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Baroness Ashton of Upholland moved Amendments Nos. 11 to 18:
Page 61, line 8, leave out "member of the House of Commons" and insert "holder of the relevant elective office"
Page 61, line 13, leave out "member of the House of Commons" and insert "holder of a relevant elective office"
"(3) In sub-paragraph (1)(a) a relevant body is—
(a) if the holder of a relevant elective office is a member of a body mentioned in paragraphs (a) to (f) of paragraph 1(8), that body;
(b) if the holder of a relevant elective office is the Mayor of London, the London Assembly;
(c) if the holder of a relevant elective office is an elected mayor within the meaning of Part 2 of the Local Government Act 2000, the local authority of which he is the mayor.""
Page 61, line 23, leave out "members of the House of Commons" and insert "the holders of a relevant elective office"
Page 61, line 26, leave out "members" and insert "holders of relevant elective office"
Page 61, line 26, at end insert—
"(5) In subsection (4) references to the holder of a relevant elective office must be construed in accordance with Schedule 7 to the 2000 Act."
On Question, amendments agreed to.
Clause 60 [Regulation of loans etc]:
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Lord Goodhart moved Amendment No. 19:
"(5A) An agreement or arrangement entered into before the commencement of section 60 of the Electoral Administration Act 2006 which would be a regulated transaction if entered into after that date is also a regulated transaction unless it has come to an end before that date."
The noble Lord said: In speaking to Amendment No. 19 I wish to speak also to Amendments Nos. 21 to 26 and Amendment No. 30. These amendments raise an issue which has already been well debated, and I will therefore try to be as brief as possible.
The Government have rightly made loans to political parties subject to disclosure, whether or not they have been made at commercial rates. In doing so, the Bill will override the confidentiality requirements that may be contained in some or all of those loan agreements. Some of the loans have been made by people who would not have been allowed to make a donation to the party. That, of course, was legal under the 2000 Act, provided they were made on commercial terms, but it was plainly a breach of the spirit of the Act. In those circumstances we believe that the loan should not only be disclosed but that it should also be repaid.
My original proposal was that the loan should be repaid as soon as the Bill not only became enacted but came into force. I was persuaded by the debate we had on that occasion that this was too drastic and that time should be given for repayment to avoid any immediate financial crisis for the parties concerned. On Report, therefore, I altered the amendments to allow 12 months from the date of the commencement of the Bill for repayment. That may be overriding the terms of the agreement, but no more so, I think, than by requiring disclosure which overrides a confidentiality clause.
Further, where the loan agreement provides for repayment on demand or on fairly short notice—as I believe almost all of them will do—the lender who chooses not to recall the loan is in effect conferring a new benefit on the borrower. I believe it is wrong to allow loans in this category to remain outstanding indefinitely and that the provision in these amendments is necessary to bring to an end a practice that is an abuse of the spirit of the law and that these amendments also give fair time for repayment by political parties which have taken advantage of this loophole. I beg to move.
Lord Kingsland: My Lords, the noble Lord, Lord Goodhart, and I often find ourselves in harmony on many of his amendments. However, on this occasion, I find myself a dissenting voice. The amendment, as I understand it, would result in existing loans, deemed illegal after the Act, having to be repaid immediately.
Lord Goodhart: My Lords, I am sorry to interrupt, and I am grateful to the noble Lord for giving way.
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However, the loans would not be repayable immediately. They would be repayable over a period of 12 months.
Lord Kingsland: My Lords, I am most grateful for that correction. The obligation to repay them would be immediate but the actual repayment would, indeed, be over a period of time. I am most grateful to the noble Lord and, of course, I stand corrected.
I find myself in agreement with the remarks of the noble and learned Lord the Lord Chancellor when, in Committee, he said:
"We think that the balance is best struck by requiring disclosure but not requiring what may wreak havoc with a party's finances or cause significant prejudices to the individual lender".—[Official Report, 8/5/06; col. 758.]
Baroness Ashton of Upholland: My Lords, the noble Lord, Lord Kingsland, and I find ourselves in agreement on the amendment, which I hope will bring some satisfaction to the noble Baroness, Lady Hanham. The noble Lord, Lord Goodhart, rightly said that the transactions described and the loans made were made in good faith and completely legally. We believe that the transparency now required is right, but we continue to take the view expressed by the noble Lord, Lord Kingsland, and by my noble and learned friend the Lord Chancellor in Committee. The proposal would wreak havoc with party finances. I know that the noble Lord, Lord Goodhart, has gone some way to ameliorate those difficulties by giving a longer timescale, but none of us knows whether any political party would be affected by that or in what way. There comes a point in retrospection where we must decide that we will go this far and no further.
Noble Lords will be aware that political parties will look carefully at the loans that they receive. They will have the opportunity between the end of our scrutiny of the Bill and Royal Assent to think carefully about the provisions and their lenders will have the opportunity to say that they would rather have the loans repaid. That is for them. We then move to a period of greater transparency when the law takes effect. We continue to think that we have the balance right. On that basis, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Goodhart: My Lords, I remain unconvinced by the argument against my amendments but, in view of the remarks made from both the Government and the Conservative Benches, it is clear that we would not succeed if we were to force a Division. I am well aware that we are running somewhat behind time on this matter and therefore, with some regret, I ask the leave of the House to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Ashton of Upholland moved Amendment No. 20:
"(4) For the purposes of subsections (1) and (2), no account is to be taken of the effect of any provision contained in a loan agreement or an agreement for a credit facility at the time it is entered into which enables outstanding interest to be added to any sum for the time being owed in respect of the loan or credit facility, whether or not any such interest has been so added."
The noble Baroness said: My Lords, at Report I made a commitment to return to the House with provisions to resolve one particular issue concerning loans that contain capitalisation provisions. In moving Amendment No. 20, I should like to speak also to Amendment No. 60. My noble and learned friend and I have previously clarified to the House—in response to a probing amendment by the noble Lord, Lord Kingsland—the status of loans that contain capitalisation provisions. We are clear that where a regulated transaction provides for capitalisation at the outset, the provisions of the Bill are such that activation of the capitalisation provision is not to be treated as a new regulated transaction.
The difficulty that we found, about which I agreed to return to your Lordships' House, concerns the complexities that arise in determining the value of a loan that provides for capitalisation. For the purposes of reporting, there would be a difficulty where the value of a regulated transaction was just below the reporting threshold—let us say, £4,000—which might cross the reporting threshold if capitalisation provisions took effect. In those cases, the variable element would be crucial in deciding whether the transaction needed to be reported under the new regime and it would be impossible to make that decision with any certainty.
Government Amendment No. 20 removes the need to consider capitalisation provisions which form part of an agreement at the outset when determining the value of a regulated transaction. For the reasons that I have just stated, to require political parties to consider capitalisation provisions in the valuation of regulated transactions would be unduly complex and would impose on political parties what could be described as a rather inexact science. As amended, all parties will have clarity in terms of the circumstances where the reporting threshold would be crossed.
Where a transaction is recordable, Amendment No. 60 will make it a specific requirement to state in the transaction report whether the agreement contains a capitalisation provision. Where a recordable transaction that did not provide for capitalisation is later varied to provide for capitalisation, the change must be reported under the continuing reporting requirement in new Section 71N. The key drivers in all this are increasing openness and transparency, and the amendments provide for specific reporting of regulating transactions that contain capitalisation provisions. Once a regulated transaction has of its own right and not in respect of capitalisation provisions exceeded the reporting thresholds, these amendments require the reporting of the fact that the regulated transaction contains capitalisation provisions.
We think these amendments strike the right balance between openness and practicability. They provide for the disclosure of regulated transactions that contain capitalisation provisions, but avoid the need for political parties to try to predict whether capitalisation provisions might or might not cause a regulated
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transaction to exceed the reporting threshold. I should add that we simply do not want to put anyone in the position where they could accidentally be criminalised when they could not possibly know in advance the value of the interest that might be capitalised. On that basis, I hope that noble Lords will accept the amendment, and I beg to move.
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