conservative Party is opposed to the direct funding of political parties. State funding would either unduly favour established parties or encourage the formation and growth of extremist parties".

As well as those commendable objections to the public funding of racist or anti-democratic parties, the Conservative Party's memorandum to the Neill committee went on to advance other arguments against state funding. It said that such funding,

    "would reduce the dependence of the parties on their own activists for fund-raising and would increase the distance between parties and the electorate".

Lord Goodhart: As regards that argument, if the tax relief is given linked to the donations, surely it would increase rather than decrease the urge to go out and recruit new members and get subscriptions from them.

Lord Bassam of Brighton: That may be a consequence. I accept the point. But these are powerful arguments which cannot be sidestepped by portraying tax relief as something other than state funding; because that is what it is, state funding by another means.

To those arguments I would add two more. The first is that I am not aware of any great public clamour for general state funding of political parties. One of the core objectives of the Bill is to clean up British politics by ensuring that there is full transparency in the way the political system is financed. I do not believe that this objective would be well served if, at the same time as banning foreign funding and requiring the disclosure of donations, we awarded political parties a public subsidy--that is what we would be doing--to help them with their campaigning activities. With the Conservative and Labour parties having spent £28 million and £26 million respectively at the last election, there is little evidence that the political process is being run on a shoestring!

My final argument is that, even if there was a case for public funding to be made, few would identify the needs of political parties as a priority in terms of public expenditure. Another point bears consideration. The administrative costs of such a scheme have not been

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the subject of any precise estimate, but it seems clear that they would be significant and they would offset the benefit, particularly, as the Neill committee recognised, in relation to smaller donations.

I recognise that the proposed new clause would give effect to one of the Neill committee's recommendations. The Government have sought, wherever possible, to adhere to the committee's recommendations. But for the reasons I have set out, this is one issue on which the Government have concluded that they must depart from the committee's recommendations.

It has been an important and valuable debate. I shall take stock of what has been said. No doubt we in government will want to reflect carefully upon it. But the points I have made in response to the wide-ranging contributions from many Members of the Committee will, I trust, begin to set the balance of the argument back in the other direction too.

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