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Having briefly identified two areas of anxiety, I must again reassure the Minister that we think the Bill is somewhat improved by these amendments. As my honourable friend David Howarth said at Third Reading in the other place, we are delighted that the artificial consensus has at last broken down on this specific issue, but we simply regret that it did not break down earlier and more generally. I think that the noble Lord, Lord Campbell-Savours, would agree that it is an important change to which we should all give a warm welcome.

If all legislation were dependent on Conservative acquiescence and no reform could proceed without all-party support, where would we be? Indeed, at an earlier stage I asked the Minister whether his addiction to consensus would prevent action if his party and the Conservatives were in cahoots on a particular issue and we, the Liberal Democrats, disagreed, but answer came there none. If this Bill fully reflected the intentions of the Hayden Phillips discussions, it would have had more teeth and there would have been more chance of

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a general reform of the funding of political parties and elections. Nevertheless, we welcome this U-turn and believe that it strengthens the Bill.

Lord Bates: My Lords, I welcome this chance to speak to the Motion before us. If the House will bear with me, it is worth taking a few minutes to recap as to how we come to be in the position we are now in. An attempt was made by Mr Prentice to table an amendment on Report in the other place. The government business managers decided that they did not want the matter to be debated and therefore it came to this place. The noble Lord, Lord Campbell-Savours, took up the amendment and with his characteristic skill and ability in Committee, again on Report and at Third Reading, brought it back here. At that point there was quite strong opposition to it. I shall come to my views shortly, but first I shall quote the Minister:

"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",

other forms. The other forms to which that remark relates are mentioned earlier in the Minister's speech where he says:

"As we have said before, the Government recognise and understand the sentiment behind the amendments ... 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 in an election to standing as a candidate".-[Official Report, 15/6/09; col. 914.]

In this sense, by introducing two specific additional tests in respect of donations, the Government said that we would be in danger of creating an "anomaly". I am sure that the Minister will be able to confirm that those were very much his sentiments which he set out in Committee and repeated here.

A very high quality debate then took place in which many excellent contributions were made. A Division was called and the amendment tabled by the noble Lord, Lord Campbell-Savours, was carried. It went down to the other place, and after what I should say what was a slight delay on the part of the business managers in bringing the Bill back to the Floor of the other place, every indication was given to the press-it was reported in the Guardian, no less-that Mr Straw, the Secretary of State, had stated that the Government Benches would be whipped to vote against the noble Lord's amendments. That was a clearly stated position. Something happened then, we know not what, but there was a Damascus road conversion in the other place and we found that some six pages of amendments, where previously the noble Lord, Lord Campbell-Savours, had sent down a paragraph, were put forward in the other place for consideration. It is interesting that those six pages of amendments have now been superseded by another six pages of different amendments, which brings us to where we are now. It is worth putting on record the circuitous route taken by the legislation and that the previous publicly stated positions of the Minister and the Secretary of State have been turned on their head for no apparent reason.

4.15 pm

Let me set out some of the problems. We remember that when the Bill was introduced the idea was to avoid the possibility of innocent mistakes and to make

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the process simple and transparent. While there is nothing transparent about the way in which the Government have changed their view and introduced these amendments, certainly the objective was that the Bill should be transparent in the way that it operated. Therefore the transparency of simply registering people on an electoral register which is supplied to each party seemed a simple way forward. Now some additional tests have been introduced. It is worth going through what the tests are and what their implications are and I shall be interested to hear the Minister's response.

First, on residence, the Explanatory Notes to Part 14 of the Income Tax Act 2007 state in paragraph 2455:

"The question whether or not a person is UK resident is primarily to be determined in accordance with case law. A limited number of statutory rules either supplement or disapply the case law rules in specific circumstances".

In other words, there is no statutory definition of residence. Therefore, if this is to appear in the Bill as a test which donors are required to pass, and there is no statutory definition of residence, it could cause a problem. I hope the Minister will touch on these points in his response. I am happy to give way at any stage if he has a specific answer because that would aid the understanding of the House, and not least myself.

The Explanatory Notes continue:

"There is no register of UK resident individuals; it would therefore be necessary to provide individuals with information to try to enable them to determine whether or not they are resident in the UK and then require individuals to make a declaration that they are resident at the time they make their donation ... By way of example, a person will always be treated as a UK resident where they spend 183 days or more in the UK".

That is very clear. They go on:

In case your Lordships do not think that is complicated enough, the Explanatory Notes continue:

This is a moot point. In speaking to it, the noble Lord, Lord Tyler, commented on the change which had been made in the other place, along with many others, from the previous tax year to the current tax year. Will the Minister deal with that specific point? The absence of a statutory definition and the four-year aggregate of 91 days' residence are an example of the complexity that we are dealing with here. What would happen in those circumstances?

The second test that has been introduced relates to domicile. Political parties will have to determine, in relation to every political donation, whether the donor is not a non-domiciled UK resident. HMRC has recently issued the new technical guidance on domicile, consisting

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of 42 pages. The introduction to this technical guidance stresses the difficulties inherent in the determination of domicile. If we thought that residence was a difficult concept to uphold in the Bill, domicile is even more complex. Add to that complexity another concern about the penalties that would be liable to the party if it accepted an impermissible donation. Again, that is relevant.

We are dealing here with the difficult concepts of residence and domicile; I think that everyone is agreed on that. Often one's tax status and domicile may be determined retrospectively, yet the Bill is set out to relate to the current year.

The prohibition on the acceptance of impermissible donations and the duty to return any such donations within 30 days of receipt, in Clause 54(1) and 56(2) respectively, are subject to criminal and civil enforcement regimes. The party and the treasurer are guilty of an offence if the donation is not from a permissible donor and is not sent back to the donor within 30 days of receipt. In addition to the points that have been raised, the Minister referred to the fact that HMRC will not be able to keep these data and there will be no register. The system of policing will therefore not be in place. If HMRC, the Government and the Electoral Commission cannot prove the offence, how can these sanctions be applied to a party treasurer who has just 30 days to understand and test these levels of residency and tax domicile?

My next point is a very interesting one that has been raised with me. The Minister said that he felt this measure was consistent with the European Convention on Human Rights. I want to test him further on that. In the case of Bowman v United Kingdom, the European Court of Human Rights proved that it would step in to protect the right to freedom of expression even in the case of UK primary legislation designed to regulate the conduct of elections. In Bowman it was found that a spending limit on third parties of £5 imposed in Section 75 of the Representation of the People Act 1983 was an infringement of the right to freedom of expression under Article 10 of the European Convention on Human Rights. There is a statutory responsibility to have an impact assessment; the Minister states in the Bill:

"In my view, the provisions of the Political Parties and Elections Bill are compatible with the Convention rights".

Is that still the case? Can the noble Lord still make that statement, given some of the precedents that relate to this?

Indeed, we extend that through EU law to issues relating to human rights. The Maastricht treaty introduced the concept of Union citizenship. According to Article 18, Union citizens have the right to move and reside freely within the territory of any of the member states, subject to the limitations and conditions contained in the EU treaty and secondary legislation. The European Court of Justice has defined Union citizenship as the "fundamental status" of Union citizens. Union citizens have a right of conditional residence and limited right to equal treatment. On that basis, they therefore have the right as European citizens to participate in and stand for elections in this country. Does the Minister

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believe that the new test of tax residence is consistent with EU law and the European Convention on Human Rights?

Section 1 of the Representation of the People Act 1985 permits overseas British citizens to vote at a parliamentary election if they are registered on the electoral roll, were resident at a UK address within the previous 15 years and registered at that address or, if they were too young to be registered, a parent or guardian was registered at that address. The requirement in PPERA that an individual be on the electoral roll therefore already incorporates a test of connection, or involvement, with the United Kingdom. This is important because it is clear that questions will be raised, time wasted and important matters debated if that matter is tested in a prosecution. Does the Minister stand by the statements about the complexity of tax and residence, and their potential for creating anomaly, that he made in Committee and on Report? A simple yes-or-no answer to that would be very helpful.

Is this the thin end of the wedge? By linking the ability to vote and donate to tax status, the Bill risks establishing a principle that political rights should be in some way based on making a contribution to the state through taxation. Has the Minister considered that aspect and, if so, what is his conclusion?

I shall touch briefly on some of the observations that have been made by the Electoral Commission, which will be landed with the responsibility for upholding the legislation. In a briefing which I am sure has been circulated to all Members who have an interest in this debate, it expresses concern. It recognises that new Amendments 12G to 12N represent an improvement over Amendments 11 and 12 which were tabled in the other place-I think that we would accept that, too. Page 2 of the document states that,

The Electoral Commission is therefore saying, "Well, we understand very much what you want to do". The Minister has said, "Well, listen, you might want to do it and it might actually please some Members of this House and the other House that you are attempting to do this, but it is going to be impossible to police"-I think he used the word "impossible". He said that all that can be required is for somebody to make a self-declaration. I think he said that it would be up to the criminal authorities to decide whether an offence had been committed. In other words, there is no access to any information for the Electoral Commission to take the lead on this-a matter that the Bill was meant to tackle.

I apologise for speaking at length but it is important to place on record legitimate questions about why the Government changed their view-if, indeed, they have done so-from that consistently argued in Committee and on Report to that proposed in these revised

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amendments. I am sure they recognise that they are now creating an anomaly within the tax system whereby somebody can vote in an election in this country, can stand at an election in this country but cannot give a donation to a party in this country which exceeds the threshold of £7,500. The Minister has accepted that this will be impossible to police. Very serious questions remain about these amendments. The pace at which they have been introduced is likely to lead to great confusion. We desperately wanted clarity from the Bill but we have confusion. That is regrettable and in no way helps the aim to which we all aspire of ensuring that the public have confidence in the system of electoral representation and the working of political parties in this country.

4.30 pm

Lord Campbell-Savours: My Lords, I intend to be very brief as I spoke at great length in Committee and on Report. I thank parliamentary counsel and those who drafted these amendments, which tidy up the amendments which we originally moved, for the considerable effort they have made during a very short period. I also thank my noble friend Lord Bach, Mr Wills and Mr Jack Straw for all the work and effort they have put into ensuring that these ideas and principles are transformed into legislation.

However, I also wish to clarify the following point. At no stage during the handling of this amendment in this House, in Committee or on Report have I ever indicated that it was intended to target any individual. I have always recognised that people in all political parties might be affected by this. My view has always been, and remains, that this is an issue of principle. It is on that basis that I have moved these amendments. I am grateful to all those, particularly the Liberal Democrats and the Cross-Benchers, for their support on the night of the rebellion when we overturned the Government's measure.

Lord Bach: My Lords, I thank all noble Lords who have taken part in today's debate. I shall discipline myself and not respond at length to this matter. The House has important matters to debate today and tomorrow.

I am grateful to noble Lords who have thanked the Government for taking the stance that they have. It is not an easy issue and I do not pretend for a moment that it is. However, we have found our way through the thicket. We were always sympathetic to the principle that my noble friend raised but were concerned about its practicalities. I do not say that all those concerns have gone away, as that would not be true, but we think that we have found a way through by retaining the principle there and the ability to implement this provision in due course.

The noble Lord, Lord Tyler, asked me a number of questions, which I shall deal with shortly. Aggregation is not a loophole. The approach in these amendments reflects the approach in the PPERA legislation of 2000. We do not believe that it is workable or fair to expect different recipients of donations to act in the knowledge of donations received by others, which they have no way of knowing about. The approach

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taken by these amendments is consistent with the 2000 Act. It would be very difficult-even onerous-to expect an MP or other individual party member to check what donations had been received in the same year by other MPs or party members of the same party. It is not at all clear how we could realistically expect someone to go about that task. We must remember that an MP represents a constituency in his or her individual capacity, not as a member of a party, and might well receive donations on that basis. We do not want to undermine that principle.

A donor could seek to get round the new restriction by giving donations below £7,500 to a large number of MPs of the same party. However, MPs are required to report donations that they receive at the lower threshold of £1,000, to be raised to £1,500 by the Bill, so such behaviour would soon become apparent. Recent events suggest that the public is not well disposed towards those who seek to operate only within the letter of the law without also respecting its spirit.

As far as companies are concerned, which was the second point raised by the noble Lord, the amendments restrict the permissibility of individuals to give political donations; they do not restrict the permissibility of donations from companies. Amendments on company donations would be out of scope. However, Clause 8 of the Bill requires a declaration to accompany donations above £7,500 about the source of the donation. That is intended to ensure that any agency arrangement is properly declared. Therefore, if an individual gives money to a company, another person or entity with the intention that that money is given as a political donation, that arrangement ought to be declared and the individual treated as the donor.

We have and continue to have sympathy with the point made by the noble Lord, Lord Tyler, on this, but there remains a serious concern about how such a restriction could be introduced in practice. In particular, there would be no easy way for parties to establish the make-up of a company's shareholder register. Those amendments were therefore not accepted and were returned to at a subsequent stage of the Bill. The noble Lord's last point that I want to answer was that Members of Parliament could receive up to £7,500 each from non-residents for tax purposes but candidates could not. He made that distinction. Where candidates are members of a political party, they are regulated under PPERA as a regulated donee and, as such, are covered by these amendments. Independent candidates are only regarded in the period preceding an election under the Representation of the People Act 1983, as amended. As such, they are not subject to the requirements in PPERA nor to these amendments. To suggest that donations to candidates are unregulated is not strictly fair or true. Indeed, most candidates are party members, so are captured by these requirements.

I do not seek to try to answer all the points made by the noble Lord, Lord Bates. I am sure that he enjoyed himself immensely in his speech by pointing out what had been said in earlier debates on the Bill. If that gave him and the House satisfaction, so be it.

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Lord Bates: My Lords, the Minister cannot get away with that. It is not a question of satisfaction. It is a question of what the Government said in this place-what he put on record, speaking on behalf of Her Majesty's Government-and what Her Majesty's Government then said in the other place just a couple of weeks later.

Lord Bach: My Lords, the strength of feeling that the noble Lord showed today on this issue was not shown in the Division Lobby on Report when he led 40 of his own side into the Division Lobby in the vote that, I acknowledge, Her Majesty's Government lost. There was a lot of feeling on this side, as well as in other parts of the House, against the Government's position.

Now, what do we do? We look and see what the strength of feeling is. We know that there were 218 names on an Early Day Motion in another place, well before the matter came to this House. We had the result of the vote in this place on Report. There clearly was a great deal of feeling in both Houses of Parliament that, on this issue, the line that the Government had taken was not the right one. So are Governments to be entirely stubborn, or should Governments do what they can to try to make what we have always argued is a good principle-I do not think that the noble Lord argues against the principle-practical? That is what we have attempted to do.

I shall try to deal with some of the noble Lord's points. He makes a legitimate point when he says that transparency about residence status and the lack of statutory definition makes it difficult to determine status. He is right; it does. However, there will be material to assist. First, the Electoral Commission will produce guidance, which is significant. Secondly, there is existing HMRC guidance, too. Thirdly, someone giving a donation of more than £7,500 who is unsure of their status can seek professional advice, because giving a false declaration is an offence only if it is given recklessly or intentionally. Someone who takes steps to satisfy themselves of their status will not have committed an offence.

The noble Lord quite understandably also refers to the ECHR. Of course we have considered whether the ECHR is possibly infringed. We think that the statement in relation to these provisions being ECHR-compliant stands. This amendment could be said to restrict rights to freedom of expression-which I think is the point that the noble Lord was getting at-or association, but we believe that the difference is that it does so proportionally. Donations of up to £7,500-not £500-can still be paid by non-domiciles. That is a clear protection, as I said in my opening remarks, and is very relevant to the ECHR argument. In short, we are satisfied that these amendments are compatible with the EU and ECHR.

The noble Lord also made a point about party treasurers. Those of us who have been party treasurers at a very low level in our parties can only have some sympathy for the position in which they sometimes find themselves under the present law. The amendments make it clear that parties will in most cases be able to rely on declarations from the donor in order to satisfy the requirement to take reasonable steps to verify that a donation is permissible. In practice, we expect that

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this would need to go beyond that only when they have reasonable grounds to think that a declaration is incorrect. Even in that scenario we do not expect party treasurers to have to understand and apply concepts of residence and domicile. We expect, for example, that they could ask the donor for a letter from his or her accountant asserting that the donor is a UK resident and domiciled. We have drafted amendments to ensure that the burden on political volunteers is minimised. I hope the noble Lord thinks that, in principle, that is the right thing to do-to make it easier for volunteers rather than more difficult.

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