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Lord Whitty: My Lords, in view of the concern expressed about water shortages and ecological effects in the very areas that these stations were researching and although I accept my noble friend's view that Ministers should not interfere directly in the priorities of research establishments, could it nevertheless not be put to the Natural Environment Research Council that the importance of water research in particular needs greater emphasis? If it is indeed NERC's own decision to change its priorities rather than a funding issue, as my noble friend implies, can it be asked to think again?

Lord Sainsbury of Turville: My Lords, people fear that important activities will not continue, but, in fact, they will be strengthened. Examples of that include the countryside survey, long-term monitoring research of freshwater ecology to help implementation of the EU Water Framework Directive and predicting the impact of climate change on biodiversity. All the fundamental monitoring arrangements that contribute to important aspects will be strengthened.

Baroness Byford: My Lords, will the Minister tell us about the 1,327 written statements that the council received? I understand that of the first 500 received only six people were in favour of the alterations. Secondly, how does he square his assertion that it was for the council to maintain its independence and not be influenced by government with the fact that Government have targets to reach and clearly are failing to reach them as regards climate change?

Lord Sainsbury of Turville: My Lords, the simple answer is that research councils do research. There can be debates about whether the research is undertaken in the right areas; as I have said, that is largely for scientists to decide and not for Ministers to interfere in. That was stated clearly in the House during the debate on the Arts and Humanities Research Council. The question of whether the Government are meeting their targets is quite separate and is not the responsibility of the research council.

National Insurance Contributions Bill

3.06 pm

Lord Grocott: My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the National Insurance Contributions Bill, has consented to place her Prerogative and Interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Bill read a third time, and passed.

20 Mar 2006 : Column 12

Political Parties: Funding

3.07 pm

The Secretary of State for Constitutional Affairs and Lord Chancellor (Lord Falconer of Thoroton): My Lords, the Government intend to move amendments to the Electoral Administration Bill, currently before this House, to make it compulsory for political parties to disclose any loans they receive.

This issue affects all political parties and I hope that the Government, political parties and the Electoral Commission will be able to work constructively together to find a solution which allows for transparency and fairness.

My intention is to achieve as great a transparency for loans made to political parties as applies to donations under the regime in the Political Parties, Elections and Referendums Act 2000.

I have today written to the leaders of all political parties represented at Westminster, and to the Electoral Commission, seeking their views on the elements of a reporting regime, including whether it should be retrospective. I have placed a copy of my letter in the Library.

The Prime Minister has announced that Sir Hayden Phillips will conduct a review of the funding of the political parties. The terms of reference of the review were announced earlier today. I have placed a copy in the Library.

3.08 pm

Lord Strathclyde: My Lords, I thank the noble and learned Lord the Lord Chancellor and Secretary of State for Constitutional Affairs for coming to the House and making that Statement. But does he not share my feeling that it is "here we go again", with the noble and learned Lord the Lord Chancellor touring the television studios all morning and turning up here after lunch to clear up another mess caused by the Prime Minister? That seems to be one role that the Lord Chancellor will never be able to abolish.

This is a deeply dispiriting day, and the Prime Minister should hang his head in shame. I have sympathy for many of those caught up in this affair—sympathy for those who were asked—I repeat, asked—to give loans to Labour, then saw No. 10 deliberately leak their names to the media in an attempt to bounce the Appointments Commission. As a direct result, those people have faced criticism of the worst sort, in which the good that they have done has been lost in a storm of scandal. The culture of spin and leak that besmirches this Government, besmirches them, too.

I have sympathy for those noble Lords in this House who legitimate and openly donated money to political parties in the past, but who came here by a lifetime of public achievement and service. Their names should not be dragged into this scandal.

Noble Lords: Oh!

Lord Strathclyde: But, my Lords, I have no sympathy at all for the Prime Minister and his coterie
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of cronies who are at the heart of this affair. They have dragged politics, their party, and, sadly, this House, into disrepute. The buck stops firmly at No. 10. I accept that the noble and learned Lord the Lord Chancellor did not know about loans for peerages. Can it be true, however, that the Deputy Prime Minister did not know, that the Chancellor did not know, that even the Labour treasurer did not know? As it concerns the honour of this House, who in the government machine knew that certain individuals had loaned money to the Labour Party before they were nominated for peerages in the current list? Was it the Patronage Secretary, or perhaps the noble Baroness the Leader of the House or the noble Lord, Lord Levy? Just who did know, apart from the Prime Minister?

I welcome this Statement, as far as it goes. We on this side supported the moves made in recent years to improve the law on party funding, since Mr Major set up the Committee on Standards in Public Life in 1994. We will join in talks with Sir Hayden Phillips. My right honourable friend Mr Cameron has been working on proposals to reform the law on party funding. I hope that the noble and learned Lord the Lord Chancellor will consider all those proposals, rather than rush to push through his own ideas—which, with the best will in the world, must have been cooked up in the No.10 kitchen after the story broke only a few days ago. Would it not be sensible to delay the Committee stage of the Electoral Administration Bill so that these critical matters can be considered in detail? If he cannot agree to that, will he use his considerable influence with the usual channels to ensure that time is made available to recommit any provisions that may be tabled on party finance, especially since we are already halfway through the Committee stage on that Bill? I know, for instance, that the noble Lord, Lord Grocott, the Government Chief Whip, hopes that some time could become available—time that is now scheduled for the Legislative and Regulatory Reform Bill.

I do not suppose that I was the only Peer who was amazed to hear the noble and learned Lord the Lord Chancellor say on television that he had found a loophole in the legislation that he now wanted to close, and that he had a Bill he could use to do so. It sounded all too much like the burglar caught in the back garden, with a bag of swag, who says he only wanted to polish the silver.

Noble Lords: Oh!

Lord Strathclyde: My Lords, it was the Prime Minister who introduced that legislation; the Prime Minister who saw the loophole and exploited it; the Prime Minister's people who told donors to give loans, not gifts, so that they could be kept secret; it was the Prime Minister who offered the peerages. For all the talk of using the Electoral Administration Bill to right this wrong, there was not a peep about it from Ministers when it was introduced just a few weeks ago. I fear that this House has been gravely damaged by what will inevitably be remembered as the loans for
20 Mar 2006 : Column 14
peerages affair. It is vital to restore public confidence in our political system. We will play our part in what is now needed—a fresh start and a change of values behind the best known front door in the world.

3.14 pm

Lord Goodhart: My Lords, we on these Benches welcome this Statement and the announcement of the review to be carried out by Sir Hayden Phillips. Under pressure first from the Appointments Commission, then from the media, the Government are being forced to consider doing things that they should have done long ago—which the Liberal Democrats have advocated for years. The mechanism of using huge loans as a way of evading the obligation to disclose donations has horrified the general public and has done much to increase public disdain for politicians and the political process. I am aware that the terms of the Political Parties, Elections and Referendums Act 2000 do not require disclosure of loans made on commercial terms. That reflected the recommendations of the Committee on Standards in Public Life. I confess I was a member of that committee at the time. We were, I am afraid, na-ve in not realising that loans—even at full market rates of interest—could and would be used for the evasion of the duty of disclosure. We therefore welcome the commitment to treat loans as donations, whatever the rate of interest. Last week, we on these Benches tabled amendments to the Electoral Administration Bill which will achieve this. We will probably reach them in the debate on Thursday. Perhaps the noble and learned Lord the Lord Chancellor would like to accept the ready-made alternatives that are available.

Our amendments would also treat as donations guarantees given by wealthy supporters of political parties of the bank loans and other debts incurred by those parties. If that is not done, it will obviously be the next loophole for evading disclosure. Therefore, will the Government also treat guarantees as donations of the amounts guaranteed for the purposes of disclosure? Otherwise, their amendments will be totally flawed.

My next question—I wish to ask it of the Conservatives as well as of the Government—is whether any loans have been used to evade the ban on donations by non-residents of this country. If so, that is another, perhaps even more serious, breach of the spirit of the law in the Political Parties, Elections and Referendums Act. Then, will the Government speed up Sir Hayden Phillips's timetable? He has been asked in his remit to report by the end of this year. It is extremely important that there should be legislation to deal with these matters in the 2006–07 Session, and that means legislation being written into the Queen's Speech. Therefore, will the Government be prepared to ask Sir Hayden to report by, say, mid-October so that that can be done?

Will Sir Hayden look at the evasion of restrictions on constituency spending limits by, for example, the national parties sending leaflets to voters in target seats, which escape treatment as constituency expenditure because they do not mention the name of
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the party's candidate? Will Sir Hayden consider the proposal of the Committee on Standards in Public Life that something equivalent to gift aid should be available to enhance the value of small donations? Or will he consider the recommendations of the Power report that voters can tick a box on the ballot paper to donate £3 out of their taxes to the party for which they voted?

Previously, the Government's answer to such ideas has been that they would take money which would otherwise go to schools and hospitals. Do the Government not realise that, alongside the billions which are rightly spent on schools and hospitals, it is vital to spend a tiny fraction of that amount on ensuring an honest and transparent electoral system?

We are faced with a crisis of confidence in the entire political system and, indeed, in your Lordships' House. It is essential for the Leaders of all parties to display proper leadership. We need a recognition by all parties—of course, I include mine—that they have to comply with the spirit, as well as the letter, of the law, and that clever schemes to evade the law will rebound on those who use them and on the whole political system, as these undisclosed loans have rebounded on the Government and on the Prime Minister.

3.18 pm

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