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Lord Bassam of Brighton: My Lords, I am grateful to the noble Lord for giving way. I apologise if I did not address that problem as thoroughly as I should have done. On reflection, I take the noble Lord's point. We are trying to make it easier for the political parties to operate in this arena. That is the reason why in this instance we have placed the obligation on the donor. It is the only occasion in the Bill where we have done that. Because of the size of the donation and the fact that the donor knows that he is making it we believe that the obligation should rest with him.

Lord Mackay of Ardbrecknish: My Lords, I understand what the Minister says. I am not sure that it justifies going against the recommendation of the Neil committee. The provision says to donors, "Be careful. If you are a donor to a political party, you may

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be breaking the law". I am not sure that that is a nice message we want to get across. We all want to encourage people to give donations to political parties. It is not much of an excuse that the donor is responsible only with regard to this type of donation. Unless the donor has been present in your Lordships' House, or reads Hansard--I am not sure that too many donors will do that--I suspect that most people who are likely to donate to political parties will not be aware of their obligations.

I am unhappy that the Minister has been so negative. I understand that it is not easy. My amendment may not be well worded, although the noble Lord, Lord Goodhart, who is a greater expert on these matters than I am, did not seem to be too concerned about the wording. However, in the spirit of the recent co-operation from Ministers, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 66 [Control of donations to individuals and members associations]:

Lord Mackay of Ardbrecknish moved Amendment No. 118:

    Page 49, line 21, leave out ("not less") and insert ("more").

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendment No. 119:

    Page 49, line 29, leave out ("(4) to (10)").

On Question, amendment agreed to.

[Amendments Nos. 119A to 123 not moved.]

Clause 67 [Register of recordable donations]:

Lord Bach moved Amendment No. 124:

    Page 50, line 15, after ("2,") insert ("3,").

On Question, amendment agreed to.

[Amendment No. 125 not moved.]

Lord Mackay of Ardbrecknish moved Amendment No. 126:

    After Clause 67, insert the following new clause--


(" . After section 379 of the Income and Corporation Taxes Act 1988 (interpretation of sections 369 to 378) there shall be inserted--
"Tax relief on political donations.
379AA.--(1) Tax relief shall be available to an individual ("the donor") in accordance with this section on qualifying political donations made by him of up to £500 in any year of assessment.
(2) A donation is a qualifying political donation for the purposes of this section if it is made to a registered political party (other than a minor party) and--
(a) it takes the form of the payment of a sum of money,
(b) it is not subject to a condition as to repayment,
(c) it is not conditional on or associated with, or part of an arrangement involving, the acquisition of property by the political party, its members or accounting units, otherwise than by way of gift, from the donor or a person connected with him, and
(d) the donor is a registered elector.

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(3) For the purposes of this section a political party is an eligible political party if--
(a) it is a registered party within the meaning of section 22 of this Act other than a minor party, and
(b) at the last general election preceding the donation in question--
(i) two members of that party were elected to the House of Commons, or
(ii) one member of that party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.
(4) If an individual makes a qualifying donation he shall be entitled, on making the payment, to deduct and retain out of it a sum equal to basic rate tax thereon.
(5) Where a sum is deducted under subsection (4) above, the sum deducted shall be treated as income tax paid by the person to whom the payment is made.
(6) Any person by whom a qualifying donation is received shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (5) above is treated as income tax paid by him; and any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the qualifying political donation to which it relates.
(7) The following provisions of the Taxes Management Act 1970, namely--
(a) section 29(1)(c) (excessive relief) as it has effect apart from section 29(2) to (10) of that Act,
(b) section 30 (tax repaid in error, etc) apart from subsection (1B),
(c) section 86 (interest), and
(d) section 95 (incorrect return or accounts),
shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable in accordance with regulations made by virtue of subsection (6) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.
(8) In the application of section 86 of the Taxes Management Act 1970 by virtue of subsection (7) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment ("the relevant year of assessment") under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date--
(a) is 1st January in the relevant year of assessment in a case where the person falling within subsection (5) above has made a relevant interim claim; and
(b) in any other case is the later of the following dates, that is to say--
(i) 1st January in the relevant year of assessment; or
(ii) the date of the making of the payment by the Board which gives rise to the assessment.
(9) The Board may by regulations make provision--
(a) for the purposes of any provision of this section which relates to any matter or thing to be specified by or done in accordance with regulations;
(b) with respect to the furnishing of information by donors or recipients, including, in the case of recipients, the inspection of books, documents and other records on behalf of the Board; and
(c) generally for giving effect to this section.
(10) In this section--
"financial year" in relation to any person, means a financial year of that person for the purposes of the relevant regulations;

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"interim claim" means an interim claim within the meaning of the relevant regulations;
"relevant interim claim" means, in relation to an assessment made for a period coterminous with, or falling wholly within, a person's financial year, an interim claim made for a period falling wholly or partly within that financial year; and
"the relevant regulations" means regulations made under subsection (9) above.
(11) Section 839 of this Act shall apply for the purposes of this section to determine whether one person is connected with another."").

The noble Lord said: My Lords, I shall not resist the temptation of saying that this is another amendment that the spin doctors should have been told about before they did the spinning. Once again, the Government are asking us to insert a provision that is contrary to the Neill report. Last weekend the spinner said, more or less, that it was a disgrace for the House of Lords to try to vary what the Neill committee said, so one must suppose that he also thinks that it is a disgrace for the Government to try to do so.

The Government have rejected the Neill committee's proposal that tax relief should be provided on small donations--those under £500 in any year. That is part and parcel of the problem of trying to encourage donors to political parties, which we considered on the previous amendment. The Neill committee's proposals are supported by the Liberal Democrats and even by some Labour Back Benchers. The Government should think carefully before rejecting them. I remind the Minister of the powerful speeches of the noble Lord, Lord Shore--he is probably glad that I have not brought the noble Lord in again to argue this point--and the noble Lord, Lord Goodhart. In the other place, my right honourable friend John MacGregor also spoke powerfully on the issue. Three members of the Neill committee have backed the recommendations in Parliament. The Government cannot dismiss those speeches out of hand.

Further, the noble Lord, Lord Neill of Bladen, wrote to the Home Secretary in October in response to the White Paper, saying:

    "During the committee's investigation into the funding of political parties we found widespread support for the view that political parties should be funded by a large number of small donations rather than by a small number of large donations. My colleagues and I remain of this view. We are disappointed that you have decided against our proposals in relation to a tax relief system".

The Government have criticised the amendment on the ground that it provides for the state funding of political parties. No doubt the Minister will repeat that criticism in a minute. But that would not be its effect. The Neill committee did not regard it as state funding. No one argues that charities that benefit from tax relief on donations are funded by the state. The provisions envisaged by the Neill committee would prevent the need for state aid of the kind proposed by the Liberal Democrats yesterday. The report argued not only that tax relief on small donations was not state funding, but, in paragraph 8.7, that it would be necessary, given the envisaged reduction in large donations, to prevent parties coming cap in hand to the Government to ask

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for state funding. The Neill committee clearly recognised that the new restrictions on donations would be likely to reduce the income of political parties, perhaps significantly. It proposed this measure in part to redress the imbalance that would be created. It is short-sighted and wrong of the Government to reject that approach.

My right honourable friend John MacGregor encapsulated the committee's views in the other place when he made the point that, because of the new restriction on donations and the reporting and disclosure requirements, large donations to political parties would be less forthcoming. He said that, because of this, the Neill committee saw tax relief on small donations as a means of ensuring that sufficient funds to serve our democratic purposes were attracted to political parties. The independent Member in another place--it is very unusual for there to be an independent Member in the other place--Mr Martin Bell, said that this new clause would encourage the "little people" to get involved in politics, which would help our democracy and make it much healthier. I do not know whether I would quite use the words that Mr Martin Bell used. However, I believe that we all know what he means, and I think he is right.

I hope that the Government will reconsider their decision to reject the Neill committee in this regard and will accept my amendment. I fully accept that an amendment of this length may well contain some technical defects. If that is so, they can be resolved at Third Reading. In a spirit of consensus, I strongly commend this amendment to the House. I beg to move.

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