---

Lord Bassam of Brighton: My Lords, I shall not say a great deal. My speech has already been made by my noble friend Lady Gould, much more effectively than I could have made it.

21 Nov 2000 : Column 760

The Government and the Official Opposition are agreed, have agreed and were certainly agreed at the time of the Neill committee, that any general system of state aid to political parties is undesirable. The noble Lord, Lord Mackay, actually repeated that yesterday when he said,

"I am opposed to the direct funding of political parties".--[Official Report, 20/11/00; col. 602.]

No doubt when the noble Lord responds to this point he will say that we are talking about "direct" funding of political parties. But I see no difference in tax relief on donations and direct funding of political parties. Of course it is direct. That is the intention of the tax relief. If I think back to the Budgets under the last Chancellor, Kenneth Clarke, and perhaps even his predecessor, it was often the case that when Conservative Chancellors wanted to make the point that they believed in charitable giving, they loudly trumpeted the fact that it was a form of state aid to charities.

If somebody can advise me that that was not the case when they are arguing the point, I should like to hear from them. My view is that tax relief amounts to a direct subsidy to political parties in this instance if this amendment is carried.

It was argued that the sums of money are small. They may well seem so. But, as my noble friend Lady Gould said, once set upon this rocky road, what is to stop governments in the future from increasing the sum of money exponentially, as it were, so that it becomes increasingly large and the benefit therefore increasingly large in terms of direct government subsidy in the form of tax relief?

We have heard the arguments about Short money, Cranborne money, free mail shots, policy development grants, start-up funding and so forth being direct state aid. The point in that regard, which was well made, is that that money relates to specific purposes; this money does not. It is a direct form of tax relief into a political party and it needs to be understood as such.

At the weekend it was revealed with some concern in some quarters of the press that when it came to matters such as Short money, the Conservative Party itself was not entirely sure whether it was using that money properly. David Prior, the chief executive of the Conservative Party, acknowledged that the money had been used for the war room at Central Office. If we cannot trust the Conservatives--if the report is right--to understand the proper use of Short money, how can we expect them to make proper use of such a direct subsidy as set out in the amendment? The Conservative Party's friends on this issue, the Liberal Democrats, need to think carefully before tying themselves so closely to this amendment which they gleefully welcomed.

Lord Hodgson of Astley Abbotts: My Lords, the Minister mentioned Conservative Party funding. He quoted from the comments of David Prior. What he did not say was that the party took advice from PricewaterhouseCoopers, who said that the purpose

21 Nov 2000 : Column 761

for which the money was being used was not in conflict with the Short money provisions. That was the basis on which the expenditure was undertaken.

Lord Bassam of Brighton: My Lords, as a matter of record that is undoubtedly the case. But what appears to have happened is that a change of definition in the Fees Office was not communicated to other political parties. The chairman of the Public Administration Committee said that the Fees Office appeared to have "unilaterally redefined the rules". I know that there is considerable anxiety over that matter. No doubt it will be a matter for disputation.

Whatever the merits of the proposal, few members of the public will identify the needs of political parties as a priority in terms of public expenditure. The sum may be small but the principle is most important. I hesitate to make the point that the political party comprising noble Lords opposite is concerned about taxation and is offering us tax cuts but here it is after a slice of public expenditure for its own political purposes. That is a strange order of priorities and no doubt the public will view it similarly. I suggest to noble Lords opposite that they ought to withdraw their amendment.

10.15 p.m.

Lord Norton of Louth: My Lords, before the Minister sits down, perhaps I may point to a matter which he did not address regarding state funding. It is not a case of the state giving out money willy-nilly; it is related to electors. Short money is related to a formula based on the number of votes a party gained at the previous election and, in the context of tax relief, it is triggered by individuals. It does not come from the state as such and there is a crucial distinction to be drawn in any discussion. The Minister's comments did not address that point.

Lord Bassam of Brighton: My Lords, my comments may not have addressed that point but the principle is the important point. Public perception is important--indeed, much of our debate on the issue has been about public perceptions. On several occasions I have been reminded that public perceptions of what happens in the process of politics are the most important. The noble Lord probably understands that better than most.

Lord Mackay of Ardbrecknish: My Lords, the fact that the Minister was on weak ground was clearly illustrated by the fact that for the first time today he indulged in some political bashing of the Conservative Party. That told me that he did not want to address the argument. He had better consult his right honourable friend the Chancellor on when a tax credit is expenditure and when it is not. The family tax credit has been shifted from the expenditure column to the negative income column in order to be able to say that it is not a state subsidy or an expenditure of state money. Perhaps he should examine that before advancing his argument further. However, I suggest

21 Nov 2000 : Column 762

that when the Minister travels home tonight in his car he looks at pages 94 to 99 of the Neill report. There he will find many powerful arguments which torpedo many of his arguments.

I presume that in logic the Government will deal with the fact that United Kingdom donations to political parties are already exempt from inheritance tax. If the Government believe that it is so terrible, where is the amendment to stop it? It is nowhere.

As the noble Baroness, Lady Gould, is seldom confused, those briefing her must have been confused about charitable giving via a payroll, about which the employer would know, and charitable giving--in which I am sure many noble Lords participate--when one fills in a form which goes to the charity together with one's cheque, which then go to the Inland Revenue and about which the employer would know nothing. I am not an expert but I believe that the Chancellor is making changes which will make the process a good deal simpler.

It has been argued that it is unfair on non-taxpayers because if a charity receives £100 from a non-taxpayer it will receive only £100 but if the money comes from a taxpayer it will receive, say, £125 after adding the tax relief. If that argument is good for political parties it must be good also for charities. Is it not unfair that non-taxpayers must give more from their own pockets than taxpayers in order to give the charity of their choice the same amount of money? The noble Baroness attacked the whole system of charitable donations and the tax regime, and I do not believe that there are many who agree with her. The noble Baroness is the first person I have ever heard advance the argument that it is a little unfair to non-taxpayers that charities can get some tax back.

Baroness Gould of Potternewton: My Lords, with great respect I quoted from the evidence given to the Neill committee by Vernon Bogdanor, who made exactly that point. If the noble Lord has read the Neill report it is not the first time that he will have heard the argument.

Lord Mackay of Ardbrecknish: My Lords, Vernon Bogdanor may be a very great man but he is not the last authority on every single issue on earth, and I beg to disagree with him on this matter. The one or two charities in which I am involved are extremely grateful to the people who give donations via deeds of covenant--they are no longer required--or forms which allow them to claim back tax. I suspect that we shall not see a proposal to abolish those tax advantages for charities in the Labour Party manifesto. I shall not pursue the point.

I also point out to the noble Baroness that subsection (3) of the new clause provides:

"(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".

21 Nov 2000 : Column 763

Given the way our system works, that is a fairly high hurdle. Not very many Members who represent tiny parties reach the other place. Mr Martin Bell is the only example who comes to mind. By and large, that hurdle would catch almost every party that could not get two Members elected to the House of Commons. As far as concerns tax relief for think tanks, I shall pass. We have some later amendments which deal with think tanks. I have every sympathy for think tanks which serve a useful purpose. Certainly, it is not my intention to cause them any damage by this amendment. I simply ask the Government why they abandon, with such venom, an important part of Neill. After all, Neill is a package which recognises that political parties will probably experience a drop in larger donations and this is a way to try to fill that gap. I would have thought that that was a perfectly reasonable proposal. However, I know that I shall not succeed in persuading the Government. For the moment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 68 [Special provision for Northern Ireland parties]:

[Amendments Nos. 127 and 128 not moved.]

---