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We do know that these non-UK taxpayers can have a huge impact on the outcome of general elections. As the Rowntree report published last year, Purity of Elections in the United Kingdom: Causes for Concern, states:
“There is substantial evidence to suggest that money could have a powerful impact on the outcome of general elections, particularly where targeted at marginal constituencies over sustained periods of time”.
I will not get into the names of people or even the parties involved because that is irrelevant to this debate, but one noble Lord who lives offshore refuses to make himself liable to tax in the United Kingdom. He converted a £3 million loan into a gift to a political party and then went on to donate a further £100,000 to that party and an additional £30,000 to a mayoral election campaign. Do we really believe that that is acceptable? As the Electoral Commission, which has got it right for once, said:
“The permissibility requirements in the 2000 Act are intended to ensure that only people and organisations with a close relationship to the UK can donate to political parties. It is for Parliament to decide if this is appropriate”.
That is precisely what we are doing with this amendment.
In a spirit of frankness, I should say that the Electoral Commission has allegedly expressed some reservations over the workability and proportionality of the Prentice amendment. But the enlightened Mr Prentice has considered its reservations and come up with a solution to the problems. He suggests that a donor simply ticks a box on his or her tax return and then the Electoral Commission needs only to certify with the Inland Revenue that that is the case—that a ticked tax return has been received. I cannot see how such a simple solution can be described as disproportional, particularly when such a donation could influence the result of a general election. Some people believe that such donations have influenced the results of general elections. Of course, it would apply only when donations exceeded a threshold laid down in regulation.
I now draw the attention of the Committee to a letter from the House of Lords Appointments Commission to Mr Tony Wright, chairman of the Public Administration Committee, announcing changes to the selection criteria for Peers of the realm. It states:
“I am writing to notify you of a slight strengthening of the selection criteria which the Appointments Commission will in future use when assessing nominees for non-party-political peerages. The Commission has agreed these changes as part of its review of policies and procedures and in the light of experience”.
A copy of the press notice is then attached which states:
“The Commission also wants to strengthen the existing requirement that a nominee should be resident in the UK for tax purposes, and be willing to confirm his or her acceptance of the requirement to remain so. This strengthening will also be reflected in our vetting criteria for future party-political and other nominations for peerages”.
Surely, if the appointment to the Lords requires UK residency for tax purposes and a liability to tax within the United Kingdom, it must follow that donations of millions of pounds to political parties, which could influence whole general elections—elections to the elected House, the House of Commons—must at the least have the same tax liability requirements.
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Finally, I turn to the response of the Government on these matters. They have circulated a document. I do not know how widely it was circulated, but it was sent to Members of Parliament in the House of Commons, certainly to Labour MPs, and perhaps even wider. However, I shall place it on the record because it is in the public interest. It is headed:
“Tax status and donations: Gordon Prentice amendments. Two amendments have been tabled by Gordon Prentice MP to make political donations from individuals who do not pay full UK tax illegal ... there are a number of practical problems”.
“The amendments would not prevent non-UK taxpayer donations. The amendments as tabled would not in practice prevent political donations from non-UK taxpayers, as they could use other routes—such as companies or unincorporated associations—to pass on funds ... These amendments would not affect company donations”.
My response to that is very simple. Why do the Government—presumably the Government were behind the document that I am now reading—table amendments to deal with the deficiencies in that area of these amendments? I invite my noble friend to consider with his officials and other Ministers in the department whether it would be possible to table amendments on Report to deal with the deficiencies identified.
I had a conversation with the Justice Secretary Mr Jack Straw about the matters raised in the next paragraph and he raised exactly these issues with me. Paragraph 2 states:
“The amendments would create an anomaly in rules regarding democratic participation. The amendments would allow a non-UK taxpayer to stand for election, collect and receive political donations, vote in elections and potentially sit in a democratically elected body. But the same individual would be barred from donating money—even to their own campaign. There is no coherent reason for this discrepancy,”—
- “and indeed such a move would be open to legal challenge on the grounds of unjustifiable difference of treatment. If there is a desire to tackle the residence and tax status of donors, it is preferable to do so in a broader context”.
That is an interesting phrase. The document continues:
So why do we not do that? Why do we not table an amendment on Report that tackles the matter in a broader way to deal with the concerns expressed in paragraph 2 of this document which has been circulated on behalf of the Labour Government—my party in Government?
“The amendments would be impractical and burdensome. An additional reason for opposing the amendment is that, as things currently stand, it would be very difficult to deliver in practice. This is particularly the case given the concerns surrounding confidentiality of tax data and the fact that such data are not readily verifiable (ascertaining whether a person is resident in the UK for tax purposes would in most cases require a specific investigation). Whereas at present political parties can fulfil their compliance duty to check that an individual is on the electoral roll, or a company is registered at Companies House, by consulting public records—obliging parties to check the tax/residence status of donors would be an impossible task. Tax records are not public documents and in any event there is no single record of individuals’ tax status”.
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We are not asking the public to have access; we are asking the Electoral Commission to go to the Revenue to check whether it would be compliant with the law in the event that it were to be incorporated in the law in the way that I suggest in the amendments.
This opens up the further question of what would happen if a party was shown to have accepted an impermissible donation some time after the event. It would presumably be required to pay the money back, despite never having been able to verify whether the donation was permissible in the first place. Such a scenario would undermine the confidence of political parties, as well as the public, in the regulatory system. I would have thought that it would concentrate the minds of parties, that they would want to be sure that it was a permissible donor donating the money, and that it was within the law. It would probably make the parties extra diligent. I know that the Liberal Party, for a period, had some difficulties in this area and, on reflection, I am sure that it regretted what happened. But the point is that it must have concentrated its mind so that in the future it would not find itself in that difficulty again, as indeed is the case. We have all learnt from what happened over the Liberal experience. Let us tighten up the law in the way I am suggesting because we can make it work.
I say to my noble friends, that I do not know where this document came from, but it must have something to do with the Government. It is a criticism of the amendment and it certainly did not come from the Conservative Party. On the basis of the document here and the reservations expressed, why do we not table amendments on Report that deal with all these matters and then deal with the concerns expressed by 216 Members of Parliament of all political persuasions, not including the payroll vote? If this House carries the amendment when finally we divide on it—as we will do on the Floor of the House—the House of Commons will have the opportunity of deciding on something that it wants to decide on. I believe that it is the function of the House of Lords to give it every opportunity to do so. I beg to move.
2.45 pm
Lord Tyler: I and my noble friend Lord Rennard have added our names to Amendments 82 and 84 for a number of reasons. I shall, as briefly as possible, add to what the noble Lord, Lord Campbell-Savours, has already said and try to emphasise one or two additional points.
First, I entirely endorse what he says about the extent of support within the House of Commons and the totally inadequate lack of attention to this issue because of the way in which the legislation was so-called “programmed”. Old-fashioned politicians like me used to think of it as guillotining. The only point on which I differ from the noble Lord is that I think it was 218 Members who signed the amendment; a very substantial number.
To pick up on one extremely important point that the noble Lord made towards the end of his speech, all parties would benefit from this situation being sorted out. What happened in the past has gone; we have all had unfortunate experiences in this field; the sooner this issue is cleaned up and it becomes
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We, too, believe that it is a matter of principle that those whose commitment to the United Kingdom stops short of making a substantial contribution to its economy through their tax should not be put in a privileged position. It is surely the greatest irony that you can save a bit of money by being a tax exile, and then you can use it to invest in the United Kingdom political parties to try to reduce the tax burden, perhaps, on non-doms. It is extremely important that we find ways to deal with this issue. To me, tax is the rent we pay to live in a civilised society. It is part of being a citizen of the United Kingdom or any other democracy.
The noble Lord, Lord Campbell-Savours, referred to the Rowntree report. I do not intend to follow him in detail, but I drew that report to the attention of the House in a Question some months ago. We are still awaiting a considered response from the Government to that extremely important report, which raised very substantial issues about the way in which the political system is seen and the extent to which individuals in our society feel disenchanted and disengaged from the political system, because of the power of money—not least in terms of the power of foreign money.
The noble Lord referred to the views of the Electoral Commission and I take seriously the fact that it recognises the purpose of what we are seeking to achieve, but has some concerns about its application. It is clearly a problem that it is impossible for any regulatory body to take a retrospective view of. Were they a tax exile last year or are they a tax exile this year? However, ways can be found around that. If there is a practical way, as the noble Lord said, for the Appointments Commission to look at this issue in relation to nominations to this House, and if that is seen to be a perfectly legal, unchallengeable way to assess the tax status of an individual, why for goodness’ sake can that not be used in the same way?
There are two subsidiary issues to which the noble Lord has not referred. As he pointed out, small donations might well fall outside this particular restriction, for reasons that we all understand. However, as I understand it from the briefing that was repeated to me from the Electoral Commission, which I received before Second Reading, if each individual donation is £1 less than the threshold, and the donation is made at that level every week of the year and goes, in aggregate, way over the top of the threshold, it would not be caught in terms of reporting and checking the origin of those donations. That cannot be right. I had hoped that having raised this at Second Reading the Minister and his team would have found a way of closing what is, at least apparently, a loophole. If it is an apparent loophole for the Electoral Commission, it must surely be one that we should take very seriously, because it would be crazy if the aggregate donation over the full 365 days of the year turned out to be dramatically more than Parliament and government intend in terms of the threshold. I hope that the noble Lord can respond to that in particular. As I have said, I raised that at Second Reading; I did not receive an answer then and
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On the other question to which I should like to draw attention, the noble Lord, Lord Campbell-Savours, mentioned the companies that might be in the control of an otherwise impermissible donor. The answer to that is of course in Amendment 89, to which he may care to add his name, in the name of my noble friend Lord Rennard and myself, and in Amendment 90. Both amendments deal with this issue. We will come to them in due course, but it is not impossible to deal with that perfectly justified point. We do not want a way whereby particular donors are excluded as individuals, but they find a route round that simply by having a company which enables them to make donations in a way that would be illegitimate in terms of the amendment and, I hope, the eventual legislation that we pass.
We have a great deal of sympathy with the points that have been raised, not just by the noble Lord, Lord Campbell-Savours, but by a huge number of others outwith politics. These are not just political animals saying that this system is being cheated, it is of a real concern to the interested public, and that was very apparent from the Rowntree report. We hope that the Minister, even if he cannot do so today, will recognise the strength of feeling among Members of both Houses—and rightly so, because the present situation is not sustainable, and the public know it is not sustainable. The public believe that it is yet one more reason why we have what is now being referred to as a reputational crisis in Parliament.
Lord Henley: The noble Lord, Lord Campbell-Savours, will not be surprised to learn that he does not have my support on his amendments. I shall be relatively brief in dealing with the arguments that he put at considerable length, but there are three important points to make.
First, and I think that the Minister would agree with me, these are matters where we should proceed by consensus. The parts of this Bill that are working best are those where consensus has come into it, as the Minister acknowledged earlier. Secondly, we already have strict rules which deal with controlling who can and cannot donate to political parties. If there is a concern about large donors having a disproportionate influence on the political process, which is in effect what the noble Lord is worried about, that is a matter that in my party’s belief should be addressed by a comprehensive cap on donations. That, as the noble Lord is well aware, would have to affect not only firms and individuals but also the trade unions. If the noble Lord was prepared to go down that route, he might find that some consensus was possible, but I suspect that he and the Government would not like to see their political masters, the trade unions, denied making the contribution that they wish to make to their party.
Lord Campbell-Savours: How would we manage to regulate a multiplicity of £50,000 donations coming in from some obscure part of the world?
Lord Henley: That is not a matter for me to address at this stage. I noted what the noble Lord, Lord Tyler, said about a whole series of individual donations
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Thirdly, I go back to the point on which he quoted the Justice Secretary. Confidentiality is very important in relation to individuals’ relations with Her Majesty's Revenue and Customs. I understand that HM Revenue and Customs currently has no power to release data of this kind to other bodies, because of confidentiality.
Lord Tyler: I am listening with great interest to the noble Lord, but does he accept that that principle has been blown to smithereens by the Appointments Commission for this House, which is presumably given access to that precise information?
Lord Henley: It might have been blown to smithereens on that one point but it still exists here. It is a valid point that has to be borne in mind.
I go back to my first and second points, which are the more important. We need a consensus and, if the noble Lord’s real concern is the disproportionate influence coming from individual donors, the route that he should look at is a cap on donations, which must affect all bodies and not just individuals.
Lord Pearson of Rannoch: As a fundraiser for the UK Independence Party, I find these amendments inconvenient. However, I also find them largely persuasive. At Second Reading, I asked the question raised by the noble Lord, Lord Tyler, about the possibility of a large number of cumulative donations of £7,499 coming in by standing order. That is not a problem that the Committee has resolved, and it is clearly unacceptable.
Perhaps I may ask the noble Lords, Lord Campbell-Savours and Lord Tyler, one or two questions. Under these amendments, what would be the position of a UK-resident taxpayer donating through an unincorporated UK association? Have they thought of that? I refer to a genuine UK-resident taxpayer, from whom a donation is currently permissible. Under the amendment, would that situation continue to apply?
Secondly, I did not want to come here as the usual Euro-bore that I am in your Lordships’ House, but I ask the noble Lord, Lord Campbell-Savours, whether he has thought about European law with regard to the amendment. I may be wrong but, as I understand it, under European law, European Union companies and individuals are able to donate in this country in a way that companies and individuals from outside the European Union are not. I apologise if I am setting off a false hare but it is an area that the noble Lord should think about, especially as we go forward. I do not mind betting that if it is not law at the moment, it will be fairly soon. Those are my two questions.
On the subject of trade unions, which I do not suppose will be popular with—
Lord Campbell-Savours: Perhaps I may intervene. As Ministers would say, “It is not in my brief to reply on issues of European law”, so I cannot answer the noble Lord’s question, although I will ask those who
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Lord Pearson of Rannoch: In that case, I was not sufficiently familiar with the Bill. I hope not to irritate my erstwhile Conservative friends too much, but a trade union is a collective of British-resident taxpayers and therefore I cannot see why it would not fall within the ambit of the amendment. Nevertheless, I hope that the noble Lord, Lord Henley, and the Front Benches generally can reach agreement on this matter. I look forward to the answer on my European point and support these amendments in general.
Lord Hodgson of Astley Abbotts: I recognise the powerful, if emotional, appeal made by the noble Lord, Lord Campbell-Savours. Some aspects of what he is thinking about are more complicated than they first appear. I am not sure that membership of your Lordships’ House is a good comparator with the ability to vote. He prayed in aid the new Appointments Commission procedures. It seems to me that, when appointing one of 750 members of a legislature, you will have a higher, or different, standard than for someone who will be one of 50 million voters, because the influence is much greater.
There are two practical points for the noble Lord to bear in mind. The first is that we recognise that a large proportion of our population—often the most talented part—may serve overseas for a period of time. I lived in the United States for five years, and so do many other people. In your period of overseas service, you may cease to be resident for tax purposes in the United Kingdom. Those people who intend to return to the United Kingdom should not in those circumstances be precluded from participating in our elections. That is recognised by the fact that you can continue to vote if you live overseas for 15 years—it used to be 20 years—by remaining on the register here. The noble Lord should address that issue.
The second point is the question of residency and domicile for tax purposes. The noble Lord, Lord Bach, and I were in this Room on Tuesday afternoon discussing perpetuities and accumulations. Residence and domicile for tax purposes is almost as complicated as perpetuities and accumulations. The simple issue of being resident for tax purposes is not a permanent state; you may drop in and out of being resident for tax purposes along the way. Therefore, I am not sure that his case will work in a practical way.
I do not wish to sound as though I am trying to deride every proposal. I hope that when we get to Amendment 108, which talks about a cap on donations and provides a blanket answer to the particular problem that he proposes, the noble Lord will be prepared to speak in favour of it as being at least a halfway house to what he is seeking to achieve here.
3 pm
Lord Pearson of Rannoch: Before the Minister rises, I have been reminded of one more question for the noble Lord, Lord Campbell-Savours. Does he see his
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Lord Campbell-Savours: My proposal provides for a stronger threshold than simply being on the electoral roll.
Lord Brooke of Sutton Mandeville: I do not think that the noble Lord, Lord Campbell-Savours, would regard it as a betrayal of a confidence if I said that he and I had a short conversation during the 10-minute interval while we were waiting in the queue to get some food. I complimented him on the fact that he was participating in this Committee and was here the whole time, and I thought that the Committee gained enormously from his doing so. He reminded me that he periodically moved amendments which, to borrow the language of the noble Lord, Lord Pearson of Rannoch, I might find inconvenient. I said it was perfectly true that I had had quite a lot of those, not only in business such as this but also in business relating to the City of Westminster.
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