Political Parties: Funding

HL Deb 07 June 1995 vol 564 cc1356-97

3.7 p.m.

Lord Jenkins of Hillhead rose to call attention to the case for an independent inquiry into the present arrangements for the funding of political parties; and to move for Papers.

The noble Lord said: My Lords, I believe that there are few more disturbing aspects of our present-day national life than the low and falling esteem in which politicians are held. That was obviously a revelation which much struck Nolan—I say brusquely, "Nolan" rather than the noble and learned Lord, Lord Nolan, to indicate that I am referring to the collectivity rather than the individual—and to some considerable extent that thought infuses his committee's report.

This view may be exacerbated by the exceptional unpopularity of the present Government. But I believe that the causes go a good deal deeper than that. Ministers, despite—to put it at its most charitable—their recent run of ill luck, do not score in the Nolan table all that much worse than the rest of us. In any event, I have a strong feeling that self-righteousness is often as dangerous as it is always unattractive, and that we should all be careful to avoid, Compounding sins we are inclined to,

By condemning those we have no mind to". Nevertheless, it is clear that strenuous efforts have to be made to retrieve the desperately low current standing of the political class, and indeed of the political process, because if that cannot be done, there are grave national and social dangers there involved. The key to such retrieval is thought, hopefully and probably rightly, to be transparency. When the Prime Minister appeared to stand against that current of opinion for a few brief days after the publication of Nolan, he found the wind distinctly uncomfortable, and, like a sensitive feather, quickly moved in response.

The first Nolan Report did not cover the financing of political parties, although it, and associated pronouncements from its members, managed to leave the strong impression that the committee's inability to deal with it left it with a deep hole in the middle. That is my strong view.

The recent actions of a number of Members of Parliament who have provoked the excitement, are squalid and wholly unacceptable if there is to be any chance of the public again looking up to their legislators and representatives. But the events which provoked the excitement have not been likely seriously to pervert the course of government. Parliamentary Questions asked for gain, or even amendments tabled in someone else's name, are offensive peccadillos, but the answers to one are unlikely to divert the course of administration, and the amendments would probably not be carried.

Any malfeasance as a result of the corrupt financing of political parties could be of an altogether different order of magnitude. I hope and think that it is rare that Ministers ever alter their decisions in accordance with an awareness of those who subscribe and those who do not. If there is a danger, it will be more subtle than that. Where a decision is marginal, a desire to please those whom it is helpful to please is a natural human reaction. Beyond that, there are other dangers and disadvantages in the present semi-secret arrangements for the financing of political parties and, above all, of one of them—the Conservative Party—because it is, or at any rate has been until recently, overwhelmingly the greatest beneficiary of company and large individual donations.

There are some undesirable aspects—if I may say so—to Labour Party finance. The dependence upon trade union subventions and those of two or three large unions are proportionately bigger than any individual contributions which the Conservative Party receives. Set against that there is the fact that the Labour Party shows considerable signs of being anxious to get away from such dependence, and that even if undesirable, it is at any rate open and not secret. There are also one or two small pools of obscurity in Labour Party private financing, and indeed in Liberal Democrat financing also.

We have offered to clear them fully up on a reciprocal basis. We might be wise—Labour and Liberal Democrats alike—to do so even on a unilateral or, I should more accurately say, a bilateral basis. So we come back to the Conservative Party. Two features stand out from the reading on this issue that I have done in the past week or so. First, the Conservative Party remains dedicated to secrecy. Secondly, it is mostly uncomfortable and defensive about it.

I had not until recently studied at all closely the proceedings and report on the funding of political parties of the Home Affairs Select Committee of another place, which sat in 1993–94. The proceedings were frankly a revelation to me. There was none of that spirit of cross-party objective inquiry which so often characterises the work of Select Committees.

Every contested decision was taken on a strict party basis and went to the casting vote of the Conservative chairman. Furthermore, the taking of evidence—it is impossible to read it without seeing this—was done much more on a point-scoring than on an information-seeking basis. It was adversarial politics at their worst. It was a striking example of what produces Nolan's starting point—the low esteem for politicians.

I hope therefore that there will be no question of the noble Viscount the Lord Privy Seal, or anyone else, arguing that this Motion is otiose because the matter was fully investigated last year. You cannot dispose of a serious issue of national importance on the casting vote of a chairman after a straight party vote. You can bring the proceedings to a close by that means, but that is different. You cannot settle it.

However, the reason that I brought in the Select Committee of the other place at this stage was to illustrate the point I was making about the defensive uneasiness which sits alongside the Conservative devotion to concealment on this issue. That was splendidly illustrated when there was a proposition that the noble Lord, Lord McAlpine, as a former treasurer, should be invited to give evidence, particularly as Sir Norman Fowler had several times said that he could speak only for the previous 12 months, because his period of office had only then begun. That proposition for an invitation to the noble Lord, Lord McAlpine, was defeated—again, only on the casting vote of the chairman—with all Conservatives voting unanimously no, which indicated either a great respect for the time of the noble Lord, Lord McAlpine, or a considerable lack of confidence in his discretion if he appeared before the committee.

Apart from that lack of frankness, there are other worrying features to the issue. There is inherent unfairness. It is far from that over-used cliché—as I think—of a level playing field. There is the difficult issue—and it is a difficult issue—of overseas gifts. There is the fact that there have undoubtedly been several big donations from those who have turned out to be very unsavoury figures. There is the entanglement of the issue with honours lists.

I do not want to make too much of that last point which has a certain tradition, although not a high one—in British politics.

Viscount Cranborne

My Lords, that comes well from a member of the Liberal Party!

Lord Jenkins of Hillhead

My Lords, no, there is a common misapprehension about that. I believe that at the time when Lloyd George was Prime Minister certain issues of that sort arose. But that was not when he was Prime Minister of a Liberal Government; it was when he was Prime Minister of an overwhelmingly Conservative coalition, with the Conservative Chief Whip being every bit as much involved in those arrangements as anyone else. However, we are not debating 1921 to 1922. I shall leave that aspect of the matter, but not the matter itself, there.

I said that I do not want to make too much of it. There is thought to be the safeguard of the Political Honours Scrutiny Committee. But there is a considerable coincidence between the generosity of companies and the advancement in rank of their chairmen or managing directors. There are also the striking, the memorable, words of the late Lord Shackleton. He was a member of that small committee for many years, and, as I think will be generally agreed, a notably unabrasive, and, in a slightly different sense of the word, generous Member of your Lordships' House.

He, in 1993—quite recently—was worried about roundabout donations through Conservative-front organisations, not to the party itself. He said: There is an obvious gap here. It is highly likely that these secret donations are by-passing the scrutiny system and that honours are effectively being bought". So, there are a lot of complicated and difficult issues here. There is plenty to inquire into.

No doubt the noble Viscount the Leader of the House will seek to hold the line and will do so rumbustiously and maybe ingeniously as well. But I would ask him and his supporters to take one thought away from the debate. They are defending a perimeter which will not hold even over the next five years. It will clearly not survive a change of government. But even without such a change, and everything is possible, I have sufficient faith—just—in the eventual responsiveness of the Conservative Party to an overwhelming current of opinion to believe that, nonetheless, there will be an inquiry; there will be a change; there will be a reform.

The question is: how and when? The Prime Minister is one of the most experienced evacuators of untenable positions. The trouble is that he often evacuates tenable ones as well. But how much better it would be for him, and maybe ultimately for his party, if for once, instead of waiting to be pushed by the eruption of some new scandal into a panic setting up of an ill-thought-out inquiry, he were to be ahead of the game and with proper deliberation either, preferably, let Nolan look into this field or, if he preferred, set up another appropriate body. I beg to move for Papers.

3.22 p.m.

Baroness Young

My Lords, I thank the noble Lord, Lord Jenkins of Hillhead, for introducing the debate today. Clearly, the funding of political parties is an important issue and it is most relevant in a democratic society; therefore, I welcome the fact that he has raised the issue today. However, I am afraid that I do not agree with the purpose of his Motion, which is, of course, to set up yet another inquiry on the subject.

When I first looked at the Motion and considered what the noble Lord might say, I believed in my innocence that he would offer alternatives to the present situation. Having listened to the noble Lord, I realise that he has made a good party political speech designed to do down the Conservatives. Now that we all know exactly where we stand we can have a good go at the subject.

I was delighted that the noble Lord complained about the present Government because, after all, at the time of the last Liberal Government everyone knew the old adage, "Lloyd George knew my father and my father knew Lloyd George", and what fell from that. However, people then lived in a much more fortunate society because, although I am the first to say that, as Prime Minister, Lloyd George did many good things for the country, no one would believe that he had an impeccable private life. Before we start criticising everyone we should recognise that everyone is human and is prone to sin. We might all remember that.

I was most surprised that the noble Lord's speech boiled down to a criticism of the Select Committee which reported in March last year. In preparation for the debate, I read that report, as I am sure have all noble Lords who are to speak in the debate. It goes into a great deal of detail about the funding of political parties, including the possible state funding of parties, and makes a series of recommendations. All of them have been accepted by my party. If the committee behaved as the noble Lord, Lord Jenkins, described I cannot imagine why those who did not agree with the result did not provide a minority report, which they have not done—

Lord Jenkins of Hillhead

My Lords, I allowed the noble Baroness to go on with her fantasies about Lloyd George presiding over a Liberal Government when it was 80 per cent. Conservative supported, but I cannot allow the last comment. There was a minority report, which appears in the report of the Select Committee. That was voted upon and defeated by the casting vote of the chairman—and only by the casting vote of the chairman—as was every single decision of that non-partisan committee.

Baroness Young

My Lords, the minority report was not from a Liberal member of the committee—

Lord Jenkins of Hillhead

My Lords, there was no Liberal member on the committee.

Baroness Young

My Lords, there is nothing undemocratic about exercising a casting vote; it is done frequently in committees. If we are going to pick and choose which aspects of constitutional procedure can be used, we can criticise any report at any time.

I agree with the noble Lord, Lord Jenkins, that politics and politicians have been denigrated generally. He is right about that and makes a serious point. It is a very serious situation. Democracy is being downgraded the whole time and I believe that the result of the Nolan Report will be a worsening effect on political life because we shall increasingly find that people will not want to stand for Parliament. That will be a most serious outcome, but I hope that I shall be proved to be wrong. It is certainly a possible conclusion to draw.

One must ask oneself why Parliament is being denigrated—and it is not just Parliament and politicians. When one looks around society one can see that it applies to the Royal Family, the Church and so forth. Every British institution is now subject to denigration of one kind or another. It is a serious matter for this country that all those well-established institutions are held in such disregard.

Much of it stems from the media. As regards Parliament, one of the great tragedies is that within living memory—I cannot remember the exact time—Parliament was reported fully in what was then called the "quality press". The House of Lords was reported fully. What do we get now? We get at most some clever political correspondent giving us about 10 inches of column saying, "Wasn't it clever that so and so knocked off the Minister and the Minister knocked off the Back-Bencher?". The whole thing is reduced to the level of farce. Therefore, is it surprising that politicians are denigrated? It is a most serious matter. On that I agree with the noble Lord, Lord Jenkins.

I turn to the setting up of the Nolan Committee. The reason that it came about was that two Conservative MPs were, in fact, set up. All right, they behaved foolishly, unwisely and, quite possibly, very wrongly. I accept all of that and I do not intend to defend it. But what is equally wrong is to set people up. I well recall that when I became a Minister one of the first things that happened to me was a visit from members of MI5 warning me of the dangers of talking to communists. There was a little more to it than that but that was the purport of the visit.

It so happened that at that time my husband was about to attend a conference in East Germany and I was told to warn him about the dangers too. People were set up, which was regarded as despicable. Why it should suddenly become less despicable because the press does it I simply do not know, but it is a good example of today's double standards. No wonder that young people in particular see Parliament and politicians as appearing to be endlessly arguing with one another, self-seeking and usually self-righteous. The only people to gain from all that are those who want to do down democracy. The point of today's debate is to discuss the funding of political parties.

Noble Lords

Hear, hear!

Baroness Young

Noble Lords may well say, "Hear, hear!", because it is important. The alternative way to fund parties will be some form of state funding because nobody has reached any other conclusion. Of course, the report of the noble Lord, Lord Houghton, in 1976 recommended that there should be a certain amount of state funding but that was not taken up by the then Labour Government. There was a subsequent report in 1981 by the Hansard Society which took a slightly different line but, again, that was not accepted. The Nolan Committee is not looking into that matter because it is outside its terms of reference. There is now the latest report from the Home Affairs Select Committee which makes various recommendations about the funding of political parties.

It is just as well to rehearse the reasons why people are concerned about state funding of political parties. It seems to me that the most important reason is that it will undermine the voluntary principle in British politics. That is an extremely important matter. Voluntary organisations of any sort function when individuals contribute to them. Although it is useful to have some state money, once there is too much, the organisation ceases to be voluntary and becomes something quite different.

It is very important that the thousands of people who contribute to different political parties should do so. That is the measure of the strength of democracy and it is one of the few measures which shows that democracy is still strong in this country.

Quite apart from that, many taxpayers would resent deeply paying taxes to parties with which they do not agree. Some would even feel that it was a waste of taxpayers' money to be spending it on political parties rather than on policies which they wished to see implemented. But there is no evidence that I can find that either controls on political contributions or state financing of political parties prevents political corruption. Indeed, in some countries where there have been elaborate systems of control and state funding, widespread allegations of political corruption have occurred. Therefore, there is no evidence that such measures improve matters.

The noble Lord, Lord Jenkins, very unfairly and unkindly attacked the Conservative Party and what it is doing. Therefore, it may be just as well to remind the House that in the financial year 1992–93, which is the last year for which there are full accounts, 70 per cent. of all Conservative Party income was raised in the constituencies. I am quite certain there is no one sitting on this side of the House who has not been involved in that activity many times over. Of the remaining 30 per cent., 60 per cent. came from companies. Those donations are subject to statutory disclosure under the Companies Act 1985 and it falls to the company, not to the party, to make that disclosure. Individual donations and direct mail make up the remainder. The fact that individuals choose to support a party is, after all, a matter of private choice.

I have been involved, as I am sure have all your Lordships, in a great deal of fundraising for many causes. No matter what the cause, there are always many individuals who wish to remain anonymous; and why should they not do so? We are free to give our money to the causes of our choice, but we do not necessarily want everyone to know that. I see no reason why that should not apply in party politics as in other areas of life.

It is extremely important to note that the Conservative Party has accepted the recommendations of the Select Committee, including its code of practice. Perhaps I should remind your Lordships of that because there seems to be some doubt about it. First, it provides that money does not buy or influence honours; illegally obtained money should not be acceptable and, if discovered to be so obtained, should be returned; substantial anonymous donations should be refused; donations from foreign governments and rulers should be refused; and benefits received in kind and income over which the party has control, such as sales and fund-raising events, should be itemised; and there should be published accounts and an independent audit.

Anybody who has been involved, as I have, for a long time in the Conservative Party, knows that at local level, where most of the money is raised, accounts are published and audited independently. Anybody is welcome to go to an annual general meeting and wade through them. There is nothing secret about that.

I deeply resent the purport of what the noble Lord, Lord Jenkins, was saying; namely, that there are many people who are somehow conniving to defeat the system and who are taking bribes of one sort or another. There is no foundation whatever for that suggestion. The noble Lord has not produced a shred of evidence, but has just made a lot of unpleasant allegations which I think he should withdraw. I think that they are a disgrace.

One of the most dangerous aspects of politics now-a-days is that such allegations are made unsubstantiated by any evidence whatever and they are then assumed to be true. In my view, that is one of the most dangerous things that is happening today.

Perhaps I may conclude by saying something about what I personally believe to be very important. One of the most significant statements made by the committee is: We accordingly conclude that trust in the integrity of the party concerned must suffice and that there is no need for precise and binding rules to be laid down for the contents of a party's accounts". Once there ceases to be a measure of trust in people, society becomes involved in a very dangerous position. Individual responsibility is undermined by suggestions that everybody is on the make in a way that I do not believe they are. If such unnecessary suggestions are accepted, they further damage democracy.

3.36 p.m.

Baroness Gould of Potternewton

My Lords, I too thank the noble Lord, Lord Jenkins of Hillhead, for initiating the debate. On these Benches we fully support the need for an independent inquiry into the funding of political parties.

Democracy depends crucially on the vitality and real and perceived integrity of political parties. The principle of transparency in the financial affairs of politicians and political parties should not be controversial in a mature democracy, and it is a great shame that it is necessary to have this debate today.

The Government argue that politics is a private affair; that donating to a political party is a personal matter; that disclosure of corporate or individual donations is not necessary. Politics can never be a private affair. Political parties are vehicles for political and social action and are for people who wish to effect change. A representative democracy cannot function well without political parties and political parties cannot survive well without money.

The aim of any independent inquiry would not be to prevent political parties raising money; it would be to ensure that it is raised in an open and democratic way. The Labour Party has made it clear that the Nolan Inquiry should have had the opportunity to look at how political parties raise their funds and there should not have been left the hole that was referred to by the noble Lord, Lord Jenkins of Hillhead. But we should not be surprised that that was resisted by the Government, considering that the Prime Minister, in response to a Question for Written Answer on 31st October on whether the Nolan Committee should look at political funding, gave a categorical "No", referring rather to the investigation by the Home Affairs Select Committee.

What was important and what worries me about the findings of the Select Committee is that the committee had to accept that there was a lack of openness and that that lack of openness feeds suspicion; that the current legal position is both unsatisfactory and unfair; that the electorate is entitled to expect accountability by political parties for their sources of funding; and that all parties should have an adequate level of funding consistent with their level of popular support.

As the noble Lord, Lord Jenkins, said, it would appear that it did not identify areas of cross-party agreement and rejected a number of key and fundamental factors which would have satisfied those anxieties. The committee's terms of reference included the question of state funding. I am sure that my noble friend Lord Houghton will elaborate on the detail of the 1976 Houghton Report, which is still the definitive work on state funding.

I shall confine my remarks to indicating that the Labour Party believes that there should be an extension of state funding, particularly in the area of political education. That might assist with some of the problems that the public currently experiences in understanding politics and politicians. It would not in any way detract from the voluntary principles mentioned by the noble Baroness, Lady Young, which are absolutely crucial.

The principle of state provision was introduced by the decision to draw up electoral registers, to fund political party broadcasts, to build into election law the production and distribution of polling cards, free post and the free use of public halls.

There is also financial assistance to Opposition parties in order to help them pursue their parliamentary functions; and the state provides an estimated £1.2 million to political advisers of Ministers. The question has been asked as to how far we wish to push that principle. An independent inquiry would help to solve that problem. There are questions that need to be asked and answered, which is why an independent inquiry is so important.

In 1989 your Lordships' House passed an amendment to equate the position of company donations with that of trade unions. That was unfortunately rejected in the other place. The Select Committee also saw no reason to change the rules. I should like to compare that situation with the accusations that are levelled at trade union support of the Labour Party. Those accusations have not been made, I hasten to add, by any noble Lord who has spoken today.

Pejorative and misleading statements have been made and they are used as a political ploy. The reality of the situation is that the affiliated trade unions are an integral part of the federal nature of the Labour Party. The monies that are received are subject to the established rules and are disclosed by the unions in their accounts and by the Labour Party. The often deliberate attempt to mislead ignores the fact that every delegate to conference—I am referring to 70 per cent. of the trade unions—must be an individual member of the Labour Party. Under the new rules every delegate will vote individually.

The open and above-board relationship between the Labour Party and the trade unions contrasts sharply with the obscurity of Conservative Party finances and the very limited regulations of company donations as compared with those applying to trade unions.

The political involvement of trade unions is more highly regulated than any other institution and is strictly supervised by the certification officer. The unions are required to hold a ballot to create a political fund, which is reviewed every 10 years, and members can opt out of that fund. They are required to have separate accounting. Union donations derive from decisions made by their members.

Company donations are subject to no such restrictions and, therefore, that is something that should be looked at. The only requirement under the Companies Act 1985 is that donations are post facto reported in the directors' report if they are over £200. There is no political fund; there is no reference to shareholders; there is no ballot; they do not have an opt-out facility and the donations are not recorded in Tory Party accounts.

Lord Chelmer

My Lords, I should have made a speech but I am not well. Directors refer the donation to the shareholders and that appears on the agenda of the meeting. I gave evidence to the committee to which the noble Baroness referred as producing the standard work on this subject. With two exceptions that Committee consisted either of Labour Party members or trade union members.

I was a treasurer of the Conservative Party for 17 years. During that time no one person gave me any money in connection with some benefit that he or she might receive. One man—and it is greatly to his dishonour—entered into a deed to give me £1 million under certain circumstances, which I was not able to fulfil. When he died, on his gravestone he was still "Mr".

Baroness Gould of Potternewton

My Lords, I thank the noble Lord for his intervention. It is correct to say that directors report to their shareholders, but that is after the event and not before it; therefore they are not taking the decision. It was a matter of humour in the newspapers recently that the Labour Party turned down a proposed donation of £5 million because there were strings attached to it, and the Labour Party is not prepared in any way to allow strings to be attached to a donation in the way that has been mentioned.

There is no political fund and no reference to shareholders, no ballot and no opt-out facility.

Even this minimal requirement is rendered ineffectual by the provision that company accounts can take up to two years before they are lodged at Companies House. If shareholders were to challenge the decision of the directors, they would no doubt be defeated by the block proxy votes of the institutions.

Occasionally, however, voices can be heard. A donation by Thames Water of £5,000 to the Conservative Party before the last general election caused a major outcry and a considerable negative response from customers and shareholders alike. That raises the issue of whether or not there should be a period of time between privatisation and the ability to make donations.

A survey in the Sunday Telegraph of 7th May indicates that the boards of many of Britain's top companies are providing cash to alleviate the Conservative Party's overdraft, ignoring calls from active investors that donations be subject to shareholder approval. In the past five years that money has amounted to £10.85 million, with virtually all of it going to the Conservative Party or organisations that channel funds to it.

However, there are indications of change. The Local Authority Pension Funds Forum, which covers 15 schemes, is stepping up pressure to make donations by boards subject to a shareholders vote. Local council funds are now drawing up a hit list of companies that make big donations but refuse to allow them to be put to the vote. The latest move comes from the GMB union which has launched a campaign to challenge that abuse of democracy.

Although I suspect that I know the reason, I should like to ask why the Government cannot accept that trade unions and companies should operate to democratic parallel positions. Why should there not be ballots of shareholders? Why should companies not have to establish a political fund?

The Labour Party has made it absolutely clear that all donations over £5,000 will be disclosed and that political parties should refuse any donations from individuals who are neither British residents nor British nationals. We shall take unilateral or bilateral action to achieve that aim.

The Conservative Party takes a different view, as did the Select Committee, which did not believe that a case had been made out for requiring disclosure of the identity of donors or see any reason for refusing foreign donations.

Labour Research, a trade union research organisation, in an analysis of Conservative Party funding, found that the fall in corporate donations to the Tory Party means that an ever increasing proportion of the party's funds come from undisclosed sources. The £2.5 million traced as donations represents only 27 per cent. of those shown in Conservative Central Office accounts.

Where do those mysterious donations come from? Some of them will be from foreign countries. Some have been identified as coming from individual supporters of the party. However, there must be many more that remain anonymous. Those donations certainly do not come from cheese and wine mornings.

It is interesting to note that the figure of £7 million that the Labour Party received from trade unions is exactly the amount which foreign bankers are reported to have donated to the Conservative Party before the last general election.

Another matter of particular interest are those areas raised by witnesses to the Home Affairs Committee, but which were not followed through in either the conclusions or the recommendations. They include, for example, the question of offshore accounts, donations from privatised utilities, the role of Ministers as fundraisers while on ministerial visits abroad, or the use of Downing Street for fundraising events. If the allegations raised are correct, surely there should be rules governing such ministerial conduct. If they are not, then we really ought to have an independent inquiry to prove that that is the case.

It is also surprising that the Select Committee failed to address the question of a national, maximum expenditure for elections—first, because it is the time of increased activity in fundraising and expenditure by the political parties; and, secondly, because it has been the subject of a considerable number of studies.

In 1991, following a consultation initiated by the then Home Secretary, of which I was part, the Home Office said that all parties, with the exception of the Conservative Party, agreed that consideration should be given to a system of controls on national expenditure. The arguments against are that it would be difficult to monitor and difficult to control; it would also be unavoidable to give political parties statutory existence which they at present lack. However, I would ask: what have the Government to fear from the registration of political parties? Is it that it would be easier to introduce financial controls and procedures for disclosure of both income and expenditure?

Finally, all those issues remain outstanding, are a source of concern and need to be addressed; and addressed by an independent inquiry unfettered by ideological interests. The lack of transparency and unequal distribution of party funding undermines the democratic process and it reduces the confidence and trust of the electorate in the political system. Is it not in the best interests of all political parties, and perhaps especially those of the Government and the Conservative Party, to support an independent inquiry and some further form or measure of state funding?

3.52 p.m.

Lord Rodgers of Quarry Bank

My Lords, the Motion before your Lordships' House is quite explicit: it calls for an independent inquiry, neither more nor less. Therefore, there is no need for anyone to rehearse the convictions held by some of us that a strong case has already been made out for such funding; nor, for that matter, to endorse the strictures, elegant and balanced though they were, of my noble friend about the present position. The only need—and I thought that it was put very well by the noble Baroness, Lady Gould, in her closing remarks—is to recognise that there are issues to be discussed and examined. I should have thought that enough has been said already in today's debate, and certainly more will be said before it is closed, to justify the argument that something should be done. My noble friend said that there is plenty to inquire into. Moreover, whether it was said in the speech made by the noble Baroness, Lady Young, or in that made by the noble Baroness, Lady Gould, or, indeed, whether it will be said in the following speeches, the issue is there. It will not go away. Therefore, why not examine it now?

The noble Baroness, Lady Young, started her speech with a very spirited and partisan attack on my noble friend, which she was entirely free to do. At the end of her remarks, she returned to a rather partisan defence of the status quo. However, in between those two stages, the noble Baroness referred to a consensus and used the word "denigration". I have to say that I do not believe that there is a consensus, unless, of course, the noble Baroness would like to explain herself further.

I believe that the noble Baroness was arguing that the problem with which those in public life are faced today is entirely external to performance. In other words, it is something thought up by the press: it is a deep worm in the wood of society which makes people sceptical about all institutions. Of course, we recognise that social change means that institutions must be examined. If Parliament cannot accept that fact then who can? In my view—and this is where I certainly depart from the noble Baroness, Lady Young—we have brought that, at least in part, upon ourselves. Therefore, to pretend that no problem exists is simply a form of self-deceit. I see that the noble Baroness wishes to respond. I give way.

Baroness Young

My Lords, I am much obliged. I entirely agree with the noble Lord's interpretation of much of what I said. However, the serious point that I was making is that, so far as concerns the public perception of Parliament, what actually goes on—the real work of Parliament, the hard slog on legislation in Committee, and so on—never gets reported and is not heard of. Therefore, the picture which people have of parliamentary life is neither a complete nor a full one.

Lord Rodgers of Quarry Bank

My Lords, I do not wish to argue with the noble Baroness, Lady Young; indeed, I can certainly meet her halfway in that respect. I believe that there are matters about which we should complain. However, if they are beyond our control, then surely we should at least look at those matters with which we are able to deal. That is the context within which we should discuss the Motion before the House.

The noble Baroness, Lady Gould, said that an "unfettered" independent committee would surely be able to look into such matters. I suggest that only those who are afraid of what such an inquiry might discover and recommend can be worried about the appointment of such a committee. We heard my noble friend Lord Jenkins of Hillhead refer to the view of the Select Committee in another place. I would strongly support the idea of a committee made up of men and women who have not previously expressed a view on the matter; and, indeed, men and women who are not Members, nor have been, of either House of Parliament. It would still be for Parliament itself—that is, the House of Commons and the House of Lords—to decide, but the inquiry would be independent, unfettered and free from any ideological influences.

We are not discussing a radical new departure; we are discussing a further step in what is an incremental process designed to enable political parties within a parliamentary democracy to function more effectively. That is the main point that I should like to make to your Lordships today. In 1937, for the first time we had payment for the Leader of Her Majesty's Opposition. In 1975—and I shall return to that later—we had the payment of what is now called the "Short money" which amounts to some £2 million in the current year. In that same year, additional allowances for Members of Parliament were introduced which led to what is now called the "Members' office costs allowance" and by which MPs in the current year receive something over £42,000. Then, 20 years ago, we had the referendum on Britain's membership of the Common Market when the sum of £ 125,000 was paid to either side in that debate. Moreover, as has already been mentioned in our discussions this afternoon, at general election time there are free postal deliveries on behalf of the political parties and of candidates and free television time.

Therefore, it is a fiction to say that what we are suggesting such a committee might look into is something entirely new rather than an extension of a principle which has previously been accepted. The fact is that for political parties, as indeed for individual Members—and, more obviously, Members of another place—parliamentary work and wider political activity are seamless. A research assistant paid out of public funds prepares speeches for an MP to deliver in Parliament and speeches to be delivered outside in the political campaigning. A secretary paid out of public funds sends letters on behalf of a Member of Parliament to his constituency party, to Smith Square, Walworth Road or Cowley Street.

As we all know—and there is no reason to be embarrassed about it—telephones in the Palace of Westminster are used by MPs and their staff, and no doubt by Members of your Lordships' House, to make calls which are essentially of a political rather than a parliamentary character. All that is inescapable. There is no way of avoiding it and there is no point in pretending that it does not happen. Similarly—I refer to the Short money—financial aid to the political parties that is designed to help them in their parliamentary activities seeps out into the wider political arena. It may be used directly to employ more staff in parliamentary work, working for the leaders of opposition parties, but there is no way of segregating strictly parliamentary business from political activities outside. To put it at its least, state funding for opposition parties in Parliament recognises that if those funds are available other funds can be released for activity elsewhere.

Reference has been made to the Select Committee. However, I must say that my own text—because I think it is a most serious text—is that of the Houghton Report published in 1976. I am sure that the whole House is anxious to hear what the noble Lord, Lord Houghton, has to say through the perspective of time. There was another report—again that was referred to by the noble Baroness, Lady Young—of the Hansard Society in 1981. But a great deal has happened, certainly since the Houghton Report, although it is fair to ask whether there is anything new to be said or discovered. The very passage of time, taking the Houghton Report as the text, suggests that there are new facts to be discovered and new arguments to be rehearsed.

I shall give your Lordships one example. The key question of the report—I hesitate to interpret the Houghton Report in advance of the remarks of the noble Lord, but this is from the text of the report itself—on state aid was as follows: assuming that the parties needed money, would you be prepared for some of it to be provided by the state from public funds"? That was a question asked in a survey conducted on behalf of the Houghton Committee. The result was an almost equal division of opinion. Some 45 per cent. said "Yes" and 44 per cent. said "No". Given the question that was asked, 45 per cent. seems to me to be a high figure of people saying "Yes". That question included the words, assuming that the parties needed money". There was no reference to the public interest or to our parliamentary democracy. There was no reference to the problems which were referred to by my noble friend Lord Jenkins of Hillhead. What if the question were different? What if the question were, If it would reduce the financial dependence of political parties on business and the trade unions, thus helping to raise standards in public life, would you be prepared to see an increase in the funding currently available to political parties"? If that were the question, I think we would see a much more positive response, not only to the original question of 20 years ago but also a more positive response than the present question would have elicited that long ago. I make that point because I believe it is perfectly reasonable to ask whether this would be acceptable to public opinion. What I am seeking to put before your Lordships is: given the issue we are facing surely there is at least a very good chance that the public might be persuaded that this was one way of safeguarding our democracy and was a worthwhile route to follow, given that it would only be an incremental stage in the funding of our parliamentary democracy.

I do not believe that we should expect or should contrive to bring about an absolute equality of resources available to parties. My own view is that they should bear a relationship to the ability of the parties themselves to win members and attract electoral support. It is also the case—which all of us know—that there is a diminishing return from expenditure over a certain limit. Therefore an absolute equality is not, I think, what we should be looking for. What we should be saying is that the funding of political parties prima facie, and subject to the work of the independent inquiry, would free political parties from an unhealthy dependence on corporate donors and a handful of rich people with, as a result, the public interest substantially safeguarded.

I was looking the other day at the defence estimates. We spend £21,720 million on defending Britain and our democracy from those who might endanger it. We spend a large sum trying to restore peace and perhaps a democratic way of life in Bosnia. Surely it would be a small price indeed to spend £10 million more of public money to continue strengthening the processes of our own parliamentary democracy.

4.5 p.m.

Lord Boyd-Carpenter

My Lords, I am afraid I cannot accompany the noble Baroness, Lady Gould, in thanking the noble Lord, Lord Jenkins of Hillhead, for introducing this subject. I think, frankly, it is a pity that he decided to do so, not least from the point of view of the very sensitive issue of our relations with another place. Another place is much more concerned with this matter than we are. After all, election expenses are directly in this category and they are, of course, of direct and continuing concern to every Member of another place. This is therefore a subject which it is natural that another place should be concerned about.

Moreover, as the noble Baroness, Lady Young, told us, another place has already had a committee of inquiry into this issue and has had a perfectly clear and comprehensive report. Therefore I find it difficult to see that there is any argument why we should go further and set up yet another independent committee to inquire into this matter. I start, I must admit, with some bias against the setting up of more and more committees of inquiry. They are of course enormously expensive. When one sees the actual figures of their cost, one is generally quite horrified. Therefore I would suggest to your Lordships that unless there is an overwhelming case on merit for setting up a committee of inquiry on a subject, we should not do so. Is there such an overwhelming case here? What useful purpose in fact would be served by so doing other than meeting some of the political prejudices of certain noble Lords opposite?

I hope that we shall decide that we do not want to set up such an inquiry and that we regard it as unnecessary. What is it in fact to do? Is it intended that it should recommend public expenditure in support of election expenditure? I do not know whether it would do that. I profoundly hope it would not. I think it is essential that the funds of political parties should in general be raised by public subscription, by people who believe in the views that that party is expressing and who therefore desire to subscribe to it. Surely that is the wholesome democratic basis for the financing of political parties in our democracy. That approach is entirely inconsistent with the approach of one or two noble Lords opposite who seem to think that this is the sort of matter that should be raked over by a public committee of inquiry, which will of course take a year or two, will spend a lot of public money and at the end of the day is very unlikely to produce anything of real public value. I therefore hope that your Lordships will not be convinced by the noble Lord, Lord Jenkins of Putney, although of course I am the first to admit—

Noble Lords

Lord Jenkins of Hillhead!

Lord Boyd-Carpenter

My Lords, I beg the pardon of the noble Lord, Lord Jenkins of Hillhead, because of course mention of Hillhead may be rather a sensitive matter for him. I certainly beg his pardon. It is indeed Hillhead, with all that did involve for him. I am therefore all the happier that we should reject his proposal quite firmly.

It think these contributions should be essentially voluntary and that those of us who want to should subscribe to the support of the political party of our choice, give it the full financial support which we can afford and see to it that it succeeds as a result of that and, perhaps still more, as a result of the work that we put in. Therefore the idea of a formal inquiry, with all the public expense, all the trouble and all the fuss which is involved, seems to me to be one which we should reject. Is it likely in fact that such an inquiry would get at any real facts which are not normally available anyhow to any of us with any public or political experience? What is it intended to discover? What is it intended to do which would be of any real practical help to the working of our democracy?

If there is a doubt about that—and I suggest to your Lordships that there is at least a doubt about it—then surely to goodness in this day and age, when so many committees of inquiry have been sitting and spending public money in a very substantial way in the course of their work, it really would be the greatest mistake for us to take this step and to suggest to the Government that they should appoint a committee of inquiry.

These political contributions are essentially voluntary. They are given because the individual concerned wants to see the party to whom he is subscribing effective and victorious, because he or she believes that it is in the national interest that that party should gain strength and should obtain a majority. That is the whole basis on which our democracy works; and to go setting up further inquiries of this sort where there is no real subject matter of essential public importance to investigate seems to me not only a waste of time but also a waste of money. Therefore, it seems to me that we in this House should not, particularly in view of what I have already said about our relations with another place, spend a great deal of time discussing or considering this proposal, but we should say politely to the noble Lord, Lord Jenkins, "No, thank you".

4.13 p.m.

Lord Houghton of Sowerby

My Lords, I will begin with two propositions. One is that far too high a proportion of the funding of political parties in Britain today is tarnished money coming from sources which are serving a self interest, sectional or collective, of one kind or another. I will also assert that the undue dependence of the two major political parties in Britain upon the traditional sources of support for funds has done them both a great deal of harm in the estimation of the public about the purity of their intentions and the disinterested approach to political affairs that is desirable.

There is not the slightest doubt about it—I speak from personal knowledge of 30 years—that the Labour Party has suffered from being tied too closely to the trade unions and being dependent upon the political levy for 80 per cent. of its funds. I believe Labour would have come to office years ago had it been freer of dependence on the trade unions. I am glad of the references that have been made to the report of a committee of which I was chairman. I should have liked to hear more about the committees, both of them in their way an important addition to this inquiry made in 1975–76. I see that the noble Lord, Lord Blake, is in his place. Surely he was chairman of a committee that went into this matter at great length on behalf of voluntary organisations.

Why am I so far in advance of my time? Here it all is. Why are we worried about a further inquiry? All the spadework has been done and the basic facts and philosophy of the matter under discussion were fully examined in this report. What do you think is in this?— 18 months of very hard work and study, interviews with people, travel abroad, looking at the effect of the funding of political parties in other countries. I can tell your Lordships a few things about the evidence we heard on this committee. Some of it was from representatives of the Conservative agents in the Conservative movement. They were tired of the amount of time they had to spend in money raising. That was the note they struck when they came to see us, and they were very much in favour of some degree of public funds going into the working of our parliamentary and democratic system.

However, we are not proposing to fund politics; we are not proposing to fund political parties for their party political purpose. We are funding the system to enable the democratic process to function properly and to give those engaged in active work the opportunity, free from some of the worries of their present activities, to look at national and political issues from a more detached point of view.

This report had one simple aim—a modest aim indeed: to reduce the dependence of the two major political parties upon their traditional sources of money. That is what it started with, and it finished with that. There was, however, special aid for parliamentary candidates, for those of any political party or of none, standing for Parliament so that they should get reimbursement of some part of their expenses if their poll was a respectable one and they saved their deposit.

When we first published our report in August 1976, the Labour Party was a bit afraid of that suggestion because it feared that the candidates of the British Union might arrive at Westminster having been funded in part by state money. When we went to Sweden as a committee to look at what was happening there, we found an extraordinary phenomenon: that 19 members of the Communist Party were members of the Swedish Riksdag. We asked, "What are you doing in this galley?" They said, "We are here because we are working the system; we are prepared to work the system and we are going to use what facilities are offered for us to come into parliament". That was how they saw it there, but apparently we were still afraid of British Union candidates in this country.

What does it matter? If they go to the electorate, they will do the sorting out, and if the candidates get a certain minimum measure of public support at the ballot box, then I think we are entitled to reimburse them for part of the expenditure in order that politics shall not be a rich man's playground. However, the report made little impression, as is the case with many reports. I have been chairman of other committees and a member of other committees which have helped to frame reports. Usually those committees are appointed at a time of rising public interest; but by the time the committee reports, that interest has passed. Something else has caught the public ear or interest and the report is neglected.

All that is now required is to consider what the authoritative reports which have already been produced look like in the context of the current situation. Is what we proposed relevant today? Is it desirable to study the matter further having regard to the fact that 20 years have passed since that report and that there is no reason why that experience should not guide us for the future? That is the proposition that I put forward on the Motion today. Noble Lords will be surprised how relevant much of the report is today. That is my message to your Lordships' House. All noble Lords have to do is read the report. If they cannot be bothered to read the evidence, just look at the summary of recommendations. I think that our decisions and recommendations are wise.

I conclude on this note. We travelled throughout Europe and Scandinavia, and sent representatives to Canada and the United States, to see what other people were doing about state aid to political parties. They were all providing it. I submit that, irrefutably, ours is the only country still relying on what we call the voluntary effort. I may be wrong. However, some curious forms of corruption were replaced by state aid in some of the countries we visited. We found in Austria, for instance, that it had long been the tradition that the ruling party in Parliament should have a rake off on all government contracts. That was the way political parties were helped. In Germany, gifts to political parties were tax free. That was the way the parties were helped in Germany. However, all the countries came round to the view that it was better to have the injection of a reasonable amount of public funds in order to enable the party political and parliamentary process to be continued free of any suggestion of corruption by money. That is the proposition that I leave with noble Lords. I have left a few minutes for other people to take it up.

4.22 p.m.

Lord Holme of Cheltenham

My Lords, in view of the sternness of the instruction of the noble Lord, Lord Houghton, to read his report, I hasten to say that I have read it. The reason for that will become apparent in a moment. Perhaps I may say what a pleasure it is to follow the noble Lord and to hear in this House the clear, principled voice of youthful radicalism coming from him which we all so much appreciate.

I was struck by the robust debating speech of the noble Baroness, Lady Young. She made an extremely important point on the disrepute into which public organisations and institutions have fallen. It is a matter to which my noble friend Lord Rodgers, referred. However, I put this point to her. Is not one of the reasons that public institutions have fallen into disrepute in this country that we find it peculiarly difficult to find a position of public interest as opposed to partisan interest on which to advance some of those great issues? Although the issue has partisan implications for each party, it should be accepted that in the end it is a matter of the public interest, as the noble Lord, Lord Houghton, reminded us. It is a sensitive issue throughout the world, not particularly in Britain. Democratic parliaments are elected everywhere. Wherever there are democratic institutions, sensitive issues arise as to whether people seek to use money to acquire special influence or special access to those democratic institutions. We should not be defensive about that; we should recognise that it is a proper sensitivity. As parliamentarians, we are bound to take the issue seriously.

The reason that I read the Houghton Report—although not alone, I suspect that I am among a select number to have done so—is that I was a member of the Hansard Society to which several noble Lords have referred. That body looked into the matter in 1981. I note with interest the vigour with which the noble Lord, Lord Boyd-Carpenter, considered that inquiries of this kind were a waste of time. I recall the outstandingly valuable contribution that his daughter, the noble Baroness, Lady Hogg, made to that commission, and how much pleasure we had in her contribution to the unanimous report that we were able to achieve on that occasion.

Lord Boyd-Carpenter

My Lords, if the noble Lord will allow me to intervene, I believe that he has misunderstood me. It was simply because that report was so full and excellent that I regarded it as a waste of time to have another.

Lord Holme of Cheltenham

My Lords, I am glad that the noble Lord said that because I shall remind the House of a few conclusions of that report and ask why nothing has been done.

One of the best ways of approaching these tricky matters is to consider what principles are involved. One of the conclusions of the Hansard Society report, and its successor report—it was a joint report between the Constitutional Reform Centre and the Hansard Society— was that large companies should seek the positive approval of their shareholders on a basis comparable with that which now exists for donations for trade unions.

It is interesting to note in parenthesis that most large companies are now giving up political donations. The arrangement is becoming less common; the trend is not to do so. Large international companies with headquarters in Britain increasingly do no make political donations. The reason sometimes appears in their statement of corporate ethics. Sometimes they do not do so because they do not wish to establish a precedent by donations in this country whereby every politician in every country in which the companies operate will solicit for funds. That is one of the reasons why multinationals on the whole do not make political donations.

Perhaps I may refer to the scheme that I should like to adopt, and outline the general principles. First, I shall refer to what an economist might call the supply side, then the demand side, and the process. By supply side I mean income donations. Let us consider what is involved in the supply side of the equation and what principles might be desirable. Perhaps some of those issues will find agreement across the House.

The first principle reiterates what the noble Lord, Lord Houghton, said. It would be in the interest of our parliamentary democracy at least to reduce institutional dependence. The second principle—I believe that it will find agreement—is that on the whole British people and British institutions should pay for British politics rather than foreign people and foreign institutions. The third principle is that democracy is healthier if there are many small donations rather than a few large donations. There are ways of securing that. In Canada, for instance, matching tax relief is given to gear up the donation of the small donor. Incidentally, if we go down the route of state funding—I have great reservations about that; I shall say a word on it in a moment—matching tax relief to small donors is surely an intelligent way to achieve that. It accelerates something that is desirable: participation in the process.

I believe that the massive subventions, for instance, in the Federal Republic of Germany have done great damage to its political system where virtually the whole of the political class is sucking off the teat of the state. If there were to be some state funding "in the mix", it would be far better for that to be achieved through the tax system. It would be an expansion of the principle of Short money: that money is applied, and meant to be applied, for parliamentary purposes.

Those are a few thoughts on the supply side. Let me now move to the demand side. What is the money needed for? We must not assume that the political parties necessarily should have vast sums of money. Why should they? What will they do with it? It is a striking paradox that we limit expenditure for constituencies, for good reasons. Those were introduced in Victorian times to stop the basic corruption and sleaze of people buying beer for everyone in the constituencies. Therefore we have constituency expenditure limits but no national expenditure limits. There is a very interesting book written about the Conservative campaign, I believe two elections ago, by a Mr. Tyler discussing the decision whether at the last moment to spend vast sums of money on advertising. The conclusion was that the money was spent but did no good at all. One of the questions that parties ought to ask themselves is whether they really need to spend tens of millions of pounds on general elections. That is what the money is raised for.

In this country we have one great boon and blessing compared to the United States, where every political office has a price tag on it and all those who stand for office know that they have to raise massive sums of money and are indebted for the whole of the time that they serve as a senator or congressman. The boon that we have is the inability of people to buy television and radio time. That boon is inestimable. It is one of the great merits of the British system. I have one question for the noble Viscount who will reply, one which I believe will interest him. It is whether in the new liberal and deregulated era of television, and extra-terrestrial television of one sort and another, he sees it possible to hold the line on the very important principle that people cannot buy radio and television time to fight elections.

To return to the nub of my thinking, we should have limits on national election campaign expenditure. There is no logical reason not to have it. People will object in this way. They will say, "What about the period running up to the election? In our system, where the Prime Minister can choose the date of the election and nobody else knows what it is, would not the governing party spend money in the period before the campaign, and therefore how could you limit it?". It would be perfectly easy to deal with that difficulty. It could be stated that expenditure during the campaign, and for three months or six months before, would be caught by whatever the limit was.

Finally, I said that I would talk for a moment about the process rather than the supply and demand equation. The key issue on process, one that the Hansard Society recommended and which I believe is unanswerable on democratic grounds, is that parties should declare the source and uses of their funds. It is an extraordinary anomaly that a party can organise itself to become the Government of this country, and is yet not subject to the basic reporting requirements to which every club, association and company is subject. I do not think that the voters, the people of this country, understand why it is that political parties are somehow special and should not have to present accounts which declare in full where they received their money and how they spent it.

I suppose that a case could be made that there are shy, shrinking violets who do not want their goodness revealed to the public. Then in that case, let us say that the report would relate to donations over £5,000. If the noble Lord, Lord Boyd-Carpenter, is right and people are giving because they believe—not because they hope for influence or access but because they believe in the cause of the party—then why on earth should they be ashamed of having their names revealed in the accounts? What is there to be ashamed of? Why should the issue of secrecy be allowed to outweigh the public interest; namely, for people to see in an open way where the money comes from, and what it is spent on?

Having tried, at great strain, to be relatively non-partisan—because I believe the issue of public interest to be important—I would mention one aspect that causes particular problems. As I understand it, one of the difficulties for the Conservative Party is that it is not in the fullest sense an identifiable organisation. There is the national union, there are Conservative MPs and there is the Leader. But the party itself is slightly difficult to get hold of. Is there a party? And if we were to say that accounts should be produced every year, what would be the party that produced them? I find myself thinking about this issue in the context of the most regrettable overdraft which I understand company opposite hold with the Royal Bank of Scotland. I understand that the sum is not unadjacent to £16 million. It is an extraordinary thing that a government committed to fiscal prudence should allow themselves to get into debt to the tune of £16 million. They must have an exceptionally friendly bank manager. The first thing that any bank manager I have ever come across says is, "I'd like to see your article of memorandum, your constitution and who the accountable officers are"; and that is quite apart from trivial matters such as security. So we must assume that the Government are very blessed in their banking relationships to be able to have such a massive overdraft.

In summary, three points are important if we want to keep our eye on the ball of public interest. First, there must be more small supporters of our political system, more individuals of modest means, fewer companies and fewer millionaires. Secondly, it is in the public interest that we reduce the limits on expenditure at elections. Thirdly, it is incontestable, particularly in the present atmosphere of reduced confidence, that we should open the system up to the light of day and to fresh air.

4.35 p.m.

Lord Beloff

My Lords, I find myself in the unusual position of agreeing with a great deal that was said by the noble Lord, Lord Holme of Cheltenham. I shall have to read Hansard to make sure that I got it right. That agreement does not, however, extend to the noble Lord, Lord Jenkins of Hillhead. I agreed only with his first sentence; namely, that there was a declining respect in the public at large in our political institutions, and particularly our Parliament. The trouble is that I could find no relation between that statement and any concentration on the subject of the financing of political parties.

On the contrary, I should think that one would have to look at other matters, unsusceptible to committees of inquiry, however powerful, such as the observed decline in the calibre of many Members of another place. Those who remember the Parliaments of the inter-war years know that they made many errors. But one has only to occupy one's seat in the Peer's Gallery in another place to see that they were a great deal better than much that is on offer now. Many reasons could be adduced for that. But the one that has not been referred to, although it is relevant in broad terms to the subject of our debate, is the growing influence and importance of political parties themselves—and in particular of their central organisations.

The Parliament that we knew, which grew out of changes in the 19th century, was a locally based Parliament. Members of Parliament either had their own financial resources or—and many great statesmen owe their origins to this—were in receipt of private patronage. It was possible to make one's way without the assent of whatever then corresponded to Smith Square, Walworth Road or Cowley Street.

On the contrary, it seems to me now that we have come to a pass in which political careers are largely dictated and determined by service to central political parties. There is a sort of apprenticeship, a ladder towards office and leadership, which is political in the narrowest sense. That would seem to me to be the case whether or not the political parties are supported financially in one way or another. My own hope would be that if there were to be changes—this is where I think I agree with the noble Lord, Lord Holme—they would be concentrated on assisting in the constituencies and on assisting individual Members of Parliament or those who wished to become Members of Parliament; that any change would not go to fill the coffers of the central organisations. Once they have power, the officials, executives, or whatever name they may go by in different parties—our three parties are so different in character and composition that it is very hard to talk about them in a single context—begin to feel the need to exert their authority.

We have at the moment a prime example of this in the Labour Party. It may or may not be a good idea that there should be more women in another place. But the idea that that should be achieved by forcing constituencies to nominate only women for winnable seats is a departure from democratic principle of any kind which would have horrified politicians a generation ago.

It must be enormously galling for someone who has fought his way up through active politics, let us say in a trade union or a local council—a genuine horny handed son of toil, which is what the Labour Party was meant to be about—to be replaced by one of the perfumed denizens of the salons of Islington. It is that kind of thing which makes me feel that we should be discussing not how we should get more money to political parties but how they should be deprived of it.

As for the way in which political parties raise their funds, in this case I do not share the strictures against the Labour Party. It is perfectly natural and sensible that the Labour Party should receive the bulk of its finance from trade unions. After all, it came into existence as the political arm of the trade union movement. It has no other rationale. It is impossible, and ought to be impossible, to distinguish between the trade union movement and the Labour Party, in the way that it is almost impossible to distinguish between Sinn Fein and the IRA. There are examples of organisations in which the overlap is fundamental. Therefore, I was very surprised to hear the remarks of the noble Lord, Lord Houghton of Sowerby, who appeared to believe that what was an asset to the Labour Party was in fact a handicap.

Turning to the Conservative Party, there appears still to be a measure of surprise that men of business consider that it is a good idea from time to time to give some money to the Conservative Party. Surely, that is a natural form of insurance. No businessman who had at heart the interests of his own pocket or his shareholders could possibly do anything but blench at the thought, let us say, of Mr. Gordon Brown as Chancellor of the Exchequer. Therefore, a small contribution, anonymous or public, to the Conservative Party is no different from any other form of insurance that a businessman might take out for any of the risks which the world of business normally entails.

To me, it is a perfectly understandable reaction. It used to be the case that other interests were represented. In Disraeli's time it was the landed interest. That has now shrunk, for all the efforts of Brussels to put more money into it. Parties are parties of interest. If they were not parties of interest, they would fade and die.

The problem for the party led in this House by the noble Lord, Lord Jenkins of Hillhead, is that it is not a party of interest. It is a party of individuals. Obviously, therefore, to raise finance or to get people to stand for office it depends upon exciting a degree of ideological sympathy. It is perhaps understandable that, with the wise exception of the noble Lord, Lord Holme of Cheltenham, the idea of a certain amount of state money should be appealing to a party of that kind. I keep remembering that, like the noble Lords, Lord Houghton of Sowerby and Lord Boyd-Carpenter, I was born under a Liberal Prime Minister. I want to see the Liberal Party, the party of my youth, retained for what may remain to me of this life.

So I am in favour of the parties going on. I see no great reason for asking that anything should be changed. The only thing in favour of having a committee of the great and the good, which would look at finance, is that, like all committees, there would no doubt be leaks from it. One can image the kind of leaks that would occur: the committee—it is said—has discovered that there is a body called the Transport and General Workers' Union, which appears to pay a great deal of money to the Labour Party; and so forth. The leaks would keep the press going and the committee could sail on its way, as the noble Lord, Lord Boyd-Carpenter, said, spending a great deal of our money but doing no great harm. There is something to be said for tying up those people who like to sit on committees and look into things to which, in the end, they can make no difference.

I do not know what, if any, Papers will be moved for at the end of this debate. I am in favour of letting the noble Lord, Lord Jenkins of Hillhead, have them.

4.48 p.m.

Lord Mayhew

My Lords, we on these Benches warmly welcome the support of the noble Lord, Lord Beloff. He introduced a new note in mentioning interests as basic to funds for the Conservative Party. Before he spoke we had a different picture of the average donor to the Conservative Party from the noble Baroness, Lady Young, and the noble Lord, Lord Boyd-Carpenter. We were introduced to the Conservative supporter who is a humble individual; one who wishes to see the party that he prefers flourish and succeed; and who does not want other people to know that he supports it. There must be many people like that.

Baroness Young

My Lords, perhaps the noble Lord would be good enough to give way. I should like to make an important point. Seventy per cent. of the money that comes to the Conservative Party comes through the constituencies and, I can assure him from many years of personal experience, from a lot of people of relatively small means.

Lord Mayhew

That may be true between elections, but not at a general election at all. We should not argue about this. We entirely agree about the individual contributions of a man who supports the Conservative Party but does not want anybody to know. He has a right to privacy. There are probably increasing numbers of people like that at the present time. However, if the size of the donation increases sufficiently, there comes a time when the donor's right to privacy comes into conflict with the elector's right to know.

I do not know where that precise point comes. My noble friend mentioned the sum of £5,000. In my view, in a healthy democracy, any donation of a five-figure kind, either to a political party or to the private office, party leaders, an MP or a Peer, is a matter which should be in the public domain.

What is more, there is another picture, which has not been mentioned, of the donors to the Conservative Party. We might contrast the picture given by the noble Baroness, Lady Young, with the description which I read a few days ago in the Sunday Times, written by a former editor: We now know, thanks to the investigative reporting of this newspaper, that the governing party has been at various times secretly bankrolled by a nefarious collection of foreigners, from dodgy Greek shipping millionaires, to shady Arab middlemen, to dubious Hong Kong tycoons, to fugitive Cypriot business men". Those people are donors to the Conservative Party and we know about them not because the Conservative Party told us, but simply because their rather energetic efforts of secrecy have broken down. For example, we know that Mr. Asil Nadir paid £440,000 to the Conservative Party, not because it appears in the party's accounts, but because the tell-tale cheque stubs were found by the Fraud Squad during its investigations. Is that the kind of secrecy which noble Lords opposite support? It seems impossible to me.

I venture to ask something of the noble Viscount. We know that he will not tell us the names of donors; we know that he will not tell us how much the donations are; but perhaps he will tell us what proportion of major donors to the Conservative Party are wanted by the police. That would help. It may take him a little time to work out but we should look into that. It is not a matter of indifference. Whether or not Mr. Asil Nadir contributes huge sums to the Conservative Party is not a matter for secrecy. The electors are entitled to know. Indeed, in relation to Hong Kong businessmen, important tycoons such as Mr. Li Kashing and Mr. See Sin Tong are major donors to the Conservative Party.

The Conservative Party says that that is no affair of the British electorate; that it is no affair of the Hong Kong electorate or the Hong Kong Government. It does not matter that those people are critics of the government and members of the shadow government for Hong Kong which the Chinese Government prepared. That is also part of the problem to which noble Lords opposite have not addressed their minds. But it is a matter of grave importance. The Government are incapable of taking decisions without affecting vast companies and huge interests of that kind in one way or the other. As the Conservative Party keeps the whole question of donations secret it is not possible to judge whether a government decision is taken strictly on its merits or because of warm feelings towards a major donor. The donations are secret and in my view that situation is quite improper and must be reformed. We know that some donors to the Conservative Party have gone sadly unrewarded. For example, the poor Al Fayed brothers.

Lord Boyd-Carpenter

Poor?

Lord Mayhew

My Lords, they were not even asking for a peerage or a knighthood; they were only asking for British citizenship. One would have thought that they had earned it. But no, presumably the Conservative high-ups thought the donations were not high enough or well enough concealed, so they go without. To achieve results donations to the Conservative Party should be not only large, but also discreetly advanced.

I have a question in relation to the Labour Party. Labour Party members will agree that if substantial donations to a political party should be made public, so also—even more—should substantial donations to the political work of individual political leaders. That goes without saying. Noble Lords may remember that many years ago eyebrows were raised when it was revealed that the private office of the late Lord Wilson was being bankrolled by a secret trust. I know that Mr. Blair, Mr. Brown and Mr. Cook are fully aware of the need for complete openness about the Industrial Research Trust in which they registered an interest. In my view they would be wise to let the public know the names of the trustees and major donors, and also of another institution called Common Campaign Limited.

However, it is the secrecy surrounding donations to the Conservative Party which is rightly the main focus of public concern. Secrecy is the mother of sleaze, which is the mother of corruption. That has been the experience of Italy, France and many other countries. While the Conservatives stick to their doctrine of secrecy at all costs, that experience may spread to this country as well.

4.55 p.m.

Lord Hooson

My Lords, reference has been made today to the fact that parliamentarians, political parties and politicians generally are in disrepute. One of the reasons for that, in addition to those suggested by the noble Lord, Lord Beloff, is that our political system is so partisan. I have said this about the legal system and I say it about the political system. The essentially adversarial system that we follow in both spheres has outlived its usefulness.

The general public is amazed that intelligent people cannot find consensus to resolve many of the acute problems that face our country today. That is why I say, in response to the noble Lord, Lord Boyd-Carpenter, that it is right to raise this subject here. Whether there are overtones or undertones of partisanship in this debate, they are as nothing compared with what would have been raised in another place. Of course, if effective action is to be taken, it must be taken in another place. But this is the right forum to ventilate feelings and have a slightly more detached debate than would be available in the other place.

I shall not go over the arguments about the present funding system, save to say I cannot understand why any party could possibly object to insisting that every contribution to a party over a certain sum should be disclosed. I entirely agree with the noble Lord, Lord Boyd-Carpenter, and his noble friend Lady Young that probably the majority of contributions to the Conservative Party come from individuals who are voluntarily contributing. I accept totally that it is probably true that the Labour Party has more individual contributors today than it has ever had in its experience. But why should contributions of the size about which we heard from my noble friend Lord Mayhew not be disclosed to the public? There cannot be a case for that at all.

Likewise, I do not believe that a public company, in particular a privatised public utility, has the voluntary sense to which the noble Lord, Lord Boyd-Carpenter, referred. It is investing in its own public interest, as it sees it, and it is wrong that it should do so. I would incline to ban all contributions from publicly accountable companies.

I want to make, briefly, the case for change. Political parties play an essential role in a democratic society, though I agree with the noble Baroness, Lady Young, that they receive much ill-informed abuse, as do all parties. It was in 1872 that Disraeli said, I believe that without party, Parliamentary Government is impossible". I agree with that. Over the past 25 years or so the responsibilities of political parties have increased dramatically both with the expanding politicisation of local elections, which I personally deplore, and the advent of European elections. If we have elected assemblies in Scotland and Wales that would also add to the responsibilities where they come into existence.

The need for efficient and adequately funded political parties has never been greater. None of the political parties, including the Conservative Party in Britain, has sufficient income to perform all its responsibilities adequately. The strain on resources is aggravated by the fact that political costs have risen far faster than inflation. The traditional solutions of a membership drive or seeking greater support from institutional backers, produce patchy and sometimes highly risky results and divert the attention of party workers from more important matters such as policy formulation. It is also in the nature of such funding to be erratic, while many of the administrative costs of running a political party are fixed costs.

The most immediate consequence of inadequate funding is that staffing levels are too low and that those who are on the payroll tend to be overworked and underpaid. I entirely take the point made by the noble Lord, Lord Beloff, that in fact political parties at headquarters have become too strong. In many ways I would far rather see any state finance advanced to the parliamentary parties and possibly into the constituencies, rather than to the headquarters.

The cost to the British people of the underfunding of political parties is either seen in avoidable mistakes made by every incoming administration because it has not prepared sufficiently—there is a lack of detail in policy, and so on—or in the excessive dependence of Ministers on the Civil Service for advice on policy.

The advantage of state subsidy in some form is that we would have more competition because state funding of political parties should lead to more and fairer competition. However, equality of electoral opportunity can only be achieved if the mechanism chosen for such a scheme includes safeguards against a misuse of power by the governing party.

Both the Labour and Conservative Parties would be freed from institutional dependence, either completely or at least to a large extent. It is the extent of the dependence which is the fear. That is the governing fear exercising the minds of the public at the moment in relation to the Conservative Party. There is nothing wrong with the principle of interest groups financing political parties provided that the payments are made transparently and voluntarily, with the proviso that public limited companies do not indulge in it at all.

There is no evidence in this country that payments made by interest groups are generally made with a view to a specific quid pro quo. I do not believe that we are that kind of country. Naturally, for example, business has, rightly or wrongly, traditionally expected a general bias in its favour from the Conservative Party. Similarly, the trade unions quite naturally expect a natural bias from the Labour Party when it is in government. Thankfully British politics is free of the corruption endemic in many countries around the world. However, what also matters is the appearance that such sponsorship generates. Parties should feel completely free to act independently and to be seen to have such freedom.

Perhaps I may take the position of the Prime Minister in the "winter of discontent". He was faced with the enormous problem of his financial backers indulging in the most irresponsible behaviour. He was leading a government that was largely financed by the very unions who were causing the trouble. Therefore, stability of income would be very important because a system of party political subsidy would ensure that income would not fluctuate wildly with varying economic conditions and with the ebb and flow of a party's political fortune. Also, party leaders would not have to waste their time attending fundraising events when they could employ their time more fruitfully elsewhere.

Perhaps I may now refer very briefly to the drawbacks of state funding because there are, admittedly, drawbacks to a system of public funding of political parties. It could maintain current parties in existence after their support had long diminished. It could lock out new or emerging parties and most systems have a bias towards the status quo. However, all these defects can be mitigated or avoided by the careful construction of the system.

I refer very briefly to foreign experience. In the past few years there have been not only reports in this country. There was a report from the Council of Europe on the financing of political parties in 1989. There was a list published in the House of Commons Hansard of 17th July 1990 at col. 496, with the information then available of funding in different parts of the world. There was the Congress Report prepared by the staff of the Law Library of Congress in 1991 on Campaign Financing of National Elections in Foreign Countries. There was the European Parliament report called The Funding of Political Parties in European Community Member States in 1991. The Home Affairs Committee published in one of its indices in its second report in House of Commons Paper 301, a list of 19 countries, including three Commonwealth countries, 13 European and an additional three elsewhere, of the funding arrangements in those countries. So the problems are not special to this country, but in every democratic country in the world at the present time.

I suggest to noble Lords that whatever partisan background we have—and it is natural in our democracy that we indulge in it—nevertheless there is a case for consensus here. There is a case for an inquiry no doubt developing from a report made 20 years ago by the noble Lord, Lord Houghton. I read that report 19 or 20 years ago and I cannot recall its precise terms now, but it was a very important report. It is in the interests of all parties to investigate this matter now and to see whether a more sensible arrangement can be achieved.

At the end of it all I say that the bulk of support for any political party should come from the individual subscriptions of those who believe in the policies of that party. But that is not to say that there is not a very good case now for investigating the importance of a state contribution at certain levels.

5.7 p.m.

Lord Harris of Greenwich

My Lords, the Prime Minister announced on 25th October the establishment of the Nolan Committee of Inquiry. In the course of the Statement he made in the House of Commons he said, It is important that the public have confidence in our system of public administration, our methods in making public appointments, the conduct of people in authority and the financial and commercial activities of public figures". He added: In the present atmosphere, there is public disquiet about standards of public life, and I have concluded that action is imperative".— [Official Report, Commons, 25/10/94; cols. 757–8.] Yet it now appears, as we all know, that the one area in which there is most clearly public disquiet about standards in public life is not to be investigated by the noble and learned Lord's inquiry. That is the subject of the debate initiated by my noble friend Lord Jenkins of Hillhead. As a result of the fierce opposition of Ministers, the issue of the manner in which political parties raise their funds will not be examined by this committee until certainly the next general election.

The Leader of the House who will be replying in a few moments is, I believe, required to justify that decision by his colleagues. He can hardly deny that there is public disquiet. Indeed, it would be remarkable if he made any serious effort to attempt to do so.

Let us consider what has been revealed in recent months and years. First, it has been estimated that between 1984 and 1992 there were £71 million of unexplained donations to the Conservative Party. If the object of the exercise is, as the noble Lord, Lord Beloff, told us a few moments ago, to deny money to central party headquarters, he must, I am sure, be disappointed that quite such a large sum was raised during that period for the party of which he is of course a member. No one knows, of course, from where that £71 million came; the exception being a small group of people at Conservative Central Office in Smith Square.

One of the people excluded from having any knowledge was Mr. Eric Chalker who was a member of the Conservative Board of Finance between 1989 and 1993. He told the Home Affairs Select Committee of another place that while members of his board received a partial breakdown of donations by UK region, value and number, more complete information was kept from him. He added that when press reports were published of specific and very large individual donations, including some from abroad, he asked the chairman of the Conservative Board of Finance for detailed information. Despite the fact that he was a member of that board of finance he was denied that information.

Secondly, we have the revelations concerning the Conservative Party's offshore bank accounts. Mr. John Strafford, another former member of the Conservative Board of Finance, said in a letter to The Times: everyone is now clear that the Conservative Party uses offshore accounts … and that a large amount of funds raised on behalf of the Conservative Party goes into accounts which are not in the name of the party". The noble Lord, Lord McAlpine, a former treasurer of the party, is quoted in the minority report of the Home Affairs Select Committee as saying on ITN that the party had tons of offshore accounts. Before the debate I wrote to the noble Lord, Lord McAlpine, indicating to him that I proposed to refer to him. I am sure that many of us are deeply disappointed that we have not had the good fortune of having the noble Lord assisting us during the course of the debate.

We then come to the consequences of that climate of secrecy. As the result of the investigations of a number of national newspapers, and due also to disclosures in the civil and criminal courts, we have begun to learn of the identity of some of the donors of party funds. There is for instance Mr. Octav Botnar, a former head of Nissan (UK) who channelled donations of £150,000 through an offshore account in Jersey. Mr. Botnar is now wanted in this country on allegations that he was involved in large-scale fraud. However, he is presently resident in Switzerland, and showing no immediate sign of being anxious to return to the UK.

There is then Mr. John Latsis, a Greek shipowner, associated closely with the military regime which destroyed democracy in Greece—a regime which, as the House will recall, thought it appropriate to torture its opponents. He is said to have contributed £2 million to the Conservative Party.

There is also, as my noble friend Lord Mayhew mentioned, the Hong Kong connection. A number of very large donations have been reported in the press as coming from named individuals. That is a matter which should awaken some interest in us. That indeed no doubt explains why no fewer than 14 Ministers of the Crown who travelled to Hong Kong on public business and at public expense took time off while in Hong Kong to involve themselves in political activities, including fund raising.

The noble Lord, Lord Boyd-Carpenter, is worried about keeping down the level of public expenditure. It might be a good idea if the Conservative Party repaid some of the assets of those gentlemen to the taxpayer who had the privilege of financing those trips to Hong Kong.

I come now to a number of other cases which have attracted a fair degree of public interest. First is another case referred to by my noble friend Lord Mayhew—Mr. Asil Nadir, the former head of Polly Peck, a fugitive from justice who fled to northern Cyprus while awaiting trial on charges of theft and false accounting. As has been indicated, cheques of £440,000 were sent by Polly Peck to the Conservative Party between 1985 and 1990. None of them appeared in the accounts which were submitted by Polly Peck. In addition, further donations were sent by Mr. Nadir to overseas firms, presumably using some of those offshore accounts.

There is also the case of the Fayeds, to which my noble friend Lord Mayhew again referred. It is unnecessary to go through that but it seems to be a matter of some passing interest. I assume that the Conservative Party would not have received money from those gentlemen if it had any doubts about their moral character. That being so, it makes it even more puzzling that they have apparently been denied British citizenship by Ministers who belong to the same political party which was perfectly prepared to accept their money.

There is then the question of political honours to which my noble friend Lord Jenkins of Hillhead referred. That was dealt with in the report of the Home Affairs Select Committee. When the noble Baroness, Lady Young, referred to that report, if I may say so, a slight note of reverence crept into her voice. It was as though the Home Affairs Select Committee of the other place was a cross between the Appellate Committee of your Lordships' House and the United States Supreme Court. Unhappily, it was not quite like that, as my noble friend Lord Jenkins of Hillhead pointed out. The report was passed by that committee only on the casting vote of the chairman.

In the course of that report—my noble friend referred to this, and I hope that the noble Viscount the Leader of the House will reply to the point—comes the comment made by Lord Shackleton, a distinguished former Leader of the House who was of course chairman of the Political Honours Scrutiny Committee. He referred to secret donations to Conservative Party front organisations which he indicated could enable honours to escape scrutiny by that committee. He is quoted as saying: There is an obvious gap. It is highly likely that these secret donations are by-passing the scrutiny system, and that honours are effectively being bought". That in my view requires a specific reply from the noble Viscount the Leader of the House. There is no way a charge of such gravity from a former chairman of the Political Honours Scrutiny Committee can possibly be ignored.

The cases I have raised this evening demonstrate an overwhelming argument for an independent inquiry into the fund-raising of all British political parties. I would emphasise, of course, all political parties. I would find it hard to believe that anyone who has been involved in any way to any significant extent in the management of British political parties over the past 35 years or so could possibly suggest that they had never received a donation which, looking back on it, made them feel altogether at ease. The difference between us in this House is a clear one. The opposition parties believe that there should be an independent inquiry, and Ministers are determined that there should not be. Given the sort of evidence that has been put before the House this evening, it is fairly obvious why they take that view.

Yet if the Prime Minister is genuinely concerned about the level of public disquiet, and about standards in public life, as I am sure he is, how can he possibly believe that that will be diminished without an examination of those issues by the Nolan Committee? Consider, for a moment, the views of a distinguished member of the Conservative Party, and former Leader of the House, Mr. John Biffen, who said: In the present mood of scepticism about British politics the Conservative Party should open its financial books and demonstrate that its accounts are not padded by big business and shady entrepreneurs". In my view, that is absolutely right.

That being so, what is the Government's case against an independent inquiry? First, we have the noble Lord, Lord McAlpine, writing in the Independent, that in Britain people have the right to give money privately to the political party of their choice. He also stated that to change that would be an affront to democracy. That sounds a little odd because today we are talking not only about the rights of British people to give their money away privately but about the rights of foreign companies and individuals from outside this country to make secret donations into offshore accounts held on behalf of the Conservative Party. Those money are not even disclosed to their own central boards of finance.

Secondly, there is the claim of the noble Lord, Lord McAlpine, that to introduce transparency would be an affront to democracy. Perhaps on this occasion the noble Lord has been guilty of a slight degree of exaggeration. I suspect that it would be a matter of surprise to the United States to discover that it had apparently connived at just such an affront to democracy, because there all significant contributions to campaign funds must be declared. And why? It is because of the scandals of the past; because of the consequences of secret donations to candidates for public office, which affects the integrity of public life. What is true of the United States is true of every advanced industrial nation in the world.

All I say in conclusion is that an inquiry on the lines suggested today is inescapable. The Government should be under no illusion that ultimately an inquiry will take place whether they want it or not. As my noble friend asked at the outset of the debate, why do they not just for once behave with good sense and allow the Nolan Committee to undertake its work forthwith?

5.22 p.m.

Lord Richard

My Lords, we have had an interesting and on occasions entertaining debate. I greatly appreciated the contribution of the noble Lord, Lord Beloff. It reminded me of a report that I once had when I was studying biology at school. I was not a good biologist and at one stage I received a report which read, "Sets himself a lamentably low standard and rarely manages to attain it". I received a subsequent report which came to my mind when I heard the noble Lord, Lord Beloff. It read, "As an entertainer he is much appreciated by the form, but as a biologist I fear that his work is somewhat negligible".

The noble Lord, Lord Beloff, entertained us greatly and I enjoyed it. However, it is interesting to note that the one issue to which he did not refer was disclosure. According to the noble Lord, everything in the garden is lovely and we can get people to beaver away on things that do not really matter. But the one issue more than any other single issue with which the debate has dealt has been disclosure. On that the noble Lord, Lord Beloff, was silent.

I fear that I shall upset the noble Baroness, Lady Young, who was upset by what was said by the noble Lord, Lord Jenkins of Hillhead. I fear that I may do the same. My noble friend Lord Houghton made a remarkable speech. His report is now some 20 years old and it may be that all we need to do is to reinstate the Houghton Committee and give it powers of revision and the job will be done. That is one possibility but I have no doubt whatever that at some stage the job will be done. There will be an inquiry and as a result there will be greater transparency in relation to the funding of political parties in this country.

Let us first see whether we can agree about anything and then see where we disagree. Broadly, we can accept the terms of the Motion. There is a case for an inquiry of some form into the present arrangements for the funding of political parties. I am open as to the precise nature and scope of such an inquiry, but I have no doubt that one should take place.

I believe that everyone can agree with two basic propositions. First, that anyone in our democracy should be able, if he wishes, to participate financially as well as practically in the working of that democracy. In other words, people should be perfectly entitled to support political parties if they so wish. But the corollary of that argument is that the support should be given in such a way that it does not call into question the integrity and validity of the very political process that is being participated in. Therefore, the second proposition, which I suspect not quite so many people will accept, is that that participation in the political process, if it is of any major kind, should be publicly acknowledged and therefore transparent.

I believe that the present system is flawed in that, first, those who participate are not always stakeholders in our democracy. Several noble Lords—and in particular the noble Lords, Lord Harris and Lord Mayhew—have had something to say about foreign participation and foreign donations to the Conservative Party. I do not propose to go over that ground again. However, I believe that there is an inherent danger in having major contributions to a political party from people who do not have a basic interest in our democracy. The danger is that they are not participating in the democratic process but are buying government policy. I hope that most Members of this House will agree that that is wrong.

Secondly, the system is flawed because it is not transparent and it is therefore not accountable. I can see no reason why that should be so. For the sake of precision, perhaps I may state precisely the Labour Party's position on the matter. I shall quote from the text which was part of the Labour Party's evidence to the Nolan Committee. We stated that we were in favour of: a new regime for the funding of political parties to include: full disclosure of their accounts". I hope that that deals with the point made by noble Lords on the Liberal Democrat Benches. The new regime should also include: proscriptions on overseas and large secret donations; limits on election spending at national as well as constituency level; new requirements for shareholder agreement, and contracting out, in respect of donations by companies". I have listened to the whole debate but I have not heard one word from the other side that is capable of justifying the situation, which my noble friend Lady Gould set out at the beginning of the debate. It is that a trade union donation must go through a whole series of hoops which are designed to ensure, first, that the members of the trade union are in favour of it, because the political fund must be set up after a ballot and, secondly, that the donation is public and everyone knows about it. I heard from the other side not one word of justification that trade unions should be under those burdens but companies should not. Why on earth not? Why should not the shareholders of a company have just as much right to know what the company is doing in relation to the political activities of that company as a trade union member has the right to know what his leaders are doing in relation to his trade union's political activities? There exists a basic unfairness which ought to be dealt with.

As regards transparency, what is the position of the Conservative Party? I can give many figures, some of which are well known. Some of them have had to be ferreted out from perhaps 150 or 200 different company accounts. We can trace donations of £2.51 million to the Conservative Party in the financial year ending March 1994. From the latest accounts for Conservative Central Office, we know that donations from companies and individuals totalled £9,372,000 in the financial year ending March 1994. One knows where £2.5 million came from but one does not know where the remaining £7 million came from. Therefore, we can account for about 27 per cent. of what the Conservatives have revealed as donations and contributions. That compares with being able to account for 36 per cent. in 1991, 54 per cent. in 1990 and 52 per cent. in 1989. Therefore, there is a shortfall. In a democratic society I do not think that it is unreasonable to ask the Conservative Party where that money has come from. People know where Labour Party cash comes from and they also know that in relation to the Liberal Democrat Party. It is not unreasonable to demand the same degree of transparency from the Conservative Party. Otherwise, there is bound to be suspicion as to the way in which the money is obtained; secondly, the way in which it is used; and, thirdly, the pay off for those people who are making contributions.

I have managed to extract some figures of the top 10 corporate donors to the Conservative Party to date. I shall merely give the list and your Lordships can draw the necessary conclusions. At the top of the list is United Biscuits which donated £1,004,500—one peerage and one knighthood went to the leaders of United Biscuits; Hanson donated £852,000—two peerages; Taylor Woodrow £837,362—one peerage, one knighthood; British & Commonwealth donated £823,560—one peerage; George Weston Holdings donated £820,000—no peerages and no knighthood but I am told that he is Canadian and is therefore not in this country; P&O donated £727,500—one peerage, three knighthoods; Western United Investment donated £620,900—no peerage but the noble Lord, Lord Vestey, is with us already; Glaxo donated £600,000—two knighthoods; and Trafalgar House donated £590,000—one peerage, one knighthood.

It may be that if I were a man with a suspicious mind, I should think that there might conceivably be a causal connection between one side of that balance sheet and the other. But being the generous-minded, naive individual that I am, who, after all, has only been involved in British politics for some 35 years, I am quite prepared to accept that all those who came to this House from the list that I have just read are well qualified and would have come to this House had they been giving donations to this party or the party of the noble Lord, Lord Jenkins of Hillhead. I am quite prepared to accept that all those who received knighthoods received them because of the shining qualities of their characters and that it had nothing whatever to do with the fact that their cheques arrived on that side of the House rather than any other.

Of course I am prepared to accept that, as is the noble Lord, Lord Jenkins of Hillhead; and even his suspicious colleague the noble Lord, Lord Harris of Greenwich, might be able to accept that. But I can tell the House that the general great British public does not accept that and does not believe that that is pure coincidence. That rubs off not only on the party opposite, which frankly I do not really care about, but it rubs off on all those who are engaged in politics. If sleaze is pouring over that party, some of the stench unfortunately falls on the rest of us.

Therefore, there is a problem which needs to be solved. The present position is not satisfactory; it is unreasonable. Question-marks are raised over the way in which the governing party of this country raises its money; where it comes from; and what is the pay off for the people paying it. In those circumstances I believe that the demand for an inquiry is more than thoroughly justified.

5.33 p.m.

Viscount Cranborne

My Lords, like the noble Lord, Lord Richard, I too am extremely grateful to the noble Lord, Lord Jenkins, for introducing what we can all agree has been a useful and important debate.

In passing I must say to the noble Lord, Lord Richard, that for a man who tells us that there is inadequate transparency in the matter that we are discussing today he seems to be remarkably informed. Indeed, I should say to him further on the question of honours that it might be worth asking himself a further question in all his innocence and mere 35 years' experience; namely, what is the contribution to the national prosperity made by the names that he has read out? Indeed, I go so far along the road of the advocacy of the Liberal Democrat Party that when I return to this matter I shall not do so on a sheet of lavender writing paper.

We can all agree about one matter. The noble Lords, Lord Jenkins and Lord Holme, my noble friend Lady Young, who made a remarkable speech, and even the noble and learned Lord, Lord Nolan, agree that the authority and respect for MPs and all those who take part in British political life has increasingly been called into question in recent years. Therefore, it seems to me that a vacuum of authority has begun to appear and people like the noble Lord increasingly turn to one source to fill it. That source tends to be one-headed and composed of the great and the good.

It is as though we are beginning to live in a rather crude neo-Platonist age in which the country relies on a race of disinterested guardians to resolve matters of ethics, government and public morals. I have noticed that the Liberal Democrat Party is particularly addicted to that approach, as we have heard this afternoon. Not so long ago, a much higher proportion of those matters would have been decided by Parliament, often with the guidance of the Church, although that is less fashionable in places other than your Lordships' House. Those guardians may nominally report to government or Parliament but my, how the press howls if an individual or institution dares to reject those recommendations.

Now, of course none of that means that I do not have the greatest respect for the great and good, or indeed that I hold that inquiries conducted by the great and good are not often useful. However, like my noble friend Lord Boyd-Carpenter, I hold that we must be careful in general that inquiries conducted by committees, however eminent, do not become so much of a habit that they begin to usurp the proper functions of Parliament. That danger became all too apparent in the 1960s when the government of which the noble Lord was such a distinguished member, in their desire to avoid taking a decision about anything, spawned Royal Commissions like a rabbit on the South Downs. I am glad to say that my noble friend Lady Thatcher and my right honourable friend the Prime Minister have resisted that temptation to the great benefit of the common weal. We should be especially careful to preserve the role of Parliament when addressing matters that concern the nature and organisation of Parliament itself and of those who organise the sending of Members of Parliament to Parliament. In our system the funding of political parties is surely and emphatically such a matter.

So, if the inquiry which the noble Lord is calling for is a Select Committee inquiry by either House of Parliament, of course I have no objection in principle to what he advocates. If, on the other hand, he is advocating the appointment of a commission of neo-Platonist guardians—and I coiled from what he has said this afternoon that that is what he has in mind—then in principle I am against him for the reason I have just given.

Even if the noble Lord were advocating a Select Committee inquiry, I am not sure that I could support him at this moment. It might not be a wholly suitable subject for a Select Committee of your Lordships' House, although I am open to persuasion on that score; but even if it were, a Select Committee in another place produced a thorough report on this very question as recently as 16th March 1994, as my noble friend Lady Young pointed out. We try, as your Lordships know, not to duplicate the work of Select Committees in another place in this House—and, of course, as my noble friend Lord Boyd-Carpenter pointed out, even on such an important subject as this, it may be a little much to expect from another place an annual inquiry of this kind.

Nevertheless, I am aware of the suggestion from some quarters that the noble and learned Lord, Lord Nolan, and his committee should undertake an inquiry on this subject as part of its next phase of work. As the House will know from answers I gave after my Statement to the House on 25th October last, my right honourable friend specifically excluded the funding of political parties from the noble and learned Lord's remit. The noble Lord, Lord Jenkins, cross-questioned me most assiduously on the subject. For the reasons I have given noble Lords this afternoon I continue to think that my right honourable friend was right to do so. The more we undermine Parliament's ability to regulate matters which most closely concern it, the more we lessen the authority of Parliament and the respect in which it is held. It is for that reason that I was relieved to read the recommendation of the noble and learned Lord, Lord Nolan, that his parliamentary commissioner for standards should report to a sub-committee of another place rather than be independent and free-standing with no responsibility to Parliament or another place.

Nevertheless, I recognise what motivates the noble Lord in initiating the debate. His concern above all is to try and ensure that the votes that elect Members of another place are secured in as unbiased and equitable a fashion as possible. I and the entire House would expect no less from the noble Lord.

Furthermore, I am sure that in the present atmosphere, when allegations about standards in public life abound, the noble Lord feels that now is not a bad time to remove all taint of interest from politics and, as the noble Lord, Lord Rodgers of Quarry Bank, advocated, free from ideological influences.

If that is what both noble Lords would like, that strikes me as a dangerous ambition. We agree that the authority of Parliament must derive ultimately from the ballot box. I hope that neither noble Lord feels that it is either possible or even desirable for interest, whether charitable, commercial, moral or sectional, to be divorced from Parliament and politics. What is politics about other than ideology and interest? The whole of the Liberal and socialist case today has been based on ideology and interest, and that has been the inescapable conclusion of at least all noble Lords who sit beside and behind me. If we attempted so to divorce it and succeeded we would be divorcing politicians from those very matters which should be their constant concern. It would be more difficult for Parliament to act as the forum where ultimate power must rest and where interest should be controlled when it becomes overmighty.

I would be worried if the great interests, commercial or sectional, did not want to support political parties, and I would be equally worried if they were forbidden to do so. We have seen the rapid growth in recent years of single issue pressure groups which, if they become too powerful, can unbalance the entire political debate. Parties in our system are, almost by definition, coalitions. That may be said about the Liberal Democrat Party, which is the result of one of the most recent and obvious open coalitions of political post-war times—mould breakers. They have a bias towards balance which helps control interest.

I do not have the time this afternoon, and I am sure that your Lordships do not have the inclination, to rehearse all the elements of a highly complex subject. I do not think that the noble Lord's Motion encourages any of us to do so.

I am more than a little tempted to follow my noble friend Lord Beloff down the extraordinarily attractive and entertaining road down which he tempted us. When we return to these matters we shall explore a little further the importance of interest of Lord George Bentick and of Disraeli.

However, I should like to touch on two matters which are relevant to what the noble Lord had to say: state funding and the anonymity or otherwise of donors to political party funds.

The Home Affairs Select Committee in another place discussed the question of state funding of political parties in some detail. Unlike the noble Lord, Lord Jenkins, and the committee chaired by the noble Lord, Lord Houghton of Sowerby, which reported in 1976, the committee in another place was not attracted to the idea of any extension of existing subsidy. As did the noble Baroness, Lady Gould, the committee acknowledged the existence of the "Short money" and the value of benefits in kind in the form of party political broadcasts, free postage at election time, and so on; but in terms of straight cash they remained sceptical.

I particularly enjoyed the speech of the noble Lord, Lord Houghton of Sowerby. I understand that he would not support the contention of the noble Lord, Lord Jenkins, that there should be a new inquiry on the grounds that his was perfectly sufficient for the purposes. Our experience of the noble Lord's thoroughness and capacity to understand the nub of any matter, whether or not we agree with him, leads us to suspect that that is not bad advice.

I should like to say to the noble Lord, Lord Holme of Cheltenham, that I hope it will be possible to hold the line on free political broadcasting, although I am not sure who watches the broadcasts apart from the entire political classes and aspirant boy racers at various central offices.

I share the scepticism of the committee. It is true that other countries subsidise their political parties from public funds. As the table on pages xii and xiii of the Select Committee report makes clear, there is no distinct pattern or practice.

A large number of the countries listed there do not give state funding and a number of them would appear to all of us to be entirely democratic in their theory and practice. It is tempting to wonder to what extent public political funding encourages the proliferation of small parties. Except for the Liberal Democrats, I suspect that most noble Lords feel that that is an undesirable development that is already encouraged by certain kinds of proportional representation. Furthermore, as my noble friend Lady Young pointed out, one could argue that state subsidy encourages corruption rather than the reverse.

My noble friend Lord Boyd-Carpenter pointed out that in this country political activity is voluntary. The Government, like the noble Lord, Lord Holme of Cheltenham, who appears in this instance to disagree with the noble Lord, Lord Jenkins, the leader of his party in this House, believes that it should remain so. Raising money for parties and devoting time to political parties is an activity of civil virtue and one that is to be encouraged in a state whose government is based on representative principles. We all know that such activity involves, above all, hard work and demands great enthusiasm for the cause at the expense of shoe leather and sometimes one's digestion. Should that enthusiasm flag, it seems curious and perhaps socialistic to argue that the state should make up for the deficiency by public subsidy. It reminds me of the nationalised industries. We know that the private sector had to rescue them and restore them to prosperity. It is no wonder that the noble Baroness, Lady Gould, and the noble Lord, Lord Richard, supported the idea of public funding, just as they in their party have supported every measure designed to increase national prosperity and to reduce individual self-reliance, which is the secret of national survival.

Even those systems of subsidy, for which such learned commentators as Dr. Pinto Duschinsky argue and which link the level of subsidy to the number of votes cast, risk institutionalising political parties. As the noble Lord, Lord Hooson, acknowledged, they thus preserve them beyond their sell-by date. In view of what has happened to the Liberals since 1917 I can understand the noble Lord's enthusiasm for state subsidy in that context. His magnificent biography of Asquith demonstrates his mastery over the period.

In parenthesis I should like to remind the noble Lord that his interpretation of the history of the time was not universally shared by Lloyd George's political opponents. I quote from the memoirs of Mr. J. C. C. Davidson who was a most distinguished political fixer in his time in the Conservative interest. Mr. Davidson's attitude to the matter of raising party funds was in marked contrast to that of Lloyd George, who was endearingly frank about his methods. In a memorandum written in 1927, Davidson recorded: In the course of a conversation with Mr. Lloyd George yesterday in which the use of Party funds for philanthropic purposes came under discussion, I"— that is, Davidson— dropped the remark that Mr. Lloyd George was fortunate in being much better situated with regard to Party funds than the Conservative Party. He laughed at the remark, and with his characteristic flair for altering his ground, burst into an enthusiastic defence of the system of raising Party funds by the sale of honours. 'You and I', he said, 'know perfectly well it is a far cleaner method of filling the Party chest than the methods used in the United States or the Socialist Party'. He complained that the Socialist Party was a trade union party solely because of the power of the trade unions to withhold funds. 'In America the steel trusts supported one political party, and the cotton people supported another. This placed political parties under the domination of great financial interests and trusts'.— I believe that the noble Lord would agree with that. 'Here', said Mr. Lloyd George 'a man gives £40,000 to the Party and gets a baronetcy. If he comes to the Leader of the Party and says I subscribe largely to the Party funds, you must do this or that, we can tell him to go to the devil. The attachment of the brewers to the Conservative Party was the closest approach', said Mr. Lloyd George, 'to political corruption in this country. The worst of it is that you cannot defend it in public, but it keeps politics far cleaner than any other method of raising funds'". I wonder how a measure which would begin to nationalise political parties would appeal to an earlier and more laissez-faire school of Liberalism.

Finally, my Lords, I would like to say a word about donations to political parties. As far as I can ascertain no one has suggested that the individual small donor should not be encouraged. Some have argued that donations should be tax allowable in other fora. I believe that one noble Lord—and I hope he will forgive me because I cannot remember who it was—mentioned that during today's debate. As noble Lords will know, that is the position in the Netherlands and, to a lesser extent, in Germany. It is an idea which might be worth exploring. But, ultimately, it is a matter for my right honourable friend the Chancellor of the Exchequer and another place.

The difficulty arises when we consider contributions to political parties from commercial enterprises, trade unions and other bodies corporate or unincorporate. I find it difficult to argue against allowing such bodies to make donations to political parties. I must ask the noble Lord, Lord Hooson, why they should be at a greater disadvantage than any individual?. Some corporations are not as rich as individuals. The fact that they are corporations does not seem to me to be an argument for disbarring them from contributing to the political party whose interests they think most closely represent their own. They have their interests like individuals and the present rules of corporate disclosure seem to me to be perfectly adequate; indeed, the remarkable catalogue put forward this afternoon by the noble Lord, Lord Richard, provides evidence to support that claim. A company giving more than £200 in aggregate must disclose the donations under the Companies Act 1985—legislation passed by a Conservative Government—and its actions are open to challenge by shareholders.

Incidentally, I should emphasise the fact that my party has accepted the code of practice set out in Recommendation 15 of the Select Committee's report.

As my noble friend Lady Young emphasised, my party has been the recipient of sustained innuendo this afternoon. In that context, I would merely draw your Lordships' attention to the line on page 35 of the Select Committee's report where the code of practice makes it clear to donors that illegally obtained money would not be acceptable and, if discovered to be so obtained, would be returned. My party subscribes to that view; and, indeed, puts it into practice. I give way to the noble Lord.

Lord Harris of Greenwich

My Lords, does that mean that the Conservative Party will return the money contributed by Mr. Asil Nadir?

Viscount Cranborne

My Lords, if that money is proved to have been secured as a result of an illegal donation of funds secured illegally, the answer is: yes, of course, if that is so.

The position with trade unions is equally clearly regulated through the 1984 Act, although I cannot resist pointing out that the Labour Party is the only British political party which arguably trades policies for political support. However, from the point of view of my noble friend Lord Beloff, that may not altogether be a bad thing.

The question of anonymity has also proved to be a contentious issue. Indeed, the noble Lord, Lord Jenkins, waxed extremely eloquent on the subject this afternoon. I must tell the noble Lord, Lord Mayhew, that attitudes have changed substantially since the 1930s, when one donor insisted that the Conservative Party should not know that he was the source of a munificent donation in case it was thought that, as a result, he would exercise undue influence in the councils of the party. Nowadays, openness is regarded in some quarters as the ultimate virtue. Just as the virtue of physical modesty suffered a decline under Labour Home Secretaries in the 'sixties, so financial modesty seems to have suffered a similar decline in the 'nineties. To reveal all is now the ultimate virtue, financially as well as physically. The noble Lord, Lord Jenkins, lauded the virtues of transparency with some warmth. With his traditions of advocating transparency in other fields, I can understand why he did so.

There is a difficulty here, which I think we should not underestimate. There are those like the noble Lords, Lord Jenkins and Lord Harris, who advocate complete exposure and who do so for the most honourable and disinterested of reasons. There are others who advocate that course in order to satisfy their's and the public's prurience and in order to blackguard honourable but modest people, who do exist despite what the noble Lord, Lord Harris, suggested. I believe that such pruriently inclined people are dangerous. That is why they have supplied a rich cast of villains for the English novel from Thwackem and Square to Obadiah Slope. They are what we dislike about puritanism. The reason that they are so dangerous is that they play on our legitimate hatred and fear of corruption. There is no easy solution to the dilemma in our imperfect world. As in so much else, we must endeavour, as the noble Lord, Lord Mayhew, implied, to strike a balance between privacy and exposure. However, unlike the noble Lord, Lord Mayhew, I believe that our present arrangements do so. On the whole, the Select Committee supports that view.

We should be grateful to the noble Lord for introducing the debate with his customary elegance. I am sorry that we do not agree. As my noble friend Lady Young said, the noble Lord made a party political speech under the cloak of righteousness and the alleged desire for consensus. I certainly know now that, for all his past political history, spiritually the noble Lord has finally come to rest under the cloak of the Liberal Party. However, I suspect that this is not the last that either this House or the public will hear of the matter. I much look forward to our further exchanges on the subject.

5.58 p.m.

Lord Jenkins of Hillhead

My Lords, I was never a great believer in second bites in speeches, especially when debates are drawing to a close. Therefore, I shall not detain your Lordships for more than a few minutes. In my opening remarks, I said that I had no doubt that the noble Viscount the Lord Privy Seal would give us a rumbustious and probably ingenious reply. I thank and congratulate him on having fulfilled those two criteria. Indeed, the noble Viscount introduced almost fantastical notes into our proceedings at times. It was certainly highly ingenious. The noble Viscount also set my mind at rest on one point. I thought that I was becoming a little too obsessed by historical matters, but after hearing the noble Viscount's long eloquent passage on 1921–1927 I shall lose all inhibitions in that respect.

The noble Viscount's reply was good humoured and, if I may say so, a little in contrast with some of the opening speeches from those Benches. I have rarely participated in a debate in which noble Lords showed more ill-tempered and defensive sensitivity than we heard from the noble Baroness, Lady Young. She really got into a great lather of indignation with me. Indeed, the noble Baroness is quite entitled to do so, and, of course, she may be quite right. However, I am perfectly entitled to point out that she showed remarkable defensive sensitivity. Moreover, even the normal lucidity of the noble Lord, Lord Boyd-Carpenter, deserted him at times, so overcome was he with the impropriety which really both speakers raised in differing ways about our having such a debate at all. I thank the noble Viscount for having distanced himself from that by saying that the debate was invaluable and for thanking us for raising the matter.

Nobody takes the view—I do not believe that he does for a moment—that people should not be allowed to express an interest in politics. I do not take the view—certainly I do not—that people should not be allowed to contribute large sums of money, if they wish, to the party of their choice. Nobody takes the view that it can be other than a horrible development if parties become entirely the creatures of state funding. I believe that there are considerable difficulties about state funding. I believe that some measure may be desirable, but it is not an easy solution by any means. Like the noble Lord, Lord Beloff, I do not want parties to be too rich or party machines to be too powerful. However, this debate asks for and is primarily concerned with honesty and transparency, no more and no less.

I am perfectly sure that, for all the ingeniousness of the Lord Privy Seal's arguments, until there is transparency this subject will rumble on. He said that what was wanted was nothing but inquiries. It is not this party, or even the party opposite, that has produced a position where for almost the first time in history there are two major constitutional inquiries running at exactly the same time. My complaint is that the Government lurch into inquiries at the last moment when scandal forces them to do it as a short-term reaction without thinking out the consequences. If they were wise they would see that this was something that had to be inquired into. Transparency will come. For once they should be ahead of the game rather than following it weakly and without due consideration. We have had a useful debate. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.