Political Parties, Elections and Referendums Bill

HL Deb 03 April 2000 vol 611 cc1086-112

3.3 p.m.

Lord Bassam of Brighton

My Lords, I beg to move that this Bill be now read a second time. The core purpose of this Bill is nothing less than to reinvigorate our democracy. Over the past decade or so public confidence in our democratic institutions has suffered as a result of the now well documented instances of financial sleaze that at times seemed to pervade the political life of our country. This is not the time or the place—or perhaps the day—to point the finger at particular individuals or particular parties. The debate, as we have seen in another place, has now moved beyond that. But the secretive funding of our political system, including funding from a number of foreign sources which had no direct stake in the future of this country, has undoubtedly left a sour taste.

We came into government determined to clean up the way we conduct the politics of this country. One of our early acts on entering government was therefore to refer the whole matter of the funding of political parties to the Committee on Standards in Public Life, as we had repeatedly pressed the previous government to do. Perhaps I may say how pleased I am to see in the Chamber today members of that committee: the noble Lord, Lord Neill of Bladen, who, of course, chairs the committee, my noble friend Lord Shore of Stepney and the noble Lord, Lord Goodhart. I particularly look forward to their contributions to the debate on the Bill and I am sure the whole House will be anxious to hear what they have to say on these important matters.

Among the issues which we asked the Neill committee to examine were how best to give effect to our two other manifesto commitments in this area—to ban the foreign funding of political parties and to require the disclosure of donations of more than £5,000. As the House will know, the Neill committee reported in October 1998. Its report and recommendations mark a turning point in the way we conduct the political life of this country. The committee found that once you lift the lid on the funding of political parties, a whole range of wider questions present themselves. I should like to place on record my thanks to the noble Lord, Lord Neill, and to his colleagues for the authoritative and incisive way in which they examined the wide range of issues that are covered in their report. Their recommendations provide the foundations of this Bill. Indeed, it is to their credit that, with only one notable exception, we can map those recommendations across to the clauses of and schedules to this Bill.

This is perhaps as good a point as any to deal with that one exception; namely, tax relief. I am conscious that the Neill committee laid heavy emphasis on the fact that its recommendations had been conceived as part of an overall integrated scheme which should be considered as a whole. This Government have no desire to cherry pick from the committee's 100 recommendations. Indeed, in the spirit of bipartisanship, we have studiously avoided doing so. In the case of tax relief, however, we are simply not persuaded that the case for the recommendation has been made out. In particular, the Government do not believe that a tax relief scheme for political donations sits comfortably with the committee's conclusion, which we share, that there should be no system of general state aid to political parties, Moreover, it falls to the government of the day to make the difficult choices about spending priorities. As the Chancellor of the Exchequer made clear in his Budget Statement last month, this Government's priorities are efficient and effective healthcare and excellence in education. This is not the time to give a tax hand-out of £4 million or £5 million to political parties.

Tax relief aside, we have sought faithfully to give effect to the other recommendations of the Neill committee. In doing so, we are conscious of the need to take the other main political parties with us where at all possible. Save on a small number of specific issues on which I shall touch later, there was a broad measure of cross-party support for the provisions of the Bill during its passage in another place. I very much hope that we can consolidate and build on that broad consensus so that the Bill that we return to another place is one that will stand the test of time as an important part of our constitutional arrangements. We are going to attend carefully to what this House says on the Bill, and we are ready to discuss any matter at any time with representatives of the other parties.

I shall now turn to the detail of the Bill. Part I establishes the electoral commission on which so much of the rest of the Bill depends. A number of Members of your Lordships' House have long argued for such a body to reinforce the integrity of our electoral arrangements. Among these I am pleased to see the noble Lord, Lord Plant of Highfield, and the noble Baroness, Lady Gould of Potternewton, in their places. It is essential to the effective working of the controls on parties' income and expenditure that they are rigorously enforced. But the electoral commission will be much more than simply an enforcement body. Another key function will be as the moderniser of our electoral system. You Lordships have only recently had an opportunity to examine what needs to be done to bring our electoral machinery into the 21st century. A number argued that the Representation of the People Act, as it now is, did no more than advance the way we organise and conduct our elections into the 20th century. If that is the case, the electoral commission will have its work cut out to ensure that our electoral law and procedures finally catch up with the 21st century.

The electoral commission will also play a key role in promoting a greater sense of citizenship. This will involve more than simply encouraging voter turn-out at elections, although the commission will undoubtedly have a part to play in that. Indeed the problem of low turn-outs, particularly at local and European elections, cannot be addressed without promoting a wider understanding of both the rights and responsibilities we each have as citizens in a democratic society.

In order to undertake these and the many other functions conferred on it by the Bill, the commission will need to be seen to be scrupulously independent both of the government of the day and of the political parties. We agree with the Neill committee's statement at paragraph 10.8 of the report that the commission, unlike the United States Federal Election Commission, should consist of independent persons and not of party representatives. We also agree that the commission's members should not be people who have previously been involved in any substantial way in party politics. Such involvement would clearly include serving as an MP, MEP or local councillor and holding office within a political party, perhaps as the chairman of a constituency association. That is an important point about the electoral commission which should not be left to the government of the day or to a selection panel. It should be set out on the face of the legislation. I shall be bringing forward amendments in Committee. To judge from debates in the other place, they will command general support.

I should point out that the Bill already contains a number of important safeguards to guarantee the political neutrality of the electoral commissioners. In particular, these will be Crown appointments and not ministerial appointments. What is more, the appointments may only be made with the agreement of the Speaker of the House of Commons and after consultation with the leaders of all parties with two or more Members of Parliament.

Finally, the selection process, which we intend to commence within the next month, will be conducted in accordance with the code of practice on public appointments. In keeping with the provisions of the code the posts will be publicly advertised and the whole selection process will be overseen by an independent assessor.

Part II of the Bill sets out the arrangements for bringing political parties within the regulatory control of the electoral commission. In large measure the provisions of this part re-enact, with modifications, those of the Registration of Political Parties Act 1998. There is, however, one important difference between the scheme as set out in the 1998 Act and the scheme in this Bill. Under the 1998 Act, the registration scheme was essentially a voluntary one. Under the Bill, organisations which support candidates at an election are effectively obliged to register with the electoral commission. It is only by introducing this measure of compulsion that all political parties can be brought, as clearly they must be, within the scope of the controls on donations and campaign expenditure.

Consequently, it will no longer be possible for an independent candidate to include a description against his or her name on the ballot paper—unless, that is, the person or the organisation which he or she represents, if any, first registers as a political party, There may be different views on whether this change in itself is good or bad. But it is certainly, we think, unavoidable. If we continued to allow independent candidates to enter a description on the ballot paper, it would be open to an organisation to circumvent the controls on parties' income and expenditure by supporting any number of supposedly independent candidates up and down the country each of whom used the same description on the ballot paper. Because all these candidates had adopted the same description it would be possible to run a nation-wide advertising campaign in support of their election.

Before I leave Part II, I want to outline important changes to the registration scheme that the Government will be bringing forward in Committee. The purpose of these changes will be twofold. First, we shall be proposing a separate registration scheme for parties in Northern Ireland. The Neill committee, in its response to the draft Bill published last summer, rightly pointed cut that any exemptions for Northern Ireland parties from the controls on donations in Part IV should apply to all such parties. As drafted, Clause 65 defines a Northern Ireland party as a party with one or more MPs elected for a Northern Ireland constituency or with one or more Assembly Members. The separate registration arrangements for Northern Ireland parties will enable all parties operating in Northern Ireland to benefit from the terms of an order made under Clause 65.

While on Clause 65, I ought to address the more fundamental objections that were raised when the clause was considered in another place—

The Earl of Onslow

My Lords, perhaps I may ask the Minister a question for clarification. Is that to allow the Northern Ireland parties to receive funding from the United States which would not be applicable to other parties?

Lord Bassam of Brighton

My Lords, I shall attempt to address that point in my concluding comments.

The position of the Official Opposition has been that the ban on foreign funding and the requirements as to disclosure should apply as much to Northern Ireland as to the rest of the United Kingdom. In principle at least I do not disagree. But the fact remains that politics in Northern Ireland are not conducted on the same basis as politics in Great Britain. There is no reason to suppose that the publication of the names of donors to the Conservative or Labour Parties will place those donors at any risk. The same cannot, unfortunately, be said of a person who donates to the Ulster Unionists, the DUP, the SDLP, or Sinn Fein. It is also the case that at least two of these parties receive a significant proportion of their funding from or via the Irish Republic. In such circumstances it is simply not realistic to seek to apply the new provisions in full and overnight. The Neill committee recognised all these difficulties and it was the committee that recommended that Northern Ireland parties should be exempt, at least for an initial period, from the controls on donations. Clause 65 gives effect to the relevant recommendations and is as much a part of the Neill package as the other provisions of the Bill.

Returning to the registration scheme in Part II, the second aim of the amendments that we intend to introduce in Committee is to allow a party to confine its registration to one part of Great Britain. The objective is to enable a "sister" party to register in another part of Great Britain. Under the provisions of the 1998 Act, the Scottish Green Party has been unable to register despite the fact that the Green Party (which is a registered party) organises only in England and Wales. That is an anomaly which cannot stand. As I understand it, the Green Party and the Scottish Green Party are two wholly separate organisations with no constitutional links with one another; the registration scheme should be able to cater for such circumstances.

While I am on the subject of ensuring that the Bill fits the circumstances of parties, I should also mention the Liberal Democrats. They have concerns about the impact of the Bill's requirements on their federal party structure. I believe that all the main parties accept that they will have to modify the way they operate, to some degree at least, in order to adapt to the provisions of the Bill. But I can assure the House that we want, if at all possible, to find ways around the concerns that the Liberal Democrats have, and we are in active discussions with them.

I can deal quickly with Part III of the Bill, which is concerned with accounting requirements. The requirements on parties to keep proper accounts and produce an annual statement of accounts are ones which I would expect any members' organisation to follow in any event. The provisions of Part III will help reinforce best practice in this area. We remain open, as we have been in the other place, to representations on the detail.

Part IV gives effect to the ban on foreign funding of political parties and the public disclosure of large donations. I accept that the scheme for implementing these controls, based on the Neill report, is a detailed one. It will have an impact on the administration of political parties. There is no getting away from that. We are, of course, ready to listen to any proposals your Lordships may have for simplifying the scheme as set out in this and other parts of the Bill. But, in considering any such proposals, the test that must be applied is whether the scheme is sufficiently robust to achieve its purpose.

The rules on donations, as recommended by the Neill committee and set out in the Bill, are tight. They extend not merely to cash donations but also to donations in kind and to sponsorship. We felt it right to make amendments in another place to soften the impact of these requirements in one small degree. As it now stands, the Bill would allow a party, or an individual or group, to receive travelling and subsistence expenses for the purpose of visiting another country, even if the money comes from an otherwise non-permissible source. For example, the provision would allow the Government of Gibraltar to continue to support visits by Members of Parliament.

There is a further change which we propose to make to the Bill in your Lordships' House, although it follows on from debates in another place. There is a consensus that it would be unduly restrictive to require the cost of exhibition stands at party conferences to be regarded as sponsorship or a donation. We propose to bring forward amendments to make this clear, building on helpful suggestions which the noble Lord, Lord Neill, has made in a letter to my right honourable friend the Home Secretary.

Parts V and VI of the Bill control election expenditure by political parties and third parties respectively. This is one area where our electoral law has failed to keep up with the realities of modern-day election campaigning. The existing law, as set out in the Representation of the People Act 1983, regulates in considerable detail spending by individual candidates and their agents at the constituency level. The spending limits imposed by the 1983 Act are quite modest: about £8,000 for the average parliamentary constituency. In contrast to these tight restrictions on individual candidates, the political parties are free to spend unlimited sums at national level. This has led to what the Neill committee termed the "arms race" in election spending.

At the previous election some 3,700 candidates spent in aggregate just under £13 million. This sum was dwarfed, however, by the £28 million spent by the Conservative Party and the £26 million spent by the Labour Party. If spending by political parties were left unchecked, the sums involved could well exceed £30 million on each side by the time of the next election, with more to follow as time went on. Elections should be a contest between values, policies and ideas, not between purses. An election cannot be said to be fair if the result is determined by which side can outspend the other. There must be some check against the relentless need to seek large donations. The controls on expenditure set out in Parts V and VI are long overdue and will ensure that in future elections there is a level playing field as between the main political parties.

As to Part VII, I come to the one part of the Bill where we have not yet managed to establish the same degree of cross-party consensus as we have with the other nine parts. Part VII is concerned with the conduct of referendums. It is important to record that this part of the Bill is not concerned about the conduct of any particular referendum but about the conduct of referendums generally. That fact was obscured during some of the debates on Part VII in another place. The essential aim of this part of the Bill is to ensure that each side in a referendum campaign has a fair opportunity to put across its case to the electorate. To this end, the Bill provides for the Electoral Commission to designate an umbrella organisation on each side of a referendum campaign. Each side will be eligible for a grant of up to £600,000, a free mailing of a referendum address and free air time for referendum broadcasts. These arrangements at least have been generally welcomed.

In addition, Part VII provides for the designated umbrella organisations, and other individuals and bodies campaigning in a referendum, to be subject to spending limits. Your Lordships' House will be aware that the Neill Committee came down against expenditure controls in a referendum, not as a matter of principle but on grounds of practicality. It is the view of the Government that as a matter of principle there should be spending limits in a referendum. The arguments are essentially the same as for an election. Fair play surely demands that there should be some safeguards against the possibility of the whole campaign being skewed by one wealthy individual or organisation.

As to the practicalities, the solution can be found in the Neill committee's own proposals for controlling donations made to referendum campaign organisations. The Neill scheme requires such organisations to be registered with the Electoral Commission for the purpose of applying the ban on foreign funding and the requirements as to disclosure. Once such organisations have been brought within the regulatory remit of the Commission it is then perfectly possible to apply spending controls to them.

How the Bill deals with Recommendation 89 of the Neill committee's report has also attracted much comment. The committee argued in Recommendation 89 that the government of the day should remain neutral in a referendum campaign and not distribute at public expense literature setting out or otherwise promoting its case. We believe that Clause 120 gives effect to that recommendation in a straightforward and unstinting way. There is an absolute prohibition on the government of the day publishing, displaying or distributing promotional material in relation to a referendum in the 28 days prior to the date of the poll.

Suggestions have been made that this 28-day "purdah" period is too short. The period is, however, wholly consistent with the average length of a general election campaign, with which the Neill Committee drew a parallel. Furthermore, in its response to the draft Bill the Neill committee welcomed the way in which the Government had responded to its recommendation on this issue.

Lord Marsh

My Lords, I am grateful to the Minister for giving way. Perhaps I may revert to the question of funding where an organisation does not fund any party's campaign but runs a parallel campaign. To pick an example at random, the European Commission has, quite legitimately, information offices throughout the UK and would have a very clear view on a referendum on EMU.

Lord Bassam of Brighton

My Lords, that is an important issue to which we shall no doubt give further consideration as we go through the Bill.

The Earl of Onslow

My Lords, does the noble Lord's response indicate that he does not have the faintest idea of the answer to the question?

Lord Bassam of Brighton

My Lords, I am grateful. For example, candidates will be subject to controls on the source and disclosure of donations similar to those now introduced for parties. The opportunity has also been taken to modernise or remove a number of provisions of the 1983 Act which are now out of date. As I have said, it will fall to the Electoral Commission to continue this modernising process.

There is another amendment to the 1983 Act which I propose to table in Committee. As many of your Lordships will be aware, the existing £5 limit on what a third party may spend in support of, or in opposition to, a candidate at an election has been held by the European Coal of Human Rights in the case of Bowman to amount to an unjustified restriction on freedom of expression. As recommended by the Neill committee, I shall table an amendment to increase the limit to £500 in the case of a parliamentary election. A limit of £50, plus 0.5p per elector, will apply to local government elections. With the agreement of the Scottish Parliament and Executive the amendment (to Section 75 of the 1983 Act) will extend to local government elections in Scotland.

Part IX gives effect to the Neill committee's recommendation that a company should be required to have the consent of its shareholders before making donations to political parties and other political organisations. It is now widely accepted that political donations by a company are of such a unique nature that the decision to make these donations should not be left to the general discretion of the directors. The requirement to seek the approval of shareholders at least once every four years will not be onerous but will ensure that companies maintain the highest standards of corporate governance.

I shall confine my comments on Part X of the Bill to Clause 134, which is concerned with the qualifying period for registration as an overseas voter. This provision does rot stem from the Neill committee hut from the Home Affairs Select Committee in another place. In its 1998 report on electoral law and administration the committee unanimously concluded that the existing 20-year qualifying period was excessive and proposed a reduction to five years. The Government agree with the committee's view that the existing qualifying period is excessive. It is wrong surely that British citizens who have lived abroad for a considerable number of years, and who have in many cases effectively severed their ties with the United Kingdom, should continue to be able to influence the outcome of elections here. That said, the Government felt that a reduction in the qualifying period to five years went too far in the other direction. Therefore, they have opted in the Bill for a qualifying period of 10 years.

I am aware that this clause was subject to considerable debate in another place. At Report stage a number of amendments were lodged which pulled in a number of different directions. In responding to those amendments the Parliamentary Under-Secretary at the Privy Council Office indicated that the Government remained ready to listen to alternatives to the 10-year qualifying period in Clause 134. This is very much the sort of provision which should, if possible, be the subject of a political consensus. We shall listen with close interest to what your Lordships have to say on this matter, and particularly to any suggestions which could pass the consensus test.

Finally, I should like to say a few words about the timetable for commencement. The lynchpin will be the successful establishment of the electoral commission. I have already indicated that we intend to commence the selection process for the electoral commissioners within the next few weeks. Subject to the Bill receiving Royal Assent by the Summer Recess, we would hope that the appointments could be made by November. Thereafter the priority will be to bring the controls on donations and campaign expenditure into force. Ideally this will be done in time for the next general election. Whether this is possible will naturally depend on when the election is called. Realistically, the earliest that Parts IV to VI of the Bill can be brought into force is in March or Apri12001. Thereafter there is likely to be some staggering of the implementation of the other functions of the electoral commission. In particular, we do not envisage transferring the functions of the four Parliamentary Boundary Commissions to the electoral commission until after they have completed the fifth general review of parliamentary constituencies in 2005 or thereabouts.

This Bill will do much to strengthen public confidence in the democratic process. It will ensure that there is full transparency and openness in the funding of political parties and reinforce the existing rules for the fair conduct of elections and referendums. These are reforms which in many respects are long overdue. They are vital to the health of our democracy. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Bassani of Brighton.)

3.31 p.m.

Lord Mackay of Ardbrecknish

My Lords, I do not envy the Minister his task in explaining the detail of the Bill. What at first sight would seem to be a few simple, easily understood propositions in the Fifth Report of the Committee on Standards in Public Life have been turned into a long, complicated and, in many places, pretty impenetrable legalese which no ordinary person could be expected to follow. If ever a Bill needed to be written in plain English, it is this one, affecting as it does the very building blocks of our parliamentary democracy.

This Bill will need to be understood not just by the treasurers of our parties nationally—they may have access to legal opinions—but by the treasurers of every constituency association of every political party up and down the land. Frankly, if a potential candidate for the office of treasurer—it is never the easiest office to fill in any organisation—finds that he has to read, mark and inwardly digest the stuff in this Bill, he will pass up the chance of being constituency treasurer; and, worse, he will advise all his friends to do likewise—and we are supposed to be encouraging people to participate in the political process!

What are the simple propositions to which we can probably all agree, at least in part? First, there should be an electoral commission. Secondly, it should be responsible for the registration of political parties. Thirdly, there should be rules on the conduct of referendums, and these should be overseen by the electoral commission. Fourthly, there should be transparency in the larger donations to political parties and to other bodies which attempt to influence the outcome of elections and referendums. Fifthly, no foreigner should donate to political parties—although who exactly is a foreigner is an interesting question which my noble friend has already raised.

I start with the electoral commission. Your Lordships will recall that during the passage of the Referendums (Scotland and Wales) Bill in the summer of 1997, I argued in favour of a general referendums Bill to cover all referendums, and a referendums commission to oversee their conduct. I prayed in aid the report of the Commission on the Conduct of Referendums which was set up by the Electoral Reform Society and the Constitution Unit, and chaired by Sir Patrick Nairne. I see that the noble Baroness, Lady Gould of Potternewton, remembers my amendments. When we discussed the Registration of Political Parties Bill (now an Act), the need for an electoral commission also arose.

In many ways, the Government put the cart before the horse by introducing referendums and registration before setting up the proper body to deal with those issues. But I suppose we should be thankful that at last they have got round to setting up the commission—better late than never. We shall want to explore the kind of person who will be a commissioner and how that membership will be decided. There must be no possibility of the commissioners being Tony's cronies. I listened with interest to the Minister on the issue of who would be commissioners. I look forward to reading his amendments, and perhaps bringing forward some of my own.

We shall want to explore the way in which the boundary commissions will be composed; and the relationship between the Scottish Executive and Parliament as regards boundaries in relation to Westminster, Scotland and local government. I shall want to study carefully the Minister's remarks that the Government have no intention of bringing the next boundary commission within the rules of the electoral commission. I find that a very odd way for the Government to approach the issue.

We shall want to look critically at Clause 12(1). We are concerned that the commission might become a propagandist for electoral change and, even more oddly, for the European Union. I cannot understand what the first subsection of Clause 12 means.

We look forward to government amendments—it sounds as though we shall have many, but that is par for the course for most of the Bills which arrive in your Lordships' House—which will link the commission with the Representation of the People Act which we passed a few weeks ago. It is another example of putting the cart before the horse.

I turn to the commission's role in the Registration of Political Parties Act 1998. Your Lordships will remember our debates on that Bill. My suspicions and fears about Government putting forward legislation to regulate political parties were somewhat underlined today when I heard the Minister talk about the regulatory control of political parties. Perhaps that is what Mr Cook will talk about today to Mr Mugabe; I am sure that he would very much like a lesson on the regulatory control of political parties. The amazing thing about the Bill is that it repeals the 1998 Act. Is that a record? Why do the Government feel it necessary to do that and to add 16 clauses to what is already a large and cumbersome Bill? In Committee, I shall be looking to the Minister to justify any changes he has made to the 1998 Act in its shift into this Bill.

I turn to referendums. In Committee I shall be judging the details of the Bill against the proposals of the Nairne commission—proposals which were largely, but not wholly, echoed in the Neill committee's report. We shall want to explore the omissions. For example, do we have pre-legislative referendums or post-legislative referendums? Who decides the question? That is perhaps the most important question. What, if any, thresholds should be used to judge the result?

I welcome the fact that the Government accept the recommendation in Nairne and Neill that umbrella campaigning organisations should he recognised for core funding. Both Nairne and Neill looked at the case for capping expenditure and referendums. The Minister spoke about that at some length; and I am not surprised. The Government have cherry-picked both Nairne and Neill as regards this matter. At page 75, paragraph 14, Nairne said: On balance, it is not considered practical to exercise government control over the total expenditure by those campaigning on either side in a referendum. Umbrella campaigning organisations should be required to undertake to provide accounts of monies received or spent on the campaign if they are to qualify for public money or services in kind". Neill said that, perhaps more dramatically at paragraph 12.46 on page 170. Referring to the capping of expenditure, he said: It appears to us that under these circumstances it would be impracticable to try to control campaign spending. The number of individuals and organisations involved would often be too large. The time-scale would often be too short. Adequate accounting procedures would often be impossible to put in place. The administrative apparatus required would resemble one of Heath Robinson's most outlandish contraptions— and would almost certainly not work". The Government will have to explain in detail why they have chosen to go against those recommendations. When I read the Bill, I wondered whether it was to show in Clauses 106 to 113, and more particularly in Schedules 12 and 13, which I invite your Lordships to read during a quiet moment, what exactly a Heath Robinson contraption looks like. I suggest that those two schedules are just that. I should have thought that transparent donation would be more than sufficient.

If the Government's motive is to have a balanced financial position between the sides in the referendum, their legislation fails. Let us consider the referendum in Scotland in 1997. The Bill does not indicate how the limits would be calculated, but, for easy counting, let us assume that it would be one-tenth of the UK figure given in Schedule 13. Each umbrella organisation would have been able to spend £0.5 million. The three parties in favour of a "yes" vote would have been able to spend between them £1.2 million. That is a total for the "yes" side of £1.7 million. The Conservatives would have been allowed £0.3 million, which would have given the "no" side £0.8 million. According to my arithmetic, £1.8 million and £0.8 million are not a balance, especially when the trade unions can pitch in with perhaps fifty grand each, as can a few more bodies on either side.

However it would have worked, there would have been no balance in the expenditure limits at that Scottish referendum. I suggest that it would be the same for any referendum one contemplates in the future. Therefore, Schedule 13 does not create balance; it ensures imbalance. Perhaps Nairne and Neill were right. We shall I want to hear some convincing arguments from the Minister before we let the Bill go down that road.

Finally, I turn to donations and expenditure. Expenditure is simpler because it builds on the well-used system employed to limit expenditure by candidates in their constituencies during elections. We have no difficulty with the simple idea that there should be a limit, but that is where simplicity ends and the complexity, so beloved of this Government, takes over.

First, the limit is to cover 365 days leading up to the election. So my question to the Minister is: at this moment, are we inside that period for the next election or are we not? Tile Minister will not answer, even if he knows—and I doubt that he does. I do not blame him either way, but the mere fact that I can ask a question which every one of your Lordships knows is impossible to answer shows that the proposition is ridiculous. Have, your Lordships heard anything so daft as counting expenditure in a whole year before an election, the date of which is known only to one person—namely, the Prime Minister—and, I suspect, not even to him at this moment? It would be retrospective accounting. The suggestion is crazy.

What is wrong with using the definition of "election period" used for constituency expenditure at the time of an election? That is simple. Or, if the Government want to cast their net a little wider, why not start the clock ticking when the Prime Minister announces the date of the election and Parliament rises?

However, I Promise your Lordships that the proposal gets dafter! As regards elections to the European Parliament, the Scottish Parliament and the Welsh and Northern Ireland Assemblies, the period is to be four months before the date of such an election. That is a little easier because those elections are fixed, but there is every likelihood that there will be overlapping between some (and perhaps all) of those elections. That is where Part III of Schedule 8 comes in because it tries to deal with the various combinations of overlapping which might occur. It is seriously incomprehensible gobbledegook. I shall not read it to your Lordships now, but I promise those of your Lordships who are to attend the Committee stage that I fully intend to read it out then and to demand clear, simple explanations from the Minister. I give him plenty of warning of that. Frankly, I believe that the Government should abandon that system and use the one that is more related to our normal way of dealing with the situation; that is, to define the election period as the three or four weeks leading up to the election.

Then there are the expenses of the third parties—no, in this case, not the Liberal Democrats, the SNP or Plaid Cymru, but organisations such as pressure groups which want to campaign in the election, or individuals such as Mr Souter who is so annoying the Labour Party in Scotland by campaigning against the repeal of Section 28, or Section 2A as it is in Scotland. As we know, the cap for an organisation campaigning in a UK election is to be about £1 million.

Guess what, my Lords: trade unions affiliated to the Labour Party and taking part in elections in the Labour Party (elections of the leader, the recent elections of the mayoral candidate for London), and giving help in cash or in kind to the Labour Party will be considered as third parties. Talk about Chinese walls! And of course each and every one of them will be entitled to spend £1 million campaigning for the Labour Party. If they were all to spend the money—I accept that that is a large assumption, but one must work out how Bills can be used—the Labour Party's allowed expenditure would simply double. I call that cheating—pure and simple.

Mr Peter Riddell was kinder. At page 115 of the Neill report, he said: Fuller disclosure should reduce the need for limits either on levels of donations or restricting central spending by parties. Overseas experience suggests that such limits can easily be evaded. Labour proposals for a national limit of f15 million on election expenses and of a tenth of this amount for national campaign spending by 'third parties' are open to abuse. Trade unions and other Labour allies could easily funnel money via such 'third parties', circumventing the intended national limit". Peter Riddell is clearly politer than I am, but my point is made. We shall certainly want to take the Government to task on why they allow their cousins to escape the cap on expenditure for the Labour Party.

I turn from spending money to raising money. At paragraph 10.32 of the Neill report, the same Peter Riddell said: the real issue concerns the raising of money rather than its spending". However, John MacGregor, who was a member of the standards committee, disagreed with his colleagues and took the view that the disclosure of donations, not their spending, is the key. Given the horrendous complications I have mentioned, perhaps we ought to think carefully about the opinions of two such experienced men as John MacGregor and Peter Riddell.

Turning to donations, what I find surprising about the Neill report appears at the beginning, at paragraph 4.5 on page 45. In a report of this size, page 45 is near the beginning! It states: In fact, the suspicions which are entertained concerning large givers are commonly lacking in any justification. We have been given no evidence that leads us to doubt that nearly all give generously either because they support the general aims of the party which they finance or in order to minimise the risk of the opposing party attaining power". Normally, if there is no evidence, there is no case and there is no need to take remedial action. However, that position appears to be too logical. The report, and subsequently the Bill, propose that all donations over £5,000 should be made public by reporting to the electoral commission and that no donations should be accepted from foreigners. It seems simple, but nothing is ever simple in this Bill.

First, as regards donations, the boundary is set very inelegantly in a double negative of, "not less than £5,000". Why cannot it merely be "greater than £5,000", making £5,000 the limit? If someone wants to sign a cheque for £5,000, he will not have to declare it, but if it is for more than that, he will. That would seem to be a more sensible situation than opening up the old dodge, which we all see when we go shopping, of goods costing £9.99, or £19.99 or £99.99. In this case, it is £4,999.99 and I do not see the logic in it. I believe that £5,000 ought to be the top of the lower limit.

Furthermore, why report during a general election every seven days? Are we really trying to make things as difficult as possible for party and constituency treasurers at the busiest time for them and everyone else? Surely, a report after the election, when the expenditure has to be submitted, is a sufficient check. Why have not the Government accepted Recommendation 39 of the Neill report? That states, at page 99: Political parties should be eligible to claim under the tax relief scheme if at the last general election two members of the party were elected to the House of Commons or one member was elected and the party won at least 150,000 votes". The noble Lord, Lord Bassam of Brighton, told us that the Government did not agree. I was not in the least convinced about why they did not agree. Certainly, the cost of £4 million leaves me quite unmoved. I understand that that is approximately the cost to the taxpayer of the Labour Party supporters who work in departments in Whitehall as political advisers. When my party and other parties ask about that £4 million, we are told that it is "peanuts" in the whole scheme of things. If it is "peanuts" so far as concerns spending on political advisers, may I suggest that it is "peanuts" in this regard, too? If the Government want us to remain with the Neill report, they should jolly well not have cherry-picked it themselves first.

I turn to the matter of the "permissible donor". As usual, that begins simply but ends up as a little minefield. One might have thought that "British citizens" would be a good place to start; but no. After all, some of them live abroad, many working for British companies and many working in British interests. However, unless they are listed on the register as "overseas voters"—and that will be made more difficult by the Government—they will not be able to donate. Yet, citizens of the Commonwealth and of the EU who are resident here even for a short time can get on to the register and contribute.

Therefore, a Canadian citizen who is resident here for his work can register and donate. Yet, an American in exactly the same position cannot, unless that American stays in America and wants to donate to Sinn Fein/IRA. We all know where some of that money ends up, and it is not only in the democratic process. Yet, under the Bill, that will be all right. It is not all right in my book.

Let us consider the Scottish example. Why should the Irish diaspora be allowed to donate to a party which is deeply mired in violence, but a member of the Scottish diaspora be forbidden from donating to the Scottish National Party, which has never been involved in violence? Although I have no truck with the Scottish National Party's principles, I shall want to know the Minister's answer to that. He will have to work very hard to convince me that his approach is right.

I might be convinced of the Neill recommendation that citizens of the Irish Republic, or, to be logical, people on the register of electors in the Irish Republic, should be allowed to donate. However, I would put two conditions on that: first, they should be allowed to donate to any party in the UK, not only to the parties in Northern Ireland; and, secondly, any donation over the limit should be declared and made public. Otherwise, how will we ever know where the money is coming from and what source is providing those donations?

Lastly, I turn to companies. We start with a simple proposition that shareholders should agree donations. Why the Government feel that they have to legislate is beyond me. Actually, it is not beyond me; I believe that it is called "spite". If shareholders did not want money to go to political parties, they could raise the matter at the annual general meeting and do something about it.

Of course, the simple proposition soon collapses. Nevertheless, I hope that the Minister will he able to say that I am wrong in my reading of the Bill. A company incorporated in Europe and carrying out business in the UK will be able to give donations without seeking shareholder agreement. Therefore, for example, BMW might decide to give donations to any party (other than the Labour Party after the way that the Government have behaved) and it would not need shareholder permission; yet a British company would. That does not seem logical.

As I have said more than once, the intention of the Bill is to implement a number of simple propositions, most of which it is fairly easy to agree with. However, by the time those simple propositions are translated into the Bill, they become complicated, contradictory, illogical, certainly bureaucratic, and expensive for the political parties to implement. We shall subject the Bill to intense scrutiny and shall expect proper debate in Committee. We shall expect the Government to attempt to simplify the Bill as we go along so that ordinary folk who are interested in politics can understand what regulatory provisions are being placed on the fundamental freedoms of people in this country. We shall hope also that the Government will act in a non-partisan way in relation to a Bill which, in my view, strikes in parts at the very heart of our democratic process.

3.53 p.m.

Lord McNally

My Lords, I was quite looking forward to the Committee stage of this Bill until the noble Lord, Lord Mackay, explained how he planned to handle the schedules to it. Usually, his speeches are sparkling and witty. But the thought of him reading out in detail the schedules makes one think that it will be hard going. However, I agree with something that he said at the end of his speech. The Government may well have been motivated by feelings of "sauce for the goose; sauce for the gander" in terms of making companies justify their party political donations, pretty well as the Conservative government forced through ballots of trade unions. I believe that one of the dangers in approaching this Bill is the idea that, "It is now our turn t D draw up the rules". If that is the case, we shall never obtain the kind of consensus that the Minister called for when he introduced the Bill.

On these Benches we give the Bill a broad welcome and broad support, although we make clear that we believe that it is he beginning of a process rather than the last word on the matter. Of course, there are anomalies which must be cleared up. Again, I agree with the noble Lord, Lord Mackay, on the question of part of the Bill being put in place a year before the general election. Perhaps I may help the noble Lord: I calculated 395 days to the general election. However, I am not sure that that will work for this Bill.

We are dealing with three important areas of politics: how political funds are raised; how they are spent; and how elections and referendums are conducted. As the Minister said in his opening remarks, it is a debate which is as topical as the morning's headlines. The noble Lord, Lord Mackay, referred to the difficulty of filling the post of party treasurer. I believe that we are probably all the poorer without the experience of "Lord Ashcroft of Belize". Perhaps he will join us in time for the Committee stage. If not, perhaps we could persuade the noble Lord, Lord McAlpine, to contribute. Both have considerable expertise.

We have always considered one of the specialities of this House to be that around us were dotted Members with particular expertise on the matter under discussion. Before the noble Lord intervenes, I recognise that someone who speaks from the Benches of Lloyd George should not dwell for too long on these matters. I believe that that may have been what he was intending to say.

Lord Mackay of Ardbrecknish

My Lords, I was simply going to say that I was under the impression that at least one of his colleagues is, or had been, treasurer of his party.

Lord McNally

My Lords, I shall move on quickly! I believe that Sir Edward Heath and, indeed, the noble Viscount, Lord Cranborne, said all that has to be said on that matter. However, I recommend to noble Lords the article in today's Guardian by the noble Lord, Lord Hattersley. He is not in his place, but then he rarely is. There is no doubt that there is about the noble Lord, Lord Hattersley, the fervour of the born-again radical. Somehow, my complete approval is tempered only by that old Hollywood saying, "I knew Doris Day before she became a virgin"!

The background to the Bill is that it is part of a whole package of reforms. Having read an article by the noble Lord, Lord Rees-Mogg, in this morning's Times, it is clear that some elements view with disapproval the attempt to bring our politics up to date. However, as the Minister intimated in his remarks, the point is that there was a need to rebuild public confidence in our political system, a need to devolve power from Whitehall and Westminster, and a need to make the systems fairer and reflect more the will of the people. In particular, there was a need to remove the stench of sleaze that had gathered around politics. I believe that today's Bill is part of another building block in that process. In our view, the aim should be to make political funding transparent and accountable. Spending rules should be fair and manageable.

We should not be setting up a system, rather like some elements of our tax laws, where the challenge is how you get around them. We need a system that is going to be obeyed. I agree with the noble Lord, Lord Mackay, that to achieve that, the system needs to be simple, understandable and usable by people, many of whom are amateurs. It is not just professional politicians that will make the system work, but thousands and thousands of volunteers. If the system becomes too complicated, it will become extremely difficult.

I can tell your Lordships of my own experience in 1983. I was passing a newspaper stand where the headlines were: "Five candidates to be prosecuted for election malpractice". Having had some experience of these matters I wondered who the fools were who were not able to get their returns in within their expenditure limits. I bought the paper and saw my own name there. The fact is that I had consulted Stockport Town Hall which had given me a figure. I told my voluntary agent that she should return figures accurately and within the figure we received from Stockport Town Hall. Stockport Town Hall had made a mistake. But it was my responsibility, not theirs or even that of my agent. I ended up being interviewed by two policemen from Greater Manchester police about possible election malpractice. The spending limits must be simplified, as the Bill attempts to do, so that volunteers and political innocents, such as myself, do not fall foul of them.

The other problem is that national expenditure was uncontrolled and it overlapped increasingly with local campaigns. It really did not matter how much I spent in Stockport when the work of the noble Lord, Lord Saatchi, was all over the constituency on national campaign hoardings. Added to that, we now have the massive increase in telephone canvassing, which is very hard to link to any particular constituency. There is an increasing use of the Internet. I am told that at Millbank there is already a special unit gathering Internet names for Internet campaigning. I am sure that the Conservatives have likewise. That kind of new technology campaigning will be difficult to control or account for. Therefore, we must set limits to party fundraising which, once and for all, cuts the umbilical cord between party fundraising and party-political patronage. It offends the general public.

I say that it is not the end of the matter because I think we shall have to return to it. We have said consistently that state funding is the real way to keep politics clean. The sums mentioned in the Bill for the two major political parties are extremely difficult to raise by means that do not involve either organisations or individuals making donations to political parties which imply some influence-buying.

If we are to achieve a political system that is truly clean, we need state funding. There has been a degree of hypocrisy regarding state funding, not least among the parliamentarians. They have consistently resisted state funding for the party outside Parliament, and yet been ever ready to extend state funding to parliamentarians through the Short money and now the Cranborne money. They take it for themselves but do not to see it as a logical extension in relation to this matter.

Short money was introduced because Harold Wilson was determined that not a penny piece of state funding should get to Transport House, which was then under the control of the ever-loyal Mr Wedgwood Benn. Therefore, the Short money scheme was devised. We should try this system of capping and transparency. However, if we really want to clean up our politics, the only way is through a proper system of state funding.

I wish the electoral commission well. I think this is an important innovation. It must be seen to be truly independent. I query what the Minister said as regards the exclusions that he set out. Outside of a Cistercian monastery, I am not sure who he will find who is qualified to sit on the electoral commission. I see some old friends there, but I have never been as dazzled by the independence of the Cross Benches in this place as some people purport to be. I do not believe that political eunuchs are particularly well qualified to take on the particular roles set down for this commission. After all, we have had some fairly good examples in the past of ex-MPs becoming extremely good judges. Furthermore there are those who were active in political parties who have become very good magistrates. The point I make is that being active in party politics should not be a disqualification, as the Minister seemed to be implying, from taking on a role that requires independence and judgment. I think that that is an unnecessary debarment of extremely worthwhile talent, although I take the point that "cronyism" has to be avoided as well.

I look forward to the debates on how we organise our referendums. I see a few familiar names on the speakers' list today who might be examining this. My own suspicion is that even if the noble Lord, Lord Stoddart, were allowed to count every vote personally, he would still object to the outcome of some referendums. But I look forward to his speech.

We shall take up a number of matters in Committee. The Minister indicated my party's continuing concern about federalism, and we welcome the constructive attitude he has taken in relation to that. We are still worried about the overall expenditure limits allowed by the Bill, although they are less than the £28 million spent by the Conservatives, the £26 million spent by the Labour Party and the £3 million spent by the Liberal Democrats—that was not mentioned—at the last election. But it is still an enormous amount for the Conservative and the Labour parties to raise. We are also concerned that the by-election campaign expenditure limit has been very high. I return to a point I made earlier, and I believe it was made also by the noble Lord, Lord Mackay. We must remember that, particularly in relation to smaller parties, one is dealing with volunteers and with very small organisations. Therefore, we should not impose too rigorous legal requirements upon them. Mention has also been made of the need—and we shall deal with this in Committee—to look at the qualification for overseas voters.

I was interested to hear what the Minister said about exhibition stands at party conferences. From my experience, I have seen a growth of trade fairs around the party conferences which are now major sources of funds for all the political parties. That is something which may need to be looked at so that funds are not dog-legged through large charges for exhibition stands to overcome the other restrictions.

I look forward also to our discussions about third party campaigning. I believe that there are dangers for democracy if we do not look carefully at and perhaps learn something from the American experience of how very well-funded, single-issue pressure groups can distort the electoral process. That needs to be looked at. We must also take on board the points made about the capacity of organisations with an interest in the outcome of a referendum trying to distort the process.

In the end, from these Benches, we welcome the Bill because it takes us in the direction of greater fairness and transparency in relation to both the funding and organisation of political campaigning. It is a beginning, not an end but, as such, we support it.

4.11 p.m.

Baroness Gould of Potternewton

My Lords, like the noble Lord, Lord McNally, I look forward to the Committee stage of the Bill which I believe will be lively. But I hope that, as in the other place, we can proceed on a consensual basis and that we do not get so bogged down in the detail that we lose sight of the principle of the Bill.

It seems to me that the Bill is an important milestone in the development of our democratic institutions. It will be the first time that political parties have been subject to statutory regulation. We should offer our congratulations to the Neill committee on its work in making the Bill possible. We should congratulate the Government on following through many of the recommendations of the Neill committee. As most of those recommendations were ones I suggested in my evidence to the Neill committee, I feel particularly strongly about that.

There is a powerful democratic and ethical, as well as constitutional, case for the financial affairs of political parties being open and accountable. A vacuum of legal principle has led to a level of disquiet about the financial affairs of political parties. I hope that this new era of openness, transparency and accountability w ill help to restore the electorate's faith in the political Process. That is a faith which we have tried to uphold historically.

From the early days of universal franchise, it was seen as an essential principle of democracy that economic power should not be able to buy political power: from the passing of the Secret Ballot Act 1872, which protected voters from intimidation, to the introduction of the Corrupt and Illegal Practices Prevention Act 1883. That Act remains the basis of our election law. But it takes into account only the expenses of the candidate and the election agent. That was understandable at the time because political parties barely existed outside the constituency or the parliamentary caucus. But things have changed. There have been dramatic changes in campaigning techniques over the past 120 years. Political parties have become more dominant. There has been much more control from the centre. That created an anomalous situation which has to be rectified by the introduction of a level playing field for national expenditure at general elections. It is a great pity that we have had to wait so long to do that. I shall return later to that point.

It is always gratifying when something for which one has argued and campaigned comes to fruition. The Labour Party was the first political party to promote the case for an independent electoral commission. It is encouraging to see the Conservative Party now converted to that view. It is better late than never. The party was certainly opposed to it in government, and I have the evidence to prove it.

I understand that it is hoped that the electoral commission will be in place before the end of this year. It is crucial that a speedy timetable is adhered to because the work and functions of the commission underpin all that follows. It is the bedrock on which the Bill is based. As there is such general consensus on the establishment of a strong, independent commission, there is no need to argue the case for supporting—at least in principle, if not in detail—Part I of the Bill.

It is important that the commission is seen to be open and transparent. The accountability and regulation applying to the political parties must apply also to the commission. Its independence is crucial to its successful operation.

As the Minister said, the Bill identifies clearly the commission's independence from the government of the day. The arrangements to be followed are those which apply to the National Audit Office, and I do not believe that anyone can say that that is controlled by government. It will be directly accountable to Parliament, and the distinctive machinery for appointing members of the commission and for setting its budget will help to reinforce that independent status.

I have a small problem with absolute independence, as has the noble Lord, Lord McNally. I believe that the commissioners must have a detailed understanding of the reality of running elections locally and running political parties nationally. The commission's many functions rightly cover all aspects of political party and election activity; that requires a real level of expertise, experience and an understanding of the political process. The issue is important because I do not believe that there will be time for a learning curve. The commission's first actions will determine its success for the future.

It has been suggested—and no doubt the claim will be made again today—that the commission could become merely an advisory body or that it will be partisanly packed. That is a complete misinterpretation of the provisions in the Bill in respect of the commission's membership and functions. Representation on the Speaker's Committee, which will oversee the work of the commission, has also been challenged by the suggestion that it will be dominated by senior government appointees. Those seem to me not very valid attempts to challenge the conduct of referendums as proposed in Part VII prior to the referendum on British entry to the European single currency. Of course, we must be concerned that there is independent oversight and monitoring of the conduct of all referendums, not just that one, and that both sides of the argument have a fair opportunity to put their case to the voters. I believe that the Bill adequately meets both of those requirements.

The commission's structure and functions in respect of referendums fully satisfy the views of the Nairne commission, of which I was a member, and provide the necessary guidance on organisational, administrative and procedural matters relating to the holding of a referendum. Like the noble Lord, Lord Mackay, I look forward to having discussions about the detailed funding of referendums in Committee and at future stages.

However, I make one point today on the wording of the question, which we discussed in the debate initiated by the noble Lord, Lord Hayhoe. It is essential that the question should be short, easily understood, objective, fair and designed for only two possible answers—"yes" and "no". It should not be multi-optional nor open to alternative meanings. I hope that the commission will advise the Government on that issue.

I make one further point on the role of the commission. It is right that the registration of political parties now comes under its umbrella, even though the Bill was passed only two years ago, and that the process of registration is no longer voluntary. However, I wish that the Bill had gone further. I believe that registered parties should have to prove that they have a membership of a certain level and that they are properly constituted bodies.

The constitutional logic behind public disclosure laws is that political corruption thrives on secret financial gifts. In exercising their vote electors have a legitimate right to know who is financially underwriting the political parties they are being asked to support. The public scrutiny of large donations by permissible donors will give that right, eliminating, as it does, donations from secret sources, blind trusts, foreign donations and loans which suddenly become donations. It is right also that donors should have to be registered electors. I might go further and suggest that they should be resident in the UK.

Donations from institutions must be treated differently from those of large individual donors. Since 1913, trade union funding has been controlled by legislation, added to by further regulation in 1984 and 1993. In 1989, your Lordships' House interestingly passed an amendment to put donations by companies on much the same footing as donations from trade unions. The amendment was rejected in the other place. On this occasion, its Members have finally been persuaded of the unfairness of the current position. However, one aspect of this part of the Bill requires further examination. The subject may be covered by the Minister's reference to exhibitions at conferences. Currently, there is no provision for small-scale sponsorship. While retaining the principle, there could be a case for setting a de minimus limit which would be of benefit both to companies, as the CBI has suggested, and to political parties.

I turn to expenditure. I have a number of queries, although not, I hasten to say, concerning the £20 million maximum limit on national expenditure, which was another of my suggestions to the Neill committee. I wish to probe the requirement in the Bill that political parties nationally declare all expenditure regionally and locally not covered by the current statutory requirements in the RPA as part of the £20 million. It is difficult to understand how that provision will work in practice. Clarification is needed. For instance, what is the position of a national party which may unknowingly exclude from its returns an item of local expenditure which should have been included but could not be because the party knew nothing about it? We need to see how such a situation would be covered. Equally, from my experience of over 40 years as a party organiser, both voluntary and paid, and having spent time in police stations, I believe that Schedule 7, outlining the list of accountable expenses, is too detailed and will be rather difficult to enforce. I am uncertain also how that detailed list will allow the commission to prepare a code of practice as laid down in paragraph 6(1)(a) of the schedule. I hope that the Minister will agree to further discussions on both those points. They are important for both national and local treasurers.

My main concern, however, relates to there being no provision in the Bill to limit third party expenditure at local level. I was pleased to hear my noble friend say that an amendment is to be made to the Bill to cover that situation. I do not understand why the provision was dropped from the draft Bill, but I am pleased that it is coming back. Without such a provision, third parties would be free to spend as much as they liked in a constituency campaign for or against a candidate. Not only were vast amounts of money spent in the Ayr by-election, to which the noble Lord, Lord Mackay, referred, but it is reported also that the same source of funding is attempting to spend £1 million on a referendum on Section 28 in Scotland.

It is not the issue that is relevant, but the example illustrates that vast amounts can be spent to influence local opinion. If that money was spent during an election, such action would seriously erode the concept of equity between the parties and corrupt the election process. There is also the whole question of Precious Life in Scotland, now being funded by international donations from all over the world. We cannot say that it should not receive money from all over the world, but we must regulate what it can spend during an election period.

I have one point for clarification on the trade unions. It is not, however, the point made by the noble Lord, Lord Mackay, based on a rather selective reading of the Neill report. Clause 83(2)(c) cross-referenced with Clause 49(2)(b) implies that trade unions are unincorporated associations. My understanding is that under trade union legislation, they are classified as quasi-incorporated organisations. I do not know whether I am right, but if I am, the definition should be the same. Many points will be raised in Committee, not least the question of whether the formula in relation to overseas voters is right or whether we should be looking for differing views. As I said, I hope that we can go through the Bill on a consensual and friendly basis because it provides the foundations for an open and transparent system of party funding. It provides the foundations for the fairest and most equal elections and the best enforced election campaign regime. The Bill is long overdue and deserves support.

4.25 p.m.

Lord Howe of Aberavon

My Lords, I hope that I may be forgiven if, not for the first time this Session, I beg absence from the end of the debate, because I have a longstanding commitment to entertain the Minister for Justice of the People's Republic of China on his arrival in this country. I daresay that our discussion will not touch upon items of the kind before the House in this legislation.

I speak with great diffidence, particularly at this stage in the debate, speaking immediately before the noble Lord, Lord Neill, and immediately after the noble Baroness, Lady Gould, both of whom have expertise far beyond my wildest dreams. I cannot plead any such thing, nor can I plead any recent coalface experience, although I can offer some other insights.

My position corresponds in a strategic sense closely to that of my noble friend Lord Mackay of Ardbrecknish and the noble Lord, Lord McNally; a Scotsman and an Irishman followed by a Welshman, dissenting on the same point. My experience goes back a long way in the sense that as a Law Officer I had to deal with the enforcement of election law in the early 1970s, when we were still quite content to rely upon the 1883 legislation. We had to give consent to prosecutions. They were extremely rare events and I appreciate that the world has moved on since then. I want to speak much more about my experience at the sharp and modest ends of the coalface to which noble Lords have referred; at constituency level. I am concerned that in the strategic sense the scope, intrusiveness and detail of this legislation go beyond what is sensibly manageable.

Although half of my dozen election campaigns were undertaken in the lush comfort of Surrey, the other half-dozen were undertaken in more arduous settings: two in a marginal seat on Merseyside; two in my home seat in South Wales; and two in a different capacity in Poplar. It is with the concept of an accounting unit as set out in Clause 23 as applied to a minimum recordable donation of £200 that I am concerned, particularly with the detail of surveillance contained in the Bill.

It was difficult, even in those unregulated days, to find anyone able or willing to act as treasurer. How much more difficult will it now be when this legislation will be judged not simply by the particular provisions brought to bear on any action, but by the fact that it is contained in a Bill of 180 pages with 19 schedules, one of which is five pages long, listing 75 possible offences, 30 of which are punishable by up to one year in prison? It is that overwhelming, comprehensive set of provisions which will be the worry when the legislation comes to be applied. It will be seen as a serious legislative intrusion into the arteries, and indeed the capillary tubes, of democratic life, at a time when the lifeblood of democracy seems to be coursing ever more slowly and in ever shorter supply. I am deeply concerned about legislation, however well considered, on that scale, passed at such speed. The noble Baroness, Lady Gould, talked about the need to get the legislation under way quickly and I understand why that is part of the aspiration, but I am concerned that we place too much faith in the legislative process.

In my evidence to the first meeting of the Nolan committee, presided over by the noble Lord, Lord Nolan, I said: My first"— and most important— point, please do not expect too much by way of salvation from detailed legalistic provision … One can too easily be led to think that things have beer rightly done by compliance with a whole series of rules rehearsed by rote, so I think it is very important not to go too far down that road". I make that point with due modesty because I am not without experience of the disillusionment that follows the enactment of comprehensive and swiftly considered legislation. I plead guilty to introducing prices and incomes legislation; the first Bill on consumer credit; one of the early Bills on the regulation of insurance companies. I also plead guilty to faltering attempts to amend company law which were subsequently taken up by the noble Lord, Lord Shore of Stepney, and, in the area of industrial relations, to a comprehensive attempt to resolve all our problems at speed, which, even after much consideration, was not wholly successful.

I do not mean to be frivolous by suggesting that in the end the tempo followed, over a series of Parliaments, by my noble friends Lord Prior and Lord Tebbit produced a more durable and a more effective solution and a solution with more consensus than the alternative. But, broadly speaking, consensus now reigns on that.

By all means let us proceed to establish the electoral commission, but I am worried about the possible consequences that may face such a body if it is so overloaded with a burden of obligations to be performed at high speed that they may be incapable of being fulfilled. Once again, we have the experience of similar situations in relation to the Passport Agency, asylum seekers or the Criminal Cases Review Body. In relation to each of those, quite suddenly huge waiting lists appeared and there were inadequate resources with which to deal with them.

I hesitate to quote again from a learned judge who was quoted only a week or two ago by the noble Lord, Lord Lester, but he deserves to be quoted. In 1944 Judge Learned Hand of the United States said in Central Park in New York: I often wonder whether we do not rest our hopes too much upon constitutions, upon laws and upon courts". He said that a society that needs a court to save it "no court can save".

It is not because, as a lawyer, I shrink from reliance on the law where it is appropriate, but I believe that in some important matters it is best to make progress by agreements outside the law, agreements of a self-policing kind. In the 1920s a Liberal Peer, Lord Moulton, said: There are three great domains of human conduct. The first is where our actions are limited or forbidden by law. Then there is the domain of free personal choice. But between these two is a third domain, that in which there is neither law nor unfettered freedom. This is the domain of 'obedience to the unenforceable', where people do right although there is no one and nothing to make them do right but themselves". I may be naive to quote that, but I believe that that thought is worth bearing in mind, as we develop regulation of a kind that is necessary in an extremely sensitive area.

I offer two reasons for being so naïve. The first is that our past experience often leads us to conclude that even without detailed legislative interference the truth will out. As some lawyers say, "even in an affidavit, the truth will out". The fact is that the circumstances surrounding contributions to my own party by Mr Asil Nadir and those to the Labour Party by Mr Bernie Eccleston saw the light of day in advance of and without the need for legislation. The parties themselves then changed the rules so as to deal with the problem.

In a wider area, on the regulation of advertising by tobacco companies—the noble Lord, Lord Harris of High Cross, will be glad to hear—I found it difficult to explain this to his friend Mr Jacques Delors. We have been able, in this country, to regulate advertising of that kind without any legislation, but by a code drawn up between the parties that may or may not subsequently need legislation. Self-policing of the right kind can often be as effective because we are capable of developing, even in political parties, a sense of guilt.

That is what concerns me in this legislation. In truth the concern, the sour taste in our mouth, as the Minister said, does not arise because of our fear of corrupt wickedness on the part of the treasurer of the Birkenhead Conservative Association, or the Poplar Labour Party. Dismay and shock are not caused by donations of £200 from people at that level. I regret that the real concern is much more often at a higher level. Whether the concern is justified, the concern about the treasurer of our own party has caused concern among the former leaders of my party in both Houses. So it cannot be dismissed as mere triviality. It is related to these issues.

Similarly, there is the recent accession to membership of this House of a group of supporters of the Labour Party. No doubt they too have many achievements to their credit, but the one qualification that the public perceive of that self-serving mass baptism is the scale of the substantial donations made by many of them—although not all—to the Labour Party.

This huge legislative mountain—I wish my noble friend Lord Mackay of Ardbrecknish and his colleagues well as they plough their way through it in Committee—may well suffer from over-intrusiveness, over-prescription and over-detail, and, I add from bitter experience, from the inclusion of errors and mistakes, particularly if it is driven through the House at speed. To deal with the matter in that way adds little credit to our legislative process.

That is my main concern. What could be an alternative approach to some aspects of this? I mention two points. First, I am not sure that we are right, as the Bill provides, to concentrate so much on the regulatory process of expenditure as a whole. Are there not other ways of limiting the demand for political money as well as doing so in the aggregate sense? In this country, by prohibiting paid-for advertising and propaganda on broadcasts on television or radio, we have already achieved what our American friends have not. We do not have to face that huge level of expenditure, but the Americans do. Is it unthinkable that we should adopt a similar approach to the strident, sight-bite, oversimplification of posters and newspaper advertising? That is not much more sophisticated than some of the sound-bites that one hears on American broadcasting channels. Advertising of that kind on posters and on campaigns cost 50 per cent of the money spent by my party at the previous election and a little over 40 per cent of the money spent by the Labour Party.

My second proposal which does deserve support, sadly the one proposal put forward by the noble Lord, Lord Neill, and his colleagues that has so far been rejected, is for tax relief for political donations. At a time when the Chancellor is liberalising the provision of tax relief for charitable donations, which is to be respected, the concept of doing the same for £4 million in relation to political donations seems to me to be entirely attractive and cannot be dismissed on budgetary grounds.

Perhaps I am revealing a previously undisclosed secret, but one surprise that met me when making out my first Budget was that the size of the public sector borrowing requirement had to be measured to the nearest £0.25 billion. In that context I do not believe that £4 million, or even £5 million or £6 million, would be too much to begrudge.

Those are my two positive points: consider the prohibition of poster advertising and newspaper advertising; accept the recommendation of the Neill commission for tax-free charitable contributions; and reflect seriously on whether the other detailed and intrusive provisions to which I have referred will encourage or discourage participation in the political process at a time when we badly need it. Is it really necessary, even in today's sour atmosphere—as the Minister said—to proceed on the assumption that the mischief that this legislation is aimed at is to be found among the foot soldiers of the democratic process at constituency level? The commission, and I hope the House, if it gets that far, will consider carefully whether these ever-forward-rolling frontiers of legislation may not be restrained. We can learn more by proceeding step by step.