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Lord Falconer of Thoroton: My Lords, I am grateful for the unequivocal support of the noble Lord, Lord Goodhart, for the proposals that I am making. I deeply regret that the noble Lord the Leader of the Conservative Opposition does not appear to see, as the noble Lord, Lord Goodhart, said, that it is a problem for every political party in this country. The problem has arisen precisely for the reason that the noble Lord, Lord Goodhart, gave. The Committee on Standards in Public Life proposed the exception for loans on commercial terms. Everyone thought that it was perfectly sensible that the borrowing from the National Westminster Bank should not have to be disclosed. The consequences of that exception have been revealed over the past few weeks, and we need to do something about it to restore public confidence.

Like the noble Lord, Lord Strathclyde, I deeply regret that individuals' names have been brought into the press in the way that they have. I have absolutely no reason to suppose that that came from No. 10, but I share the noble Lord's deep concern that people who have given to public life in the way that many on the list have done have had their names besmirched in this way.

I agree with the noble Lord, Lord Goodhart, that we also need to look at other issues, such as guarantees. There is a difference between what I am proposing now and what Sir Hayden Phillips will be looking at. As the chair of the Electoral Commission said in the Times this morning, we need to have political parties and they need to be funded. They need to be funded in a way that improves and impresses public confidence. That is a longer-term issue than that which can be dealt with by an amendment to the Electoral Administration Bill.
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But there is no need to delay introducing an amendment about transparency regarding loans. That is why I am making my announcement today.

The noble Lord, Lord Strathclyde, is absolutely right that I spoke on the radio and television about this issue today. I apologise to the House for that. It was entirely my decision and responsibility. It was an issue of great public importance, so I thought it right that the public debate should continue. I hope that those on the Benches opposite will support the proposal for greater transparency.

Lord Waddington: My Lords, does the noble and learned Lord the Lord Chancellor agree that it might be salutary after these revelations if a few prosecutions were brought under the 1920s legislation that forbids the sale of peerages? Perhaps he will have a word with his noble and learned friend the Attorney-General.

Lord Falconer of Thoroton: My Lords, I think that there is great public disquiet, and it is right to put in place a legal framework in which everybody has confidence.

Lord Fowler: My Lords, surely this question goes beyond loans and even cash for honours. Does the noble and learned Lord the Lord Chancellor agree that it is wrong for any organisation—whether a trade union or any other—to buy political influence through political donations? I remind him that in leading the attack on the Conservative Party in 1993 when I was party chairman, the then deputy leader of the Labour Party, Margaret Beckett, said that, in contrast to the Conservatives, the Labour Party reveals,

When did that policy change?

Lord Falconer of Thoroton: My Lords, the noble Lord is right. This issue goes way beyond loans. That is why we have asked a respected independent figure, Sir Hayden Phillips, to look right across the board at the question of party funding. The issues are much more than just about loans; they are about donations, and relationships with donors and organisations that support the parties. We have never stopped our policy of being as transparent as the law requires. A new legal framework is required.

Lord Mackie of Benshie: My Lords, have any of these loans ever been repaid?

Lord Falconer of Thoroton: My Lords, I cannot comment on the detail of these particular loans because further work is required.

Lord Stoddart of Swindon: My Lords, it is entirely reprehensible that by accepting these loans, the Government—or at least Mr Blair and some of his colleagues—sought to undermine the safeguards that they put in place regarding donations. Will Sir Hayden Phillips's committee consider voluntary or compulsory donations by taxpayers? Does the noble
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and learned Lord agree that when political parties get their snouts into the taxpayers' trough, there will be no limit to the expenditure, and it will by no means eliminate problems and corruption regarding such expenditure?

Lord Falconer of Thoroton: My Lords, Sir Hayden Phillips's committee has a completely unlimited term of reference to look at the funding of political parties generally. It will consider voluntary and even compulsory donations. The noble Lord refers to a concern that many people have: is it a sensible use of money to give it to political parties? That is one of the issues that the committee will consider. Everything is open, and I fully agree with everything that the noble Lord, Lord Fowler, says. There is a much more profound problem than simply loans, which we need to address, because the health of our political system depends on the health of our political parties.

Lord Tebbit: My Lords, does the noble and learned Lord agree that although the Labour Party is in the dock this week, some distinctive and distinguished members of that party are particularly angry about the way in which they have been deceived in this affair? Problems with party financing have been going on for a long time—even before Lloyd George's day and the Liberal Party. In future, will the Prime Minister desist from saying that his Government will be whiter than white, and say, "greyer than grey"?

Lord Falconer of Thoroton: My Lords, I entirely agree that there has been a problem with party finance for many years, decades, generations and centuries. We have tried to deal with it; we did not deal with it adequately. That is why all the political parties and the Electoral Commission must come together to find a durable solution to this problem.

Lord Campbell-Savours: My Lords, could we not introduce enabling provisions within the Electoral Administration Bill to cover the possibility of introducing regulations on state funding and donations at a later stage?

Lord Falconer of Thoroton: My Lords, we need to see precisely what would be the best amendment to the Electoral Administration Bill in relation to the loans issues. In relation to the wider issues, we need consensus across the political spectrum, embracing all parties. That way we will have a durable solution. I do not think it is possible to pre-seed the way in which one would do that in the Electoral Administration Bill. I do not know what the Delegated Powers Committee here would say, but introducing an enabling power to deal with an as yet unknown proposal does not seem to be a sound way of proceeding.

Lord Smith of Clifton: My Lords, will Sir Hayden Phillips's remit enable him to look at the ceiling of expenditure at election times? After all, that is part of
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the root cause of why parties want ever-increasing funds. Will he be able to comment on whether this should be reduced?

Lord Falconer of Thoroton: My Lords, yes, the terms of reference allow Sir Hayden Phillips to consider that.

Viscount Bledisloe: My Lords, the noble and learned Lord avoided answering the question asked by the noble Lord, Lord Waddington, about prosecutions, by saying that it was desirable to put in place a good statutory regime for the future. Does the noble and learned Lord think it is desirable that, if an offence has been committed under existing legislation, a prosecution should be brought? If so, would the noble and learned Lord bring that to the attention of the appropriate person?

Lord Falconer of Thoroton: My Lords, of course it is desirable if any offences have been committed, but I have no reason to suppose that offences have been committed.

Lord Shutt of Greetland: My Lords, political funding is needed because there are political costs. Would the noble and learned Lord the Lord Chancellor agree that these costs are often at ward level, constituency level, the level of groups of constituencies in a city, and at regional level? Will Sir Hayden Phillips's review look—particularly in terms of what we call "state funding"—not only at nationalised state funding, but really take account of costs at all levels of political activity?

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