Electoral Reform (Hansard, 13 June 1995)

§ Mr. Paul Flynn (Newport, West)
I beg to move, That leave be given to bring in a Bill to control parliamentary election expenses within limits set nationally and in each constituency; to establish a national registration system for political parties; to require companies who donate to parties to establish accountable political funds; and for connected purposes. Our general election system is potentially corrupt. It can be—and almost certainly has been—abused by the rich, the powerful and criminals to buy influence and honours from political parties. The law places strict limits on all election moneys that are spent in local areas on saying, "Vote for Blair" or, "Vote for Major", but there are no controls whatever on moneys spent on saying, "Vote Labour" or, "Vote Conservative".
Vast sums have increasingly been spent on so-called national spending and have been concentrated in the 150 constituencies where elections are won and lost. For every pound spent in constituencies, £8 is spent nationally. The Bill seeks to limit such spending, ban secret overseas donations, make the accounts of political parties transparent, restore some credibility to the honours system and stop attempts by companies such as Imperial Tobacco to subvert Government policy for its own anti-social ends.
Today, I had the pleasure of welcoming to Parliament representatives of the Latvian Saema. We take great pride in our democracy and claim that it is the mother of democracies, but our system is long overdue for a great deal of care and maintenance. In that area, we are in a foolish position. For more than 100 years, we rigidly controlled local spending by candidates and had severe penalties for overspenders. Having introduced reforms to control bribing and treating, an aberration in the law in 1974 allowed parties to spend unlimited amounts.
While the law frets about the minnows of spending, the fat salmon go by unhindered. The Bill is supported by all Opposition parties and even a progressive group in the Conservative party seeks such reforms.
There is no better example of the abuses that have occurred than of Imperial Tobacco's handing over of 2,000 poster sites to the Conservative party in 1992. In a letter to me, its marketing manager explained why. He said: Labour and Liberal Democrats had said they would support a ban on tobacco advertising. Speaking as a tobacco company we'd like to see the Conservative party re-elected because we believe they will continue to oppose the advertising ban. The Conservatives have delivered on that.
Nothing in the future prevents any person or company, here or abroad, or even any country, however malign their interest might be, from spending unlimited millions—billions, if they want—on campaigning for any party. If not yet corrupted, our system certainly invites corruption. Vote buying has returned to British elections. Scandals have involved many parties, including the Labour party, to which, it has been claimed, people with criminal records or criminal intent, such as Mr. Maxwell and Mr. Costas, have given money. It has been claimed that Hong Kong business men have contributed to the Conservative party—that Sir Yue-Kong Pao gave £1 million and that Li Ka-Shing contributed £100,000. It has been claimed that two fugitives from British justice, Mr. Asil Nadir and Mr. Octav Botnar, contributed £440,000 and £1 million respectively to the Conservative party, and we know of the case of Mr. Mohamed Fayed.
608 It is a great shame that the Select Committee on Home Affairs did not produce the answers that the House wanted. First, it sought not to have the investigation and then to delay and weaken it by denying witnesses to the House, including witnesses from the Conservative party. It did Parliament no service whatever by producing an anodyne report that did not deal with a serious problem. It is a great tribute to my hon. Friend the Member for Sunderland, South (Mr. Mullin), that he produced, in an amendment, a splendid report that gives us some practical reforms for the future.
The case of Mr. Asil Nadir is even more worrying because it reveals that the sums he gave the Conservative party had been channelled through firms abroad and that the Conservative party was not clear what its sources were. In a statement, the former Treasurer, Lord McAlpine, claimed that Asil Nadir had met him in 1991 and tried to persuade him to ensure that criminal charges against him would be dropped. It was suggested that that would be in return for the donations he had made to the Conservative party.
I have other examples of how money is used subversively. There is a correlation between the sums of money given by companies and the honours that members of those companies have received in the system. The figures have been given to the House on many occasions. The rate for peerages seems to be about £500,000 and that for knighthoods seems to be about £250,000. It is disgraceful that our democracy should be so besmirched by such practices.
It should be the duty of all right hon. and hon. Members to ensure that we put democracy back on an even keel. We must stop what is now going on. It is possible for democracy to be subverted by the wealthy, the powerful, the criminal and those—such as tobacco companies—who want to use their contributions for purposes that are contrary to the interests of the people and to buy their own or their party's way to power. I commend the Bill to the House.

§ Mr. David Shaw (Dover)
I oppose the Bill because it is one-sided. Labour and the trade unions were hardly mentioned by the hon. Member for Newport, West (Mr. Flynn), and the structure that would result from the proposals in the Bill would be open to abuse. The Bill would bring political parties under the control of the state and the Government of the day, and we would have no democracy. The proposals would lead to state funding of political parties, which is what Labour's 1992 manifesto called for. I believe that the Bill is based on a fundamental misconception about the financing of the Conservative party.
The hon. Member for Newport, West failed to open up the mysteries of trade union and Labour party funding, but we can find many secret arrangements the Labour party puts together to get funds from as many different sources as possible. What we find is that the trade unions own and control the Labour party and its finances. We find in the accounts of the Labour party that 70 per cent. of funding comes from the trade unions directly.
We cannot find the major donors from the Labour party's accounts, but, by going to the trade union accounts, we can discover that four or five major unions give 609 £1 million pounds apiece to the Labour party. I wish that the Conservative party could rely on four or five people to donate £1 million apiece, election after election. It is easy for the leader of the Labour party to raise money. He just has to make four or five telephone calls, and £1 million turns up as a result of each.
The Labour party has a problem, and that is what lies behind the Bill. Membership of the Labour party has not been going up, as the publicity machine would have us believe. If one reads the accounts carefully, we see that the party is not taking off the list people who are not paying their subscriptions. The Labour party's most recent accounts showed that contributions from the membership had gone down.
Writers who sell their books offshore—gosh knows where their money is, but it is not easily detectable onshore—and the pop stars who support the Labour party, we wonder how much of their money is onshore, may announce their support for the Labour party, but the accounts show that they are not donating very much and certainly not to the extent about which they sing and write.
The secrecy behind the Labour party's accounts is considerable. Although there is £4.7 million of direct financing, a large amount of indirect financing goes into what I call the off-balance sheet and off-profit and loss accounts. Some £2.2 million does not go to the main accounts, but directly to the general election funds. The Walworth road property arrangements—whereby the trade unions own that property—have been varied so that the rental agreement now covers the decorating and maintenance of the property by the tenant, the Labour party. The trade unions pick up the bill for that.
There is a business plan, in which £2 million a year is donated to the Labour party. People may ask whether that affects the control of the Labour party, and it is clear from the accounts that it does. The accounts suggest that the business plan is managed by a group of guarantor unions— the GMB, the Union of Communications Workers, the Graphical, Paper and Media Union, the National Union of Rail, Maritime and Transport Workers and the Transport and General Workers Union—Which is defined as the control group. Therefore, I believe that they control the Labour party.
One area of the Labour party's financing is open and available for people to discover. It has taken a pensions holiday and not paid into its pension funds for the past two years. Some might think that the Labour party has "done a Maxwell" on its own pensioners.
The Labour party also sets up secret companies. A company called Common Campaign Ltd. was set up in August 1994 to finance newspaper advertising by the Labour party during the general election. That is outside Labour party rules, which require donations of £5,000 and more to be disclosed. The company was set up by Labour party supporters in an attempt to avoid such disclosure.
I have not much time to go into as much detail as I should like, but some further points need to be made. Not only do the trade unions, representing 8 million or fewer people, control the Labour party, they constitute a powerful group of organisations behind that party. Almost £1 billion in assets are shown in the trade union accounts. There is a £200 million annual cash flow, £300 million in directly owned assets and £400 million in pension fund 610 assets. All those resources are used to help one political party when a general election comes, so there are almost £1 billion worth of assets behind the Labour party. The Conservative party's financing pales into insignificance in comparison.
The Walworth road development trust, which has recently been set up, receives a contribution of £244,000 in support from the GMB, and that does not even come from the GMB's political funds, but from its direct funds, so Conservative members of the union support that loan to the Labour party. The Labour party's business plan has been set, and the GMB has put a £75,000 general guarantee from its general funds behind that Labour party development plan.
Another form in which the Labour party gets help from the unions is grants to parliamentary candidates. The GMB donates £30,000 for those, and other unions make similar donations. Those are not only the national affiliation; the local affiliations of the GMB account for about £294,000. Other unions do likewise. The GMB's central Labour party affiliation accounts for more than £1 million.
Then there is the Labour party's by-election insurance fund, towards which the GMB also contributes, as it does to the Labour party conference. There is a sinister operation based in Walworth road called the trade unions for a Labour victory levy, with mysterious staff operating out of Labour party headquarters. The GMB alone contributes £94,000 to it.
Trade unions are contributing to the Labour party in all sorts of different ways. I have not had time to mention the 1992 general election, in which trade union advertising cost as much as the Conservative party spent, whereas the Labour party itself spent still more on advertising. NALGO spent £1 million on advertising alone, and the trade unions were happy because, in a confidential memorandum, it was said: The evidence for both the 1987 and 1992 elections is that where there was well co-ordinated union involvement, involving many unions, with a co-ordinator in place early and with time to properly co-ordinate activities, then the election result was significantly better than average. An example of excellent union involvement was York…Croydon, North-West…Norwich, North". In all those constituencies, the trade unions put in resources out of all proportion to the legal election funds and to anything that was allowed under the law. They put those resources together and provided extra money to get Labour candidates returned.
There are many reasons for opposing the Bill. The Labour party has lots of secret funds. Through its leader and its leadership, it gains money from the trade unions through all sorts of different accounts and in all sorts of different ways. The Conservative party must do everything to resist that, for the sake of democracy, because we are outgunned financially by a narrow band of people who are not widely representative.
When it is alleged that one gets a return from donating to the Conservative party, we should remember the words of Mr. Fayed, who said that he had given £250,000 but got nothing in return. That is evidence that, if one donates to the Conservative party, there is no guarantee of anything in return. One donor made that clear. If one donates to the Labour party, however, one has total control, according to the Labour party's own accounts. The Bill seeks to promote the Labour's party sources of 611 finance and funding and to make sure that the Conservative party has even more difficulty raising money. Labour goes in for secret financing—

§ Madam Deputy Speaker (Dame Janet Fookes)
Order.
Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business):—
The House proceeded to a Division.

§ Mr. D. N. Campbell-Savours (Workington)
(seated and covered): On a point of order, Madam Deputy Speaker. Is it in order for a Whip to bully a Conservative Back Bencher and stop him calling a Division of the House?

§ Madam Deputy Speaker
If there was an incident, I did not see it.
Question agreed to.
Bill ordered to be brought in by Mr. Paul Flynn, Mr. Nick Ainger, Mr. Jon Owen Jones, Mr. Paddy Tipping, Mrs. Gwyneth Dunwoody, Mr. Dennis Turner and Mr. David Winnick.