HC Deb 09 November 1998 vol 319 cc47-116

[Relevant documents: Fifth Report of the Committee on Standards in Public Life on the Funding of Political Parties in the United Kingdom.]

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Clelland.]

4.59 pm
The Secretary of State for the Home Department (Mr. Jack Straw)

I want first to put on record the Government's appreciation of the work of Lord Neill and his fellow members of the Committee on Standards in Public Life. Their report on the funding of political parties in the United Kingdom is the fifth to be published by the committee and the first under Lord Neill's chairmanship. The committee has, as in its previous reports, shown considerable wisdom and balance in addressing the issues.

If the integrity of the democratic process is to be upheld, we must ensure that the whole system of party funding and election expenditure is open, transparent and fair. The committee has come forward with a report directed to that end. I am on record as saying that the Government strongly welcome the report; we are committed to legislating on its main findings as soon as possible.

It is worth recalling how we got to the position that we are in. It is no exaggeration to say that public confidence in party funding reached its lowest point in the years of the last Conservative Administration. The party of government raised millions upon millions of pounds every year, yet persistently refused to tell the public where it got it from.

The extent to which the Conservative party relied on the cash of foreign donors to outspend other political parties at elections is clear. Whether the money was a £1 million gift from a Hong Kong business man or £1.5 million from a Greek shipping magnate, the Conservative party's principal concern seemed to be the size of the cheque. The Asil Nadir scandal merely added to the unpleasant whiff that pervaded Conservative party funding.

Mr. Desmond Swayne (New Forest, West)

As the right hon. Gentleman is making partisan points—he said that the low point in party political funding was under the Conservative Government—will he accept that the low point in the conduct of referendums was under this Government, particularly in the referendum on Wales?

Mr. Straw

I do not accept that for a moment, but I shall be happy to discuss the conduct of referendums when we reach that point in the report.

In January 1995, I submitted the Labour party's evidence to the Committee on Standards in Public Life, which was then chaired by Lord Nolan. In that evidence, I argued for the Labour party that the committee should be allowed to look into party political funding and recommended a regulatory regime similar in detail to that recommended by Lord Neill last month. The Labour party's proposals included full disclosure of political parties' accounts; proscriptions on overseas and large secret donations; limits on election spending at national as well as constituency level; new requirements for shareholder agreement … in respect of donations by companies".

The response of the Tory party and the Tory Government to the calls for an inquiry on party funding was to do nothing. Worse, the previous Conservative Administration deliberately blocked the Nolan committee even from considering party funding, the most crucial issue in ensuring high standards in public life. The former Prime Minister, the right hon. Member for Huntingdon (Mr. Major), repeatedly refused, despite Lord Nolan's views, to refer the issue to him.

The response of the right hon. Member for Huntingdon to Labour calls was typified by his answer to my right hon. Friend who is now Prime Minister during Prime Minister's questions a year before the election. Asked whether the issue of party funding should be referred to the committee, the right hon. Member for Huntingdon replied: No. I do not believe that that is the right way to proceed. Party funding has been investigated by the Home Affairs Select Committee".—[Official Report, 21 May 1996; Vol. 278, c. 95.]

Some hon. Members will remember that radical Home Affairs Committee report, which was published in March 1994. It recommended that the identity of large donors should remain private and that shareholders should not need to sanction company donations, and it supported foreign donations to political parties.

As my hon. Friend the Member for Sunderland, South (Mr. Mullin) will confirm, the Committee—unusually for a Select Committee—split precisely along party lines. As the minutes of proceeding show, it divided 5:5 and the Chairman had to use his casting vote. The minority report recommendation for a funding regime similar in scope to that recommended by Lord Neill's committee was rejected by Conservative members of the Committee using the Chairman's casting vote.

Mr. Chris Mullin (Sunderland, South)

I vividly recall that, in 1993, when I first suggested an inquiry, Conservative members of the Committee fell over themselves to prevent one—they did everything they conceivably could to block it. It was only thanks to one renegade Conservative, who is no longer in the House, that we were permitted to consider the issue at all.

Mr. Straw

My hon. Friend has greater knowledge of the Select Committee's internal workings than I do, but his account of that pattern of behaviour is corroborated by some of the evidence that was given to the Committee by none other than the right hon. Member for Sutton Coldfield (Sir N. Fowler), the shadow Home Secretary, who had then returned to high office as chairman of the Conservative party. On 16 June 1993, the Committee examined him on the Conservative party's memorandum of evidence.

Given the position that the Conservative party is now adopting, the right hon. Gentleman's evidence to the Committee is interesting. He said: That individuals choose to give financial support to a political party is, in our view, entirely a matter of private choice. Donors assist the Conservative Party because of their support for its policies. We do not publish details or comments upon the names of donors. That is a matter for donors themselves. That written evidence was repeated in answer after answer during the right hon. Gentleman's stonewalling performance.

Mr. Nick Hawkins (Surrey Heath)

Will the right hon. Gentleman give way?

Mr. Straw

I will give way in a second. The most uncomfortable moment in what was obviously an uncomfortable session for the right hon. Member for Sutton Coldfield was when he was asked about what had happened—or not happened—to Asil Nadir's £440,000 donation. He was reminded that the money had not been declared in the Polly Peck organisation's accounts. He said, and I quote from page 52: Again, I should emphasise the point that the last contribution was made in March 1990"— as though the effluxion of time had made receiving money from a north Cypriot crook all very well. He continued: Clearly, that should have been declared. That is a matter for the company and its auditors. I hope that the right hon. Member for Sutton Coldfield will now say why, as I understand it, the Conservative party has not given the money back to the shareholders. More years have gone past since he gave his evidence. Well before the Conservative party accepted the money, there was the clearest possible evidence that Polly Peck was, to say the least, a slightly dodgy organisation.

Mr. Peter Bottomley (Worthing, West)

Will the right hon. Gentleman give way?

Mr. Straw

I will in a second, after I have given way to the hon. Member for Surrey Heath (Mr. Hawkins).

The right hon. Member for Sutton Coldfield was reminded of an article in the Daily Mail of 13 July 1981—well before the Conservative party started canvassing for money from Asil Nadir. The reporter went to Famagusta and wrote, of a Polly Peck operation: I have never seen a store full of canned fruit guarded by men with machine guns before. I never got to see what was in the wooden crates. I glimpsed inside the warehouse. Everyone had a fairly good idea about where Asil Nadir's money came from, yet the Conservative party took it, and has not replaced it.

Mr. Hawkins

Does not the Home Secretary feel a twinge of embarrassment about the extent of his humbug, when "the people"—as he and his Front-Bench colleagues say—will remember that he and the Prime Minister referred the issue to the committee to cover their embarrassment over the Ecclestone affair, and when we still know nothing about the blind trusts from which so many of his colleagues, including the Prime Minister and the Paymaster General, have benefited?

Mr. Straw

Even the chronology of events shows that not to be the case.

On blind trusts, it is important for the Conservative party to read its own evidence to the Neill committee. That evidence, quoted on page 240 of the report, says: We believe that there is an argument in favour of a form of blind trust that should be examined by the Committee. There is no point in Conservative Members complaining about blind trusts when their evidence to the committee shows that they support them.

Mr. Peter Bottomley

The Home Secretary has been speaking for about 10 minutes; he spent one sentence saying that he accepted the committee's main recommendations, without saying which recommendations he did not accept. As the committee's new terms of reference were issued on 12 November 1997, nearly a year ago, would it not be a courtesy to the House and to the committee to discuss the recommendations and consider how we can make progress?

Mr. Straw

Of course I will deal with that, but the background is important. Had the Conservative party not deliberately blocked the Nolan committee from considering the issue of party political funding, all the changes that we and the British public want could have been in place well before the general election and this debate would not have been necessary.

It is worth reminding the public and the House of the climate in which the Conservative party was operating. For my bedtime reading, I am fond of political biography and autobiography. I recommend Lord McAlpine's memoirs, appropriately entitled "Once a Jolly Bagman". On page 229, he gives the definitive statement on why the Conservative party always closed the shutters when it came to any scrutiny of its political accounts. He says: Personally, I do not think that we ever should have shown how we spent our money. The Conservative Central Office is not a charity dedicated to helping the sick and suffering,"— he can say that again— it is a fighting machine dedicated to winning elections. Well, it was. He said that it was the height of folly to expose how such a machine manages its resources or, indeed, how large or small these resources are at any one time.

Lord McAlpine came up with a final solution to all the nonsense about scrutiny of the Conservative party's accounts. Lamenting the strain on the party's finances, he says: There was a black hole in the Party's finances… The solution was easy: we gave up publishing accounts. There we have it.

It is worth reminding the public about the serious concern that existed about the relationship between those who were funding the Conservative party and those who held power in it. Lord McAlpine was the party's treasurer. On page 264 of his memoirs, he says: Senior officials in Central Office were in the pay of businessmen and promoting their interests, and I felt that the place was out of control… A warning was given to me about a particular businessman, and I passed the message on to two members of the Cabinet who were closely associated with him. Within hours, my words were repeated to this man. That was the background that we had to face.

Mr. Martin Linton (Battersea)

Will my right hon. Friend confirm that, at least as early as 1991, and quite possibly in 1990, the Department of Trade and Industry was investigating Polly Peck? We know from stubs found by the fraud squad that Asil Nadir was signing cheques to the Conservative party's account in Jersey as late as 1990. May there not have been some overlap between the incoming payments and the investigation?

Mr. Straw

I do not know the details as well as my hon. Friend does; no doubt he will make those points when he speaks.

Mr. Gerald Howarth (Aldershot)

The Home Secretary has made an inauspicious start, in contrast with the way in which he handled the debate on electoral change last week. He is being extremely partisan. There is a fundamental difference between contributions to the Conservative party and to the Labour party. The former did not buy a change in Government policy, but contributions to Labour by Bernie Ecclestone did.

Mr. Straw

There has in the past been a fundamental difference between donations to the two parties. The names of donors to the Labour party have been known, and not kept secret.

Sir Brian Mawhinney (North-West Cambridgeshire)

The Home Secretary slipped away from the subject of the Select Committee report before I had a chance to catch his eye, and I want to take him back to it. One of the recommendations was that political parties should not take donations if there was any suggestion of buying policy favours. The Conservative party always accepted that recommendation, but the Labour party never did; we know that it sold policy to the trade unions, but did it do so to any other groups?

Mr. Straw

It is scarcely worth replying to that point. One cannot honestly look back at the history of the Conservative Government between 1979 and 1997 without noticing—to put it as delicately as I can—some coincidence between those whom we now know to have been large donors to the party, and some of the interests that seem, coincidentally, to have been favoured. I make no allegation, but I do not suggest that the right hon. Gentleman makes much reference to the Select Committee report, as it was a pretty disreputable period in the Conservative party's parliamentary history when it used its partisan power on that Committee to block the implementation of recommendations that it now says it will accept. That is why it is so important to put some of the history on the record.

In our manifesto, we promised to oblige parties to declare the source of all donations above a minimum figure"; to ban foreign funding of political parties; and to ask the Committee on Standards in Public Life to consider how the funding of political parties should be regulated and reformed. The statement in November last year was by no means the first time that we had mentioned the matter.

We moved swiftly to fulfil the last of those commitments, and in November last year, my right hon. Friend the Prime Minister announced that the Committee's terms of reference would be extended to enable it to study issues relating to the funding of political parties.

Originally, we intended to legislate in the current Session to deliver the first two of the manifesto commitments—to ban foreign funding and to require disclosure of donations above a minimum threshold—but Lord Neill wrote to me in January asking the Government to defer legislation pending the conclusion of his committee's inquiry, because of concerns about the simultaneous consideration of the issues by both Parliament and the committee.

Lord Neill stressed that his committee was considering not whether the Government's commitments to ban foreign funding and to require disclosure of donations should be fulfilled but how that could best be done. On behalf of the Government, I agreed to Lord Neill's request, while making it clear that we were determined to legislate on the issues.

All three major political parties, along with many others, made submissions to the committee. The Labour party has in fact long operated voluntary rules to disclose the names of donors who give more than £5,000 and to refuse funds from foreign sources. We argued, in our evidence for limits on spending at elections, for an electoral commission to oversee the regulation of party funding, and for rules to ensure that company donations are made only with the proper agreement of shareholders.

All those recommendations were accepted by Lord Neill and his colleagues. The Conservative party's evidence, by contrast, makes interesting reading. As Conservative Members have clearly not read the references to blind trusts, for example, I commend the evidence to them as an example of what happens when a party cannot make up its mind, as two bits of the party appear to have been involved in pasting that evidence together. We shall be told today that the Conservatives are committed to disclosure. I am glad to welcome any converts. However, their evidence, on page 239 of the report, says: Although the Conservative Party is committed to disclosure, there is a case to be made against it and we hope that the Committee will give serious consideration to some of the drawbacks, in particular when considering calls for full disclosure of the names and donors and the amounts they give. We believe that there is a perfectly honourable case to be made for anonymity. A similar ambiguity is shown throughout their evidence.

Despite all that circumlocution, some parts of the evidence grudgingly repeat the pledge made by the Leader of the Opposition to disclose the names of major donors—a promise first made on 23 July last year. He said: We must be open about our funding. In not being so in the past, we have often appeared secretive and defensive.… And so I will instruct our party treasurers that in future years we will list the major donors to the Conservative party alongside our published accounts. But I want to go further than that.… We will publish new guidance later this year, and our intention is that in future years the Conservative party will no longer accept foreign donations.

Given the history of Conservative party funding, those are brave words, but they are hollow. Despite all the bravado of fresh starts and new beginnings, 16 months have passed and my best information is that we have yet to see the list published by the Conservative party. If the right hon. Member for Sutton Coldfield (Sir N. Fowler) wants to give us more information, I should be delighted to hear it.

Sir Norman Fowler (Sutton Coldfield)

I shall readily do so. The names of donors will be in the annual accounts, which will be published in the next few weeks. As the right hon. Gentleman knows, the financial year runs to April.

Mr. Straw

It is helpful to have that information. We look forward to receiving the accounts and the names of donors, which I assume will cover April 1997 to April 1998.

Mr. Dennis Skinner (Bolsover)

I am intrigued. I well remember that, when the Tory party was running the country, the country was £50 billion in debt and the party was £19 million in debt. The Tories never managed to solve the problem of the nation's finances, but, miraculously, they solved the problem of the party's finances. They had one treasurer who could not run the country, but another who was scouring about for funds. When they publish their accounts, I want to know where the money came from to put the Tory party finances in the black. We need all the information, not just that for the past year.

Mr. Straw

My hon. Friend is right that we need all the information, but I fancy that he will be disappointed. He is also correct to point to the success of men such as Alistair McAlpine, who decided that one of the best ways of dealing with the problems and challenges of Conservative party finances was not to publish any accounts. Things have moved on a little, but not very far.

The report provides a good basis for legislation.

Mr. Dale Campbell-Savours (Workington)

The right hon. Member for Sutton Coldfield (Sir N. Fowler) has just given us an undertaking at the Dispatch Box that all donations to the Conservative party will be published. Is there not a danger that, unless that is carefully policed, there will be grouped donations to organisations that then become the registered donor to the party? Will my right hon. Friend press the right hon. Member for Sutton Coldfield for an assurance that that will not happen? Let us have the assurance in the House of Commons.

Mr. Straw

My hon. Friend is right to be sceptical about the extent of the information that we receive. When the right hon. Member for Sutton Coldfield gave his evidence in June 1993, he was asked about such river companies. My hon. Friend the Member for Sunderland, South (Mr. Mullin) asked about the innocent-sounding Northern Industrial Protection Association, which I thought was a private security company, but turned out to be a group of industrialists funding the Conservative party. Many similar organisations were listed. We accept recommendations 18 and 19 about the use of front organisations and the proposal for an electoral commission to police such matters.

The Neill committee has come up with 100 recommendations, centring on the full public disclosure of donations of more than £5,000 nationally and of more than £1,000 for constituencies, and on the banning of foreign funding, together with appropriate enforcement machinery. However, the report rightly does not stop there, but addresses wider issues, including the public funding of political parties, limits on campaign expenditure, tax relief for donations, company donations and the conduct of referendums.

The next step is to turn the report into legislation. We are setting about that straight away. It will not be possible to introduce and carry through a measure of such scope with due attention to getting the framework and the detail right in the next Session of Parliament, but we intend to produce a draft Bill before the next summer recess and to bring forward legislation so that new rules can be in place for the next general election. In the meantime, there is nothing to prevent the political parties from complying on a voluntary basis with those recommendations that can be complied with without legislation. My party has invited the other parties to agree to a scheme under which the amounts of large donations and the names of donors could be made public immediately.

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)

If there will be no statutory means of policing election expenses by the time of the elections for the Welsh Assembly and the Scottish Parliament, how will the issues be policed or regulated in the meantime?

Mr. Straw

I was coming to that. We are laying down provisions in the Scotland Bill, the Government of Wales Bill and the European Parliamentary Elections Bill for regulations that cap national spending. There will be other regulations on compliance. They will not be as satisfactory as they would have been had an electoral commission been in place, but they will be sufficient on an interim basis.

Mr. Peter Brooke (Cities of London and Westminster)

The Home Secretary said a moment ago that the Government would accept recommendations 18 and 19, but went on to say that the draft Bill would not be available until the summer. By the time he sits down this evening, will we know which recommendations the Government are not accepting?

Mr. Straw

I want to give an indication of that, although it will not be by numbers.

In his speech later this evening, the Under-Secretary of State for the Home Department, my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth) will ask each of the main parties to nominate contacts for my officials to deal with on the detail and to take forward some of the specific recommendations.

It is important to look carefully at the enforcement machinery proposed to ensure that it will work in practice. Other countries' controls on donations and campaign expenditure have turned out to be wanting. We need a scheme that is practical to operate, but is also effective and commands public confidence.

I hope that the whole House shares the Neill committee's concern to avoid what it describes as the arms race in general election spending. Limits have been in place for a century or more on expenditure by individual candidates at a local level in parliamentary and other elections. They are fully accepted as part of our election landscape. They were imposed when there was virtually no national campaigning that was separate from local or constituency campaigning. The electoral law takes no account of the increasing national expenditure by political parties, which is separate from that at a constituency level. That is out of date and anomalous. We are committed to putting national limits on such spending.

Having accepted the need for national limits, the next question is where they should be set. There is no right answer to that question. The limits must be set at a level at which they will have an impact, but plainly, no purpose would be achieved if we set the limits at such a high level that they simply encouraged more spending.

For parliamentary general elections, the Neill committee has proposed £20 million. Lesser figures have been suggested—some more tentatively than others—for elections to the Scottish Parliament, the National Assembly for Wales, the Northern Ireland Assembly and the European Parliament. Certainly, the figures proposed in each case are in the right bracket, and I understand that there is wide acceptance in Scotland and Wales of the proposed specific limits of £1.5 million and £600,000 respectively. We want to hear the views of the public and of political parties before we come to a final view, but we shall ensure that appropriate national limits are in place in time for the Scottish, Welsh and European elections next May and June.

On the form of enforcement machinery, we favour a regulatory body independent of Government and free from party political interference. The Neill committee follows in the footsteps of the Select Committee on Home Affairs, my party and many other organisations in recommending an election commission, and the need for a commission has also recently been endorsed by the Jenkins Commission. We believe that that case is made out, and legislation will provide for an election commission to be established.

Many overseas jurisdictions have an election commission in some form, but there are many models. We need to look closely at how wide the functions of a commission should go. I can tell the right hon. Member for Cities of London and Westminster (Mr. Brooke) that we want as far as possible to ensure that there is a consensus between the parties, and that is the purpose of the discussions that are being established.

Mr. Robert Sheldon (Ashton-under-Lyne)

I welcome my right hon. Friend's acceptance of the valuable election commission, but can he say how the House of Commons, or a Committee of the House, will deal with the commission's expenditures?

Mr. Straw

My right hon. Friend will recall that the Neill committee proposed that the election commission should be established in a manner that would make it similar to the National Audit Office and the Public Accounts Committee. In other words, it should be a creature of the House of Commons, not of Ministers. There is every argument in favour of that proposal. It is important to establish the commission's independence of Government, and to ensure that it is properly funded. My right hon. Friend knows better than almost anyone that the NAO is funded from the Consolidated Fund, not from votes for individual Departments. That is an important way in which the NAO's position has been strengthened.

We must consider closely how wide the election commission's functions should go. At a minimum, it will need to ensure compliance with the rules on disclosure of donations, the prohibition on foreign funding and the limits on national campaign expenditure. The Neill committee suggests that it should also have general oversight of the conduct and administration of elections. A number of issues concerning the administration of elections are already being looked at by the electoral procedures working party under the chairmanship of my hon. Friend the Under-Secretary of State for the Home Department. Some people argue that conferring such issues as voter registration. the franchise and electronic voting on any oversight body would divert it from its core regulatory functions, but my instinct is that those issues ought to be involved.

There is an argument that all electoral matters should be brought under the umbrella of an election commission. Under this scenario—lwhich is not advanced by the Neill committee—the parliamentary boundary commissions would be merged with the new body. The Neill committee did not favour that, but the Jenkins commission was of the view that an election commission should co-ordinate the work of the four boundary commissions. The matter clearly needs further reflection.

Another key area considered by the Neill committee was state funding. The committee came down squarely against a system of wholesale financial support to political parties from the public purse. I support that conclusion. It would be unhealthy for our democracy if established political parties were financed by a subvention from Government. Such easy money could soon result in parties losing touch with their members and supporters, to the detriment of the whole political process.

While I oppose blanket state funding, well established arrangements are in place for targeted financial support or benefits in kind—such as the free post—to assist candidates and parties at elections and Opposition parties in Parliament. Such targeted support is justified in the interests of a level playing field at elections and of ensuring that opposition parties can effectively perform their Parliamentary duties. The Neill Committee has recommended a number of extensions to targeted financial support. Specifically, it proposed: state funding to enable parties to meet the start-up costs of complying with the disclosure requirements for donations; a policy development fund of up to £ million; and tax relief on donations to political parties of up to £500.

In each case, the Committee has made a well argued case for such financial support, but, no matter how worthy such proposals may be, it falls to the Government and Parliament to consider them against spending priorities as a whole. There may be many people in the country and in the House who would rather see public money spent on further improving our schools and health service than on providing subsidies to political parties. We shall listen carefully to all the points made.

Sir Norman Fowler

We are talking about £2 million or £ million, not massive amounts. Surely the Government can make a better response than that.

Mr. Straw

I am glad to hear that the Conservatives so impartially support the idea of better funding for Opposition parties. I never noticed them do so when they were in government. There is a good case for better funding of Opposition parties, but if the right hon. Gentleman had listened a little more closely, he would know that I included in that bracket the suggestion of tax relief on donations. I have personal reservations about that, but it is a matter for my right hon. Friend the Chancellor. Others may have their own reservations.

Mr. Edward Leigh (Gainsborough)

Will the right hon. Gentleman give way?

Mr. Straw

I must get on, or I shall take time from hon. Members on both sides who wish to speak. Neill further recommends that the election commission should have a role in relation to referendums. The Committee says that, in any referendum campaign, there must be a fair opportunity for each side of the argument to be put to voters, and that the election commission should allocate core funding to the two sides. Linked with that recommendation is the recommendation that the Government of the day should, as a Government, remain neutral. So far as use of the Government machine is concerned, the Neill committee says, referendum campaigns should be treated as though they were general election campaigns. However, the committee also says clearly that it should be open to the Government of the day to state their view, and that it would be appropriate for members of the Government to campaign vigorously during referendums.

Those are important comments and recommendations, and they need careful attention in the context of future referendums. It is fair to say, with respect, that this is not the clearest section of the Neill committee's report, not least because of the opening chapter. I have taken some personal interest in this matter, not least because I was on the wrong side in the 1975 referendum—although some might say it was the right side in terms of the argument, but the wrong side in terms of the result.

On the one hand, the committee says, as does the Conservative party, that we should follow the rubric of the 1975 referendum campaign. On the other, however, it seems to imply that it is possible to re-create during a referendum campaign—which, by definition, will occur during the active life of a Government—the conditions that must apply at the end of a Government's term when there is a general election.

Mr. John MacGregor (South Norfolk)

I hope to comment further on this point later if I am called. I agree with the Home Secretary that there was some public misunderstanding of the recommendations on referendums, because of the way in which the summary recommendation was put. However, the key issue is that the committee said that core funding should be equal for both sides. Ministers will of course want to campaign, and in some cases—obviously so in the case of proportional representation—they will campaign on different sides of the argument. The committee said that there should not be core funding from the state for one side of the campaign, and Government funding for that side, too.

Mr. Straw

I accept the right hon. Gentleman's point. Campaigning should be for political parties and other bodies. The permanent civil service should not be embroiled in the campaign: that would be quite wrong. However, in some circumstances, it may be appropriate—probably in advance of a referendum rather than at it—for the Government of the day to publish a White Paper stating their views. For some referendums—one on the single currency, for example—Ministers would have to continue to have access to official advice during the campaign. If there were turbulence in the markets, or some other serious question arose during the campaign which related to the conduct of monetary or economic policy, it would be wholly unrealistic to cut Ministers off from that advice.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

I hope that my right hon. Friend remembers that, in the 1975 campaign, in effect, two sides were pushing the yes point of view and one was pushing the no point of view because the Government put out extra information and put an enormous amount of money into the campaign. By all means allow Ministers access to information, but the British people have the right to know that two totally different points of view are being put forward during a referendum campaign, and that does not consist of two thirds pushing one way and one third the other.

Mr. Straw

I accept my hon. Friend's last point, but we must accept the reality that a referendum campaign will be conducted during the active life and not at the end of a Government. During a campaign for a referendum on a single currency, the Government will still have continuing responsibility for the conduct of economic, fiscal and monetary policy; and if there were turbulence in the markets, Ministers would have to have access to official advice. We are talking not about spending money, but about having access to advice to which they would not have access during a general election campaign.

Mr. William Cash (Stone)

The Home Secretary has made some interesting and useful comments on state funding, but, on the conduct of referendums, does he agree that many people believe that we have already embarked on a campaign on the euro and the single currency? It started recently. Indeed, the Prime Minister told me in an answer to a parliamentary question last week that the Government have spent £3.8 million on radio and television advertising on the euro. Significant sums have already been allocated or disbursed, and further information is to be made available to schools. Does the right hon. Gentleman accept that that is all part and parcel of the movement towards changing public opinion, which will be directly relevant to the referendum? Effectively, the campaign has already started.

Mr. Straw

I do not accept that. Whether we or the hon. Gentleman like it or not, the euro is to be a reality in 12 of the 15 European Union countries from the beginning of next year, and 60 per cent. of our trade is with Europe, so it would be wrong for the Government not to prepare business for the impact that the euro will inevitably have on British business whether we are members of the single currency or not.

I shall conclude, as many hon. Members on both sides of the Chamber want to speak. This brief run-through of the Neill committee report has brought me back to my starting point. The Government are committed to ensuring that our post-war tradition of high standards in politics is maintained and enhanced. The people of this country, who entrust to political parties the running of their local councils and national Government, have the right to expect elected politicians to act for the good of the community as a whole, not for sectional or personal interests that are able to curry favour by secretly peddling large financial donations. The integrity of the political system can be assured only if political parties are open and accountable, not only to their members, but to the country at large. The Neill committee report provides us with a framework for achieving that and I reiterate our strong welcome for the report. We will act quickly to implement its main findings and we will be open to comments and suggestions. We want fair and effective controls in place for the next general election. I commend both the report and the motion to the House.

Sir Norman Fowler (Sutton Coldfield)

That was not one of the Home Secretary's most impressive speeches. Frankly, he was unconvincing on the referendum question and did not take the House with him in his other arguments. The right hon. Gentleman and my hon. Friend the Member for Worthing, West (Mr. Bottomley) were right to say that the debate enabled an agreed future policy to be set down. For at least half his speech the Home Secretary was content to make party points about events, most of which took place a decade ago. He talked about political contributions, but the real scandal of such contributions, and the real issue, is whether they buy party policy, and that is institutional Labour policy.

The Home Secretary must remember the Bernie Ecclestone case, when the Government did a U-turn on cigarette advertising, and the fact that Tom Sawyer, when he was deputy general secretary of the National Union of Public Employees and was presented with the prospect of a reduction in union influence, said, "No say, no pay." Above all, the Home Secretary needs to remember the blind trusts set up by the Labour party—by those on the Front Bench—which were so objective and above suspicion that the Neill committee has declared them illegal. We will not take lessons from the Home Secretary or the Labour party.

Above all, I regret the failure of the Home Secretary to lead us forward in the debate. The Neill committee gives the House, politics and political parties an opportunity to move forward which should be taken. I congratulate the committee on its report, which is a comprehensive and fair assessment of all the major issues involved in funding. That does not mean to say, as the right hon. Gentleman knows, that we won all our arguments. However, we accept the findings in the report and believe that legislation based on it should be introduced, with the proviso that it should implement all the major proposals. There should be no cherry picking of one proposal, leaving the others to one side. The Home Secretary's smokescreen on referendums was one of the least convincing parts of a pretty unconvincing performance.

By any analysis, the report comes at an important time. The country faces the prospect of new elections and voting systems—we will debate one system tomorrow evening. Also, and just as important, it faces the prospect of referendums on proportional representation—we look forward to the Home Secretary's contribution on that subject—and on the single currency, if and when, or when and if, the Government decide to put that issue to the public. By any standards, and irrespective of party division, those are fundamental issues which go to the heart of our democracy. Therefore, it is vital that the rules whereby such referendums are conducted are fair to both sides. It would be a travesty if the Government alone controlled the publicity and were the recipients of public money in such a campaign.

As the Neill committee makes clear, no Government can be truly objective in providing information for a referendum if they support one side of the argument. That was my view in the referendum on London local government. As it happens, we supported the idea of a mayor for London, but, when presented with the so-called objective advertising, there was no doubt that most people got the message that they should support the proposed change.

The referendum in Wales was even more questionable. During evidence to the Neill committee, there was widespread criticism of the literature distributed to every household in Wales, because it simply set out the Government's case for the Welsh Assembly. The Neill committee said: We were disturbed, in particular, by the evidence we heard in Cardiff to the effect that the referendum campaign in Wales in 1997 was very one-sided, with the last-minute No organisation seriously under-funded and having to rely for financial support essentially on a single wealthy donor. The outcome of the Welsh referendum was extremely close, and a fairer campaign might well have resulted in a different outcome. The committee was saying that a profound change had taken place in the structure of government, although serious questions remained about the fairness of the referendum that decided that structure. That should not be allowed to happen again. Both sides in a referendum should have the opportunity to put their case fairly and equally. We therefore support the Neill committee's recommendation on the need to provide both sides of an argument with a proper voice during a referendum.

Mr. Peter Bottomley

Would it be helpful for the Minister who replies to the debate to say whether the Government agree with the Neill committee that what they did over the Welsh referendum was wrong? The Home Secretary did not have time, but will the Minister make a commitment that, if a referendum is held in this Parliament before the law is changed, the Government will abide by the recommendations of the Neill committee, even though they have not legislated for them?

Sir Norman Fowler

That is a matter for the Minister when he replies. We have not had too much specific guidance on the issue, so I am not optimistic, but I take my hon. Friend's point.

Mr. Cash

I agree with what my right hon. Friend has said about referendums so far. In the light of the information that I gave about the Prime Minister's answer to me last week, does he agree that, given that the single currency and the euro are, by definition, some time off, it would be intolerable for what is in effect taxpayer's money to continue to be pumped into a Government propaganda exercise well in advance of the referendum? The rules should not be confined merely to the period of the referendum campaign itself, which, by definition will begin well in advance and, in my judgment, has begun already.

Sir Norman Fowler

I knew that the time would come when my hon. Friend and I agreed on Europe; that time appears to have come. I readily agree with what he said. If the Government can use money for propaganda on the euro, there is an unquestionable right for public money to go the other way. I say seriously to the Home Secretary that we will want to review matter this closely.

Sir Brian Mawhinney

Does my right hon. Friend accept that he may have been a little hard on the Home Secretary? He will recall that the Home Secretary urged all the political parties to abide by the Neill committee's recommendations; even if the Government had not had time to bring forward the necessary legislation, we should all voluntarily bind ourselves to them. I find it hard to believe that he would have urged us to do that if the Government had been planning to ignore the recommendations on referendums in this Parliament.

Sir Norman Fowler

My right hon. Friend is renowned as a very fair man. I agree with him. I hope that his interpretation of the Home Secretary's speech is correct. Doubtless the Minister who replies will be able to tell us where the Government stand on referendums, because the House is in some difficulty in understanding their position.

Referendums are a fundamental issue. If they are to become part of our way of political life—there are two coming up—it is right, proper and urgent that action should be taken. The legislation must cover that.

Equally, legislation must cover political funding. The most important part of the proposals of the Neill committee is the national limit on spending. I heard what the Home Secretary said on that; he is going to accept it. The Neill committee makes a powerful case. The table on page 43 makes one point clear. In cash and real terms, the spending of the two main parties at each election has been increasing. In 1997, the Conservative party spent about £28 million on the general election campaign and the Labour party around £26 million. For both parties, that was an increase of more than 100 per cent. since the 1992 general election. It also means that election spending, on the latest basis, is about equal for both major parties.

It is a fiction—I speak from personal experience—that the Conservative party has been consistently able to outspend Labour at every election. In the 1994 European elections, we had no billboard posters up. It is true that I launched and unveiled posters, including one that was intended—my hon. Friend the Member for Stone (Mr. Cash) will be pleased about this—to show Britain as a European doormat. Regrettably, in its production, it came out not so much a doormat as a cowpat. Once the posters were launched and had done their ceremonial trip around Smith square, they were stripped off the vans ready for the next launch. Fortunately, Labour's posters—it had the money to put up posters—were so bad that they had no effect on the outcome.

I have some sympathy with the view of Peter Riddell, the political columnist of The Times, that the effect of campaign spending can be much exaggerated. As he says, Labour did not lose elections in the 1980s because it was outspent by the Conservatives. Equally, on the basis of our spending in 1997, we should have achieved a rather better result than we did.

My observations of the 1987 general election campaign support the Riddell theory. By every sensible indication, we were winning that election by a mile, but, following so-called wobbly Thursday, one or two people in the Conservative camp—not, I hasten to add, the then chairman—thought that we needed to do much more. The result was a splurge of national newspaper advertising, at vast expense. As the Home Secretary will recognise, I am the last person to argue against newspaper advertising, but in this case I am by no means convinced that it affected the outcome one jot.

Objective evidence of that sort is not the point. What matters is what party leaders and campaign managers feel. I suspect that the headquarters of all the major parties feel that they would prefer to have an overdraft than lose the election, so there is a temptation to spend and spend, and the effect is an election spending arms race. I therefore agree with the Neill committee that it is in no one's interest that we continue to go down that road.

Mr. Phil Woolas (Oldham, East and Saddleworth)

I notice that Lord Young has been mentioned. It is suggested that he was responsible for wasting about £5 million on advertisements, if I recall correctly. Lord Whitelaw said in his memoirs that it was a waste of money. However, such an amount would surely have had a bearing on the attitude of the editorial staff and proprietors of the newspapers in which it was spent. For the record, does the right hon. Gentleman agree?

Sir Norman Fowler

No, not really. I do not remember mentioning Lord Young's name. I look forward to the hon. Gentleman's speech, if he is called.

There is also the issue of how we define a national campaign and over what period the rules should be in place. We would be wise to recognise that there are difficulties there. I think that the guidance given in paragraph 10.48 of the report is as good a way of defining national spending as any. It refers to expenditure on account of or in respect of the conduct or management of the election. Clearly, we will need to examine that definition in the Committee that considers any legislation that results. Equally clearly, it is important that the proposed election committee, which I again welcome, keeps the matter under close review. Nevertheless, in principle, I believe that the limit is sensible, as is the limit on third-party spending in a campaign—spending by an outside body that could influence the outcome of an election. I believe that the Home Secretary agrees with me on that point, but his speech did not make that clear.

Mrs. Dunwoody

Would the right hon. Gentleman include in that opprobrium spending by third parties such as the European Commission during referendums?

Sir Norman Fowler

Yes, I would. I was referring to national elections, but, by analogy, if that money were spent to influence a referendum in this country, there would have to be limits. There is no question about that.

On the question of third-party spending, I was not convinced by the arguments advanced by Mr. Dave Prentis, the deputy general secretary of Unison, that the sort of campaigning his union does during elections is politically neutral. In his evidence to the committee, he said: The type of campaigning that we do is not primarily geared to supporting one political party. We are attempting to get the debate centre stage. I find myself underwhelmed by that argument. I have taken part in eight elections and I am still awaiting that helpful Unison advertising, which I am sure is just around the corner.

Mr. Woolas

Will the right hon. Gentleman give way?

Sir Norman Fowler

Is the hon. Gentleman intending to make a speech?

Mr. Woolas

I am attempting to clarify the Conservative party's policy, because the accusation that has been made is serious. Unison's advertising campaigns promoting public service are paid for out of what is called the non-affiliated fund, and covered by the certification officer. Complaints were referred to that officer, and Unison was vindicated. May I infer from what the right hon. Gentleman has said that the Conservative party is opposed to promoting quality public services?

Sir Norman Fowler

That is one of the most pathetic interventions that I have heard for some time, but I shall answer it.

I thought that both Front-Bench teams, and even the hon. Gentleman, agreed that we needed to have some control and limits in respect of third-party spending. That is why we are telling the Home Secretary that we want all those points dealt with in the legislation. We do not want to have the sort of cherry picking for which the hon. Gentleman is arguing, because that would be against the public interest. Labour Members must decide on the overall approach to be taken. We have had an inquiry to which we have all given evidence. We have won some of our points and lost others. I suggest that the sensible thing to do is to accept what the Neill committee has said.

On the subject of spending limits, there is a proposal regarding the transparency of political contributions. Again, we accept the Neill committee's finding. My right hon. Friend the Leader of the Opposition has already acted and, with effect from July last year, has undertaken to publish with the annual accounts the names of all donors giving more than £5,000 in any one financial year.

Mr. Campbell-Savours

Will the right hon. Gentleman give way?

Mr. David Winnick (Walsall, North)

Will the right hon. Gentleman give way?

Sir Norman Fowler

Let me continue for a minute.

It important to recognise that the argument on disclosure does not all go one way. That is not just what I believe; it is a point underlined by the Neill committee, which said that there was a risk that the arguments in favour of confidentiality will be discounted in the public debate …Nevertheless … they deserve serious consideration. I agree.

Mr. Campbell-Savours

Paragraph 4.66 of the report makes it clear that, under the Neill proposals, there would be a requirement to identify the original donor of the money. Under its arrangements for disclosure for the current period, and before the introduction of legislation, will the Conservative party do precisely that, or, in the registration—and therefore disclosure—of registered names, will it simply identify individual organisations that make donations, or the individuals who make donations to those organisations?

Sir Norman Fowler

I believe that I am correct in saying that individual contributions will be identified, but I shall check, in time for the winding-up speeches, the position on contributions by organisations.

Mr. Winnick

Will the right hon. Gentleman explain why, to the last, the Conservative Government were so strongly opposed to disclosure and why they made sure that the Nolan committee was excluded from looking into party financing? Will he tell us why the Conservatives in opposition have experienced a total, albeit welcome, change of mind?

Sir Norman Fowler

I did say reasonably clearly that there was a case for non-disclosure and confidentiality. We put that case, but it has not been accepted by the Neill committee. We accept the committee's decision.

The case for confidentiality was set out in great detail in the committee's report. I emphasise that it was not only the Conservative party that set forth the case; the committee itself took considerable care over it. There is no requirement to disclose publicly gifts made to charity or to voluntary organisations. One can imagine a business man in a heavily Labour area who would not want to disclose his contribution to the Conservative party, if he felt that he would be discriminated against, and that case could be made the other way around.

When I was chairman of the party, I encountered the exceptional case of a lady who in her will left a large amount of money in the form of a legacy, half of which was to go to charities nominated by the chairman, the other half going to the party. There was one condition: that she remain entirely anonymous. Her living relations, with whom I discussed the matter, agreed with her wishes. We respected her wishes, even though there was no question of her being able to benefit, or influence policy to her own benefit, as a result of the legacy. Those arguments were put to the committee, which rejected them, and we accept the committee's decision.

The most important point about political funding is this: a great deal of time is spent debating the issues surrounding funding, but the basic danger against which we must guard is that a contribution to a political party buys policy. That is the danger in a democracy, and it was that danger that was illustrated when the committee started its work by the case of Bernie Ecclestone.

A leading figure in the world of formula one racing, Mr. Ecclestone, it was disclosed, had given £1 million to the Labour party to help to finance its May 1997 general election campaign. The disclosure came shortly after Mr. Ecclestone had had a meeting with the Prime Minister to discuss the exemption of motor racing from the ban on tobacco advertising at sporting events—an exemption that was made. It is that sort of issue—contributions governing or influencing policy—that lies at the heart of the debate on political donations.

Mr. Mullin

Just for the historical record, had Mr. Ecclestone previously given any money to the Conservative party?

Sir Norman Fowler

I have no knowledge of that whatsoever.

The issues which I describe also surround the trade union funding of the Labour party. The entire and explicit purpose of that funding has been to influence policy, and we have to question that. Issues of transparency and influencing policy are also directly connected to blind trusts, which the then Opposition Front-Bench team set up during the last Parliament. The Neill committee gives such blind trusts extremely short shrift, saying: The Committee rejects the very concept of such blind trusts as being inconsistent with the principles of openness and accountability. Moreover, there must be considerable doubt whether they ensure anonymity. The committee's proposal could not be more emphatic, stating: Blind trusts should be prohibited as a mechanism for funding political parties, party leaders or their offices, Members of Parliament or parliamentary candidates.

Mr. Linton

I welcome the right hon. Gentleman's assurance on blind trusts, but how does he square that with his party's proposal to the Neill committee for a political donations institute, which is intended to have exactly the same purpose as a blind trust—to accept anonymous donations and hand them on to the party concerned?

Sir Norman Fowler

As the hon. Gentleman knows, because he has read the report and the evidence, the institute, which did not exist when the then shadow Cabinet was accepting blind trusts, was proposed as a point for discussion. The Neill committee considered and rejected it, and it was entirely right to do so.

We support the other proposals in the report such as those for foreign donations and we accept the Neill committee's definition on that. We accept also the proposals concerning transparency and disclosure.

I have one caveat. The improper influence of policy is the acid test of all that is proposed. Transparency does not avoid the dangers of contributions influencing policy. There is no question but that it makes the process more open, but there is a need for us and any system to remain vigilant on that point.

In that context, we need to pay particular attention to what we do to help the development of policy, to which the Home Secretary referred. On page 93, there is a proposal to set up a small policy development fund of £2 million. That is a sensible measure. The amount of finance is limited, but it would substantially help Opposition parties—the Labour party could also benefit—and it should not be beyond the Government to accept that scale of spending.

The bigger issue is that of financing Opposition parties in Parliament. Again, we are not talking about big sums. The Conservative party receives £986,000 in Short money, which, because of the formula based on election results, is a reduction of £500,000 on what Labour received in opposition. Clearly the Labour party found £1.5 million inadequate, otherwise it would not have set up blind trusts in the first place.

I have a distinction in the Conservative party in that I am the only person to have been a member of Lady Thatcher's shadow Cabinet and that of my right hon. Friend the Member for Richmond, Yorks (Mr. Hague). The last time around, the present Home Secretary was a political adviser to the woman whom I was shadowing—Lady Castle—and even members of the Cabinet are beginning to look younger. In the intervening period, the conditions of opposition have not changed much. By any objective analysis, the resources devoted to supporting the Opposition parties are inadequate, as hon. Members on both sides of the House know.

We do not require vast sums, but it would be sensible to take this opportunity to make a new start in these procedures and provide for separate budgets for the Leader of the Opposition and the shadow team. In practical terms, that is light years away from general state funding of political parties, which I, like the Home Secretary, do not support. I support the voluntary financing of political parties because that voluntary commitment gives a party its strength. A strong party must therefore have a large, nationwide membership. I agree with the Neill committee that tax relief on relatively small donations would be a sensible way to widen membership, and I am disappointed that the Government are still sitting on the fence.

We congratulate the committee on its report. I emphasise that we would welcome legislation at the earliest opportunity, but we want legislation that covers all the report's proposals, for referendums as well as elections. There is an opportunity for all parties to proceed in agreement, and I hope that the Government will take it.

6.14 pm
Shona McIsaac (Cleethorpes)

Tonight we must face the fact that politicians are not held in high esteem by the majority of people in this country. In any straw poll in any town centre, people would say that Members of Parliament are here only to benefit themselves and are overpaid and probably lazy. They all think that we scurry off to jobs outside Parliament. They probably also reckon that we all take backhanders. I do not blame people one bit for thinking that—we are well paid; some Members do have jobs outside Parliament; and as for backhanders—the so-called sleaze issue—there have been many cases of cash for questions and associated problems.

I want to focus not only on who funds political parties, but on who funds Members of Parliament. If we are to clean up politics and if Members are to be held in high esteem by voters, we must have openness not only for party political funding, but for Members' outside interests and sponsorships.

The Tories must answer a host of questions about party funding, as was stated earlier. I heard what the right hon. Member for Sutton Coldfield (Sir N. Fowler) said about accepting the Neill committee proposals, but I want to ask many questions. First, Labour got into government because of what the Conservative party got up to, and we should not forget that. Aspersions have been cast on Members because of the Conservative party's history.

I recall the right hon. Member for Huntingdon (Mr. Major) announcing that foreign funding of the Conservative party amounted to very little. I want to know exactly what is "very little". I heard the right hon. Member for Sutton Coldfield say that £2million is very little funding for Opposition parties. We still do not know precisely where the Conservatives got their money. The Leader of the Opposition promised to publish his party's list of donors 18 months ago. Where is it? Reading the evidence in the report, I have a sneaking suspicion about why there has been delay after delay in publishing the list. Lord Parkinson said in his evidence that an obligation to disclose all donations over £5,000 would lead to a reduction in the number of people giving money to the Conservative party. It wants to keep its donations secret.

I do not accept the argument that giving money to a political party is akin to giving money to a charity. Donating money to the RSPCA or the local dogs home to look after furry animals is a world apart from donating money to a political party because one wants it to be in government. The Conservatives are delaying publishing their accounts because they do not want that source of funding to dry up, as Lord Parkinson said, or perhaps they do not want to disclose the names of donors because, as in the case of Asil Nadir, they are getting dodgy money from abroad.

I have a few more questions about Conservative party funding. I am partisan, because it was that party's actions that put Labour Members here. Has the Conservative party ever held overseas bank accounts, and if so, will it stop doing so, by accepting the report's recommendations? According to the treasurer of the Liberal party of Australia, the Tories have raised millions of pounds in Australia. Why do they not come clean about those foreign donations tonight?

The right hon. Member for Sutton Coldfield said that he wants to make progress and start afresh, so I suggest that he answers those questions in the Chamber. I want to know whether the Conservatives Abroad association comprises members who are not registered to vote in Britain. Is that another Conservative organisation that channels money into the party? Another big question is how the Tories turned a debt of £20 million into a surplus of £7.4 million, when allegedly all their big corporate donors had deserted them.

We have also heard much about blind trusts and the funding of the Opposition Front Bench. Let us examine the finances of the Leader of the Opposition. Has he revealed who funds his office? Why did he move out of the Parliament building and set up an office elsewhere? Why is that money not declared in the Register of Members' Interests? Those questions must be answered tonight if we are to have openness and total transparency.

I refer to another quote from Lord McAlpine's wonderful book. He said that Conservative central office was basically "out of control" and stated: Junior officials in central office were in the pay of businessmen"—

Mr. Straw

Senior officials.

Shona McIsaac

I thank my right hon. Friend for that correction. Lord McAlpine said that senior officials were in the pay of businessmen and promoting their interests". We want to know who those businessmen are.

As I said earlier, it is about not only who funds the political parties, but who funds Members of Parliament. Yes, we have the Register of Members' Interests, but I believe—I am probably in the minority—that it is full of loopholes. There are many ways to get around the register. If we dip into it, we will see the list of Members of Parliament—they are largely Conservative Members—with directorships and sponsorships. Some of the specifics are disclosed and some are not. Members of Parliament are not required to make an exact disclosure of how much money they receive from jobs outside Parliament that they secured simply because they are Members of Parliament. We need to tighten up the register; if people are to trust us, we must discover who is funding Members of Parliament.

The Neill committee report should also be tighter. I note that the Government intend to accept the majority of its proposals, but I believe that the report's recommendations on donations to political parties should be tighter. The provisions should be worded in such a way as not to give the Tories another little loophole through which to channel money here, there and everywhere. They have done that in the past, and they will do it again. The Tories will have to do so, because, as we know, their money is drying up and they need to find another way of breaking the rules. I ask my right hon. Friend to address the issue of who funds Members of Parliament and to consider incorporating that—

Mr. Gerald Howarth

Will the hon. Lady give way?

Shona McIsaac

No, I will not; I am making only a short speech.

I ask my right hon. Friend the Home Secretary to examine who funds Members of Parliament and who funds the political parties. We must discover whether the House needs also to address the former issue. In the past, my right hon. Friend has considered making the corruption of Parliament a criminal offence. Councillors have much stricter registration rules than apply in this place. I should like the same strict standards to apply to us and to our interests, so that we may move forward to a different era in party political funding and the funding of Members of Parliament.

6.23 pm
Mr. Robert Maclennan (Caithness, Sutherland and Easter Ross)

My right hon. and hon. Friends and I broadly welcome the Neill committee's report, and take the view that, although it does not go as far as we have gone—and, indeed, as far as we recommended in our evidence to the committee—it represents a significant advance in the attempt to control the distortions produced by improper political funding and, perhaps even more important, to correct the public's perception that the political process was up for grabs. If that was the case—and I believe it was—it was due largely to the performance of the outgoing Conservative Administration.

To listen tonight to the speech by the Opposition spokesman, the right hon. Member for Sutton Coldfield (Sir N. Fowler), was to experience some surprise—I put it no stronger than that. There has been something of a Damascene conversion on the Conservative Front Bench, and we have not been given any explanations for that quite remarkable change of mind. Most people who were concerned about Parliament's good name found it difficult to comprehend the previous Government's obstinacy in refusing to allow the committee—which they set up—to consider the funding of political parties.

There was some slight mitigation, in that the committee was established fairly close to the time of the general election. It might have been difficult to implement before that election measures designed to deal with problems that were manifest on all sides. Such a move might have been viewed as an attempt to close the door after the horse had bolted. However, the House is entitled to a more detailed explanation than was afforded by the right hon. Member for Sutton Coldfield of how the Conservative party has come to stand on its head on this issue. His address to the Home Secretary—delivered in a somewhat holier-than-thou tone—about cherry picking seemed to me to be self-interest not very heavily disguised.

I am happy, on behalf of my party, to accept the report's broad—and most of its particular—conclusions. However, it is not, I believe, appropriate to refrain from making positive suggestions in order to flesh out the report where it is incomplete. The report is not couched in the form of instructions to counsel. We should not be accused of cherry picking if we take the view that the committee has not argued its case as forcefully or as convincingly as it might.

At this stage, it is right to question the Government further about their intentions regarding the report's implementation. The Home Secretary said that we would not see in the next parliamentary Session legislation to give effect to what I believe is the core recommendation: the establishment of an electoral commission. That is understandable, but I regret that the Home Secretary did not lend any sense of urgency to backing that proposal. If a draft Bill were produced towards the end of the coming parliamentary Session, there might be further consideration of it during the following Session and no legislative action for some time. That would be highly undesirable. I profoundly hope that the Government will include such a proposal—I understand that they cannot announce tonight the contents of next year's Queen's Speech—in their legislative programme.

Mr. Straw

The right hon. Gentleman is correct: we cannot announce tonight next year's, or even this year's, Queen's Speech. He understands the constraints on Ministers: we cannot say that a particular piece of legislation will be in the Government's legislative programme in a year or so. With that caveat, the Government are committed to legislating on the Neill committee report. We also want to ensure that we get it right, which is why we intend to publish a draft Bill. I very much hope that the right hon. Gentleman and the other main parties' representatives will join the Under-Secretary, my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth), in the working party on that, so that we may get the detail right meanwhile.

Mr. Maclennan

My right hon. and hon. Friends and I shall be happy to participate in any constructive discussion. [Interruption.] As the Under-Secretary says, such discussions are already going on. Does the Home Secretary intend the work that is being done by the Under-Secretary to be subsumed by the electoral commission when that is up and running? What is being done at present has followed the pattern of previous Parliaments—a review of general electoral law, and tidying up. That will no longer be an appropriate matter to be led by a Minister in future, but should be led by the commission. No doubt that issue will emerge when these matters are further considered.

We urgently need to deal with these matters not so much because of the need to clean out the Augean stables, the legacy of the previous Conservative Government, as because of the need to deal with the public perceptions of, and immediate problems associated with, forthcoming elections and referendums. Since the most recent general election, our constitutional scene has changed dramatically. There is to be a series of elections—especially those that will take place in spring 1999—in which very many of the matters addressed by the Neill committee will arise.

It is important that we have a detailed expression from the Government of their intention to give effect to the recommendations where legislation is not necessary, where that may be done in respect of the European elections, the elections to the Welsh Assembly and the Scottish Parliament, and, although we have not yet had legislation for the government of London, in that election as well.

The committee proposed that Opposition parties in the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly, for example, should be entitled to some state funding—a sort of Short money. A clause to provide for help for Opposition parties had been added to the Scotland Bill, but the Bill that became the Government of Wales Act 1998 was too far down the track before the committee reported, so a question remains about the Government's intentions regarding the Welsh Assembly.

What plans have the Government to deal with the recommendation that tax relief be granted on donations to political parties? I listened to what the Home Secretary said on that. It is right for him to listen to Members' views, but a long delay is not necessary. A quick response is likely. The official Opposition have already made a positive response. I responded favourably to the report, on behalf of the Liberal Democrats. I hope that the Government will act in the next Finance Bill.

The Neill committee's arguments for its recommendations on referendums were less than totally compelling. I detect in the official Opposition even more nervousness about those recommendations than about some of the others. The committee obviously understood the issues, and its desire that there be a level playing field between the two sides of an argument in a referendum campaign was sensible and equitable. However, the committee took an artificial approach to the role of Government.

It is not easy to draw a line between facts and opinion, and if a referendum is to be conducted on a central issue of Government policy—the only occasion on which referendums are likely to be held, and on precedent many of them will focus on matters of constitutional change—it is ridiculous to suggest, or imply, that the Government should be hampered in making their case as the Government. Is the implication that a Government who go to the country to ask whether the country supports a Government policy must contract out the case to another body before it is possible to have a properly financed campaign? Such a set-up would be artificial in the extreme.

Mr. Swayne

Does the right hon. Gentleman accept that, during a general election campaign, Ministers are quite capable of going to the country to argue their case in a partisan way? Is it not too much to expect similar activity to take place in a referendum campaign while the neutrality of the Government machine is maintained, as it is in a general election campaign?

Mr. Maclennan

I do not believe that it is as straightforward as that. In general elections, Governments are judged not only on their record and their programme for future governing but as individuals. Voting preference at a general election is determined by a complex thought process. I believe that it is possible to draw a distinction between what happens in a referendum and what is done by Governments qua Governments as candidates for re-election during a general election campaign. The general election rules have worked relatively well, although they were stretched by the previous Administration, which churned out highly expensive, illustrated official documents, which often had surprisingly little in them except propaganda. In that area—

Mr. Gerald Howarth

Will the right hon. Gentleman give way?

Mr. Maclennan

No. I am finishing answering the question asked by the hon. Member for New Forest, West (Mr. Swayne). I shall give way to the hon. Gentleman when I have done so, if he still wants to intervene.

In a referendum, on precedent, the matter being examined is a narrow choice, or a choice which—although its impact and effect may be very significant—may be considered discretely, without any reflection on the Government as a whole. Indeed, in the 1975 referendum on the European association, the Government as a whole had a position, but there were two positions taken by members of the Government.

In the holding of referendums, the prime duty is to ensure that both sides of the case are properly heard and argued, so undoubtedly funding should be made available to those who oppose the Government's proposition; but the suggestion that the Government's case should be contracted out to a campaigning body is an artificial approach, which I would not espouse.

I do not quarrel with the view that suitable restraints might be placed on Ministers participating in the formal campaign, but, as we have heard from the Conservative Benches, it is not the formal campaign that moves minds but the arguments that are going on all the time. The fact that a Minister who attends a meeting to advocate the Government's case is advised not to drive to it in his official car is neither here nor there. What gives the Government the great advantage is the fact that they have made a specific case continuously in the period prior to the formal referendum campaign.

I would have examined closely the arrangements made to furnish the no side of campaigns with suitable resources, and the propriety of certain meetings being handled differently from the way in which they are dealt with at general elections. We should not pretend that the balance of arguments is other than somewhat stacked behind the Government, by virtue of the fact that the Government's own policy is at issue. To try to muffle the issue and pretend that the Government could be neutral about their own policy—I believe that the word "neutral" appears in the report—would be wholly artificial.

I would give way to the hon. Member for Aldershot (Mr. Howarth) at this point—but it seems that he no longer wishes to intervene.

A further issue is the campaign period for referendums. The report suggests that the period should begin after Royal Assent. It is not entirely clear to me what the committee had in mind in that part of its report. If a referendum Act did not specify a date for a referendum—which is possible, as it might be left to subordinate legislation to do that—at what point would that requirement become operative? There are many such points of detail, which the committee understandably did not think it right to consider. That will leave a good deal of work for Members of Parliament to give flesh to those bones.

I found the committee's report less than compelling in respect of party political broadcasts. It is curious that, although the report makes some suggestions about the role of the election commission in that connection—for example, the election commission might use its good offices between the broadcasters and the politicians—there is no formal recommendation about the role of the commission. Recommendation 95 exhorts broadcasters to do all in their power to maintain … strict … neutrality", but it does not recommend that the election commission should have a formal role in that regard.

Mr. MacGregor

The explanation is that, although the issue was raised with us during the evidence, we did not feel that we could make a recommendation on that point, because our remit was entirely to do with political funding.

Mr. Maclennan

That is a helpful explanation. It lends force to the view that we should not feel that we are departing from our proper response if we do not follow every dot and comma of the committee's recommendations. There is much to be said for giving the electoral commission greater powers over party political broadcasts than was directly advocated by the Neill committee.

For some time we have lived with an extraordinary arrangement, which has not worked as well as it might and which is rather fragile in its base. We have a shadowy committee of members of all the parties who are supposed to have a role in the matter, but at the last general election that role seemed almost to disappear. Now there is dialogue between individual political parties and the broadcasters. That has tilted the balance too far away from the necessary objectivity, and needs to be policed.

The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth)

It might help the right hon. Gentleman to know that the issue has been raised with me elsewhere. It is our intention, through the electoral procedures working party, which I chair, to encourage the broadcasters to enter a dialogue with the political parties about how the new regulations might be made to work more effectively and, by implication, more fairly.

Mr. Maclennan

I am grateful to the Minister. I am aware of his support for that view. However, we should not rely simply on the good behaviour of the broadcasters, as a matter of happenstance. We should consider whether the entire issue should be covered by regulation. I am increasingly of the view that that is necessary—the more so as the outlets for broadcasting expand and the opportunities for "narrowcasting" become clearer. The committee referred to that, without drawing any conclusions from that development.

My party was in favour of an element of state funding, so it will not surprise the House to learn that the arguments advanced by the Neill committee against state funding did not command our total support. It was never our view that that should be a substitute for the individual or other funding that has traditionally sustained our democracy. We would consider it wrong to seek entirely to substitute state funding for that. However, democracy depends heavily on political parties for its effectiveness. There should be no political embarrassment in giving taxpayers' support to that process.

That philosophical point of view has to some extent been overtaken by events, at least temporarily. I take exception to the Aunt Sally raised by the Neill committee when it dismissed the idea that state funding should be established for the indefinite future. I do not believe that such a proposition was before it. A period of experimentation with state funding would have been worth-while, but I shall not flog that horse further.

On foreign funding, I broadly support the Committee's views. There have been spectacular occasions of unacceptable interventions from abroad in support of the outgoing Conservative party. I should have liked to press the committee—as the Home Secretary did, without any answer being vouchsafed—on the case of Polly Peck.

Mr. John Greenway (Ryedale)

That is a past issue.

Mr. Maclennan

It is not just a past issue, but a continuing scandal. It is up to the Conservative party to rectify the matter as soon as possible.

There have been one or two glancing references to European organisations during the debate. It would be interesting to know what attitude the Government would take to them. Would such organisations be regarded as foreign—for example, for the purposes of election to the European Parliament? I believe that that would be drawing the net too tightly.

I take exception to the Neill committee's recommendation that donations to political parties should be received only from people who are eligible to vote in the United Kingdom. I do not know whether it was the committee's deliberate intention to rule out people under the age of 18 from participation in or membership of political parties. If that was the case, it seems to be a mistaken intention. I hope that the Government will look closely at that.

The main purpose of the Neill committee, which I wholly endorse, is much greater openness about donations. Save for what might be regarded as a Committee point, which is to express some doubt about the practicality of the proposal that donations of more than £5,000 should be reported to the election commission within seven days during an election period—that is the 12th recommendation—I find myself in broad agreement with everything that the committee has to say on donations. My party has as its target the disclosure of donations of more than £1,000, and, as most of our donations are less than £5,000, that is a considerable undertaking.

As for time, we have rules about reporting expenses during elections, and I think that they have worked reasonably well in terms of time. Returning officers have to receive reports from election agents in a given time. To avoid muddles, uncertainties and possibly substantial additional expenditure, which the committee recognised might be the consequence of its recommendation—and particularly because the committee proposes to invoke the criminal sanctions for a breach of this rule—I think that the time limit might be regarded as somewhat too tight.

It would be of interest as well to know whether the Government have it in mind to render void an election in which some criminal practice such as that to which I have alluded has been engaged in. It seems to me that that possibility would be at least as likely to have a deterrent effect as some ex post facto criminal sanction meted out to the malefactor.

I conclude by expressing my appreciation, and that of my party, to the Neill committee, which has worked quite fast to produce its 100 recommendations. I have no doubt that these recommendations need further refinement, or that they will receive careful attention and broad support from the majority of right hon. and hon. Members.

6.52 pm
Mr. Martin Linton (Battersea)

I welcome the report of the Neill committee, and I welcome also the extraordinary volte face that we witnessed from the Opposition. I remember hearing the right hon. Member for Sutton Coldfield (Sir N. Fowler) give evidence to the Select Committee on Home Affairs in 1993, when, needless to say, I was sitting on the press benches.

I had to pinch myself several times this evening during the right hon. Gentleman's contribution to reassure myself that it was the same right hon. Gentleman to whom I was listening. I look forward to hearing the speeches of his colleagues, the right hon. Member for South Norfolk (Mr. MacGregor), who is a member of the Neill committee, and, if they catch your eye, Mr. Deputy Speaker, the right hon. Members for Cities of London and Westminster (Mr. Brooke) and for North-West Cambridgeshire (Sir B. Mawhinney), who have, in common with the occupants of the Opposition Front Bench, been chairmen of the Conservative party. We look forward to seeing whether they are able to throw any light on the mysteries of Conservative party funding over the past few years.

I do not want to look back to the past; I want to address myself to the contents of the Neill committee's report. I start by saying that I think that the committee should be congratulated on facing the central issue in its terms of reference by recommending a limit on election expenditure. You may remember, Mr. Deputy Speaker, that I was rash enough in my maiden speech to suggest—you were kind enough to rule me in order—that the huge sums that the parties received from undisclosed sources were like a cancer in our political system. I very much welcome the recommendation that the parties should be obliged to declare donations of more than £5,000. I welcome even more the fact that the committee has not fallen into the trap of believing that disclosure is enough. The right hon. Member for Sutton Coldfield said almost exactly the same thing: transparency does not avoid the danger.

The cancer that has invaded our body politic is not only that we have not known where the money is coming from, but that, increasingly, it has come from individual millionaires, with all the attendant dangers. I do not necessarily mean the dangers of corrupt deals behind closed doors; we do not know enough to say whether there have been any. I am talking about the danger that parties will feel beholden to their donors. They will be nervous of offending them, and anxious not to jeopardise their chances of another donation.

Mr. Gerald Howarth

I am grateful to my colleague from the Select Committee on Home Affairs for giving way. We cannot continue to suggest that there may be something improper about the dealings of the Conservative party when we have direct evidence that the Labour party has done a complete stitch-up deal with a business man, and has been exposed to public view not by members of it, but by other means. Bernie Ecclestone gave the Labour party not £5,000, not £7,500 but £1 million, in exchange for which he got a change in policy. It is outrageous for the hon. Gentleman to suggest, with no evidence, that there is a mote in the eye of the Conservative party when there is a socking great beam in the eye of his own party.

Mr. Linton

I shall come on to the plentiful evidence about the corruption that may have occurred over the past few years. As for the Ecclestone affair, I shall say only that the Government behaved openly and honourably, naming the Labour party's donors and returning donations that could have influenced decisions. Even though the Government, with the best of intentions, declared the donations and returned the money, it is certainly true—I agree with the hon. Gentleman to this small extent—that the very act of accepting donations of such magnitude creates difficulties for any party and for any Government.

I was about to say that I believe that the committee has set too high a figure in suggesting that £20 million should be the expenditure limit for elections. We all know perfectly well that we cannot raise that sort of money from wine-and-cheese parties and bring-and-buy sales. When Lord Sawyer was giving evidence for the Labour party to the committee, he said: To raise that kind of finance … we have had to seek donations up to £1 million, and we would need to continue that sort of fundraising programme in the absence of any substantial state aid. We need a limit that removes the need for millionaire donations.

In its evidence, the Labour party suggested £15 million, and my right hon. Friend the Home Secretary said that he believed that that figure was in the right bracket. I hope that my right hon. Friend tends towards the figure originally suggested by the Labour party, or even the figure that I would prefer of £10 million, which I think would avoid the need for the fund raising that we have heard about to be undertaken by any party in future.

We must remember that, in every election for the past 100 years, the Conservative party has outspent all other parties. That may not have helped them in 1997, but excluding coalitions, the Conservatives have been in power for 70 per cent. of the past century. However big or small we believe the role of money to be in elections—there is plenty of debate about the subject—I do not think anyone can seriously doubt the proposition that elections should be fought on a level playing field. Only one member of the committee disagreed with that view, just as only one member of it was a member of the previous Government. The report quoted him, and the right hon. Gentleman will be able to tell us whether the quote is fair. It is as follows: He disputes the view that election expenditure is excessive, comparing what is spent in any one year on promoting washing powders, butter spreads and toilet rolls. I refer, of course, to the right hon. Member for South Norfolk. I shall leave it to him to explain what on earth he meant. The right hon. Gentleman should explain why he argued strongly against the extension of state funding, whereas he enthusiastically supports a trebling of Short money for Opposition parties now that he is in opposition for the first time in 18 years.

The introduction of tax relief for donors to political parties is bound to help people in higher rather than lower tax brackets. The Home Secretary says he has reservations about that. The purpose of preventing millionaire funding of political parties is to encourage a large number of small donations instead of a small number of large donations. I fully accept that the tax system can be used for that, but I urge my right hon. Friend to consider the use of tax credits, as in Canada, which give people the same rebate whatever their level of spending, unlike tax relief, which is tied to the rate of tax and depends on whether a person pays tax.

The report should have dealt with one or two other points of detail. Although the increase in Short money is welcome, the committee stopped short of recommending an extension of the provision to the governing party. That is illogical. Short money for Opposition parties is to be trebled, but the parliamentary Labour party has an important role to play in supporting members of the Government, who have their private offices, and the more than 300 Government Back-Bench Members. I do not see the logic of using Short money for Opposition parties only, given that the needs of the Government party are so much greater.

Mr. Greenway

I am grateful to the hon. Gentleman for making that point. I was not a Minister in the previous Government, but, as a shadow spokesman, I have to rely on precisely the same office costs allowance that he receives as a Back Bencher.

Mr. George Howarth

As I did.

Mr. Greenway

As the Under-Secretary rightly points out, so did he. There is a world of difference between our duties as Back-Bench Members, including holding the Government and our own party to account over policy, and trying to hold the Government to account as an Opposition spokesman.

Mr. Linton

Of course there is, but Opposition Front-Bench Members receive almost £1 million of Short money. It is up to the hon. Gentleman to speak to his colleagues who are responsible for distributing that money to ensure that it is used for its intended purpose, which is to assist Front-Bench Members in research. I do not disagree with the hon. Gentleman: it is not enough. However, he and the committee should have the grace to recognise that there are other needs in Parliament apart from those of Opposition Front-Bench Members—but I do not want to dwell on that.

The committee turned its face against any limit on the size of donations. I fully recognise that it can be difficult to enforce a limit on donations: it is much easier to limit expenditure than to limit income. When the committee was given its brief, the Prime Minister said that he looked to the committee for its views on anything up to and including a complete cessation of business funding. I do not know whether that would be practical, but it is rather pusillanimous of the committee to rule out any limitations on donations. The problem that it is trying to address has been created by these huge, £1 million-plus donations. I welcome the attention that the committee paid to the issue of shareholder ballots. The previous Government introduced one trade union Act after another to make it more difficult for trade unions, through their political levies, to affiliate to the Labour party, but they never applied the same standards to companies. I welcome the fact that the committee strongly recommends that companies and trade unions should be dealt with on an equal basis.

If a company wishes to give money to a political party, it should put the issue to its shareholders at least once every four years. Only if it has the support of its shareholders should it give their money to political parties. In the past, very few companies have done that. Marks and Spencer and Rank have held votes of their shareholders, which have always been in favour of political donations. Shareholders in Marks and Spencer voted by 50 million votes to 12 million: that decision puts the trade union block vote in the shade. The principle that shareholders should decide whether to give money to political parties is right.

It is a great shame that the committee stopped short of extending to shareholders the right that the previous Government rightly insisted should be given to trade unionists: to contract out of a levy that they did not agree with. It used the excuse of impracticality: it said that it would be impossible to exempt particular shareholders from paying a contribution to a political party. If it is so easy to ballot shareholders on political donations—it merely requires another question to be printed in the annual report, which is sent to every shareholder—it is not beyond human endeavour to find a way of enabling shareholders to contract out of a political levy.

I welcome the report's recommendation on state aid for political research, and I hope that it receives all-party support. It mentions £2 million, which is a fairly small amount, but it would make an enormous difference to the most important function of political parties—to work out the policies on which they would run the country if they were given the chance. Taxpayers will surely realise that this is a small investment in a worthwhile area.

In line with the Labour party's evidence, I think that the committee should have gone further. It should have allowed state funding to be used for political education within parties and for the training of election agents, councillors and party officials, such as treasurers. Political parties in this country are small voluntary bodies. They are fragile and underfunded, and they sorely lack the basic expertise required to take over the running of the country.

On party election broadcasts, the report goes so far, but not far enough; it recommends that they should be retained. I accept that not every television viewer immediately switches to a party election broadcast; nevertheless they are an important part of the communication between the parties and the voters, and they are a bulwark against the Americanisation of British politics. We all know about the amount of money that is spent in American politics on television and radio advertising. Even in the mid-term elections last week, huge amounts of money were spent by both parties. Those sums would dwarf the spending of our parties in elections. Rules on party election broadcasts must apply to all existing and future channels. I hope that that important guarantee will be written in at a later stage.

The committee is right to say that, although blind trusts were started with the best of intentions—to insulate Front Benchers from the pressures of donations—experience suggests that they cannot be guaranteed to succeed. The committee also turned down the Conservative party's suggestion of a political donations institute, which is quite right.

I was glad to see in the report a chapter that has not yet been mentioned—that on the honours system. The Conservative party often denies it, but the honours system has been a central part of fundraising, not only up to and including the days of Lloyd George, but, I regret to say, even since. If any Opposition Member is tempted to deny that, I simply point to the brutal figures: under the previous Government, 50 per cent. of honours for exports or industry were given to people who happened to have contributed to Conservative party funds, whereas the proportion of companies that gave money to the Conservative party was, at the most, 6 per cent.

I asked a statistician at the London school of economics to work out on a tri-squared table exactly what the chances were that it was a pure product of coincidence that 6 per cent. of the universe received 50 per cent. of the awards. He worked it out as a chance of one in 10 to the power of 133. I do not deny that it is possible that there is no causal connection whatever between honours and donations to the Conservative party, but the Conservatives would be asking us to believe in a rather long chance if they insisted on maintaining that.

The committee was right to include the honours system as part of a report that is basically about fundraising and to insist that the Political Honours Scrutiny Committee should be enlarged, broadened and given stronger powers so that the temptation to use the honours system as an implicit reward for fundraising—I do not say that open deals have been done, or that any agreement has been written on paper—would be countered.

The report contains the most extraordinary notion that money does not have any effect whatever on election results, which is an idea that the right hon. Member for Sutton Coldfield described as the Riddell thesis, from the political correspondent of The Times. It was also defended in the committee by the right hon. Member for South Norfolk.

The right hon. Member for Sutton Coldfield has been chairman of the Conservative party, as has the right hon. Member for Cities of London and Westminster. Why on earth did they spend money on advertising if they seriously expect us to believe that money does not have any effect on elections? Why did not they close down central office? Why does the advertising industry exist? How do newspapers exist, if advertising is completely ineffective? It is stretching belief beyond the point of endurance to suggest that advertising is effective for toilet paper or breakfast rolls, but somehow ineffective in politics.

Mr. Brooke

Does the hon. Gentleman recall the observation of the great man at Unilever who said that he knew that half his expenditure on advertising did not work, but he did not know which half?

Mr. Linton

Those are wise words. I would put the chances at even more remote than that. In political advertising, a designer could be asked to design 12 posters, but only one would strike a chord, resonate with the public and win votes. Having the money to try out 12 posters to find out which one works makes a difference, not because each is successful or because all money spent on political advertising succeeds, but because every now and then—bingo, one hits the jackpot, as any treasurer of the Conservative party would concede.

Lord McAlpine, who has been much quoted in the debate, once told a former press colleague of mine, "If you've got £1 million or £2 million to spend on political advertising, forget it; if you've got £8 million, you can make people believe anything you want." Having the right amount of money to spend on political advertising is important.

I should elaborate on state funding. My right hon. Friend the Home Secretary suggested that the report had come out squarely against state funding. That is not my reading of it; for one thing, state funding comes in many different forms—in kind, free mail, free lettings and free broadcasts. Such state funding is not only supported, but warmly encouraged, by the report, and there are many ways in which the committee wants to extend it.

The committee has great reluctance about state funding in cash, as probably almost all hon. Members have, but let us understand that the reason for that reluctance is not that there is something intrinsically bad about it. Every European country, apart from the United Kingdom, has state funding—there is nothing necessarily wrong or corrupt about it—but the history of party funding in this country in the past 10 or 20 years has been so dispiriting and so alarming, that it is understandable that people have turned against the idea of giving cash aid to the parties that have scraped the bottom of the barrel.

Ironically, lack of state funding was the reason why the parties scraped the bottom of the barrel. The fact that they scraped the bottom of the barrel in turn became the reason why the public would not countenance state aid, but, in time, people will realise that the price of getting rid of millionaire funding of our political parties will, in the end, be an increase in state funding—perhaps in kind, perhaps with strings or perhaps bit by bit; that is the direction in which this will lead.

The report said not that the committee was squarely against state funding, but that the arguments were finely balanced and that the time for it had not yet come. I would accept that: people are not ready for state funding, but we must accept in our hearts that, like every other country in Europe, we will sooner or later have to move further in that direction.

We should not miss the historical importance of the Neill report, simply because we have—I am glad to say—an unexpectedly wide consensus on it. The report will close a shameful chapter in the political life of this country. In a sense, I am sorry to have to become partisan, but the historical record and the historical reasons have to be spelled out: for the past 20 years, the Conservative party has relied heavily on donations from millionaires to finance its election campaigns. We are not able to say whether there has been any corruption only because we know so little about who gave the money, but there have been quite enough cases—I promised the hon. Member for Aldershot (Mr. Howarth) that I would come to this—and quite enough ethical issues raised by donations that have become known.

My right hon. Friend the Home Secretary mentioned the £450,000 that the Conservative party accepted from Asil Nadir, only a year before he was being investigated by the Conservative Government for fraud. It accepted £1 million from Octav Botnar, shortly before he moved to Switzerland over a disagreement with the Inland Revenue about alleged underpayment of taxes of £57 million; and £5 million from Graham Kirkland, shortly before he became a knight in the birthday honours list.

Mr. Gerald Howarth

The hon. Gentleman is clearly suggesting that Sir Graham Kirkland, to correct his name, received a knighthood simply because he had given money to the Conservative party. The hon. Gentleman and Labour Members do not understand that people have been recognised through the honours system because of what they have done for this country and for employment. Unlike the Labour party, they have created jobs and prosperity, and it is entirely right that they should have been rewarded in that tangible way for so doing.

Mr. Linton

Far from it. I am not suggesting that Graham Kirkland corruptly gave money in exchange for, or in expectation of, an honour. I am saying that a system in which donors to the Conservative party are so quickly and so well rewarded is bound to encourage the provision of further funds. Indeed, who can completely exclude from his mind the possibility that that might be part of the intention?

We should also consider overseas fund raising and such people as Sir Y. K. Pao—he was a golfing partner of Sir Denis Thatcher, but I do not know whether that was his prize—and Li Ka-shing, who gave £1 million to the Conservative party and hosted dinners for the right hon. Member for Huntingdon (Mr. Major) when he was Prime Minister. T. T. Tsui went to see the right hon. Gentleman in Downing street to discuss Hong Kong airport. C. K. Ma, whose father was—no doubt inconsiderately—imprisoned by the Taiwanese for heroin smuggling, seemed to believe, quite wrongly, that giving £1 million to the Conservative party would somehow buy his father the right to return to Hong Kong. A series of donations were clearly given in the expectation of favours. I am not suggesting that such favours were promised.

To discover where all this came from, we must look to 1976, when Lord Thorneycroft was chairman of the Conservative party and a new treasurer—Lord McAlpine, who has been quoted several times in this debate—was appointed. Having accepted Short money on behalf of the Conservative party in opposition, Lord McAlpine persuaded Lord Thorneycroft to refuse money that the Houghton committee, under the Labour Government, recommended should be given to all political parties. The Conservatives were the first party to accept Short money. Indeed, it paid for the researchers who developed what we now know as Thatcherism. The Houghton committee consequently became a dead letter, and Britain became the only country in western Europe that did not move to any system of state funding.

Refusing the Houghton committee' s recommendation was on the cynical calculation that, although the Conservative party was in debt, the Labour party would be worse off if state funding were not provided. Lord Thorneycroft complained; he believed that the Conservatives must accept the Houghton money because the party was £1.9 million in debt. That seems chicken-feed in comparison with the Conservative party's subsequent £19 million debt.

The Conservatives maintained opposition to state funding of political parties so that the Houghton committee' s recommendation could never be implemented. Their calculation was right, in the sense that they always had more money than the Opposition parties, but in the end, as sources and the patience of industry in giving money waned, they had to scrape lower in the barrel, accepting overseas funding of all sorts. Such a financial strategy entirely merited—indeed, could have predicted—the election result.

Until 1997, the Labour party had no choice but to try to match Conservative spending. History will show that, as soon as this Government had the opportunity, they acted decisively to bring the arms race of escalating election spending to an end and to clean up the sleaze in our political system. If they do so with the Opposition's support, that can be described only as very welcome. Let us remember that the report is the result of a pledge that Labour made before the election. We said that we would clean up sleaze in the funding of political parties, and I do not think that anything will deflect the Government from doing so.

The parties are caught in a vice between falling incomes from their traditional sources—that applies to companies and to trade unions—rising costs of campaigning and the demand and need for more sophisticated policy research. There are only two possible consequences. We either have a slum democracy, in which parties are poorly staffed and researched and unprepared for the task of running government—contributing to expensive policy errors, such as the poll tax, which cost the country £1.5 billion—or a sleaze democracy, in which parties are forced into an unhealthy reliance on funding from private individuals, which will sooner or later compromise the parties' integrity. That is the lesson of the Ecclestone affair as much as it is of all the others that preceded it.

I very much welcome all the Neill report's proposals. Between them—disclosure of donations, a ban on overseas donations, a limit on election expenditure, ballots for companies that want to give money and tax treatment for donations—we should be able to put this sorry chapter of our history behind us for ever.

7.23 pm
Mr. John MacGregor (South Norfolk)

It has been a great privilege to serve on the Neill committee and deal with the report under the wise and skilled chairmanship of Lord Neill. It has been a fascinating exercise.

From the very first evidence we took, which was from Peter Riddell, one of our most perceptive political columnists on this and many other issues—he covered much of the field—and from our visits abroad and the interviewing of witnesses around the country, it became clear that the question was much more complex than the simple thought of disclosure and banning of foreign donations would lead one to believe. We became increasingly aware that we were dealing not just with general elections but, due to the multiplication of the number of different types of electoral systems, the onset of referendums and the technological developments we face, an on-going scene which covers a very broad field. I should like to make a few general points before I turn to our principal recommendations.

First—this is very important—the committee felt that there was very little evidence of abuse. In paragraph 4.4, we draw attention to The two most obvious objects which are supposed by the cynical to underlie large political donations". They are: the purchase of access to Ministers (or Shadow Ministers) and the purchase of influence over policy. It is worth getting paragraph 4.5 on the record: In fact, the suspicions which are entertained concerning large givers are commonly lacking in any justification. We have been given no evidence that leads us to doubt that nearly all give generously either because they support the general aims of the party which they finance, or in order to minimise the risk of the opposing party attaining power. That is a very important comment, because it reflects the real position of British politics.

I had a fairly extensive ministerial career in various Departments, and can firmly say that on no occasion did I take a decision on policy or anything else that was based on any donation to any political party. Indeed, I did not know who the donors were. That contrasts with the situation in the United States today, and in Canada before changes in disclosure and election rules. I do not believe that there is much corruption or abuse in that area in this country, but the perception that it exists is another matter. The perception, above all, had to be dealt with.

Secondly, I have always strongly believed that politics is an honourable profession. One of the problems with regular stories suggesting possible abuse, sleaze or corruption is that they give a totally false impression of the realities of politics—exaggerating the extent of such issues.

Exaggeration and concentration on such stories feed on themselves, creating a public mood.

I noticed in some of the debate and discussion in taking evidence the notion that there was somehow something tainted about being involved in politics—whether as a parliamentarian or as an active voluntary worker in the constituencies. I hope that our recommendations will eradicate that impression. They are based on the belief that politics is a wholly worthy activity, and one not to be looked at askance as though it was something shady.

I should like to put on record only two other passages of the report. In setting out the committee's approach at the beginning of the report, paragraph 2.11 says: The pursuit of politics is an honourable profession to which many men and women devote their lives. Behind each career politician stands a regiment of dedicated voluntary party workers. It is very important to state that at the outset. I am sure that hon. Members across the parties would agree.

Paragraph 2.23 states: The argument here is that strong, healthy political parties are essential to the functioning of a strong, healthy democracy. In particular, strong and healthy parties are necessary as a means of recruiting ordinary citizens into decision-making positions at all levels of government, local as well as national, and also as a means of engaging very large numbers of people—as campaigners, activists, fund-raisers and participants in public debate—in the whole democratic process. Our view is that parties are indeed essential in this way. That approach coloured our thinking towards producing a package.

I was very glad that the Home Secretary—I am sorry that he is not present, but I hope that the Under-Secretary of State for the Home Department, the hon. Member for Knowsley, North and Sefton, East (Mr. Howarth) will pass on one or two of my remarks—expressed precisely those sentiments recently in evidence to the Home Affairs Committee, in response to a question from my hon. Friend the Member for Aldershot (Mr. Howarth). I wholly agree with them.

Mr. Andrew Love (Edmonton)

I hear what the right hon. Gentleman says, but does he accept that successive scandals in this area over the past 19 years caused that malaise in the public's view of political parties?

Mr. MacGregor

I think that those matters have been greatly exaggerated. There are perfectly good explanations for the vast majority of donations, and I hope that the committee's recommendations, and the follow-up to them, will make that apparent.

There are two points that I wish to emphasise. First, there is nothing wrong with making financial donations as an individual or as a company. Indeed, I would argue that it is necessary. We do not want politics run on a shoestring, leading to poor decisions, poor government and the discouragement of good people from coming into politics. However, donations should be out of a conviction for a cause, and not to secure personal favours in return. Secondly, it is unhealthy to the political system for a party to rely on a few large donations from wealthy people, and it is desirable to widen and assist fund-raising by more ordinary citizens. It is in that context that the committee has made some recommendations.

I wish to refer to the principal recommendations, although I shall not dwell on them at length—they are clearly laid out in the report. The key passage is the chapter on disclosure. The disclosure of donations enables everybody to see what is going on, and I think that we have got the limits right. We argued for some time over the limits of £5,000 nationally and £1,000 at constituency level, but I believe that those figures are sensible.

One matter which has not been mentioned so far is that we have made an exception of small donations under £50—the endless local contributions from wine and cheese parties, coffee mornings and raffles. Some may argue that that gives a slight loophole, but I think that the loophole is tiny. One would have to go to a lot of wine and cheese parties and raffles and make a lot of small donations to get close to the figure that we are talking about. The importance of excluding such events is twofold. First, we do not want to discourage those activities which widen the network of people who are involved in politics.

Secondly, the administrative task of scrutinising and keeping records of all those small donations would be impossible.

We had a long discussion on the effect of disclosure in terms of political parties being able to raise funds. There is no clear answer. Some of the evidence from overseas suggested that, once disclosure of donations is introduced, there will be a considerable reduction in the amount of money going into the political parties. I would guess that that will happen, because some people, for perfectly honourable reasons, will be deterred from giving—when they might have given, for honourable reasons, otherwise—because they just do not want public disclosure of the fact that they are contributing to a political party.

There will be a reduction—it could be considerable—in the money going into political parties from the more wealthy donors or companies, and it is important to take that into account when we look at some of the committee's later recommendations.

As for foreign donations, we had to wrestle to work out the best definition of a "foreign donation". I personally think that we got it right, in terms of both individuals and companies. Some organisations—for example, big international lobbying organisations—may bring considerable sums of money into a political party which supports, say, an issue on animal welfare. We have put restrictions on those organisations also, because it is not just companies we need to be concerned about. I hope that we have the definition right, but it took a good deal of working out.

There is an exception for Northern Ireland in relation to disclosure of donations and foreign donations. In terms of foreign donations, the exception was made because of the Ireland Act 1949 and the Irish Republic's Electoral Act 1997. I should like to see no exceptions to the general rules in relation to disclosure or foreign donations. However, we took the view that, on security grounds—at least in the short to mid-term as far as disclosure was concerned—and on the technical grounds that I have described for foreign donations, there had to be an exception. Everyone on the committee felt that, as soon as the Government felt that the exception could be dropped on both scores the better, because it was much better to have no exceptions.

There was an argument that any exceptions in Northern Ireland for foreign donations should apply in Scotland as well. I cannot see why, as what applies in the rest of the United Kingdom should apply in Scotland as well. However, it leads to the point that there have to be good reasons for an exception in terms of foreign donations and disclosure, and we accepted that the case in Northern Ireland applied in both respects.

The committee felt from the outset that, as we moved into a more complex area, the arguments for an electoral commission were overwhelming. We could be dealing with a scene that changes much faster than in the past, and technological developments will be very important in the context of the ceilings on expenditure—about which I shall say more later. Because of the proliferation of various types of election, the issues could change. We felt that the electoral commission should have the remit not only to control how the legislation was applied in practice, but to keep reviewing whether changes were necessary in the light of the kind of developments to which I have referred.

I wish to refer now to tax relief. There is a clear recommendation in the report—which I wholly support—that the Government should look at the recommendations as a package and as a whole. There must be no cherry-picking, because the temptation may be to pick the cherry that one likes, while leaving some of the others aside. We see the process as a unity of approach. If we are to curb—as, inevitably, we will—the amount of donations as a result of disclosure, and if we believe that an absolutely critical point of our whole approach was to encourage many more ordinary citizens to become involved in the political process and to give donations, tax relief is an important recommendation.

I would very much regret it if the Government decided that they were unable to embark on the tax relief change, because I believe that giving tax relief on donations to political parties—which are, after all, about the future of us all—is just as important and worth while as giving it on donations to charities.

Some have argued that the tax relief proposal will favour one political party over another. I do not think it will, because we have put strict limits on our recommendations on tax relief—a limit of £500, with relief limited to the basic rate. That will not help higher-rate taxpayers more than ordinary taxpayers. In addition, the argument that some people do not pay tax is not a reason for not embarking on the scheme.

I must tell the hon. Member for Battersea (Mr. Linton) that we looked at tax credits as an alternative. However, the difficulty was that, in the British tax system—the evidence from the Inland Revenue was clear—tax credits would be difficult and expensive to operate, whereas the tax relief system, based on charitable donations and so on, would be much easier.

In fact, the tax relief system is much easier to operate for political parties than it is for charities. There are a multiplicity of charities which must correspond with the Inland Revenue, it being the responsibility of the charity to apply for tax relief. However, in terms of political parties, there will only be two or three mediums through which tax relief will be provided. That is why we chose that route.

Mr. Maclennan

I am interested in what the right hon. Gentleman said about taking the recommendations as a package. Did he and the committee consider the recommendation on the Short money and the aid given to parties in Parliament to be part of that package, as there has been some argument that that system favours one party over another?

Mr. MacGregor

The right hon. Gentleman has read my mind, as I was about to speak about Short money, which the committee regarded as very much part of the package.

I served on the Standards and Privileges Committee for a few months before the general election. I felt that blind trusts were a way to get around disclosure—if the Committee had been able to finish its work, I would have strongly objected to them. However, I understood the arguments for them—Opposition Front Benchers need more funding to carry out their activities. I have thought for a long time—I believed it when we were in government—that the Short money is inadequate. The demands on Opposition Front-Bench spokesmen in keeping themselves well informed are substantial.

Mr. Linton

The right hon. Gentleman has been, among others things, Lord President of the Council and Leader of the House. Why, if he held those views, did he not introduce reforms to increase Short money then?

Mr. MacGregor

I was not under any pressure to do so. Now that the matter has come up, I am happy to make my views known. The issue was graphically brought to light when my hon. Friend the Member for East Hampshire (Mr. Mates) went, as shadow Secretary of State for Defence, on a crucial fact-finding mission to Bosnia. He was fortunate enough to have had a lift out in a Royal Air Force plane, but the plane would not bring him back, and the Short money did not extend to paying his fare. Indeed, I am not sure how he managed to return—

Mr. Gerald Howarth

By bicycle.

Mr. MacGregor

Perhaps by bicycle.

An Opposition spokesman carrying out a perfectly legitimate, and highly desirable, activity as part of his responsibility should not have to fund his trip from his private resources or from 10p or 20p donations at coffee mornings. Since Short money was introduced, political life has become much more complex, and the demands on Front-Bench spokesman have become much greater.

I hope that the Government accept the committee's recommendation to treble Short money. The committee also made detailed points about the money's distribution, but I shall not describe them now.

One of the justifications for trebling Short money is the amount that taxpayers now spend on special advisers. This year, £3.6 million, I think, is being spent on special advisers—the Government have taken on many more than we had. Those of us who have had special advisers—including, I am sure, the Home Secretary—know that a good deal of their work is political. In comparison with the £3.6 million that is spent on Government special advisers—on top of all the other resources for the Government machine and the civil service—the trebling of the Short money would be a small sum.

The hon. Member for Battersea asked why Short money should not be given to Back Benchers from the governing party. Short money is specifically for Front-Bench activity; it is not for Opposition Back Benchers, so the committee did not believe that there was a case for extending it to Back Benchers from the governing party.

Having disagreed with the hon. Member for Battersea twice, I should add that I entirely agree with his arguments for some modest funding for political research. One of the weakest parts of the Home Secretary's speech—with the exception of all the tendentious stuff at the beginning—was the way in which he compared political research funding with the money that is spent on education and schools. That was rather cheap, and it missed the point. Short money and political research funding are important to the proper working of government and to the development of policy by any future Government. It is wrong that Opposition policy development should depend on 20p contributions at coffee mornings—proper funding would be a well-directed use of taxpayers' money.

Mr. Straw

The right hon. Gentleman's admonition on my speech was fair. My mistake was to wrap up comments about Short money with comments about tax relief, which are separate issues. We have some serious considerations to make before we allow donations to political parties for policy development. I accept what he says about Short money, however, having had to put up with its shortage in opposition.

Mr. MacGregor

The right hon. Gentleman should read what I said about tax relief, which I believe should be part of the package.

It became apparent to the committee that referendums were a key issue. I am trying to avoid being politically contentious, as that was not the committee's approach, but the evidence we received in Cardiff led me to believe that the operation of the referendum on the Welsh Assembly was outrageous. There would not have been a no campaign if it were not for the fact that a member of the Labour party had been sufficiently worried about the establishment of the Assembly to ask her bank manager for a £4,000 overdraft to start up the campaign—her courage led Robert Hodge to donate £80,000. Despite the shortage of funds, the campaign came close to being successful. We should not conduct major constitutional referendums in such a way.

The committee's recommendations on referendums are extremely important, and I hope that the Government will take them up. There are arguments for extending the remit of the electoral commission—or some other body—beyond the scrutiny of political funding in referendums, but it was not the task of the Neill committee to consider them.

Another point should be clarified. There has been some misunderstanding about what the committee meant in saying that the Government should be neutral in referendums—perhaps the point was not drafted sufficiently clearly. Of course the Government should not be prevented from expressing their views vociferously. In any referendum on proportional representation, the Government will, presumably, speak with two voices—

Mr. Straw


Mr. MacGregor

I am very glad to hear it, if that voice is going to be the Home Secretary's. However, the right hon. Gentleman must concede the possibility that there will be two voices. If there are, Ministers will express their personal views, and will not expect the Government machine to back them with expenditure. The committee argued for core funding for both the yes and the no campaigns in that case.

If there is one Government view on the single currency, of course the Government should not be prohibited from expressing it. The committee's point was that the Government case should not receive double funding on such an important referendum issue. The Home Secretary mentioned Ministers taking civil servants' advice on the single currency during the campaign. That is perfectly proper, just as it is when Ministers have to take policy from civil servants during a general election campaign. The committee's concern was about expenditure and double funding.

As the hon. Member for Battersea said, I put forward a minority view on expenditure limits. I believe that disclosure is the key issue in dealing with the abuses—or perceived abuses—of the current system. I also believe that expenditure is a matter of freedom of choice and freedom of speech. In a general election, we should not constrain a party's expenditure. Indeed, that is the committee's unanimous view on referendum campaigns. At paragraph 12.47, the freedom of speech argument is adduced as a reason for not having a ceiling on referendum expenditure.

We must put in context the amount that is spent in most election campaigns. Most companies' annual expenditure on marketing and advertising for major products is more than is spent by political parties in a general election campaign, which is, none the less, a much more important matter. As Peter Riddell suggested in evidence, I do not think that a ceiling would work. There would be so many difficulties of interpretation and possibilities of abuse that, for the impact that it would have, the game would hardly be worth the candle.

It has been argued that a ceiling would prevent political parties from spending their money unwisely, but that is the responsibility of the parties themselves. We spent an awful lot of money unwisely in the 1997 general election campaign, but that was our fault, and it is not the duty of the state to save us from our faults. There is a nannyish element to such arguments.

Those are the arguments of principle and of practice that led me to the view that I reached. I am glad that there has been such a positive response to the report, and that the Home Secretary wants to legislate as soon as possible, but it is important to see the package as a whole, and to ensure that any referendums that are coming up are conducted within the framework that we set out.

7.51 pm
Mr. Phil Woolas (Oldham, East and Saddleworth)

I hope to embarrass the right hon. Member for Sutton Coldfield (Sir N. Fowler) by largely agreeing with him on the report's call for extra funding for policy development.

Political parties have reached a paradox, as there is general agreement that the profession of politics is held in low regard, but we need to have well-funded political parties—and especially policy development—to get out of that situation. The right hon. Member for Sutton Coldfield was absolutely right when he said that we need to distinguish clearly between policy development and campaigning or electioneering. As anyone who is familiar with political parties knows, it is perfectly possible to separate those two functions. The idea that businesses, trade unions or individuals can buy influence over policy leads to the accusations of corruption, with a small or a large "c".

I would go much further than the Neill recommendations on policy development. The arguments for state funding are best seen in continental Europe, and especially in Germany—and previously in West Germany—where part of the post-war settlement involved providing state funding for the political parties and establishing policy development bodies with taxpayers' money to act as a form of democratic guarantee. That system has served German political parties, right across the political divide, very well.

Given the low public standing of the profession of politics, I understand that taxpayers would not want their money spent on political campaigning or electioneering, but I think that the establishment of policy development bodies with state funding, on the principle that they would not accept any donations other than from the state, would afford a separation that allowed businesses, individuals and trade unions to continue to donate money to the political party of their choice. I agree that they do that mainly for ideological reasons, and not through a desire to buy influence.

If the recommendation were accepted—I noticed that my right hon. Friend the Home Secretary was sceptical—it would have more far-reaching consequences than the committee may have recognised. I agree with my hon. Friend the Member for Battersea (Mr. Linton) that an increase in state funding is inevitable, and I would support that if it were directed towards developing policy forums or think tanks. That would radically change the role of the civil service, and especially its relationship with an incoming Government.

We need to ensure that Opposition parties are much better prepared for government when they take office. I do not want to rehearse the stereotypes of Sir Humphrey and his delaying tactics, but I believe that many of the incidents that have been cited tonight—including the Ecclestone affair—would have been avoided had the Labour party's policy development been more advanced in opposition.

I do not see why we should not be able to second civil servants, industrialists, academics and others to state-funded policy development forums, to help parties to work out policies in more detail. That would not be an abandonment of ideology, as some have argued; it would help political parties, of whatever ideology, to develop practical policies that could be implemented on coming to office.

On Short money, suffice it to say that I would welcome a huge increase in the allocation for Government Back Benchers. I sometimes think that Labour Back Benchers provide a better opposition than the official Opposition. On that basis, perhaps we should get some of the money. I will not go too far down that road, as I can imagine the Whips suggesting a link with, for example, how often we read our pagers.

I remind hon. Members of the background to the introduction of in the trade unions ballots on the political levy. I share the consensus that the ballots have by and large improved the situation. The trade unions are more accountable, and the systems are transparent. The effect was the opposite of the intention.

I believe—this is backed up by a reading of the Hansard reports of debates of the time—that the then Government's intention in enacting the Trade Union Reform and Employment Rights Act 1993 was to drive a wedge between the trade unions and the Labour party, and to cut the party's funding. The expectation was that at least some trade union members would vote against affiliation; but that did not happen. In practice, the links between the unions and the party were strengthened.

Wearing my party political hat, I have a word of warning about the proposals for shareholder ballots. Recommendation 34 is fairly specific, but not specific enough for us to make a judgment on how companies would decide whether to make political donations.

There is a key difference between a company and a trade union. For trade unions, there is one member, one vote; for companies, there is to be one share, one vote—or that is how I read recommendation 34. That is very different from one shareholder, one vote. As we know, shareholding in most public limited companies is heavily biased in favour of institutional shareholders. It is conceivable that small shareholders would vote one way and the big institutions would vote another way. We need to be careful about the details of such proposals, to avoid the pendulum swinging too far. We do not want to look back in 10 or 20 years and wonder why we went so far.

One of the key principles recommended by the Neill report is to achieve greater public confidence that individuals and organisations do not buy influence in political parties. There has been controversy in my constituency for some time about the administration of the Melton Medes pension fund. I hope that the House will bear with me on this practical example, because it illustrates the urgent need for the implementation of the majority of the Neill committee's report.

The scheme has been subject to accusations of bullying and maladministration. The female workers in the factory have been forced, under threat of dismissal—this has been admitted by the chairman of the trustees—to sign contracts that postpone their retirement age from 60 to 65. There are allegations of intimidation against some of the members of the pension fund.

That may be of little interest to the House. However, the chairman of Melton Medes, Mr. Nat Puri, is listed in the Register of Members' Interests as a major donor to the campaign of the right hon. and learned Member for Rushcliffe (Mr. Clarke) for the leadership of the Conservative party. He is also listed in the Labour party accounts as a major donor to the Labour party. The Occupational Pensions Regulatory Authority and the Financial Services Authority have failed to order investigations into the administration of the pension fund. The members of the fund—the existing work force and the current pensioners—are very sceptical about the power of the financial watchdogs and the political process after the injustice that has taken place.

I am not suggesting that the Labour party, its Ministers or the right hon. and learned Member for Rushcliffe are in any way involved in the events that I have described—indeed, I know that they are unaware of them. However, that does not reassure the members of the pension fund. Greater transparency and greater accountability are required.

Mrs. Eleanor Laing (Epping Forest)

Given what the hon. Gentleman has just said about what he is not alleging, what is his point? What is the connection between donations to any political party and the administration of the pension fund that he is talking about?

Mr. Woolas

My point is that in this case—and, I believe, in many others—the members of the pension fund have lost faith in the political party system, because they believe that both parties have failed to protect their interests. The disclosure of the donations by the company looks pretty raw, given the effects of the decisions of that company. I want more transparency, to reassure the members of that pension fund that there has been no untoward activity. I believe there has been none, but they do not share my view.

I was a senior manager in an affiliated trade union for several years, and have been on the receiving end of many requests for donations to the Labour party—and, on a couple of occasions, to other parties. My experience is that the trade unions suffer from the accusation that they are buying policy, just as much as the Labour party does. It is a two-way relationship. That is why an increase in state funding for policy development would benefit not just the Opposition parties, but the party of government, currently the Labour party, and the trade unions. The trade unions would be free to carry on giving money for leaflets, stickers and posters, up to whatever limit is set—£15 million or £20 million have been suggested—but there could be no accusation that policy was being influenced by donations or affiliations in any political party. That would improve our political process, providing modern, professional political parties and better policy, thereby serving the public much better than the current system.

8.6 pm

Mr. Martin Bell (Tatton)

I shall be brief and non-partisan—brief because the issues are fairly simple, and non-partisan because it is difficult for a party of one to be partisan, just as it is difficult for a party of one to qualify for Short money, although, as the party leader, I would not mind if the rules changed.

I have an interest to declare. The debate concerns broad issues of trust and confidence in the democratic process, which propelled me, rather to my surprise, into Parliament. In my written and oral evidence to the committee, I suggested a national campaign spending limit for parties of £2 million each. The committee went for a higher figure. That much money cannot be raised on the rubber chicken circuit, because there are not enough rubber chickens or party members with the stomach to digest them, so it will have to be raised by other means. Some of it will come from big contributors, which gets us again into the grey area of whether we are selling and buying influence or selling and buying access.

I welcome the imposition of limits, just as I welcome the recommendations on referendums. The Home Secretary had an opportunity in the debate to accept that an independent mechanism will be necessary for the conduct of referendums. I have entered into a single-issue and very short-term alliance with the Conservative party on this, which I am sure will not spread to other issues. We are backed in our campaign for a real referendum by Charter 88, the Electoral Reform Society and, I think, the majority of the British people, who cannot accept that the Government can be umpire and player on the same field. There is a question of legitimacy. When a referendum is over, the losing side has to accept that it was fairly conducted. That was part of the problem with the Welsh referendum.

The public will not allow any more public money for political parties—money that could otherwise be spent on schools and hospitals. It is up to the parties to fire up enthusiasm and match the idealism of the young with the idealism of the not so young. They have to generate support to get a lot of small contributions. 1 have perhaps a unique experience in politics, after an incident last January involving a tabloid newspaper. I found that I had to pay £9,400 in legal fees, which I had not known I owed. People started sending me the money, so I have experience of running a fund lowering campaign. If any party wants to draw on that experience, I shall be happy to help it out.

The issue of honours is important. In the companion volume to the report, the most fascinating evidence of all is that given on 13 May by Lord Pym, the chairman of the Political Honours Scrutiny Committee, when he addressed the issue whether there was any link at all between contributing to party funds and the award of honours. I had expected him to say that there was absolutely none, and that that would occur under no circumstances and over his dead body. What he actually said was: On the whole, the principle we follow is that if somebody gives their money to a political party, that is a bonus point rather than a minus because they are supporting what they believe in with their own money … Our responsibility is to look at the totality of the contribution made by individuals and weigh them all together. Donations may be one aspect of their achievements; it may be a minor one, but it is an aspect. Donations are an achievement? Signing a cheque is an achievement? That seems to me to be both a corruption of the language and a corruption of politics. If Lord Pym really believes that, if he has not changed his mind, if he has been correctly transcribed, and if words have the meaning that they appear to have, he should step aside. If any other member of his committee believes the same, he or she too should step aside, so that their positions can be filled by people who would place an absolute and unbreachable fire wall between donations and the award of honours. It is a matter of integrity, and of trust in government. People care about that. I hope that the Minister will address that point.

8.11 pm
Mr. William Ross (East Londonderry)

The hon. Member for Oldham, East and Saddleworth (Mr. Woolas) said that the best opposition came from the Back Benches, and he may have heard me say from a sedentary position that that is not unusual. Back Benchers are the backbone of parties. They are the folk who go out to fight and to argue in the streets. They know the Government's policy, and they are the first to detect the rapid shifts that occur as soon as an Opposition become the Government. That is why they, being tied to the true faith, become the most devastating critics of the Government. Perhaps they are not as vocal early in a Parliament as they will later become, but let me assure the hon. Gentleman that, with the majority that his party has, it will happen. I have seen it all before.

My first point is about the nature of the political party. I am on the same footing as the Home Secretary and several others in believing that political parties should seek a mass membership. If the membership is big enough, and if it is supported by relatively small membership fees—I am against large fees—it will be followed by fund raising, canvassing, and much more, as naturally as day follows night. I am against the idea of a political elite receiving large sums of money from public funds so that it can run elections and Governments by buying space in newspapers and time on the other media. That would be totally wrong, and would be destructive of the democratic principle. We should stay as far from it as we can.

The Home Secretary said that he would write to ask for representatives from each major party. What does he consider to be a major party? A major party in one part of the United Kingdom, such as his own Labour party, can be totally non-existent in another part, as his is in my Province. I hope that he will bear that in mind.

The report mentions £5,000 for donations. That seems a reasonable sum, not too big and not too small. State funding should be given only through the Short money. I find it repugnant that any political party should look to the public purse for money to run its operations in its headquarters, in the House or in the country. If we are to offer money, it should be done strictly for parliamentary purposes. The Short money was created for that reason, and that is how it should be used.

The Home Secretary, in setting out his views, did not refer at all to Northern Ireland. That was left to the right hon. Member for South Norfolk (Mr. MacGregor). The Opposition's Front-Bench spokesman did not mention Northern Ireland, and nor did the Liberal Democrat spokesman. We have been told that there should be openness regarding money for elections and so on. I have glanced through the large report—we do not have time to read all the reports that land on our desks—and hon. Members will understand that I concentrated on the Northern Ireland section.

I read the concerns expressed by the Social Democratic and Labour party, and the reference to the wishes of its supporters to remain incognito. I well understand that desire. A brick, or worse, through the window, attacks on one's children, and threats and intimidation are not common on this side of the Irish sea, but we have to live with them. That said, I believe that anyone prepared to put forward a political point of view must be prepared to defend it in every forum and against every enemy. For that reason, I diminish the comments of the SDLP about concerns for the safety of its people, although those concerns are perhaps greater even than those of other political parties in Northern Ireland.

The strange position of the Irish Republic was mentioned by the right hon. Member for South Norfolk, and is set out in the report, beginning at page 75. Under the Ireland Act 1949, the Irish Republic and its citizens enjoy a peculiar position in British law. The Republic itself maintains a wide definition of who is an Irish citizen or national. We must take those two things into account.

Paragraph 5.38 agrees that nationals of the Irish Republic are not really foreigners because of the 1949 Act. Paragraph 5.39 says: it would be virtually impossible to halt the flow of funds from the Dublin offices of the SDLP or Sinn Fein". The Home Secretary must realise that halting and policing are not the same thing. They should not be treated as lightly as the report treats them. It is crazy to license one or two parties in the United Kingdom to raise money by such means, and to accept donations from such sources, without our giving the same licence to all parties. That position is not sustainable. If any of the major parties cared to go to the European Court of Human Rights, the Government might find themselves in major difficulty.

My concern is increased by the fact that there are difficulties in some people's minds about the source of some IRA-Sinn Fein money. There are allegations of drug dealing, of robbery, of rackets, of intimidation and of protection money, to name just a few. The public manifestation of Messrs Adams, McGuinness and others going to the United States for $500-a-plate dinners and other fund raising is also hard to tackle. We would be remiss, however, in not attempting to tackle those problems. We cannot turn a blind eye to them. We must investigate them, and we must have answers. If we are to allow money to be handed out willy-nilly, the handout must be policed.

Who is it who tries to conceal the sources of its money? Only one party does—Sinn Fein-IRA. That party is no friend of the democratic principle, and we should not connive at allowing it to get away with, literally, the murder, intimidation and violence that it uses to raise some of its funds. We must ask serious questions, and we must police carefully the sources of that party's funding. We need to know. Nothing frightens the evildoer as much as the spotlight of publicity shining into the darkest corners of his behaviour. That is a dark corner of those people's behaviour, let us get a searchlight on to it as soon as possible.

I do not hold referendums in high favour, for a number of reasons, not least that the Government always set the question, which has a great effect on the outcome. Under the Northern Ireland (Border Poll) Act 1972, which has been repealed, the question was, "Do you want Northern Ireland to become part of the Irish Republic?" and about 97 per cent. of the people said no.

In the last referendum in Northern Ireland, the question on the ballot paper was not the issue. Essentially, the question was, "Do you want peace?" What fool wants war? It was a classic case of misdirection, as the real question was, "Do you want the IRA in government?" Of course, that issue never really surfaced. As a result of that affair, I am of the opinion that equal funds should be available to both sides of the argument, and that it is equally important to allow a much longer period to sell the case.

Mrs. Laing

Does the hon. Gentleman agree that the problem of the wording of the question in a referendum could be solved if an electoral or independent commission were given the power to scrutinise the way in which it was worded, and if that power were taken away from the Government?

Mr. Ross

One can build in such safeguards until the cows come home, but the best referendum is a general election. No matter how many safeguards one builds in, the Government will eventually see to it that their will carries the day when it comes to the question asked. I have been in this place long enough to be highly suspicious of safeguards, as I know how weak they normally are.

There are all sorts of problems. The Government of the day are to be neutral, but their members may campaign. There will be associated costs. The Government's position has already been mentioned in the debate. Whenever one goes down the road of a referendum, one finds that the Government manage to promote their ideas through the question. If the referendum has the authority of the Government behind it—the power of Government with the media and so forth—the result is a foregone conclusion. It will be what the Government desire it to be.

Another little problem is that, under our system, no Parliament can bind its successor. Referendums are an attempt to bind a successor Parliament, which is another good reason for not going down that road. However, a successor Government could overturn the result of a referendum if they had the guts, because power lies not with referendums but with the majority in this House. No Member of this House should allow that power to be taken away from us.

We should consider carefully the Government's role in the Northern Ireland referendum this year. Hon. Members have referred to the Welsh referendum, and I know of the hullabaloo associated with it. Most people in Great Britain took little notice of the arguments advanced during the Northern Ireland referendum campaign, but large gobs of Government money were expended. As far as I am aware, the figures have never been given. Perhaps the Minister will be able to tell me where I can find those sums in the Northern Ireland Government accounts. Where are they set out clearly? How can I find out which parties expended what money?

I noticed from the evidence given by the president of my party that we received some donations from the Irish Republic to fight the referendum. Since the party and I were of divided opinions in that matter, I would be interested to know who the individual donors were. Was it the Joseph Rowntree Foundation or one of those wealthy multimillionaires who inhabit the Irish Republic and who are always so willing to buy Northern Ireland businesses and so forth? I think that we deserve to be told. It is not merely the general public who want to know where the money comes from in referendum campaigns and party political politicking. I suspect that many Back Benchers on both sides of the House want to know because it would give us a clearer idea of the real forces that drive both Front Benches.

The leaked letter from Mr. Tom Kelly, the spin doctor in the Northern Ireland Office, listed all the people whom the Government machine in Northern Ireland had to influence. The Government did not deny it, but simply complained to high heaven about the leak. Judging by the way in which some of the individuals and elements named in the letter have behaved since, it is plain to those of us who take an interest in such matters that the pressures of Mr. Kelly and the Government had the desired effect. Since the Conservative party is apparently to publish its accounts for this year and last, perhaps the Government will publish the accounts of expenditure on the referendums in Wales, Scotland and Northern Ireland. We want to see clearly what the sums were.

I could say much more on the subject, but will let that suffice. I have a number of concerns about the way in which the whole affair has been handled. We need more openness and fairness, and we also need much more forthrightness from Governments of all parties.

8.26 pm
Mr. Peter Brooke (Cities of London and Westminster)

It is a pleasure to follow the hon. Member for East Londonderry (Mr. Ross). A familiar cry in some Irish elections is, "Vote early, vote often." Not long ago during the passage of a certain Bill, it was not clear when the Divisions would occur and I sought advice from my former private secretary at the Northern Ireland Office, who was sitting in the Box. He told me that there would be no Divisions until long into the evening, but that we would then vote frequently. I said that that was one of those rare instances of "Vote late, vote often."

In the interests of brevity, I will not comment in detail on any of the 100 recommendations in the report, which I welcome. I do not accept Northern Ireland as a deliberate exclusion, as the position in that respect applies to all the other recommendations.

As a former chairman of the Conservative party, I declare an interest. Until our party conference a month ago, when my right hon. Friend the Member for Devizes (Mr. Ancram) became chairman, 10 members of both Houses had served as party chairmen since we won the general election in 1979—one did so twice. Three other ex-chairmen are still Members of the House. One of them, my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler), opened the debate for the official Opposition, to which the hon. Member for Battersea (Mr. Linton) alluded.

With 10 chairmen in 19 years, my term in office from November 1987 to July 1989 was about par for the course, although my right hon. Friend the Member for Sutton Coldfield was less than personally helpful when he said in his opening remarks that the Home Secretary had concentrated on events a decade ago, which to my unmathematical mind puts them neatly and precisely in the middle of my term of office.

The hon. Member for Battersea said that he looked forward to my contribution, and I can shed light on one aspect of the Neill report—recommendation 45 on by-election expenditure. A footnote on page 111, on paragraph 10.5, refers to the special rate of expenditure for by-elections being introduced in 1989. Those of us with any exposure to by-elections before the 1989 legislation knew that there was an element of fiction to all parties' returns of by-election expenditure, but that agents were the only actors in the piece who were liable to a gaol sentence if the return was successfully questioned. It was clearly not possible that that should go on, but legislation had to have all-party support.

My right hon. Friend Lord Hurd of Westwell, then Home Secretary, delegated to me the task of negotiating with the shadow Home Secretary, Lord Hattersley, who in turn deputed negotiation to Joyce Gould, as she then was, in Walworth road on the basis that, if it was all right with her, it would be all right with him. We in turn reached agreement. I note that the task of reaching agreement was given to an officer and an official of the two party headquarters. Although a fair number of contributors to this debate have metaphorically held their noses about party headquarters, that Shakespearean standby, the second murderer, can have his or her uses upon a noble stage.

The Home Secretary, in a speech only marginally flawed by partiality, attributed to the past two decades the palm for improper political finance in our history. I thought that he was a little forgetful of the 18th and 19th centuries. In 1832, that great year in our parliamentary history, 850 out of the 1,000 voters in Stamford were bribed. If I had been one of the 150, I would have wondered what was wrong with me. Between 1832 and 1857, 443 petitions to invalidate parliamentary elections were mounted and 75 were sustained. In 1880, there were 42 petitions after the general election, of which 16 in England were successful; eight led to the appointment of royal commissions, and seven towns were temporarily disfranchised.

Even in this century, I thought that the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) was over-pious in forgetting that notorious tout for honours, Maundy Gregory, the subject of three biographies from which one can distil a description of him as an actor cum secret service informer cum suspected murderer. Lloyd George, who was Prime Minister but not leader of his party, derived a war chest of £1.5 million in 1920s sterling from those activities. I cannot blame Lloyd George for giving an earldom—for providing him with £200,000—to Lord Farquhar.

Mr. Skinner

You can say that again.

Mr. Brooke

An earldom to Lord Farquhar. It was an absent-minded transfer, at a time when Lord Farquhar was treasurer of the Conservative party. I suspect that the hon. Member for Cleethorpes (Shona McIsaac) may have forgotten the industrialist who gave Ramsay MacDonald in his first premiership the interest from £40,000 and the use of a Daimler, and who, coincidentally, received a baronetcy shortly afterwards.

Ironically, the sale of honours between the 1890s and the 1920s did much to enervate the local efforts of the Liberal party. Without wishing to intrude on private grief, I suspect that one of the reasons for my party's recent retreat in the English metropolitan boroughs, where we now hold six seats out of 124, owes much to over-reliance on business funding and a reduction in the number of businesses still controlled within the cities where they were once headquartered.

I have quoted before in the House the instructions received at my mother's knee never to jog backwards, although she rendered it more felicitously. There has been talk of damascene conversions in the Opposition. For myself, recalling my mother's instructions, I welcome the committee's recommendations unreservedly. I was sorry not to draw from the Home Secretary precisely which recommendations he did not accept. The loose language of soundbites had alluded to accepting the main thrust of the recommendations or, in his language today, the main findings. I infer from the phrase "accepting the main thrust" that the less attractive recommendations fell into something that I described to the Leader of the House two and a half weeks ago as the lesser thrust. So far, the precise detail of the lesser thrust has not been vouchsafed to us.

The Government must be careful in taunting us on any delay in disclosure, to which we are already committed. In return for the official Opposition's acceptance of the recommendations in their entirety, we are promised a draft Bill next summer. I may be doing the Home Secretary an injustice, but I did not pick up whether the delay in legislation is because of drafting difficulties or the scale of the rest of the Government's business programme, which would send a message about the Government's sense of priority on these issues.

The Corrupt Practices (Suspension of Elections) Act 1883 was provoked by the experiences of the 1880 general election and was an outstanding success, which we would like to see reflected in post-Neill legislation. Between 1874 and 1880, Conservative central office spent nothing, while Conservative candidates at elections spent £500,000 in 1870s sterling. Declared candidates' expenditure in 1880 was £41 million at 1980s prices. In 1885, it fell to £28 million and in 1886 to £19 million. At 1980s prices, it went back above £30 million only twice between 1886 and today—ironically, in 1906 and 1910.

Not only was candidates' expenditure cut, but the habit of constituency associations was formed in the 1880s and 1890s. After the 1883 legislation, in the words of an historian of British political finances, the cut in permitted spending led directly to the growth of political participation. My father served on the Maxwell Fyfe commission during the 1945 to 1950 Parliament, which gave rise to Lord Woolton's switch from individual Members of Parliament funding the party locally to the greater energy of more widely based associations. Out of crises, I say to Conservative Members, can come opportunities.

Finally, I want to express in a bouquet of unreserved welcomes to the Neill committee a particularly unreserved welcome to its referendum rules and how it reached them. There has in some aspects of what I think the Labour party calls "the project" been some evidence of lack of preparation. As a strategic planning professor once taught me at the Harvard business school, "If you do not know where you are trying to get to, any road will get you there." That observation may reasonably be applied to the Government's approach to the serried referendums and their rules, as the Neill committee mentioned. When we press for universal referendum rules, junior Ministers in charge of Bills have regarded that as outside their remits. We are in the Neill committee's debt for having produced such rules.

8.36 pm
Mrs. Eleanor Laing (Epping Forest)

It is a difficult task to follow the excellent, elegant elucidation by my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) of this difficult subject. Last week, I introduced a Bill to set up an election commission with powers over the conduct and financing of referendums. The Minister looks surprised. It was a ten-minute Bill.

Mr. George Howarth

I am sorry if I gave the hon. Lady the wrong impression. I was simply nodding in recognition of the fact that she had introduced such a Bill.

Mrs. Laing

I thank the Minister for clarifying that. I thought that the Government had not noticed.

The main effect of my Bill would be to implement the recommendations of the Neill report. I thought that the Government had not noticed it, because they did not oppose it, although there was every opportunity to do so. No Labour Member opposed it. I had hoped that the inference to be drawn from the failure to oppose it was that the Government were in favour of its provisions. Sadly, it seems from what the Home Secretary said that that is not the case.

The Home Secretary was not clear about the Government's attitude to Lord Neill's recommendations on referendums. He said that the chapter on referendums needed careful consideration. We have learnt to interpret the Government saying that a matter needs careful consideration to mean that the matter will take a very long time to consider, and that they will effectively kick it into touch. I am sure that my right hon. Friend the Member for Cities of London and Westminster will tell me whether, not being a rugby expert, I have misunderstood the sporting metaphor, but I believe that kicking something into touch means delay, delay and more delay. Why do the Government want to play for time on such an urgent issue? We have to regulate the conduct of referendums soon, because there could be another referendum at any minute.

A referendum is not a mere opinion poll, to be used at the whim of the Government of the day. The matters that are likely to be put to a referendum in the near future are far too serious to be treated in the way that the present Government—or, indeed, any Government—treat opinion poll results, by spinning them in the media to their own advantage. There is a threat of referendums on several important subjects, such as whether there should be a fundamental change to our voting system, whether the pound should be merged with the euro and whether the composition of Parliament itself should be altered. It is incredible—unbelievable—that the Government are willing to conduct referendums on such fundamental aspects of our democratic system, but unwilling to entrench that process of consultation in a properly determined framework.

The Home Secretary today showed the Government's acceptance of the Neill committee's recommendation that an election commission be set up to regulate elections. Apparently it is right that we should have further regulation of elections, but no regulation of referendums. Where is the logic in that? Perhaps the Minister will answer that question. The Government are saying that elections must be fair, but that it is not necessary for referendums to be fair. Would anyone, on either side of the House, argue that referendums do not have to be conducted fairly? If not, we have to ask ourselves what lies behind the Government's reluctance to accept the Neill committee's proposals. Of what are the Government afraid? Why do they want to retain a biased system?

The referendum in Wales has been mentioned many times today, but hon. Members will not be surprised to learn that I shall refer to the referendum in Scotland. First, I shall quote the evidence to the Neill committee of Mr. Raymond Robertson, a former Member of Parliament, who is now chairman of the Scottish Conservative and Unionist party. He said: The Government was a player on one side of the referendum. The Government were campaigning for a yes vote. The Prime Minister came to Scotland twice. The Secretary of State for Scotland led the yes campaign. They were able to write the rules and an information leaflet and to send it out to every house. I think that is fundamentally unfair in a free society. I agree.

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

Is the hon. Lady not concerned that the Scottish Conservative party has still not come to terms with the fact that the people of Scotland are getting the Parliament they want? The fact that Mr. Robertson complained in that manner serves only to confirm that the Conservative party in Scotland continues to be out of touch with the wishes of the Scottish people.

Mrs. Laing

The hon. Gentleman could not be more wrong, and I cannot deny his remarks vehemently enough. My argument is not about the result of the referendum in Scotland. I am the first to admit that, no matter what rules applied or how much money was spent by any and all sides in the referendum campaign, the result would have been the same. The result was overwhelmingly in favour of what the Government, the Scottish National party and the Liberal Democrats had argued, and I am not challenging that result. However, since the hon. Gentleman has made the point, I have to answer it: the Conservative party in Scotland is now campaigning to win seats in the new Scottish Parliament, and is working to make that Parliament work. I may be sceptical about whether that Parliament can ever work, but that is not the issue this evening.

I am fair, and I believe in putting both sides of the argument; therefore, having quoted Mr. Robertson, I shall tell the House what the Minister for Home Affairs and Devolution, Scottish Office told the Neill committee. He said: We tried very hard indeed to achieve objectivity, in that the words would carry meaning in terms of significance, but no hint of advocacy that 'If you do this on 11 September, Scotland will be some nirvana afterwards.' But you are right: it is a difficult process. The Minister was absolutely right: it is a difficult process to achieve that objectivity. In fact, it is impossible for any Government, no matter what their political colours, to achieve it. That is why we need fair funding for fair referendums.

The Home Secretary has considered the reasoned plea for real referendums, a campaign that has the support of hon. Members from all parties in the House and, indeed, the hon. Member for Tatton (Mr. Bell), whom the Conservatives were pleased to welcome to the campaign, although we understand that he does not want to join us in all our campaigns. It also has the support of several Members of another place, the Electoral Reform Society, Charter 88, the Constitution Unit and the Institute for Constitutional Research.

We have called for, first, the establishment of an independent commission. The role of such a commission could be carried out by the electoral commission which the Home Secretary has welcomed as part of Lord Neill's recommendations. Secondly, we want the commission to report within three months on a clear set of rules to govern the conduct and financing of referendums. That is a matter of urgency, as I hope the Minister recognises. There are many matters to be examined and clarified: for example, as the hon. Member for East Londonderry (Mr. Ross) mentioned, the wording of the question asked in a referendum, what constitutes a sufficient majority and who is eligible to vote in a referendum. That last question was raised during the referendums in Scotland and Wales, but Ministers never answered it; they simply sidestepped it.

Those referendums are now behind us, but the question remains for future referendums. It is ludicrous that, in Scotland, leaflets about the referendum were printed in Cantonese because people who had just come from China to reside in Scotland and to do a good job working in Chinese restaurants there had a right to vote in the referendum on the future constitutional position in Scotland. People from China had the right to vote, but soldiers serving in Scottish regiments who were temporarily resident in England because of their work in the British Army were not allowed to vote. That is iniquitous. It is simply not fair. It is one of the many matters that should be dealt with and ruled on by an independent commission before we have another debacle during a so-called consultation of the people.

The third thing for which the campaign for real referendums has called is that no referendum should be held in future except one that is conducted in accordance with the rules laid down by the commission. The Electoral Reform Society has called that a level playing field for referendums. What could be the motive of any hon. Member who purports to uphold democracy, but who wants referendums to be conducted other than on a fair and level playing field? A referendum must not only be fair, but be seen to be fair, so that its result is accepted by all sides, winners and losers, and by everyone who is affected by its outcome. That is why the rules must be clear, obvious and properly constituted. Campaigns must also be fairly funded. That unarguable truth leads inevitably to the necessity for public core funding, which the Neill committee also correctly recommended in its excellent report.

It is absurd and indefensible that in this sophisticated information age, in which our democratic system conducts general elections according to strict rules—that is one reason why ours is one of the oldest and most stable democracies in the world—we have, over the past year, condoned a situation in which the Government have been able to spend taxpayers' money promoting one side of a referendum campaign. By not accepting the Neill committee's recommendations today, the Government and all Labour Members are continuing to condone that unfair situation. That point cannot be argued; it is obviously unfair and therefore undemocratic.

Lord Neill has recommended simply: The government of the day in future referendums should, as a government, remain neutral and should not distribute at public expense literature, even purportedly 'factual' literature, setting out or otherwise promoting its case. That is such a reasonable recommendation that it is difficult to understand why the Government have not accepted it with alacrity and enthusiasm. Indeed, that recommendation is the essence of democracy. The Government cannot wriggle out of that, and every Member who defends democracy should now call on the Government to implement the Neill committee's proposals on fair referendums. If that is not done swiftly, the Government must, at the very least, immediately undertake to hold the next referendum according to those proposals.

8.51 pm
Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

We welcome the conclusions of the Neill report, and accept all its recommendations, particularly that on national limits on campaign expenditure. As the report points out, that is in the spirit of the original 19th-century legislation, which first introduced upper levels on electoral expenditure.

We have all seen the ridiculous spectacle of candidates drawing up their return of election expenses, perhaps checking whether they sent somebody a telegram and working out the results to the last penny, while they are surrounded by hundreds of thousands of pounds-worth of expenditure by national party campaigns, none of which has been accounted for in any way and which dwarfs into insignificance expenditure by individual candidates.

We should be grateful that we are in danger of being saved from ourselves and from following the example of the United States, where year after year election expenditure has increased and the only effect has been to reduce the electoral turnout and increase apathy and disillusionment with the political process. Lord Neill touches on that point.

I welcome the committee's suggestions of corresponding limits of £1.5 million for the Scottish Parliament elections and limits for third parties who may be involved in election campaign funds. As of last month, all the Scottish parties have stated their willingness to stick with those limits even in advance of legislation to enforce the recommendations.

I have to confess that, for my party, stopping short of the £1.5 million expenditure limit may not prove to be an insurmountable problem. However, I am concerned that some of our opponents have not spelt out precisely how they will stick to the suggested limit, and we need an urgent meeting between the Scottish parties to agree the precise interpretation of Lord Neill's recommendations. I am sorry that there are no Scottish Labour Members here to confirm their acceptance of those proposals. Perhaps they are preparing for a long night on Wednesday, when we shall discuss the Scotland Bill.

My main concern is that third parties who are involved in the election might not limit their expenditure. By third parties I mean not political parties but those who are involved in campaigning. Already, Bill Morris of the Transport and General Workers Union has been on a day trip to Scotland. He said that his union would campaign all out against independence. In an election for a Scottish Parliament, that is effectively campaigning for the Labour party and against the Scottish National party. Scottish National party Members want to know whether the TGWU and any other organisation that intends to get involved in the campaign will stick to the spirit of the Neill report and limit their expenditure.

That leads me to the recommendation that sources of funding should be limited to those who are entitled to vote and UK-based organisations. Scottish National party Members are happy to accept that. The logic of that carried through to Scottish elections would mean that only those who are entitled to vote in those elections and only Scottish organisations should contribute to the funding of campaigns for the Scottish Parliament. I am greatly concerned that organisations from outside Scotland would get involved in the next Scottish election or in a future referendum in Scotland. I am certain that, if any such organisation were to be involved, its motivation would not be to support the Scottish National party or further the cause of independence.

I am concerned also about the effects of Government information campaigns, which have been mentioned by other hon. Members. Recommendation 89 of the Neill report deals with that in relation to referendums, but I am particularly concerned about the forthcoming information campaign for the Scottish Parliament elections and the need to explain the new voting system. The Government plan a budget of £2 million to explain the voting method for the Scottish Parliament. At a press conference to announce that expenditure, the Secretary of State for Scotland said that he was concerned to explain to the people that the purpose of the second ballot is not to allow voters a second choice.

Hon. Members will remember that the first ballot is for the constituency seat and the second is for the regional lists, which are to be used to top up the membership of the Parliament to make it more proportional. The Secretary of State was apparently worried that some Labour voters might view the second ballot as an opportunity to express their second choice, which he feared might be the Scottish National party. Some of us think that the Secretary of State should be more worried about the fact that the SNP might be the first choice of some voters. However, I do not think that that falls into the category of legitimate information. The legislation does not refer to the intention of a particular ballot, but alludes only to its outcome. Voters have a perfect right to interpret how a particular ballot is used and the reasons why it is used. On the basis of that argument, it might be possible for the Government to run an information campaign under the existing system declaring that the purpose of the ballot is not to allow tactical voting. That is why I have grave concerns about public information campaigns.

I welcome recommendation 17 of the Neill committee report, which states that it is an offence to discriminate against someone on the basis of his or her contribution to a political party. That provision might have come into effect earlier this year when the Scottish Office executed a volte face over the granting of a knighthood to Sean Connery when it discovered that he had donated money to the Scottish National party.

Recommendation 41 regarding Short money suggests not trebling Short money—that is recommendation 40, which I also welcome—but conducting a general review of Short money and examining the particular difficulties that affect smaller parties, which must deal with the same policy issues as larger parties but which receive little support from Short money in the form of research funding. I welcome that recommendation.

In conclusion—unusually, I find myself in agreement with the Opposition—I think that we need legislation in order to implement the Neill committee's recommendations in full as soon as possible. To some extent, the Government's reputation depends on their willingness to do that. Labour made much noise—particularly before the general election—about the system and the way in which it was being misused by the then Government. We now have a means of reforming the system, and it behoves the Government to implement the report in full at an early date.

9 pm

Mr. Dennis Skinner (Bolsover)

This is one report by the do-gooders—the chattering classes—with which I agree. I support quite a number of the Neill committee's recommendations. The committee was established principally because there was so much financial sleaze that someone needed to step in. A list of proposals was put to the Neill committee with which I could not help but agree. I remember well standing here at the time of the Ecclestone affair—I think that was what it was called—and telling the Prime Minister that every adversity creates an opportunity.

I suggested to the Prime Minister that day that we should cap national spending in general elections. I proposed a figure, and the Neill committee—its members are a bit posher than me—has gone a bit higher. I said that, since major parties spend about £6 million financing 600-odd Labour and Tory candidates, that should be the official figure. If that is the amount that is spent in constituencies, an equivalent figure should be spent nationally. I think that that would help to clean up the political equivalent of the Augean stables.

As has already been said, we have had another basinful in the mid-term elections in the United States. A candidate named Feingold in Wisconsin stood for election to the Senate. He declared that he would not take any so-called "soft" money, and he only just made it. Despite the fact that he was supported by all kinds of people, he nearly lost the election—he won by only a very narrow margin—because his opponent was able to spend a vast amount of money on his campaign. The sooner we take hold of this problem, the better.

I am quite enthused that the Tory party now thinks that the Neill committee's recommendations are great. It was not so long ago that the Tory Government would not even contemplate considering such issues. It is a little fanciful of the Tory party to go on about referendum campaigns, expenditure equality and the rest of it in an attempt to create the impression that the Labour party and this Government are dragging their feet purely and simply because of the referendum issue. I remember what happened in 1975, when—I have said this many times—those in favour of Britain remaining in the common market spent 10 times as much money campaigning as those of us who opposed them. The truth is that we would have lost anyway.

The turning point of that referendum campaign was the moment when the Prime Minister of the day, Harold Wilson—who had sat on the fence for God knows how long, saying, "On one hand this, but on the other that"—decided to jump off the fence and join those who were campaigning for a yes vote. I believe that that was the most significant thing that happened in that campaign. I kicked up merry hell about the £10 million, or whatever it was, that was spent, and I said that it was wrong that everyone had a little booklet shoved through their letter box; but in my heart, I know that that was the key decision.

In a referendum campaign on the euro, I expect the Government to put their case, and I expect different people to have different points of view. In case the Whips are listening, I point out that I declared in my general election manifesto: I shall vote against a single currency. That document was not printed by Millbank or the appropriate region of the Labour party; I did it myself. I did it because I thought, "Who knows? They might have a bit of a referendum some day or other, and I had better get my position clear." I regard that as more important than the money that the Tories keep talking about in the debate. In my view, that document gives me more backing than all the finances that anyone could talk about, because I have told my constituents the score.

I must say to everyone, including the Tories, that the referendum on the euro is already being softened up. You don't need to be an Einstein to realise what is happening. All the talk about equality in the amounts to be spent on the referendum is phoney, because anyone who is watching the signs knows that there is a lot of activity now—including among members of the Tory party, who are being lined up in all sorts of ways. The previous Chancellor of the Exchequer, the right hon. and learned Member for Rushcliffe (Mr. Clarke), is being lined up for this, that and the other. I hear that Chris Patten is going to be a European Commissioner; and the right hon. Member for Henley (Mr. Heseltine) has been given a job in China.

Shona McIsaac

Send him.

Mr. Skinner

He is being sent in. I envisage that that softening-up process will continue in the next 12 months. I rest secure in the knowledge that I shall vote against the euro on principle, irrespective of how many people are wooed from the Tory party, the Liberal party and so on. The referendum on the euro may be a close contest. I do not think that the result will be as clear-cut as the vote against proportional representation.

There will be no referendum on PR this side of a general election. The Liberal Democrats should get that into their noddles: even if they sit on Cabinet Committees and so on, the chance of a referendum before a general election has gone. When the leader of the Liberal Democrats went on "The Frost Programme" the other Sunday morning, he blew the gaff. He said to all the other Liberal Democrats, in as many words, "I'm going to let you down." It is time that they got rid of him, if that is how strongly he feels. He has already said that there will not be a referendum on PR before the next election.

That brings me back to the issue of finances. I do not believe that finances can be decisive if the referendum on PR is held on the tinpot proposals advanced by Lord Jenkins. He has a cheek, has he not, to talk about regulating our voting system when he is in the other place for life? He need not submit himself to the vote in any fashion. There is a strong body of opinion—which I do not believe money can change—against PR.

The House will have gathered by now that, unlike the Liberal Democrats, I do not go a bundle on referendums. It so happens that we made a manifesto pledge. Unlike on some more important issues, I shall not have to walk the plank on it. Nevertheless, I expect to cast my vote in the House in accordance with what I believe. In some cases I shall vote in accordance with my constituents' views and in some cases—especially on the monarchy—I shall probably vote against the views of a majority of my constituents, but I always expect to vote in accordance with what I believe. That is what I am sent to this place to do.

The referendum issue will not be changed by the issue of money. The question is whether it can be sold to the public, and on PR I do not believe that it can. On the euro—that is a different matter.

I welcome the fact that the Neill committee has presented its proposals, which will stop all those foreign donations. The Tories will not get money from the Chinese communists or the Cypriots. They will get no more money from Asil Nadir, and none from Greece and other places. I welcome that. It is almost as though I had sat on that committee, which has come up with such great proposals.

Incidentally, I helped to write the Labour party's proposals when I was on the NEC, and almost all of them have been accepted by Lord Neill and the rest of the committee.

The Under-Secretary of State for the Home Department, my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth) will have to do something about the referendum issue to satisfy the whims of Opposition Members and others. I do not accept that the Tory party has a case when it argues that my right hon. Friend the Home Secretary and others are holding back because they are frightened of that issue.

The package of recommendations as a whole is a big advance. If it helps to halt the trend towards what is happening over there in America, we shall have done everybody a service. If it stops all those posters on every hoarding, most of them telling a pack of lies, and the expenditure of £250,000 in the national newspapers in a general election campaign, we shall have performed a valuable service.

I do not say that that will make politics 100 per cent. honest, but it will go down that track. It represents a big advance. When we get the recommendations on the statute book before the end of this Parliament in order to enact them for the next Parliament, that will be a useful step forward.

9.11 pm
Mr. Desmond Swayne (New Forest, West)

I shall be brief. It is with some reserve that I speak, with the Under-Secretary of State for the Home Department, the hon. Member for Knowsley, North and Sefton, East (Mr. Howarth) having returned to his seat. Last Thursday, he accused me of not having read the report that was the subject matter of our debate, when in fact I had read it, although I admit that I did not give much evidence of having done so. I must declare that I have not read today's report in its entirety. I have, however, read chapter 12, and I shall confine my remarks to that.

I took great exception to the comments of the hon. Member for Tatton (Mr. Bell) on political donations, but I shall not stray into that ground, as I have not read the report. However, I have dipped into the telephone directory of evidence and read many of the submissions. I draw the attention of the House especially to the evidence given by Peter Riddell of The Times, which I found lucid and extremely educated. I speak in an entirely unpartisan manner, as Mr. Riddell has been particularly uncomplimentary about me.

Chapter 12 deals with referendums. The issue is not just that we are having so many referendums—I believe that 13 were promised in the Labour party manifesto, although I freely admit that I have not read that document—but the importance of the questions before us in referendums. Those are questions central to our constitution and are almost impossible to unpick. Once passed, the policies that are put in place—the changes to the constitution—are almost irreversible. It is almost a case of one man, one vote, once. There is something totalitarian about the very suggestion of the settled will of the people. The phrase sends a shudder down my spine.

Nevertheless, the issue of referendums is a hugely important question, and it is therefore proper that the Neill committee has dealt with it—and, I think, well. An important principle of democracy is at stake. We know that the central principle of democracy is that the will of the majority should prevail. However, I think that there is an even more important principle that underpins that, and that is that the minority—the losers—must accept that the will of the majority has been legitimately arrived at. I certainly think that that will not be the case unless we are prepared to examine and implement the recommendations of the committee on referendums.

There was always that lingering resentment referred to by the hon. Member for Bolsover (Mr. Skinner) about the 1975 referendum. I understood that the expenditure was 20:1 in terms of the money that was spent by each side. Nevertheless, the question of finance is particularly important. The evidence given to the committee in that respect was quite instructive, and was referred to by my right hon. Friend the Member for South Norfolk (Mr. MacGregor) in the context of the Welsh experience and the funding of the Welsh no campaign. Recommendation 84 on core funding is important. There is a widely held perception that there must be a fair opportunity for each side to put its case to the voters. It is not sufficient to say—the Labour party's evidence to the committee appeared to suggest this—that, if protagonists are not able to co-ordinate a campaign and raise funds to finance it, it is evident that they have little political support. The basis of a referendum is that it must reach out beyond the organised political parties to those who are not and never have been politically organised.

I think that one example will suffice. Let us suppose that we had had a referendum on the Maastricht treaty. The three main political parties would have lined up to back the treaty; they would have organised and run such a campaign. However, those who opposed the treaty—I submit that they comprised a large proportion of the electorate—would have found themselves without a ready-made organisation to make the case. It is important that core funding, as proposed by the committee, should be in place and available to assist in those circumstances. Therefore, I believe that recommendation 84 is sound.

Placing national limits on referendum campaigns is, I think, much more problematical. In 1975, the two campaigns were required to publish their accounts, in the hope that that would provide some restraint on their expenditure. I think that that was a pious hope. However, I am not sure that there is much else that can be done without unnecessarily restricting free speech.

It is unnecessary and undesirable to require opponents to operate under one political umbrella, even if they support the same side on a political question. There are quite different ideological routes that might lead to the same case. That is obviously clear with the campaign that would emerge against the single European currency. It comprises a host of very different groups reflecting different ideological backgrounds. I believe that it would be a restraint on free speech to impose any sort of financial limit on those groups collectively.

As for the role of Government, I entirely support recommendation 89. I differ from the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) in this respect. I believe that it is proper for Ministers actively to campaign in a referendum campaign without using the Government machine to support that case.

9.18 pm
Mr. Gerald Howarth (Aldershot)

When the Home Secretary opened this interesting debate, I chastised him for beginning inauspiciously on a partisan note, which is not how he conducted himself in last Thursday's debate. I am afraid to say that he set the tone for some of his hon. Friends who followed him. I am sorry that the hon. Member for Cleethorpes (Shona McIsaac) has left the Chamber, because I intended to address a few remarks to her. I hope that she will reappear.

The background to the debate is the Labour party's contention that the report has been brought before Parliament entirely because of shortcomings and a lack of standards in the Conservative party. That was evident in the remarks of the Home Secretary and those of the hon. Members for Cleethorpes and for Bolsover (Mr. Skinner). I thought it was only a matter of time before the hon. Gentleman became an establishment figure. Now that we know he is the author of this report, his hour has arrived. I do not know what it will do for his 74 per cent. vote in Bolsover now that his constituents are aware that he is part of the establishment in the House.

In various interventions, I have said that the criticism that has been levelled at the Conservative party is unjust. There is no doubt that, in the run-up to the last election, the Labour party sought to profit from the allegation that the Conservative party's standards had fallen below par.

The idea that the Labour Government have, since the election, behaved in a pristine fashion is contradicted by the facts. The Foreign Secretary sought to install his mistress, at public expense, in an office in—[Interruption.] As the hon. Member for Plymouth, Devonport (Mr. Jamieson) may have been intimating, that was a disgrace. The Paymaster General has been upbraided by the Standards and Privileges Committee. A Labour Member has lost the Whip because he has brought the party into disrepute. Another Labour Member faces election charges, and we have seen squalid activity by the Labour party in local government. Labour Members do not like to be reminded of that, because they have tried to pretend that they have come into government to clean up an unclean act.

The hon. Member for Cleethorpes has not returned. I do not want to be discourteous to her, but I must say that her contribution to the debate was particularly mean. I expressed concern when, as a new Member with no experience of the House, she was appointed to the Standards and Privileges Committee. I thought that it was unfortunate that someone with no qualifications and no knowledge of the House was appointed to that Committee.

It is my personal crusade to correct the huge injustice that was done to a former hon. Member, my friend Mr. Neil Hamilton. It is extremely unfortunate that this matter has been allowed to lie on the table, as it is now perfectly clear that members of the Committee, including Sir Gordon Downey, chose to rely on the word of a liar, Mr. Fayed, and on his employees.

Mr. Deputy Speaker

Order. I advise the hon. Member that this is a dubious line for him to take in this debate. He should return to the substance of the debate.

Mr. Howarth

I am dealing with a dubious character. The hon. Lady dealt with party political funding and referred to the funding of Members of Parliament. My right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke), using historical precedent, also mentioned that matter.

The Labour party sought to build a case against the Conservative party for falling below standards. Mr. Fayed has been proved to be a man of ill repute, whose word cannot be trusted. Therefore, the Committee should revisit the matter in the light of what he did in relation to Tiny Rowland's safe deposit box, which was under his command.

Mr. Mike Hall (Weaver Vale)

What has that got to do with the debate?

Mr. Howarth

The hon. Gentleman, who I believe has a non-speaking role in the House, asks from a sedentary position what that has to do with the debate. I am responding in particular to the remarks of the hon. Member for Cleethorpes, to which I listened throughout. It is only fair to point that out, because a lot of Labour Members have cast aspersions on the Conservative party and our source of funding, using that as a reason for bringing these changes and the Neill committee's deliberations before the House. It is therefore entirely right to put the record straight, in so far as I am able, with my persuasion that I do not believe that my party deserves the reputation that people have sought to place around its neck.

The Labour party is fired up about this matter, but all the money that we spent at the previous general election could not bring us a result anywhere near that which we might have hoped to achieve. I do not believe, therefore, that Labour Members' concerns about party political funding should weigh so heavily on their minds, given that it is perfectly clear that money spent—however much—is not proportional to votes received.

We need not consider only the Conservative party. Sir James Goldsmith, of the Referendum party, spent about £20 million, which was not much less than the Labour party or the Conservative party spent. He did not get a single Member elected to the House, so that proves that cash does not buy seats. The Labour party should therefore start piping down on that issue.

We must be clear about what is being proposed in the committee's report. My right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) has accepted much of it on behalf of the Conservative party, and it has been welcomed in other quarters, but we must be clear that it will create a substantial bureaucracy. An electoral commission is to be established, new criminal offences are to be introduced, there is to be a huge bureaucracy of quarterly reporting for political parties and a lot of imposition on local party organisations. I am not sure that local parties will be able to produce the bureaucracy that is envisaged, and will be required, by the report.

I must deal with two specific points. [Interruption.] I shall not be too long. I welcome the committee ruling out state funding, which would be an entirely wrong use of taxpayers' money. I believe that I have the support of the hon. Member for Bolsover on that. If he wrote that paragraph, as he suggested, that is two issues on which he and I are ad idem. I am at one with him on the euro debate, which is why I am wearing a sterling badge, and I look forward to joining him in that battle.

I welcome what the report says. I do not believe that the country is ready to delve deep into its pocket to finance political activity. If we rule that out, we must accept the consequences, which are that we must receive money from private sources and we must have a mechanism by which that will be acceptable to the public.

Now that the Home Secretary is back with us, I hope that he will not mind if I quote from his response to my question at the Home Affairs Committee recently, to which right hon. Friend the Member for South Norfolk (Mr. MacGregor) alluded. The Home Secretary said: What we are talking about here is paying for our democracy, paying to ensure that there are informed choices made available and also paying for the machinery of our political parties. One of the things I resent"— as I do— is this insinuation that there is something slightly dirty about the running of political parties or the involvement of people in political parties, when this is very honourable, and without all the people who run our political parties, most of whom are volunteers who do their work for nothing, we would not have a functioning democracy in this country. We ought to celebrate that and not somehow be ashamed of it. I also agree with you that overwhelmingly people as individuals should pay for the running of political parties and it should not come from the state because if it comes from the state then we are down the slippery slope of detached political elites and also corruption. The Home Secretary got it absolutely right; I agree with every word. There is, however, a consequence of such a view. I fear that, in the way in which the Neill committee is seeking to ensure that individual giving is sanitised, we shall come adrift from the idea of encouraging people to give freely.

Although I welcome the proposed tax relief, disclosure will unquestionably have an adverse effect on the Conservative party. I know people who would like to give to the Conservative party not because they want an honour or to buy a policy, but because they want to support a party that stands for principles with which they agree, as they might support a charity. They will be deterred from doing so if they fear that they will be penalised by the Government of the day for supporting the Conservative party. The Government must seriously consider that before they go down the road of prescription and openness. If the result is that people are deterred from giving to political parties, the policy that the Home Secretary enunciated, with which I strongly agree, will be worth absolutely nothing.

It is extremely important that the committee's recommendations on referendums are accepted entirely. The Government have a duty to consider the matter carefully and not kick it into the long grass. They have such a duty because they have elected to take the referendum as a new and frequently used political and constitutional device. My hon. Friend the Member for New Forest, West (Mr. Swayne) made clear what could happen if the Government and the Opposition of the day were united, leaving the anti vote without any core funding.

9.31 pm
Mr. John Greenway (Ryedale)

This has been an important debate on an issue of profound significance, not just to the health of political parties, but to the future direction of politics in this country. I sense personally that we are at an important crossroads. The Neill report signposts a clear route to the restoration of trust and confidence in the democratic process. We have travelled the alternative route for far too long, indulging in incrimination, allegations of abuse and corruption, often with the scantiest evidence or justification.

It was deeply sad that the Home Secretary, for whom, as he knows, I have the highest regard, took such an alternative route for much of his speech in opening this debate. It is surely time for us to move on. Labour in government must face up to its shortcomings and recognise the futility of pursuing a war of words over allegations of malpractice, which serve only to undermine public confidence in the House and in the very fabric of our democratic process.

I shall resist dwelling on the fact that such criticisms of political parties as there are in the report are, in the main, directed at the Labour party. We have yet to be told who contributed to the Prime Minister's blind trust when he was Leader of the Opposition. The Ecclestone affair was a new departure because it left a clear impression that policy was influenced. Several major contributors to Labour at the election now have peerages. I know some of them personally. They are undoubtedly capable and sincere, and may well deserve their seats in the other place. I simply make the point that people who live in glasshouses should not throw stones. It does none of us any good when we do.

The committee has made a powerful and invaluable contribution to the efforts of both Government and Parliament to restore public confidence in the political process. Its early reports have been characterised by a willingness to set aside party differences and by a readiness that the recommendations be accepted without equivocation. The same should happen now, with a determination to grasp the opportunity to establish more transparent and enduring structures for the conduct of public life in which the public can have confidence.

The Labour party long argued for the committee to examine all the issues surrounding the funding of political parties. Indeed, as Lord Neill reminds us, it was the Prime Minister who gave the committee the extended terms of reference to undertake this study. Many members of the public believe that Government policy is influenced by large donations. A lack of transparency about the sources of party funding fosters this suspicion. These deep-seated concerns and damaging perceptions will not be addressed and laid to rest if Parliament and the Government fail to take heed of the Neill committee's findings, or if key recommendations are ignored or watered down in a crude and cynical attempt to gain party advantage.

We cannot be seen merely to be paying lip service to the new structures and ideas that Lord Neill has recommended. I believe that the public want to see all political parties and the Government embracing the Neill proposals, not just without demur, but with open enthusiasm—speedily, comprehensively and in earnest. There should be no question of the Government cherry-picking the bits that they like and walking away from the bits that do not suit their purposes. Labour wanted this review. It would be utterly shameful to refuse to adopt the principle behind any of the key recommendations.

It is clear from the debate that the Government do not like and are less than enthusiastic about at least three important respects. First, I wish to refer to the Short money. There has been much discussion about this in the debate but, as someone new to Front-Bench responsibilities, I know that we are inadequately resourced, and we should accept what Lord Neill has to say. I note also that several Labour Members wanted to take matters further, with funding for the Government party to oppose the Government whenever necessary.

I wish to mention tax relief. If we are to have openness of funding, it is crucial that—as the hon. Member for East Londonderry (Mr. Ross) said—we encourage mass membership. The tax relief proposals will go a long way towards encouraging that. It is both sad and disappointing that the Treasury—whose hand was on the shoulder of the Home Secretary—thinks that this proposal is too expensive.

Most disappointing of all is the Government's attitude to the recommendations on the conduct of referendums. Clearly this is something that the Government did not bargain for, yet they have been most enthusiastic about the promotion of the referendum as an important means of gauging public opinion on significant areas of public policy. Several hon. Members have said that, as Labour has encouraged this development—and intends to resort to it on future occasions—there is every reason to establish some basic ground rules. The Government cannot complain if, as a result of their own inadequacy in this regard, the Neill committee has taken this long-overdue opportunity to do the job for them.

My right hon. Friend the Member for South Norfolk (Mr. MacGregor)—we pay tribute to him and to the other members of the committee—said that the matter was a key issue on which the committee had to make recommendations. The conduct of recent referendums has lacked consistency. As Dr. James Mitchell of the university of Strathclyde commented: The rules of the game have differed in each referendum.

The report highlights two main concerns-th— role of the Government and the funding of campaigns. However, the Government's failure to ensure that both sides of the argument are presented to the electorate—their failure to put the case both for and against a Scottish Parliament, a Welsh Assembly and a mayor for London—deserves the greatest condemnation, as it has undermined the democratic legitimacy of the referendums' outcomes.

Indeed, Lord Neill's detailed review of the referendum on the new Welsh Assembly is a damning indictment of the way in which the referendum was conducted and the lack of fairness in the campaign. As he says in paragraph 32 of chapter 12, a fairer campaign may well have resulted in a different outcome. He also said that the referendum on the proposals for a mayor for London was only marginally better. Surely no one can be comfortable with such an incriminating and conclusive judgment.

That need not happen again. The Neill committee offers the House and the country a sensible and practical framework for the conduct of future referendums. On funding, it rightly concludes that equality cannot be guaranteed, as spending is not confined to political parties or to members of those organisations that may traditionally have campaigned openly for one party during general elections. As the hon. Member for Bolsover (Mr. Skinner) said, no matter how much money one spends, one will not win if one has not got the argument. I also entirely agreed with what he said about proportional representation.

The 1975 European referendum showed that a balance could be struck in the set amount of money that each campaign received. That arrangement was sensible and, as Lord Neill recommends, we should use it as the benchmark for the future. The objective should be to guarantee that both sides of the argument are clearly stated—literature should be provided to every home to that effect.

The set funding formula will not guarantee equality, so it is ever more essential that any inequality should not be exacerbated by, as Lord Neill says, the use of taxpayers' money to support the Government's point of view. I welcome the Home Secretary's acknowledgement of the general agreement that the civil service machine of Government should remain neutral and I agree with those who suggest that the European Commission should keep out of any future referendum—if there is one—on the euro. It would be foolish and short-sighted to ignore the importance of a proper framework for referendum campaigns. A referendum should be able to settle an argument once and for all, but it will not be able to do so if it is perceived as an unfair contest. If, as seems likely, a referendum is being used to seek a popular mandate for major constitutional change, it is surely vital to the enduring outcome of the answer to the question put that both sides of the argument are adequately stated and understood. How many times have we heard it said that the country was misled in 1975? There is no room for Government-inspired misleading propaganda. As Lord Neill's recommendations are clearly intended to last, Ministers should have a little humility and bear in mind the fact that, one day, the roles will be reversed.

Mr. Straw

They have been reversed.

Mr. Greenway

They will be reversed again, and sooner than the right hon. Gentleman thinks.

Labour's lack of commitment to the recommendations in that key area is contemptible. We have been treated today, not to a ringing endorsement, but to fudge and equivocation. The Government have been caught on the hop with a problem that they had not bargained for. Instead of facing up to the committee's principled proposals for the conduct of future referendums, the Government have chosen to prevaricate. That is a great pity, because in every respect the report heralds a fresh start in the affairs of major political parties and the conduct of election and referendum campaigns.

The Government have hinted that the legislation to implement Neill may not be introduced in the next Session—I suppose that that means that it will not—and that is disappointing given the urgency of some of the issues. As my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) rightly said, we should voluntarily bind ourselves to Neill's recommendations. The Minister has the chance to tell us that that is what the Government intend to do.

The report concludes: Our recommendations form an overall integrated scheme for the reform of the funding of political parties. It has gifted us the opportunity of a clean break, allowing us to put the past behind us and draw a line under what has gone before, often under the cloak of confidentiality. We should embrace the findings whole-heartedly.

9.45 pm
The Parliamentary Under-Secretary of State for the Home Department (Mr. George Howarth)

Despite the occasional heat that it has generated, this debate, on the whole, has been worth while. It was important to reflect the care that the Neill committee took in reaching its conclusions: much thought clearly went into the recommendations, so it was necessary for us to give the whole range of issues an airing in the House.

I am sorry that the right hon. Member for Sutton Coldfield (Sir N. Fowler) and the hon. Member for Ryedale (Mr. Greenway) tended to take a rather sneering tone. I say that more in—

Sir Norman Fowler

Sorrow than in anger?

Mr. Howarth

I want to use that phrase later, in another context, so I will save it.

I say that in the hope that, in due course, those Conservative Members will come to see that there is more that unites than divides us. I do not want to be too partisan, as I want to build a bit of consensus; but, if they are honest, they will accept that, if they were in government now, there would have been no Neill committee, no proposals, no commitment to a draft Bill and none of the debate that we have just had, because none of the issues would have been on the agenda. That is the truth of the matter. It is not entirely plausible at this juncture in the political cycle for Conservative spokesmen to take the moral high ground.

I hope that we can all agree that our starting point must be that all hon. Members and all political parties should be open and transparent about the way in which our parties and our politics are funded. As part of our commitment to strengthening democracy, I can confirm that we take the matter extremely seriously.

Again, I hope that we can all agree on the important principle that giving money to a political party, whether in small subscriptions or in large donations, is not in itself a disreputable activity. In any democracy, funding political activity is an important and necessary way of stimulating political organisation and debate. Indeed, the report says as much, but it equally makes it clear that secrecy about the source of donations will inevitably lead to suspicions about donors' motives.

The most important question that the public will want to ask if donors keep donations secret is, what have they got to hide? In the absence of any answer, the inevitable conclusion will be that such transactions involve cash for favours or other disreputable activities. That will always be the public perception of such secret donations. Often, suspicions will be without foundation, but unless everything is out in the open, the worst will be assumed. The only way to deal with that is to lift the veil of secrecy. The Neill report will help us to base the system of party funding firmly on the principles of integrity, accountability and openness.

As my right hon. Friend the Home Secretary has made clear, we welcome and strongly support the broad thrust of the report. Our manifesto—influenced by my hon. Friend the Member for Bolsover (Mr. Skinner)—said that we strongly believed that donations of £5,000 and more should be disclosed and that foreign donations should be banned. I shall not repeat all that has been said about the Conservative party and Asil Nadir, but any party that indulges in that kind of funding will always be open to criticism.

For the system to be watertight, robust and clear reporting arrangements will be needed. We welcome the recommendations for limits on campaign spending and the establishment of an election commission to police the system of disclosure and reporting.

The report contains back-up proposals on how to set up and implement the arrangements. However, it is important that the political parties have a voice to ensure that the machinery is realistic and manageable, as well as robust and comprehensive. We have agreed to authorise Home Office officials to set up dialogue with the political parties represented in the House and a small number of others. To begin the process, officials will shortly be writing to each political party, inviting them to nominate one person to act as a conduit. I hope that all the parties will respond positively. We recognise that it is necessary to have the mechanics in place to enable everyone to feel happy with the eventual arrangements. Every party should be able to respond. Provided they are not trying to create loopholes or get round the Neill recommendations, their points will be taken seriously.

Several Conservative Members, and my hon. Friend the Member for Bolsover, mentioned the euro. The current Government information campaign has only one purpose: to prepare business for the euro, which will come into operation from 1 January 1999. It has nothing to do with the possible entry of the UK. If anyone has any doubts about that, they should read the literature that is circulating. The Treasury has produced fact sheets for businesses, particularly aimed at those that trade with countries that we already know will adopt the euro. It would be irresponsible not to give such facts and advice. If businesses were not prepared, particularly those that trade with the countries involved, it would be to their disadvantage and to the disadvantage of the British economy. The campaign is perfectly responsible. It has nothing to do with the referendum.

I accept that the hon. Member for New Forest, West (Mr. Swayne) has read chapter 12 of the report. He demonstrated a detailed knowledge of it and, on this occasion, failed to move me to say anything critical of him, although I do not necessarily agree with every word—or even many of the words—that he said.

I must say, more in sorrow than in anger, that the hon. Member for Aldershot (Mr. Howarth) made an unworthy speech which lowered the tone of the debate.

Mr. Gerald Howarth

I am sorry that the Minister felt that my speech lowered the tone. He has not been in the Chamber for all of the debate, but he has heard his hon. Friends and the Home Secretary chastise the Conservative party as though it had fallen below par. I do not believe that my party has done so, and I sought to give examples of where the Labour party has fallen below par.

Mr. George Howarth

The hon. Gentleman should remember a remark that I made a few moments ago. If it had not been for the behaviour of the previous Government, and of his party, the Neill committee need never have happened. Without his party's behaviour, there would have been no proposals and nothing for us to debate tonight. I do not want to be entirely at odds with the hon. Gentleman; I recognise that he has a strong personal friendship with Neil Hamilton, and that that has motivated him to some extent. However, that friendship cannot justify some of his remarks.

Several Conservative Members, including the hon. Member for Epping Forest (Mrs. Laing), suggested that some expenditure on some of the referendums that we have held had been unfair. I reject that. The Scottish and the Welsh people would reject it too. The Opposition must answer questions themselves. In a written question in October 1992, my hon. Friend the Member for Leicester, East (Mr. Vaz) asked the Secretary of State for the Environment what is the total expenditure so far by his Department on publicising the poll tax and related information. My hon. Friend was told: The costs to date are £5,710,500."—[Official Report, 22 October 1992; Vol. 212, c. 350.]

Mrs. Laing

Will the hon. Gentleman give way?

Mr. Howarth

No; I do not have much time.

If the previous Government could waste all that money on a tax that no one wanted, and that eventually had to be withdrawn, we will take no lessons from the Opposition on how to promote referendums.

As my right hon. Friend the Home Secretary has said, we want to study the proposals on tax relief, which have a measure of support among the Opposition and the Liberal Democrats. If we are to give tax relief, the Opposition must recognise that it cannot come from nowhere. Revenues that the Government would have had for, say, education or health would be forgone. We have to weigh that loss in the balance when we make a decision on the tax relief proposals.

Shona McIsaac

I am intrigued by what my hon. Friend says about tax relief. In the Neill committee's report, Lord Parkinson is cited as saying that the Tory party technically does not exist. Can we give tax relief to something that does not exist?

Mr. Howarth

The electorate almost made that a fact at the general election. I welcome the fact that there is a considerable difference between the Conservative party memorandum published in the report and the extent to which the right hon. Member for Sutton Coldfield has welcomed the report's proposals. The right hon. Gentleman was gracious enough to say that the report did not reflect exactly what his party wanted, but that the proposals were sufficiently balanced for him to feel inclined to accept them in the round. That is a good way to deal with it.

The Government welcome the report. It reflects a commitment that we made in our manifesto to require full disclosure of donations above £5,000 and to ban foreign funding. Following this debate, we will move forward by preparing a draft Bill for publication next summer and by legislating before the next general election. The Committee on Standards in Public Life has performed a valuable service—that is my view and I hope that the House shares it—not only for politics but for the country. I hope that that will in some way restore the public's confidence in politics. If we are to clean up the politics of Britain—and the public demand nothing less—whatever our politics we need to give the proposals the proper weight, seriousness and priority that they deserve. We will do so.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.