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("( ) Where, in the case of a permitted participant that is a registered party, any expenses are incurred in contravention of subsection (1), the expenses shall not count for the purposes of sections 112 to 118 or Schedule 13 as referendum expenses incurred by or on behalf of the permitted participant.").

The noble Lord said: Amendment No. 234YH was spoken to on 8th October. I beg to move.

On Question, amendment agreed to.

Clause 108, as amended, agreed to.

Clause 109 [Restriction on payments in respect of referendum expenses]:

Lord Mackay of Ardbrecknish moved Amendment No. 234YHA:

("( ) No donation received by a registered party which is a permitted participant from a permissible donor of the type specified in section 49(2)(c) shall be used to make any payment in respect of referendum expenses.").

The noble Lord said: I rise to move Amendment No. 234YHA. This is beginning to sound more like a game of Scrabble than a Committee stage!

The amendment addresses the question of what the registered parties can spend. I shall not go over the previous argument. This relates to the main parties: the Conservative Party, the Labour Party and the Liberal Democrat Party, and the Nationalist parties in Scotland and Wales.

One of the arguments used by the Home Secretary in the other place in defending the imbalance between the three parties that would be on one side of the euro

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referendum and the Conservative Party on the other was that the Liberal Democrats would never be able to spend up to their limits. The Home Secretary stated:

    "the Liberal Democrats are offered generous spending limits in the Bill, but it is a racing certainty that the party will not be able to raise money to the level of the spending limit".

Perhaps I may say to the Liberal Democrats that that shows the contempt in which they are held by the Home Secretary. He does not think that they are up to raising the money. He continued,

    "So to argue that spending by the Labour and Liberal Democrats parties will be nearly equal because both parties will be able to spend up to a maximum amount fails to take into account the capacity of parties to raise money up to the maximum".--[Official Report, Commons, 10/1/00; col.38.]

The Liberal Democrats have a £3 million spending limit. They may well be unable to raise the £3 million. However, if they do not, the Labour Party can give them the money they need to reach that limit. If they can raise only, say, £1.5 million, the Labour Party can give them £1.5 million. We raised this in Committee two weeks ago. I pointed out that allowing political parties to donate to other political parties under Clause 49(2)(c) would allow the Labour Party to top up the Liberal Democrats, thus proving that the Home Secretary's argument last January in the other place was bogus. The Minister responded by stating:

    "It is possible that where particular parties share the same objective on an issue, one of those parties may see fit to provide some financial support to the other".--[Official Report, 12/10/00; col.565.]

Exactly. What the Minister said last week confirms the argument I made about the Labour Party topping up the Liberal Democrats in a referendum on the single currency, or any other topping up. It might be the Labour Party topping up the Scottish Nationalists or Plaid Cymru; it does not really matter.

The Minister had other concerns about my amendment to stop all political parties donating to other parties. He said that it would adversely affect parties in a coalition or the relationship between the Labour Party and the Co-operative Party. I have drafted this amendment to meet both my concerns and those of the Minister. I hope that we may have a consensus on it.

My Amendment No. 234YHA--the Scrabble amendment--would allow the Labour Party and the Co-operative Party to donate as much money to each other as they liked. Indeed, it would allow the Labour Party to give as much money to the Liberal Democrats as it liked. We hear from Mr Ashdown's diaries that the Prime Minister has great plans for a Lib-Lab pact. However, I suspect that some members of the Labour Party would not be so keen. I shall not mention the Deputy Leader--but I have.

My amendment would stop donations from the Labour Party being used to top up the Liberal Democrats in a referendum campaign. Where parties were acting in concert and one had a low limit but lots of money to spend, the other being in the reverse position, they could easily transfer money in order to maximise advantage. I thought that the whole point of basing spending limits on individual parties and their

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electoral success--I believe that is the phrase in fashion--at the last election was that those parties were considered distinct and were not being considered the same.

The Bill as drafted clearly allows for the situation I envisaged. If it does not, I hope that the noble Lord will tell me that I am wrong and that no money can transfer from the Labour Party to the Liberal Democrats to help that party reach the £3 million limit. If he cannot say that I am wrong, I suggest that he accepts my amendment or, if his draftsmen do not like my amendment, that he comes forward with a suitable amendment at the next stage. I beg to move.

Lord Bassam of Brighton: As the noble Lord said, this takes us back to last week's question when he took exception to the fact that one registered political party would, theoretically, be able to donate to another political party. Perhaps because he has a conspiracy theory he used the Labour Party and the Liberal Democrat Party as examples in this debate. As he said, Amendment No. 234YHA seeks to close off that option, at least in respect of referendums.

The noble Lord clearly has in his sights the possibility that in a referendum on the euro the Labour Party, having set aside £5 million for its own campaign, might contribute to the campaign of the Liberal Democrats. I entirely accept that that is a theoretical possibility; but it is no more than that. Theory is fine; practice is different. As I explained to the Committee earlier, we fully accept that the limits on referendums expenses provided for in the Bill would not produce a wholly level playing field as between the two sides in a campaign. We do not pretend therefore that the expenditure controls represent the complete solution. However, as I argued before, the limits will ensure a more balanced campaign than would be the case if there were no limits at all.

We expect permitted participants in a referendum to campaign either under their own name, as part of an umbrella group, or as a combination of the two. If any political party or, for that matter, any individual or company sought in addition to contribute to the campaigns of other permitted participants, that would be exposed and the electorate would form a judgment on such tactics. It goes back to the issue partly rehearsed in the earlier debate.

Such a move would not necessarily be contrary to the letter of the provisions in Part VII, but it would be strongly against the spirit of the spending controls. We have not sought to close off such a tactic because any attempt to do so would come back to the Neill committee's observation on Heath Robinson's contraptions. Those comments were apposite in that context and are apposite in this.

I see no merit in singling out registered parties as Amendment No. 234YHA seeks to do. In any event, it is worth remembering that Part VII is not simply concerned with referendums held throughout the United Kingdom. What if there were to be a further

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referendum in Northern Ireland? If this amendment were accepted, the Conservative Party registered in the Great Britain register could not contribute to any campaign mounted by the Northern Ireland Conservative Party. Likewise, the Labour Party could not contribute towards the SDLP's campaign and the Liberal Democrats would be prevented contributing to the Alliance Party's campaign.

Why should the Co-operative Party be prevented making a donation to a referendum campaign conducted by the Labour Party, or for that matter an umbrella organisation which might involve the Labour Party and other like-minded souls? There are long-standing constitutional links between the Labour Party and the Co-operative Party and if one wishes to make a donation to the other, it should be allowed to do so.

I hope that, on reflection, the noble Lord, Lord Mackay, does not see too many conspiracy theories in operation. He is not usually a conspiracy theoretician, but I know he can be drawn dangerously in that direction. However, on this occasion I hope that he feels able to withdraw his amendment.

Lord Mackay of Ardbrecknish: Clearly the noble Lord has been too busy briefing himself for this Bill to read the extracts from The Ashdown Diaries in The Times over the past two days or he would see that one does not have to get up early in the morning to devise a conspiracy theory. It was clearly going on behind his and his colleague's back, both before and after the last general election.

So I am afraid that all the Minister has convinced me of is that the scenario I set out is even more likely to happen; that in fact money will be moved. If one of the parties in the coalition of parties on one side of a referendum cannot find enough money to reach its ceiling, it can be given that money by the other parties.

We have exposed a serious defect in the Bill. The noble Lord has an easy solution; that is, do not set limits. The Labour Party would not have to siphon off its extra money to the Liberal Democrats round the back door. It could spend its £5 million; the Liberal Democrats could spend as much as they could raise and the Tories could spend as much as they could raise. That is a simple solution.

The Bill has a serious loophole. We shall need to study carefully what the Minister said and find ways to address it, without damaging the close relationship between the Labour Party and the Co-operative Party. Frankly, why they have to sail under different flags nowadays beats me. They should decide to amalgamate fully and not pretend that they are two different parties.

I was not impressed by the Minister's argument in relation to a Northern Ireland referendum. I would be quite happy to close off money going that way across the Irish Sea just as he, in the Bill, wants to close off money coming the other way in terms of general elections. I would have no problem with that, and his explanation did not convince me that my amendment

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was wrong. We shall study what he said. We may come back to this major loophole in the Bill at another stage. But I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.45 p.m.

Lord Mackay of Ardbrecknish moved Amendment No. 234YHB:

    Page 69, line 15, at end insert--

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