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Lord Mackay of Ardbrecknish: My Lords, he can say that but the point is that the political parties must check it. A donor may send in a donation and give the barest details. The donor may give his London address where he is not registered as opposed to his address in the country where he is; or he may give his address in Scotland or Northern Ireland where he is not registered, for reasons that we have already debated. The observations of the noble Lord, Lord Peston, who intervenes in a very interesting debate, underline his devotion to electronics. This portion of the Bill cannot be implemented until there is a central register; otherwise, this will be a retrograde step.

I return to the point that I reached in my winding up when the noble Lord intervened. The Government must give serious consideration to ways to enable this matter to become a practical proposition for the political parties at the time of elections. In the meantime, I beg leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Lord Shore of Stepney moved Amendment No. 90:

Page 38, leave out lines 23 and 24.

The noble Lord said: My Lords, I rise to move Amendment No. 90 and speak to the other amendment in my name. I am aware of the wide scope of this Bill. In a measure of such dimensions it is very easy for what appear to be minor matters to be almost overlooked. The devil is often in the detail, and the particular devil to which I speak is an important one. The subject matter of the amendments--it can be described in two words--and the issues which they raise go very deep. The amendments are concerned with foreign funding and the extent to which we are prepared to allow or resist the invasion of foreign

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funds deliberately aimed at influencing or guiding public opinion at the time of elections and referendums.

One is also concerned with foreign money which seeks to influence the political parties themselves and is a source of income for them. Clearly, that is an important issue in itself, but it goes deeper. One is concerned with a constitutional issue of profound importance; namely, the extent to which we are still a parliament that is able to speak for our people and make the laws of our country, or a subordinate legislature over which there preside unelected but superior powers vested in institutions outside this country, in particular in Brussels and the European treaties which give it such power. This is not in any sense a party political argument, except that it is of such importance that, whatever may have been the position in the past, the Labour and Conservative parties, which are the two major political organisations, have over the past two years agreed to oppose foreign funding, whether by rich individuals or rich companies, which probably accounts for the greater part of the wealth of the parties and the problem we are considering here. That is no longer in dispute, and I do not need to pursue it any further.

I am a member of the Neill committee, to which I shall refer in a moment. I am also a life-long member of the Labour Party. For a long time I have been a member of one or other of the two Houses of Parliament. I hold for them the greatest respect. It is wearing all three caps that I address my remarks to the House tonight.

I remind my own party of the following words in the Labour Party manifesto. In the chapter entitled "We will clean up politics", it said:

"Foreign funding will be banned. We will ask the Nolan Committee to consider how the funding of political parties should be regulated and performed".

In his introduction to that 1997 manifesto the Prime Minister used almost the same words. He said:

"We will clean up politics ... and put the funding of political parties on a proper and accountable basis".

Therefore, there is no question about the commitment of my own party to the cause of bringing to an end foreign funding in British politics.

I turn to the Neill committee, which was duly asked to consider the matter and ascertain the views of the political parties. A whole chapter of the report--Chapter 5--is given to arguing why it is in the interests of our country to keep out foreign money from the financing and the influencing of politics in this land. Recommendation No. 24 states:

"Political parties should in principle be banned from receiving foreign donations".

That was a unanimous recommendation of the Neill committee and one that has been accepted by both the Labour and Conservative parties.

I turn to my two amendments. Amendment No. 90 seeks to keep foreign money out of the funding of political parties. My second amendment, Amendment No. 173, seeks to keep foreign money out of referendums. Keeping foreign money out of

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referendums is important when one considers that the most likely referendum--I should be careful what I say here--could be about the euro. At least that was the likelihood a year ago. Obviously, it would matter enormously to European interests how the British people voted in a referendum on the euro.

Given the Labour Party's manifesto commitment, the agreement with the Conservative Party and the unanimous recommendation of the Neill committee, what has happened? The Government have accepted the provision for the rest of the world but not for countries, companies and individuals of the European Union. One is bound to ask: how is it that this extraordinary exemption has been made and what is the justification for exempting those categories?

Regarding the referendum matter, I should like to quote from the Neill committee. It sets out our views about the inappropriateness of foreign donations playing a part in the politics of this country. It then states:

"In that chapter we discuss the issue in relation to the funding of political parties, but the same arguments apply with equal if not more force to the funding of referendum campaigns, especially since these are likely to be concerned with major constitutional questions".

I do not think that anyone will seriously dispute that that is the case.

So here we are. How do the Government explain--I will not say justify--the matter? It is difficult to repeat the argument used because it is rather bizarre. They say that somehow or other it would offend Articles 43 and 46 of the European Community treaty which deals with the right of establishment. The right of establishment is about European firms having the right to set up subsidiaries here in Britain and not being discriminated against in the commercial sense. That is absolutely right. Similarly, Britain is able to have subsidiaries established in the 14 other European Union countries.

That should rightly be the end of the matter. But, no. The Government have accepted an interpretation of Articles 43 and 46 which says that it would be contrary to the treaty and discriminate against European companies and European citizens who are not on our own register if we were to include them in the otherwise universal world-wide ban on foreign funding. They have said this. Almost unbelievably the only matter they can quote in their defence, as it were to give the issue authority, because it is fairly remote from the general purpose and wording of Articles 43 and 46, is a judgment against the French Government in 1983. That is not overwhelmingly convincing.

In a letter written and circulated by my noble friend Lord Bassam following our last debate, the Government, in interpreting that judgment, said that under Article 46 of the treaty, legislation departing from the principles of free movement, to be justified,

"would have to presuppose the existence of a genuine and sufficiently serious threat to the requirements of public policy, affecting one of the fundamental interests of the society in question".

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With great emphasis I would say, "Yes, it does affect one of the fundamental interests of this society that we keep our politics honest and free from the distorting effects of foreign money". Therefore, even on the basis of the Government's defence or argument, there is an obvious and powerful case to be made that the judgment cannot apply to us because we have major reasons of public policy why we should, in this area alone, discriminate against not merely European companies and people but against the world. It is discrimination in reverse in favour of the Europeans and against everyone else that adds to the whole bizarre nature of this insertion into the Bill. What the Bill does is literally to say, "Well, they can do it, although no one else can".

I do not know whether it is out of a sense of shame, but in Clause 52(2)(b)(ii)--which I am seeking to change--the Government state,

"a company--incorporated within the United Kingdom or another member State".

We are not told the member state of what. Remember, we had this embarrassment last time. Is it member states of the European Union, the world community, the United Nations or the Commonwealth? Good heavens! I assume that it was the shameful fact that it was the European Union alone which led my noble friend to decide that it would be better to remove those words, although they had appeared in an earlier draft. What can one say?

Perhaps I may lead on to the area of what I consider to be shame and the area of great constitutional significance. There is no doubt that the Government share my view. In a short debate in Committee in the House of Commons on 25th January 2000 the Deputy Leader of the House of Commons, Mr Tipping, spoke for the Government when dealing with amendments that probed this exemption of European companies and so on. Speaking from the Government Front Bench he said:

"We would dearly like to devise a Bill that stopped donations from European companies and limited them to companies that were incorporated in the United Kingdom".

That is what the Minister said. To make absolutely certain that no one misunderstood the import of his words, he went on to say:

"We would like to restrict the Bill to British-based companies. The matter has been thoroughly explored. We are advised that it is not possible to draw the Bill in such a way as to exclude companies that are incorporated in the EU and operate and register here. I wish it were possible".--[Official Report, Commons Standing Committee G, 25/1/00; col. 109.]

Good God! In the history of our Parliament, has any British Minister ever made so shameful a capitulation to foreign powers and influences?

I speak now as a parliamentarian. I hope that those who have shared the privilege and experience that I have had of serving in the House of Commons will understand how utterly unacceptable and deplorable that is. It is not just that the Commission, presumably, or the European Union authorities have made this demand on us; it is the supine surrender of the Government in the face of it that I find so utterly

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deplorable, so difficult, so unbelievable. I cannot understand it. But it illustrates--this is the constitutional point--that the sovereignty of Parliament, if this advice is allowed to stand, has passed from the hands of Westminster to the authorities in Brussels and the European Court of Justice.

We have had many recent debates about whether some of the moves in the European Union affect our sovereignty. I do not ask people to take a view on the generality of those issues. But if my noble friends--beginning with my noblest of friends, I suppose, in No. 10, although he is not with us here--really do believe that they have joined a superpower rather than a superstate, how can they justify this provision? This is not the act of a superpower; it is the act of a superstate exerting and exercising its authority over us. We must say no. I ask the House to support the amendments. I beg to move.

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