Political Parties (Funding)

HC Deb 27 July 1999 vol 336 cc134-48 4.21 pm

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

With permission, Madam Speaker, I wish to make a statement about the funding of political parties.

We came to office committed to reform. Our three commitments were, first, to require large donations to political parties to be disclosed; secondly, to outlaw foreign funding of political parties; and thirdly, to invite the Committee on Standards in Public Life to look into the wider question of the funding of political parties in the United Kingdom.

The committee, under the chairmanship of Lord Neill of Bladen, was given that remit in November 1997 and reported in October 1998. The committee's review was comprehensive and authoritative. Because of the range of matters covered, it was not practicable to legislate in the current Session of Parliament, but I promised to publish a draft Bill before the summer recess, and I am doing that today.

The draft Bill is contained in a White Paper which provides the Government's overall response to the Neill committee's report. We intend to introduce the necessary legislation as soon as possible, taking full account of comments received from right hon. and hon. Members and from outside organisations by 15 October.

I shall summarise the main points of the White Paper and draft Bill. The Bill takes forward the two specific manifesto commitments to which I referred earlier, and which were endorsed by the Neill committee. Donations to political parties of £5,000 or more at the national level and of £1,000 or more at the local level will have to be made public. Furthermore, it will be unlawful for a political party to receive donations from an individual who is not registered to vote in the United Kingdom, or from companies that are not incorporated in the European Union and also carrying on business in the United Kingdom. Provision is also made for shareholder approval for donations.

There has also long been concern over the amounts that political parties are able, without restriction, to spend nationally at election times. The existing law, developed in the last century, already regulates very closely what can be spent by or on behalf of candidates at elections at constituency or local ward level. However, in the present day a large part of the effort and money devoted to winning elections is spent by parties not at a local or constituency level, but nationally and not on behalf of specific candidates.

The Bill therefore provides for new national spending limits on election expenditure, and agrees with the Neill committee that the limits should be set at a level substantially below the amounts spent by the two main parties in 1997, to avoid what Neill described as an arms race in spending between the parties.

On that basis, Neill recommended and the Bill provides a limit of £20 million for the main parties involved in a United Kingdom general election, with lower limits for parties that do not field full slates of candidates, and for other elections. When the Bill is introduced it will also contain provisions for regulating third-party spending at the national level, as recommended by the Neill committee.

To enforce the restrictions on donations and expenditure, the draft Bill places obligations on the parties at both local and national level to keep and submit accounts. That will apply particularly to the recording of donations. The scheme in the draft Bill, which sets a de minimis level of £50 for internal reporting, follows the Neill committee's recommendations.

All political parties will wish to study these detailed provisions carefully over the forthcoming months, but if the object in view can be served with some simplification or easement, the Government will be open to suggestions.

Annexe 1 of the White Paper contains a detailed chart setting out each of the Neill committee's recommendations, and the Government's proposed response. The one recommendation that we have not pursued is the recommendation that income tax relief should be allowed on donations to political parties. The Government take the view that that would amount to state aid by another route, and would divert expenditure from other priorities.

Some political donations are made not to a party as such, but to groups within a party or to individuals, including Members of Parliament. We agree with the Neill committee that comparable requirements should be imposed in respect of such donations, and the Bill, as introduced, will cover that. We would welcome views on whether the obligation to report such donations should fall on the party in question or on the person who receives them, and on whether donations that are currently recorded in the Register of Members' Interests should be put on a statutory basis.

The Neill committee made a number of suggestions for change relating to referendums. The Government accept them all, as I made clear when the Neill report was published last October. It is important to ensure that the two sides in any referendum campaign have a fair opportunity to put their case. We therefore propose to include state cash support on an equal basis for the two umbrella campaign organisations, with free mailing and access to referendum broadcasts, as the Neill committee suggested.

The committee also made recommendations about the position of the Government of the day in any referendum campaign. As it suggested, a Government are almost bound to be closely engaged in the subject matter of a referendum; but there is a point at which the Government should step back, and leave it to political parties and other campaign groups to make their case to the electorate. The draft Bill therefore provides for a 28-day period running up to the referendum poll in which the Government of the day should not issue material to the public on the subject matter of the referendum. Other rules, similar to those providing for election purdah periods, will also apply.

In one respect, however, the Government have gone further than the Neill committee's recommendations. In our judgment, it would be unfair and inconsistent with everything else that is proposed if referendum campaigns could be skewed by the injection of disproportionately large funds that happen to be at the disposal of a particular party or campaign group. We therefore propose to set limits on all organisations involved in referendum campaigns. In the draft Bill, the limits are £5 million for the two designated umbrella organisations and for political parties with two or more Members in the House of Commons, and £500,000 for other political parties and campaign organisations. Those restrictions on spending would run from shortly after the date when a Bill providing for a referendum is introduced in Parliament. As Neill recommended, referendum organisations will also be subject to the same requirements as political parties in regard to foreign donations and other related matters.

I have left until last one of the most important provisions of the draft Bill. The Neill committee recommended, as have many others, the establishment of an electoral commission, and the Government agree with that recommendation. The commission's first function will be to oversee observance by political parties and others of the new regulatory regime; but I believe that we ought to go further. The commission will therefore be charged with making recommendations on changes to electoral law. We also envisage its having, in a wider sense, an important role to play in voter education. I want it to encourage people to vote in elections and referendums, and to help to explain the democratic system in a wholly non-partisan way. The draft Bill also provides for the electoral commission to take over, at a later date, the functions of the parliamentary boundary commissions and of the Local Government Commission for England.

It is paramount that the electoral commission should be wholly independent of the Government of the day. The draft Bill therefore provides the strongest safeguards of that kind which our constitution can lay down. The commissioners would be appointed by Her Majesty on an address from the House of Commons. A Speaker's committee would be established to oversee the commission's budget.

The Neill committee's report rightly emphasises the vital contribution, which we should celebrate, that political parties make to this country's democratic life, but for too long, public confidence in the political system has been undermined by the absence of clear, fair and open statutory controls on how political parties are funded. All of us here want to encourage citizens to play a full part in this country's political system, and that must include encouragement of voluntary donations to political parties.

The Neill committee report gives us all the chance to make significant improvements in this vital area of our national life. Today's publication of the draft Bill and White Paper provides the detail of the Government's intentions. By providing greater honesty and openness to our political system, we hope to restore public trust and to promote greater confidence in our democracy.

Miss Ann Widdecombe (Maidstone and The Weald)

I thank the right hon. Gentleman for his statement and for his customary courtesy in giving me early sight of the statement—a novelty that I am still getting used to.

I add my congratulations to the Neill committee on a thorough and detailed work that contains much that will improve our democratic way of life. Having started on that friendly note, may I ask the right hon. Gentleman to comment on some glaring omissions in the draft legislation?

Why, for example, despite yet more assurances and promises today, is there nothing in the draft legislation—which is, after all, all that right hon. and hon. Members and the public have to comment on in the consultation period—on banning blind trusts, let alone any proposals for the detailed working of such a ban? Is that because five senior members of the Government used such funds: the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer, the Foreign Secretary and the Leader of the House?

Why does the proposed legislation do nothing to end the scandal of cash for policies, or to stop a repeat of the Bernie Ecclestone and Formula One affair? Will the legislation stop organisations such as, say, the International Fund for Animal Welfare, to which this small donor will make no further donations, and the Political Animal Lobby from buying policies at election time? Given that large donors to Labour have been given positions both in and by the Government, why is no effort made to ensure that all donations are not only without strings, but seen to be without strings?

How does the draft legislation propose to ensure that donations do not buy positions in government? [Interruption.] That was an important question, which the House perhaps did not hear. I asked the right hon. Gentleman how he intends to ensure, given that there is nothing in the draft legislation, that donations do not buy positions in government.

Why are trade unions given a privileged position in the legislation? Why does it require a disregard of the fact that they might be affiliated to a political party, a disregard that will not apply to any other organisation?

The right hon. Gentleman has said that he does not agree with the Neill proposal for tax relief on political donations of up to £500—but surely he will concede that the cost of such a measure would be barely more than the Government are spending on their own special advisers?

Will the right hon. Gentleman explain why, although the Government will be subject to restrictions for only 28 days before a referendum is held, other organisations will have such restrictions for up to six months?

Will the right hon. Gentleman tell the House why, according to his draft legislation, no candidate will be allowed to stand as, for example, an independent socialist or a pro-London candidate without first setting himself up as a political party?

How are national limits on spending to be enforced for a period of one year before a general election when we do not have fixed-term Parliaments?

Finally—it is a sensitive and delicate question, but nevertheless an important one—given the legislation's proposals on Northern Ireland, will the right hon. Gentleman tell us whether Sinn Fein will be able to receive foreign donations—for example, by channelling them through the Republic?

Mr. Straw

I am grateful for the right hon. Lady's comments at the beginning of her statement, and particularly for her thanks—I gave mine in my statement, but am very happy to repeat them—to the Neill committee for the excellence of its work and recommendations.

The right hon. Lady is obviously very sorry that I have shot her fox by accepting all of the Neill committee's recommendations. Consequently, she has been left thrashing around in a state of amnesia about the Conservative party's record on political funding. The simple truth—an apology from a Conservative spokesman would be in order on the matter—is that we would have needed neither the Neill report nor the draft Bill had the Conservative party not sunk the funding of political parties—its party—to such depths.

Moreover, neither the report nor the draft Bill would have been necessary had not the previous Government—of whom the right hon. Lady was a member—repeatedly refused to refer the funding of political parties to the Nolan committee. Time and time again did my right hon. Friend the Prime Minister demand that the previous Government do so, but they point-blank refused.

The right hon. Lady mentioned the interesting issue of blind trusts. The body of the report—not only the Bill, but the whole of the White Paper is subject to consultation—makes it clear that, for the simple, straightforward and very prosaic reason that parliamentary counsel ran out of time in drafting—[Laughter.] The right hon. Lady may laugh at that, but she knows two things very well. First, this Government have a heavier legislative programme than previous Governments. Secondly, parliamentary counsel's time is limited. She asked me what we were doing about blind trusts. The answer to her question is given in full on pages 23 and 24 of the White Paper, which she has had for hours. If she had read it—if she had used that time sensibly—she would have seen that the Government have accepted every single one of the Neill committee's proposals on blind trusts.

The Government have always been clear on the issue of blind trusts. In our evidence to Neill, we said that blind trusts should be the subject of prohibition. What did the Conservative party—not the previous Government, but the current official Opposition, led by the current Leader of the Opposition—say about blind trusts? It said: We believe that there is an argument in favour of a form of blind trust. So the right hon. Lady comes to the House not knowing her own party's policy on the issue of blind trusts. The party preceded that reference to blind trusts with the following absolutely stunning statement in respect of political donations: We believe that there is a perfectly honourable case to be made for anonymity". The Tories' pursuit of that case for anonymity was one reason why the reputation of the political process was plunged so low during their time in government.

The right hon. Lady asked me about donations being made only without strings. There is no suggestion that donations should be made with strings, although I know that the Conservative party has great difficulty with that, given its record. Indeed, the whole purpose of a transparent system of reporting and disclosure and strengthening the regulation of the honours system is that we do not want to replicate the process that we witnessed in the 1980s and early 1990s, when there was a strange coincidence—I put it no higher than that—between those who gave large donations to the Conservative party and those who received honours or other favours.

The right hon. Lady asked me about special advisers. I do not think that she should complain about the money that the Opposition receive from the public purse. We sought to gain a reasonable increase in the money that the Opposition received from the public purse and we were systematically knocked back on that. We have been generous to a fault. The Opposition now receive £500,000 for the Leader of the Opposition's office alone; altogether the Opposition receive £3.4 million—an increase of 250 per cent.—and it remains an open question as to whether the British taxpayer is getting value for money from the Opposition.

The right hon. Lady asked about the trade unions. Neill recommended no change in the regime for trade unions. They are already properly regulated and have been the subject of much tighter regulation than the shareholder disclosure regime that we plan to put in place. The national limits that we propose should apply for one year before an election takes place. I understand the right hon. Lady's point that people do not have precise notice of when an election will take place. I am happy to discuss that with all right hon. and hon. Members, but if the right hon. Lady thinks about the matter, she will appreciate that it is essential that the limits should apply for longer than the four or five weeks of an election campaign. In practice, most expenditure by a political party is not expended until after the election whistle is blown or, as in early 1997, when it is obvious when the election will take place. However, there is some election spending in the preceding period and it is important that the regulations should cover that.

The draft Bill contains special provisions relating to Northern Ireland to protect the identity of donors, if necessary. They apply to all parties, but of course, as we have made very clear, we are ready to accept comments on them.

Mr. Chris Mullin (Sunderland, South)

I welcome the statement, which goes a long way towards the major cleansing of the British political system for which some of us have argued for a number of years. Hopefully, it will also end the slide towards money-driven rather than issue-driven politics, and we shall return to issue-driven politics. I have just one or two queries.

First, I welcome the £20 million cap, but does my right hon. Friend not think that £20 million is too high and that it is a desirable objective to reduce by as much as possible the amount of money that is swilling about in British politics? Secondly, one effect of the proposals will be that anyone who has lived outside the United Kingdom for as long as 20 years will still be able to make donations to British political parties. That is as a result of the changes that the previous Government made to the right to vote. Does my right hon. Friend think that there is a case for limiting the right to vote to people who have been outside this country for up to only five years—and, therefore, for changing the eligibility to make donations?

Finally, does my right hon. Friend recall a little scam, whereby the drinks and tobacco industries have the main advertising hoardings in the country all booked up for most of the year, but at election time, they mysteriously and suddenly become available to one political party? Is there anything in the proposals to address that problem?

Mr. Straw

I am grateful for my hon. Friend's remarks. The figure of £20 million is a matter of argument. It is what Neill proposed, and we have sought assiduously in the draft Bill to follow the Neill recommendations in their detail, as well as in their spirit.

On overseas electors for the British Parliament, it is unarguable that if people are on the electoral register to vote in this country, they should be entitled to make donations to the political party of their choice. There is a separate question about whether the rules laid down in the mid-'80s—which allowed people with a rather distant connection with this country to vote, such as those who have not been resident here for 20 years—should continue. The Select Committee on Home Affairs has proposed that the period be reduced to five years, and we are considering that carefully.

On the drinks and tobacco industries, we are seeking in the draft Bill to control the behaviour of political parties. There are limits to what can or should be done in a democracy, although none of us on this side of the House approves of the way in which the drinks and tobacco industries used to monopolise poster sites on behalf of the Conservative party.

Mr. Richard Allan (Sheffield, Hallam)

We warmly welcome the Home Secretary's proposals—especially for an electoral commission, which we believe to be long overdue. Will he consider accepting our proposal to give the commission a formal role on advising on the question in a referendum, as we believe that to be vital in conducting fair referendums in this country?

Will the Home Secretary consider the implications of devolution for this matter? Party responsibilities for matters such as funding are now, quite properly, devolved to national parties in the various parts of the UK. We hope that he will be sensitive to that, rather than requiring powers to be taken back centrally to parties in London.

Is the Home Secretary concerned that the draft Bill might prevent young people under 18 from becoming subscription-paying members of a political party by confining donations to registered electors? Will he consider that issue, so that we do not exclude from taking part in the political process the young people who often seem to be sadly lacking from it?

Finally, will the right hon. Gentleman reconsider the issue of an upper limit on individual donations? In so doing, he might do his bit to try to end the dependency culture, whereby a party leader becomes so dependent on particular large donors—such as those who give £1 million a year, for example—that he finds it impossible to kick the habit, even when that person has been shown to be fundamentally unsuitable to make such donations?

Mr. Straw

I am grateful for the hon. Gentleman's endorsement of Neill's proposals and our response to them. We are not proposing that the commission should advise on questions in a referendum. Once the commission is established, it will be seen whether that is considered an appropriate role for the commission, which may take the view that advising on the wording of a question in a referendum could lead the commission into partisan areas.

In practice, while there has been argument about the questions in the referendums that we have had in this country in the past 25 years, everyone has known what the issue has been. It has been clear: do we stay in the Common Market, or leave? Do we vote for a National Assembly for Wales and a Scottish Parliament? In future, do we vote for a change in the electoral system, or not? Do we vote to join the euro? It is not a huge problem.

On devolution, I accept the gravamen of the hon. Gentleman's comments. We acknowledge in the draft White Paper that many parties—this applies particularly to the Liberal Democrats, but increasingly to others—have a federated structure, and we must be sensitive to that. He will understand that, with some small exceptions, the question of elections within the UK is a reserved area, however. We have sought to square the circle properly in the draft Bill but we are open to proposals and comments on whether we have got it right.

There is no proposal in the Bill that should for a second have the effect of preventing a United Kingdom resident who happens to be under 18 from making donations to political parties, but if such a gremlin has crept into the drafting, we shall ensure that it is removed. The purpose of that part of the Bill is to restrict foreign, not under-age donations. We are happy to have donations from people of any age.

The Neill committee considered upper limits on individual donations in some detail. I do not believe that they are practical. It is far more effective to cap spending and have full disclosure of donations than to try to cap what individuals may give. With the best will in the world, if we go down that route we end up with all the complications that have been found in the United States, where, in practice, a level playing field is not secured for the political parties and a great deal of evasion is encouraged, to small purpose.

Several hon. Members

rose—

Mr. Deputy Speaker (Sir Alan Haselhurst)

Order. A lot of hon. Members want to ask questions and I have to think of protecting the later business, in which many hon. Members have said that they would like to speak. Let us have short questions and short answers, please.

Mr. Robert Sheldon (Ashton-under-Lyne)

My right hon. Friend has announced a major change in the way in which the financial operations of elections are conducted, and I expected no less. He rightly started with the Neill recommendations. I am not altogether happy with the upper figure of £20 million, which may be open to discussion, but the most important aspects are the electoral commission and the electoral commissioner. The initiative that the commissioner can show will be available for the first time to keep a close control on the financial operations of elections.

How much time does my right hon. Friend envisage the commissioner being able to devote to the job? Will it be a full-time or a part-time post?

Mr. Straw

I am grateful to my right hon. Friend for his endorsement. He speaks with great experience, not only as Chairman of the Standards and Privileges Committee but as a long-serving former Chairman of the Public Accounts Committee. We will want to draw on his experience, as we want to base the independence of the new electoral commission on the model of the National Audit Office and the Comptroller and Auditor General.

The first part of the Bill gives the commission wide powers and restricts the powers of the Secretary of State, because some changes in electoral law will be able to be proposed in the House only if they have been endorsed by the commission. I would anticipate that the commissioner's would be a full-time post, and there would certainly need to be a substantial number of full-time staff as well as other part-time commissioners. We intend to ensure that the commission can do a proper and effective job.

Mr. John MacGregor (South Norfolk)

As a member of the Neill committee, I warmly welcome the Government's acceptance of the vast majority of our recommendations, and in particular those on referendums, both because there was some doubt whether the Government would accept them and more especially because it was very clear to us in the hearings that we held around the country that the funding arrangements for the earlier referendums under the present Government left a great deal to be desired.

The Home Secretary referred with approval to the Neill principle that strong and healthy parties are essential to the functioning of a strong democracy. The second part of the sentence to which he was referring goes on: as a means of engaging very large numbers of people … in the whole democratic process. In that respect, the recommendation for tax relief on small donations from large numbers of people was, we thought, crucial. One of the effects of our recommendations and the Government's acceptance of them will be some diminution in donations from other quarters, hence the importance of encouraging such donations to fill the gap. Will the Home Secretary think again about tax relief?

Mr. Straw

I am grateful to the right hon. Gentleman, and especially for his welcome for what I said about accepting the regime for referendums. I am aware that a canard was flying that there was some doubt about the Government's position, but I made it clear, in an interview on the day that it was issued, that we welcomed the whole of the report. The right hon. Gentleman will remember that, in the debate in early November, I again made clear our acceptance of the referendum proposals.

I understand that the right hon. Member for South Norfolk (Mr. MacGregor) has strong views about the proposals to make small donations to political parties tax-deductible. The Government take a different view. We are of course open to representations, although they would have to be very strong to make us change our mind. I do not accept that the degree of people's involvement in a democracy would depend on whether they could get tax relief on their donations.

We have a pretty vibrant, working democracy in this country. Not enough people are involved in the system, and all political parties would like more people to get actively involved in politics. They would also like politics, through civics courses, to become more central to the education of the nation's children. There are other ways of achieving that, and I believe that if there is a case for giving state aid to political parties—including state aid for political education—that aid should be given explicitly, rather than through the happenstance of individuals' donations on which tax could be deducted.

Mr. Harry Barnes (North-East Derbyshire)

Will we have to wait until the electoral commission has finished its work before further reforms to the electoral system, beyond those in the White Paper, are introduced? I am thinking especially of a rolling register to cover the millions of people missing from existing registers, and of the registration of homeless people. If those reforms are to be blocked because the electoral commission will be required to finish its work first, some of us would consider that the cart had been put before the horse.

Mr. Straw

I can give my hon. Friend the assurance that he seeks. We will not have to wait for the electoral commission to complete its work. Indeed, as the Under—Secretary of State, my hon. Friend the Member for Knowsley, North and Sefton, East (Mr. Howarth), has already announced, we have separate proposals from the all-party electoral working party for other changes to improve the process, and they include the introduction of a rolling register.

Mr. Dafydd Wigley (Caernarfon)

I generally welcome the Home Secretary's statement, but I seek clarification on two matters. First, will funds from outside Wales be allowed to be given to political parties fighting elections to the National Assembly for Wales? Secondly, will the electoral commission be relevant to the Assembly, and to local government in Wales?

Mr. Straw

I know of no way in which we could prevent motor vehicles travelling across the Severn bridge from carrying donations to the Welsh Assembly. The idea that we could recreate Offa's dyke, fill in all the gaps and thereby put a wall around Wales is not a proposition that even the right hon. Gentleman would want to pursue. The proposals that I have set out are for the whole of the United Kingdom.

The right hon. Gentleman asked about local government in Wales. That is a reserved matter, but the organisation of local government boundaries in Wales is a devolved matter for the National Assembly for Wales. The White Paper makes it clear that, if the National Assembly wished the review of those boundaries to be taken over by the electoral commission, we would be open to making provision for that.

Mr. Dennis Skinner (Bolsover)

I have to say that this statement is a darn sight better than the one before it. [Laughter.] Does my right hon. Friend agree that trade unionists in particular will be very pleased at the announcement that shareholders will be able to subject donations to a vote of approval?

Does my right hon. Friend the Home Secretary recall that a few years ago I proposed to the Labour party's national executive committee that a sum equivalent to the amount that a political party spends on all its candidates in an election would be sufficient as an upper limit? That amount is roughly £6 million now. Will he have another look at that proposal?

Finally, will my right hon. Friend accept from me that this is a most opportune statement? It could not have come at a better time, especially given that the Tories are run and financed, year on year, by Mr. Ashcroft. Will he also understand that, in the run-up to a general election—more than at any other time—the Labour party must set the agenda? That is what this proposal does.

Mr. Straw

I thank my hon. Friend for the tenor of his remarks. His point about trade unions is important. We submitted party funding to an independent committee comprised of people of all political persuasions and none. We asked it to consider the matter independently and impartially, and to implement proposals. The committee said that no change was required in the regime for trade unions, but that huge changes were necessary in respect of company donations.

I contrast the way in which we have proceeded with the way in which the previous Conservative Government ruthlessly sought to hobble Opposition parties in a wholly partisan way. They hit in particular at the Labour party's sources of funds while protecting their own. Their sources included donations from companies in the UK and abroad, but also from very shady individuals, including Asil Nadir. It remains to be seen whether the Tory party has given back his £400,000.

Mr. Gerald Howarth (Aldershot)

There, we have had the true motive behind the Home Secretary's statement. He should accept that this action is, in some respects, an act of reprisal by the Labour party and that aspects of it will effectively hobble the Opposition. The Government are not content simply to have an overwhelming majority in the House, with destroying any opposition in the other place, or with having a supine load of journalists mesmerised by the power of the Prime Minister's press secretary.

Does the Home Secretary accept that some of his proposals—in particular, the decision to require disclosure of donations in excess of £5,000—will hobble the Opposition? Does he agree that many people will be deterred from giving fairly modest sums to political parties—as the Home Secretary says that he wants them to do—because the right hon. Member for Hartlepool (Mr. Mandelson) will set investigative journalists on them to dig up as much dirt as possible? Does he agree that that will not improve the democratic process?

Mr. Straw

If this had been a reprisal, I would have been conducting it under friendly fire. The hon. Gentleman should have seen the face of the right hon. Member for Maidstone and The Weald (Miss Widdecombe) as he spoke. The proposals are based on an independent report, which the Conservative Front-Bench team has demanded—having done a full pirouette from the previous position—that we should implement in full. That is precisely what we have done, and I am very sorry to have discomfited the Conservative spokesmen.

The hon. Gentleman remains unreconstructed, taking the view held by a former treasurer of the Conservative party, Lord McAlpine, whose solution to party funding was entirely straightforward. Lord McAlpine said: 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,"— perhaps an open question these days—

it is a fighting machine dedicated to winning elections. He also wrote: There was a black hole in the Party's finances … The solution was easy: we gave up publishing accounts. That was the approach then taken by the Tory party. I am glad to see that those views remain represented, red in tooth and claw.

Dr. George Turner (North-West Norfolk)

Can my right hon. Friend say more about what will happen with shareholders? Many shareholders are pension funds that hold their power on behalf of others. Many of us do not want our pension funds to do what many have done in past and fund the Tory party on the false premise that it is good for the economy. This Government have shown that the Labour party is good for the economy. Surely our companies should not be involved in party politics unless their shareholders overwhelmingly say so.

Mr. Straw

The principle that my hon. Friend lays down was accepted by the Neill committee, and we set out our response to that on page 26 of the White Paper. We propose, as Neill did, that there should be a requirement on company directors to seek shareholder approval for donations, including donations that involve non-commercial sponsorship. Neill proposed that the cycle of approval should take place every four years. That is in the draft Bill, but we are open to suggestions as to whether it should occur more often.

Mr. Peter Brooke (Cities of London and Westminster)

Pursuant to the question of the hon. Member for Sunderland, South (Mr. Mullin), can the Home Secretary confirm that the 20-year rule was part of a Bill, passed quickly at this time of year in 1989, which also increased the limits on by-election expenditure, that such a Bill cannot in a narrow space of time be passed without bipartisan support and that all aspects of that Bill—before publication and including the 20-year rule—were agreed by Lord Hattersley, the shadow Home Secretary, on the advice of Walworth road?

Mr. Straw

I do not know all the detail, but I can confirm that the Representation of the People Act 1989 was a bipartisan Act, and that my noble Friend Lord Hattersley was shadow Home Secretary at the time. The right hon. Gentleman is therefore correct but, 10 years on, that does not mean that, because something was passed with bipartisan support, it should not be open to review. The proposal should be open to review. We seek on this issue, as we have on electoral processes, to proceed as far as possible on a bipartisan basis.

Mr. Martin Linton (Battersea)

Does my right hon. Friend agree that, with this Bill, he has put within our grasp an end to sleaze in the funding of political parties? Does he agree that those who opt out of paying tax in this country should also opt out of funding political parties, at least for five years until they are no longer on the electoral register, in line with the principle in the Neill report that funding of political parties should be limited to those who live, work and carry on business in the United Kingdom?

Mr. Straw

I hope and believe that my hon. Friend is correct to say that the proposals in this Bill will help clean up British politics and put an end to sleaze in the funding of our political process. On the restrictions on overseas donors, we want the political process to be funded by those who have a stake in it. That is why we seek a ban on foreign donations, whether from individuals or companies. We define that by reference to the domicile of the company but also by reference to whether an individual is on the electoral register.

Mr. Martin Bell (Tatton)

I wish also to query the proposed £20 million limit for a political party campaign. That seems to me an extraordinary amount of money that will keep parties spending more than they can safely raise and keep them beholden to the big contributors. Surely a cheaper politics is a more trustworthy politics. Perhaps we could, for as little as £2 million or at the most £5 million, take politics out of the hands of the big contributors and give it back to the people.

Mr. Straw

The sum of £20 million was that proposed by Neill. It is important that the limit should be realistic. I apologise to my hon. Friend the Member for Bolsover (Mr. Skinner), who also made that point, for failing to answer it.

The simple truth is that the original regime that we now operate was established at the end of the previous century when almost all election spending took place at a constituency level. There was virtually no national party spending, and the dates on which elections took place varied from one part of the country to another. It is interesting that the total level of spending at a constituency level at the end of the 19th century was, in real terms, very substantial, and ran to much more than is spent today at a constituency level because the constituency was the focus of the campaign. Today, for reasons that everybody understands, there is a greater focus on the national level.

Neill was correct to say that the regime should recognise that arrangement, but the committee has also proposed to reduce for future elections the amount that was spent at the previous election. I recall that the Conservative party is reported to have spent about £27 million at that election, and the Labour party £26 million. I think that £20 million is therefore a reasonable restriction. If the figure were much lower, the restriction would not take account of the realities of modern campaigning.

Mr. Dale Campbell-Savours (Workington)

In the case of institutional shareholders, would pension funds and insurance companies be required to consult their policyholders before using their votes at annual general meetings on political funds?

Mr. Straw

No, they would not. That is a separate but very live issue about the degree to which those who exercise shareholder power consult the beneficial interest, which is typically those who have put money into a pension fund, and how they do so through trustees. We are strongly supporting measures to strengthen the role of trustees in the control of pension funds.

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

I welcome the statement in principle. The Home Secretary will know that, in Scotland, the political parties came to an agreement along the same lines before the recent election there. I refer him to the jocular reply that he gave the right hon. Member for Caernarfon (Mr. Wigley) earlier regarding spending by UK parties in devolved elections. Does he agree that the transfer of funds and resources from London to Edinburgh or Cardiff during or before such an election is a serious issue? Given that he has already distinguished in his statement between local and national donations, will he consider that matter further?

Mr. Straw

Unless we were to put walls around different parts of the United Kingdom and abandon the single currency that was introduced for England and Scotland in 1707, it would be impossible to work out how, in practice, we could prevent donations being made to Scottish political parties by people in the rest of the United Kingdom. Furthermore, I do not believe that to be desirable within what is a union of this kingdom.

The Bill contains clear regulations regarding the donations that people make to political parties in Scotland and elsewhere, and a clear regime for the spending of those political parties. I appreciate that the hon. Gentleman will not have had time to read the White Paper but, if he looks at page 40, he will see, set out in column D, the proposed spending limits for the Scottish Parliament. Obviously, that figure is pro rata. The limit is £1.5 million for each political party in a general election for the Scottish Parliament, compared to £20 million for parties in a national general election. That is a sensible way to proceed.

Mr. David Winnick (Walsall, North)

Is it not downright scandalous that the whole dirty, murky world of party financing was not touched on by the Conservatives for obvious reasons, particularly because they used money that was known to be stolen?

I press my right hon. Friend again on the question of tax exiles. Why should someone who is technically a British citizen and entitled to vote here but who, for obvious tax reasons, ensures that he or she does not spend more than 90 days a year in the UK be in a position to finance a political party? Such a case is, of course, in the news, and demonstrates that the Tory party is almost exclusively dependent on such a tax exile. We need to change that, and I tell my right hon. Friend that, if that is not dealt with in the Bill, some of us will hope to press an amendment, which is likely to be supported by our hon. Friends.

Mr. Straw

My hon. Friend was entirely right to draw attention to the disreputable record of the previous Conservative Administration in refusing to clean up British politics because they knew that the spotlight would turn on the murky record of the Conservative party.

I am glad to welcome converts, wherever they come from, but I remind Conservative Members that, when the mere suggestion was made that the issue of party political funding should be referred to the Nolan committee, the then Prime Minister, the right hon. Member for Huntingdon (Mr. Major), said, I do not believe that that is the right way to proceed."—[Official Report, 21 May 1996; Vol. 278, c. 95.] The Conservatives did not want an inquiry because they did not want it to reveal what they knew to be the truth. Their view was the view of Lord McAlpine—that the best way to avoid scrutiny was simply to avoid having any accounts.

I understand the concern of my hon. Friend the Member for Walsall, North (Mr. Winnick) about people who are tax exiles, but it seems to me that the position of tax exiles must be dealt with through Finance Bills. It is unarguable that, if someone is lawfully on the register to vote in this country, that individual must be allowed to make donations to a British political party that is registered in this country. I do not understand how we could retreat from that principle, although I appreciate that amendments may be tabled to the Bill from all quarters, and I look forward to the argument on them.

Dr. Julian Lewis (New Forest, East)

Is not the Government's response to recommendation 89 of the Neill committee grotesquely inadequate? That recommendation established the following principle in these words: 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. There is no mention there of the 28-day limit that the Government are putting in, in their so-called acceptance of that recommendation. Is it not blindingly obvious that the Government intend to raid the public purse on a massive scale in the months leading up to a referendum, stopping only a meagre four weeks before polling day?

Mr. Straw

The hon. Gentleman never improves his case by the hyperbolic way in which he presents it. He is wrong. We are putting in place, in statute, restrictions on expenditure by Government that his Government would never have dreamed of. We can have an argument about whether 28 days is the precise period—I am happy to do that—but the 28-day period follows the principles that Governments of both parties have followed in respect of what is call the election purdah period for elections that take place within a Parliament, and we intend to stick to the principles in the Bill, not only to their letter but to their spirit.

Several hon. Members

rose—

Madam Speaker

Thank you. We are now going to move on. We shall be coming back to these matters again later.