Political Parties: Funding

HL Deb 05 February 1997 vol 577 cc1675-725

3.8 p.m.

Lord Jenkins of Hillhead rose to move to resolve, That this House calls on Her Majesty's Government to refer the issue of the funding of political parties to the Committee on Standards in Public Life or some other appropriate body.

The noble Lord said: My Lords, this subject was raised in a somewhat different form 20 months ago. I make no apology for raising it again. I said at the conclusion of the debate in June 1995 that until there was transparency, this subject would rumble on. I also said that this is an issue on which I have no doubt what the ultimate outcome will be. I do not believe that there is a single noble Lord in this House who seriously considers that secrecy of political donations will exist in 10 years' or even five years' time. It is merely a question of how many rearguard actions are fought on the way.

In the debate in June 1995, there were a number of characteristic speeches from the Benches opposite. Almost all who spoke, except for the noble Viscount, Lord Cranborne, are not here this afternoon. The noble Baroness, Lady Young, and the noble Lord, Lord Boyd-Carpenter, retreated into slightly irascible self-righteousness, the one explicitly stating and the other implying that it was really rather disgraceful that the subject should be debated at all. Then, as a great relief, the noble Lord, Lord Beloff, who is on splendid form this afternoon, put up a smoke screen of hilarity, of which he has such an infinite supply, happily. And then we came to the noble Viscount the Leader of the House who retaliated—perhaps I might say—with a speech which mingled rodomontade and philosophy in about equal proportions.

It shows that things are serious when a Cecil becomes philosophical. I looked to see whether the noble Viscount's great-great-grandfather, the great Lord Salisbury, had contributed some particular apercu on this issue. He is, after all, rightly credited with being the creator of villa conservatism. I thought that he might have made some remarks about how the Conservative Party depended, if not on pennies of the people at least on the shillings of the bourgeoisie. I failed, but in the course of my slightly superficial research, I came across a short passage which, while I am bound to admit it might have been even more relevant to last Friday's debate than today, is, in my view, such a gem that I do not think that I can resist giving it to your Lordships' House. In 1897—l00 years ago—Lord Salisbury, then of course in office as Conservative Prime Minister, said: The federated action of Europe is our sole hope of escaping from the constant terror of war, which weighs down the spirits and darkens the prospect of every nation in this part of the world. The federation of Europe is the only hope we have".

I am sorry that the noble Viscount did not go into the Lobby on Friday afternoon in order to defeat the Bill which is so inimical to the spirit of his great-great-grandfather.

The remainder of the case from that side of the House last time was that the individual should have the right to back the party of his choice, or, for that matter, of his interest, with his money. That applies just as much to a millionaire as it does to a political foot-soldier.

Now, I do not dispute that for a moment. The issue is not whether he should be entitled to subscribe but whether the recipient party should be allowed to keep it secret. That is the simple nub of the matter. As criminal money, semi-criminal money, and the money of foreigners who should not be part of the British political process as such, but who may wish to influence things here, has a tendency to find its way into political subscriptions, there is an additional need for disclosure and transparency.

There is no need or appropriateness for any party to mount a holier-than-thou horse about this matter. Every party has had in its history faintly embarrassing subscriptions, though it may sometimes not be all that far back in its history. The party opposite appears often addicted to reminding us that, "My father knew Lloyd George" which was at a certain stage a famous catch-phrase in relation to political honours. What it should remind itself is that when that distinguished Welsh statesman was so referred to he was presiding over a government who were at least 80 per cent. Conservative, that the money was shared, that quite a lot of it was devoted to doing down poor Mr. Asquith.

The essential difference is that my party, the Liberal Democrats, and, as I understand it, the Labour Party, recognise the overriding public case for full disclosure, even if that involves a few embarrassments, whereas the Conservative Party thinks that the scale of its embarrassment is such that it must cling to secrecy against the obvious merits of the case until the last possible moment.

The issue becomes more important as we approach what is clearly going to be the most frenzied and probably degrading general election campaign. As if we had not already had enough from Sir James Goldsmith, our poster sites are already being made hideous by conflicting exaggerations which remind one of the old nuclear concept of MAD (mutually assured destruction); but there will not be a balance as there was in the nuclear concept.

The Conservative Party, I am told—it can be denied or alternative figures can be given if it wishes—has about £26 million available. We, my noble friends and I, and our cohorts in the other place, have a fairly negligible sum. The Labour Party, I suppose, has somewhere in between. The £26 million we shall have to live with—we will live with—I think that the electorate, too, will know how to live with it. I am not suggesting that it should be banned, but we should know where it came from. I am perfectly certain that the bulk of it did not come from small rank-and-file subscriptions, not that I doubt for a moment that the Conservative Party is anxious to get as much additional money as it can from small sources. It even wrote to my wife yesterday asking for £20.

Dr. Mawhinney did so himself, or so he purported to do, and with that mixture of the inaccurate and the maladroit which so characterises his style, he addressed her as "Ms M. Jenkins". He said that the Labour Party would say anything to get a vote. It seems that he will approach anyone to get £20.

The Lord Privy Seal (Viscount Cranborne)

My Lords, I take that as rather commendable evidence of my right honourable friend's support of the classless society.

Lord Jenkins of Hillhead

My Lords, how does the right honourable gentleman Dr. Mawhinney normally address the noble Viscount?

Viscount Cranborne

My Lords, I think that it would be impertinent of me, and perhaps indiscreet, to give any indication whatsoever to the noble Lord and to the House of some of the more impertinent forms of address which the chairman of my party calls me. I plead the need for privacy in some matters.

Lord Jenkins of Hillhead

On envelopes, my Lords, does he use these impertinent and derogatory terms? I think that in general Dr. Mawhinney is a good deal more interested in gifts of £20,000 and £200,000 than of £20.

I do not want to stop anyone subscribing, but I want it to be done openly. Nor, may I say, am I in any way obsessively necessarily keen on an elaborate system of state financing of political parties, which was a hobby horse upon which a number of noble Lords opposite rode off on the occasion of our previous debate. I do not want, as it were, to write the rigidities of party politics into our constitutional arrangements or to encourage party machines to get even more above themselves than they already are. Parties are useful, necessary instruments, but they are not tabernacles and should not be treated as such. If they are allowed too much of their head they make monkeys of us all.

Now, my Lords, what form should the inquiry take? I at first thought that the Nolan Committee itself should perform the task. But the noble and learned Lord, Lord Nolan, has been kind enough to inform me that, while he sticks firmly to his stated view that party financing needs inquiry, his committee is fully committed until his three-year remit comes to an end in October this year.

I am therefore open-minded about the exact form of the inquiry, except that I am sure that a Select Committee of the House of Commons will not do. It never has, from the Marconi case onwards, whenever an issue has been one of direct party conflict. That was overwhelmingly true of the 1994 Select Committee which split down the middle on strict party lines and every issue for decision was carried only by the casting vote of the chairman. A repeat of that would serve little purpose. But it could either be a successor to Nolan, or an ad hoc inquiry, or even a full-scale Royal Commission.

It ought to be worked out and agreed between the parties. There is a lot to be said for as much consensus as possible. But I do beg the Government and the Conservative Party not just to dig in on untenable ground. It will not work in the long or even the medium run and on the way it will further discredit the already battered reputation of politics. I beg to move.

3.21 p.m.

Lord Laing of Dunphail

My Lords, I wish to congratulate the noble Lord, Lord Jenkins, on his amusing and witty introduction and to thank him for bringing forward the Motion. With the greatest respect, I hope that it gives your Lordships opportunity to bury the thought once and for all.

In speaking against the Motion, I do so with some experience of the present system, having been treasurer of my party for the five years to 1993. For this Motion to be put forward indicates that there is uninformed concern, but nevertheless concern, that the present system is flawed. Suggestions have been made in the media and elsewhere that because some individuals give large sums to political parties, some anonymously, there must be an element of sleaze or unfair advantage being sought. Company giving, of course, is overt, and that is surely up to shareholders.

I can state quite categorically that during the five years when I was treasurer, notwithstanding that quite large sums were involved, not one person—not one—asked me to try to secure for him or her any preferment or privilege. Some who gave, subsequently received recognition not necessarily for their political giving but for what they had done in their public lives. After all, it would be a strange system in which giving to a political party precluded one from receiving recognition for other public works. On the other hand, others who gave, some quite substantially, received no recognition.

I believe that much of the money that came to the party centrally—and I am talking about money which came to the party centrally—came because of the record of various governments in office and because of the fear of very high tax rates being imposed if the party lost an election. That is a perfectly legitimate thought and reason. In answer to a point which was made by the noble Lord, perhaps I may say that, in percentage terms, only a very tiny amount came anonymously, and came from people who liked giving anonymously, whether it be the Church or charities because that is what they believed.

I can think that three substantive reasons for referring this matter to the Committee on Standards in Public Life, or to any other committee, would be because of evidence of corruption or advantage; that public funds should be used to fund parties; and to investigate overseas giving. As I have just said, I had and have no evidence of corruption or preferment. I respect the right of people to give anonymously if they choose; it is another freedom. For public funds to be used would seem to me to be a fundamental error—and it has been suggested—putting bureaucracy in the place of democracy. It would take away yet another right of individuals to think for themselves and to apply their money as they see best for themselves and, in their eyes, for the country.

As regards overseas giving—

Lord Wallace of Saltaire

My Lords, is the noble Lord equally convinced that trade unions, when they give money to the Labour Party, do not wish for anything in return? It has for many years been the Conservatives' allegation that unions are buying influence through giving money and, indeed, the Conservatives have insisted on strictly regulating that. Can the noble Lord explain the precise difference between those two activities of giving money?

Lord Laing of Dunphail

My Lords, I have no definite reason for knowing why the trade unions give to any political party.

As regards overseas giving, we have gone out of our way to attract and have been extremely successful in attracting billions of pounds in inward capital investment, which has been very good for our economy and recognised as such. It therefore seems quite rational to me for companies or individuals who invest here to have the right to back the party or government whose policies are likely to give them the best return on that investment. Surely the Committee on Standards in Public Life, or possibly any other committee, has more important matters to look into than this matter, which is in a perfectly healthy state.

3.27 p.m.

Baroness Gould of Potternewton

My Lords, I rise to support the noble Lord, Lord Jenkins, and to thank him for raising this very important issue. I support the Motion because it is in line with the declared commitment of the Labour Party that in government the question of funding of political parties, including state funding, will be referred to the Committee on Standards in Public Life or to some other appropriate committee.

The continual refusal by the Prime Minister to take such action can lead only to the inevitable question: why not? What has the governing party got to hide? The wall of secrecy that surrounds the funding of the Conservative Party makes it inevitable that it should be singled out for particular scrutiny. Indeed, it has singled itself out. The Conservative Manifesto at the last election stated that: we will be less secretive about the workings of government". Surely, the same principle should apply to the workings of the party of government.

It is not axiomatic that good government requires the existence of political parties, but it is difficult to conceive any change, at least in the near future, in our political system. If we believe that democracy depends crucially on the vitality and the integrity of political parties, the principle of transparency in the financial affairs of politicians and political parties should automatically follow.

There is a powerful democratic case for the financial affairs of political parties to be open to public inspection. A representative democracy cannot function without political parties, and political parties cannot survive without money. Political parties are vehicles for social and political action and people who want to effect political change will express their support for parties not just in votes and in voluntary effort but by giving money. Political donations have now become very important and it is a pity that they have become such a controversial part of our political life. The law cannot alter that; nor should it attempt to do so. It can determine, however, whether the process is transparent and accountable or concealed and corrupt.

There has been a long historical struggle for fairness and equity in our electoral process, be it by extending the franchise or in the financing of elections. From the earliest days of the universal franchise, it was seen as an essential principle of a democracy that economic power should not be able to buy political power. The passing of the Secret Ballot Act 1872 protected voters from intimidation but made no attempt to deal with the question of bribery. And with the removal of intimidation, in the election of 1880, bribery came to the fore when it is estimated that at current prices, candidates spent more than £114 million to bribe the electorate to vote for them.

As a consequence, it was felt necessary to curb the spending of candidates by the introduction of the Corrupt and Illegal Practices Prevention Act. That Act still remains the basis of our election law, at least at constituency level. But the main failing of the Act was that it referred only to expenses incurred by: a candidate or his election agent". It took no account of political parties, mainly because they scarcely existed outside the constituency and the parliamentary caucus, and there was certainly no concept of national campaigning.

In that 100 years, the law has never been amended. There is still a free-for-all when it comes to national spending by political parties. No legislative framework has been established to regulate their financial affairs; no legal obligation to publish accounts; no law requiring disclosure of donors, be they individuals or companies; no restrictions on money from abroad; and no determination of a maximum for election expenses.

It is that vacuum of legal principle which has led to the general level of public disquiet about the financial affairs of political parties and given rise to important proposals for reform, reforms that are supported in principle by all the political parties bar the governing party, and by independent committees of inquiry such as the Hansard Society.

It was a pity that the Home Office Select Committee, no doubt for political reasons, in 1994 failed to take the opportunity to look at reform. It produced a code of conduct on which the Government have relied heavily in justification of their non-action, but that fails absolutely to deal with the real issues of public disquiet, the lack of financial disclosure, donations from abroad and the need for democratisation of company donations.

All those points are dealt with in the Labour Party's legislative proposals to clean up political funding. Every political party will have to declare the source of donations of more than £5,000. No company will make a political donation without first balloting to set up a political fund, with shareholders having the right to opt out. And no party shall accept donations from foreign sources.

It would clearly be an unwarranted intrusion into individual privacy to argue that every financial contribution to a political party is made public. Demands for disclosure do not refer to small contributions to party funds, but there must come a point on the scale where the concern for individual privacy gives way to a concern about influence and secrecy. The Labour Party puts that disclosure limit at £5,000 but, whatever the limit, the legislation must be watertight and must apply not only to donations but also to loans, collateral and the money value of gifts, advertising or sponsorship. Would that not be consistent with the existing principle and practice of MPs having to declare their financial interests?

We shall no doubt be asked to believe, in our naivety, that the £40 million to £50 million which the Conservatives have raised over the last three years has in the main come from summer fetes and wine and cheese parties. I only wish that I could have raised that sort of money from the events which I organised. But in reality, the Conservative Party has always relied on substantial donations from commercial companies and wealthy industrialists. It is not the giving of such donations which is wrong; it is the method of their receipt and the lack of public declaration that raises concern. As the noble Lord, Lord Jenkins of Hillhead, said, we need to know from where the money comes.

Following the revelation last year of the Tory fund-raising Premier Club, the Prime Minister insisted that no one can buy access to Ministers and that no one can buy favours. But suspicion will remain wherever there is reliance on secret financial gifts and fund-raising activities which are not open to public scrutiny. In spite of the comments of the noble Lord, Lord Laing of Dunphail, it allows for the widespread perception that there is a connection between financial contributions to Conservative Party funds and the award of honours.

Again, I am sure that we shall be told that the responsibility for honours is that of the Political Honours Scrutiny Committee. However, I would refer your Lordships' House to the words of Lord Shackleton, a former chairman of the committee, in the Observer when he said: There is an obvious gap here. It is highly likely that secret donations are by-passing the scrutiny system and that honours are effectively being bought". Of equal concern must be the allegation that the Premier Club had been advising its members to conceal their political donations in company accounts as entertainment, even though the members were told that the money, possibly up to £100,000, would go to Conservative Party funds. That must be in contravention of the Companies Act which states that: companies must declare direct or indirect donations in their Annual Accounts". The eminent commercial lawyer, Robin Potts, in the Observer on 21st July said—and I paraphrase—'it is plainly the indirect making of a contribution; it seems to me to be plainly wrong'.

Equally, the issue raised by foreign donations is not only ethical but constitutional. Why should people who are not entitled to vote in a UK election be entitled to influence its outcome? At the last election the Conservative Party apparently received £7 million in overseas donations. Although the noble Lord, Lord McAlpine, has stated on the record that that money was paid to the Conservative Party through "tons" of offshore and overseas accounts, none of that information is in the public domain. That is another aspect of the mystery which surrounds the financing of the governing party.

In 1989 your Lordships' House carried an amendment to the Companies Act requiring that donations for political purposes should be proposed at annual general meetings of companies. In the other place, the Government rejected that amendment as they opposed also the draft legislation Political Parties (Income and Expenditure) Bill. That freedom of companies, so stoutly defended by Conservative MPs, stands in stark contrast to the battery of legislative restrictions on trade union contributions to the Labour Party.

Company donations are subject to no such restrictions. There is no political fund; there is no reference to shareholders; there is no ballot; there is no opt-out facility; and the donations are not recorded in Tory Party accounts.

If time allowed, one could also explore the question of offshore accounts, donations to privatised utilities, the alleged role of Ministers as fundraisers or the alleged use of Downing Street for fund-raising events. All of those issues on the way in which the governing party raises money need to be addressed and until they are, there will continue to be suspicions and unfounded allegations about improper influences operating in public life which damage overall the public credibility of the political and electoral system in the eyes of the voters. That will be removed only by new legislation based on an open and frank examination of party financing.

3.38 p.m.

Lord Holme of Cheltenham

My Lords, it is probably very dangerous to try to cap one's leader's funny stories. However, on to my doormat yesterday fell a white envelope with very striking blue ink addressed to me from the right honourable John Major. Of course, I was curious to receive that letter. It was soliciting my support. But the noble Viscount's explanation of why that skilfully targeted direct mail campaign had been sent to me personally was that the envelope was addressed to Mr. Holme. No doubt it was in pursuit of the classless society which the noble Viscount mentioned earlier.

Of course, that is an extremely sensitive issue everywhere, not just in Britain. This is an issue with which every democratic society must grapple. It is not in some way unique to us or a special British cross that we have to bear. In every democratic country, people want to scrutinise the relationship between money and political parties. That is quite natural and healthy. One way of attempting to do this, which may be doomed because we are close to a general election when partisan spirits rise high, is in terms of what the public interest would suggest rather than the partisan interest. If I may, I shall try to do so for a few minutes and I shall start by trying to define the nature of the issue.

I do not believe that the issue is how the political parties can get hold of more money. That may sound odd coming from a spokesman for one of the poorer parties, but I do not believe that that is the issue. The issue is, first, one of the good name and reputation of the political and parliamentary system; and, secondly, it is an issue of how we encourage participation in our politics, rather than further extending the alienation which has now become a problem in Britain. If we cannot define the public interest in the House of Lords, I do not quite know where we can.

There is probably a third public interest issue; namely, how do we deny special access to institutions and people with a great deal of money which would trump the access of the ordinary citizen? If we live in a civic democracy, the first requirement is that each citizen should not only be equal under the law but also feel that he or she has equal access to the political process. If that equal access is interfered with by large institutions, not claiming preferment—and I entirely accept what the noble Lord, Lord Laing, said—but seeking special access through their donations, that is at someone's expense. It is at the expense of the ordinary citizen, the ordinary voter, who is denied the very same access.

Therefore, rather than taking a view of the question of party funds—that is, if it is to be referred to the noble and learned Lord, Lord Nolan—based on the late Wilfred Pickles' notion of "Give 'em the money", or "Let's have some state funding", I should like to suggest another way of speaking about it. I do not believe that we should discuss it that way.

Let us start with the demand side of the equation. For example, why do parties want money and what do they want it for? Of course, there are perfectly proper purposes for which parties need money: they need money for research; they need money to sustain their organisations; they need money to fight elections; and they need money to help them work with public opinion and express it.

However, I wonder whether the public interest is served by massive expenditure on poster advertising of the type that we see at present. How can it be in the public interest to have floods of red crocodile tears pouring on to the streets of Britain because one party or another chooses to spend millions of pounds on poster advertising? I can recommend to your Lordships a book by Mr. Rodney Tyler about the 1987 campaign. He described a great row in the Conservative Party about the last half million pounds that it decided to spend on advertising in that campaign. He concluded that everyone concerned agreed that the last half million pounds was wasted. It may well be that all this political poster advertising is wasted. But if it is, it is at the expense of very great public irritation with its effect on the tone and level of political discourse in Britain. Do parties need to fight general elections, and the run up to them, as if they were engaged in the competitive marketing of, say, soap powder or baked beans?

I suggest that one of the issues that the noble and learned Lord, Lord Nolan, might consider is the question of limits on national expenditure at general elections. In the last years of the last century limits were introduced on constituency expenditure. Noble Lords will recall the Eatanswill by-election in the Pickwick Papers with the gross spectacle of money spent to buy votes in constituencies. That was unacceptable and was stopped. Now we live in a media world and elections have moved on. We all know that the general election takes place as much nationally as in the constituencies. Does not the same logic apply? Should there not be limits on national expenditure? I do not ask that from a self-interested Liberal Democrat point of view; indeed, I accept that the limits might be very much higher than my party is able to spend.

However, it is not right that there should be no limit whatever on plutocracy in the pursuit of votes. There should be a limit, and it could be a sensible one upon which I believe the parties could find agreement. It would force the parties to do what they should do in any event—namely, to think harder about how to address the electorate rather than simply overwhelming them with quasi-commercial propaganda. Some people object to that modest proposal by saying, "Yes, but the parties would simply start advertising in advance of the election", just as they are doing now. That situation could be caught quite easily. You could catch governments up to clever tricks about the date of the election by saying that all expenditure for three months before the general election would be caught by those limits. Therefore, any party which chose to start its advertising early would simply find that it had less to spend during the election. Therefore, clever games with the date of the election would not serve at all.

I believe that there is something to be done on the demand side of the equation rather than automatically assuming that the more money that is around for the parties the better. However, on the supply side of the equation, I very much accept the point made by the former treasurer of the Conservative Party about personal probity not only on his part but also in the motives of those who gave. There is no point in implying otherwise. However, I question the latter part of his proposition and would ask him whether he is really satisfied that it is a freedom not to declare that.

Just as every business would declare its source and use of funds in its accounts, I believe that it would be entirely appropriate for parties to declare their sources and use of funds. Why should parties occupy a special place in the law that clubs, associations, and companies certainly do not occupy? Why should they not be required to disclose the names of their donors? If people then decided in those circumstances that they did not want to give, that would be their decision. But if they are proud of the party that they support, why should they not be prepared to come out in public and say, "We support them". I do not think that one would have to take that down to very small donations but, let us say, every donation of £5,000 and above might be declared.

The second aspect to which I have already referred is the transparency and publication of full accounts. I think that there is a particular problem with the party opposite in that respect because, historically, there is not quite an entity that you can get hold of called "the Conservative Party". If I understand correctly, there is the national union, the parliamentary party and the leader of the party, but the Conservative Party itself is almost a metaphysical concept and does not correspond to a legal entity that is easy to nail down. I see that the noble Baroness sitting opposite, who knows a great deal about these things, is nodding her head, so that must be the case.

I should like to suggest that it would be a good start and quite a good idea if the Conservative Party, like any club or association which wants to carry on trade and pursue its humble objectives, were to exist legally. Then we could say to it, "Well, why don't you publish your accounts and let us know where the money comes from?" I know that there is an admirable group in the Conservative Party—namely, the Conservative Reform Group—which seeks to do precisely that. It seeks to encourage its fellow Conservative Party members to publish full accounts like any other responsible body.

The third question on the supply side of the equation is the desirability of having more small supporters; that is to say, more real people getting engaged in the political process rather than it simply being large institutions which pay the piper. That bears on the criteria of participation, of enthusiasm and of voluntarism upon which civic society depends. That would be a great thing. Indeed, in Canada small donations are encouraged by having a matching tax break for such donations. Therefore, if you wanted to have state funding into parties, that would be a way to do it. You could match small contributions by a matching contribution from the taxman and, in that way, you would encourage people in what all parties depend upon—people's private and enthusiastic activity.

In brief, on the supply side I would say that undeclared donations, overseas donations and very large donations must all at least see the light of day. I personally suggest that it is inappropriate for people who do not live and vote in this country to contribute to the British political process. That is also something that the noble and learned Lord, Lord Nolan, could consider if he is charged with looking into the matter.

In summary, therefore, I think desirable features of a reformed political financing system would not depend on vast state handouts but on economy and frugality on the part of the parties; transparency in the system so we could all understand what was going on; and a greater reliance on the donations of private individuals and less dependence on large scale institutions to finance the political system.

3.50 p.m.

Lord Campbell of Alloway

My Lords, it is a pleasure to follow the noble Lord and at last to know what I am: I am a member of a metaphysical body and that gives me tremendous fortitude to address your Lordships' House.

The noble Lord was dealing with matters really beyond the Motion. As I am about to be critical of the Motion, I, with respect, draw attention to the fact that we are concerned with the funding of political parties but not with the limits of expenditure of political parties, although that is another matter which might be considered.

My noble friend Lord Laing of Dunphail rightly suggested that the only reason for a reference, as proposed by this Motion, could be the issues of secrecy, disclosure and transparency, which are all issues of great importance leading up to the election. But, as my noble friend suggested, there really has to be concern that the present system is flawed, and that is not so. There has to be evidence of corruption or preferment. There is no such evidence. So what is the object of this exercise? Assuredly this is not an appropriate occasion on which to consider suggestions as to misconduct of any political party in the context of funding. No allegation may be substantiated, answered or fairly decided within the compass of this debate.

To refer to the Premier Club or to the Institute of Public Policy Research as a new front for Labour, or to refer to certain other matters such as the arcane financial relationships between the Labour Party and the trade unions is quite beside the point. There is therefore mere suggestion, mere assertion, no evidence, no firm basis on which your Lordships are invited to refer this question to the Nolan Committee—I see the noble and learned Lord is present—which the noble and learned Lord has wisely declined to entertain before the election. At all events to make a sane, quasi judicial decision in a committee of that kind, one needs time, patience and a considerable amount of care.

Much may be said about the suggestion in the Motion that this should be referred to some other body. What worries me is not that we should debate and discuss—that is fair enough and is usually beneficial—but that we have a resolution to seek in effect to enjoin the Prime Minister to refer this question. It is not only premature; it is utterly pointless. To what profit or purpose are we so to resolve and divide? The hope is that we may as usual follow the Wednesday custom to discuss, debate and then move for the withdrawal of Papers and that we may not be asked to divide. Surely this is not the occasion on which to depart from convention and establish an unwelcome precedent—a departure from a convention which could well one day invite imposed reform.

Why should your Lordships be asked to indulge in this extraordinary exercise? It would seem—I may be wrong—that it is because of something that was said by Dr. Brian Mawhinney last November concerning openness about the sources of opposition funding which touched a raw nerve, as inevitably it would. This appears from the correspondence to which I shall refer but not quote verbatim. A letter was written on 20th November by the Leader of the Labour Party, the Leader of the Liberal Democrats and various other opposition parties to my right honourable friend the Prime Minister. They referred to Dr. Mawhinney's remarks. The suggestion to the Prime Minister was that he would remove his objection to the Nolan Committee investigating party funding and that if the Prime Minister did not agree they would assume that he believed there was something to hide over the sources of Tory funding.

My right honourable friend replied in substance on 22nd November suggesting that Dr. Mawhinney had been misunderstood, there was a certain amount of hypocrisy on the part of the Labour Party, and that it had apparently been forgotten that these matters had already been investigated by the Home Affairs Select Committee in 1994, which set down the guidelines that parties should not accept money with strings attached. He referred to the receipts of the Labour Party from the trade unions—more than half the party's income—in return for 50 per cent. of the votes at the annual conference. Then reference was made to the position of the party which I support.

These matters seem to have been, or may have been the reason why this matter has been brought before us today. In the final paragraph it was suggested that this request was an attempt to pave the way for the state funding of political parties. To be perfectly fair, the noble Lord, Lord Jenkins of Hillhead, made no reference at all to state funding. I know not whether that is in any sense involved in this debate.

Lord Jenkins of Hillhead

My Lords, I fear the noble Lord cannot have been listening. I had a paragraph on state funding.

Lord Campbell of Alloway

My Lords, I was listening but I do not hear as well as I should. If we are dealing with state funding, the position seems to be that the Home Affairs Committee—at paragraph 2, as the noble Lord knows—did not think it should be extended beyond the confines of current legislation. Without boring your Lordships because your Lordships will know this, I merely refer to paragraph 15 of the summary of conclusions which refers to the recommended code of conduct which covers the situation and which, I understand, has not been breached. With respect, it is well understood that the noble Lord, Lord Jenkins of Hillhead, would wish to break the mould of a predominantly two-party system and introduce an amalgam of state funding and PR akin to that adopted—

Lord Jenkins of Hillhead

My Lords, I sympathise that the noble Lord could not hear, but I said at some length that I was not in favour of state funding, and gave my reasons.

Lord Campbell of Alloway

My Lords, again I misheard the noble Lord. I can only apologise. If we are not concerned with state funding, I can conclude. The Motion in terms raises no allegation of misconduct as regards funding. If there is some allegation, let it be dealt with. Let it be investigated by some independent body. Perhaps the noble Lord, Lord Jenkins of Hillhead, for some reason that I do not understand—but then I would not—considers that the Home Affairs Select Committee of another place is not appropriate. It seems to me that it would be. What is important is that on this occasion we should not have to divide and resolve because that serves no useful purpose and, as I have suggested, could create a most unwelcome precedent.

4.2 p.m.

Lord Whitty

My Lords, this is the first occasion—it may well be the only one—when I rise in this House feeling confident that I am somewhat more informed on this area of policy than many other noble Lords. For many years I was General Secretary of the Labour Party which, although not a metaphysical entity, was until relatively recently quite innocent of the grubbier aspects of fund-raising. During my time we increased the Labour Party's income from £4.5 million to £16 million and at the same time shifted away from a heavy dependence on trade union finance to one which is much less than the 50 per cent. which was quoted.

I am one of the strongest defenders of the links of the Labour Party with the trade unions. However, I believe that the pre-existing dependency to the tune of 90 per cent. of income was unhealthy for both trade unions and the party. We need, therefore, a more sophisticated across the board approach to political funding. I am also conscious that this is the second time in five days that I have supported a Liberal Democrat Motion. I hope that that will not extend paranoia on the opposing Benches. I believe that men and women of good will of all parties recognise that central to the issue is integrity of politics and the way in which politics are seen by the electorate.

There is deep concern among the public about political finances. We all know that the level of corruption in this country is relatively small compared with America, Japan or Italy. But it is there; it is believed to be there, and believed to be growing by the bulk of the electorate. The electorate is aware of the massive sums, for example, given to the Conservative Party by Asil Nadir. The electorate is aware of the "Cash for Questions" scam, foolish and petty though it may be. For many years there have been accusations about the Tory Party's reliance on big business, and the Labour Party's reliance on trade unions. We now have Sir James Goldsmith establishing his own Referendum Party, financed personally at a reported cost of £20 million—more than either of the major parties spent in the last general election. It may be welcome to many of us that Sir James seems to be wasting that money and looks like achieving an outcome that is no better and probably rather worse than his son-in-law achieved recently in Pakistan. But the fact remains that if the Referendum Party were to achieve even a fraction of its aims, it would affect not only the outcome of the general election but of Britain's relationship with Europe.

There was a thorough examination in 1993 by the Home Affairs Select Committee of another place. Unfortunately, the main conclusions of that report split on party lines. I believe that the committee of the noble and learned Lord, Lord Nolan, or some arm's length and independent body, is best and most respected in this area. On behalf of the Labour Party, I submitted to the committee a number of inter-related proposals. We dealt with state finance and political parties. I believe that that is part of the debate. But we also dealt with transparency and disclosure; the rules governing donations to political parties; and the issue of donations by non-British citizens and other overseas donations, as has been spelt out by my noble friend Lady Gould. We also dealt with the point raised by the noble Lord, Lord Holme, of limitations on electoral expenditure and tax treatment of political donations.

We were in favour of a package of reforms. We would be prepared to put much the same message to any other committee which considered the matter. Perhaps that committee will have recourse to report after the next general election but it should certainly report before the election after that. It is an area which needs clearing up. The present system is flawed; I disagree with the noble Lord, Lord Laing. Moreover, it is seen to be flawed by a large proportion of the electorate. Political parties are not charities. They are not church organisations. They are bodies which purport to run the apparatus of the state and are essential to the whole integrity of democracy in our society.

Contrary to what we have heard so far, I believe that many Conservatives recognise the damage done to the Conservative Party image and to democracy by secrecy and non-disclosure. For three or four years before the last election nothing was available in Conservative Party accounts or company accounts to explain from where about 50 per cent. of their finances had come. That is £21 million. It gradually slipped out where quite a lot of the money had come from. It was not from bazaars, garden parties, cheese and wine parties and home-made jam sales in the Home Counties, as we are sometimes led to believe by noble Lords opposite. It came from Greek shipowners, Hong Kong magnates and indeed from Asil Nadir. Those donations were not disclosed by the Tory Party. They were not disclosed in company accounts. In the case of Polly Peck they were almost certainly illegal.

On the other side of the equation, the relationship between the Labour Party and the trade unions may be controversial but I dispute that it is arcane. It is open and above board, and remains so. We believe that we can defend it. The Labour Party has always had in the public arena how much the trade unions give to the party. More recently we made it even clearer by putting it in a single figure. Not only trade union donations but any other donations over £10,000 now appear clearly listed in the Labour Party accounts. Can there be any real objection to a binding requirement on all parties that they do precisely the same? Any donations of over £5,000 or £10,000 should be listed and in the public arena. If the recipient party does not want to reveal how it is being financed, that donation should be refused. If the donor does not want it known that he or his institution is giving money, it should not be offered in the first place.

In some cases we are dealing with institutions which use other people's money. As my noble friend Lady Gould has already said, the rules governing that are somewhat lacking in equity. Trade unions are obliged to set up a separate political fund which they have to re-endorse every 10 years, and allow their members to opt out of, whereas companies do not have to go through such obligations. Some parity is surely required here.

I agree with the noble Lord, Lord Holme, as regards limitations on electoral expenditure. Possibly we are in an era when that will attract more support. Even so, the electoral extravaganza that we are about to face is nothing compared with American standards. Nonetheless, we have the bizarre situation where limitations on local expenditure constituency by constituency have been rigidly defined since the election of 1880 when effectively £140 million worth (in today's money) of bribes was running around. I think that I am right in saying that the Liberals won that election.

For a hundred years those rules have been applied. But there is no limit on national election expenditure. There are regulations in Canada, Scandinavia and certain other countries which would limit national expenditure. I believe that we should follow their lead on these matters.

As regards taxation, I am not in favour of blanket tax relief on political donations, but possible tax exemption for small donations should be examined. Preferably a different sort of approach should be adopted. In the United States, one dollar—which I understand is to be raised to five dollars—can be earmarked in tax returns for a particular political party or campaign. Surely £1 of everybody's income tax could be earmarked in a very small box on the tax form for donations to political parties.

Finally, there is the vexed question of state funding more generally. I do not want to go into it in great detail, but in Germany, Scandinavia, France, Italy, the United States, Canada and Australia, the case has been made for many years; and the new democracies of central and eastern Europe are following. They accept state funding as an essential feature of democracy. Democracy should not be valued less by the taxpayers of Britain than it is in those countries; and it would be complacent to believe that democracy is less fragile in Britain than it is in those countries.

I am not in favour of state subsidy for electoral expenses; that just encourages them. In any case, election time is a point in the electoral cycle where political parties find the ability to raise money most easily. However, I am concerned about the health of political parties throughout the electoral cycle and the health of parties, not just at the Westminster level but throughout the country.

Three years ago the Home Affairs Committee estimated that the total level of state funding in Germany was 200 million deutschmarks, and in the free-market United States, 77 million dollars. I do not advocate anything like that amount for this country. But if the recommendations of the committee chaired by the late lamented Lord Houghton of Sowerby 20 years ago were to be updated, the expenditure on state support of democracy through political parties would amount to £14 million a year.

That is not an enormous sum to pay for democracy. It would still require political parties to raise other moneys. However, it would ensure that parties could sustain their structure throughout the electoral cycle. I do not advocate that parties should receive state funding in the present circumstances. We should see this as a package. They should not receive taxpayers' money unless there is transparency as to the sources of funding, openness on how corporations and trade unions establish political donations, and some limitation on national campaign expenditure. Taken together, all those would reduce the temptation to seek undisclosed, potentially illegal and corrupt donations.

The good name of democracy is at stake. I am content to support the reference of all these issues to the Committee on Standards in Public Life, or any similar body which could undertake a thorough and, it is to be hoped, non-partisan approach to these issues.

4.12 p.m.

Earl Russell

My Lords, I listened with great enjoyment to the noble Lord, Lord Laing of Dunphail. He reminded me of the butler who, one Sunday morning, came to see his employer and opened with the words, "Madam, I was not found dead drunk in a ditch last night". The noble Lord denied a charge that had not been made. He said that of all the people with whom he had dealt who had given money, none had asked for privilege. I think the noble Lord knows that the world is not quite so simple. If the noble Lord were to order a taxi and ask the taxi driver to get him from here to Paddington within 15 minutes, it is unlikely that the taxi-driver would solicit a tip. However, I think the noble Lord would not be surprised if such a thought were not absent from the taxi-driver's mind.

I begin with a confession. I very much hope that my honourable friend Mrs. Maddock will still be prepared to speak to me tomorrow. Fortunately, she is one of the most generous people in politics. The confession goes back to the night of the Christchurch by-election. That was when Mr. Asil Nadir had lived—shall I say?—down to his name, and the tangled story of his financial relationship with the Conservative Party, into whose details I shall make no attempt to enter, was all over the newspapers. Going round the doorsteps on polling night, I was treated to such tirades of apocalyptic indignation about what was going on that even I, at 6 o'clock on polling night in a by-election that we were desperate to win, was moved to say, "I don't think it's really quite as bad as that". Having now proved myself to be no politician, I hope that I am perhaps none the worse a politician for that.

We must be concerned with the legitimacy of our political system. That night I heard that legitimacy called into question. If we care for our own parties, we must be concerned to believe that they are attempting to contribute to the national interest as we see it.

I offer that incident also as an answer to the noble Lord, Lord Campbell of Alloway, who said that there was no evidence of any public discontent. I will tell him also about when I first discovered, I think at the age of about 13 in 1950, that companies gave money to political parties. I experienced an utter sense of shock. I understand that people give money to political parties because they have beliefs. But, as the noble Lord, Lord Campbell of Alloway, knows, the corporation is a legal fiction. A corporation does not have a collective political will. So it immediately occurred to me as a 13 year-old schoolboy to ask: if they give money to parties, what do they get for it? If I could ask that question at 13, others can ask it too.

The noble Lord, Lord Campbell, said that there was no evidence of misconduct. In a case where our central complaint is about a lack of transparency, that must necessarily be so. He knows that if a court should sit unexpectedly in camera for no apparent reason, it will not be possible to make any specific allegation of misconduct in relation to the conduct of that court. But there will be a very profound doubt as to why that sitting was held in camera. The suspicion may well, as many suspicions are, be misplaced.

In the words of my honourable friend Mr. Maclennan in his submission to the committee chaired by the noble and learned Lord, Lord Nolan, we believe in rule by popular consent, not by private money. Noble Lords opposite may tell me that that aim is Utopian. In a sense it is. But so is the aim of government of the people, by the people, for the people. So is the undertaking to do justice. These are things at which we aim, and at which I hope we shall always continue to aim.

When we complain now, as many Members on the Benches opposite do, about a decline in public morals and diminishing honesty, and debate the Bill dealing with social security fraud, which arrived in this House a little less than an hour ago and about which I hope to say more on another occasion, we should reflect that what we do, preach and even threaten matters a great deal less than the example that we set and indeed, even more, the example that we are supposed to be setting. If, when dealing with people perpetrating benefit fraud, we find that they believe, like the voters of Christchurch, that "they are all on the fiddle", we may legislate until we are blue in the face and we shall not stop it.

We need to consider what impression we give to the public at large. The sense that a suspicion of corruption may de-legitimate a government has been expressed in other contexts. One of my academic colleagues, an American friend of some 30 years' standing, wrote a lengthy book on corruption in the reign of King James VI and I, arguing that that so de-legitimated the government that it brought the Civil War a great deal nearer. I say to her what I said to the voters at Christchurch: I do not think it is quite as bad as that. But there is a case to answer.

The power of patronage, the power of money, in the history of English and of British politics has been a matter of complaint for a very long time. One need only look, for example, at the work of Henry Bolingbroke. What is new is the point where the tide of money is lapping against our defences. It used to be government corrupting individual MPs; now the party system makes that exercise of spending very largely unnecessary; now the key instrument is the party.

My noble friend Lord Holme of Cheltenham said that it was dangerous to attempt to cap one's leader. It is perhaps doubly dangerous to attempt to cap one's leader and one's campaign director both together. However, I cannot resist quoting the Conservative Party's target letter to pensioners during the 1992 election: Now that you have retired, now that you are no longer working, now that you have time on your hands, you might begin to think of taking an interest in the Conservative Party". That letter was delivered to Mr. and Mrs. D. Thatcher of Dulwich. I have not heard of any reply; I should be interested to do so.

As is often said, the power of party has increased quite remarkably. We are in many ways moving towards a presidential system of government and therefore the importance of strengthening a party appears to many people to be great.

In addition, we easily forget how much more expensive the process of electioneering has become in our own lifetime. The first election of which I have serious memory is the election of 1945, when I was eight. That election was conducted almost entirely by word of mouth and shoe leather. One conducted it by meeting voters and talking to them. In the past voters came to meet us. Indeed, I can remember in rural constituencies real political meetings with real floating voters as late as 1966. Such meetings hardly ever happen now. We have so many more voters and one does not reach them that way. One needs to reach voters collectively and en masse. That is why electronic techniques of electioneering, and particularly television, which we did not have in any real way in 1945, have become far more important than they ever were. That is why the comparative importance of money in electioneering is far greater than it has ever been at any time in our memory or indeed in recorded history.

We live, as King James VI and I also did, at a time of rapid disposal of state assets. There are thus a great many situations in which one may ask, when an asset is disposed of for less than its value, whether there is a quid pro quo. I have asked myself precisely that question on a number of occasions in the course of my own business in this Chamber. I have never raised it in public because I have never known whether my suspicions were justified. I know perfectly well that of 10 suspicions probably only one will be well founded, and I will have no idea which one that may be. But, because I ask the question, a rot of doubt is set at work in my mind which means that I have less sense than I would otherwise have of the legitimacy of what is being done. I believe that any party, at any time, is unwise to leave itself open to such a suspicion. Transparency is a virtue which has a great deal to recommend it.

4.24 p.m.

Lord Beaverbrook

My Lords, I should perhaps declare an interest, although it is now much diminished. I was deputy treasurer of the Conservative Party from 1988 to 1990 and treasurer from 1990 to 1992 with my noble friend Lord Laing. I do a bit of fund-raising now from time to time and I shall perhaps do some more in the future. I have been responsible for the raising of very substantial sums for the Conservative Party.

I am grateful to the noble Lord, Lord Jenkins, for whom I have the highest regard, for initiating this debate on an extremely important subject and one on which your Lordships' House can take a more objective view than is possible in another place.

I am sure my noble friend Lord Laing will agree that, contrary to popular perception, however much we raised for the Conservative Party it never seemed to be enough. The ever increasing cost of running the central organisation of a major political party tends to mean that whatever one raises has already been spent. I am sure that that applies both to the Labour Party and the Liberal Democrat Party, though possibly not to the Referendum Party. The noble Lord, Lord McAlpine, who is not in his seat today—I am not even sure where his seat would be—said to me the other day, "Having worked for 20 years for a party with no money and lots of policies, it is rather interesting to be in one with lots of money and no policies."

I did a back-of-the-envelope calculation this morning as to what it costs to fight a general election. The Conservative Party has more than 600 constituency associations, costing an average of, let us say, £25,000 a year. That comes to £75 million over the life of a parliament. If you add central costs of £75 million per annum, that is £100 million over five years, making a grand total of some £175 million. The Labour Party can probably do the same sums with, I would guess, similar results. It is not just a phenomenon of the Tory party.

The lesson is that democracy is an expensive business. So far business and the trade unions have carried a substantial share of that expense. I know that noble Lords opposite would love to meddle with the funds available to the Conservative Party—but for spurious reasons. Today's Motion is no high-minded suggestion for the public good. It is an attempt to insinuate that a problem exists when it most certainly does not. By suggesting that political funding is a matter for the Committee on Standards in Public Life, the noble Lord, Lord Jenkins, implies that shortcomings exist. They do not. No political party accepts money which it knows is tainted. To do so would create a time bomb. If it goes off, it has quite the opposite effect to gaining more votes.

Lord Wallace of Saltaire

My Lords, I fully accept that no political party would accept money if it knew it was tainted. What does the noble Lord think a political party should do if it discovers that money which it has received is tainted?

Lord Beaverbrook

My Lords, I was just coming to that point. By the law of averages there will be the occasional bad apple that goes undetected or turns bad subsequently. Under those circumstances any political party has to consider whether it wishes to return the money. That decision must be made in the light of the popularity that it will lose or gain as a result of its decision.

Tory donors support the Conservative Party because they believe in Conservative policies in the broadest sense. Labour donors support their general policies, I do not doubt. It is a fundamental part of the political party treasurer's job to weed out and fend off any attempt at undue or wrongful influence before it comes anywhere near the political hierarchy of the party.

Having met thousands of Tory supporters, I have only once been approached with an improper suggestion. My noble friend Lord Laing said that he was never approached; perhaps I was thought to be more of a pushover. That one occasion was one too many and is precisely why in the Tory party we rigorously separate the treasurer's department from the chairman's department. The controls are already there. Self-regulation is self-interest, and it works.

Noble Lords have mentioned disclosure. It already exists. Company donations have by law to be made public; that has already been stated today. Private individuals are another matter. We are all free to spend our personal money as we wish. The principle of the secret ballot must be paramount. I have profound doubts that the individual's right to confidentiality over his or her political intentions should be compromised by compulsory disclosure of personal political financial support. The interests of democracy are not well served by such suggestions.

The noble Baroness, Lady Gould, quoted certain remarks of the noble Lord, Lord McAlpine, about foreign donations to the Conservative Party at the last election. I do not know from where those remarks could possibly have come. The noble Lord, Lord McAlpine, retired as treasurer in 1990 and certainly was not privy to the working of the treasurer's department at the 1992 election.

Personally, I have had a growing interest in state funding of political parties' central organisations. That may not find great favour with my noble friend on the Front Bench. I assure him that I shall not alarm him unduly, but I know that it interested the Labour Party. Some years ago we had informal discussions. At first glance and at headline level, state funding seems to have certain attractions. Certainly, the job of party treasurer would be less onerous and governments would be less open to criticism of partisan interest. There are many broad arguments in favour and I shall not bore the House with them today. As always, the problem is in the detail. I could see no end to wrangling over the fine print.

More importantly, however, I have grave doubt about the appetite of the taxpayer for another £100 million or so of public expenditure every year. I have even greater doubt that the leadership of either the Conservative or the Labour parties would dare make such a suggestion.

I have mentioned the cost of running a major political party today. It has risen enormously over the past two decades. The noble Earl, Lord Russell, made that very point. It has risen not just because of inflation, European elections or higher profile campaigns for local elections and by-elections but because of competition between the parties—tit for tat advertising campaigns, for example. Escalation is rife. Does not my noble friend think that it is time for the parties to discuss between themselves some kind of limit by agreement? As noble Lords have said, there are statutory limits to expense at local level with which no one seems to argue, although I do not follow the noble Lord, Lord Holme of Cheltenham, quite so far as to suggest statutory limits for central expenditure by political parties. But we do not need to involve the committee of the noble and learned Lord, Lord Nolan, or some yet to be created body. We need a dialogue, perhaps when the current political temperature has receded.

I suggest that we reject today's Motion. It is partisan, implying that Tory fund raising is somehow tainted. It was not in my day, and it is not today. The party of the noble Lord, Lord Jenkins, may indeed envy the success of Tory fund raising but perhaps it should look no further than its party's policies to see why that party cannot emulate it. I welcome the debate but I sincerely hope that the House will reject the Motion if it is pressed.

Lord Richard

My Lords, before the noble Lord sits down can he confirm that I heard him aright? Did he say that whether or not money which is discovered to be tainted should be given back should depend upon the popularity or unpopularity of giving it back? Is he saying that that is the basis of his party's policy?

Lord Beaverbrook

My Lords, I said that money, if it is proven to be tainted, in my view should definitely be returned. That is what I believe I said. On the other hand, often insinuations fly around as to whether or not money is tainted. Under those circumstances I believe that it is up to the party involved. If it wishes to hang on to the money and does so, it will find that the electorate takes a dim view of such action.

Lord Richard

What, my Lords, has popularity to do with it?

Lord Beaverbrook

My Lords, the point of raising money for political parties is presumably to be able to afford to spend money on campaigns to get more votes. If that money turns out to be tainted, it will have the opposite effect to getting more votes.

4.35 p.m.

Lord Desai

My Lords, not for the first time I find myself in a somewhat curious position. I do not know whether it is due to age, coming to this Chamber or something more temporary, but I have become very sceptical about many of the speeches that I have heard this afternoon.

I agree with the noble Lord, Lord Jenkins, that we should have transparency. There should be transparency about what political parties as public bodies receive. There should also be legislation about transparency on what companies do just as on what trade unions do. But beyond that, I find it hard to go along with many of the other remarks made today. As I feel I am in possible danger of being thought totally cynical, let me try to explain what I mean.

My noble friend Lady Gould said—the figure she gave was quite startling—that £114 million in today's terms was spent in 1872. If that is the case, politics today is much less corrupt. In terms of sheer numbers, the electorate was a fraction of the size that it is today, people were less active and things were less expensive. So I do not feel that we can say that over the years politics has become more corrupt.

I shall come to the point of my objection. I want to pinpoint the matter. My noble friend Lord Bruce looks very startled. Perhaps I should yield to him and sit down if he would like to ask me a question about it. But the per capita expenditure in terms of the £114 million in 1872, was much more than it is today with 44 million adults on the electoral roll.

I do not believe that there should be a limit on what political parties should spend. There is always the unintended consequence of human action and one must never bind oneself against that. Once one does so, one has to decide about indexing, what counts as expenditure and so on.

Let me ask one question: what is the real objection to money? It seems to me that the real objection to money is that it is thought that people buy elections. I do not believe that there is any proof of that. It may have been possible in 1872, in a small constituency. We read about it in novels—a hundred voters are wined and dined and can be influenced. But today's couch potatoes are not about to get out and be bought in that way. One has to advertise to them.

I am very serious about this matter. There is a real objection. Two things are being confused. One is that we should like, as the noble Lord, Lord Holme, said (and I agree with him) lots of people and many voters to participate in elections. They should give money or work voluntarily at whatever they can do. That is fine. I agree about that. The other objection seems to be that companies give a lot of money to political parties and somehow buy influence. Of course they buy influence. What else would they do? I have never thought it bad that trade unions gave money to the Labour Party. I think it is very good that they gave money to the Labour Party. They wanted a certain kind of agenda advanced in politics and therefore they gave them money. Good for them! I entirely deny that it is somehow a very corrupt act when trade unions give money to the Labour Party. I wish they had given more.

We have a large state. Whoever is in power or likely to be in power will have a lot of influence. The kind of influence for which people give money is what would be called in stock market terms "insider information". People want to jump the queue. They want information. But it is not criminal. If people thought it was criminal, they would ask for a law making criminal the passing on of certain kinds of insider information. Would that be effective? Let us say that certain kinds of meetings between businessmen and politicians should be made illegal. The Americans have a law like that, but it has not stopped corruption in America. The Americans also have state funding, but that has not stopped corruption in American politics or private donations.

I do not believe that election outcomes are bought. After all, one could easily say that a good many newspapers are partisan and that perhaps the newspapers ought not to be allowed to be partisan. If we believe that insider information is being bought by companies, and if we can find ways of proving it, we can make that a criminal activity. That is fine. However, I believe that people will give money.

Lloyd George split the Liberal Party. The Conservative Party has been in power on its own for 51 years and the Labour Party for 20 years. I may sound cynical, but I believe that companies give money because they want access to information. I do not know how one would prevent that in a liberal society. There is a symmetry of who gets what money. I believe that any attempt to legislate in detail would run into a lot of problems. I would point to the example of the United States of America. I think we will get legislation because at the very minimum we will have to have legislation for transparency.

Perhaps I may use old fashioned terminology. In a capitalist society you cannot prevent people buying influence. If you do not want that, do not have capitalism. However, I do not think it is easy to do that. Therefore, if we are going to pass a law, we shall have to be quite sure that we do not so hobble ourselves that corruption continues but legitimate activities are discouraged.

4.42 p.m.

Lord Wallace of Saltaire

My Lords, I am not entirely sure how far I agree with the speech of my noble friend and colleague Lord Desai and whether he is really in favour of capitalism or against it, but I look forward to continuing that discussion with him on a later occasion.

I remind the House that the Motion specifically asks Her Majesty's Government, to refer the issue of the funding of political parties to the Committee on Standards in Public Life or some other appropriate body". The case for doing so rests on the belief, which a number of noble Lords have already expressed in the debate, that political parties are an important part of democracy and are in effect public bodies in that democracy. Indeed, in most other democracies, political parties are part of a framework of regulation and law.

When the Conservative Government took office, they looked at the anomalous position of British trade unions as they saw it and insisted that they should introduce legislation to bring the trade unions properly within a framework of law as regards their political activities. They have therefore left exposed the extraordinary situation of a Conservative Party which is not a legal entity, which does not publish its accounts and is therefore a very important part of the British political system which somehow exists outside the framework of law. That is extraordinarily anomalous and is bending the British constitution in all kinds of ways.

We have seen the Conservative Party over the past 20 years bend the British constitution in a number of other ways. I have never understood why the Labour Party did not more vigorously oppose the extension of voting rights to people who are non-resident in Britain. It was done quite clearly because it was believed that more of them were Conservative and it would therefore increase the proportion of Conservative voters. The principle behind it was quite clear. It was representation without taxation. I am also clear that the poll tax was intended to reduce the number of potential Labour and Liberal Democrat voters by encouraging poor people to cut themselves off from the register. That was clearly part of the intention. Those were matters of bending the traditional conventions of the British constitution.

I have listened to the speeches of the noble Lords, Lord Laing and Lord Beaverbrook, and others with astonishment at the degree of complacency there is. There is a wide gap between those within the Palace of Westminster who are extremely happy with, proud of and defenders of the British constitution as established and developed from King Alfred to the present day and those outside who see a political system with which they identify less and less and which seems to them to be sleazy if not actually corrupt. We face the real prospect at this election that a smaller proportion may vote than in any election since the war. We have to address that. As the noble Lord, Lord Beaverbrook, said, that is a question of the interests of democracy. However, having raised the question, it seems to me that the noble Lord did not answer it.

It is extraordinary that the Conservative Party still assumes that while the Labour Party is not entitled to depend upon trade union paymasters the Conservative Party is entitled under all circumstances to depend upon—indeed to demand—the support of the corporate sector. We saw the reaction of various people in the Conservative Party to support for the report of the Institute for Public Policy Research. They thought it was shameful that corporate directors could possibly have put their names to a document which might be closer to other parties than to the Conservative Party. That suggests the extent to which we are in a deeply unbalanced situation; and balance is important for democracy.

The noble Lord, Lord Campbell of Alloway, remarked that there is no proof, but we all know that there are plenty of rumours and allegations. Some weeks ago I was sitting with a journalist who asked me, "Have you noticed how many Ministers are going round the Gulf at the present moment? What do you think they are doing there? How much money do you think is flowing from there to the Conservative Party?". I have no idea whether there is any truth in that rumour. All I know is that that is the kind of rumour that floats around.

We are talking about not inconsiderable sums of money—£40 to £50 million—in the turnround in the Conservative Party's funds. It is quite possible that what we have is the very good will of a number of National Lottery winners who have felt so grateful at their receiving £10 million each that they have given half of it to the Conservative Party. That is rather unlikely. I suspect that what we have seen is a substantial amount of money from rich private donors and a certain amount also from abroad, but none of us knows. It is precisely because we do not know that the situation is not fully democratic.

Every time we have discussed the process of privatisation I have thought about the principles of "old corruption" in the late 18th century, about which I learnt as a student. What was "old corruption"? It was the flow of large sums of money to people with political influence in order to buy access, preferred information and, if possible, preferment. What did it influence? Above all, it influenced the Government's choice of contractors—monopolists and receivers of government subsidies. We are now moving back into that situation through the process of privatisation, particularly as we move into situations where the Government provide subsidies to privatised companies, as in the railway network.

I noted, looking at the preferred bidders for the lease of the Treasury building, that almost all of them were already subscribers to the Conservative Party. I have every confidence that in that instance the Government's attitude to the leasing of the Treasury building or the price which they were prepared to accept was in no way influenced by that. But if the matter were to be referred to the Committee on Standards in Public Life one issue that might be raised is whether private companies which were in receipt of government subsidies should not be forbidden from contributing to any political party as part of their contract with government. That is precisely the sort of thing that we should now be investigating because we are moving into this very shadowy relationship between government and private business in a contractual relationship.

Money can buy politics. The American example of the availability of bought advertising time on television shows us the dangers of slipping into a situation where politicians offer privileged access and a nod and a wink—I include not only President Clinton but Speaker Gingrich—with real consequences in terms of popular disillusionment. Popular disillusionment with politics in the United States is at a much more advanced stage than it has yet reached here.

It seems to me that there are many advantages in keeping politics as inexpensive as possible. I declare myself strongly against any move towards state funding. As far as possible, that means that politics remain open for new parties and new movements to enter. No doubt that is very unwelcome to the Conservative Party and fairly unwelcome to the Labour Party as well, but that is what a real, vibrant democracy means.

I have fought five elections in which we have managed to raise £10,000 to £15,000 per campaign. On no occasion was any single donation larger than £500. That seems to me to be the way in which democracy should operate. The donations come in at £20 or £100; one goes out to seek them and one organises rallies. That is the way in which we should be dealing with the matter in an open democracy.

Money is also able to buy more influence in politics as new methods and techniques such as targeting and the use of computers build in advantages for those who have the equipment. That also suggests to me, as a number of other speakers have suggested, that we need to look at the question of national limitations on funds.

There is here a constitutional principle attached. I was glad to hear the noble Lord, Lord Beaverbrook, note that at least there is a constitutional principle which we have to accept: how open should our democracy be? This is a major respect in which our democracy is closed. One of the most established and important institutions of British politics, the Conservative Party, in this very important and central respect, is closed to public view. That is unacceptable in a mature democracy and something which this House should, therefore, consider. We need to restore public confidence in democratic politics. In this country at the moment we face declining public confidence in politics, particularly among the young. Therefore, I believe that this is a very useful contribution to rebuilding that kind of public confidence.

4.52 p.m.

Baroness Seccombe

My Lords, I wish to add my gratitude to that of other speakers to the noble Lord, Lord Jenkins of Hillhead, for bringing this matter before us today. I have listened very carefully, and with the greatest interest, to noble Lords who have spoken. I wish to make just one or two points. I shall not detain your Lordships for long.

Perhaps I may declare what I call a "non-interest". I am not, and never have been, a treasurer at any level in the Conservative Party. That may be a good thing for my party because I do not really believe that I possess the necessary expertise. It may be just as well that that did not happen. But one thing that I have experienced is that treasurers within the party have all been honourable people and have understood exactly their responsibilities.

However, as a committee member of my association, I have been constantly involved in fund-raising events and now, as a party vice-chairman, I travel around the country. I am deeply impressed by the voluntary side of the party raising money in the branches, the wards and the constituencies. I heard the noble Earl, Lord Russell, say that there are new techniques. I do not believe that any party should forget that elections are won in constituencies, and that a well-organised and well-funded constituency is just as important as any other issue. Everyone understands that running associations is costly. I find it humbling and a privilege to see the generosity of members who support all the small events which, added together, keep associations afloat.

The remarkable thing about donors to the Conservative Party is the broad and broadening range of people who choose to support the party financially. It is no surprise that, set against the background of ever-increasing living standards, an ever-increasing number of people from all backgrounds wish to make a contribution to ensuring the continuance of a Conservative Government.

Over the past seven years more people have, through their own hard work, made themselves millionaires than at any other time in our history. In doing so they have created the jobs that have allowed others to prosper. That is why people wish to support the Conservative Party financially. The treasurers of the Conservative Party operate very strict guidelines. In particular, the guidelines state that no donation should be accepted which has strings attached; which the party has reason to believe contains illegally obtained moneys; or which are from a foreign government or royal family or agents, or from an unknown source.

In contrast to the Labour Party, the Conservative Party has accepted all the recommendations of the recent Home Affairs Select Committee of another place on party funding. Companies are of course required by law to declare a political donation in their annual accounts. Donations from individuals are an entirely private matter and I respect their right to confidentiality. Contributions to the central funds of the Conservative Party are made by those who support conservative principles and who wish the Conservative Party to win local, national and European elections. Such contributions are an important part of our democratic process. As I have said, the Home Affairs Select Committee has looked into this matter and made recommendations. I see no purpose in the issue being referred to another body, and I urge your Lordships to reject the Motion.

4.57 p.m.

Lord Monkswell

My Lords, democracy needs transparency and fairness, as mentioned by a number of speakers. It may be useful to start with what we know and then to go into some of the areas where we have no knowledge although the debate has been quite interesting revealing things which are not necessarily in the public domain. For instance, we know that in all the general elections since the 1970s the Conservative Party nationally has out-spent the Labour Party 2:1. I hazard that that had some effect on the outcome of those elections; it is interesting to debate how much.

If spending more money than the Labour Party was the cause of Conservative victories, the Conservative Party cannot then say that it was because of their policies that people voted for it and that the poor policies of the Labour Party deterred people from voting for it. The Chief Whip is puzzling over that proposition, but he will no doubt get it in a minute.

There is the argument that if money does not have that effect, why spend it? If the Conservative Party argues that spending twice as much as the Labour Party during a general election has no effect on the outcome, then let us indulge in a proper British exercise in fairness. Let there be agreement between the two major parties that they will spend about the same amount of money in the coming general election. I pose that as a question.

There have been allusions to the political scene in the United States of America. I wonder whether we really want to go down that road. The political process there is so dominated by the expenditure of money and concentrates so little on practical politics in terms of principle and policies.

As a number of noble Lords have pointed out, there are limits on the expenses of individual candidates at local, parliamentary and European Parliament elections. But there is no control at national party level. It is high time there was. The noble Lord, Lord Campbell of Alloway, asked why we were having this debate and said there was nothing wrong with the system. I suggest that such a lack of control is one of the problems with our system.

I should like to say a few words on transparency. Having been active in the Labour Party at all levels, I can testify to the transparency of our funding—

Lord Campbell of Alloway

My Lords, I am very much obliged to the noble Lord. He mentioned my name and made my observations sound totally idiotic. Sometimes they are, but I do not think they were on this occasion. Of course, the presentation of a policy, if it is well done, may cost more money than if it is badly done.

But you cannot, by presentation, improve the essence of a policy. If it is not a good policy nobody will vote for it. How does the noble Lord deal with that? I know that he makes me sound ridiculous, but I am asking him for a moment to consider what I say.

Lord Monkswell

My Lords, in this context, I would say, "If the cap fits, wear it". The noble Lord asked me a question. If one looks at the expenditure by the advertising industry on a whole range of products from soap powder to box office films, one can see that it has an effect on what people purchase. To be honest, it is not necessarily a reflection of the worth of the product. People buy on the basis of the advertising they see on television.

Lord Campbell of Alloway

Policies are not soap powders.

Lord Monkswell

The noble Lord says that policies are not soap powders. Unfortunately, that is almost the direction in which we have been heading over the past 20 years.

I want to say a few words about transparency. I was pointing out that I have been active in the Labour Party at all levels and that we know where our money comes from and where it goes. I have to admit that it may not be the most eagerly awaited item on the agenda of party meetings, but I can assure the House that we have a treasurer's report at every meeting and that those reports are made and presented most assiduously. Unfortunately, that does not appear to be the case in the Conservative Party. Indeed, I can remember a very public campaign waged by some public-spirited activists in the Conservative Party demanding that the party properly publish its national accounts—

Lord Strathclyde

We do!

Lord Monkswell

I am not sure whether that campaign was successful. However, we do have information about certain company donations because, as noble Lords have said, it is a requirement of the Companies Act that companies should declare their political donations. It now transpires, however, that some companies may get round that by describing such donations as "entertainment". I find that a bit sad.

The regime that applies to companies is rather different from that applying to trade unions. That smacks a little of preferential treatment for one side of the political argument. Noble Lords have elaborated on that point, so I shall not go into it further.

Private donations are less visible and it is interesting that they tend to come to the surface only when a particular individual comes up before the courts. I am sure that that is not really what the Conservative Party wants.

One of the things I have found most worrying has been the allegation—confirmed by the noble Lord, Lord Laing of Dunphail—that the Conservative Party receives money from overseas donors. How then can we be sure that decisions of a political party, and particularly of the party of government, are made in the best interests of the citizens of this country? Looking after those interests is why the Government were elected. The point is especially apposite with regard to the Conservative Party which wraps itself in the Union Jack and says, "We are the patriotic party. We are the party for the British people." How can the British people have the confidence that that party will engage wholeheartedly in furthering the best interests of the British people if it is funded by foreign sources? We just do not know.

The noble Lord, Lord Laing, pointed out that foreign donations were made on the basis of there being some fruitful return. He cited inward investment as an argument for foreigners making donations to the Conservative Party in this country. Yes, a certain amount of benefit comes from inward investment. If a new factory is built, it provides employment. But at what cost? We do not hear very often about the vast sums of public money that are paid in the form of subsidies to foreign companies investing in this country. We are not told in the same breath which tells us about inward investment that this Conservative Government have run the economy in such a way as to ensure that at least 1 million people are out of work, unemployed and therefore pulling down the living standards of all our British workers—

Lord Strathclyde

No!

Lord Monkswell

The Government may not like that interpretation, but it is certainly one interpretation of what is happening.

I hope that this debate will encourage the Government to refer the matter for independent investigation. We need that because there are many grey areas and there is much information about the funding of political parties which the British people do not have but which they need. I hope also that the Conservative Party will realise that it is important that it puts its own house in order if we are to have a flourishing and untainted political democracy.

5.8 p.m.

Baroness Byford

My Lords, the debate initiated by the noble Lord, Lord Jenkins of Hillhead, about the way in which political parties are funded has proved interesting. The noble Lord would like the matter to be referred to the Committee on Standards in Public Life. I understand that the noble and learned Lord, Lord Nolan, did not agree with that, saying that he was not sure whether such a broad study could best be carried out by his committee. I have listened with interest to the comments that have been made, many with humour and many with innuendo, and I should like to pick up just a few of them.

I am anxious that this debate should not be regarded as an insult to the many hundreds of thousands of party volunteers of all parties. If that is the case, it is a pity that the worthy and generous deeds that are done on behalf of all our parties are now being questioned by some of the very people who once relied on that support.

I declare an interest. I am president of my local Conservative association. I am a volunteer. I am one of the grassroots workers who believes in local participation. In my party, each association is independent. It is autonomous. It raises its own funds, selects its own candidates, both locally and nationally; consults its own members and reflects their views. Perhaps that approach is not shared by all other parties.

How do we raise our money? We raise money from members locally through subscriptions, individual contributions and putting together a whole variety of fund-raising events. Perhaps we are more fortunate than noble Lords on the other side of the Chamber. The noble Lord may smile. We still get money from rummage sales, coffee mornings, barbecues, Christmas fayres and supper evenings. Those events run our local associations. Individuals give us their support at whatever level they wish. We do not have a minimum subscription, but each member and each amount given is of equal importance to us. This mass membership base is of great importance. Members feel part of the political scene and can reflect their concerns and aspirations. In turn, they are in contact with the wider electorate.

Some members are happy just to support their local branches, while others go on to serve the community. Many of them become councillors. Those who work in their constituencies know that sometimes it is said by people, "We never hear from you except at election time". They do not mean us. Our newly-formed association that has been made up from bits of four constituencies ensures that it makes contact with them. We have leafleted all of them to tell them about the new boundary changes that have taken place and the implications of those changes for them.

In addition to being president of the Charnwood Conservative Association, I am president of the National Union of Conservative and Unionist Associations. For the past few years I have visited hundreds of Conservative associations up and down the country. They organise themselves in a similar way to our association. Some have a larger membership than ours but all work voluntarily to raise money, exchange views on political matters and act as a local link. They are the ones that others go to on specific issues. This contact, together with the tremendous input by Members of Parliament through surgeries, visits and events, explains why the present system enables us to have close links with the electorate. I would be sorry to see it lessen.

I should like to deal with the whole question of transparency. My noble friends referred earlier to the fact that the Labour Party received money from the unions. I do not find that a problem. But I was intrigued to read of a fund—I believe it amounted to £2 million—which had been set up for the Leader of the Labour Party. I would be interested to know who had contributed to it and how much. We are not hung up on it as noble Lords opposite appear to be hung up on our funds.

The noble Lord, Lord Wallace, referred to the influence that could be bought. I was intrigued to read a letter written by his party in September referring to a business community lunch organised at the Metropole in Brighton. According to that letter, the lunch would be kindly sponsored by Onyx who would provide a buffet-style environment in which more than 100 council leaders could meet the business community. I do not object to that. It went on to say that all of those councillors controlled councils solely or with the assistance of other parties. The word "transparency" has been used by noble Lords on the Benches opposite. It would be remiss of me if I did not also raise mis matter in the debate today.

Our most important objective is to make people feel that whatever party they support, they can trust the system. I am concerned by some of the comments and innuendoes that have been made. Our democratic society which is the envy of the whole world has served us well and succeeded, thanks to the finance raised by volunteers and others year by year. I have no problem about people giving money to a party. If they wish to remain anonymous, they should have the freedom to do so. Long may the worthy institution of organising our political parties in the way that we do continue and survive. Long may our country have volunteers who give of their time and effort to preserve our democracy. I encourage noble Lords to reject this Motion.

5.15 p.m.

Lord Harris of Greenwich

My Lords, allegations about improper methods of raising money for political parties have damaged many politicians, not exclusively those in this country. They have damaged politicians in Germany, France, Italy and in particular in the United States. In each country there have been charges, often proven, of disreputable conduct relating to the raising of large sums of money for political campaigning. In a number of cases there have been subsequent criminal proceedings against some of those involved. Further, in some cases legislation has been introduced with the aim of bringing these activities under some form of control.

The consequences have been all too predictable. There has been a further diminution in the respect in which politicians are held. That has been our experience in this country as well. Following the revelations concerning Members of Parliament who were prepared to receive money for tabling Parliamentary Questions, damage was done not only to their party but to many others involved in the political process. Mr. Major rightly said after the exposure of some of these activities: 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; col. 758.] Mr. Major then announced the appointment of a committee headed by the noble and learned Lord, Lord Nolan. The committee set to work with considerable dispatch. It has already produced a number of reports that should make a notable contribution to reducing the level of sleaze in public life in this country. But in one area the committee has been told that it cannot trespass. Strangely enough, it relates to the methods of financing political parties in this country. It is remarkable that that is so, first, because there is already deep public suspicion about the methods used by some party fund-raisers and, secondly, because two of the three major political parties in this country have already indicated their support for such an inquiry that could look into exactly the kinds of episodes to which the noble Baroness, Lady Byford, referred a moment or two ago. We are in favour of the inquiry but the noble Baroness is not. She wants this Motion to be rejected.

If the result of the next election leads to a change of government in this country, it is clear that the Nolan Committee, or a similar body, will be asked to undertake this task. The noble Viscount, Lord Cranborne, should tell the House this evening why his noble friends continue to resist the inevitable so fiercely. There is little doubt among most political commentators as to why the Government take that position: it is that they have so much to hide. One has only to run through the list of celebrated names: Asil Nadir, Octav Botnar and John Latsis. All of them are secret contributors to Conservative Party funds. The first is a fugitive from justice in Northern Cyprus. The second is a refugee in Switzerland who is wanted in this country by the Inland Revenue. He shows no enthusiasm for returning to this country. The third is a £2 million donor to party funds who was a keen supporter of the Greek colonels—men who held on to power by torturing many of their political opponents.

There are others. I refer to the Hong Kong businessmen who were feted by 14 Ministers sent at public expense to carry out government business in Hong Kong. They devoted a great deal of time there to raising money from those gentlemen. Unhappily, those gentlemen in Hong Kong now appear to have switched their allegiance from the Conservative Party to the Chinese communists.

Even when it is clear that the money was sent to the Conservative Party wholly improperly, it seems to make no difference. We were all entertained by the answers given by the noble Lord, Lord Beaverbrook, when the noble Lord, Lord Richard, asked him about that. As I understood it—and no doubt the noble Lord will correct me if I have his answer in any way wrong—he suggested that it was wrong to accept tainted money. He was unclear as to whether that money should or should not be returned. We should all be extremely grateful to know the answer to that question put by the noble Lord, Lord Richard.

Lord Beaverbrook

My Lords, with the leave of the House, if the noble Lord reads Hansard tomorrow, as I am sure he will, he will see that, in response to the point made by the noble Lord, Lord Wallace, I said that I am in favour of any tainted money being returned.

Lord Harris of Greenwich

My Lords, I welcome that answer, because I am just coming to that point. Unhappily a number of the noble Lord's colleagues do not share that view. The stubs of six separate cheques totalling £365,000 were found by officers of the Fraud Squad when they raided Mr. Nadir's offices.

They were taken from an account used by Mr. Nadir to remove money from Polly Peck International. The administrators' report on that matter says: The Unipac NatWest Jersey account was the conduit for the misappropriations by Asil Nadir". In a letter, the administrators said: The Touche Ross investigations confirm that the monies donated by PPI were paid on the instructions of Mr. Nadir acting without the authority of the board of PPI. It is the contention of the administrator that Mr. Nadir is liable to repay the sums concerned as a result of his fraud and/or breach of fiduciary duty and/or malfeasance as a director". In a covering letter to Conservative Central Office, the administrator said: I would urge you to return the donations to Polly Peck so that the creditors can at least obtain some small measure of compensation from this unfortunate affair". As I understand it, and I welcome it, the noble Lord, Lord Beaverbrook, thinks that the money should be returned, but unhappily that is not the position of Conservative Central Office. It has refused to repay the money. It has clung on to that money which is in its accounts only because of Mr. Nadir's fraud. I am sure that we would all agree that Mr. Howard, the Home Secretary, must be a deeply embarrassed man. As Home Secretary he reminds us constantly of the Government's determination to ensure that crime does not pay. Yet every time he passes those large party poster sites he must reflect that a large number of them must have been paid for with Mr. Nadir's stolen money.

Then there is the question of honours. After the Maundy Gregory affair, a new system was established designed to prevent the purchase of honours. Indeed, it is now a criminal offence to give or accept any gift, money or valuable consideration as an inducement or reward for procuring the grant of a title. No one has ever been convicted under that legislation, and of course they probably never will be, unless someone is daft enough to put the offer in writing.

If everything is as it should be, it seems a little odd that there is such a remarkable contrast between one group of company directors and the others over the award of honours. After an analysis of a large number of company accounts, it was found that about 6 per cent. of companies gave money to the Conservative Party. So if there were no link between giving money and receiving honours about 6 per cent. or 7 per cent. of honours would have gone to directors of those companies. Strangely enough, it was not 6 per cent. who received the honours; it was eight times as much—just about 50 per cent. The relationship could hardly be more direct. Yet we are asked to believe that there is no relationship between the awarding of honours and the granting and giving of money to the Conservative Party.

Apart from the directors of companies, there is the curious secrecy about the identity of those who make these private donations. Why should not every political party be required by law to publish lists of those who subscribe more than a set sum? We support that idea from these Benches, and so, I understand, does the Labour Party.

I am glad to say that the noble Lord, Lord McAlpine, former treasurer of the Conservative Party, has now come round to that view and has joined us in our position. I told the noble Lord that I should be referring to him in the course of this debate but unhappily I understand that he is in Australia. In a newspaper article last September the noble Lord, Lord McAlpine, said: For the good of the party"— that is, the Conservative Party, and not, as I understand it, the Referendum Party— and in support of the forthcoming election campaign, I would advise that we now disclose substantial donations. The Conservative Party has been wrong-footed in this whole matter. It is still fighting the battle of privacy for private political donations. That is yesterday's battle—from wars fought long ago. Far better that the Conservative Party talk to its private donors and seek their permission to publish their names". The noble Lord, Lord McAlpine, is right. I hope that when the noble and learned Lord, Lord Nolan, and his committee, or a comparable body, come to examine that issue, as they certainly will be doing—noble Lords opposite should have no doubt about that—they will seriously consider the noble Lord's proposal.

That is more than ever necessary for two reasons: first, because of the relentless stream of allegations that foreign businessmen are attempting to use the clout that their donations give them to influence Ministers. In any event, I must confess that I see little reason why any person who is not a UK citizen should be permitted to make substantial donations to a British political party. The second reason is the growth in the number of front organisations endeavouring to raise money for the Conservative Party. Those groups, such as the Premier Club, referred to by the noble Baroness, Lady Gould, will, for a donation of a mere £100,000, invite the person concerned to intimate lunches and dinners with members of the Government. A third reason is that even members of the Conservative Party's board of finance are not allowed to know the names of the donors. I know that from the evidence given by Mr. Chalker who has been much involved in this matter within the Conservative Party. He said in his evidence to the Home Affairs Select Committee of another place: Members of the board are consistently denied more than the bare minimum of financial information. By dint of persistence some brief glimpses were snatched of what was usually kept carefully out of sight, but, in reality, not an inch of permanent ground was yielded in 48 months". Of course, it may be said by the Leader of the House that allegations have been made against parties other than his own. The noble Baroness was kind enough to refer to my party and to the Labour Party. I can give a simple answer. We are in favour of the inquiry, but we know perfectly well that the Government Chief Whip is encouraging all his colleagues to come here and vote down any question of an independent inquiry. We are perfectly happy to have those allegations considered if any committee—either the Nolan Committee or a comparable body—looks into the matter. But the Government want no inquiry at all.

There is a strong belief in many parts of the House, although it will be denied by noble Lords opposite, that there will soon be a change of government. If that occurs, the noble and learned Lord and his inquiry, or a comparable body, will soon be invited to examine this matter. If we wish to restore the tattered reputation of British politics and British politicians, the issue must be addressed. A wise government would accept this Motion. However, in what are probably the dying weeks of this Parliament and this Government, I fear that there is little prospect of that. And so the truth will have to be forced out of the Conservative Party. I hope that in a few weeks that is exactly what will happen.

5.31 p.m.

Lord Richard

My Lords, we have had an interesting and at times entertaining debate. I wish to say at the outset how much I miss the voice of one who used to take part in such debates with great regularity; namely, Lord Houghton of Sowerby. In any debates on party political funding, from that seat below the gangway one could hear his tones—I nearly said "dulcet tones", but the last thing he was was dulcet—on this subject. He would have been fascinated with today's debate.

No fewer than five former treasurers of the Conservative Party are Members of this House. The noble Lords, Lord Laing and Lord Beaverbrook, have spoken today. I understand that the noble Lord, Lord McAlpine, is in the Antipodes—what a pity! There are also the noble Lords, Lord Harris of Peckham and Lord Hambro. We heard pleas in mitigation from two of the five old lags. If I were the judge, I do not believe that they would have moved my stony heart very much in my direction. The noble Lord, Lord Laing, said, "Take it from me, all is well". The noble Lord, Lord Beaverbrook, said, not unsurprisingly, "Take it from me, all is well". He revealed what I can describe only as a breathtaking amorality when he said that the issue of giving back tainted money depended somehow on the popularity or the unpopularity of that act—

Noble Lords

That is not what he said!

Lord Richard

My Lords, that is what he said the first time. He may have changed that in the course of the debate—

Lord Beaverbrook

My Lords, the noble Lord mentioned my name. I believe that when he reads Hansard tomorrow he will see that at the outset I said that I personally am in favour of returning any money that has a hint of taint about it.

Lord Richard

My Lords, the noble Lord used the word "popularity". I was so surprised that I rose from my accustomed leisured position on the Front Bench. Having lurched to my feet, I put the point to him, but, if he will forgive me, I am bound to say that I did not find his answer impressive. I shall of course read Hansard.

We heard from the noble Baronesses, Lady Seccombe and Lady Byford. With great respect, we are not talking about money raised from coffee mornings. We are not talking about sales of work by local Conservative ladies. We are talking about very large sums of money, where they have been raised and whether the country is entitled to know how that metaphysical entity represented on the Benches opposite, which has now been in government for nearly 18 years, obtains its money, where it comes from, whether it is clean and what effect it has. There are two issues in the debate: first, whether there is a problem; and, secondly, if there is a problem, what should be done about it.

Perhaps I may now deal with an issue raised by the noble Baroness, Lady Byford—that is, the Labour Leader's office fund. I shall deal with it openly and put it before the House, and the House can then judge. That fund is managed by three trustees; the noble Lord, Lord Merlyn-Rees, and the noble Baronesses, Lady Jay and Lady Dean. They are well known to Members of this House. The trustees ensure that all donations raised are consistent with the general rules governing donations to the Labour Party. The fund makes contributions to the Leader's office to supplement the funds which come from the Short money and from the party. The fact that contributions are received by that office from the fund is acknowledged in the register of Members' interests. Is any such acknowledgement made of any fund by that metaphysical entity sitting opposite us tonight? I doubt it.

When that fund was set up, the Labour Party took advice from two top QCs in the field. I emphasise that their advice to the trustees was that the trustees should keep confidential the names of the contributors—

Noble Lords

Oh!

Lord Richard

No, wait, my Lords, there is more to come! The names should be kept confidential in order to ensure that there could be no suggestion that the making of donations might be intended or might in practice operate so as to exert influence or secure favour. Therefore, the position is that people contribute to the trust; the trust then distributes the money to the Leader's office; and that money is then registered in the register of Members' interests. Furthermore, that arrangement was put before Sir Gordon Downey, who approved it.

I also say to the noble Baroness, Lady Byford, that we are perfectly happy and content that that arrangement and any other relating to Labour Party funding should be submitted to an independent inquiry such as that requested in the Motion. Let the committee look at the arrangement and if there is anything wrong it will tell us. I have heard nothing from the other side tonight which will match that offer—that is, putting the whole issue of Conservative Party funding to an independent scrutiny. If the other side will say that, I shall be most interested indeed. We are prepared to do it. We have nothing to hide so far as this is concerned. I have put the facts in front of the House and I am perfectly content that the noble and learned Lord, Lord Nolan, should judge them. I hope that that will be the position on the other side, too.

Baroness Byford

My Lords, I rise to my feet only because the noble Lord named me again. I am sure that the noble Lord will correct me if I am wrong, but I understand that the people who have contributed are not named, nor is the amount that they have given. As I said, I do not find that difficult if the noble Lord accepts that the same principle applies to people who donate to us. But the noble Lord does not appear to do so and perhaps he could clarify the matter for a newcomer to the House.

Lord Richard

My Lords, I thought that I had clarified the matter. We were advised by the two silks that in order to ensure that there could be no allegation of over-connection or sleaze, the two issues should be kept separate. And they are kept separate. If the noble and learned Lord, Lord Nolan, considers that we should be doing something different, we are perfectly prepared to do so. However, if after examination an independent committee says to us, "We believe that you should do it in another way", we shall be perfectly prepared to do it in another way. I have heard nothing to match that coming from the other side of the House tonight.

I return to the two issues in the debate: first, is there a problem; and, secondly, if there is a problem, what should be done about it? Contrary to some of the speeches we have heard today, there is in my view and in the view of an increasing number of people in the country a widespread perception that all is not well.

Let us consider the position of the two major parties on this issue. In its submission to the Nolan Committee, the Labour Party set out its attitude. It called for (this is our policy): a new regime for the funding of political parties to include: full disclosure of their accounts; 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". That is the position of the Labour Party. It is clear; it is unmistakable; and we are quite prepared to submit it to the judgment of the noble and learned Lord, Lord Nolan.

We are in favour of much greater disclosure and transparency. As the noble Lord, Lord Wallace, said in the course of his speech, disclosure and transparency are important qualities in the democratic process. Otherwise, there is a question mark about the validity of a great deal of what one of the parties may be saying. We are in favour of proscribing overseas donations and large secret donations. That is a proscription which works well in many other countries, including the United States and Australia. So that is where we stand.

Let us look at where the Conservative Party stands. To say the least, it is shadowy. We know that it was in serious financial difficulties a few years ago. We know too that donations from public companies have declined. As has been pointed out, those companies have an obligation to disclose political donations in their accounts so if the accounts of all the public companies are checked, the political donations to the Conservative Party by those companies can be traced.

If that is so, where does the money come from to build up the Conservatives' alleged war chest of £26 million? Who gave the money and under what terms? Of course, people are entitled to make donations to political parties; but in our view, any donation to the election fund over a certain figure should be made public. We believe that figure should be £5,000 and anything over that should be made public. The fact is that we do not know how the Conservative Party is being financed, although from time to time certain facts emerge from the shadows.

It is reported to have received £1 million from Mr. Botnar. Did it? Perhaps the noble Viscount the Lord Privy Seal will tell us whether it did receive £1 million from Mr. Botnar. It is reported to have received significant donations from the jailed BCCI fraudster, Mr. Viriani. Did it? And if so, how much? We know that it received money from Asil Nadir because that emerged in the course of liquidation. As I understand it, that money has not been repaid despite the fact that there is clear evidence that £365,000 of it was stolen. Does the Conservative Party intend to repay that money? We have heard it say from time to time that of course it will repay it and we even heard it said that tainted money would be repaid without any consideration of popularity or unpopularity. But it would be nice to know that the cheques have gone back and that the Conservative Party was actually doing something to repay the people who were defrauded of the money that was stolen from them by Mr. Nadir. What on earth is the Conservative Party doing taking that sort of money? It seems to me to be thoroughly unhealthy and disreputable.

We know too that in 1995-96, the Conservative Party raised £18.82 million from donations. Central Office accounts showed a 47 per cent. increase in donations for the year ending 31st March 1996 from £12.73 million to £18.82 million—a large jump. Where did it come from? When one is talking about sums running into millions of pounds and when the Government are presenting themselves to the country at an election, it is not unreasonable to know who has put more than £5 million into the coffers of the Conservative Party when it is fighting that election.

We have heard about the existence of strange clubs. I gather that the Premier Club has two tiers of membership. For £10,000 per year, ordinary members get supper with Cabinet Ministers, including, occasionally, the Deputy Prime Minister. That is rather pricey at £10,000, but I suppose that if you want to make a donation and dine with Mr. Heseltine, that is the price of it. But for £100,000, you get two dinners a year with the Prime Minister, Mr. Major. I am told that other benefits are special hospitality at the annual conference; a policy information service; detailed briefings on key issues such as the economy, trade and industry and taxation.

For more normal people, there is something called the Millennium Club where you only have to pay £2,500 per year but you do not get Mr. Heseltine and you certainly do not get near the Prime Minister. For that you get the promise of: a unique networking opportunity … to meet and interact with senior ministers at lunches, receptions and private functions". I suppose that some people may be prepared to pay £2,500 for a bit of interaction with the Minister of State at the Home Office, but there it is.

The one which I find to be extraordinary and disreputable is something called the Dragon Club. As I understand it, it was set up quite deliberately to raise money in the Far East for the Conservative Party. All that carries with it an unmistakable odour of sleaze and corruption.

The noble Lord, Lord Harris of Greenwich, delved slightly into the honours list. I wish to say one or two things about it. If that list is examined, it can be seen that a high proportion of recipients of a knighthood are personal donors to or are closely associated with companies which have contributed to the Conservative Party. Under the premiership of the noble Baroness, Lady Thatcher, from 1979 to the Birthday Honours List of 1990, there were 173 honours which went to industry. Of those, 112 were to donors to the Conservative Party; that is, 65 per cent. of all honours. Under the present Prime Minister, from 1991 to the New Year's Honours List of 1995, 53 honours went to industry, of which 36 were donors to the Conservative Party—that is, 68 per cent. of all the honours. I suppose that it could be argued that it is a remarkable person who gives money to the Conservative Party and so, because of his remarkable nature, ought to be recognised by the gift of a knighthood. That takes a lot of swallowing and I am extraordinarily sceptical about those figures and the implications which clearly arise from them.

It seems to me that if one believes in greater transparency in government, on any view of the matter, there is a problem here. As the noble Earl, Lord Russell, said, there is a case to answer. The real question for this debate should be who is to do the investigation. My own preference would be a reference to the Nolan Committee. That committee has expressed the view that party funding needs to be looked at, although in May 1995, the committee decided that it would not be within its present terms of reference to examine the overall nature of party-political funding and, for example, to address such other questions as to whether state funding of political parties would be desirable.

Perhaps I may say in parenthesis here that this is not a debate about the state funding of political parties. It is a debate about whether the funding of British politics should be looked at by an independent body. That is the issue and I suggest to the House that that case has been proved.

However, the Nolan Committee said that it would put aside the issue of political funding for the time being but it added that after the next election, it would consider again whether to examine that subject. It concluded that if funds were being given to a political party in exchange for the receipt of favours from holders of public office, that would fall within the committee's remit. That is an issue which is becoming increasingly urgent for independent examination.

That issue should be looked at by a body like the Nolan Committee, which has a proven track record of independence and integrity. While I am conscious of the fact that there might be political difficulties in a straight reference to the Nolan Committee, I feel that in principle the decision should be taken and the political difficulties, such as the terms of its mandate or the possible composition of the committee, should be examined, clarified and resolved.

I have found this to be a revealing debate. I am grateful to the noble Lords, Lord Laing and Lord Beaverbrook, two of the major participants in the affairs at which we are looking today, for their contributions to the debate. The debate has revealed the fact that the Conservative Party is secretive about the sources of its funding—excessively so. It has revealed also that the majority opinion of those who have spoken in the debate consider that that is unhealthy for British democracy. We shall support the Liberals in the Lobby this evening.

5.49 p.m.

Viscount Cranbone

My Lords, as the noble Lord, Lord Jenkins of Hillhead, has reminded us, we last addressed this important subject on 7th June 1995. I believe that I am right in recalling that in my reply then I forecast that we would return to the question of party funding; and, indeed, thanks to the noble Lord's admirable persistence, we have done so today. Like everyone else who has participated in the interesting proceedings this afternoon, I am extremely grateful to the noble Lord for that.

I am also grateful for another reason. Like his noble friend Lord Russell, I, in particular, hope that his party's policy for reform of this House will not succeed. In the light of today's entertaining remarks, my principal emotion for wishing that this afternoon is that it would deprive the noble Lord of the opportunity to drag his knowledge of 19th-century history into ad hominem teasing of representatives of the hereditary peerage in your Lordships' House.

Before turning to the substance of the debate, it would be remiss of me not to draw your Lordships' attention to the character of the Motion before us. I believe that I am right in saying that it is divisible. As my noble friend Lord Campbell of Alloway noted, the Motion is very different in character from the Motions we normally debate on Wednesdays. I hope that the Whole House will ponder for just a while on what the implications are both for the character of our Wednesday debates and, indeed, for any future debates on Wednesdays if we are to persist in this and if we are to take this as a precedent. I, for one, hope that this will be an exception rather then the thin end of the wedge. I am glad to see the noble Lord, Lord Richard, nodding his head. I assume from that that he will not be following the noble Lord, Lord Jenkins, into the Division Lobby tonight.

Lord Richard

My Lords, if I were not to do that it would not be an exception.

Viscount Cranborne

My Lords, as usual, the Labour Party honours its rules, once again, more in the breach than in the observance.

I turn now to the Motion itself. It is interesting for another reason. With his usual courtesy, the noble Lord gave the House plenty of notice of his intentions. He tabled his Motion as early as Thursday, 16th January. It stood on the Order Paper for well over two weeks in all its pristine glory. Let me remind your Lordships of its wording: To move to resolve, That this House calls on Her Majesty's Government to refer the issue of the funding of political parties to the Committee on Standards in Public Life". If I may say so, it is as clear, elegant and unequivocal in its language as we would expect from the noble biographer of Asquith and Gladstone.

However, on Monday last something rather curious happened. The noble and scholarly Lord changed the terms of his Motion. As your Lordships can see it now reads: To move to resolve, That this House calls on Her Majesty's Government to refer the issue of the funding of political parties to the Committee on Standards in Public Life or some other appropriate body". I fear that I may be verging on impertinence but, for a moment, I am forced to suspect that this amended Motion does not strike one as enjoying quite the clarity and elegance of the original. The last few words inject a certain vagueness that was commendably absent from the original Motion. It is a vagueness that I suggest can only be explained by haste.

Your Lordships will undoubtedly wish to know what extraordinary event occurred to induce the noble Lord to redraft his Motion so hurriedly and, perhaps, at the last moment. The noble Lord himself gave us a somewhat elliptical version of what happened for, of course, he is far too modest to explain to your Lordships how he came to demonstrate yet again his virtue of flexibility under fire. Fortunately I am in a position to enlighten your Lordships.

The difficulty that the noble Lord encountered was this. The noble and learned Lord, Lord Nolan, to whom the Whole House should be extremely grateful for his persistence in sitting and listening to the whole of our debate, has said that he did not want this matter referred to his committee. It is true that the noble and learned Lord has expressed his personal opinion that, Party funding is a subject that needs looking at after the election". Indeed, that was much referred to during the course of today's debate. The noble and learned Lord has even said that: in so far as it raises the possibility of funds being paid in, in return for favours or the expectation of favours", it would come within his committee's terms of reference. However, the noble and learned Lord told the BBC's "Today" programme on 23rd January last that he, would like to see it go to a parliamentary House of Commons Select Committee". So there you have it, my Lords. If your Lordships will forgive the mixed metaphor, the noble and learned Lord had three-quarters killed the fox of the noble Lord, Lord Jenkins, and the noble Lord found himself in imminent danger of being more Catholic than the Pope.

I quoted the noble and learned Lord, Lord Nolan, as saying that the next Parliament should examine the question of party funding in another place. Your Lordships will know that another place will decide what it wishes its Select Committees to examine, as always. We know that its Home Affairs Select Committee examined the question of political parties in the current Parliament. The next House of Commons may well wish to follow the noble and learned Lord's advice and return to the subject. That is and will remain a matter for another place in the next Parliament.

Unlike the noble Lord, Lord Richard, I, for one, think that that would be an attractive mechanism to employ if it were felt that another examination of the question were needed—certainly better in my view than, for instance, a Royal Commission. I have ventured to observe to Your Lordships before that, although commissions and inquiries clearly have their place—and I am sure that the Whole House would agree that the inquiry of the noble and learned Lord is a very good example—it is a pity that over the past few decades they have been used so extensively. There are, it seems to me, some matters that Parliament should decide rather than surrendering responsibility to some commission of the great and good, however eminent. The noble and learned Lord, Lord Nolan, certainly acknowledged that by implication when he made it so abundantly clear that Sir Gordon Downey should report to a committee of another place. The question of funding of political parties is surely also a matter which Parliament should examine, debate and decide, as my noble friend Lord Campbell of Alloway clearly said.

Our present system ensures that political parties are principally supported by voluntary organisations, albeit with some help from the state as has already been noted by a number of noble Lords. As we have heard this afternoon, a number of people, including certain noble Lords and notably the noble Lord, Lord Whitty, whose experience in such matters we all respect, feel that the present system is open to abuse. Indeed, some more than suspect—for example, the noble Lord, Lord Richard, made an accusation about as direct as even he has been known to make—that substantial donations are made to political parties in exchange for undue influence for honours.

I hope that it is not too unworthy a thought to say that it is of course very much in the interests of opposition parties to make that accusation. Like my noble friends Lord Beaverbrook and Lord Laing of Dunphail, whose powerful speeches I personally found rather more impressive than perhaps a number of Opposition noble Lords did, I am highly doubtful as to whether the problem really exists in the form to which, for example, the noble Lord, Lord Harris of Greenwich, elevated it.

We have made considerable progress so far as honours are concerned; indeed, especially since the Liberal Party was last in power. As a number of speakers observed, a committee of three eminent Members of your Lordships' House scrutinises nominations and the Chief Whips of the parties concerned sign certificates undertaking that no impropriety has taken place under an Act which would mean that they would lay themselves open to criminal prosecution if they were found to have erred. I know from personal experience just how extremely seriously those safeguards are taken and regarded.

In view of the direct accusations that the noble Lord, Lord Richard, levelled at my party this evening, I ask the Labour Party this: can it assure me that there is no Member of this House sitting on the Benches opposite who has never given a large sum to the Labour Party? In view of the remarks of the noble Lord, Lord Richard, this evening, I can only assume that he will be able to rise and assure me that the answer is no. I am perfectly willing to give way to the noble Lord if he feels able to deny that, or answer that question in the negative.

As regards undue influence, we should be careful here. I see no reason why bodies such as the trades unions should not support a political party—indeed I agree with the noble Lord, Lord Desai, in what he said—or why companies should not also support a political party. Indeed in view of this Government's record on unemployment, it would be entirely understandable if the trades unions transferred their allegiance to the Conservatives. It has been accepted that it is right that such donations should be made public and it is only sensible that members and shareholders should know where their contributions are going. That is common ground between us.

By those who make the accusations, however, two solutions are advanced. First, some say that the details of all substantial donations should be declared to the public—many have said that this evening; and, secondly, that public funds should be used to help finance political parties. I was pleased to hear the noble Lord, Lord Jenkins, repeat his doubts this evening about that solution. Of course these two solutions are not necessarily incompatible. I shall discuss the question of public financing first. I shall not weary the House by repeating at length the arguments I attempted to put before your Lordships 18 months ago. However, I believe there are great virtues in making political parties rely on voluntary contributions rather than the public purse. I am sorry that I find myself at variance with the noble Lord, Lord Whitty, on that point.

Not the least of these virtues is that the system ensures that the political parties are not further institutionalised as part of the state itself. Unlike the noble Lord, Lord Whitty, I do not believe that these parties should run—I think I quote his phrase exactly—the apparatus of the state. It seems to me that that is for Ministers to do supported by the Civil Service. I add in parenthesis that this is of course an argument also against PR based on party list systems.

We know from our history that in the long term parties wax and wane in strength over and above the more short-term changes the electorate imposes every four or five years. The previous time this happened was in the early decades of this century which saw the Liberal Party give way to the Labour Party as the alternative government to the Conservatives. It is a process which took some time. I hope the Labour Party will allow me to comment that it is all the stronger for that because it had more time to establish itself in the context and in the thoughts of the electorate.

I believe the process would have been less likely to happen had the Liberal Party been institutionalised by financial support from the public purse. I can quite see that some Liberal noble Lords who have spoken this afternoon—certainly not the noble Lord, Lord Jenkins—might regret this lack of public finance. But, after all, their party's electoral record since the early 1920s does not suggest that the voters agree with them. Rather, the direct financial link between public and party helps ensure a responsiveness from the party to those who vote for it. The figures that my noble friend Lord Beaverbrook gave merely serve to underline that view, as did the eloquent description by my noble friend Lady Byford of the daily life in Conservative associations.

Lord Harris of Greenwich

My Lords, I hope I may ask the noble Viscount one question as he has referred to his noble friend Lord Beaverbrook. Does he think that tainted money, held at the moment by the Conservative Party, should be returned to the administrators of Polly Peck International, or does he not?

Viscount Cranborne

My Lords, I anticipated that the noble Lord, Lord Harris, would have forgotten the answer that I gave him 18 months ago to that very question, which was that if the money is tainted it most certainly should be returned. That is no more nor less than I said 18 months ago.

It seems to me that at a time when we hear many worries in public about the excessive power of the state it is perverse to suggest that we should ask political parties to become dependent on public funding. As I said, I was extremely pleased to hear the noble Lord, Lord Jenkins, repeat his doubts on that score.

Your Lordships might also like to consider whether state funding does anything to stem corruption. The noble Lord, Lord Holme of Cheltenham, mentioned other countries. Certainly from the record of certain other countries, which I am far too delicate to mention, I can see no reason why it should do so.

The noble Lord, Lord Desai, in yet another remarkable speech to your Lordships, referred to the fear of buying insider information as being one of the matters that should worry us. I agree with him. I do not see that that fear either is addressed by state funding. In a socialist society—the noble Lord referred to a capitalist society—the record might suggest that it is much easier to buy insider information even than it is in a capitalist society. We have only to go east of the Oder-Neisse line to see the truth of that. There is every reason to suppose that it would have much the same effect on political parties as it has had on industry.

Our experience of state funding in other fields has surely shown that it encourages incompetence and poor responsiveness to the public. Like the noble Baroness, Lady Gould, I think the case for transparency is a much more serious one. As I made clear in my reply to the noble Lord when he raised this subject 18 months ago, it certainly is a cause very much in tune with the current Zeitgeist. This was the matter that concerned most of your Lordships during this evening's debate. However, it seems to me that as in so many things it is a matter of balance. It is important that influence and honours should not be corruptly bought and sold and that the public should be satisfied with the system. At the same time donors, particularly individuals, have a right to privacy. Indeed, some give anonymously in order that it should remain impossible for them to influence the recipient in their favour.

I remind the noble Baroness, Lady Gould, that this is a consideration that perhaps lies behind the Labour Party's extensive use of blind trusts, about which the noble Lord, Lord Richard, waxed so eloquent.

Lord Richard

One!

Viscount Cranborne

My Lords, the noble Lord, Lord Richard, says one. In that case I wish to ask him whether or not my information is true. I proceed a little further. I understand—as he said—that Mr. Blair has established a blind trust called the Labour Leader's Office Fund. I also understand that Mr. Prescott receives support from the John Prescott Campaign/Research Trust, while Mr. Gordon Brown is close to the Industrial Research Trust/Fair Tax Campaign. I also understand that among the trustees of these blind trusts are Members of your Lordships' House. I remind the noble Baroness, Lady Gould, that the sums they collect are not trivial. The Sunday Times is not a paper I always believe. I have to say that in advance of referring to it. However, the Sunday Times thinks that Mr. Blair's fund has attracted donations and pledges of about £2 million. Is that what the noble Lord, Lord Richard, might call—I think I quote him accurately—thoroughly unhealthy? He seems to think that any large sum of money is by definition thoroughly unhealthy, except of course when the large sum is taxpayers' money which is used to subsidise broken down nationalised industry.

Mr. Prescott himself told the BBC's "World at One" on 18th November last: The argument is that if the leader knows who has given them money, they may give favours … It's crucially important that the leader is not aware of any financial contributions given to his actual office". In other words—to quote the noble Lord, Lord Richard—"Take it from me, all is well". It must be all right because two top QCs have said so. As a distinguished barrister the noble Lord would know better than I how much this has to do with the law and the judgment of two top QCs, but I am certainly sure that it has everything to do with lack of transparency. As the noble Lord, Lord Richard, said a moment ago, it is a question of who gave the money and on what terms.

Time presses and I apologise for having spoken for so long. In all this we should remember that politics is about interest. I agree with the noble Earl, Lord Russell, that the prosperity and liberty of this country depend on politicians serving the interests of individuals and of bodies, corporate and non-corporate. We must all judge as best we can where the balance of national advantage lies.

1 cannot believe, however, that the national interest can be served by discouraging anyone from supporting a political party. To attempt to conduct political debate by holding interest at arm's length smacks of the innocence that courts disaster. Far better to encourage interests to participate in politics and to rely on controls that provide a balance between transparency and discretion.

I hope that I have been able to convince your Lordships, without repeating everything I said 18 months ago, that the state of party funding is not the problem that the noble Lord, Lord Jenkins, supposes it to be. Did I not know him better I would be tempted to think that he sees this subject as a handy stick with which to beat the Government. If one subtracts the Liberal speakers who have loyally rallied to their leader's banner, one does not discern even in this House from the number of speakers this afternoon a burning interest in the issue. Nevertheless, I acknowledge that the subject is an important and difficult one. It has now been debated twice in your Lordships' House and the subject has been extensively looked at since the Houghton Report over 20 years ago. I echo the tribute paid by the noble Lord, Lord Richard, to the late Lord Houghton. I believe that extensive safeguards exist. Despite what the noble Lord, Lord Holme, said about the dementi on state funding, the Motion suggests to me that the noble Lord, Lord Jenkins, wants state funding, or to reduce voluntary support for the main parties to somewhere nearer the level his own side can attract—a common argument of all those who feel that the rest of us owe them a living.

I hope that the noble Lord will feel able to withdraw his Motion, if only for parochial reasons regarding Wednesday debates in your Lordships' House. If he wishes to press it to a Division, I hope that noble Lords will join me in rejecting his Motion as a partisan attack by a party barred from office for longer than it, but not the electorate, would like. To accept the Motion would, I suggest, merely imply that there is something in the straw man which the Liberals have put up to your Lordships this afternoon.

6.12 p.m.

Lord Jenkins of Hillhead

My Lords, I am never a great believer in second speeches from the same person in a single debate. Therefore I shall not detain your Lordships for long. The noble Viscount the Leader of the House generally has the effect of putting, or keeping, me in a good temper. I am bound to say, however, that I thought his speech did not very directly reply to the case I had endeavoured to put.

The noble Viscount's speech fell into three parts. First, he made a great issue about the fact that I had made a change in the Motion a few days ago. I made the change because the noble and learned Lord, Lord Nolan, told me, which I did not know—perhaps I should have done—that his remit comes to an end in about six months' time and that he has a full programme until then. Therefore one had to seek an alternative method. I immediately instructed the Liberal Whips' office to ring the noble Viscount's office to tell him that I had made the change and why I had made it in order that he need not waste a large part of his speech replying to the original Motion. However, I clearly under-estimated the need he felt for a little padding for his speech.

Secondly, the noble Viscount devoted a large part of his speech to attacking the case—he fairly said that I had not made it—for public funding. He admitted freely that I was against it. Nonetheless he devoted the second part of his speech to that subject. The third part of his speech he devoted to some exchanges with noble Lords opposite about the financing of the Leader of the Labour Opposition's office—not a very direct reply to the Motion which I and my noble friends have put down.

However, the debate has been extremely useful. I am struck by several factors. First, compared with 20 months ago the mood on the Benches opposite has become much more defensive. That is obvious. The speeches we heard from the Back Benches, I am afraid, gave the impression that there was a lot to hide. It was also noticeable that, with the exception of the noble, and in this respect I think gallant, Lord, Lord Campbell of Alloway, there was no—I shall not use the harsh term, party apparatchik; I shall use a warmer term—distinguished officer of the Conservative Party who felt any compulsion to intervene in the debate and to defend the present position.

The noble Viscount appealed to me not to have a Division. I must say that he would have some frustrated troops behind him if I were to change my mind. I am bound to say to him that I am perfectly willing to regard this as an honourable exception for a Wednesday debate. I commend the Motion.

6.15 p.m.

On Question, Whether the said Motion shall be agreed to?

Their Lordships divided: Contents, 138; Not-Contents, 185.

Division No. 1
CONTENTS
Addington, L.	Davies, L.
Alderdice, L.	Dean of Beswick, L.
Archer of Sandwell, L.	Dean of Thornton-le-Fylde, B.
Ashley of Stoke, L.	Desai,L.
Bath,M.	Donaldson of Kingsbridge, L.
Beaumont of Whitley, L.	Donoughue, L.
Berkeley, L.	Dormand of Easington, L.
Blackstone, B.	Dubs, L.
Blease, L.	Eatwell, L.
Borrie, L.	Ewing of Kirkford, L.
Brooks of Tremorfa, L.	Ezra, L.
Bruce of Donington, L.	Falkender, B.
Callaghan of Cardiff, L.	Falkland, V.
Calverley, L.	Farrington of Ribbleton, B.
Carlisle, E.	Fitt,L.
Carmichael of Kelvingrove, L.	Freyberg, L.
Carter, L.	Gallacher, L.
Clancarty, E.	Geraint, L.
Cledwyn of Penrhos, L.	Glasgow, E.
Clinton-Davis, L.	Glenamara, L.
Cobbold, L.	Gould of Pottemewton, B.
Cocks of Hartcliffe, L.	Graham of Edmonton, L. [Teller.]
Craigavon, V.	Grantchester, L.
Currie of Marylebone, L.	Greene of Harrow Weald, L.
Dahrendorf, L.	Gregson, L.
Darcy (de Knayth), B.	Grey,E.

Hampton, L.	Norton, L.
Hamwee, B.	Ogmore, L.
Hanworth, V.	Paul, L.
Harris of Greenwich, L. [Teller.]	Perry of Walton, L.
Haskel, L.	Plant of Highfield,L.
Hayman, B.	Ponsonby of Shulbrede, L.
Healey, L.	Prys-Davies, L.
Henderson of Brompton, L.	Ramsay of Cartvale, B.
Hilton of Eggardon, B.	Rea,L.
Hollis of Heigham, B.	Richard, L.
Holme of Cheltenham, L.	Robson of Kiddington, B.
Hooson, L.	Rochester, L.
Howell, L.	Rodgers of Quarry Bank, L.
Howie of Troon, L.	Rogers of Riverside, L.
Hughes, L.	Russell, E.
Hutchinson of Lullington, L.	Sainsbury, L.
Hylton, L.	Sandwich, E.
Jay of Paddington, B.	Sefton of Garston, L.
Jeger, B.	Serota,B.
Jenkins of Hillhead, L.	Sewel, L.
Jenkins of Putney, L.	Shepherd, L.
Judd,L.	Smith of Gilmorehill, B.
Kilbracken, L.	Stoddart of Swindon, L.
Lawrence, L.	Strabolgi, L.
Lester of Heme Hill, L.	Symons of Vernham Dean, B.
Lockwood,B.	Taverne, L.
Longford, E.	Taylor of Blackburn, L.
Lovell-Davis, L.	Thomas of Gresford, L.
McIntosh of Haringey, L.	Thomas of Walliswood, B.
Mackie of Benshie, L.	Thomson of Monifieth, L.
McNair, L.	Thurso, V.
Mallalieu, B.	Tordoff, L.
Mar and Kellie, E.	Turner of Camden,B.
Mason of Barnsley, L.	Wallace of Coslany, L.
Merlyn-Rees, L.	Wallace of Saltaire, L.
Meston, L.	Warnock, B.
Methuen, L.	Wedderbum of Charlton, L.
Molloy, L.	Whaddon, L.
Monkswell, L.	Whitty, L.
Morris of Castle Morris, L.	Wigoder, L.
Murray of Epping Forest, L.	Williams of Crosby, B.
Nathan, L.	Williams of Elvel,L.
Nicol, B.	Williams of Mostyn, L.

NOT-CONTENTS
Aberdare, L.	Campbell of Alloway, L.
Abinger, L.	Campbell of Croy,L.
Addison, V.	Carnegy of Lour, B.
Aldington, L.	Carnock, L.
Alexander of Tunis, E.	Carr of Hadley,L.
Allenby of Megiddo, V.	Chadlington, L.
Ampthill, L.	Charteris of Amisfield, L.
Anelay of st. Johns, B.	Chelmsford, V.
Annaly, L.	Chesham, L. [Teller.]
Ashbourne, L.	Clanwilliam, E.
Astor, V.	Clinton, L.
Attlee, E.	Cochrane of Cults, L.
Balfour, E.	Colwyn, L.
Beaverbrook, L.	Cornwallis, L.
Belhaven and Stenton, L.	Courtown, E.
Belstead, L.	Cox, B.
Bethell, L.	Craig of Radley,L.
Biddulph, L.	Cranborne, V. [Lord Privy Seal.]
Birdwood, L.	Crickhowell, L.
Blatch, B.	Cumberlege, B.
Brabazon of Tara, L.	Davidson, V.
Brentford, V.	De Freyne, L.
Brigstocke, B.	Dean of Harptree, L.
Brougham and Vaux, L.	Denbigh, E.
Buchan, E.	Derwent, L.
Buckinghamshire, E.	Dilhorne, V.
Bumham,L.	Dixon-Smith, L.
Butterfield, L.	Dudley, E.
Byford,B.	Eccles of Moulton, B.
Cadman, L.	Eden of Winton, L.

Ellenborough, L.	Montrose, D
Elliott of Morpeth, L.	Mottistone, L.
Elton, L.	Mountevans, L.
Feldman, L.	Mowbray and Stourton, L.
Ferrers, E.	Munster, E.
Flather, B.	Murton of Lindisfarne, L.
Gainford, L.	Newall, L.
Gainsborough, E.	Nickson, L.
Geddes, L.	Northesk, E.
Gisborough, L.	Onslow, E.
Gladwyn, L.	Oxfuird, V.
Goschen, V.	Palmer, L.
Gray, L.	Parkinson, L.
Gray of Contin, L.	Peel, E.
Hacking, L.	Pender, L.
Hardinge of Penshurst, L.	Peyton of Yeovil, L.
Harmsworth, L.	Pilkington of Oxenford, L.
Harris of High Cross, L.	Platt of Writtle, B.
Harris of Peckharn, L.	Quinton, L.
Hayhoe, L.	Rawlings, B.
Hemphill, L.	Rennell, L.
Henley, L.	Renton, L.
Hesketh, L.	Renwick, L.
HolmPatrick, L.	Romney, E.
Hood,V.	Rotherwick, L.
Hooper, B.	Saatchi, L.
Hylton-Foster, B.	St. Davids, V.
Inchcape, E.	St. John of Fawsley, L.
Inchyra, L.	Saint Oswald, L.
Inglewood, L.	Saltoun of Abernethy, Ly.
Ironside, L.	Sanderson of Bowden, L.
Jakobovits, L.	Seccombe, B.
Jeffreys, L.	Sempill, L.
Jenkin of Roding, L.	Shrewsbury, E.
Kenilworth, L.	Skelmersdale, L.
Kenyon, L.	Soulsby of Swaffham Prior, L.
Kimball, L.	Stevens of Ludgate, L.
Kingsland, L.	Stewartby, L.
Kinnoull, E.	Stockton, E.
Knutsford, V.	Strathcarron, L.
Laing of Dunphail, L.	Strathclyde, L. [Teller.]
Lane of Horsell, L.	Sudeley, L.
Lauderdale, E.	Swinfen, L.
Leigh, L.	Swinton, E.
Liverpool, E.	Taylor of Warwick, L.
Long, V.	Tebbit, L.
Lucas, L.	Tenby, V.
Lucas of Chilworth, L.	Teviot, L.
Luke, L.	Teynham, L.
Lyell, L.	Thomas of Gwydir, L.
McColl of Dulwich, L.	Torrington, V.
MacFarlane of Bearsden, L.	Trefgarne, L.
Mackay of Ardbrecknish, L.	Trumpington, B.
Mackay of aashfern, L. [Lord Chancellor.]	Vivian, L.
	Wade of Chorlton, L.
Mackay of Drumadoon, L.	Wakeham, L.
Macleod of Borve, B.	Weatherill, L.
Marlesford, L.	Westbury, L.
Massereene and Ferrard, V.	Wharton, B.
Merrivale, L.	Whitelaw, V.
Mersey, V.	Wilcox,B.
Miller of Hendon, B.	Wise,L.
Milverton, L.	Wynford, L.

Resolved in the negative, and Motion disagreed to accordingly.