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Lord Davies of Oldham: My Lords, I beg to move that the House do now adjourn during pleasure until 8.30 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.40 to 8.30 p.m.]

[Amendment No. 21 not moved.]

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Clause 11 [Policy development grants]:

Lord Rennard moved Amendment No. 22:

    Page 8, line 13, at end insert--

("( ) "a policy promotion grant" is a grant to a represented registered party to assist the party with the promotion of policies for inclusion in any manifesto on the basis of which--
(i) candidates authorised to stand by the party will seek to be elected at an election which is a relevant election for the purposes of Part II, or
(ii) the party itself will seek to be so elected (in the case of such an election for which the party itself may be nominated);").

The noble Lord said: My Lords, Amendments Nos. 22 to 26 set out an alternative to the proposals for assisting the financing of democracy put forward by the Neill committee. This alternative removes the Government's principal objection to the proposals of the Neill committee. The alternative will cost the Chancellor of the Exchequer no more than the Conservative Party's proposals. It should, therefore, be a compromise between the two cases to be argued shortly between Government and Conservative Front Benches over the proposed tax concession scheme.

It is clear that the Government do not want the tax concession scheme. The absence from the Bill of measures to implement the Neill committee's proposals to give tax relief to political donations of up to £500 is the single greatest departure by the Government from the report on which they have relied very heavily to justify implementation of most of the Bill. It was made plain earlier in the debate that the Government's principal objection was simply that a tax concession scheme would mean more money going to those parties which were able to raise the most money from donations of up to £500. I said in Committee that I shared that reservation. The tax concession scheme could have the opposite effect to the Neill committee's intention to create a more level playing field in our democracy.

By these amendments the Government's principal objection is overcome. An equivalent sum of money to that which the Treasury estimates to be the cost of the tax concession scheme would be distributed instead by the electoral commission, not on the basis effectively of topping up the Inland Revenue donations of up to £500 but on the same basis as the commission distributes the policy development grants. With all-party agreement, the Bill already provides for policy development grants of up to £2 million per annum to be paid to the main parties in accordance with the specific recommendation of the Neill committee. It is not a huge step from the distribution of £2 million policy development grants to say that the commission should distribute up to a further £4 million in policy promotion grants. That figure could be varied to any level up to £4 million, which is the same cost as that estimated by the Treasury if the tax concession scheme was implemented.

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If this is an alternative to the tax concession scheme, as I believe it should be, the Conservative Party should not be able to object on the grounds of cost. The costs are the same as the tax concession scheme which that party advocates; indeed, the sums are similar to those currently claimed from the public purse by the Conservative Party for financing the activities of the so-called war room in Conservative Central Office and the Leader of the Opposition.

The Government may also try to claim that £4 million is too much or is not the right priority, but the sum is no more than they spent last year on promoting the fact that elections would take place for the London Mayor and Assembly. That figure is but one-hundredth of 1 per cent of the extra £43 billion which the Government repeatedly say is about to put into public services. If the argument is really about funding for schools and hospitals or paying for democracy, the Government should reconsider the £4 million per annum spent on their special advisers. I do not resent that expenditure because I am sure that the Government need that advice. We should recognise that democracy does not come free and that the Government already have a considerable role in paying for it. A little more government support is essential if we are to reduce the dangerous over-reliance of all the parties on a few millionaires. Faced with the options of the status quo or a tax concession scheme, I believe that this is the best way forward which will most certainly be recognised in time to come, if not immediately. I beg to move.

Lord Mackay of Ardbrecknish: My Lords, I have listened with interest to the words of the noble Lord, Lord Rennard. The noble Lord appears to seek a compromise with the Government. I am opposed to the direct funding of political parties. There is a significant difference between the direct funding of political parties and tax relief. Clearly, the latter depends on how much financial support one receives from the electorate and one's supporters. That is a different issue from receiving financial help on the basis of the previous election, or the one before that. I understand that in Sweden one political party which has ceased to exist still gains funding because of the way that the system works. Clearly, that would not be possible if there was tax relief. While I admire, as always, the ingenuity of the noble Lord, I prefer tax relief, which was recommended by the Neill committee.

Lord Bassam of Brighton: My Lords, the noble Lord, Lord Rennard, has been open and honest as ever about his party's support for a general system of state funding for political parties. These amendments provide for such funding to be made by means of a policy promotion grant. The amendments seek to ride on the back of the scheme for policy development grants recommended by the Neill committee and provided for in Clause 11 of the Bill. But there is no disguising the fact that policy promotion grants are of an altogether different character. These amendments provide for nothing less than a state subsidy of

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£4 million per annum to help parties meet their election campaign costs. If these amendments were accepted the taxpayer would pay for the Liberal Democrat posters and newspaper advertisements at the next general election. I believe that there are more than a few people outside your Lordships' House who would find that a rather unattractive proposition.

The noble Lord clearly sees the scheme of policy promotion grants as an improvement on the Official Opposition's proposals for tax relief for political donations, which we shall no doubt discuss further tomorrow. It could be argued that these amendments address some of the rougher edges of the tax relief scheme. But among the objections to such a scheme is that it would be expensive to administer relative to the benefit involved and it would benefit disproportionately those parties whose supporters were in a position to make donations of up to £500 or more. A system of policy development grants disbursed by the electoral commission would overcome those objections. There would be no administrative costs for the Inland Revenue or the political parties to worry about and any costs to the commission would be unlikely to be significant. Fairness in the allocation of the £4 million fund would be assured as the money would be distributed by, and in accordance with, the scheme recommended by the commission.

Those advantages, however, do not do anything to address the fundamental point that a system of policy promotion grants would yet more clearly constitute state funding of political parties. No doubt there are solid public interest arguments for the disbursement of public money to help parties to fulfil their parliamentary functions or develop long-term policies. I do not believe, however, that the same kind of case can be made in relation to meeting campaigning costs. Nor does the proposal address the question of broadening political parties' sources of funding which was the rationale for the Neill committee's proposal in respect of tax relief. I believe that such an arrangement would provide political parties with even less incentive to encourage larger numbers of small donations. I put it to the House that a convincing case for any scheme providing for a general state subsidy for political parties has yet to be made out. I hope that the noble Lord will withdraw his amendment so that we can deal with another part of the main debate tomorrow.

Lord McNally: My Lords, before the noble Lord sits down, is it not time that we stopped having this competition in humbug between the two Front Benches about state funding? The pass on state funding was sold almost a quarter of a century ago with the Short money.

Lord Bassam of Brighton: Oh!

Lord McNally: My Lords, the noble Lord lets out a groan from a sedentary position. What does he think Short money is other than state funding? Of course the pass was sold with the Short money intervention, and

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it was intentionally sold. It fed money directly into the coffers of the political parties. At the moment we see the Conservatives using some money for Central Office and some for other purposes. It seems to me that the Neill committee missed a glaring open goal by not cutting through the mutual humbug and saying that state funding is not a matter of lifting the skirts as though one had seen a mouse but is something to be welcomed as far preferable to an over-reliance on the big donors. Yet once again both Front Benches have missed the opportunity.

We will return to this matter because the tax concession is perhaps a worse second best. But for Ministers to condemn state funding as some great vice misses an opportunity. My noble friend is absolutely right. Within a decade, we shall be returning to this matter. The way the matter is dealt with in the Bill leaves in place all the temptation for abuse.

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