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My other real concern is about the implication for constituency parties. At present political parties can fulfil their compliance duty to check that an individual is on an electoral role, or a company is registered at Companies House, by consulting public records. Obliging parties to check the residence status of donors for tax purposes would be an impossible task and I am sure it is nowhere near as easy as putting a cross on the tax form. Tax records are not public documents and, in any event, there is no single record of individual tax status. I am not sure whether, even if a cross would satisfy it, it would be possible to use that cross because information would then be being disclosed about that person’s tax. The consequence of that could be that a constituency party could find itself in difficulty and may end up having to repay the money. So there are many flaws in the argumentation. That is not to say that there is not a problem. Maybe there needs to be a wider discussion on the issue of tax status and participation in politics generally, but that is not a discussion for this Bill and this amendment does not achieve what it is intending to achieve.

Lord Anderson of Swansea: My Lords, my noble friend recognises that there is a problem and argues that the amendment does not wholly meet it. Of course that is true, but I agree with the noble Lord, Lord Tyler, who made the point that, even though this House should probably be reluctant to intervene in elections since we are a unelected House, this amendment gives the opportunity for the elected House to make its own decision, and this is what we should allow it to do.

I can see no reason for the Government’s rejection of this. The Government, in a rather civil-servant way, give 1,001 reasons why we should reject this, but do not come forward with any real reasons why this particular anomaly should not be met. The mischief which the noble Lord, Lord Campbell-Savours, seeks to meet is very clear; it is the mischief of the buying of elections by rich individuals who are not domiciled in this country. Quite properly the noble Lord, Lord Tyler, mentioned the good inverted US principle of no representation without taxation. Why should individuals have a disproportionate effect on our electoral process?

I am thinking, for example, of a very competent colleague in the House of Commons, who lost his seat in 2005 and watched a tidal wave of money pour into his marginal seat from certain individuals in the years prior to the period when it was banned. He could do nothing about it. Clearly, only a relatively small number of marginal seats are laser-beamed in this way. This is not a partisan position. I hope the main Opposition also see the danger to our democracy of having elections bought in this way by very rich individuals. The awful thing for this individual was not that this tsunami of money poured into his constituency and overwhelmed him but that the money came from someone who was non-resident in this country. That is clearly the mischief that the noble Lord is seeking to meet.

I simply ask this question of the Government: do they recognise that this is a problem at the very root of our democracy? Over the years, step by step, we have

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tried to remove the influence of money on elections and corrupt practices—mostly, I concede, thanks to the Liberal Party over the centuries—from the great Reform Act through to secret ballots, seeking to remove various forms of corrupt practice and the effect of money on elections, so that one individual does not have a greater say in the determination of an election result than other, ordinary folk. Why can we not seek some means of doing it? It is not good enough simply to parade a series of individual objections to the points raised. Why will the Government not do something about it? And is the Conservative Party content to allow this possibility to pervert our democracy without accepting what is here and giving the House of Commons—the elected House—the opportunity to debate it and put it right if it is able to do so?

Lord Neill of Bladen: My Lords, there are two debates going on. The first is whether the amendment is in substance correct, whatever nitpicking one can indulge in. The other is that we have a duty to give the other place a chance to vote on this issue. If I may take the liberty of pretending to be a member of the public, if asked, as a man in the street, whether I would approve of a wealthy foreigner—not even a member of the EU—paying a huge sum of money to one political party in the run-up to a general election, and it being acceptable under the rules for influence to be wielded in that way, the only possible answer would be, “What an absolutely outrageous suggestion—of course not. Surely that’s not allowed”. One would have to say, “Well, as a matter of fact, it is at the moment. We are talking about an amendment to stop it being possible”. I am sorry to fantasise, but I believe this is how people would react: “Well, I am all with it”.

On the second issue, we now want to give the other place—we call it the House of Commons out in the street—a chance to vote on this portion of the Bill. The man in the street might say, “I thought this Bill came to you from the House of Commons. It must have thought about this”. One’s response would be, “No, I’m afraid I have to enlighten you on that point. It often does not consider very important parts—sometimes great chunks—of an Act of Parliament. The House never had the opportunity to debate this proposal. We are not suggesting chicanery. It somehow came out through the machinery; there was no chance of debate”. My ideal man in the street would say, “That is ridiculous. Give them a chance”.

7.30 pm

Lord Lea of Crondall: My Lords, it is probably incumbent on members of the Labour group who are inclined to support the amendment to explain themselves very briefly.

At a time of constitutional renewal, and with the absurdity of the overuse of the guillotine in the House of Commons, there is a very powerful argument here. To put a shot across the bows of those who talk about constitutional change without having any way of meeting it—the noble Lord, Lord Tyler, produced a Bill on this earlier, and it seems to have been debated for a long time—I am very interested in and sympathetic to the premise with which my noble friend Lady Gould, who has enormous experience in this field, began.

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I also agree that the amendment does not do certain other things that may or may not logically be part of a jigsaw puzzle. Equally, I pick up the point that something needs to be done and that, if this amendment is carried, the Government must realise that they will have to put their brain to this with more urgency, so that when it gets back to the House of Commons—I doubt that that will be by Third Reading, but it may be—unless the procedures of the House of Commons are even more incomprehensible to Members of this House, the mysterious authorities there cannot simply say for the second time: “No, we are not going to take the amendment”.

Lord Oakeshott of Seagrove Bay: My Lords, briefly, I support this amendment and the excellent speeches made by the noble Lord, Lord Campbell-Savours, and my noble friend Lord Tyler. The speeches were in support of the amendment, with the sole exception of the noble Baroness, Lady Gould. She made two points. First, she broadly agrees with the amendment but thinks that it does not go far enough. That is no reason to oppose it. Her practical point was that it would be very difficult for parties to check whether donations met this test. I do not think, off the top of my head, that it would be difficult. All one would need would be a requirement that any person making a donation signed a form to say that they were wholly resident or domiciled in this country for tax purposes, that a donation could not be accepted if that were not so, and that it would be a criminal offence to accept a donation without that form and a criminal offence to sign it if that were not true. It would be very easy indeed for the Electoral Commission to check with the tax authorities whether any person had signed the form wrongly. I cannot see that that is a problem. I see that the noble Lord, Lord Myners, is here. I know that he is very sympathetic to the drift of all this, and I am sure he will quickly tell me if I have not got this quite right. The noble Baroness, Lady Gould, is looking for problems where they do not exist.

Baroness Gould of Potternewton: My Lords, I am sorry to intervene. The noble Lord has talked about individuals, which seems fine. That seems to be a very easy solution to the problem. However, the donations do not come from the individual directly; they come indirectly. How would he solve that particular problem?

Lord Oakeshott of Seagrove Bay: My Lords, this is what I mean when I say that we should not accept any donations from companies at all. That is the solution to that one.

My Bill, which is currently in Committee, requires that no one who is not ordinarily resident or domiciled in this country shall sit in this House. The Government say that they are very sympathetic to that. I am very glad for that sympathy, and I hope that it will soon be converted into practical action. However, the amendment before us today is arguably even more important than my own Bill. It is outrageous that non-resident Peers can sit and vote on our laws in this House, but it is even more outrageous that a person who does not pay full British tax can pay millions to a political party—money that is, in effect, filched from the British taxpayer by that person because he is not resident here and does

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not pay tax but can influence millions of votes. If the Government believe that this is wrong and must be stopped, why will they not accept the noble Lord’s amendment? If they say—as to some extent they have been saying, although I hope that has changed—that my Bill is the wrong way of dealing with the abuse of non-resident Peers sitting in the House, what is the right way of dealing with the abuse of donations that we all accept is happening? Why will the Government not act while they still have the power to do so? We are at the eleventh hour.

Lord Rooker: My Lords, I did not intend to speak, but I must say that I wholly support the amendment in the name of my noble friend Lord Campbell-Savours. I have two brief points to make.

In June 1977 in a committee in the other place, my late colleague Audrey Wise and I tabled amendments to the Finance Bill. As well as being told that the amendments were inconvenient, we were told that they were in the wrong place in the Bill and were technically deficient—all those reasons. Our view was: “Make them okay. Put them in the right place in the Bill”. That is what the Government did, but they would not have done so if we had not tabled the amendments. I must say to your Lordships, although I would not dare to give examples, that on several occasions at the Dispatch Box in recent years I have moved government amendments or agreed to amendments to government Bills from noble Lords around the House that were not perfectly drafted. Our view was that we needed them so that the draftsmen in the other place could get to work to achieve our objective. That is done every day of the week. That is what parliamentary counsel is for.

The general view among the population now is that we have banned donations from foreigners. Morally, you cannot argue that case if you allow the status quo on the taxation argument; the noble Lord, Lord Neill, made that point. If the amendment had not been on the amendment paper in the House of Commons, it would be quite wrong for us to try to put it in from here. The fact that it was on the amendment paper but not debated means that it was still part of the Bill’s proceedings.

Generally speaking, if anyone outside this place asks us what we do, one of the key answers that we give is that we ask the House of Commons to think again. It will not think again unless the issue is on the amendment paper, and we can get it on to the amendment paper only if my noble friend’s amendment is accepted. I shall vote for it.

Lord Warner: My Lords, briefly, I support all those who have spoken in favour of the amendment in the name of my noble friend Lord Campbell-Savours. I have one very simple point to make. Over the past few months, we have heard from all the leaders of the political parties their undying commitment to cleaning up politics. If we collude in supporting this Bill without an amendment of the kind which my noble friend has moved, we are colluding in not cleaning up politics. We should support the amendment.

Lord Bates: My Lords, this has been a debate of outstanding quality. I am new to your Lordships’ House, and it is incredibly impressive to hear such

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skilled speeches and debates about the detail of this legislation. I shall touch on a few of those points without detracting from the outstanding experience that is present in this House and which I do not possess.

In moving his amendment, the noble Lord, Lord Campbell-Savours, touched on a point with which we certainly agree: the procedural way in which matters are conducted down the other end of the Palace of Westminster—the over-frequent use of the guillotine and the stifling of debate—leaves much to be desired. That is not the case here. This amendment was moved in Grand Committee, again very ably. It sparked a debate that went on for an hour. During that time, the Minister gave a detailed, almost line-by-line, rebuttal of the reasons why the amendment would not work in the way that it was proposed. I found that argument quite persuasive.

There is a need, which has been articulated by my right honourable friend David Cameron on a number of occasions, to remove big money from British politics. That desire is there and all parties of the House need to agree on how it should move forward. Hayden Phillips had almost reached that point before, sadly, the Government abandoned that pledge. Therefore, we are left with the difficulties before us. Very detailed restrictions are put on people who want to donate to political parties in this House. They have to be registered or be on the electoral register. The money has to come from a UK-registered corporation. In both those respects, it could be argued that there is some level of interest; namely, that either the person is resident and is on a register or that they are part of our economy and paying through a company which is registered here.

We also need to bear in mind that context is important as regards the notion and the language of buying elections. I can understand why people use that sense of hyperbole—

Lord Sewel: My Lords, I am grateful to the noble Lord for giving way. I accept that he is making a very balanced speech. But does he not accept that there is a core argument in your Lordships’ House, which addresses the role of an upper House, a revising and scrutinising House? The argument is that on a matter of significant interest, particularly if it affects how we carry out our politics, it is appropriate for this House to give the opportunity to the other House to make a determination on an issue of fundamental importance that it has not so far had the opportunity to decide.

Lord Bates: My Lords, I follow the noble Lord’s argument. There is a sense in which it could be argued that the other place had an opportunity when Mr Gordon Prentice presented those Bills. The fact that that opportunity was denied by the business managers in the Commons is regrettable and we are redressing it by having a more reasoned debate in this place. I do not doubt that. Because they have behaved in a certain way once, the argument is to pass it back to see whether they will behave in the same way again. I am not entirely persuaded of that because of another point, which was touched on by the noble Baroness, Lady Gould, who pointed to some of the difficulties. On the way through this Bill and the legislation, we

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have talked about the difficulty of too onerous a requirement being placed on volunteers within associations who could potentially make innocent mistakes, and the boundaries of knowledge.

Certainly, it is possible to check whether a company is registered in the UK for tax purposes and to check the electoral register to see whether an individual is on that register. It is not possible for the average person to scrutinise tax records, which are private, in order to ascertain whether that is not the case. The solution is that there should be voluntary disclosure. In Committee, the Minister’s response pointed to some of the difficulties which that can land one in, because tax status is determined retrospectively. Tax returns are filled in at the end of a year. A register of electors is for the year ahead. In terms of those types of arguments, there is something to be considered.

7.45 pm

In addition, we are roping into funding and taxation the whole issue of residence and domicile for tax purposes. I am no tax specialist, but many learned Members seem to make a very handsome living out of determining who is and is not resident and domiciled for tax purposes. It may not be as clear cut as one might suggest as far as this proposal is concerned. Those big money elements of politics also need to caution people. Before the intervention, I referred to hyperbole and the buying of seats and the buying of elections. Big money has been around in politics for a long time. If I feel slightly saintly on this, it is because I spent a glorious weekend walking around the grounds of the Earl Grey’s house, Howick Hall in Northumberland. I feel at least some moral element of authority. In that respect, we are talking about nothing of that here.

Especially in the days of the media, elections are won and lost by the veracity of the arguments and the compelling nature of the case put forward. If my party happens to be doing better in the elections at this time, it is because of the positive alternative offered by David Cameron to this country, which is put forward by the party. The electorate is capable of making those independent judgments. To minimise them or to use inappropriate language to question whether they are capable of making that judgment is perhaps unfair at these times.

In conclusion, the matter has been aired and discussed. In Committee, the Minister gave a vigorous defence of the reasons why this is difficult to bring about from a legal point of view. We on this side of the House look forward to the day when big money is genuinely taken out of politics and those cross-party agreements—

Noble Lords: Oh!

Lord Bates: My Lords, that is genuinely the case. The Liberal Democrat Benches laugh at this, although their idea is that big money should not come from trade unions or businesses, but from the taxpayer. They want public money to fund their coffers. They want big money that is public money. That is unacceptable to the British public who are facing many pressures on

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public services and would not choose to fund political parties at this time. With those comments, we await the Minister’s rebuttal on these matters and we will support him in that.

Lord Bach: My Lords, Amendments 29 and 30 would add to the permissibility requirements relating to donations from individuals. In addition to the existing requirement that an individual be registered in an electoral register, Amendment 29 would provide that an individual would have to be resident in the United Kingdom for the purposes of the Income Tax Act 2007 and would have to not be a non-domiciled United Kingdom resident. Amendment 30 would amend proposed new Section 54A of the 2000 Act by requiring any declaration by an individual donor as to the source of a donation to state that he satisfies these additional requirements. I agree with the noble Lord, Lord Bates, that this has been an outstanding debate and I thank all noble Lords who have spoken.

As the House knows, these amendments were originally debated at some length in Grand Committee. The Government have listened carefully to the points that were made then and have been put again today, but I must inform the House that the Government continue to have serious concerns about these amendments on principled, practical and legal grounds. I want to reiterate these concerns and I apologise in advance if it takes a little time. I hope to address additional points raised in Grand Committee and in today’s debate.

As we have said before, the Government recognise and understand the sentiment behind the amendments, which is that those who donate to political parties in this country should pay tax in this country. We also recognise, however, that making a donation is just one way in which an individual can participate in our democracy. There are many other ways, ranging from exercising the right to vote to standing as a candidate for the House of Commons and sitting in a legislature as we are tonight in the House of Lords. We believe that there is a spectrum of political involvement from voting at one end to sitting in the legislature at the other, with large political donations somewhere in-between.

The Government have stated their firm belief that it would be wrong in principle to create an anomaly by introducing extra restrictions on only one form of participation without considering whether equivalent restrictions should be placed on other forms of participation. We believe that the issue of what should be the correct relationship between an individual’s taxation status and their right to civic and democratic participation needs to be looked at as a whole. I can tell the House tonight that this will be one of the issues that will be covered by the democratic renewal council in its deliberations, which are taking place now, on the wider constitutional reform agenda. I can give that commitment to the House this evening that it will be part of its brief to look at this issue as a whole.

Notwithstanding this objection of principle, significant legal and practical difficulties must be given detailed consideration before any restriction on donations relating to tax status could be introduced. I am afraid that we are of the view that the amendments fail to deal adequately with these difficulties. As a result, they risk introducing a new restriction which could not be effectively

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enforced and which could be open to legal challenge. Moreover, the amendments—and this is a crucial point, in our view—would not achieve their intended objective, since non-UK taxpayers could continue to have a role in funding political parties and other political entities through companies and unincorporated associations. For this combination of reasons, we are duty-bound, we feel, to resist these amendments.

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