Political Parties, Elections and Referendums Bill

HC Deb 10 January 2000 vol 342 cc34-116

Order for Second Reading read.

4.20 pm

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

I beg to move, That the Bill be now read a Second time.

The Bill draws comprehensively on the work of the Committee on Standards in Public Life, chaired first by Lord Nolan and now by Lord Neill. I place on record my thanks and, I believe, those of the whole House, for the excellence of the Committee's work, and express our gratitude to its distinguished chairmen and members.

The Bill is an important milestone in the development of our democratic institutions. For the first time, how political parties conduct themselves will be the subject of statutory regulation. Political groupings have been a feature of our parliamentary system of government for more than 300 years, and it has been well over 100 years since Disraeli led the way with the development of mass party organisations to parallel his 1867 extension of the franchise. It is something of a paradox, then, that so little statutory recognition has so far been given to the central role played by political parties in the political life of this country.

Parties are vital to the effective functioning of any representative democracy, but the political parties of today do not simply sustain a particular set of political leaders in office. In any mature democracy, political parties also provide both a crucial link between the citizen and the elected Government of the day and some of the key processes by which that elected Government are held to account.

Parties must be capable of discharging effectively those onerous responsibilities, and that necessarily requires money. Parties can secure funding from one of two basic sources: they can receive a subvention from the state or they can attract funding from their own supporters. The Neill committee recommended against the first of those approaches: a view with which the Government wholeheartedly concur. Indeed, rather than underpinning representative democracy, over-reliance on state funding could in the end undermine it.

Political parties should be the champions of the people, ensuring that the state is their servant and not their master. An over-reliance on state funding could absorb parties into the fabric of the state, thereby putting their own institutional needs and those of the state above the needs of those whom they are elected to represent. The health of our democracy is far better served if parties are principally reliant on their own efforts to secure adequate funding. Such an approach compels parties to engage with their members and supporters.

That engagement between parties and the people must be a reciprocal one. We should celebrate the fact that so many supporters of political parties recognise their civic responsibilities and duties by contributing to their chosen party's financial well-being. Democracy does not come cheap, and those who are able should be ready to dip into their pockets to help to sustain it.

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

Why is the Labour party in government wholeheartedly in support of the arguments against state funding when, as recently as in the consideration of the Houghton committee, it took the opposite view? Is it simply that its power in the land has grown since then, or has some objective reason displaced all its earlier arguments?

Mr. Straw

I am trying to cast my mind back to when the Houghton committee reported: it was not in the past decade or so, and I think that it was in the mid-1980s. Our view on state funding today is fully consistent with the view that we took in 1995, when the Labour party in opposition gave evidence to the then Nolan committee. I remember that, because I had the honour on behalf of my party of drafting the evidence and getting my colleagues' approval for it, as well as giving oral evidence. Parties do sometimes change their minds. On some issues, even I have been known to change my mind, but it happens that, on this and other issues of a constitutional nature, I have not.

The right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) and I may reach some agreement on my next point. The Neill committee argued that, if we want such civic engagement as I have mentioned, the state should at least be prepared to give a helping hand by providing tax relief for small donations. On that discrete point, the Government remain unpersuaded of the case for such a scheme but, overall, the controls on campaign expenditure in the Bill will significantly reduce the demands on parties to raise even greater sums of money.

We have also reduced the pressure on political parties by more than doubling the taxpayers' funds available to Opposition parties. Such is the generous spirit that we have brought to government that the subvention of state aid to the Liberal Democrats has increased by a factor of three and the Conservatives now receive more than £3 million of state funding to help them to make their opposition effective.

Mr. David Winnick (Walsall, North)

It has not done them much good.

Mr. Straw

We are also interested in best value—as is the Conservative party—and it remains to be seen whether the Audit Commission will feel the need to scrutinise whether the Conservatives have used that £3 million to good advantage. Certainly, I make no complaints about the state of the Opposition. Long may they continue in the same way. Of course I say that in jest.

At the heart of the Bill's provisions is the need to ensure that the funding of political parties is open and transparent. Greater transparency will not only strengthen the accountability of political parties but help to buttress their financial standing. The secrecy that has hitherto been permitted to political parties in their funding, and the scandals to which such secrecy has given rise in recent years, have undoubtedly left a sour taste. In contrast, all political parties—and the reputation of our political system as a whole—will benefit from the Bill.

The Neill committee also recognised that, in order to restore public confidence in the political process, it was important to put an end to what the committee termed the "arms race" in election spending. Campaign spending at a national level by the two main parties has increased from an average of £5 million in 1983 to £27 million in 1997. If we took no action, those sums could easily exceed £30 million for each party at the next general election. The perceived need to match, if not exceed, spending by the other side has put a tremendous burden on the parties. Such pressure could lead a party to an unhealthy reliance on a handful of wealthy donors, and that would plainly not be good for democracy.

The new arrangements also introduce controls on spending at a national level as well as a local one, for the first time. Our Victorian forebears, when faced with growing electoral abuse, introduced the Secret Ballot Act 1872 and the Corrupt Practices Act 1883 to stamp out the buying and selling of votes, something that was done brazenly at that time.

Compared with today, elections were fought on a very different basis in the latter part of the 19th century. In the days before a national press and the broadcast media, the electoral battleground was in individual constituencies. Indeed, elections took place on different days over some time, and it was common for leading figures, including Gladstone, to stand for election in two, three or more constituencies and then make their choice according to the sessional orders—with great celebration if they were lucky enough to have been returned for two or more constituencies. Although the campaign took place at a local level and hardly at all at a national level—it was only events such as Gladstone's famous Midlothian campaign that saw the beginnings of national campaigning—and even after controls were introduced, vast sums by today's standards were deployed in an attempt to buy elections. It helps to put current levels of campaign spending into some historical perspective to learn that, at the 1880 general election, after controls were introduced, candidates spent the equivalent of £106 million at 1997 prices, but they spent it at a local, not a national, level.

Mr. John Bercow (Buckingham)

I am sure that the House has listened to the right hon. Gentleman's historical exegesis with great interest. If he is against the purchase of votes, how does he justify promoting a Bill that will allow the issue by Ministers of official press releases in support, for example, of the abolition of our national currency, while regulating the activities of campaigning organisations in any such referendum for up to six months, thereby preventing the supporters of national self-government from effectively arguing their case?

Mr. Straw

I do not accept what the hon. Gentleman says. I have sought to ensure that the spirit, as well as the letter, of the Neill committee's recommendations on referendums is introduced into the Bill. If, as I think, the hon. Gentleman is referring to the fact that controls on campaign spending in a referendum can go back six months, but that the purdah period for Government is 28 days, that is no different from the situation on general elections that obtained under the previous Government as well as this one. I think that there is general agreement that, once the provisions are fully in force, the spending rules should cover the year before a general election. However, we have sought to replicate the purdah period that exists before a general election—when officials cannot get involved in the policy of the Government of the day except in narrowly controlled circumstances—to apply to referendum campaigns, but obviously taking account of the differences. I shall shortly speak in more detail about the changes to referendums.

Given every other change that has taken place in our national life over the past 120 years, it is astonishing that we still conduct our elections according to rules laid down at the end of the 19th century. They tightly regulate spending by candidates and third parties at a constituency level, but do not recognise even the existence of political parties and third parties at the national level. That is plainly absurd, and the Bill puts the situation right.

Similarly, as the Neill committee recognised, the way in which we conduct referendums has also failed to keep up with the changing political landscape. Neill proposed having standing ground rules in operation, well in advance of any future referendum, so that the debate can concentrate on the issue at stake and not on the conduct of the poll.

Each side in a referendum campaign must have the opportunity fairly to put its case to the electorate. The Bill achieves that by providing for the designation by the Electoral Commission of an umbrella organisation on each side of a campaign. Once designated, the two umbrella bodies will each be entitled to a grant of up to £600,000, a free mailshot to each household and free air time for referendum broadcasts.

In addition, in the 28-day period before the date of the poll, the Government of the day will stand back from the debate and leave it to the umbrella groups and other participants to campaign. This purdah period is a fair and practical response to the Neill committee recommendation, and the committee has welcomed it.

Mr. Denis MacShane (Rotherham)

What does my right hon. Friend have to say about the huge sums of money already being spent on a pre-referendum campaign? Mr. Paul Sykes has said in the Yorkshire Post that he is prepared to spend £235 million campaigning against Members of Parliament who believe that our country should be a full player in Europe. He is putting up posters all over the country. Mine has a rather flattering picture of me when younger. Constituents are phoning up asking who is publishing this picture with my name on it.

This is taking place now—millions and million of pounds are being spent to try to get Britain to leave Europe. That must be considered by the Government and the Neill committee.

Mr. Straw

As I shall explain in a moment, it is not possible to achieve perfect equality in spending by both sides in a referendum campaign. I am pleased to learn that my hon. Friend has been portrayed by a picture that suggests that he is even younger than he is.

Mr. Peter Bradley (The Wrekin)

But no more lovely.

Mr. Straw

As far as I am aware, I do not even merit a poster from Mr. Sykes in my constituency, still less a photograph. However, that is one of the burdens that I must bear.

I can tell my hon. Friend the Member for Rotherham (Mr. MacShane) that the arrangements for the fair conduct of referendums, in part VII, include one departure from the Neill committee recommendations. That departure has to do with expenditure limits on campaign organisations—a subject of much debate, both in the Neill committee and outside it. The committee said that it was not opposed to expenditure limits as a matter of principle, but it questioned how such limits could be applied effectively in practice. It therefore proposed that there should be no limits on either side.

For a reason that I shall expand on in a moment, the Government agree that it is not practicable to impose an overall limit on the amount that each side in a referendum may spend. In our judgment, such an approach would indeed be unenforceable. It would compel otherwise implacable opponents, who happened to share the same view on a given referendum question, to work together and agree a share-out of the expenditure limit. To expect that to happen is simply not to live in the real world.

It not possible either to construct a regime that automatically produces a level playing field between the two designated umbrella bodies, but that leaves everyone else out in the cold. We know that from the experience in Quebec, where considerable use is made of referendums. There, a 1978 Act introduced an almost total ban on independent spending by individuals or groups operating outside a formal umbrella group or what was called the national committee.

Several sections of that Quebec law were struck down by the Supreme Court of Canada in October 1997, on the grounds that they violated freedom of expression under both the Canadian and the Quebec charters of human rights and freedoms. Any equivalent provisions here would be equally vulnerable to legal challenge under article 10 of the European convention on human rights.

However, I have taken some trouble to talk to colleagues in Canada, and I should also tell the House that the operation of the Quebec law was intolerably complicated. Squabbles took place between participant groups both before and after referendum campaigns about how a fair share-out might be implemented, and about whether it should. In the end, it was accepted in Canada—as I hope that it will be accepted in this House—that such a fair share-out was impossible.

However, it is possible to place limits on the spending of each individual or organisation participating in a referendum. I will be the first to admit that that will not produce absolute equality in terms of what is actually spent in a campaign, any more than the prescription of maximum limits on what parties may spend will secure an equality of what is actually spent in elections by those political parties.

For example, the Liberal Democrats are offered generous spending limits in the Bill, but it is a racing certainty that the party will not be able to raise money to the level of the spending limit. So to argue that spending by the Labour and Liberal Democrats parties will be nearly equal because both parties will be able to spend up to a maximum amount fails to take into account the capacity of parties to raise money up to the maximum.

We have listened to the criticisms levelled against the expenditure limits set out in the draft Bill. I accept that they were too crude and failed to take account of the relative support for political parties as represented in the House. We have refashioned the limits in the Bill, and made them more sensitive to what we perceive to be the level of support for those parties.

I also say, particularly to Conservative Members, that the revised expenditure limits set out in the Bill are not necessarily our last word on the matter. We remain open to argument if better, more workable proposals can be introduced. I have to say—I do not say this with any arrogance—that, so far, I have not seen any better and more workable alternatives than those in the Bill. I have asked the Opposition to come forward with their further and better particulars for some months. If they present them to us, we shall certainly consider them on their merits.

Mr. Simon Hughes (Southwark, North and Bermondsey)

I have a linked referendum question. In the Home Secretary's examination of part VII on referendums, has he considered two issues that do not appear in the Bill? The first is that referendums could be triggered by people other than the Government and the second is that the formulation of a referendum question should be arbitrated by someone other than the Government and the Government majority in Parliament. For example, the question could be arbitrated by the Electoral Commission.

The Government are committed to two referendums—one on the European currency and another on the electoral system—and the way to ensure that debate on each does not get clouded by the debate on how to take the decision would be to have a process that would decide the referendum question independently of Government and of Ministers of the day.

Mr. Straw

The hon. Gentleman puts two points to me. The first is whether we have considered the circumstances in which a referendum might be introduced by people other than the Government. The Bill deals with referendums that are determined by Parliament. It is possible to conceive of circumstances in which an Opposition Back-Bench Member introduces a private Member's Bill that will secure a referendum. In such a case, and notwithstanding the fact that the Bill had been introduced by an Opposition Member, Parliament would have decided on a referendum and the rules in the Bill would come into play. In practice, all previous referendums have been held on the basis of Government Bills. However, it is not Government but Parliament that decides to have a referendum. That is an important and profound distinction.

The hon. Gentleman's second point is the important one of whether there should be invigilation of the question set in a referendum. I am open to argument on that point, but my judgment is that, in the end, the question must be a matter for Parliament. The question should be clear when Parliament is coming to a decision on whether to approve a Bill proposing a referendum. However, there are good grounds for considering whether the Electoral Commission could have a role in advising Parliament and the Government on the wording of the question. It is plainly in nobody's interest to have a question that is either so confusing to the electorate or so patently biased as to lead to a decision by the electorate that remains open to question. However, it is a matter of record that the questions asked in referendums in the past have, on the whole, been fair. If a referendum is to have legitimacy, it is crucial that fairness is apparent in the question.

Mr. Dafydd Wigley (Caernarfon)

rose—

Mr. Frank Field (Birkenhead)

rose—

Mr. Straw

I shall give way to the right hon. Member for Caernarfon (Mr. Wigley) and then to my right hon. Friend.

Mr. Wigley

As the Home Secretary is coming to the conclusion of his remarks, may I ask him about his comment that the Government have an open mind about the figures and that they are prepared to discuss them in our later consideration of the Bill? Does that statement relate to the provision in clause 122, which sets a limit for by-election expenditure of £100,000 for each candidate? That is a massive figure and could lead to money influencing votes. The clause is against most of the Bill's other provisions, which we support, and that figure should be moved downwards.

Mr. Straw

The question is open to argument. Although I cannot speak for Plaid Cymru, I can speak for the three main parties in England, and it has been suggested that the total spent by each party in some parliamentary by-elections looks as though it may have exceeded the amounts submitted by candidates' agents.

Mr. Simon Hughes

Surely not.

Mr. Straw

The hon. Gentleman obviously has information to which I am not privy about the Liberal Democrats' practices. I have merely communicated a suspicion to the House. However, if it is true, it is important that expenditure limits are realistic and reflect a reality that is common to all parties.

We are open to argument, but to set a limit of £7,000 or £8,000 for a parliamentary by-election is unrealistic. It would take no account of the fact that by-elections these days are very different from those of even 40 years ago. They are not only local events in a constituency, but events of considerable national significance.

Mr. Field

I am grateful to the Home Secretary for giving way. May I say how much everyone—not just in the House, but in the country—will welcome his remarks about opening consultation on the question to be put in a referendum? It is crucial for the legitimacy of the process for people to feel that the question has been set as fairly as possible.

Will my right hon. Friend clarify to the House the provisions in the Bill for expenditure limits on outside campaigning organisations? Do I understand correctly that two rules are proposed in the Bill? There is a rule on the limit of expenditure by outside pressure groups for the period after the Government introduce the Bill for the referendum. That is a set amount, specified in the Bill. The second expenditure limit is in the year before a general election. That is 5 per cent. of what parties can spend in an election campaign.

My problem in understanding that is that, unless Parliament runs to the very end of its life, no one can know when the year preceding a general election begins. What advice would my right hon. Friend give to outside organisations on that point?

Mr. Straw

I am grateful—[Interruption.] No, I have loads of advice, and I ask the House to hold its breath while I offer it. I am grateful to my right hon. Friend for his remarks in respect of the referendum question, and for his representations to me about that matter.

My right hon. Friend asked a question that I have often been asked, and that has also been posed to the Neill committee. We have a maximum limit on the life of a Parliament but no minimum limit and, as we know from our recent history, elections over the past 30 years have taken place at various stages in a Government's term of office, ranging from three and a half years in the case of the Heath Government in the early 1970s, to five years—right against the buffer—on two successive occasions, in 1992 and 1997. Given those facts, the question is how political parties can judge the date from which to run the clock.

The answer is that, for accounting purposes, the clock will run retrospectively from the date of the general election. That will not be onerous on the political parties, because, in practice, expenditure by parties is largely end-loaded. However, it will provide a check on parties against anticipating an election and spending huge sums in advance of the election.

Given our constitutional arrangements and the fact that we do not have fixed elections, I accept that there is no perfect way of achieving the regulation that we all seek. I believe that our proposals are the best way of achieving that end, and will not cause the problems that are sometimes anticipated, but we are open to argument if we have missed something.

Mr. Field

Again, I am grateful to the Home Secretary for giving way. I applied my comments also to outside pressure groups. How can they judge when the clock has started, if the clock starts only when the Government call a general election? Is that not like saying that we encourage marriage, but we intend to introduce a Bill providing that, if people have not called a divorce within a certain period of time, they will be in serious trouble?

Mr. Straw

I shall not follow my right hon. Friend down the winding path of his metaphor, if that is all right. This is a debate about political parties, not family policy.

I do not accept my right hon. Friend's contention. In terms of the day-to-day non-campaigning part of their activity, third parties will not be caught by the provision but, if they seek to influence an election, which is the expenditure in question, our proposed arrangements are reasonable.

Dr. Julian Lewis (New Forest, East)

rose—

Mr. Straw

I must make progress. The leader of Plaid Cymru, the right hon. Member for Caernarfon, was rather optimistic when he suggested that I was about to come to the end of my remarks. I should like to take the House quickly through the main parts of the Bill—after all, that is the purpose of the Minister's speech on Second Reading.

Part I, which establishes the Electoral Commission, is the foundation for all that follows. To undertake its key role at the heart of our electoral arrangements, the commission must be as independent of the Government of the day as our constitutional arrangements allow, and it must be answerable directly to Parliament and not to Ministers. Much of the framework that we have put in place for the appointment of electoral commissioners and the funding of the Electoral Commission has been borrowed from the arrangements that apply, and have worked successfully, in the case of the Comptroller and Auditor General and the National Audit Office.

Part I confers a number of general functions on the commission. It will be responsible for keeping under review the law and conduct of elections and referendums. The Representation of the People Bill, which is before the House, makes a number of overdue reforms in the way in which we administer our elections. All too often in the past, our electoral law and practice have failed to keep up to date with changes in our political system, with changing life styles and with new technology. We need a better process for securing those changes, and the commission will provide that.

Clause 11 gives the commission an important education function. In that, we go beyond what Neill recommended, but I hope that the measure has the approval of the whole House. There is no easy answer to the problem of low turnout at elections. We cannot therefore expect miracles from the Electoral Commission. We have, however, been slow in this country to recognise the importance of preparing people to participate in civic life. There is considerably more to that than simply explaining the mechanics of voting.

People will turn out to vote only if they see the value of voting. That comes from an understanding of our institutions of government and from a realisation that politics and politicians make a difference to our daily lives. The new citizenship curriculum being introduced into schools in September is one important step. How we act and behave as politicians is another, and the civic education programmes of the Electoral Commission will be a third.

Part II, for the most part, simply re-enacts with modifications the Registration of Political Parties Act 1998 except in one important respect.

Dr. Tony Wright (Cannock Chase)

I want to ask my right hon. Friend a question before he leaves the subject of the Electoral Commission, which is in some ways the most fundamental part of the Bill. Before every election, there is a charade about whether there will be a debate between the party leaders. Will the Bill regulate election broadcasting, as it will regulate the rest of political broadcasting, so that we can stop all those silly games? We would then know exactly what we would get, we could organise matters in a grown-up way and the commission would have the same authority over such broadcasting as it will have over the setting of referendum questions.

Mr. Straw

The Bill does not regulate party election broadcasts, and it is appropriate that the commission should not. Traditionally, that has been sorted out by discussion between the political parties and the broadcasting authorities. For all the defects concerning debates between party leaders, the arrangements work well, and the position in this country is certainly better than that in many countries where political parties have to purchase air time, with all the distortion that that produces. I doubt whether a commission that wants to be independent will want to take on such a task.

Mr. Julian Brazier (Canterbury)

The Home Secretary has just paid an implicit tribute to those in all political parties who become involved in political life. Most of those people are, of course, unpaid. How does he reconcile what he has just said with the Government's attitude to political honours; for example, for those involved in local government?

Mr. Straw

I am certainly fully aware that people from all parties who give distinguished public service, often based on their political position, are honoured by the Government. The hon. Gentleman will know that it is a matter of order in the House that we do not question the award of honours, save on a substantive motion, so, if he will excuse me, I will not pursue that matter.

As I said, part II re-enacts, with modifications, the Registration of Political Parties Act 1998, except in one important respect. The registration scheme set out in the 1998 Act was essentially a voluntary one. In contrast, part II brings any organisation that supports candidates at an election within the ambit of the controls on donations and campaign expenditure.

Part III deals with accounting requirements. Over time, the commission can be expected to establish common accounting requirements, so that the accounts of all parties follow best practice and can fairly be compared, one with another.

Part IV delivers our manifesto commitments. Parties will be required to report on a quarterly basis all donations of £5,000 or more accepted by the central organisation, and £1,000 or more accepted by a constituency association or other sub-division of the party structure. In the immediate run-up to a general election, reports will have to be submitted weekly.

The prohibition on foreign funding and anonymous donations is achieved through the concept of a "permissible donor", which is to be found in clause 48. The categories include an individual registered to vote and a registered company or unincorporated association that conducts business in the United Kingdom. Trust funds, including blind trusts, are specifically excluded from the definition of a permissible donor.

Before leaving part IV, I draw the House's attention to clause 64 and schedule 6. The provisions place holders of elective office, including Members of Parliament, under a statutory duty to report donations of £1,000 or more to the Electoral Commission. Those arrangements will augment, not replace, the existing registers of interest maintained by the House and other elected bodies.

Parts V and VI control election expenditure by political parties and by third parties respectively. The limits on campaign expenditure by parties follow the recommendations of the Neill committee. In parliamentary general elections, a party will have an "allowance" of £30,000 for each constituency that it contests. The familiar limits for expenditure at local level will continue to apply.

The expenditure limits for third parties are equivalent to 5 per cent. of the maximum amount that could be spent by a political party at a relevant national election. Those controls will cover national spending by trade unions, companies and others that is intended by those organisations to influence the outcome of an election.

Part VIII builds on the Representation of the People Bill by further changing the Representation of the People Act 1983 with a view to hauling its provisions at least into the 20th century, if not quite into the 21st century. I particularly draw your attention to clause 125, Mr. Deputy Speaker. It is designed to introduce into the 1983 Act the measure of clarity that Madam Speaker found that it lacked, following the successful appeal by my hon. Friend the Member for Newark (Mrs. Jones) against her conviction for a corrupt practice.

The House will be aware that, in the 1997–98 Session, the Select Committee on Home Affairs unanimously concluded that the existing 20-year qualifying period for registration as an overseas voter was excessive. The Government concur with that view. However, it is arguable that the Committee's recommendation that the qualifying period be reduced to five years goes too far in the other direction. Therefore, clause 130 provides for a reduction to 10 years, and that is a balanced and equitable response to the Committee's recommendation.

I should add that I do not propose to commence that provision until after the next general election, and then only when the new system of rolling registration is in place. That will ensure that a British citizen returning to this country after spending a period abroad will normally be able to re-register on the domestic register within six weeks at most. It takes anything up to 15 months under the existing annual registration arrangements.

Mrs. Llin Golding (Newcastle-under-Lyme)

The clause does nothing to prevent plumping. My right hon. Friend will recall that, in a by-election in the Vale of Glamorgan, Conservatives Abroad put all its overseas voters into that constituency, thereby denying my hon. Friend the current Member for Vale of Glamorgan (Mr. Smith) victory on that occasion. Cannot the Bill ensure that the place where people register is linked to the area in which they lived or were registered before they went abroad?

Mr. Straw

I am interested in my hon. Friend's comments, although I believe that there are already requirements relating to proof of previous residence. I shall follow up those points and write to my hon. Friend, and ensure that the matter is taken up in Committee.

Mr. Simon Hughes

Will the Home Secretary give way?

Mr. Straw

I have already given way to the hon. Gentleman, and I should like to bring my remarks to a close.

Part IX puts into effect the Neill committee's recommendation that companies should be required to obtain the prior consent of their shareholders before making donations to parties or other political organisations. Political donations by a company are of such a unique nature that the decision should not, as it is at present, be left to the general discretion of the directors. The requirement will ensure that donations are made only when the management of a company can clearly demonstrate to shareholders—not less than every four years, according to Neill committee recommendations—that they are in the interests of the company.

Our objective is to effect as much as possible of the Bill by the next general election, whenever that may be. To achieve that will be no small undertaking, given that the successful establishment of the Electoral Commission will underpin all that follows. There are several imponderables in the timetable, for example, the timing of Royal Assent and that of the general election, which will be on or before May 2002.

All being well, we aim to have the electoral commissioners appointed and the Electoral Commission functioning by November. As soon as possible thereafter, I want to bring part II into force so that the transitional arrangements set out in clause 30 can come into play. Existing registered parties will then have six weeks in which to notify the Electoral Commission of the name of their registered treasurer and to deposit a scheme setting out their financial structure. It is only then—February or March 2001—that the accounting requirements and the controls on donations and on campaign expenditure, which are set out in parts III to VI, can come into force. The timetable is demanding, but, having established long-overdue controls on donations and campaign expenditure and consulted extensively on them, it is incumbent on us to do all that we can to have them in place for the next election.

We want to work with all parties to prepare them for the implementation of the Bill. We will offer what guidance we can in the run-up to the establishment of the Electoral Commission. However, there is a limit to what the Home Office or the commission can do. In the end, it will be down to each party to prepare for those far-reaching changes. The preparations need to start now.

We should not underestimate the importance of the Bill. The conduct of elections will never be quite the same again. As with all changes to electoral law, we wish, as much as possible, to proceed on the basis of consensus. I have no doubt that the right hon. Member for North-West Hampshire (Sir G. Young) will have points of detail to make, but I take comfort from the broadly supportive comments of the right hon. Member for Richmond, Yorks (Mr. Hague) during the debate on the Loyal Address. The time has come to get down to the business of restoring public confidence in our political institutions. The Bill aims to achieve that, and I commend it to the House.

5.2 pm

Sir George Young (North-West Hampshire)

The Second Reading of this Bill marks a further step in the progress towards the statute book of the Neill committee's recommendations. Since the report was published in October 1998, we have had a full day's debate in the House on 9 November that year and the publication of the White Paper and the draft Bill, launched by the Home Secretary's statement, followed by questions and answers on 27 July last year. Just before Christmas, the Bill and the explanatory notes were published, and they are now before the House.

At each stage, the Opposition have made it clear that we accept Lord Neill's recommendations, and we will not obstruct their passage on to the statute book. I join the Home Secretary in paying tribute to Lord Neill and his committee—they have managed to build consensus out of the bricks of political contention. We accept the establishment of the Electoral Commission, the accounting requirements for political parties, the principle of containing national campaign expenditure at a general election, and the reporting of major donations and the restrictions on third parties. I agree with almost everything that the Home Secretary has just said.

My party's criticism of the Bill is that it rejects the Neill committee's recommendations on two points. However, I was delighted to hear the more conciliatory passage about referendums in the Home Secretary's speech. I shall discuss that shortly. The key objective of putting the Neill recommendations on the statute book is to enhance the status, credibility and integrity of the profession of politics. For that reason alone, it is particularly important for Government to resist the temptation to tweak the Neill committee's recommendations to seek party advantage. If they gave in to that temptation, it would add to public cynicism about the political process instead of defusing it.

Paragraph 2.34 of the Neill committee's report states: We wish to emphasise that our recommendations have been conceived as part of an overall integrated scheme for the funding of political parties. There is a direct linkage between all recommendations, which should be viewed as a whole. The Government should pay attention to that assertion.

I want to make one or two general points.

Mr. Peter Bradley

Further to the Neill principles, can the right hon. Gentleman confirm that the Conservative party conforms both in spirit and to the letter of the recommendations of the Neill report?

Sir George Young

I have said that we accept the Neill recommendations and we will not obstruct their passage on to the statute book. Our disagreement with the Government is about where they have departed from Neill.

I want to make some general points, ask questions about the Bill and then say a word or two about those aspects where we think that the Government should follow Neill. First, this is a constitutional Bill and we believe that key sections should be taken on the Floor of the House. I note that there is no resolution to that effect at the moment. I hope that the Home Secretary will agree that discussions should take place between the usual channels because legislation on the holding of referendums, establishing an Electoral Commission, controlling political parties and restricting the franchise deals with clearly constitutional issues that are of interest to all hon. Members and would qualify to be considered in the Chamber.

Secondly, although it is common ground that politics here should be cleaned up—no party is beyond reproach—we should note that this country has been spared the scale of corruption that has plagued other democratic countries. Thanks to a vigilant press, a neutral and professional civil service, Opposition parties and Back Benchers in Parliament, the Public Accounts Committee and the National Audit Office, it is more difficult to contaminate the decision-making process and for corruption to flourish in the United Kingdom than elsewhere. Those who have flirted with that have rightly paid a heavy price, and few people in this country choose politics as a means of enriching themselves. As the Neill report states: 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". Thirdly, to pick up something that the Home Secretary said, there is nothing wrong in giving money to a political party. If we reject state funding—I believe that most hon. Members do—and agree with the Neill committee that political parties are essential to democracy", giving to a political party promotes and strengthens that democracy. Indeed, Neill went on to assert: We have been given no evidence that leads us to doubt that nearly all"— large givers— 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. None the less, there is a price that has been paid because people do not know who is paying how much for what and standards have been lower than they should be. The Bill can help to rebuild public confidence in the political process.

Mr. MacShane

Before the right hon. Gentleman leaves the subject of public funding for political democracy, may I ask whether he is repudiating the £3 million that the official Opposition receive and the very handsome extra salary and the free car that the Leader of the Opposition receives, all of which is paid for by taxpayers' money?

Sir George Young

If the hon. Gentleman had been in the Chamber in June last year when that matter was debated, he would have heard me speak on behalf of the Opposition about the implementation of the Short recommendations on the funding of Opposition parties. He will see on the record exactly what I said on that occasion.

I shall make another general point at this stage. It relates to what I call the school governor syndrome. Many of us have been school governors—the Home Secretary may still be one—but it has become more difficult to recruit school governors, not because people are any less interested in, or committed to, the fortunes of their school, but because the responsibilities, the bureaucracy and the time required have increased to the extent that it is a less attractive proposition for a volunteer with other commitments. The same sort of risk is involved in putting our essentially voluntary political organisations into a new regulatory framework.

Has the Home Secretary sat down with the treasurer of the Blackburn Labour party and gone through the eight pages of schedule 6, and in particular paragraph 10, which deals with the offence of failing to deliver a donation report? Has the Home Secretary discussed with him the spine-chilling schedule 19? Many local associations on all sides are working hard to balance the books, find candidates for local elections, pay the quota and pay the agent, should they have one. We need to keep an eye on the burdens that we put on voluntary organisations, not least because the problems that have arisen have been at head office rather than in the branches.

I deal now with some of the questions that have been asked. The key one, which the Home Secretary touched on towards the end of his speech, is: when will the Bill kick in? Let us assume that there will be a general election in the spring of next year and that this Bill reaches the statute book in late summer. Does the Home Secretary believe that all the Bill's provisions will be up and running in time for the next general election? The commission will need to find headquarters, recruit up to 50 people, set up the procedures for registration, give guidance on accounts and enable third parties to register.

In November 1998, the Home Secretary said: We want fair and effective controls in place for the next general election."—[Official Report, 9 November 1998; Vol. 319. c. 58.] If there is an election in spring 2001, schedule 8 could bite and affect campaign expenditure incurred once the Bill becomes law. All parties preparing to contest that election will need to know whether they will be fighting it under the present regime or the new one. In its leader today, The Times suggested that there may be an election this autumn. I assume that the Bill will not be implemented by then.

The commencement date will also be of interest to those defined as third parties. Voluntary bodies with environmental interests, interests in animal welfare and in a host of other issues that come up at a general election may need to register and set up the necessary accounting arrangements if they are to play a part in the next election and stay the right side of the law. They would appreciate a little more light being shed on commencement dates.

Will the Home Secretary rule out the holding of any referendum until the Bill's provisions are up and running? If he does so, is that not an explicit admission that the Government will go into the next election with a manifesto commitment from the last that has not been honoured—namely, the commitment to hold a referendum on an alternative to first past the post?

On a related point, clause 10 deals with policy development grants, which will benefit everyone in this House apart, I am sorry to say, from the Member for Tatton (Mr. Bell). The Bill says that these grants are to assist the party with the development of policies for inclusion in any manifesto". Does the Home Secretary envisage such grants being paid in time for useful work to be done by all the political parties before the next election, or is this a recommendation of Neill that will have to wait until the next Parliament to take effect?

Clause 11 deals with education about electoral and democratic systems. Will the Electoral Commission get drawn into the debate about the merits of competing electoral systems? I very much hope that it will not. If we are to have a referendum on first past the post versus alternative vote-plus, umpired by the commission which will see fair play, we cannot also have the umpire promoting the virtues of alternative vote-plus under this clause. Those powers will need careful definition.

The same clause gives the Electoral Commission a duty to promote public awareness of the institutions of the European Union. My understanding is that the institutions of the European Union already have a budget to do that, and I wonder whether there is a risk of duplication.

What would be the position if there were a referendum on PR or the euro? Could public money, as dispensed by the commission by way of grants under clause 11, be used to fund partisan campaigning? There are no safeguards in the Bill to prevent that from happening, and we shall certainly want to consider the matter again in Committee.

Clause 22 contains a convenient subsection—subsection (8)—which grants trade unions exemption from being part of the Labour party. Twenty eight trade unions are affiliated to the Labour party, and Neill tells us that 44 per cent, of the expenditure from all political funds goes to the Labour party in affiliation fees, and much of the remainder is spent on activities or advertising likely to support the Labour party. Despite the fact that those trade unions are affiliated to the Labour party, this subsection says that they are not. Is it logical to regard those trade unions as totally separate from the Labour party when they are joined at the hip?

We shall need a better definition of a donation and of sponsorship under clause 45. Charities that take stands at party conferences are worried that they may be caught by the definition of a donation. Firms that send delegates to the party conference might find they have inadvertently sponsored the party. What about advertisements in conference publications or in dinner programmes? Are they deemed to be donations that require shareholder approval or declarations by individuals? What about sponsorship of the passes for the Labour party conference? Does such commercial advertising require shareholders' consent?

We need more of an explanation than we have so far had of why clause 130 on overseas voters is in the Bill, given that the Bill implements the Neill report and that that issue was not dealt with by Neill. The Committee considering the Representation of the People Bill will deal with the issue of overseas voters on Wednesday. July's White Paper made no reference to reducing the 20-year period that qualifies overseas voters. The Government have introduced this issue into the Bill, although it was not considered either by the Neill committee or by the working party on electoral procedures. Although the Labour party gave its support to a 20-year limit in 1989, it now plans to change that. I was, however, grateful for the Home Secretary's confirmation that no change would be made until after the next election and the introduction of the rolling register. I believe that some British citizens will have been entirely disfranchised by a piece of legislation for the first time since 1832.

The Government have rejected the Neill recommendations in relation to two issues. I think that it is on the proposals for referendums that they move furthest from the recommendations and are on the thinnest ice. In paragraph 12.21, Neill clearly makes the point that, in referendums, political parties may be pitted against one another, or most of them may find themselves on the same side, or one or more may be seriously split. The report states: Whatever happens in any particular case, it is clear that general rules governing the conduct of referendums cannot be based on predictions about the parties' behaviour or assumptions about their role. It also states: The parties should certainly not be assumed to be central to all referendum campaigns". The Neill committee rejected the Labour party's assertion in its evidence—quoted in paragraph 12.25—that the focus of any regulation should be on the political parties. Neill concluded: We do not accept that the focus of any regulation should be on the political parties. To represent referendum campaigns as merely another manifestation of the usual party political battle seems to us both misconceived in principle and false to the history of referendums since 1975. We believe that arrangements should indeed be put in place that are specific to referendums but that they should not be based on the idea that parties are the main players in the process. The Bill simply reinstates the arguments that the Labour party put to Neill and that Neill rejected. Indeed, anyone reading the White Paper quickly might be misled into believing that Labour had accepted Neill. Paragraph 8.2 of the White Paper states: The Committee's report contains a set of recommendations on these matters which the Government accepts. In fact, the Government have accepted an entirely different set of recommendations.

The position adopted in the Bill is difficult to defend. In the event of a referendum on proportional representation, the Bill allows the Labour party to spend £5 million. That money might be spent by the Home Secretary in favour of first past the post, or by the Foreign Secretary in favour of AV-plus. That Labour contribution, which might come down on either side, would dwarf the £600,000 or so received by the umbrella bodies from the taxpayer. That shows the difficulty of predicating expenditure limits for referendums on issues such as PR on reference to political parties. Similarly, there is no logic in relating such limits to the share of the vote at the last election. The issue of the referendum may not have been on the radar screen at the time of the last election, or the parties may have been split.

As the Home Secretary knows, the Neill committee expressed concerns about the Government's proposals in its letter of 15 October. The letter says: We recognise that some of your recommendations in relation to the conduct of referendums differ from our proposals quite materially, the most significant being your decision to put a cap on referendum expenditure by political parties and other organisations … however, we are concerned that the detail of your proposals could give rise to some difficulties. You have proposed that, for a United Kingdom-wide referendum, there should be a limit of £5 million for each political party with two or more Members of the House of Commons, with a similar restriction on umbrella groups. If in a particular referendum most political parties were on the same side of the argument, there would be a risk that such an arrangement could work unfairly. We are also concerned that the proposed arrangement provides a disincentive to the formation of umbrella groups, and we question whether it is right that political parties, irrespective of the number of Members … should be subject to the same £5 million cap. I recognise that the Government have changed the figures, but the principle enunciated by Neill—that the arrangements could work unfairly—is still valid. If there are to be limits, they should surely apply to each side of the argument rather than to individual political parties, whose members may well be on both sides of the argument. I am glad that the Home Secretary is prepared to look at the matter again.

Mr. Brazier

I thank my right hon. Friend for allowing me to intervene on his customarily thoughtful speech. I refer to a comment that he made earlier. Regardless of whether the Home Secretary has consulted Blackburn's Labour party treasurer, is there not something faintly ridiculous in the idea that Labour might impose a £5 million spending limit on the basis of one side of the argument, given that a recently leaked opinion poll revealed that three quarters of Labour activists were on the other side?

Sir George Young

There would be a lively debate in the Labour party if it decided to spend £5 million in defiance of the view of many Labour party members.

Dr. Julian Lewis

I was intrigued by the Home Secretary's comment that there would be individual spending limits on individual pressure groups. As someone who used to run advocacy pressure groups, I know that, under that regime, I would immediately split my group into two, three or four groups to get around the restriction. Does that not mean that his provisions are completely naive and meaningless?

Sir George Young

The limits apply to each individual third party, so we could have a proliferation of third parties all spending up to the desired cap but spending in total more than anyone could under an overall cap. We will no doubt want to return to that matter in Committee.

The Government have made a further change that did not appear in Neill. At paragraph 12.41, the Neill committee asserted that we believe that … neither taxpayers' money nor the permanent Government machine … should be used to promote the Government side of the argument.

Mr. Straw

We can discuss the matter in more detail, but what is the right hon. Gentleman saying on the issue of spending limits? He has criticised the Government, despite the fact that we have moved. Is he saying that there should be an absolute limit on spending by either side in a referendum, as in Quebec?

Sir George Young

Neill recommended no cap at all; if one were to accept Neill's recommendation, there would be no cap. If we are to have a cap, it should be done not by reference to political parties but according to the side of the debate. I note what the Secretary of State said about Quebec. It is worth looking at. It did not sound like a killer argument. I hope that he was genuine when he said that he would look at the matter again and will do so with a view to moving the cap away from political parties and to getting a balance between both sides of the argument in a referendum.

Mr. Field

Is it in the spirit of Neill to say that our aim should be to balance the budgets of either side of the argument? Neill puts great emphasis on the fact that a referendum campaign is different from a general election campaign. In a referendum campaign, it is important for a range of reasons to support one side of the argument to be put forward, not limited by a cap.

The absurdity of the current Government stance is that if Paul Sykes, who has already been mentioned, had bought the Daily Mirror when it was up for sale, there would have been no expenditure limits at all and every day the Daily Mirror could have published a particular view for or against the single currency. My hon. Friend the Member for Rotherham (Mr. MacShane), despite the photograph that has been circulated, is worried about such a campaign spending money to circulate leaflets. Is it not bizarre to say that the press should have no restrictions at all, but old-fashioned campaigning groups should?

Sir George Young

The right hon. Gentleman makes a valid point. Neill argued against caps because he thought that they were ineffective. Even under the Bill, it will still be possible for the press to spend as much as they want until the campaigning period begins. The Home Secretary indicated that there is some unease about what is in the Bill and that he has an open mind on the matter.

I go back to the point that I was making. Neill asserted that neither taxpayers' money nor the permanent Government machine … should be used to promote the Government side of the argument. On that recommendation on page 66 of the White Paper, the Government have written "Agreed", but that is not the case. Under the Bill, the Government would be able to publish material on the case for a particular result until a period of 28 days leading up to the poll. That could be influential. Those two changes run the risk of creating an uneven playing field, something that Neill was keen to avoid. We will want to return to those subjects in Committee and hope that the Government will have second thoughts.

The second area where Neill was rejected was on tax relief at the basic rate for small donations of up to £500. I notice that the Home Secretary said that he remained unpersuaded. I do not know whether that means that there is a chink of light and we may be able to persuade him. He did not seem to be so dogmatic as to reject it totally. Neill weighed up the pros and cons and came down in favour.

Other recommendations in Neill had resource implications, but the Government have taken them in their stride. They have increased the Short money; they are helping the parties with the changes necessary for registration; they are paying £2.6 million, which is the running cost of the Electoral Commission; and they are paying £2 million, which will be allocated yearly, as policy development grants. The Government are spending a comparable sum on their own special advisers. It is difficult to argue that the £4 million in that particular recommendation would break the bank, and rejecting it exposes the Government—unnecessarily, I think—to the argument about cherry-picking and seeking advantage.

In particular, it is perverse to criticise parties for over-dependence on large donors, but then to reject the very recommendation that would reduce that over-dependence.

In the committee's view, the principal advantage of such a scheme was that it would encourage a different pattern to political donations, so that parties would not rely for their funding needs on a relatively small number of donors each making large donations. The committee said: We have found very widespread support for the view that it is more democratic, and therefore in the public interest, that political parties should be funded by a large number of small donations rather than by a small number of large donations. A system of tax relief which increases the value to political parties of smaller donations is likely to encourage the parties to make greater efforts to obtain them. As the Home Secretary knows, the committee wrote a letter in which it said how disappointed it was with the Government's recommendations, and invited the Government to make an estimate of the costs. The committee stated: we strongly urge you to reconsider our proposals on tax relief on political donations in the light of your conclusions as to the administrative cost of their implementation. On those two issues, we hope that the Government will think again. The Bill will enact many of the recommendations of the Neill committee that the Opposition support. On referendum spending and on small donations, the Government have decided, so far, not to implement Neill.

The Opposition will not divide the House on Second Reading, but we invite the Government to think again on those key issues during proceedings in Committee.

5.27 pm

Mr. Frank Field (Birkenhead)

The Bill is immensely important, and the House has been treated to two very serious speeches—by the Home Secretary and by the shadow Leader of the House—that bode well for the ensuing debate. I hope that my hon. Friend the Member for Cannock Chase (Dr. Wright) will forgive me for saying that I take particular pleasure in the Home Secretary's growing stature: each time that he speaks in the House, he seems even more confident in mastering his brief. Although that gives particular pleasure to Labour Members, I should hope that it pleases both sides of the House.

I also hope that the spirit in which the Home Secretary commented on various key issues will be translated into the words on the record. All hon. Members will know only too well that, even with the best intentions, our comments do not always appear in the record as we should wish.

I should like merely to draw the Home Secretary's attention to two aspects of his speech. First, he drew an analogy—I used one also in my intervention—between the National Audit Office and the Electoral Commission, and such a parallel can only strengthen the United Kingdom's political process. Most members of the public may not be aware of the National Audit Office, but—thank goodness—politicians and those who practise politics know only too well what that body is about and the independence that it maintains. It bodes very well for the future that the commission is being modelled on that type of success.

The other immensely important aspect of the Home Secretary's speech was the issue of how questions are phrased not only in referendums generally, but in the referendum that most hon. Members will have in mind when debating the Bill—the one on the single currency. The Home Secretary's approach to the matter is very healthy and wholesome. No one in his right mind thinks for a moment that the Government will allow the matter to be settled by a committee. However, I welcome the Government's openness to receive opinions and their stated wish to ensure that the question is as clear and unambiguous as possible.

We are debating changes to our electoral system at a time when politicians' stock in the country is not very high, to put it mildly. The approach of my right hon. Friend the Home Secretary and the shadow Leader of the House can only add to the stature of politicians and political activity. That is good for everybody who is concerned with advancing and nurturing freedom.

For the proposals on the financing of third parties that want to campaign in a referendum to be workable, we shall have to lock some people up. Otherwise, the proposals will be unworkable, resulting in us looking foolish and our stock in the country falling.

To return to the point that I made during the intervention that my right hon. Friend kindly took, let me say that I understand how the rules will operate for outside campaigning bodies once a referendum Bill has been introduced to the House. We shall know that a clock starts ticking. The Bill will set a spending limit for the campaigning organisations that have registered. The worry is how those organisations, with the best will in the world, will remain within the law during the year before a general election. They will not know the date of a general election until the Government call it, but their expenditure in the 12 months before the election will be determined by the date of that election, even though they will have spent most of their 12-month budget before they know the date.

There are two choices. Either all campaigning organisations accept the formula for what they can spend in the year before the election campaign—and spend it every year from now on—or they take a risk in the hope that the courts will find in their favour when they plead that they acted in good faith and spent in the normal way, not knowing when the election would be.

Mr. MacShane

Is there not a third option—that this country joins the other mature democracies and has a fixed term for Parliament?

Mr. Field

There are all sorts of possibilities. Just as it is not sensible to expect the Government to surrender sovereignty over the final phrasing of a referendum question, no Government are likely to give up the considerable power of choosing the date of a general election. It may be desirable for an Opposition, but it is not practical politics.

I look forward to hearing what my hon. Friend the Under-Secretary says when he sums up later. There is much to support in the Bill, but I do not believe that the Government have got the formula right here. It is not workable—or could be made workable only by sending people to prison because they have unknowingly broken the law. In this country, the Government usually lose such cases. As with the poll tax, when the Government start sending people to prison, the rest of the country does not like it. Retrospective legislation will certainly not be popular.

I have one further question that my hon. Friend might be kind enough to answer later, about the funding of political parties in Northern Ireland. The Bill accepts the fiction that, while the Republic of Ireland is a separate country, we regard it differently in respect of overseas donations. Sinn Fein is a party that is spread throughout the Republic of Ireland as well as Northern Ireland, and it will be able to receive contributions from its organisation south of the border. The organisation north of the border will not have to publish details of where those funds have come from, other than the fact that the money has been given to Sinn Fein.

Will we require Sinn Fein in the Republic of Ireland to publish details of where its donations come from if it transfers money to its operation in Northern Ireland? We all know that considerable numbers of Irish-Americans have a particularly twisted view of this country, and enjoy raising large sums of money to be spent in a way that causes the British Government trouble. We are attempting, quite rightly, to clean up the acts of political parties in this country, but it is wrong to allow funding from overseas donations to come to Sinn Fein in the Republic of Ireland and then be transferred to and spent in Northern Ireland—which is, after all, still part of this country.

I welcome so many of the Bill's proposals, and the spirit in which the Home Secretary introduced the Bill today. However, I make a plea to my right hon. and hon. Friends on the Front Bench. I do not believe that they are proposing workable measures in the Bill to control the expenditure of those outside pressure groups which will necessarily wish to influence the result of a referendum. In this instance, the Neill committee's reasoning holds, and I hope that, before we progress much further, the Government will concede that point.

5.37 pm

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

I agree with the underlying purposes of the Bill, and I accept what the right hon. Member for Birkenhead (Mr. Field) said about its importance and seriousness. I do not doubt that we shall wish to return to some of the issues that the right hon. Gentleman raised about the conduct of referendums and ensuring fairness.

I want to express my appreciation to the Neill committee, and to the Government for proposing the Bill. Most of the measures contained within it have my support. My only concern is that the Bill does not go far enough to deal with what people on both sides of the House recognise as the serious public perception that our system of financing political parties is wide open to abuse, has been abused and has discredited the Westminster system, almost to the point at which there has been a switch-off and a withdrawal of public support. It is difficult to link that with the decline in voting on which we have remarked in earlier debates, but there is considerable concern.

The concern was fostered by episodes such as the Polly Peck affair, and the situation was not helped by Mr. Bernie Ecclestone. Allegations have been made from both sides of the House that the honours system has been abused for funding purposes. I doubt whether the Bill by itself can remove all of those concerns but, even if a Bill cannot wipe out all the problems, that is not to say that, in itself, it is not of some value. In so far as the Bill is fostering openness about giving, it must enjoy the support of the House. We shall certainly support it tonight.

Some of the measures are of particular value. I have long advocated, and am delighted about, the establishment of a powerful independent Electoral Commission, which will have a role in respect of referendums and of broadcasting. I dissent somewhat from the Home Secretary's view that everything in broadcasting is perfectly satisfactory. He gave the impression that the usual channels arrangements had worked admirably, but that is not my colleagues' view. I am glad that the commission is to be allowed at least to make recommendations to the broadcasters and to engage in dialogue with them. We welcome that important safeguard, which seems not to have flowed from Neill but to be a modification by the Government, for which we are grateful.

The Bill provides that shareholders will have some say before their money is allocated to political causes. That is not merely equitable and in line with the rights of trade union members: it is long overdue. I am happy that the provision now appears to enjoy cross-party support.

Another important issue, which I believe stems from Neill, is that, flowing from the definition of a permissible source, it appears that younger citizens who are not on an electoral register may be debarred from giving money to a political party and perhaps even, per consequence, from joining one. That would not, I think, be the Government's wish, and it is certainly not ours. I hope that the point can be cleared up.

Mr. Straw

People under 18 will be eligible to make donations of up to £200. I do not think that there are all that many under-18s who would want to give more than that. The Bill also contains arrangements to cover multiple donations, of up to £5,000.

Mr. Maclennan

My concerns are partially assuaged by that. We can consider the point in Committee.

In our desire to ensure that money does not come from foreign companies, we have had to recognise the special position of companies operating under European law and carrying on business here. As I understand it, those companies may be permitted to donate. There is an area of uncertainty in my mind about the position of European party organisations campaigning in European elections. Increasingly, as the European Parliament becomes more authoritative and more democratic, it is to be anticipated that parties will be linked. Foreign parties should not be debarred from assisting British parties, and vice versa—although that is obviously not covered by the Bill. I hope that the provisions on foreign funding sources will not unintentionally preclude such assistance.

The Bill appears to depart surprisingly from the Neill recommendations in respect of the sanctions to be applied in the event that a party dishonestly accepts a non-permissible donation. Neill proposed that the treasurer or individual responsible for monitoring such matters might be liable to criminal prosecution and that the party might forfeit a sum of up to 10 times the offending donation.

The Bill retains the risk of criminal prosecution, but it would subject the party only to the risk of forfeiting the original sum. That does not appear to be a particular disincentive to accepting money from unsuitable sources. We can return to the issue, but why did not the Government follow Neill's recommendation on that point?

The right hon. Member for North-West Hampshire (Sir G. Young) mentioned another departure from Neill in respect of the taxation of donations of £500 or less to political parties. I agree with the right hon. Gentleman, because our politics would be healthier if more people were involved in the funding of political parties. If it were more widely recognised that making political donations was a virtuous participation in democracy and the public were given every possible encouragement to do so, parties would not be driven to seek the massive funding from rich individuals that has characterised the funding of the two major political parties in the past. That valuable proposal has been dropped without adequate explanation of the Government's thinking.

There are wider considerations concerning the encouraging of private spending initiatives. I was interested to read in The Times this morning of the Chancellor's interest in encouraging charitable spending. He even trailed some expectation that the Budget might offer some inducement to such expenditure by individuals to foster the civic society. If we are to foster the civic society by offering charitable relief, we have now a golden opportunity to restate the case for the involvement of citizens directly in their democracy through participation in the electoral process by donation. I hope that the Government will reconsider the issue.

I am not sure of the answer to my final point of detail. The issue was raised by the Government and has been the subject of some dialogue across the Floor in this debate. I do not argue with the one-year limit on election expenditure, to be computed retrospectively, but the problem is partly a result of the nonsense that allows the Prime Minister, who is a competitor in the race, to fire the starting gun. That is a constitutional anomaly that is rare in other countries. It should be eliminated by providing a terminal date for Parliament so that no party is disadvantaged. It is much clearer to the Government when the clock will start ticking on expenditure than it can be to even the most shrewd and experienced observers of the political scene.

My main concern is another phenomenon that has been developing. Elections in this country are increasingly fought and won in as few as 100 constituencies. Having a cut-off point for expenditure will not deal with that problem. Those constituencies that will determine the next election are identifiable today. The Home Secretary said that expenditure was end-loaded—or some such expression—but, in those constituencies, it could be front-loaded as a means of avoiding the consequences of this provision.

Dr. Julian Lewis

In support of what the right hon. Gentleman has just said, let me say that political parties may, as the Home Secretary said, tend to concentrate most of their expenditure nearer the election or referendum than at an earlier stage. However, pressure groups will tend to take a much longer view; they will want to spend their available money much more evenly throughout the whole period, but will not know when they are allowed to start doing so.

Mr. Maclennan

That is a fair point. It reinforces my view about the desirability of ending the uncertainty about the date of elections, so that calculations on funding and other matters can be made freely and openly. In prefacing my remarks on this point, I said that I was not sure what the answer was within the ambit of the Bill. My fear is that the limit provided will not be effective—perhaps it cannot be. Perhaps we should introduce a set and predictable date for elections.

I believe that the Bill, although well intentioned and quite useful, so far as it goes, will not significantly alter the public perception about the possibility of buying political support. Transparency is important and desirable—however, we have for many years seen transparency at work in other countries. In the United States, people openly give money to candidates for election to the Presidency. Millions of dollars are spent openly, yet the cynicism of the public in that country must not be under-estimated, despite the existence of complete transparency and the fact that it is possible to chart the favours bought and given for that money. An article in The Guardian pointed that out as recently as last Friday.

I fear that, in putting all the emphasis on transparency, the Government have missed a real opportunity to do something that would really change the public perception. I regret, in particular, that they have not limited donations by individuals. This could be seen as a self-serving view from a Liberal Democrat who is incapable of summoning the kind of assistance that Mr. Bernie Ecclestone gave the Labour party. I do not for a moment deny our inability to summon to our war chest the sums of money that can be commanded by those who are either in Government or can present themselves as tolerably likely to be in Government. That is the reality—it is why that kind of money is given, and will continue to be given unless the practice is stopped.

The Neill committee considered the issue. It pointed out that, in the 1997 election, the Labour party received 21 donations of more than £50,000, and that, in 1996–97, the Conservative-party received 119 such donations. It is simply not tenable to argue that people who donate large sums of money are not courted by senior members of those political parties. So long as that happens, and large sums of money are donated by powerful, industrial figures, the public will be suspicious about what the donors are getting in return. It is hard to deny the probability of a major quid pro quo; people do not give such sums out of the goodness of their heart, or because of their peculiar commitment to supporting democracy instead of buying a painting by El Greco.

The only way to eradicate such suspicions is to limit donations. We proposed to the Neill committee that the limit should be £50,000, but appear to have been unable to obtain consensus in respect of that or any other figure. But the principle still needs arguing.

If there is disappointment that the Bill does not deliver the public confidence the Government claim that they seek to secure, I hope that they will return to the issue with an open mind. Incidentally, they will probably find it more difficult to obtain such large sums of money, although perhaps not for a few years—however, that is not the point. The point is that the commitment to democracy should be spread across many more people, and donations should be capped at a much lower level. However, that would have a significant consequence for the funding of the two old political parties, as they used to be called. When elections are in the offing, the Labour and Conservative parties spend as if there were no tomorrow. Indeed, representatives gave evidence to the Neill committee of how it works from their point of view, and how they had to raise funds of more than £10 million to meet the challenges of elections.

I think that we are spending too much on elections. We have not yet gone as far as the United States, but the need to raise such sums of money goes far beyond what is required to ensure that the issues about which the electors are being asked to decide are properly understood.

Not only is more being spent on each general election, but there is, concurrently, a requirement—which I welcome—to spend more on other elections. I refer to elections for the mayoralty in London, the Scottish Parliament, the Welsh Assembly and the European Parliament. Demand for money with which political parties can fight those elections is growing exponentially. If we do not cap donations at a lower level than that proposed by the Government, political parties will be forced to go cap in hand to rich donors and entertain them at the Dome, and the favours that the donors ask for will be more difficult to withhold.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich)

I apologise for not having heard the opening speeches. Is the right hon. Gentleman saying that he wants to change the whole electoral system in favour of proportional representation and various other major changes, while not allowing anyone to pay for it? Is he assuming that the state will pay for it all?

Mr. Maclennan

No, I am making no such assumptions. I have not mentioned the mode of election—nor, the hon. Lady may be surprised to discover, has it even been on my mind. I am, in this part of my speech, concerned much less with the effect of the Bill on Liberal Democrat fortunes than with the business of Government. The Labour party's dependence on substantial amounts of money donated by a handful of very rich people who can then call the tune is undesirable. The hon. Lady's party argued eloquently for state funding when in opposition. The Home Secretary appeared, uncharacteristically, to have forgotten, in his reply to my earlier intervention, that, as recently as 1994, in its evidence to the Select Committee on Home Affairs, the Labour party argued that the public were prepared, and would be more prepared, for an element of state funding. I am arguing only for a cap on expenditure that is substantially below what the Bill proposes, for a cap on individual giving of around £50,000, and for a modicum of state funding for elections.

Mr. Simon Hughes

Is my right hon. Friend aware that, just before Christmas, the Department of the Environment, Transport and the Regions announced that the cap on spending for this year's London mayoral elections should be set at £990,000 per candidate? There was widespread opposition to that announcement, as it seemed to make it even more clear that yet another potentially worthwhile electoral process could be bought by the few, rather than owned by the many.

Mr. Maclennan

I am grateful to my hon. Friend but I do not want to labour the point that I have made.

I do not suggest that the problem of the pressure on political parties in a modern democracy that arises from the need for funding will be solved entirely by state funding. It is simply a principle that we can espouse without changing very much the direction of our thinking about our democracy. Most aspects of elections are funded by the taxpayer, and the partial state funding of political parties does not seem to me to be a very big step beyond what has long been accepted as inevitable.

The dangers of not tackling the problem are rendered eminently clear by what is going on in Germany at the moment. But for the grace of God, the fate of ex-Chancellor Kohl and his colleagues could be shared by a number of senior figures in this country and in the United States. We should not be as complacent as I think we are at risk of being about our own system for funding politics and political parties.

My party and I welcome the Bill, but I hope that it will not be thought that it represents the end of the discussion. The Bill should not draw down the shutters on further steps to reinforce the process of paying for our democracy in a way that allows people to be confident that the system cannot be bought by people outside the political process, as has sometimes happened.

6.3 pm

Mr. David Winnick (Walsall, North)

The right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) can be satisfied that the Bill will not by any means be the end of the debate.

Speaking for the official Opposition, the right hon. Member for North-West Hampshire (Sir G. Young) said that our record in connection with funding for political parties is better than that of other countries, and I would not disagree. However, the right hon. Gentleman would agree with me, I am sure, that we should not be complacent: enough has happened in the past few years to cause a good deal of disquiet among people who would not normally be worried about party financing.

Over the years, I and other colleagues have pressed for reform of the rules governing party funding and general election expenditure. On 12 February 1997, just before the general election, I introduced the most recent of my ten-minute Bills on the subject. I am glad to say that a good deal of what was advocated in that and in other colleagues' proposals has been incorporated in the Bill. We are making progress.

The then Conservative Government and Labour Opposition were very critical of each other's money raising methods, and I pointed out at the time that it was difficult to understand why the matter had not been referred to the Committee on Standards in Public Life. In the circumstances, that seemed the appropriate course of action, but the then Prime Minister, the right hon. Member for Huntingdon (Mr. Major)—to whom I sent a note to the effect that I would mention him in passing in this debate—refused to do so. When the committee was set up under Lord Nolan, Labour Members pressed again and again for it to consider party funding, but the right hon. Gentleman told the House: I do not believe that that is the right way to proceed."—[Official Report, 21 May 1996; Vol. 278, c. 95.] The right hon. Member for North-West Hampshire did not really explain why the question of funding was not considered when his party held office, but I am genuinely pleased that he has accepted much of what is in the Bill, and that he has said that the Conservative party will not vote against it tonight.

I am pleased at that, not because there is any danger that the Government might lose in a Division, but because we are slowly approaching unanimity on the question of party expenditure and funding generally. That is useful, and will do much for British public life.

The Bill provides that donations above £5,000 will have to be declared. I see that my right hon. Friend the Home Secretary is about to leave the Chamber. Before he does so, I want to tell him that I should like the sum to be £2,000. That proposal may or may not be accepted in Committee, but there is a case to be made for it.

Mr. MacShane

The experience in America is that the sum can be set at any level, because it is always divvied up. For example, if the limit is £5,000, and a person wants to donate £50,000, he can find nine others to give £5,000 each. Ways can always be found to get around any limit that is set.

Mr. Winnick

That is an argument against any restriction being established, but I am not persuaded.

I am also in favour, despite what my hon. Friend has just said, of restricting the amount that any individual, or members of his or her immediate family, can donate. It is unfortunate that one person can donate a very substantial amount of money, even when it is done for the best of reasons. Any such donation to the Labour party would of course be for the best of reasons, but even so I consider it undesirable that the amount is not restricted. Again, that may be a matter for consideration in Committee.

Mr. Peter Bradley

Normally, I follow the arguments of my hon. Friend very closely, but does he not agree, on reflection, that his proposal that donations to political parties ought to be restricted to one or two members of a family is profoundly undemocratic? It is almost like saying that only one or two family members can have the vote.

Mr. Winnick

That is my hon. Friend's view. However, it is obvious that any restriction on how much an individual can donate can be got around very easily, as a person can get his or her spouse or adult children to contribute. The real argument is whether a person should be prevented from giving more than a certain sum. My hon. Friend obviously disagrees—one of the rare instances of disagreement between us. My views are along the lines that I have advocated.

Mr. Andrew Robathan (Blaby)

Would the hon. Gentleman include in his proposed restrictions the possibility that family members might make donations to different parties? Not all family members vote the same way, after all. Would the hon. Gentleman ensure that there would be an upper limit on the amount that a husband could give to one party, and on what his wife could give to another? How would he make that work?

Mr. Winnick

That is an interesting point, which could be considered in Committee.

Blind trusts have been the subject of a good deal of criticism. It is right that they should now be outlawed, and I welcome that. I basically believe—this has long been my view as well as that of the Labour party—that all political funding should be known, declared and above board. The proposed Electoral Commission will have a job on its hands and I can well imagine the complaints that will be made to it by the Government, the Opposition and the Liberal Democrats. Like the Committee on Standards in Public Life, it can expect such complaints and there is nothing wrong with that. However, it must have—my right hon. Friend the Home Secretary persuaded me that it will have—the powers to police fully party income and expenditure. It will no doubt issue annual reports and I trust that the people appointed to it—I hope that they will not be the subject of any controversy—will stand no nonsense and will not be browbeaten by the Government, the Opposition or anyone else. I want to see an end to the curse of secrecy in party funding. I hope that the Bill will go a long way towards ensuring that.

I may run the risk of being accused of making a party political point even though I said that, in so far as I could, I would try to avoid party controversy. I have already said that I welcome the fact that the Opposition will not vote against the Bill's Second Reading and that we are achieving a degree of unanimity. The Leader of the Opposition has said that Conservatives believe that foreign donations should be outlawed, so it is strange and disturbing that the Conservative party can continue to be bankrolled by a person who may be on the electoral register here but who clearly lives in another country and, moreover, is that country's representative at the United Nations. If that is not sinister, it is undesirable and disturbing, and I can well understand those Conservatives outside the House who have expressed their concerns. They are doing the Conservative party a lot of good by saying that such a state of affairs should not continue.

In a letter to my hon. Friend the Member for The Wrekin (Mr. Bradley) that has been publicised, Lord Neill said that he considered that the manner in which the Conservative party received money through a Belize-based trust was undesirable. He said that it should not receive money from such a source. I hope that the Conservative party will consider the position. From the point of view of Labour Members, there is much to be said for such funding to continue. It provides us with ammunition and, no doubt, the Conservatives would use such ammunition if we were funded in the same way. One cannot take politics out of politics. However, given what I said about funding being above board, it would be in the interests of the public good if the Conservative party discontinued the practice of receiving money from, and being bankrolled by, someone who not only lives abroad, but takes an active role in another country's affairs. We shall see what happens in the months leading up to the next election.

I have long argued that it is right for limits to be placed on individual candidates' expenditure and I notice what will be done about by-election expenditure. However, it makes no sense to place such a limit on the expenditure of individual candidates while allowing parties nationally to spend as much as they like. Common sense demands that things should change.

I understand that it is more than 100 years since a limit was placed on how much could be spent on behalf of candidates. I hope that, when the provision that clearly places a limit on political parties' spending in general elections comes into force, it will be fully honoured. I have no doubt, however, that there will be complaints to the Electoral Commission, but I cannot imagine—I may be wrong, but I hope that I am not—that any future Government will change this aspect of the Bill.

I come to company donations. It should be remembered that Labour Members made the point at the time that no trade union could ever donate money for political purposes unless it had held a ballot. Such donations would be illegal; and that law dates back to before the first world war. When the Conservative party decided that trade unions should hold a series of ballots every 10 years, Labour Members argued that that provision should also apply to companies. Our arguments were fair and so successful that one or two trade unions that did not have a political fund decided to create one. We made the fair point that the same rules should apply to trade unions and companies alike. The right hon. Member for North-West Hampshire did not challenge that aspect of the Bill, and I am pleased about that.

I am not altogether persuaded, however, that company and trade unions ballots will take place on an equal footing. As I understand it, company ballots will take place through a resolution at the annual meeting of a company and that there will not be a ballot of individual shareholders, as happens in trade unions. Such balloting may be impractical for companies—I do not know—but the manner in which trade unions and companies are allowed in law to make donations should be on an equal footing. That would end a good deal of controversy.

The Bill is a landmark in the reform of political expenditure and party funding. It is a worthy measure and, even though one or two aspects of it cannot be put into practice until the following election, I am pleased that it will be on the statute book before the next election. I am pleased to support the Government who have introduced the Bill. I hope that much of the sleaze and secrecy of past years will end for good. Although I did not want to mention it, some parties were so determined to hide the way in which they raised money that they used river companies, and so on. I want to strike a non-party note as far as is possible, so I express my welcome for the Bill.

6.17 pm

Mr. John MacGregor (South Norfolk)

I was a member of the committee that drew up the Neill report, and I am grateful to the Home Secretary for his kind remarks about the contributions of the members of that committee. I shall not be partisan, except to point out to the hon. Member for Walsall, North (Mr. Winnick) that the Neill committee has had to make recommendations about the practices that other political parties, including the one in government, have adopted in the past year or so and, indeed, before the previous general election.

It was a fascinating experience to be a member, as it was the first time that I had served on such a committee. Because of the thorough way in which we dealt with the issues and considered others, such as the referendum issue, that we realised were becoming important, it was fascinating to see how, over a period, members from different backgrounds came together to reach their conclusions. In that respect, I pay particular tribute to Lord Neill, whose chairmanship was admirable. The committee considered the issues thoroughly and the hearings that we undertook throughout the country and abroad—especially in Canada and the United States—were valuable.

I warmly welcome the Government's substantial acceptance of the committee's report, which I hope will stand the test of time for many years to come. I am aware that the Electoral Commission rightly has the remit to review developments as time goes on and especially after elections, but I hope that the broad framework of the Neill report will stand the test of time. The fact that the Government and all the political parties accept that broad framework means that that is likely to happen.

I do not want to waste the House's time by simply pointing out where the Government and the Bill agree with our report and nor do I want to go through the rationale for all our recommendations. However, I wish to discuss several issues and the first is the Electoral Commission. That is one of the most important recommendations in the report, and the Government have added to the funding responsibilities of the Electoral Commission new responsibilities such as taking on those of the boundary commissions, review of electoral law and guidance on party political broadcasts. That is absolutely right. It was not within the remit of the Neill committee to make such recommendations, because they are outside the issue of funding, but it makes sense to draw all those aspects of elections into the Electoral Commission's responsibilities.

Part VI refers to the rules relating to third parties in national election campaigns and in referendums. The importance of the recommendations on third parties should be underlined. Our experience in the United States brought that home to all members of the committee. As the House knows, the one recommendation in the committee's report with which I disagreed related to the limit on the expenditure of political parties in election campaigns, but there is obviously a broad consensus that we should go down that route.

What is happening in the United States and, I venture to predict, will become clear in the next presidential election, is that, with the limits on spending in presidential election campaigns, there has been a rip-roaring take-off in the amount of expenditure undertaken by third party campaigners. Many of those are campaigning on specific issues, but some get very close to campaigning for a particular presidential candidate. It is easy to see how that would happen, if there were no restrictions on third parties.

My hon. Friend the Member for New Forest, East (Dr. Lewis) referred to some of the difficulties in relation to a referendum campaign. He is right. Inevitably, when a limit is imposed on the expenditure of a political party, those who want to support that party, perhaps only on particular issues, will find ways of putting their funding into the third party campaign, rather than into the political party. There must therefore be an element of control on third parties, similar to that on political parties.

The leader of Plaid Cymru, the right hon. Member for Caernarfon (Mr. Wigley), raised the matter of by-elections. The Government are right to impose a limit of £100,000 on by-elections. We all know that, in one way or another, the limits have been transgressed in most by-election campaigns, for an obvious reason. It is unrealistic to expect a by-election campaign to be conducted within the same limits as those that apply to an individual constituency during a general election.

The Home Secretary was right to identify the crucial point that by-election campaigns during a Parliament, particularly from mid-term onwards, are effectively mini general election campaigns. All of us who have been involved in by-election campaigns know that the media spend an enormous amount of resources in such campaigns, which are effectively national political campaigns. It is therefore essential for the political parties to respond by sending their Cabinet or shadow Cabinet Ministers to take part in the by-election campaign. In that context, the present limits are unrealistic. We have all turned a blind eye to what is going on, and it is right for the Bill to take a realistic approach.

The Government have taken a different view from the Neill committee in relation to clause 46, which sets the de minimis threshold in relation to some donations that will be outside the controls in the Bill. We recommended a de minimis limit, and I was particularly keen on that, but we proposed a figure of £50. The Government took that figure up in the White Paper and invited responses. They have now proposed a limit of £200. As a practising politician—rightly, there were only a few of them on the Neill committee—I strongly support that change, for three reasons.

The first is a rather small reason, but it was mentioned earlier by the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan). Writing to the Home Secretary in his response to the White Paper, following discussion with the committee, Lord Neill drew attention to the position of young people under the age of 18. With the definition of permissible donor being restricted to those on the electoral register, young people under 18 seemed to be precluded from making contributions to political parties.

The Home Secretary stated in his response that raising the figure to £200 would cover the point. He stressed that again this afternoon, when he responded to the right hon. Member for Caithness, Sutherland and Easter Ross. He is right to say that most young people under 18 would not want to contribute more than £200 in any one year to a political party.

As we all know, there are endless small ways in which party activists contribute to political parties. Many fund-raising events are held in the constituency. Donations of £10, £20 or £30 are made to a supper, a large proportion of which, after the cost of the food is covered, goes to party funds. Further donations are made through raffles and so on. It would be intolerable for a local organisation to have to track all such donations. That would bring the entire system into disrepute.

The de minimis provision is right, and £200 is a more realistic figure. Having spent not far off £50 on various activities in the constituency in the first seven days of the new year, I recognise that the £50 limit was too low.

There is a wider point, to which my right hon. Friend the Member for North-West Hampshire (Sir G. Young) referred in his opening remarks. We must be careful that the system is not so restrictive that it makes people frightened to take on the job of treasurer in the local party association. That was much in my mind when I argued for a de minimis provision.

That is a practical matter, and an important one. It is not easy to attract people to take on the role of constituency party treasurer. If they thought that they would be responsible for tracking all those small donations, most people would be put off. I warmly support the provision in the Bill. Even in relation to the responsibilities of the national party treasurer, we must be careful not to impose possible criminal liabilities for which the treasurer cannot be fully responsible.

Although I warmly support the move to £200, I believe that two points require further consideration. In raising them, I am not suggesting any change to the £200 limit. First, there could be a loophole in relation to foreign donors. The problem is to track back foreign contributions. If a £200 contribution is made on a number of occasions, how can that be checked? It is worth exploring the issue in Committee, but that is not a reason for changing the figure.

Secondly, with regard to UK donors, the individual donor will be responsible for informing the party when his overall donations exceed £200. Many innocent contributors may transgress the limit through ignorance of the fact that they must track their donations themselves. It is important that the donor's responsibility should be publicised.

The point about young persons was one of the issues raised by Lord Neill in his letter to the Home Secretary, following the White Paper. The Home Secretary responded positively, as he did on two other issues. In clause 64 and schedule 6, it is made clear that, where donations of more than £1,000 are made to individuals, whether they are candidates for Parliament or for mayor, it will be the responsibility of that individual to disclose the donation, not the responsibility of the national treasurer.

That is right, and not just for the reason that I do not want impossible burdens to be imposed on the national treasurer. There will be situations in which there will be donations to individuals that the national party may not be able, or may not wish, to track. The election of the mayor of London will provide a classic example of that. The candidate who may go forward for the Labour party will not necessarily be a candidate for whose campaign the party feels complete responsibility for tracking all donations. In other words, there is not necessarily an alignment between who stands for mayor and whether he or she wholly supports party policy. It is therefore right to include that clause in the Bill.

I turn now to fairness in referendums. The key issue here was equal public funding for both umbrella organisations. In our last debate on this matter, I referred to the fact that all members of the committee were absolutely astonished by the unfairness with which the referendum for the Welsh Assembly was carried out. When we took evidence in Cardiff, it was clear that, were it not for the courage of one woman, a Labour party supporter, who took out a large overdraft at her bank, there would not have been a campaign against the Welsh Assembly. That would have meant that, although substantial funds from Government expenditure were available for the yes campaign, there would have been nothing at all for the no campaign.

The element of fairness is best provided, above all, by having an equal public contribution for the umbrella organisation on each side. Achieving fairness by imposing a total cap on expenditure for both sides is extraordinarily difficult, which is why it is so important to keep stressing the element of having an equal public contribution to each side.

As we have already seen from this debate, a number of difficulties will arise with expenditure caps during referendum campaigns. My hon. Friend the Member for New Forest, East referred to the difficulty that I described a moment ago, and he is right to say that there will be all sorts of ways legitimately to get round those caps. It will be impossible to impose equal expenditure caps on each side.

The right hon. Member for Birkenhead (Mr. Field) made a good point when he referred to the possibility of funding through a national newspaper. There is no doubt that, when there is an expenditure cap, the role of the media becomes much more important, and they can create a major imbalance if they take differing editorial attitudes to the two sides in a referendum. That is why the Neill committee found that it would be difficult to have a fair, workable system of capping in referendums. I still hold to that view, which is why I took my original view on capping as a whole.

No doubt that matter will have to be discussed further because it is clear that there is unhappiness about it, but we must recognise that we will never have a perfect system of capping that will achieve fairness. Hence the importance of fairness in public contributions.

In debates in the House and exchanges in the Neill committee, we took a different view from that of the Home Secretary about the moratorium on the Government's role during the run-up to a referendum campaign. I am glad that the Bill includes the 28-day moratorium, which meets our point, about which the Home Secretary was initially a little dubious.

Mr. John Smith (Vale of Glamorgan)

I am sure that the right hon. Gentleman would not wish to give the House the wrong impression about the fairness of the referendum campaign in Wales. Is he aware that one of the key supporters of the no campaign was one of the richest men in Wales, Sir Julian Hodge, who now lives in an offshore tax haven? He is a multi-millionaire, and we know that he provided funds and resources for that campaign.

Mr. MacGregor

I have to tell the hon. Gentleman that we went into detail on that matter in Cardiff, and it was not Sir Julian Hodge but his son who provided funds. We took evidence from him at some length, and his contribution was a good deal less than the amount that the yes campaign had. More importantly, he said that it was only when he saw press publicity about the courage of the Labour supporter who intended to fund the no campaign through an overdraft that he realised that he ought to make a contribution, so I point out that, if the Labour supporter had not taken that action, there would have been no contribution from Sir Julian Hodge's son either.

Having said how grateful I am that the Government have responded to so many of the Neill committee's points, I shall turn to the one outstanding difference that the committee and I still have with the Government. Before I do so, I want to make detailed points to which the Minister could respond when he replies to the debate.

The first point is one that the right hon. Member for Birkenhead made in an intervention and in his speech, and relates to the Government's decision that the campaign period for a national election should relate to the 365 days up to the election. I recognise that there is no perfect system for deciding the campaign period, and we wrestled with the matter at length, but I have considerable worries about that recommendation, for all the reasons given by the right hon. Gentleman. My right hon. Friend the Member for North-West Hampshire also referred to that issue.

The provision is retrospective, and it is not fair to put people who may incur substantial liabilities in the position of not knowing when they embark on a particular course of action whether it will be within the framework of the law. Political parties and, as my hon. Friend the Member for New Forest, East pointed out, third party campaigners cannot tell when the election will be.

That is not a fair basis on which to set up a system because, as we all know, the last two years of a Parliament can often be regarded as an election period. At such times, one is always aware that there might be an election. Even in this Parliament, people are talking about there being an election within the next year. It is difficult for an organisation to plan its expenditure when it is so uncertain about what the 365-day rule refers to.

Another problem is that the rule gives the party in power an advantage because it does at least have an idea of when the election campaign will start. I am therefore unhappy about the proposal. The Neill committee made a recommendation and, on page 125 of its report, in paragraph 10.48, it said: We conclude … the precedent established by the 1983 Act"— which relates to constituency expenditure— should be followed and that the national spending limits, like those relating to individual candidates, should apply 'before, during or after the election' and to any expenditure 'on account of or in respect of the conduct or management of the election'. We are aware that, over the years, the courts have had to construe these words in a variety of instances. We suggest that the opportunity be taken to reconsider the formulation of the definition of 'election expenses', in the light of those cases, so as to ensure that it is drafted in a way that makes clear the intention that the concept is not to be interpreted restrictively. I know that there are difficulties concerning that recommendation, but there are also difficulties with the proposal in the Bill.

The one point that the Government have rejected is tax relief for small donations. My right hon. Friend the Member for North-West Hampshire read out the passage of the Neill report in which we emphasised that we thought that this should be an integrated package. That is the single main element of the Neill recommendations that has been dropped. It is important that the House should understand our case.

I recognise that the Government will respond that the matter is, in any case, an issue for a Finance Bill. That may well be so but, as the right hon. Member for Caithness, Sutherland and Easter Ross pointed out, The Times this morning said that the forthcoming Finance Bill will contain a proposal that is not a million miles away from what I am talking about. I hope that the result of this debate will be that the Home Secretary will be prepared to lobby the Chancellor about the Finance Bill.

Mr. Peter Brooke (Cities of London and Westminster)

Will my right hon. Friend acknowledge that, if clause 128 can write into the Companies Act 1985 provisions relating to companies and how their donations are decided, there is no logical reason why provisions in this Bill should not be written into a Finance Bill?

Mr. MacGregor

That is a fair point, and I certainly hope that, as a result of the contributions to the debate, the Government will pursue the matter in that way.

I feel very strongly about the issue, which is an important part of the package. To make my case, I shall quote two passages from our report, one of which my right hon. Friend the Member for North-West Hampshire has already quoted. The first passage, from the beginning of our report, sets the scene by stating: 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. I shall shortly set out the relevance of that to the Home Secretary's opening speech today. The second passage is from paragraph 2.23, which says: 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 … in the whole democratic process. Our view is that parties are indeed essential in this way, and our recommendations"— especially those relating to public funding of political parties and tax relief— are intended to foster vigorous party activity, especially at local level, but in ways that are consistent with the principle of openness and help to preserve both the independence and the accountability of the political parties.

Mr. MacShane

I have listened to the right hon. Gentleman's argument about tax relief, but the fact is that my constituency contains some of the poorest people in Europe—people who are on benefits or extremely low salaries—so there is no money available for political donations, even with tax relief. I expect that Westminster, Chelsea or South Norfolk contain far more people who would be able to make such contributions, if they were enticed to do so by a tax relief. The right hon. Gentleman is merely proposing another means by which to encourage money to flow to local Conservative associations, at the expense of Labour constituency parties in much poorer parts of the country.

Mr. MacGregor

That is the biggest load of nonsense I have heard for a long time. It certainly is not what new Labour is all about. Labour probably attracts more large donations than the Conservatives, so it cannot plead poverty. In addition, thanks to 18 years of successful Conservative Government, many Labour party supporters have incomes that are well above the basic rate of tax.

As my right hon. Friend the Member for North-West Hampshire said, in response to the White Paper's rejection of the concept of tax relief, Lord Neill stated: we strongly urge you to reconsider our proposals on tax relief on political donations in the light of your conclusions as to the administrative cost of their implementation. The reason is that one of the main points made in response to our recommendation was that administrative cost would be high. I challenge that claim. We framed the recommendation so that the process would not be like tracking all donations and tax reliefs relating to this country's many charities. Instead, responsibility for assessing the number of donations and the total costs and appealing to the Electoral Commission for the relief would rest on national treasurers, with the result that such requests would flow through only three or four avenues. I do not believe that the administrative issues facing the Government or the Electoral Commission would be anything other than extremely small.

As the Under-Secretary of State for the Home Department, Lord Bassam of Brighton, admitted in a written answer in the other place on 13 October last year, the administrative costs of a tax relief scheme have not been estimated. The members of the committee asked the Government to make such an estimate, but we have not yet received an answer. I hope that the Minister who winds up the debate is prepared to reveal the Government's estimate to the House tonight.

I have noticed that, more recently, the Home Secretary has retreated from the argument based on administrative cost, presumably because it was not much of an argument in the first place. His argument now rests on two points: first, that such relief would amount to a form of general state aid by another route; and, secondly, the need to balance the loss of revenue against other spending priorities. Our argument is that encouraging many more smaller donors to the political parties is healthy for the political process itself and helps parties to reduce their dependence on large donors, which is also healthy. Therefore, the arguments in favour of a tax relief are civic, whereas those against it relate to cost.

The cost would be limited, because it would be related to basic tax relief on donations of up to £500. I note that the Government have estimated that the total benefit to political parties would be about £4 million to £5 million. That is a minuscule sum compared with the £750 million spent on the dome, or the £500 million that the right hon. Member for Caithness, Sutherland and Easter Ross and The Times tell us that the Chancellor is considering making available to charities through tax relief measures in his next Budget.

In respect of his new proposals on tax relief on charitable donations, the Chancellor argues that it is a way of encouraging "a new civic patriotism". I believe that there is no better way of demonstrating such civic patriotism than playing a full and healthy part in our democracy through our political parties. The Home Secretary echoed that thought several times during his speech today, referring to the importance of political donations as a crucial link between the Government and local communities, and to those who recognise their civic responsibilities and duties and who play a part in political parties. He laid great emphasis on the contribution of political parties to civil life.

It would add little to the £500 million for charities to allow tax relief on modest political donations. I plead with the Government to reconsider their attitude. The Neill committee regarded its recommendations as an integrated package, and saw a tax relief scheme as a means of compensating political parties for the undoubted results of the Bill's being passed, in that it will be less easy to raise money from sources that have until now been major contributors. If we are to have a healthy political scene, it will be essential to encourage more small donations.

My one regret is that the Government have not taken up the recommendation on tax relief, but I generally welcome the way in which they have responded to the Neill report. Subject to one or two minor reservations and the larger one relating to tax relief, I am delighted with the Bill.

6.47 pm

Dr. Alan Whitehead (Southampton, Test)

The Bill is important because it recognises three long-standing constitutional fictions, places them under the spotlight, defines them and takes action on them. I welcome the all-party support that has been displayed during the debate, but have to point out that, in the past, the Conservative party has prospered from the maintenance of those fictions, despite widespread evidence of public disquiet about less-than-straightforward party funding arrangements.

The first of those constitutional fictions is that elections are contested by the individuals listed on the ballot paper who, under relatively recent legislation, may—if they want to—provide a party label to guide voters. In reality, elections are, to an overwhelming extent, conducted by parties. We Members of Parliament might choose to believe that our fabulous personalities and stirring deeds are the factors that sway voters. There is no doubt that, to a certain extent, each election hinges on the merits or otherwise of the candidates, but not to the extent that is sometimes pretended. In truth, most people vote primarily for a party and for the candidate on the ballot paper who has secured the support of that party.

Dr. Julian Lewis

Does not the logic of the hon. Gentleman's argument suggest that the hon. Member for Witney (Mr. Woodward) should now submit himself to a by-election, given that it was the Conservative party, not him personally, for which his constituents voted at the last general election?

Dr. Whitehead

As the hon. Gentleman knows, I was referring to the position in general elections. Unfortunately, it is not custom and practice in the House for everyone who crosses the Floor to submit to a by-election. Some hon. Members who are present in the debate were previously members of other parties.

In general elections, the national campaign plays a substantial role in voters' behaviour at the ballot box. It is a constitutional fiction that local party members have nothing to do with the public's view of the national party's campaign. It is right to take steps to regulate parties' conduct in elections. The public have a right to know that their representative is who he or she claims to be, and that the party supports its local representative's campaign ethically and openly. Who funds the party and the means by which it is funded is therefore important. The limit on national spending restores reality to a constitutional fiction.

Those who have stood for election, especially in the sort of marginal seats that the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) described as the key battlegrounds of modern elections, will recognise the sense of wonder and puzzlement that candidates experience as they struggle to ensure that they remain within the local spending limits, only to find that a national party has moved in and bought all the poster sites. That happened to me, and, regrettably, the party was not mine. When that happens, the local campaign appears ludicrous to many members of the public. Strict limits are demanded locally, while a parallel campaign takes place in those key battlegrounds, funded from who knows where. Candidates can also find that a supposed non-party organisation—a third party—which is well funded from opaque outside sources is campaigning hard against them. That biases election expenditure against the logical intention of the local expenditure limit.

That leads to a second constitutional fiction. It makes no sense to keep to local expenditure limits while arguing for a free-for-all national limit, especially as that results in the outcomes that I have described. American research shows that money thrown at a campaign seems to make a difference. In United States proposition and referendum campaigns, money seems to talk.

In a seminal book on the subject, Thomas Cronin analysed a series of American referendums and propositions and the difference in expenditure between two sides, which varied between three to one and 200 to one. He also analysed specific referendum and proposition campaigns as they progressed. He considered public opinion that favoured an initiative when it was first presented, examined the funding for the campaigns and looked at the result. Two examples, plucked at random, are instructive.

In Montana, the proposition was: Shall a mandatory 5 cent deposit be placed on beer and soda cans and bottles if, by 1983, 85 per cent. of such containers are not being voluntarily recycled? The proponents spent $12,000 and the opponents spent $500,000. Initially, 70 per cent, agreed with the proposition; only 29 per cent, voted for it.

In California, the proposition was: Shall a 10 per cent. surtax be placed on oil company profits from California sales proceeds from which tax to be used for improved public transportation? The proponents spent $400,000, while the opponents—the oil companies—spent $5,770,000. Three months before the vote, 66 per cent. of the population agreed with the proposition, but the eventual vote in favour was 44 per cent. On an American analysis, throwing money at a referendum campaign can change the outcome. The public are properly concerned about that.

The third constitutional fiction is that the United Kingdom eschews referendums. To bend the famous saying, the British constitution does not take account of referendums except when it does. That has led to ad hoc arrangements for the referendums that have taken place. It is high time that a comprehensive system of regulation for referendums was established, especially as they are set to become a far more regular feature of the United Kingdom political scene in future.

I strongly support giving the Bill a Second Reading tonight. However, in the spirit of the dialogue that is taking place in the Chamber, I hope that several points will be examined closely in Committee. First, I hope that third-party election campaigning will be considered. The hon. Member for New Forest, East (Dr. Lewis) mentioned that earlier. He said that he was head of a political action organisation and that he would have split his organisation into four. I devised names for the four sections: Friends of the Bomb, Amis de la Bombe, Cold War Warriors and Catch a Spy Inc. All those organisations could contribute to a campaign. The hon. Gentleman was right to say that that had happened in the United States and that fractured campaigning money gets around regulations on third-party funding. I do not have any immediate suggestions on how to deal with that, but I hope that the Committee will examine the matter in some detail.

The second point is about referendums. The Bill is sensible: the Electoral Commission will designate relevant campaigning organisations when there are two possible answers and set boundaries on campaign funding during referendums. However, the Bill does not provide for responsibility for regulating referendums that do not cover at least the area of a regional development agency. That excludes many referendums on the organisation and structure of local government, some of which will cover an area as large as a county or a city of 1 million or more people. They may attract considerable funding. Unlike referendums that are within the scope of the Electoral Commission, they may be triggered by what is effectively a proposition campaign—a campaign to gather sufficient signatures to trigger the referendum. Therefore, they have an entirely different dimension.

Mr. MacShane

I have listened to my hon. Friend's argument with great interest. Is he not saying that the Bill is unlikely to be the last word? We are opening a Pandora's box. As democracy, devolution and other democratic consultations take off under new Labour's programme, the House and society will have to return to the issues that the Bill covers.

Dr. Whitehead

My hon. Friend is right. It may be a good idea at this stage to ascertain whether account can be taken in Committee of the fact that referendums in Britain are here to stay at different levels of government. They need proper regulation to secure public confidence in their outcomes.

I mentioned setting up referendums that are triggered locally. We have made the assumption that national referendums are generally triggered by Government and agreed by Parliament. It is interesting that the Local Government Bill, which is currently before another place, provides that a referendum can be triggered locally by a write-in vote of 5 per cent. of the population requiring a local authority to set up a referendum on whether they should have an elected mayor. Under those circumstances, the campaign to trigger the referendum has life, funding and other attendant attributes. In the United States, signature harvesting for propositions, especially when they are backed by commercial interests, has a substantial financial life of its own. It may be undertaken by companies that specialise in gathering signatures. They may be paid per every 1,000 signatures and make a substantial sum of money. We may ask ourselves whether we would like that practice in the United Kingdom.

I note that the Local Government Bill, which was published before Christmas and is currently proceeding in the other place, provides only in clause 30 for the Secretary of State to make provision as to the conduct of referendums. The categories listed in clause 36, however, which may be the subject of the Secretary of State's regulation, significantly do not include the regulation of either the finance of a referendum or the process of gathering signatures to trigger one.

Clause 118 prohibits the publishing of promotional material on referendums by local authorities. That provision may be regarded as applicable only to regional or national referendums. I hope that that is the case; otherwise we shall be left in the difficult position where anybody but a local authority can publicise a local or sub-regional referendum. We have no clarification of the extent to which a local authority can or cannot pursue a position that it has reached in the light of a referendum triggered in its area. We are told that all that will be the subject of separate regulation, but it might be prudent to add to the remit of the Electoral Commission by extending its overall responsibilities on the fair conduct of referendums to provide some overall input to the conduct of sub-regional and local referendums in order that the regulations arising from the Local Government Bill are not seen to be at odds with those arising from this Bill.

There is a further possible anomaly that I hope might be looked at in Committee. Clause 95 specifies that the Bill will apply to any referendum held throughout … the United Kingdom … Scotland, Wales and Northern Ireland … or any region in England specified in Schedule 1 to the Regional Development Agencies Act 1998. That schedule defines the areas that are, broadly speaking, coterminous with the pre-existing boundaries of the Government offices for the regions, which make up the regional development agency areas. That has been the basis on which RDAs have been set up, but the Government have committed themselves, in the fullness of time, to the development of elected regional assemblies, which I applaud, provided that they represent the will of the people in the region. That reflects the comment of my hon. Friend the Member for Rotherham (Mr. MacShane). The Green Paper on RDAs envisaged that some form of legitimisation by referendum or similar means would be required to achieve that so a further category of referendum could arise, which is, one assumes, the reason for the provision that a referendum in a region shall be covered by the provisions of the Bill.

It is by no means certain, however, that a referendum to establish a regional assembly would be conducted in an area coterminous with the present RDA boundaries. Indeed, it has been suggested that the decision to go for a referendum might be within the competence of the regional chambers established to run alongside RDAs. As regional boundaries are presently a given and arise from Government offices for the regions' boundaries, does it follow that every region would want a referendum to take place within the boundary that it was given when it was set up? Is it likely that exactly the current boundaries in the south-east or the south-west, for example, would form the basis for a successful referendum on a regional assembly? As matters stand, and from my reading of the Bill, it appears that that is the case. If not, a resulting referendum would not be regulated by anybody.

Those are elements of the Bill which I believe that it is important to get right, but overall they are small matters in relation to the change that will be achieved by the passage of the Bill itself, which will strike a great blow for public confidence in the integrity of the electoral system that they rely on for the validation of public decisions. The electors will know that the political parties that represent them and seek their votes are properly constituted and transparently funded and that the conduct of elections and referendums by those parties is fair and unswayed by people throwing money at them, either directly or indirectly. That change is incalculably important to the maintenance of the integrity of the political process of the United Kingdom and the probity and even-handedness of its electoral procedures.

7.4 pm

Mr. Peter Brooke (Cities of London and Westminster)

One of the pleasures of debates of this particular sort, in which there is broad agreement about what is being debated, is that, when one side is being rude about the other, it does so in a civilised manner. I thank the hon. Member for Southampton, Test (Dr. Whitehead), who made some allusions to my party in the early stages of his speech, for having maintained that very civilised tradition.

On 9 November 1998, when we debated the Neill committee proposals for the first time, the Home Secretary, for reasons I can only guess at, suggested that political excess was uniquely a feature of the previous 19 years. I animadverted on that later in the debate—there was an element of rewriting history in those remarks—but I am delighted that his speech today went back to the 1880s, although he regarded the events of 1880 as especially excessive, even after a series of anti-corruption measures had been passed. As I remarked in columns 96 and 97 of Hansard, the excesses of the 1880 election—16 separate petitions were argued, eight Members lost their seats and seven towns were disfranchised—gave rise to the 1883 anti-corruption legislation, which transformed the political landscape. The highly beneficial effect of that legislation, which I quoted that evening, was the academic verdict of the principal authority on those matters, which was that the cut in permitted spending led directly to the growth of political participation. Political corruption, I fear, does not go back only to the 1880s; it goes back to the 1780s as well. I was once the Paymaster General. The apogee of corruption in the Paymaster General's office—in the 18th century it was a profitable office to hold—came in 1781 when Lord North, fresh from losing the American colonies, instituted an investigation of that office for embezzlement: six Paymasters General were pursued beyond the grave and Lord North himself was found to owe a bob or two. Since nothing changes in our history, the great Edmund Burke was appointed Paymaster General in the capacity of Mr. Clean and took through the House in 1782 a Bill that said that the penalty for forging the Paymaster General's signature shall be death without benefit of clergy. That was amended 25 years later by the House, which is more lenient than the Executive, and the penalty was translated to 14 years in Australia. I am bound to say that I thought 14 years in Australia a heavy price to pay for forging my signature.

Mr. MacShane

Does the right hon. Gentleman remember that the former right hon. Member for Thanet, South, Mr. Jonathan Aitken, was once Paymaster General in his Government? Things never change in the House, do they?

Mr. Brooke

The hon. Gentleman runs the risk of being too clever. My former right hon. Friend, who represented Thanet, South, was never Paymaster General. If I may say so, it is a mistake for people in glass houses to throw stones.

The Bill, which I welcome, comes in a long tradition of such clean-up legislation, but I share the view of my right hon. Friends the Members for North-West Hampshire (Sir G. Young) and for South Norfolk (Mr. MacGregor) and the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan) that, if we are to secure again the academic verdict that I quoted a moment ago, the tax encouragement of small donations is desirable. The argument of the hon. Member for Rotherham (Mr. MacShane), which he deployed on my right hon. Friend the Member for South Norfolk, could be equally applied to tax encouragement for charities, but I do not imagine that he will be doing that when the Chancellor of the Exchequer introduces such proposals in the Budget.

Like the right hon. Member for Caithness, Sutherland and Easter Ross and my right hon. Friend the Member for South Norfolk, I noticed the irony of the Chancellor taking his second bite of this particular charitable cherry in the context of taxation this very day, having taken his first bite in the pre-Budget statement late last year. I particularly noticed, too, his emphasis on civic virtues. The previous Government, in 1986 and thereafter, made changes to taxation in relation to charitable giving. My right hon. Friend the Member for South Norfolk was a Treasury Minister at the time, as I was, and we had some responsibility for that.

It is significant that one of the central features of the announcements that the Chancellor made today was the proposal to sweep away the limits on gift aid and to make gift aid possible at any level of gift. That is an irony. The Government are saying that it is too complicated and would be administratively impossible to introduce the tax encouragement of small donations for political parties at the very moment when they are earning the plaudits of the charitable lobby by changing the regulations on gift aid—or at least we assume that they will do so.

On corporate donations, my right hon. Friend the Member for South Norfolk and the right hon. Member for Caithness, Sutherland and Easter Ross will recall the Committee stage of the 1978 Companies Bill. My right hon. Friend was the Opposition Whip, and the right hon. Gentleman was one of the Ministers steering the Bill through the House. The late Ian Mikardo introduced amendments to that Bill that would have achieved the objectives of clause 128 of the Bill that we are considering tonight. I recall that either the right hon. Member for Caithness, Sutherland and Easter Ross or his colleague, the present Minister for the Environment, entertained Opposition Members by the skill with which they deflected Mr. Mikardo's amendments and argued that they should not be part of the Bill.

If we are to have clause 128, there is the hazard of a read-across to the issue that my right hon. Friend the Member for North-West Hampshire raised about determining referendum expenditure via political parties, because that carries the potential for an internal vote within political parties to decide on which side that party's expenditure is to be expended in the referendum or in what proportions. Such a split in funding is commonplace in north America. When I lived there, great corporations quite cheerfully gave equal sums to both sides of the argument. It was up to them to decide in what way that served their shareholders' interests, but it was a feasible proposition.

Subsequent to my right hon. Friend the Member for North-West Hampshire, the right hon. Member for Birkenhead (Mr. Field) concentrated on the timing of expenditure. The Government's present proposals at best resemble the useless advice to a man with cramp that he should have taken salt three days before, and at worst recall that bizarre episode in the 1920s when summertime was introduced. In the other place, an hereditary peer, whose descendant has perhaps survived the Government's axe in the past couple of months, argued that the wife of an hereditary peer, hitherto childless, could give birth to twins on either side of the midnight hour at which summertime either came in or went out, which would have affected the primogeniture. With that degree of relativity on the timing of expenditure, the Government's present proposals run the risk of taking them into the theatre of the absurd.

Mr. Maclennan

Before the right hon. Gentleman leaves that interesting, historical account, it might be of interest to place on record the fact, which I freely admit, that the line that I took in debates on the 1978 Companies Bill on the late Mr. Mikardo's amendment was forced on me by the late Mr. John Smith, who was not satisfied that the unions would accept a straight no, which I would have preferred because it would have made my life a lot easier and enabled me to bring the matter to a conclusion quickly.

Mr. Brooke

It is a feature of these debates that, when we make these occasional forays down incidental byways, we pick up all sorts of interesting information from other travellers along the same road.

I want to refer to four final minutiae. First, I notice in clause 2(2)(b) that the Prime Minister's consistent practice of moving key Executive jobs from this House into the other place, where Ministers are not able to be cross-examined by elected Members of this House, may soon claim the scalp of the Home Secretary. It is conceivable that, under this legislation, the Home Secretary could find himself serving in the House of Lords.

Secondly, in 1989 I was involved in negotiating the first reforms on expenditure for by-elections and the trend towards realism. I wholly support the Government's proposals, as did my right hon. Friend the Member for South Norfolk. I support the Home Secretary's assertion that it was all different 40 years ago with the observation that, in the 1945–50 Parliament, the then Opposition did not win a single by-election yet they reduced the Government's majority from 150 to six at the general election in 1950. That is an index of how different by-elections were in those days.

Thirdly, although I was responsible for negotiating the 20-year rule with Lord Hattersley, and Walworth road, I agree—in this respect I am echoing an earlier exchange involving the hon. Member for Crewe and Nantwich (Mrs. Dunwoody)—that, although it has been introduced in the Bill rather less than gloriously, the 10-year rule will make it much easier to verify the residential credentials of someone who has been abroad for some time.

Finally, I do not apologise to the hon. Member for Rotherham, because he has been playing an active part in the debate, and one of the consequences of that is that he may get caught in the crossfire. When he said of a particular European issue in the domain of the Bill that he hoped that the Government and the Neill committee would attend to it, I hope that it was a slip of the tongue and that what he meant was that the Neill committee and the Government would attend to it, for it is much better that these matters are dealt with by the Neill committee first.

7.17 pm

Mr. Denis MacShane (Rotherham)

It is a pleasure to follow the right hon. Member for Cities of London and Westminster (Mr. Brooke). The Bill is far more complicated than it seems at first sight, as this issue has begun to unravel as a great public problem. The right hon. Member for Cities of London and Westminster referred to the corruptions of the 1780s and the 1880s. Those of us who enjoy our Trollope will know that buying seats and being dismissed from a seat were key issues in all his great novels.

In his reply to my intervention, the right hon. Gentleman talked of people living in glass houses. I patted my wallet trying to think of what he might mean. His former right hon. Friend, to whom I referred, Mr. Jonathan Aitken, was once Chief Secretary, which is a superior, modern form of Paymaster General. I do not want to be partisan, but the plain fact is that the creation of the Neill committee and this extremely complicated Bill stem from the financing of the Conservative party as revealed in the past decade, although I could include the whole of the last century. We have not mentioned the occult financing from Greek shipping millionaires and Hong Kong millionaires. We know about Neil Hamilton and Mohamed A1 Fayed. I regret the fact that Mr. Michael Ashcroft has capitulated to The Times and has not had his day in court. I expect that the trial would have led to the same humiliation that has been visited on the former hon. Member for Tatton.

Mr. Robathan

The hon. Gentleman's comments have been typical. Why does he not also mention Mr. Bernie Ecclestone and that well-known gentleman, Robert Maxwell, who was a donator to the Labour party? The Labour party might give back some of the money to the Maxwell pensioners.

Mr. MacShane

As is well known, the Labour party returned Mr. Ecclestone's cheque. The huge difference is that, the more isolationist the Conservative party has become in recent years, the more it depends on foreign funding and offshore money of one sort or another. That is the political reality, and it has led to this extremely complex Bill, about which I have some questions to put to my hon. Friend the Minister. It is a long Bill: it has 175 pages. Moreover, schedule 19 specifies no fewer than 106 offences for which members of the public involved in politics might be fined or put in prison. I think that the office of party treasurer, nationally, regionally or in constituencies, will become extremely sensitive.

I want to focus on just three elements of what is a long and complex Bill. I strongly believe that this is not the last word. I think we all salute the work of the Neill committee, although I disagree with its recommendations on tax relief for political donations. Let me repeat what I have already said. In my constituency, wages are low, and many people are on benefits because of the wicked policies implemented by the Conservative party over the past 20 years. In South Yorkshire the chances of raising money for either party are slim, but I think that a tax-relief incentive would benefit, mainly and unfairly, the Conservative party, and I consider that, rather than administrative complexities, to be a good and principled reason for rejecting it.

I fear that we shall have to search for Solomons to sit on the Electoral Commission. Party politics is a passionate business, involving not just sums of money in connection with the conduct of elections, but for the winners of an election the control of some 40 per cent. of the total wealth of any modern nation. That is why the question of party political funding has been so sensitive in all the advanced democracies. It has done huge damage to politicians in all parties. One example is Chancellor Kohl. I broadly support increased public funds for democracy. In Germany, there is almost limitless cash for party political operations—for political parties and their foundations—yet Chancellor Kohl faces criminal charges because he took secret funds from different donors, and spent them without any public accountability. I therefore welcome the acceptance of the principle of transparency, which I think is reflected throughout the Bill.

My hon. Friend the Minister may not reply to this point tonight, but I hope that he will consider the issue of overseas voters. I feel uneasy about the decision to reduce the franchise for the first time in decades, if not hundreds of years. I was going to say that I felt uneasy about voting in favour of that, but it appears that there is to be no division. A huge number of British citizens live overseas, and feel passionately that they are British. They feel that they have a strong connection with this country, and that the defining moment of citizenship is the moment when they can cast their vote.

The House of Commons Library has done some research for me. According to the latest estimates, which date back to 1993, there are 8.6 million British nationals living overseas, 650,000 of whom are in Europe. In 1997, 214,000 United Kingdom service personnel were posted overseas, and 840,000 United Kingdom state pensions are paid to pensioners living in countries throughout the world.

It used to be said that there should be no taxation without representation. I am not sure whether we should now say that there should be no receipt of welfare benefits without representation. Many British men and women go abroad to work for international organisations. They may be employed by a British company, and have been posted overseas, or perhaps to work for a non-governmental organisation. Such people may marry and live overseas for 10 or 15 years. The House should think carefully before telling them suddenly that their key, core citizenship right of voting is to be taken away.

Mr. Andrew Mackinlay (Thurrock)

Has my hon. Friend observed that, regrettably, the Bill has not been used to remedy the wrong whereby people living in Gibraltar, who are European Union citizens, must still suffer the democratic deficit—both in relation to the EU itself, although the European Court of Justice has found in their favour, and in another regard? Ultimately, their Government are here, and this is their Parliament. If we go to war, the people of Gibraltar cannot say, "If you don't mind, we will sit this one out."; they are committed. Yet, unlike comparable territories connected with the Netherlands, France, Spain and the United States, they have no representation.

It is shameful that we should call ourselves a democracy while people peppered around the globe have no vote and no representation in this place. I am sorry that the Government did not use this opportunity to recognise the existence of a wrong and remedy it, and I hope that they will think again soon.

Mr. MacShane

My hon. Friend has made some fascinating points. I am pleased that I have the confidence of constituents, and hope to retain it in order to continue to be the hon. Member for Rotherham. However, there may be those who would like to be hon. Members for Gibraltar, the British Virgin Islands, St. Helena, Belize or other leftovers from the British empire. My hon. Friend was right to draw our attention to the anomalies involved, although I am not sure whether the Bill will resolve them.

The question of the removal, or reduction, of the right of overseas British citizens to vote is important. Other Bills being considered extend the right of members of the Irish Republic, a sovereign foreign state, not just to vote but to participate, as candidates, in our political procedures. We have extended the right to vote in local and European elections to the many hundreds of thousands of European Union citizens who live in the United Kingdom. I agree with that entirely. In his new year address, the Prime Minister said that Britain would never succeed as a nation isolated from Europe and the rest of the world. We would send out quite the wrong message if we told our citizens who live overseas, temporarily or in the longer term, that, after 10 years, they could not vote. If something is wrong in principle, it should be stopped immediately. The 10-year cut-off makes no sense.

Later in the year, some of us will attend parties organised by the Democrats abroad to promote candidates in the US presidential election. Supporters of the Opposition may attend parties organised by the Republicans abroad. The United States, that great democracy, encourages American citizens living overseas to participate fully in the American electoral process. Each country has different rules, and I do not wish to generalise but, on the whole, the trend is in the opposite direction to that proposed in the Bill. As we begin to live in a more international community, other countries are trying to involve their citizens overseas by allowing them to vote.

I do not expect my hon. Friend the Minister to give me a direct reply tonight, but perhaps the Government will agree to consider this again in Committee. Although few of those concerned register or vote, I know that there will be immense disappointment about the removal of this connection with Britain.

In regard to the financing of referendums, the Neill committee seems to have strained at gnats, while being prepared to swallow camels. The plain fact is that the great referendum campaign in regard to whether Britain remains a full member of Europe is already under way.

Earlier, I showed the Home Secretary a rather flattering picture of me that Mr. Paul Sykes has caused to be circulated in my constituency: he has put up huge posters of a young, better-looking Denis MacShane. Friends of mine in Rotherham have telephoned me to say "Gosh! Who is paying for all this? I did not realise that the Labour party had all this money." A young chap is beaming down at the good voters of Rotherham. I do not really look like that any more, do I?

The big print simply says "Denis MacShane". The small print contains the anti-European diatribe from Mr. Sykes, who, according to the Yorkshire Post, has said that he is prepared to spend £235 million on his campaign against Europe. He is not alone: the entire foreign-owned press in this country campaigns, day after day, against Europe, or specifically against the European currency. They have a right to do so, but let us have no nonsense that a public debate will start only when we come to a referendum, whenever that is after the five economic tests and so forth have been met. There are a number of anti-European bodies. One is headed by Lord David Owen and seems to have people allocated to it from The Times. These outfits are working assiduously and already occupy a huge amount of terrain. I am not quite sure how one can effectively counter that, but the idea that the Bill will in any way aid parties and organisations that are not anti-European is plain nonsense. I do not think that the Neill committee can deal with that matter; nor can the Bill completely.

Dr. Julian Lewis

In the interests of fairness to Lord Owen, I am sure that the hon. Gentleman would, on reflection, think that he should describe Lord Owen and his campaign as very much in favour of Europe and of this country's membership of it, but against Britain joining the single European currency, a view that is shared by at least 64 per cent. of the electorate.

Mr. MacShane

One of the things that I have got used to is people saying, "We are in favour of Europe, but we do not like the social chapter. We are in favour of Europe, but we do not like the single currency. We are in favour of Europe, but we do not like common agricultural policy. We are in favour of Europe, but we do not like the European Commission. We are in favour of Europe, but we do not like Mr. Santer, Mr. Prodi, Mr. Patten or the recently ennobled Lord Brittan." As Abba Eban said in a slightly different context, that is just semantic fiction. We should bury that silly word "Euro-sceptic." Those who are anti-European should be honest, as the hon. Gentleman is, and come out and say so.

I welcome Clause 11, which deals with the funding of policy discussion. We already have a considerable amount of state funding—funding by the taxpayer. Whatever the words to disguise it, £3 million goes straight to the Opposition Front-Bench team. An enhanced salary has been created only in recent years for the Leader of the Opposition. The chauffeur-driven car that he enjoys is a perk that is worth a good deal of cash.

I have no problems with that, but I should like us to go a stage further. Whether that can be done through amendment in Committee, or is something that the Neill committee has to come back to remains to be seen, but it is necessary for political parties to have the resources to carry out effective discussion and education about a policy.

Older members of the Conservative party will remember how, after 1945, it made a comeback because it became a mass party again. It opened great centres for political education. The Conservative party adjusted to the new realities of the post-war world through extensive policy discussion and debate. Too much of our country's discussion on policy, on political ideas and on what Government policy of the day should be is in the hands of editors of newspaper opinion pages, or is based on the big speeches of party leaders. Often, those are distorted from all sides—I am not making a Labour party point— by the way that they are reported in the press. To counter this, none of the parties has adequate resources for policy education and discussion.

The Bill suggests that the Electoral Commission could in any financial year make available £2 million of so-called policy development grants to political parties. I welcome that but, if we assume that that money will be divided up just between the three main parties, each year they will get £650,000 which, if divided into 659 constituencies, is about £1,000 for each constituency. If we divide that by the average number of voters in each constituency, it comes to about 1p per voter each year for policy discussion.

I hope that that is not a reductio ad absurdum argument, but, as an American senator once said, when we add £1 million, £1 million and £1 million, we begin to have real money, but when we divide £2 million between the political parties, activists and constituencies, it does not add up to much.

If we are, as a Parliament and as political parties, to win back some control over our democracy from the men of money and the organisations of money, we will have to make education about policy part of our political party process. That will require funding. It is good that schools are starting civic education, but that will be of no use if political parties do not have the resources to carry it forward. The Electoral Commission is exactly the right body to oversee the payment of that money and to ensure that it is not given to parties to be used at the pleasure of the party leadership, but spent properly on policy discussion and debate.

I welcome the Bill. It will help to reassure the public that the massive vote that they gave the Labour party to form the Government is being used to introduce law that will not only end the scandals that have disfigured our politics and gravely damaged what was once a great political party, the Conservative party, but to usher in continuing debate about the need for the people and their elected representatives to regain some control over the political process.

I know that we are a property-owning democracy, but property, capital and money should not own democracy. The Bill is the beginning of reclaiming the right of people and their elected representatives to have some control over the policy and the political parties that govern in their name.

7.36 pm

Mr. Martin Bell (Tatton)

I aim to give the shortest speech in the debate and, of course, the only one that comes from a non-party perspective. I do not have a party; I do not want a party. I am not showered with the largesse of Short money. I do not seek Short money. The proper posture for the Tatton Independent is one of cheerful frugality, but I was elected on an issue of trust. I care about trust, and the people of Tatton showed spectacularly that they cared about it.

This important Bill is, significantly, about trust. It is about the essence of our democracy. It is about the way in which we prevent abuses. For the first time, there are provisions to control our political parties, which up to now have been getting and spending money and wasting their powers as they wished because no legislation existed. Amazingly, until now, they have been operating more or less in a free-fire zone. Our electoral law is based on the electoral law of 1883, which was most recently revised in 1983. Some change is long overdue.

I have nothing against political parties. I regard them as necessary—I would not even say necessary evils. They are necessary for sound and stable government, although it is possible to have one or two Members of Parliament outside the party system, but the parties' power has increased, is increasing and should be diminished.

For that reason, I welcome the Bill. To some extent, it reins in the excesses of party spending and party funding. Essentially, the parties are raising more money than they can safely spend. That is part of the problem.

I welcome, as I know that many other Members will, the ban on foreign funding. I welcome, as I know that they will, the greater transparency on the point at which donors should be named. I do not welcome—it is the fundamental flaw of the Bill, and of the Neill report—the relatively large amount of money that the parties are allowed to spend. In the last general election, the two main parties spent more than £25 million each. At the next election, they will be able to spend nearly £20 million.

Where does the Under-Secretary of State for the Home Department think that money is coming from? Is it coming from the little people? Is it coming from the rank and file? Is it coming from ordinary members, from whom it can safely be raised—from the rubber chicken dinners? There are not enough rubber chickens out there. There are not enough party regulars with the will to eat them to raise that kind of money. This is an important reservation, as it goes to the heart of some of the abuses of recent years.

If I may correct the hon. Member for Rotherham (Mr. MacShane), it was an American congressman who said: A million dollars here, a million dollars there, and very soon you're talking about real money". Today, we are talking about real and serious money, but I do not understand how any party will be able to raise it safely to the extent allowed in the Bill.

Is it possible that new members and new contributions will be attracted to the Labour party by some of its innovations, such as the closed list system in the European elections, the extension of the property franchise in elections in the City of London—the last rotten borough in Britain—or the decision to use an electoral college to select Labour's candidate for mayor of London? It seems to me that those proposals are undemocratic, and that there is an undemocratic element at the Bill's heart: it concerns how the money will be raised.

In evidence to the Neill committee, I suggested that each party be allowed to spend an upper limit of £2 million in a general election. Andrew Rawnsley, of The Observer, suggested that the figure should be £5 million. Whatever the figure is, it will have to be within the reach of ordinary party members. If it is not, where will the money come from, if not from the Bernie Ecclestones and Michael Ashcrofts—be they never so blameless characters, as I do not doubt that they are—when the bills come to be paid?

When the Government adjust their policy until, quite by chance, it suits Mr. Bernie Ecclestone's business interests, and when the Conservative party argues for a life peerage for Mr. Ashcroft, people will start to ask, "What's going on?" They will get a whiff of something that they do not like. I know that the people of Tatton are very sensitive to that.

Will we go down the American route, in which a candidate might spend $16 million to buy a Senate seat, but—as happened in California—still fail? I was based in America for many years, and remember talking to Senator Lawton Childs—Democrat of Florida, and an honourable public servant—who was weighing up whether he should run for a second six-year term. He worked out that, if he did so, he would have to spend one half of his time fundraising, so he quit, because that is not what he went into politics for. I feel that, with the central defect in the Bill, we are going down that wrong road.

We do not want to go down the road of turning our party conferences into trade fairs. If I wanted to have lunch with the Home Secretary at the Labour party conference—a fairly unlikely contingency—I would be happy to pay for my lunch, and I would be happy to pay for his lunch, but I would not want to have to raise for the Labour party £10,000, £20,000, £50,000 or whatever the equivalent might be for the privilege of having lunch with him.

I can recommend a better way to go. Last July, the Tatton Independent party held its annual conference, in Knutsford, and it was much more party than conference. I paid for everyone's lunch, and the only deal that I made with them was that I was not allowed to have a standing ovation. It worked extremely well. It is a kinder, gentler politics, much cheaper and much closer to the people.

I am sometimes asked—because of the strange way in which I got into the House—whether I think that the current Parliament is under the same taint of suspicion as the previous Parliament. I used to say no. Now I say, "No—well, not in the same way." The culture of greed has gone. The cash in brown envelopes has gone. The invoices supplied for amending a Finance Bill have gone. A recent celebrated libel case definitively drew a very welcome line under that, and I should, in passing, pay tribute to Sir Gordon Downey—a very great public servant, and a servant of this House—and to his vindication. We knew all along that he would be vindicated.

Does that mean that the beast of corruption has been got rid of in our system? No, it does not—it is still out there somewhere. It lies out of range of the nets and harpoons of the parliamentary policing system, which is working quite well now, in two spheres: in the funding of political parties and the award of honours, and in the relationship between them.

We know that there is a relationship between the two because of some of the evidence given to the Neill Committee. Although that evidence is not reflected in the Bill, it was very important evidence, which came from Lord Pym, who was at that time chairman of the political honours scrutiny committee. He was asked whether there was, or should be, any connection at all between donations to a political party and the subsequent award of honours.

Lord Pym was the gatekeeper of the system, and one might have expected him to answer, "No, in no circumstances, and over my dead body." In fact, he answered that, in some circumstances, all other things being equal, he could see that a political party contribution could be a bonus rather than a minus, because the individual was putting his money where his opinions were—hence a contribution to a political party was an achievement.

Just consider that. When has signing a cheque been an achievement? Accumulating money—depending on how it is accumulated—may be an achievement, but I do not think that signing a cheque is one. All other factors in a candidate's qualifications being equal, the chairman might as well have provided us with a rate card. How much for a peerage? How much for a knighthood, or for a humble MBE? What will £50,000 a year for five years buy? Hon. Members will appreciate where we were going with that practice, which was opening the door to the buying and selling of influence.

Now the political honours scrutiny committee has a new chairman—Lord Hurd—who, to his great credit, is applying the rules much more vigorously, and we have a much better system in place. However, there is still a grave risk, which comes from the Government's briefing paper on the Neill report, issued at the end of July. The paper quoted with approval one of the scrutiny committee's criteria: to consider Whether the achievements of the individual overall are meritorious to an extent that makes donation of lesser significance. Within those words lurk hidden shades of meaning.

We shall not have a clean system and a system that entirely enjoys the public's trust until donations to our political parties are of zero significance, or even of disqualifying significance, in the award of honours.

Mr. Winnick

I am listening to the hon. Gentleman's speech with interest. I do not want to rehearse the entire argument now, but would not a restriction on the amount that an individual may give to a political party not only help in addressing the issue that he has been describing, but provide a means of restricting the sums that political parties are able to spend at general elections?

Mr. Bell

I am grateful for that intervention and agree absolutely. I recommended such a limit to the Neill committee, but it was not accepted.

We have to devise a system of politics that is more honest, cheaper, and wins the trust of the people. I am arguing not for a community of saints and angels, but for a system in which the crooks, charlatans and the sharp operators so often attracted to the honeypots of politics lose their rights of privileged access.

7.48 pm

Mr. Martin Linton (Battersea)

It is a great honour to follow the hon. Member for Tatton (Mr. Bell), whose very presence in the House symbolises the reasons why the Bill is so necessary. He also made a very good case for why the Bill does not go as far as it might.

I welcome the Bill, and believe that, for the past 25 years, there has been a crying need for reform of party funding. My right hon. Friend the Home Secretary had trouble remembering the exact date—or even the existence—of the Houghton committee report. I remind him that the committee reported in August 1976—which was very much the date on which the United Kingdom and the House took a wrong turning on the issue of party funding. We missed the great chance that we had then of reforming the party funding system, as every other European and north American country did in the 1970s or 1980s.

We missed the opportunity then mainly because the then official Opposition party—under its then new leader, now Lady Thatcher—turned its back on any reform whatsoever of the party funding system and pursued what one can only describe as a beggar-my-neighbour policy. Although the then Opposition were themselves bankrupt, they knew that the Labour party would always be worse off than they were.

The Conservative party continued that policy for the next 20 years, eventually leading to its own undoing at the 1997 general election, amid accusations—in many cases, realities—of sleaze. The Conservative party has now had a change of heart and I welcome its new approach to party funding.

Compared with some of my hon. Friends, particularly my hon. Friend the Member for Walsall, North (Mr. Winnick), I am a relative novice to the subject, but in 1994, I produced a report for the Institute for Public Policy Research on the subject. While I was preparing the report, I visited Germany, Canada and Quebec—by chance, the same places that the Neill committee visited last year. My report had only 18 recommendations compared with the 100 made by the Neill committee, but I am glad that many of those 18 were repeated by the Neill committee and have found their way into the Bill. I am delighted that the Bill delivers some of the reforms that I argued for, including the disclosure of donations over £5,000, the ban on overseas donations, the introduction of national spending limits for elections and referendums, the requirement to hold shareholder ballots and, last but not least, the establishment of an Electoral Commission.

However, I agree with the hon. Member for Tatton that there are some points on which the Bill does not go anything like far enough. Once we get through the arithmetic, clause 72 and schedule 8 set the limit on national campaign spending at £20 million for a party that puts up candidates everywhere in the UK, or £19 million for a party that has candidates throughout Britain. That is far too high and will not achieve the primary goal of reducing the amount spent by political parties at general elections.

The Neill committee's report estimated that the main parties spend £26 million and £28 million respectively at the 1997 election. The widely drawn definition of campaign expenditure in clause 65 and schedule 7 shows that the system can never be so watertight that there is no scope for parties to pass off some election-related expenditure as administrative overheads. That was the experience in Canada, on whose system our proposals are largely based. There was endless argument between the parties and the director of elections about what counted as expenses. There are bound to be grey areas where it is impossible to decide whether something is election expenditure, such as opinion polls commissioned by parties before an election.

The right hon. Member for South Norfolk (Mr. MacGregor), who is back in his seat, referred to the difficulty of defining election expenditure and therefore opposed the idea of capping. I think that he drew the wrong conclusion. Of course it is difficult to distinguish election expenditure from other expenditure, but that does not mean that we should give up on the Bill's central ambition of capping election expenditure. If we are to have a downward step change in election spending, it would make more sense to adopt the Labour party's proposal to the Neill committee of a £15 million limit. Lord Sawyer, who was then the general secretary of the Labour party and gave the evidence, said of the party's £26 million spending at the 1997 election: 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. A limit of more than £15 million is bound to result in a party's seeking large donors, beyond its members and smaller donors.

A related point is whether there should be two limits—one for constituency spending and one for national spending—or a single limit. In my evidence to the Neill committee, I argued in favour of a single limit encompassing constituency and national spending. The Neill committee seems to have got that the wrong way round. It believed that an integrated limit would allow parties to concentrate their spending even more on marginal seats; on the contrary, it would prevent parties from doing that because, once they had spent up to their limit in marginal seats, they could spend only in non-marginal seats. Applying the limit constituency by constituency would prevent the use of all the resources in 100 marginal seats. That would have the advantage of introducing the principle of equity between voters. Parties would have to treat the voters the same in every constituency. That point was made by the right hon. Member for Caithness, Sutherland and Easter Ross (Mr. Maclennan)—it sounds as though he represents three constituencies, but it is only one.

The Bill has missed an opportunity on individual donations. The main concerns have been about the source of donations, particularly overseas or undisclosed donations. However, people are equally concerned about the size of donations. We have only to look back a few years to the concern that was felt about donations to the Conservatives of £500,000 from Asil Nadir, a couple of million pounds from John Latsis and £5 million from Lord Kirkham. To match those sums, my party could not but accept donations of a similar magnitude. I am sure that Conservative Members will point out if I fail to do so that we accepted a £1 million donation from Bernie Ecclestone and, I believe, £2 million from Lord Sainsbury.

No matter how well intentioned, a party that relies on large individual donations will always feel beholden to the big donors, nervous of offending them and anxious not to jeopardise a repeat donation. If not in the minds of the party then in the minds of the public, that reliance will inevitably compromise the party's integrity. My right hon. Friend the Home Secretary referred in his speech to an unhealthy reliance on a handful of wealthy donors. The way to avoid that is to ensure that the limit of what parties can spend is within the reach of what their supporters can raise without recourse to million pound donations. That is why the definition of permissible donations under clause 48 onwards should be tightened through the application of an upper limit on individual donations of £250,000.

The Neill report argues against an upper limit on two grounds. The first is that disclosure should contain the arms race between the main parties. Disclosure will deter a few would-be donors, but there is no evidence from other countries that it will stop, or even contain, the arms race. Disclosure is important, but it does not go far enough.

The second argument is that it would be easy to evade the limit by spreading resources among friends or setting up subsidiary companies. My hon. Friend the Member for Rotherham (Mr. MacShane) made that point. That ignores the simple counter-measures that can be taken to enforce limits on donations. Quebec has successfully enforced its $3,000 limit on donations by insisting that every donation must be made by personal cheque and making it an offence to hand on a donation from somebody else. There are stories about lobster parties at which one firm buys up a table and gives every executive £3,000 to donate, but it is difficult to get round such limits.

The main argument against a limit on donations in the past has been that, whereas one might want to limit individual donations, one might not want to limit donations from companies, trade unions or other political parties. At that time, it would have been difficult to make the distinction. Now, company donations are subject to shareholder ballots, parties are subject to the Registration of Political Parties Act 1998 and trade unions are subject to political fund ballots. There is no longer a difficulty in isolating individual donations and applying a limit to them that does not apply to other categories.

Clause 63, the Northern Ireland exemption, must be considered carefully by Ministers because it could drive a coach and horses through the Bill. If a list of permissible donors were to include registered voters in the Republic of Ireland—to which I have no objection—those voters would not be subject to clause 54, on the evasion of restrictions. The clause could be used as a channel for donations from abroad—or from within the UK—which would then become anonymous donations.

The definition of a Northern Ireland party in the Bill would mean that donations could be made only to parties represented at Stormont or representing Northern Ireland seats at Westminster. That would exclude some parties. However, we should remember that the Conservative party and the Green party contest elections in Northern Ireland, and that the Conservative party came within 2,000 votes of winning a seat in Northern Ireland in 1992. There is every possibility that it will win enough seats to qualify as a Northern Ireland party in the future.

I have no reason to believe that anyone is planning to use the loophole. However, if donations can be made which are not subject to the registration of donors, it is clear that it will be easy to evade the effects of the Bill—not only by Irish people overseas, but by donors of all kinds who will use it as a way into the British political system.

On overseas voters, clause 48 says that any individual is a permissible donor provided that he or she is registered in an electoral register". The Neill committee is rather contradictory on this point. On the one hand, it has put forward a much looser definition—that anyone can give money if he or she is a registered voter or eligible to be put on an electoral register. That would include millions of people overseas. On the other hand, the committee has enunciated exactly the right principle—that it is right to take the opportunity to lay down the principle that those who live, work and carry on business in the UK should be the persons exclusively entitled to support financially the operation of the political process here. In other words, only people who live and work in this country should be allowed to fund our elections. That would mean that tax exiles who do not live here would not be entitled to give money to political parties in Britain.

I welcome clause 130, which reduces the qualifying period for overseas voters from 20 years to 10. The Home Affairs Committee—of which I am a member—recommended that the figure be reduced to five years, and the Home Secretary has met us more than half way. Having listened to the representations of some of those who currently register as overseas voters and who may still have close links with this country, I think that the reduction is probably far enough.

Under the new rolling register provisions of the Representation of the People Bill, whereas in the past it would take anything between four and 16 months to register as a voter in this country, it will take in future between two and four weeks. It will be much easier for people who live for brief periods in this country between foreign postings to re-establish their connection as voters.

I still question whether it is right to make being registered to vote a sufficient qualification for giving money to political parties. After all, it is possible to be registered as a voter in this country and at the same time to be a foreign resident, a foreign dual national, a foreign taxpayer and even—as we have seen recently—a representative of a foreign Government.

It seems anomalous to allow people to fund political parties in this country if they are not liable to pay tax here. Why should they be able to influence the tax that we pay if they do not pay tax themselves? I would support an amendment that separated the issue of making declarable donations from overseas from the issue of voting, and I would introduce a second qualification—that permissible donors should be ordinarily resident in this county. That is the main criterion used by the Inland Revenue for deciding whether someone is resident in this country, and the same is true of the health service.

Clause 10 allows the commission to make policy development grants of up to £2 million a year. I agree with my hon. Friend the Member for Rotherham that that limit is far too low. I would suggest that it should be at least £10 million if it is to be in any way meaningful. Clause 10 also allows grants to be made only to parties with two Members who have taken the oath or the affirmation. It is not clear why that should be so, and it seems to be a mean-spirited attempt to make sure that one particular party from Northern Ireland does not benefit in any way from what is offered.

We must take a longer view on party funding. The Home Secretary referred to the law in Quebec, which is one of the only places in the world which really applies, and has developed, the spirit of our Corrupt Practices Act 1883 and turned it into something meaningful. Quebec applies the measure with unusual vigour. I have said that individual donations are limited, and what the press can and cannot do during an election is strictly controlled. There is, to be sure, an exemption for the press, but it is interpreted much more narrowly than in this country. Quebec has shown that that it is possible to control spending even in referendums, so that both sides of the argument feel that they cannot take advantage of having more money. Quebec has shown what it is to insist that politics should be conducted on a level playing field.

Those who refer to third parties must decide how they view elections. To my mind, elections are, by their very nature, periods during which those who are not candidates must accept a certain temporary restraint on their freedom of speech; otherwise, money will always be able to buy elections. The whole purpose of the Bill is to try to avoid that.

In my report for the IPPR, I made some other suggestions for ways in which we could ensure a level playing field in politics without introducing direct state funding. Those ideas included: state aid in kind; poster space to be allocated to the parties in a fair way at the beginning of elections; that that should be paid for; that newspaper advertising should be allocated in a fair way also; and that there should be more free postal deliveries. There are many ways in which we can improve the system.

We must remember that it was the beggar-my-neighbour policies of parties in the 1970s, who thought that it would be an advantage to do without any reform of party funding, that led them to scrape the bottom of the barrel for funding because their own sources of funding were drying up. That has so discredited all political parties and their funding that the public would find it unacceptable to have state funding in terms of cash donations from their taxes to political parties—a reluctance that one can well understand.

This country is practically the only country in Europe or north America that does not have state funding of parties, and that has led indirectly to the discrediting of politics. I do not advocate state funding now, but we must move towards a situation where people in this country have more faith in the political system and in the integrity of their political parties. Perhaps one day in the future the House will be able to introduce what is needed—a much more secure financial basis for political parties that will make the sleaze and corruption of recent years unnecessary.

8.10 pm

Mr. Alasdair Morgan (Galloway and Upper Nithsdale)

My party welcomes the Bill. It represents an improvement, or a move towards one, in how political parties conduct themselves. It will boost the public's confidence, which has been so badly undermined in recent years.

Before the Scottish Parliament elections, the parties reached an agreement largely based on the Neill recommendations and included the provisions in a statutory instrument, which seems to have worked well. Neill felt that the political arrangements in Scotland were best handled by appropriate modifications to our main recommendations". I seek a reassurance that, when the composition of the Electoral Commission and the Speaker's Committee is being decided, the different interests and political structures in Scotland and the other devolved areas will be taken into account.

I note that two of the statutory members of the Speaker's Committee will be the Westminster Minister with responsibility for local government—presumably that means local government in England and Wales—and the Home Secretary, neither of whom has a large locus in either Scotland or the other devolved parts of the United Kingdom.

The policy development grants seem to relate to policy on all matters for places such as Scotland: devolved as well as reserved. The smaller parties—smaller, I hasten to add, in Westminster—need to be considered. I noticed that, when the hon. Member for Rotherham (Mr. MacShane) spoke of how the money would be divvied up, he worked on the basis of a division by three. I assume that that was simply for arithmetic ease.

Allocation is often made on the basis of representation in the House, but the cost of research is not proportional to a party's membership or number of seats in the Chamber. It may cost the Liberal Democrats as much as it costs the Labour party to develop a housing policy, for example. We must be careful about the criteria that are used in the allocation of moneys under the scheme. That is especially important in the devolved parts of the United Kingdom, as the representation in the devolved Chambers is certainly not similar to that in Westminster.

I welcome, in clause 31, the help for parties towards the cost of complying with the various strictures of the legislation. The raising of the de minimis level from £50 to £200 will certainly reduce the costs of compliance, and that is welcome. I note that the Bill refers to the cost of installing software and even the provision of software by the Electoral Commission. I emphasise again that the cost of administering the consequences of the Bill is not necessarily in proportion to a party's representation in Westminster.

Classifying a permissible voter as one who is on the electoral register means that the headquarters of every party will have to have the registers for the entire country, or at least all those parts of it in which they are interested, presumably in electronic format. It is certainly not the practice in Scotland for the assessor or registrar to give out compact discs or floppy discs free with the register. Perhaps an amendment could be made to ensure that party headquarters are able to get computerised versions of the registers each year as they are issued, without having to bear the cost.

I have a problem with the definition of a permissible voter as one who is on the register, as opposed to the Neill recommendation that it should be someone who is entitled to be on the register. I realise that the concept of a rolling register minimises the problem to some extent, as does the fact that the requirement applies only to those who donate above the de minimis limit of £200, but I have a problem in principle with a formulation that, in theory, debars a substantial number of our citizens from donating to a political party. The latest estimate from the 1991 census shows that about 3 million people were not on the register.

Mr. Peter Bradley

Does the hon. Gentleman concede that it is a strange principle that somebody should be entitled to fund a party for which he or she is not prepared to vote?

Mr. Morgan

It is not up to me to try to explain the decisions of individual citizens. People may decide not to register for religious reasons, for example, and they should not be excluded from giving money to a party if they so choose. The Neill recommendation would be as easy to administer and would avoid the problem.

Clause 44 and schedule 4 concern the returning of accounts from a party's different accounting units, which can go down as far as the individual ward and branch. I am glad that no financial return is to be required if the year's transactions in the unit amount to less than £25,000. As a former national treasurer, and subsequently secretary, of my party, I know the difficulty of getting information from several hundred ward organisations. The problems that I faced would pale into insignificance beside those involved in collecting information required on a statutory basis.

I note that the commission has the power to require returns from such accounting units, and I seek an assurance that such a power would be used only in exceptional circumstances, when somebody thought that the provision was being used to fiddle the books.

Recommendation 38 of the Neill committee suggested that tax relief should be allowed on small donations. I understand what the hon. Member for Rotherham and others said about that being more of a benefit to the Conservative party than to other parties representing some of the poorer constituencies—the average income is fairly low in my rural constituency—but I tend towards the Neill committee's view that it is important to encourage small donors to be the mainstay of political parties, as tax relief would do. It is perhaps a lost opportunity not to have implemented the recommendation.

I welcome the controls on election expenditure by political parties. It has already been pointed out that the Representation of the People Act 1983 has long been a farce. Candidates jump through hoops worrying whether they have spent too much on telegrams, whatever they may be, while the parties spend millions of pounds without any controls. We need to avoid being in the same situation as the United States faces.

A cynic might say that the limits set out in the schedules in connection with various elections are those that will suit the larger parties. The hon. Member for Tatton (Mr. Bell), who is not a cynic, certainly made that point, and the hon. Member for Battersea (Mr. Linton) also alluded to it. In Scotland, for example, the limit for a general election will be £2,160,000. In Scottish Parliament elections, the limit will be £1,516,000. I will not give away any state secrets if I say that the SNP will be in no danger of breaching either limit. We must ask why the limits are so high and who will benefit from that.

I also have a problem with the provisions on third parties and their expenditure and I echo the points made by the right hon. Member for South Norfolk (Mr. MacGregor) and the hon. Member for Southampton, Test (Dr. Whitehead). A limit will be placed on what each third party can spend, but there will be no limit overall on what third parties can spend. I accept that some third parties may spend money that is not identifiable with any particular party, but the reality is that third parties more and more spend money that definitely relates to the campaign of one party. A trade union, for example, may run a campaign that appears to favour two Opposition parties equally, but in reality we know that it is targeted in favour of one party. A strong case can be made to include third-party contributions in the overall total of a party's spending and the Electoral Commission should be allowed to make a judgment on whether a third-party campaign has contributed towards a party's expenditure.

Clause 122 provides for limits on expenditure in by-elections. I accept what the Minister said, and I know from my own experience that the limits in by-elections have been stretched on some occasions. However, the new limit of £100,000 is on the high side, especially in Scotland where the electorate in each constituency is smaller than in constituencies south of the border. Setting the limit as high as £100,000 will allow the larger and wealthier parties to influence disproportionately the outcome in by-elections, which—as hon. Members have said—can be crucial in the run-up to general elections.

The potentially retrospective nature of other provisions in the Bill will also cause problems, because we will not know in advance the date of the general election. The arguments in favour of a fixed-term Parliament are strong, and that would fix the problem. Those arguments are strengthened by the fact that we now have that very system in the Welsh Assembly and the Scottish Parliament, and this House, could learn from those examples.

It strikes me that, as with so much legislation, we will not get the Bill right first time. We can try to enforce restrictions on political parties and other people who wish to influence the course of political debate, but they will spend time—people are probably doing so even as we speak—working out ways to get round those restrictions. We have made an important start, but we will have to be prepared to come back to the issue as people find ways to get round the restrictions and to subvert democracy.

8.24 pm

Mr. Peter Bradley (The Wrekin)

When the right hon. Member for Cities of London and Westminster (Mr. Brooke) commended my hon. Friend the Member for Southampton, Test (Dr. Whitehead) on the civilised way in which he voiced his hostility to some of the positions on party funding adopted by the Conservative party, the right hon. Gentleman may have been issuing an anticipatory reprimand to me because, although I am attracted by the spirit of consensus that has prevailed today, I can see little justification for it. The principles that Opposition Members have enunciated are not borne out by their practices.

When I challenged the right hon. Member for North-West Hampshire (Sir G. Young) in an intervention earlier, he suggested that the Conservative party conforms to the recommendations that the Neill committee published some time ago. I do not believe that to be the case. He may have misunderstood my intervention and I may have misunderstood his response, but the chairman of the Conservative party was quoted in The Times on 24 November as saying: The Conservative party has always made it clear that it would operate by its guidelines until such a time as Parliament might introduce new guidelines. In other words, the Conservative party does not conform to the recommendations of the Neill committee, nor does it conform to the proposals set out in the Bill. That should be a cause of grave concern to the House.

The Bill is necessary for all the reasons that have been eloquently expressed this evening. We need to render our political process transparent and our political parties accountable. We need to eliminate undue influence, or the perception of it, on the way in which we conduct our political affairs. We desperately and urgently need to restore public confidence in our political system. In too many parts of the country, indifference to our political system is giving way to alienation and disaffection. We saw that in the low turnouts in the recent European and local elections. Scepticism about politicians' ability to make a positive difference to the daily lives of our constituents too often gives way to cynicism about our preparedness to do so or to serve in the public interest.

The Bill will contribute to rehabilitating our political system, as will other constitutional reforms, including not least the reform of the upper Chamber. However, we cannot deny that our political system has been a victim of the extraordinary degradation of politics and politicians in recent years. The problem is that, even if it can be shown that sleaze was a problem principally of the previous Government and the Conservative party, when one political party is brought low, we all suffer, because our political system is degraded. It will be restored only if all political parties act in concert to restore it, which is why I am concerned at the apparent chasm that still exists, despite the speeches of consensus tonight, between the Conservative party on the one hand and the Government's proposals in the Bill and the Neill committee recommendations on the other. I hope that the Conservative spokesman will take the opportunity when he winds up to disabuse me of that apprehension.

The Conservative party is largely responsible for the public's perception that sleaze, both individual and collective, attends our political system. One does not have to do research in the Library to support that contention, because we have had reminders in the very recent past. There is Lord Archer—until recently, I understand, a man of "probity" and "integrity". The Conservative party fell out of love with the man long before it was prepared to part company with his cheque book. That is not to its credit. I need not go into detail about the Hamilton case, because we are all familiar with it. The same applies to Jonathan Aitken, who started by buckling on the shield of truth and has finished up by strapping on the electronic tagging device of perjury.

Whenever the Conservative party is asked, "Will you open the box or take the money?", it opts to take the money. It has been prepared to take money from anyone, anywhere, in any currency, in any denomination, in brown envelopes—however it comes—with no questions asked and no explanations offered or given.

Mr. Robathan

In many ways, I am loth to intervene in such a silly and partisan attack on a collection of people. There may have been individuals in the Conservative party who have misbehaved, as there have been in the Labour party and other parties. I hold no brief for corrupt politicians, of whom there are remarkably few in any party.

The hon. Gentleman attacks us collectively, which I resent. Will he will urge the Labour party, and all organisations within it, to return money to the creditors of TransTec if it turns out that some of the money that should go to them has found its way into the Labour party's coffers?

Mr. Bradley

The hon. Gentleman makes an interesting debating point. I think that he is anticipating events to a large extent. When he intervened earlier in the debate, he mentioned the name of Bernie Ecclestone. That is a very good example, because although, as far as I understand it, no wrongdoing was ever sustained against the Labour party, the very perception that there may have been a question mark against that donation caused the Labour party to refer the matter to Lord Neill's committee and to accept its recommendation to return the donation.

Conservative Members have said that they are at one with us on the principles of the Bill, but—I speak more in sorrow than in anger—their actions belie that commitment. I see no evidence that the Conservative party has ever returned money. It did not return Asil Nadir's donation. It has certainly not taken the trouble even to refer the Michael Ashcroft controversy to its own ethics and integrity committee. Try as he will, the hon. Gentleman cannot have it both ways.

Mr. Robathan

Will the hon. Gentleman give way?

Mr. Bradley

If it is a brief point.

Mr. Robathan

Could the hon. Gentleman enumerate the cases in which Lord Neill has suggested that money should be returned from the Conservative party to anyone else? Lord Neill—I think that it was Lord Neill—instructed the Labour party to return the £1 million donated by Bernie Ecclestone in order to ensure that tobacco sponsorship was allowed for Formula One racing.

Mr. Bradley

I am happy to respond to the hon. Gentleman's point. I shall return in my speech to Lord Neill. I suspect that he has never asked, suggested, recommended or instructed the Conservative party to return funds to non-permissible sources because it has never referred to him for advice on the money that it receives—in stark contrast to the behaviour of the Labour party. That is why the public holds the Labour party in greater esteem than the Conservative party. Until the hon. Gentleman and his colleagues learn that lesson, we shall continue to seek to teach it to them.

Let me quote from a letter to the Neill committee, dated 30 January 1998, from the then deputy chairman of the Conservative party, the hon. Member for Windsor (Mr. Trend). He said: Until the Leader of the Conservative Party's speech on the 23rd July 1997, the Party had no specific rules covering the receipt of foreign donations, except that we had made it clear that we did not accept donations from foreign governments or rulers. That clearly did not exclude the United Nations ambassadors of foreign Governments. The letter continues: As a consequence, we did not record separately donations that were received from overseas. That startling omission supports my view that the Conservative party is prepared to take money from anyone, in any currency and any denomination.

It is clear that the Conservative party received massive overseas funding throughout the 1990s. It received £10 million in the run-up to the previous general election alone, and £16 million between the elections of 1992 and 1997. I derive those figures from the Conservative party's own published accounts. There were 47 overseas donations in that period at an average of £345,000. Twenty per cent. of all donations of more than £100,000 received by the Conservative party came from overseas sources.

Other hon. Members have referred to the identity of some of those generous sources of funding. They include Sir Y.K. Pao and Mr. C.K. Ma of Hong Kong; John Latsis, the ship owner; and Asil Nadir. What did they want? What did they think that their contributions to the then party of Government's fighting fund would confer on them? That question was posed eloquently by the hon. Member for Tatton (Mr. Bell).

However, much more interesting than what they sought is what they got for their money. Throughout that period and beyond, the Conservative party refused to regulate its affairs. The hon. Member for Blaby (Mr. Robathan) said that, when the opportunity existed for the previous Government to ask Lord Neill or his predecessor, Lord Nolan, to examine precisely those matters on which he has now reported and which form the basis of the Bill, they declined it. We are entitled to ask why the Conservative party, in that period and subsequently, refused self-regulation. That is why it is so necessary that legislation be introduced that will require, by statute, the Conservative party to submit to regulation.

Lord McAlpine, a previous Conservative party treasurer, stated, not under pressure from Jeremy Paxman but in his autobiography: The Conservative Central Office is not a charity dedicated to helping the sick and suffering". That might be news to some, but we all knew it, and, by 1997, the electors had certainly woken up to it. He went on to state that it is a fighting machine dedicated to winning elections. I believe it to be 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. The former Conservative party treasurer was clearly saying no to regulation, clarity, transparency, accountability and scruples.

Mr. Robert Walter (North Dorset)

Would the hon. Gentleman concede that Lord McAlpine clearly told the Neill committee that no one who gave money to the Conservative party had influence over its policies, and that the party chairman was seen to tear his hair out? I quote from the Neill report itself.

Mr. Bradley

If the hon. Gentleman tells me that Lord McAlpine said that, I am sure that he said it. However, I am more interested in what has happened since 1997 than before. I believe that matters have gone from bad to worse. The lack of values set out by Lord McAlpine is in stark contrast to what he has said about the current treasurer of the Conservative party. Lord McAlpine said that the current treasurer would take up that post "over my dead body". I wonder what he meant by that.

However, it is extraordinary that the current Conservative party treasurer is also its principal donor and the leading fund raiser for the party. With extraordinary irony, the Bill will mean that he will be the accounting officer, or regulator, for the party, too.

What is known about the recent record of Mr. Michael Ashcroft and the Conservative party exemplifies why the Bill is so necessary, and makes it clear why the Conservatives have resisted its provisions until they have no choice. I want to spend a few minutes explaining not only why Mr. Ashcroft is an inappropriate person to be treasurer of the Conservative party, but why he is a non-permissible source.

The former deputy chairman of the Conservative party, the hon. Member for Windsor, told the Neill inquiry that the party's approach to foreign funding had changed with the election of the right hon. Member for Richmond, Yorks (Mr. Hague) to the leadership. In his speech accepting that post, the right hon. Gentleman said: We must be open about our funding. In not being so in the past, we have often appeared secretive and defensive. And we have paid a political price for that. It is time to be much more open. We have nothing to hide and nothing to fear. But I want to go further than that. We have to recognise public concern across the Western world about the sources of funding for political parties. We must respond to that concern. We will publish new guidance later this year"— he was speaking in 1997— and our intention is that in future years the Conservative Party will no longer accept foreign donations. Thus the right hon. Gentleman put it on the record in 1997 that those guidelines would be published.

Lord Parkinson, who was then chairman of the Conservative party, told the Neill committee: since the last election we have had no donations which we have even had to wonder whether they could be classified as foreign". The Conservative party's formal evidence to the committee made the same unequivocal assertion. It said: Although we have no reason to believe that any money received by the Party in the past should not have been accepted, Mr Hague has made it clear that in future we will not accept foreign donations. No such donations have been offered or received since the General Election. What is Michael Ashcroft if he is not a foreign donor? Let us consider his attachment to the United Kingdom. He is non-resident; he is a non-taxpayer; he is the owner of a foreign bank; he is the holder of a foreign nationality; he is the diplomatic representative of a foreign Government and the funder of a foreign political party. How much more foreign can one get?

I put that point in what I thought were civilised terms in a letter to the leader of the Conservative party as long ago as April last year. The reply that I received from the current chairman of the Conservative party was succinct and very much to the point. He said: I can assure you that the matters to which you refer in relation to donations are fully consistent with our stated rules. In 1997, the leader of the Conservative party said that the Conservative party would publish its guidelines for foreign funding and, in 1999, the chairman of the same party told me that it had "stated rules". What are those stated rules? How do they conform, as the right hon. Member for North-West Hampshire said that they do, to the Neill proposals? How close are the proposals of those on the Conservative Front Bench to the proposals set out in the Bill?

All the attempts that I have made to prize out of the Conservative party a copy of those guidelines have failed. I suggest that that is simply because they do not exist or because they certainly did not exist until they were cobbled together very hurriedly last November in response to continuing inquiries from The Independent and The Times. I am not altogether surprised that the Conservative party is now hastily covering its tracks. Its leader says that it will not take foreign funding but the hon. Member for Windsor says that it does. In the hon. Gentleman's letter of 30 January 1998 to the Neill committee, he says: amounts from overseas bank accounts are recorded as foreign donations". In other words, the donations that the Conservative party has received from the Belize Bank Trust company are classified as foreign donations, yet the Conservative party says that it does not accept foreign donations. The acceptance of the substantial funding that the Conservative party receives from Mr. Michael Ashcroft via the Belize Bank Trust company not only contravenes the Conservatives' own, and as yet unpublished, guidelines but clearly contravenes Lord Neill's recommendations.

For the avoidance of doubt, I wrote to Lord Neill in December and asked whether in principle a trust company based outside the United Kingdom and, indeed, the European Community would constitute a permissible source of funding. On 22 December, Lord Neill wrote back to say: I draw your attention in particular to Recommendation 26"— of his committee's report— which states, inter alia, that only companies incorporated in the UK should be a 'permissible source' of company donations. Clearly, the Belize bank is not in that category. As I have said, Mr. Ashcroft's donations, on which the Conservative party in a large part depends, are counter to both the spirit and the letter of the Neill recommendations and the provisions of the Bill. The Conservative party knows that.

I also asked Lord Neill whether he had received in submission from the Conservative party a copy of the guidelines to which the party chairman so frequently refers and whether Lord Neill had offered any advice on them. In the same letter to me, he said: To the best of my knowledge there have been no communications in which this Committee has given advice to the Conservative Party about its own internal guidelines on foreign funding. As I hinted earlier, that is either because the guidelines do not exist or because the Conservative party does not wish to risk the criticism that would follow if it submitted its questionable guidelines to the Neill committee.

I have a number of questions. It is, perhaps, unusual to ask questions of those on the Opposition Front Bench, but they will shortly have an opportunity to respond. I should like a clear answer to this question: will the Conservative party adopt the Neill committee recommendations in the way that the right hon. Member for North-West Hampshire suggested that it already had? If it will not adopt those recommendations and embrace the provisions of the Bill, will the Conservative party finally publish the guidelines that steer its approach to foreign funding, which the Leader of the Opposition said he would publish in 1997 and the chairman of the party says are already enshrined in stated rules?

Will the Conservatives explain why their practice does not conform to Neill's recommendations? To satisfy the hon. Member for Blaby, and if there is any doubt in their minds, will they refer the matter to the Neill committee? If necessary, are they prepared to repay to Mr. Michael Ashcroft the donations that he has made, and continues to make?

While they are on the subject—I am sure that there is a great deal of interest in this issue—will the Conservatives let us know whether the police are still pursuing the investigations that they were supposed to have mounted last year into the apparent raiding of the records of the Conservative party accounts at the Royal Bank of Scotland, or has that piece of propaganda quietly subsided into the sands?

The wheel has come full circle. In my view, the Conservative party is as sleaze-ridden in this Parliament as it was in the previous one. There were no guidelines before 1997—that much is apparent from what Conservatives have said—and I believe that there have been none since. There were foreign donations before 1997. I believe that foreign donations have been accepted ever since.

The undertakings given by the Leader of the Opposition on the issue are pure opportunism and hypocrisy. It has been business as usual. The Conservative party has dragged British politics into disrepute. That is why the Bill is needed, and it has taken a Labour Government to provide it, whether the Conservative party likes it or not.

In closing, I shall comment briefly on the provisions of the Bill, which I welcome, although I have some reservations. In clauses 45 and 46, I see no reference to the benefits that political parties derive from the underwriting of loans and the guaranteeing of bank overdrafts by third parties. That can be a benefit far greater than even the most significant donation, depending on the size of the debt or overdraft. I see no definition in those clauses that would catch that as a donation.

It is important to ensure that, in cases where donations are returned as impermissible sources of funds, no benefit should be derived during the 30-day qualification period. For example, a very large donation could attract a large amount of interest in the 30-day period before it is returned to a non-permissible source. I hope that we will close that loophole. Similarly, any forfeiture of impermissible donations should include any benefit derived from interest payments.

I am concerned, and others have mentioned it too, about the difficulty of policing the onus on donors of multiple amounts of less than £200 to declare their accumulated funding. If someone donates £199 a day on a standing order, by the end of the year he will have donated £70,000—a significant sum.

Most importantly, I am concerned about the reduction in clause 130 of the qualifying period for overseas electors from 20 to 10 years. It surely cannot be the purpose of the Bill to prevent British residents overseas from making legitimate donations. I am thinking, for example, of people who have dedicated a life to the British economy, paid taxes throughout their working life, and retired to the sunshine of Spain, and who wish to maintain contact with the political party that they support and the political scene in Britain. It cannot be the intention of the Bill to deprive them of that right.

The clause misses the point. I do not believe that hard-working UK taxpayers will understand or accept that someone who pays no UK tax should be allowed to influence British politics. That important point was made by my hon. Friend the Member for Battersea (Mr. Linton).

If people purposefully remove their assets from this country to avoid paying UK tax—I am not suggesting that they are breaking the law in any way—they should forgo their right to influence the British political agenda. Others have alluded to the clear principle that there should be no representation without taxation. I hope that the Government will table amendments in Committee to ensure that those who are entitled to fund UK political parties are registered to vote here and, unless retired, liable to pay tax.

With those and the other amendments that I and other hon. Members have mentioned, the Bill will do the job that the British electorate expect of it. The Bill may not prevent the Conservatives or, it must be said, any other political party from taking money from unsavoury sources, but at least the British electorate will know who pays the piper. They will at last be able to exercise their judgment and cast their vote according not only to the stated policy in a party manifesto but to the company that the party keeps.

8.51 pm

Mr. Andrew Robathan (Blaby)

I have not come here to attack the Labour party, but it is customary to say something nice about the speech preceding one's own and I shall not do so today. Under the cover of privilege in this House, I could make many allegations about the Labour party, individual party members and Labour Members of Parliament. Generally, however, I consider them to be a misguided but well-meaning bunch of people with whom I disagree.

I might go on, but I shall not be too rude about the speech of the hon. Member for The Wrekin (Mr. Bradley) except to say that he should dwell on what he has done. Perhaps he thinks that he will reap a few more votes in The Wrekin, but I think that the good burghers there will see the error of their ways, oust him at the next election and return a Conservative.

I shall comment on what the hon. Gentleman said about donations always influencing the way in which parties react. He mentioned Asil Nadir. What exactly did Asil Nadir get from the Conservative Government as he fled to Cyprus to escape British judgment? Absolutely nothing. Closer to home, in my constituency, somebody who supported the Conservative party said to me, "I have given all this money to the Conservative party, and I don't get anything for my planning applications." I replied, "Well, no. What did you expect?" He may have expected something, but I can assure the hon. Member for The Wrekin that that person got nothing because donations do not, as he tried to say, always mean influence. They may get someone a hearing, but they certainly do not get influence.

This party, like the Labour party and other parties in the House, has very little to apologise for in general, although some individuals may have erred.

The problem of speaking late in a debate is that all the best arguments have already been made. I do not intend to bore the House by repeating the arguments made by some of my right hon. and hon. Friends, which have been extremely good. I shall concentrate instead on referendums. The House may recall that I introduced the Referendums Bill last year. It was talked out by the Government, acting, as the hon. Member for The Wrekin will know, altruistically without any consideration of their own interests.

I welcome the Bill, particularly the provisions for referendums, but with qualifications. The Government have, I fear, included provisions that I view with a certain amount of suspicion. Even Labour Members may agree that the Government like to be in control, particularly of elections. Whereas an election or referendum is a chance for people to express their feelings democratically, Labour Members may agree that, for some in Millbank, an election is more of a chance to find out whether they can meddle a little.

Those who do not agree might ask the hon. Members for Brent, East (Mr. Livingstone) or for Cardiff, West (Mr. Morgan) about the arrangements put in place for selecting the Labour candidate for the mayor of London or choosing the candidate for the First Secretary of the Welsh Assembly. Nationally, almost everybody—even most members of the Labour party—disliked the closed party lists used for elections to the European Parliament, which were debated at length in the House. One further example is that of the Welsh devolution referendum, in which a large majority of the Welsh population did not vote for devolution. The Government created the Welsh Assembly none the less.

I welcome the creation of an Electoral Commission to take Government interference out of referendums. In the spirit of bipartisanship, I acknowledge that all Governments, not only the Labour Government, might feel the urge to interfere. I believe that the commission will be able to enforce many of the recommendations made by Lord Neill and his committee. I should like to make a few suggestions regarding the powers of the commission set out in clause 5, which states: The Commission shall … submit reports to the Secretary of State on … such matters relating to referendums … as the Commission may so determine". I hope that the Minister will say whether my suggestions fall within the commission's remit.

My first suggestion is that the commission should make recommendations on the wording of any question to be asked in a referendum. Those who, like the hon. Member for The Wrekin, follow such matters closely will know that, in February 1975, NOP ran a poll asking a series of questions in respect of the Common Market. I do not always believe opinion polls, even though, sadly, the events of May 1997 show that they tend to be right. However, the 1975 poll is illustrative in that, on a factually incorrect question, it managed to garner a majority among respondents in favour of leaving the Common Market. On another question, it managed to get an 18 per cent. majority in favour of staying in the Common Market. As the House will know, the eventual result of the referendum was approximately two to one in favour of staying in. That demonstrates something that we all know: the wording of a question can dictate the result of a referendum in favour of the person who has set the question. Therefore, I recommend that the Electoral Commission should have the opportunity to comment, and make recommendations, on the wording of any referendum question.

My next suggestion is that a voting threshold should be included in any future referendum. The House will remember that there was a threshold in the 1979 referendum on Scottish devolution. Earlier today, regional assemblies—a matter that leaves every one of my constituents cold—were mentioned. I doubt that they would turn out to vote on the establishment of an east midlands regional assembly. We should set a threshold before establishing such bodies. The Welsh Assembly was created on the approval of only one quarter of the Welsh electorate, so no one can pretend that the Welsh desperately wanted it.

Another matter for the commission should be the timing of separate but related referendums. The House might not think that an important issue, but if we want to remove political expediency from the calculations underlying referendums, we should consider how the Welsh referendum was held exactly one week after the Scottish one. The Government allege that they were held on separate days to avoid confusion, but most people in all parties would agree that the Scottish vote, which was rightly expected to be heavily in favour of devolution, was thought likely to influence the Welsh vote. The House will note that there appears to have been no confusion about holding separate elections to the Scottish Parliament, the Welsh Assembly and local authorities on the same day last year, nor about county council elections and a general election coinciding on occasions in the past and, no doubt, in future.

The question of spending limits has already been discussed at length, but it is worth recalling a little of the convoluted route by which we arrived at the current position. The White Paper suggested a limit of £5 million for each umbrella organisation and each political party with more than two Members of Parliament. Those proposals were widely regarded as being unfair. For example, if we were to hold a referendum on entry to a European single currency, the yes campaign would be able to spend £25 million and the no campaign only £10 million, based on current party positions. We and others, including Lord Neill, criticised those proposals, and the Home Secretary had to abandon what many perceived to be a partisan attempt to influence funding for a future referendum on a single currency.

Under the new sliding scale rules that the Bill introduces, the figures come out better. My calculations show that the yes campaign in a single currency referendum would be able to spend approximately £14 million, and the no campaign approximately £10.5 million. That is much more equitable.

We should also consider a point of principle: referendum spending limits should not be based on how well a party did in a previous general election. The point of a referendum is to determine what was not decided at a general election. The referendum is an instrument for teasing out a specific large issue from the rest of the issues that were decided by a previous general election. Making spending limits in a referendum campaign dependent on the way in which people voted in a general election replaces the issue among the others that had previously been decided. That negates the purpose of a referendum.

If a general election is not adequate for making a decision on a specific issue, why should it be adequate for determining the amount of money that can be spent on deciding the issue? Why should people's view of the Labour Government's stealth taxes at the next general election determine the number of leaflets that they receive about the euro in a referendum after the election?

My colleagues, especially my right hon. Friends the Members for North-West Hampshire (Sir G. Young) and for South Norfolk (Mr. MacGregor), have made other comments on funding and capping. I believe that the proposals in the Bill remain flawed, but I shall not pursue that.

I want to consider briefly Government involvement in referendums. The Neill committee recommended that the Government of the day 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. It is interesting to ascertain why the committee said that. Evidence quoted in the report states that the Government, being on one side of the referendum in Scotland, was able to write the rules and an information leaflet and send it to every house. The Neill committee agrees that it is fundamentally wrong for the Government to be a player and to write the rules. In the Scottish devolution campaign, the Government distributed information leaflets to every household. They omitted any argument in favour of a no vote. In Scotland, that Government propaganda cost £730,000.

In Wales, the Government spent £164,000 on the campaign. The Neill committee stated that it was "disturbed" by the "one-sided" referendum campaign, and added: A fairer campaign might well have resulted in a different outcome. The committee had good cause to demand Government neutrality.

Unfortunately, the Bill does not provide for Government neutrality, which would prevent a Government from influencing a referendum. The Government have rejected Lord Neill's proposals and decided that neutrality should apply only for the final 28 days of a campaign. In a long-drawn-out campaign such as that on the single currency—I am sorry to use that example again, but it is pertinent—28 days of neutrality is laughable.

The Treasury is already spending £29 million on its euro preparations—more than the total that the yes and no campaigns will spend in a future referendum. The Minister for Europe is touring the country—appropriately with Eddie Izzard—in some sort of two-man show to persuade people of the benefits of a single currency and the European Union.

Government propaganda is aimed at making the last 28 days of any subsequent referendum campaign as unimportant as possible by creating a mood of resigned fatalism among the British public about the supposed inevitability of joining the euro. The 28 days of neutrality, after all the organs of state have weighed in for months, is an inadequate safeguard of a fair and balanced campaign. Government neutrality should start when the plan for a referendum is presented.

I generally welcome the Bill, but its provisions for referendums are flawed. I suspect that the Government cannot resist attempting to retain their control over all elections and referendums. The Minister may be delighted to know that I do not totally distrust them on these issues, notwithstanding the speech of the hon. Member for The Wrekin, but they have already held several referendums and are committed to holding more, not only on the euro but—possibly, probably or perhaps not—on proportional representation. I fear that the Bill is in danger of representing a missed opportunity for producing a generally fair framework for the succession of plebiscites that are already planned.

Various hon. Members have said that we may need to revisit the situation. That may be true, but I hope that some of the issues that have been raised can be ironed out in Committee. I have to say—I hope that the Minister will listen—that a Committee of the whole House should consider the Bill because this is a constitutional matter and it should be examined on the Floor of the House. I hope that the Committee will be given the opportunity to improve the Bill and, especially, to address the concerns that have been raised on this side of the House.

9.6 pm

Mr. John Smith (Vale of Glamorgan)

I add my welcome and support for the Bill, it has been a delight to hear so much support being expressed from both sides of the House, even with reservations such as those of the hon. Member for Blaby (Mr. Robathan). It is extremely encouraging that there is such widespread support and to hear such comments, although it is sad in many respects that such a Bill has had to be laid before the House. The primary reason for that is that we had reached a crisis point in terms of trust in politics and politicians in this country by the end of the previous Government's term of office.

When I came into politics some years ago as an unpaid lay councillor—I am sure that I do not need to tell you this, Mr. Deputy Speaker—it was a pastime that garnered some respect in the community, even at local councillor level. Our Member of Parliament 25 years ago, who was not of my political persuasion, enjoyed considerable respect, trust and confidence in the community, but there has been a gradual decline over the past 25 years. Unfortunately, over the past 10 years, there has been a dramatic fall in confidence in politics and politicians among the general public and we have to put that right. The Bill puts us well on course to doing just that.

In 1992, not out of choice, I was obliged to leave the House for five years, but not as a result of the wishes of my constituents because the majority of them voted for me to remain their representative for another five years. A small proportion—people living in other lands—who had little association, if any, with my constituency decided to vote for someone else and put me out of office, but I was delighted to be re-elected with the biggest majority in my constituency in 50 years. That was partly a consequence of a lot of people feeling upset because they did not think that their voice—the local voice—counted.

I welcome the Bill with its transparency, which will go down well, and the limitations on expenditure. More than anything else, I welcome the restrictions on foreign donations and donations from foreign nationals. I wish only to draw attention to a couple of matters. The first is tax relief on donations. A number of arguments have been made today, but there is a simple point: if we have not accepted in the Bill the principle of general state support for political parties, we simply cannot accept tax relief on political donations. No matter what spin or gloss is put on it, it is a form of general state support for political parties so we should give that one short shrift.

The second matter, which concerns me greatly, is the danger of evasion of the restrictions on foreign donations. The Bill has had all-party support. Many parties, including the Conservative party, have already begun to embrace the Neill committee's recommendations. That is good, and we are on track and going in the right direction. Before the Bill becomes an Act, I hope that many, if not all, the parties in the House will have adopted many of these proposals.

However, I am concerned about a particular political party. The House may be surprised to hear that it is not the main Opposition party. One of the key recommendations in the Neill report, which is implemented in the Bill, is the publication of accounts. That must be the first step towards transparency and openness in public accountability for the funding of political parties. One party in the House still has not published its accounts, and that is Plaid Cymru. Despite giving an undertaking to do so, the Welsh nationalists have failed to publish their accounts and, by that very act, they have undermined confidence in the political system in Wales in particular, and across the country.

It may or may not be a coincidence that Plaid Cymru has a secret dollar account in the United States of America. We do not know the value of that account containing donations made in north America, because the party does not publish its accounts. As far back as January 1996, the Welsh nationalists are on record as saying in the House that they would not accept any donations from foreign sources. Two of the most senior members of that party supported a ten-minute Bill to that effect.

We now discover advertisements in the north American press for donations towards the fighting funds of the so-called party for Wales—which has to go to north America for its funding. It is seeking funds and sources of funds to raise $250,000 for its war chest for the election, having given an assurance in the House and elsewhere that it would not accept donations from foreign nationals. When challenged, the Welsh nationalists say that they adhere to the Neill committee's recommendations and that they do not accept donations from anyone other than people entitled or registered to vote in this country. It does not say that in the adverts that appear in the north American press.

A point that must be raised in relation to the Bill is that we have no way of knowing whether Plaid Cymru has received donations from any source if at a later stage it says that it accepts donations only from people registered to vote in this country, as does its sister party. In fairness to the Scottish National party, its website makes it absolutely clear and states publicly that it will accept donations only from people registered to vote in this country. Plaid Cymru, the so-called party for Wales, does not do that. It has given two undertakings to provide information to prove that it is not receiving money from any foreign nationals based in north America, but it has yet to do so.

Plaid Cymru is making a big mistake. It is damaging politics in Wales, and damaging the reputation of the House. The Minister should reconsider clause 54 to ensure that we can enforce the regulations relating to donations that are not permissible from countries where our jurisdiction is limited. It is all very well for political parties to say one thing, if they are doing another.

Like all hon. Members who have contributed to the debate, I warmly welcome the Bill.

9.15 pm

Dr. Julian Lewis (New Forest, East)

It was a pleasure to hear the hon. Member for Vale of Glamorgan (Mr. Smith) pay tribute to his predecessor, the late Sir Raymond Gower. I come from south Wales, and I well remember the respect in which Sir Raymond was held. The hon. Gentleman was right to suggest that such personal regard can have a massive effect on votes at a general election, but I would take that argument further, and draw an analogy with personal regard for the behaviour of a party. When such personal regard disappears—as it had undoubtedly disappeared for the Conservative Government by 1997—it, too, can have a massive effect in a general election.

Along with most of my colleagues, I welcome the Bill for the most part, but we should recognise the importance of having faith in the democratic process. It may be a bit rough and ready, and it may take some time to come into effect, but, at the end of the day, if a party behaves badly, it will be punished. I think that we in the House are mistaken if we feel that everything must be tied up in clauses, subsections and schedules, because eventually the British people will have their say. They will make their judgment, and deliver their verdict.

I assure the hon. Member for Vale of Glamorgan, and all hon. Members present, that plenty of Conservative Members are determined, by their examples, to try to restore the standing of Members of Parliament in the public perception, in the same way as the hon. Gentleman and his colleagues. That applies to new Conservative Members, and to those who were here during the last Parliament, and who viewed much of what happened then with dismay.

In the spirit of agreement that has permeated today's debate, I want to raise three issues. Two have been mentioned today; I have mentioned the other in a different context, but I believe that it is relevant to the Bill. My first point relates to the excellent speech made by my right hon. Friend the Member for South Norfolk (Mr. MacGregor). He mentioned the Neill committee's concern about the fact that the referendum for the establishment of the Welsh Assembly was almost even more one-sided than it turned out to be: only by sheer chance was there any financial support for the "no" campaign. That is why I agree with the Bill's provision that public money should be available for umbrella groups—up to £600,000 for each group on each side of the argument.

As I said in an earlier intervention—and as a number of hon. Members seemed to confirm by agreeing with me—we have a major problem with the provision imposing a cap on what individual pressure groups can spend from funds that they manage to raise privately. Naturally, if they are not members of umbrella groups, they will have to raise the funds privately. In my intervention, I explained that I used to run a campaigning pressure group, which, as the hon. Member for Southampton, Test (Dr. Whitehead) was kind enough to remind the House, dealt with nuclear weapons and the importance—as I saw it, and as it was seen by people who shared my beliefs—of retaining the nuclear deterrent in the climactic closing years of the cold war in the early and mid-1980s.

Let us suppose, for example—I believe that examples help to concentrate the mind—that, in 1983 or 1984, a referendum had been held on whether Britain should retain its independent nuclear deterrent. Let us suppose that the various groups campaigning in favour of either side of the argument had been able to raise a certain amount of money. I was running a group with the short and snappy title of the Coalition for Peace Through Security. Lady Olga Maitland, who later became a much respected and doughty Member of Parliament, was running another group with an equally short and snappy title: Women and Families for Defence, later truncated to Families for Defence.

What would we have done if we had been told that we could spend only a fraction of the money that we were able to raise? Let us say, for example, that we were allowed in that campaign to spend £10,000 per group and could have raised £30,000 each. What would we have done? I can tell hon. Members what I would have done. I would straight away have disbanded the Coalition for Peace Through Security and set up the coalition for peace, the coalition for security and, with all due deference to Lady Olga, the coalition for defence.

What would Lady Olga have done? She would have set up families for peace, families for defence and families for security. Straight away, we would each have trebled our capability to spend money, if we could raise it. It is manifestly obvious that such a restriction is no restriction at all.

No doubt the pro-nuclear disarmament lobby would have adopted similar tactics. It had plenty of groups. There was CND, Teachers for Peace, Women Opposed to the Nuclear Threat, Scientists Against Nuclear Extermination and even, notoriously, Babies Against the Bomb. Those would all have been able to subdivide and to replicate themselves ad nauseam. I do not see the hon. Member for Test disagreeing with that. I suspect that he was a member of at least some of those groups and knows that I am telling the truth. The Government have to deal with that problem because it is a meaningless restriction as it stands.

I turn to the point that was rightly highlighted in the excellent speech by my hon. Friend the Member for Blaby (Mr. Robathan). My calculation slightly differed from his as to what money would have been available to political parties that were campaigning for and against the single currency, but the broad principle applies.

I calculated that, under the Government's original provisions, probably a £20 million limit would have been imposed on parties campaigning in favour of the single currency and only a £5 million limit would have been imposed on parties campaigning against it; that limit could possibly have been £10 million. However, from my calculations, it still appears that the limit for those campaigning in favour will be at least twice that for those campaigning against. That will lead to a disparity in the campaign resources that parties are able to spend.

Let us suppose, however, that the Conservative party and those who campaigned to retain the pound could raise more money than they were allowed to spend. What would happen under those circumstances? Do people honestly believe that that money would just remain in the pockets of potential donors, who had been willing to give it to the Conservative party to campaign to save the pound? I doubt it. They would find other avenues. It would go to other groups, bodies and organisations.

That is why the whole concept of putting caps on what may be spent by parties or groups in a referendum is fundamentally flawed. I am not alone in that opinion. I understand from my right hon. Friend the Member for South Norfolk (Mr. MacGregor) that that is precisely the reason why the Neill committee did not recommend capping the limits in that way.

I was particularly impressed by the point made by my hon. Friend the Member for Blaby—that the whole purpose of having a referendum is to cut across the normal party divisions that form in general election campaigns, and that determining how much each party should be able to spend in a referendum by its vote at the previous general election misses the whole point of creating special referendum arrangements.

Dr. Whitehead

Does the hon. Gentleman accept that the American experience in propositions and referendums demonstrates an association between huge expenditure imbalances and outcomes? Is he saying that we should make no attempt to curtail such consequences and simply let rip, or that the system that the Government are proposing in the Bill requires amendment?

Dr. Lewis

It is obvious that the Government have taken a decision to reject the Neill approach, and it is not realistic to expect the Government to change their mind and remove the caps completely. However, I am still gravely dissatisfied with the effect of the sliding scale, which will give unequal potential to different parties to campaign on either side of a referendum question, and will give unfair advantages to one side of a referendum debate rather than another.

I shall be quite specific and use the example of economic and monetary union. I suspect that what is really behind the Government's actions and their original flawed scheme—which would have created a much greater disparity between the amounts spent for and against in a referendum campaign on membership of the single currency—is their knowledge that they have a mountain to climb.

Despite all the Government's effort to propagandise on the desirability, as they see it, of replacing the pound with the euro, the evidence of systematic polling has been that the gap in favour of keeping the pound has been widening, so that, currently, a massive majority of at least 64 per cent, of people are in favour of keeping the pound and rejecting the single currency. Therefore, the cause of adopting the single currency is almost as unpopular as the cause of unilateral nuclear disarmament—supported by the hon. Member for Test—was in the 1980s.

The Government, therefore, even using their ability to spend more money on their side of the argument, will have great difficulty in turning that opinion around. For the sake of a hard case, they are in danger of making a bad law.

In my last couple of minutes, I should like to refer very briefly to an issue that I raised on 30 November, in the debate on Second Reading of the Representation of the People Bill, on the need to close a loophole that affected me in the general election campaign, when I was a parliamentary candidate, and provable lies were broadcast against me personally on the internet with the intention of damaging my vote.

On the same day, I discussed the matter with the Under-Secretary of State for the Home Department, the hon. Member for North Warwickshire (Mr. O'Brien) and I received an indication—which has been renewed since, in a letter that he sent me on 15 December—that, as he said in his letter, he is "sympathetic to the problem" of candidates being attacked, using the internet, to undermine their personal reputation by the telling of lies.

The problem of character assassination in general election campaigns has always been dealt with by the Representation of the People Acts, but, in this case, that remedy failed because the material had been posted on to the internet prior to the election campaign. It had not been removed from the internet during the general election campaign. That was deemed inadequate to constitute publication for the purposes of the existing Acts.

At that time, I thought that it would be more appropriate to move an amendment to the Representation of the People Bill. Subsequently, however, I have been advised that it would be more appropriate to move an amendment to the Political Parties, Elections and Referendums Bill. I should be very grateful if, in his reply to the debate, the Under-Secretary—whom I thank for the close interest that he has taken in the matter—might give an intimation of whether he would welcome such an amendment in Committee. I am delighted that the hon. Member for Ellesmere Port and Neston (Mr. Miller), who intervened on me on that previous occasion, has said that he is willing to table an amendment with me. On that note of consensus, I conclude my remarks.

9.30 pm

Mr. Robert Walter (North Dorset)

The Opposition have always made it clear that we support the recommendations of the Neill committee and that we shall support the legislation that implements the report. Politics in Britain is clearly not corrupt. We already have legislation to deal with corrupt and illegal practices. However, many legal practices that have grown up in recent years have led to concerns in the minds of our electors about the transparency of our democracy.

Concerns about money lead to suspicions about the motives of elected politicians, the army of voluntary workers who support them and the generous contributions made by donors large and small. Neill stated clearly that he was not offered any direct evidence of misconduct by political parties or by their fundraisers. He went on: 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 party workers. We owe it to our electors, to those voluntary workers and to our donors to use the Bill to create transparent and open financial arrangements for our political organisations that will enhance our democracy, putting those who give so generously beyond reproach, protecting our fundraisers and treasurers, most of whom give of their free time, and leaving us elected politicians to get on with government or legitimately opposing those who govern.

I am grateful to my right hon. and hon. Friends for their contributions to today's debate. I particularly wish to echo the excellent opening speech of my right hon. Friend the Member for North-West Hampshire (Sir G. Young). We look to the Minister to answer the questions that he posed. The first and key question related to timing. The provisions of the Bill affect events up to one year before a general election. Can we assume that an election held in October of this year, as was suggested in The Times this morning, or the spring of next year would be excluded? The hon. Member for Vale of Glamorgan (Mr. Smith) mentioned the by-election that Plaid Cymru has called with undue haste in Ceredigion. It will not be covered by the Bill, because it will take place as soon as 3 February.

The Government are committed to holding a referendum on proportional representation in this Parliament. Will it be held under the new rules? Will policy development grants be paid before the next general election? Do the Government regard the spending of trade union political funds as separate from the funding of the Labour party? Will we get better definitions of donation and sponsorship? Why does the Labour party, which backed the 20-year limit for overseas voters in 1989, want to halve it to 10 years? Why did the Government reject Neill's recommendations on tax relief for small political donations? I shall deal in a moment with my right hon. Friend's comments on referendums.

My right hon. Friend the Member for South Norfolk (Mr. MacGregor) gave an excellent speech. He is a distinguished member of the Neill committee and made some useful comments on third party expenditure and the de minimis limits. His comments on the obligations placed on local party treasurers and on donors tracking their own donations are most helpful and we shall use them in Committee. His comments on tax relief for small donations will also be pursued in Committee. I hope that the Minister will justify his opposition on the grounds of cost, either tonight or in Committee. My right hon. Friend's comments were echoed by my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke), who gave a fascinating historical perspective to the Bill and made a series of useful observations which we shall also use in Committee.

My hon. Friend the Member for Blaby (Mr. Robathan)—who was most restrained in following the hon. Member for The Wrekin (Mr. Bradley)—raised some useful points on the powers of the Electoral Commission, on referendums and on the unfairness of the Government's proposals on referendums. Latterly, my hon. Friend the Member for New Forest, East (Dr. Lewis) gave an excellent speech, touching on standards in political life. He raised concerns that we all share about the funding of referendums, and I wish to speak a little about that now.

I wish to deal with that aspect of fairness in our democracy—the equality of opportunity for both sides to be able to put their case in an argument. On this test, the Bill clearly fails when it comes to referendums. Neill's recommendation 83 was: In any referendum campaign there must be a fair opportunity for each side of the argument to be properly put to the voters. Neill rightly proposes vigorous standards of financial transparency in the funding of the referendum campaigns, along with some excellent proposals—which are incorporated in the Bill—on core funding from the public purse.

Neill did not propose the elaborate dog's dinner contained in the Bill for limiting the funding of various types of organisations based on some quite bogus criteria. Neill states: It would be impracticable to try to control campaign spending. The number of individuals and organisations involved would often be too large. The time scale would often be too short. Adequate accounting procedures would often be impossible to put in place. The administrative apparatus required would resemble one of Heath Robinson's most outlandish contraptions—and would almost certainly not work. Well, Heath Robinson is alive and well and working in the Home Office. He helped draft this Bill.

It might be useful for a moment to analyse why referendums are used or proposed in this country. The 1975 referendum enabled Harold Wilson to bypass a deeply divided Labour party and gain a popular mandate for his policy as opposed to that of the national executive committee of the Labour party. The 1979 devolution referendum saw leading members of both major parties in both the yes and no camps. Indeed, the future leader of the Labour party, Mr. Neil Kinnock, campaigned vigorously and successfully against his own Government's proposition. I had the delight, two months later, of being his Conservative opponent in the subsequent general election.

Mr. Winnick

What was the result?

Mr. Walter

Unfortunately, he won—but only just.

The most recent devolution referendums—particularly the one in Wales—saw prominent members of the governing party campaigning against the proposition. Both the major parties at the last election were committed to a referendum on the single currency, which has been mentioned by right hon. and hon. Members on both sides. Why? Why, in a representative democracy, did they not have a clear mandate on the issue? Why are the Government proposing a referendum on proportional representation? With 75 per cent. of the Labour party against the proposition, there is no clear mandate for it.

What is the logic of controlling the expenditure in a referendum campaign by linking it to political parties and then defining a formula based on popular support at a general election at which the Government gained no clear mandate on the issue that is the subject of the referendum? Who will decide whether the Labour party's £5 million in the PR referendum is given to the no or to the yes campaign? Will it be the Prime Minister or the national executive committee?

The Minister of State, Home Office (Mr. Paul Boateng)

Same thing.

Mr. Walter

Oh, it is the same thing, is it? The truth is revealed.

Mr. Straw

It was a joke.

Mr. Walter

He who laughs last.

If there is no coherent link between support in a general election and party commitment to a referendum outcome, how should we control the spending—or should we control it at all? Neill rejected any cap because of the complexity of enforcement. As the right hon. Member for Birkenhead (Mr. Field) pointed out, whatever the cap, the proprietors of The Sun or The Mirror can campaign for one side or the other day after day and not be subject to any limit.

There is a certain attraction in the simplicity of an equal cap on both sides, but Neill could find no formula that would fit the Bill. The Government's formula is unfair and unsustainable. The Home Secretary is clearly unhappy and has invited an alternative proposal. The proposal on the table is the Neill proposal, which we support.

The Bill contains important constitutional changes. I emphasise our desire that, by agreement through the usual channels, the provisions on referendums, on the control of political parties, on the establishment of the Electoral Commission and on restricting the franchise should be taken on the Floor of the House.

We welcome the Neill report and support the measures to enact it, so we will not divide the House tonight.

9.42 pm

The Parliamentary Under-Secretary of State for the Home Department (Mr. Mike O'Brien)

Some commentators are naturally suspicious whenever the House agrees on legislation, but I take considerable comfort in the large measure of cross-party support for many of the Bill's provisions. Despite the tone of the end of the speech by the hon. Member for North Dorset (Mr. Walter), the House has been broadly supportive of the terms of the Bill.

We have heard some excellent speeches, including those from my right hon. Friend the Member for Birkenhead (Mr. Field) and my hon. Friends the Members for Walsall, North (Mr. Winnick) and for Southampton, Test (Dr. Whitehead). My hon. Friend the Member for Battersea (Mr. Linton) made a well-informed and thoughtful speech, and my hon. Friend the Member for Rotherham (Mr. MacShane) made a powerful contribution.

There were also important and worthwhile contributions from the right hon. Members for North-West Hampshire (Sir G. Young), for Caithness, Sutherland and Easter Ross (Mr. Maclennan) and for Cities of London and Westminster (Mr. Brooke). I listened with especial care to the contribution of the right hon. Member for South Norfolk (Mr. MacGregor), who is a member of the Neill committee. The endorsement of a leading Tory on the committee for most of the Bill's provisions was telling. I hope to deal with his specific questions as we proceed.

When we are embarking on major constitutional changes and changing some of our party political machinery, it is right that the House should proceed on a consensual basis as far as is possible. Nothing would be more destabilising than if, with each new Administration, how we conduct our elections were subject to change and counter-change.

There is still no agreement on a number of issues—thankfully, a small number. I hope that we can discuss those issues as the Bill progresses through the House. On referendum spending limits, my right hon. Friend the Home Secretary has on more than one occasion said that he is willing to consider alternative proposals; but any alternative must be workable. We see fundamental practical and legal difficulties with any scheme that applies a single overall spending limit to each side of the argument in a referendum. The right hon. Member for South Norfolk made a telling point when he said that he thought that it was probably impossible to have complete equality. Those who seek to achieve it must have the onus placed on them to show that it would be practical and legal to achieve that aim. We do not have a closed mind on the issue, but we have considered it with care and the other solutions that have been proposed would produce even greater difficulties.

The hon. Member for North Dorset made the point that the Neill committee recommended that fair opportunity should be provided for both sides to put their arguments to the public during a referendum, and we endorse that view. However, fairness does not necessarily mean equality. Equality may produce unfairness in certain types of campaign, especially if those on the same side have different reasons for seeking a particular outcome. Some people might not be able to advance their views under an umbrella organisation which would, I suspect, be the only way in which we could achieve perfect equality in expenditure.

The hon. Member for North Dorset also said that the Opposition had said that they would support the Neill proposals. However, I note that, in the Conservatives' internal briefing on the Neill committee's inquiry, they said: In some areas, we think that the Neill report does not go far enough. If there are election spending limits, for example, there is a strong case for capping spending on referendum campaigns too. The proposed 28-day purdah period provided for in clause 118 is entirely consistent with the Neill committee's recommendations and with the long-standing position in respect of general election campaigns with which the committee drew a parallel. The Neill committee has welcomed the Government's proposals in relation to the role played by the Government during a referendum campaign. Separate legislation would be needed, for example, to determine the procedure for setting the question that would be put in a referendum. The question will need to be considered in the context of such legislation, and it is right that its wording should be a matter for Parliament to decide. The Neill committee did not propose any role for the Electoral Commission in setting a referendum question, but the right hon. Member for Caithness, Sutherland and Easter Ross suggested that it should. We are sympathetic to that idea, and will consider it.

We listened carefully to the comments about the expenditure limits proposed in the Bill. In particular, the Neill committee has said that it does not oppose expenditure limits as a matter of principle, but it has questioned whether parties represented in the House of Commons should be subject to the same £5 million limit, irrespective of the number of Members of Parliament they had. In view of the Neill committee's concern, we have adjusted the expenditure limits for political parties so that they are now geared according to the parties' share of the vote at the last election. The hon. Member for Blaby (Mr. Robathan), among others, questioned whether that was fair, but achieving complete fairness would be difficult. It is a legitimate area for debate and perhaps in Committee we may consider it in more detail. I repeat that we do not have a closed mind on the issue.

We will propose Government amendments in relation to the administration of referendums. As the Bill stands, part VIII provides the framework for the fair conduct of referendums, but the nuts and bolts of organising the poll and the count are missing. We intend to table amendments that will plug that gap and make the legislation a truly generic referendums Bill. I do not expect those amendments to be controversial, so the House need not worry, but we will welcome any representations the Opposition may have to make.

Another point raised by the right hon. Member for North-West Hampshire and by the hon. Members for North Dorset and for Blaby was which stages of the Bill might be taken on the Floor of the House. As my right hon. Friend the Home Secretary said earlier, we recognise that parts of the Bill give rise to constitutional issues. However, that cannot be said of the Bill as a whole. We will wish to discuss through the usual channels which provisions should properly be taken on the Floor of the House. I hope that that explanation provides some reassurance.

The right hon. Members for North-West Hampshire, for South Norfolk and for Caithness, Sutherland and Easter Ross all mentioned tax relief. The right hon. Member for South Norfolk also asked about administration costs. The Government are not persuaded of the case for tax relief on donations. It would amount to general state aid by another route, and the Government have to balance the loss of revenue that such relief would entail against other spending priorities.

The Bill sets out proposals for targeted assistance to political parties, including provision for a total of up to £2 million to be made available each year for a policy development grant. A generous increase, 270 per cent., in the Short money funding for Opposition parties has been agreed.

The right hon. Gentleman asked about the administration costs of tax relief. Such costs are only one factor—by no means the paramount one—that the Government took into account when coming to their view. We are still prepared to discuss the issue during the Bill's passage. Any precise assessment of the administrative costs of a tax relief scheme will depend on the ultimate shape of the relief and the way in which it is paid. No decision on these matters has been taken. Subject to that proviso, I suppose that a very rough estimate—I can do no better than that—of the sort of costs to the Inland Revenue of setting up and administering such a scheme would be between £700,000 and £1.1 million in the first year, and between £500,000 and £700,000 in subsequent years. Such costs are high, and must be set against the likely benefit to the main political parties—which will themselves incur costs in connection with the administration of the scheme—of perhaps £4 million or £5 million. There has to be a balance. We can discuss these issues further, but I hope that that explanation is helpful to the right hon. Gentleman.

Mr. Simon Hughes

The arguments that the Minister deploys about the costs of that scheme are perfectly valid, but how does he address the more telling political question? Unless we encourage people who will give smaller amounts of money, we will allow the drift of political funding to go in favour of a few well-off people who will contribute—that is, funding by the few, not the many.

Mr. O'Brien

I do not wish to teach the hon. Gentleman how to run a political party, but the Labour party has done precisely that. It has changed the whole way in which it is funded by talking to its members and supporters and bringing in, in small donations, very large sums of money. We have changed the basis of much of the Labour party's funding.

The hon. Gentleman should look at the operation that the Labour party has undertaken and the way in which we go out and talk to our members—indeed, the Conservative party says that it has been doing something similar for a long time. In that way, he may find out how to do this. The main thing though, is for the hon. Gentleman's party to have the members first.

I should like to deal with a couple of other questions raised and will write to hon. Members on the points that I do not have the opportunity to deal with here. The right hon. Member for North-West Hampshire spoke about the exclusion of trade unions from the ambit of the Labour party. The trade unions are regarded by the public more as donors to the Labour party. If the unions are treated as an integral part of the Labour party, their affiliation fees will be an internal party transaction, not subject to disclosure. Clause 22(8) ensures that such affiliation fees are treated as donations and are subject to the disclosure requirements. The Labour party prefers such matters to be open. I hope that that deals with the point.

I was asked about whether charitable stalls and company stalls at party conferences require shareholder consent. I am happy to discuss further—both through the usual channels and directly with hon. Members from the various parties—how the matter of conferences should be dealt with. A genuine problem exists that requires further consideration. Some of the issues are complex, especially those involving stands at conferences, and we shall be happy to discuss them further.

Another question had to do with when policy development grants will be available. We expect them to be available after 1 April 2001, but it remains to be seen whether that will be before or after the next general election.

I should like to tackle a number of other matters, but fear that time will defeat me. However, I can tell the hon. Member for New Forest, East (Dr. Lewis) that I am still considering the matter that he posed in connection with the internet. I have some sympathy with his point, although I cannot guarantee that we will be able to deal with it during consideration of this Bill. However, I am prepared to discuss the matter further with the hon. Gentleman.

My hon. Friend the hon. Member for Rotherham made a powerful speech, one important element of which was that the role of a party's national treasurer will become very sensitive and be subject to very strict rules. All political parties must grasp the importance of this change, and take it on board. To paraphrase a former Prime Minister, I can tell the House that the time for penny-farthing political parties has gone: we now need some professionalism in the organisation of the finances of all parties, both small and large.

The public will demand that, because they want openness. The Bill will deliver the necessary level of openness, but the political parties will be required to ensure that there is an element of professionalism in their financial organisation.

The hon. Member for Tatton (Mr. Bell) raised a number of important points. As other contributors noted, the hon. Gentleman's presence in the House is a clear sign of the need for a Bill such as this. I listened with interest to what he said and I welcome his general support for the Bill. With regard to the cap of £19.7 million on election expenditure, I can tell the hon. Gentleman that the Government considered the level of that cap with great care. However, we must be realistic and accept that parties have to be able to communicate with the electorate on a national basis.

We want to ensure that the level of funding is realistic. If we went down to the level of £2 million suggested by the hon. Gentleman, the incentive for getting around the requirement might become considerable. We must be realistic about the nature of our political process, and establish rules that we can enforce.

However, I agree with the hon. Member for Tatton that, in recent years, the question of sleaze has brought discredit on our political system. Too many people in the country think that politicians are a bunch of self-interested crooks. As my hon. Friend the Member for The Wrekin (Mr. Bradley) said, each scandal discredits more than just the individual or political party involved. In the eyes of many of our constituents, such scandals reflect badly on all political parties and all politicians. That is one of the reasons why young people are often alienated from the political process. It is why some refuse to vote, and it is also why even those who do vote have a cynicism about the political process rather than a proper scepticism about politicians.

As the Neill report showed, many hon. Members on both sides of the House became involved in politics out of a sense of idealism and a determination to improve things. For the average voter, it is difficult to associate idealism and trust with foreign donations, secrecy in party funding and the behaviour of some politicians.

As the hon. Member for Tatton suggested, it is time to reassert the better values of decent politics and to give honest politicians the ability to present politics as an honourable vocation. We must give political parties a chance to show that they care more about principles than donations. The Bill gives us that chance, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Standing Committee, pursuant to Standing Order No. 63 (Committal of Bills).