Political Parties, Elections and Referendums Bill

HL Deb 03 April 2000 vol 611 cc1123-75

5.18 p.m.

Second Reading debate resumed.

Lord Neill of Bladen

My Lords, I take the House back to the Political Parties, Elections and Referendums Bill. I have an interest to declare in that I had the honour to be the chairman of the Committee on Standards in Public Life which produced the report we are discussing. My interest is to see that a Bill which carries into effect the recommendations of our report goes on to the statute book.

It is a little intimidating to have so many members of my committee present, two of whom will speak after me and, no doubt, correct me. I refer to them in batting order: my noble friend Lord Shore of Stepney and the noble Lord, Lord Goodhart. I also see in the Chamber the noble Baroness, Lady Warwick. So four out of the 10 members of the committee are present today.

I propose to follow the injunction of the noble Lord, Lord Mackay, for brevity certainly and, I hope, clarity. My colleagues and I have written at considerable length in the report what we believe needs to be done. In the debate on the Queen's Speech on 24th November last year, I spoke in general terms on this matter, welcoming the fact that the Bill was to be introduced and giving a little of the background to the work that the committee had undertaken. I shall refer briefly to that in a moment.

Three general reflections have occurred to me on thinking about the debate. The first reflection is to remind your Lordships of the background. The committee of which I became chairman was about the fifth committee to have under consideration the topic of the funding of political parties. The Houghton committee was the first, some 24 years ago in 1976. That committee divided on party lines and nothing followed. There was then a Home Affairs Select Committee of another place in 1994, which met with a similar fate. In the mean time, there had been efforts by the Hansard Society. The only general reflection one draws from this is that it may on occasions be an advantage, in considering what is, in a sense, a highly political issue, to have the matter considered by an independent committee which is not in itself political. As your Lordships are aware, we had one member of each of the three major parties nominated to serve on the committee. They do not serve as spokesmen on the committee, but they have a great importance for the rest of the committee in telling us how the world works. That is one reflection.

Another general reflection—I do not think that this point has been made today—is that great efforts will now be made in the House to perfect and to produce an excellent Bill.

In addition, a change in the political climate and in the climate of thought is required. We do not need to look very far overseas to come across one or more countries which have on their statute books some excellent statutes which provide for the control and regulation of party funding. Those statutes are useless unless there is a general will to comply with their provisions. The only provision in the past of which we have any evidence that there has been some disregard is concerned with by-elections. There was evidence before the committee that in by-elections there was, as it was put by some witnesses, almost a conspiracy between the political parties not to report one another, even though there was some fairly blatant overspending. We shall have a series of extremely detailed rules backed by criminal sanctions, but it is essential that it should become unthinkable for any political party to want to cheat on the rules.

My third general reflection concerns the question of public perception. In our work, my committee is constantly made aware that it is not enough for an institution or for a set of rules to be extremely good; we need to be aware of what the public think is happening on the ground. That was particularly relevant when we came to one of our main points, that there should be disclosure of the sources which give money to political parties. We encountered a great deal of public cynicism about such sources. The argument ran that people do not give large sums of money unless there is something in it for them. So we tried to come up with recommendations that had very much in mind the way in which ordinary people, the voters, will think of the system once it is up and running.

If I were asked to summarise the key points in our report, I would say that there are only about five. First, we were very firm that there should be no state funding. We do not want that here. We visited at least one country where there was a large element of state funding and we did not particularly like what we saw.

I have already made the second point: for transparency of the sources from which money comes. We thought that that was of prime importance. Any gifts above £5,000 should be publicly declared.

Thirdly, we were against foreign money. We thought that support for political parties in this country should come from people who have an interest and stake here, who are present in this country and entitled to vote here.

The fourth key provision or guiding principle was a limitation on the "arms race", which was referred to earlier. We saw that particularly well demonstrated in our visit to the United States, where we saw a great deal of evidence of that. In that context, perhaps I should mention the point made by the noble and learned Lord, Lord Howe, when he talked about the ban that we currently enjoy here on radio and television advertising. I am not sure that the House fully appreciates just how important and valuable that control is. The human rights convention has been mentioned today: supposing in some nightmare scenario a case was to go to the courts in this country, and ultimately to Strasbourg, in which it was ruled that it was contrary t o the freedom of speech principle in the convention for us to have that control. Enormous pressure would then build up for additional funds, way above the £20 million cap that we recommend. The evidence in America was that approximately 80 per cent of the money raised by political parties is spent on short bursts of television and radio advertising, mainly of the negative kind—that is, not advocating a policy but denigrating the particular individual on the other side. That is a route down which we do not wish to go.

My fifth point is that we thought it essential that there should be a body to supervise this new system—an electoral commission. There was some hostility initially in some quarters to that idea, but we did not see how the system could work without it. Having mentioned the electoral commission, perhaps I may add a footnote, again in line with the observation of my noble and learned friend. I am a little worried about overloading the electoral commission, particularly in the early days. There is a reference in Clause 12 to an educational role. In a perfect world, one might say that we should have a commission and that one of its duties should be to inculcate the sound principles of democracy. But that is not wholly compatible alongside the administrative duties, which should be its prime role, of ensuring that the system is up and running and that there is no cheating. That is quite different from going around schools, universities and debating societies and advocating the merits of the system we have in place. I have a concern that too much will be put on the commission—especially with boundary commission responsibilities thrust upon it as well—and that the hard core of what we wanted to do will, in a way, be diluted.

I shall not detain your Lordships' House much longer, but I want to make one or two other points. As regards referendums, interestingly, when we began our work we did not start out thinking that that was a topic that would concern us; but as we went around collecting evidence, it suddenly became apparent that we could not tackle the question of the funding of political parties without considering this new instrument of democratic decision making—the referendum—and so we were drawn into it. We had some particularly interesting evidence. We travelled around the country—to Cardiff, to Edinburgh and to Belfast—and we had very recent evidence of how the system had been working.

The most striking case, which has been most commonly cited—I mentioned it myself on the last occasion—was the experience in Wales which concerned the last minute actions of a couple of people. A lady had no money at all, but she borrowed £5,000 from her bank; she managed to get in touch with the son of a wealthy man, who himself had some money. Between them, they put together some £100,000—about 10 per cent of what the other side had—and they began to campaign about a fortnight before the vote. We all remember how close that vote was. It seemed to us self-evident that it is absurd to consult the general population and seek its views on an issue unless there is a machinery in place to ensure a clear statement of the arguments from each side.

They do it differently in Dublin. They have a rather ingenious way of doing it there. They have a body—a referendum commission—which issues a statement giving the best case on each side. We are not proposing to do that here. But one has to have fairness and one must make the playing field as level as possible.

We enunciated the principle that the Government should not spend state money on advocating a particular result in a referendum. In the end, although initially doubtful about it, the Government acceded to that proposition. There will be a period of one month, or 28 days, prior to the referendum when that principle will be observed. My committee thought about that and in the end accepted it as a reasonable "win" for our proposition, although of course it does not go quite the whole way.

Where we are, and remain, unhappy—I wrote to the Minister about it—is on the issue of tax relief, which has been mentioned today. We thought that there was a danger with our proposals in the sense that some large givers would be deterred; and that some people who for reasons good or bad—some possibly very good—would not want their names publicly to be attached to a large gift. Therefore, we thought that a policy of encouraging the maximum number of small gifts should actively by adopted. The proposal was that gifts up to £500 should carry tax relief in order to encourage small people who would like to support political parties to give. We were not intending any bonanza for the wealthy, whereby one could give £500,000 and the state would have to cough up the balance. The overall cost would be minuscule in the scale of what we are talking about. We recommended also some Short money increases and so on—£2 million or £3 million has gone in that direction. It would have been a good thing to encourage democratic support for the political parties by making that concession. I am sorry that it has not proved possible for that to be done.

The noble Lord, Lord Mackay, has drawn attention to a large number of points of detail on the Bill. We did not draft the Bill. We drafted the ideas which lie behind it. I hope that I shall be forgiven for not following the noble Lord down his ingenious route in looking at possible defects in various clauses. I commend the Bill in principle to the House and hope that it will finally be enacted.

5.32 p.m.

Lord Jopling

My Lords, it is a pleasure to follow the noble Lord, Lord Neill. I particularly agreed with one of the final points he made about the attractions of tax relief. It is a great pity that the Government have not thought fit to include that kind of provision in the Bill.

I have always taken the greatest pride in the British electoral system as it stands today—principally when I visit the United States. I have had the great honour of being the secretary of the British-American Parliamentary Group for the past 13 years. Hence I go quite often to meet members of the House of Representatives or the Senate. I am always overwhelmed by their envy of two particular parts of the British electoral system. The first is that we have only a three week campaign and very tight spending limits. The length of time that potential United States politicians have to spend on the road trying to get elected is quite horrific. I remember going to West Virginia and spending a day with Senator, as he now is, J Rockefeller when he was trying in 1972 for the first time to become the Governor of West Virginia. I remember his wife saying rather despairingly that they had already been on the road for a year and there was still two months to go until the election. In fact, he failed to win that time and he did not become Governor of West Virginia until the next election four years later, so I suppose that they had to spend another 18 months on the road. That does not seem to be a good system.

The second great advantage we have—I come back now to points made by the noble and learned Lord, Lord Howe of Aberavon, and the noble Lord, Lord Neill—is that it is in this country held to be illegal to buy air time on either television or radio. Again, so many politicians in the United States have told me how they would welcome with open arms, although I do not suppose that the owners of the media companies would welcome it, a change in the law to make it impossible for those in the United States to buy air time.

When we are changing our system of elections, as we are in the Bill, I judge it primarily in terms of whether we maintain fully those advantages with regard to a short campaign, tight spending limits and the fact that in this country we cannot buy air time on television or radio. Above all, we must ensure that there is no possibility that in an election or referendum in Britain either parties or individuals can hire air time. In the United States they would love to ban it. However, as I understand the position—the noble Lord, Lord Neill, skirted around this point—it is very likely that that would be held to be illegal under the constitution, which says that there should be freedom of speech. I agree with the noble Lord that it would be a tragedy if a human rights court somewhere, perhaps beyond these shores, ruled that in Britain we too must allow our politicians, in the interests of free speech, to be able to buy air time.

The allocation in our three-week campaign of free air time during elections is perfectly fair and adequate. Indeed, anyone who has fought an election would agree that, for the public, three weeks is already a good deal too much for very many of them. With a whole number of new radio and television channels and with international channels like CNN, some companies would undoubtedly be all too ready, given an opportunity, to take cash for selling air time to candidates in British elections. I should very much like to see written on the face of the Bill a clear statement that it is illegal for candidates in elections or those pushing a case in a referendum to be able to buy air time and that they must confine themselves to the free allocation that is agreed.

I say that principally because the new regulations in this huge Bill are much too complicated and go far too deeply into detail. I so agree with a previous speaker who referred to a step-by-step approach. The Bill as it stands will inevitably lead to a new science of keeping the campaign legal and within the law but at the same time taking advantage of all the loopholes in election law that appear as a result of the Bill. The complexity of the Bill and the raft of new offences, running into pages and pages, make it inevitable that not only will parties at local and national level need accountants to look after their finances, but those accountants and those organisers will need a lawyer at their elbow as well in order to ensure that they are kept within this new complexity of election law. The science, which I believe will grow, of finding loopholes in election law will be comparable to that of finding tax loopholes which has proved so profitable to so many professional people. Parties will be forced into trying to find such loopholes. I can hear them now saying, "If we don't take advantage of every loophole, the other parties will, and they will trample all over our backs".

I turn to the issue of foreign funding for political parties. Although I understand the purpose of the Bill's provisions, I do not really understand how one stops the funding of political campaigns from overseas sources during an election. The noble Lord, Lord Marsh, asked a question about this matter during the Minister's introductory statement and we did not receive a satisfactory answer. I hope that we shall receive one. I speak of campaigns that would refer neither to the fact that an election was taking place nor to any election candidates or political parties; but the content of those campaigns would have a clear political message which would be very relevant to the issues surrounding the election or referendum. In the past, it could have been a campaign with regard to anti-nationalisation. Now, it could be a campaign that is either pro- or anti-Europe. It could be done by means of posters, by mass mailing or by the use of various IT techniques. This seems a wide open way in which the provisions that the Bill rather laboriously attempts to lay down could be circumvented.

I turn next to the issue of referendums, and begin by expressing a personal prejudice. I believe, as a matter of principle, that referendums are a negation of the parliamentary system. I irritated my constituents over 33 years when I was a Member of another place by always saying that I would never support a referendum for anything. I detest referendums and have always wanted to vote against them. Hence, I should much prefer that there were no referendums, and for us not to have to make rules for their conduct. But if we are to have the wretched things, the terms of the question are crucial. A question set by Parliament, backed by the steamroller effect of the Whips, is the wrong way to decide what the question should be. I hope that the electoral commission will play a bigger part than the Bill seems to suggest in deciding what the question should be. The noble Baroness, Lady Gould, also referred to this matter.

Finally, the Bill is full of over-complications; and it contains too many anomalies and unfairnesses. It will need a long and detailed Committee stage because it needs a great deal of amendment. What is needed, and what we want, is a Minister who is properly briefed, one who is understanding not only of the Bill but of election law and practice, and who is sufficiently flexible to ensure that the finished product is fair and that it can achieve a consensus in this House.

5.43 p.m.

Lord Shore of Stepney

My Lords, I begin by declaring an interest as a member of the Committee on Standards in Public Life whose report underlies most of this legislation. My remarks need to be brief. I certainly do not disagree with what my most distinguished chairman had to say, and indeed said so well. He has been an excellent, and independent, chairman of our committee, unequalled except perhaps by his distinguished predecessor, the noble and learned Lord, Lord Nolan. We have been very fortunate.

I want to pick up the point made by my noble friend Lady Gould, who is no longer in her place. She went to the heart of the matter when she said that the concern is, above all, about doing something to prevent the purchase of political power. That is the underlying thought. It is certainly one that I have had—not necessarily at the top of my mind but it has always been there—since I became interested in politics. The irony is that, when I first entered politics, one of the thoughts that associated itself with the concern about the purchase of political power was the perceived imbalance in purchasing power as between the Conservative Party, our principal rival, and my own party, with its much more limited access to funds. Now, in the curious way that events have of standing everything on its head after 30 or 40 years, we find that disclosure—the naming of names, the identification of where money is coming from—no longer fits the old pattern of the corporate finance of Conservative power, but that New Labour has equal access to corporate power. Whether that will remain true in the future, as it undoubtedly has been in the recent past, I do not know; but in the past decade the old imbalance has virtually disappeared. That is healthy for British politics. I am all for a general balance.

What I particularly like about the Bill is that it does two things which we all agree are important and worth while. First, it insists that the parties disclose the sources of their funds. Anything over a small amount must be made clear. That must be healthy; it must be right. We know, in other words, who is contributing and whether the motives for the contribution are entirely above board, or whether they are suspect or open to criticism. We can then develop the case. That knowledge is a great advantage. Frankly, it was not something that we used to know about my old rivals in the Conservative Party, and I welcome the new provision.

Having provided for openness in regard to party finance, the Bill moves to the second stage: exercising some control over it. I am not yet entirely clear in my own mind precisely what the Bill is doing in terms of the regulation of party finance between elections, as it were. I shall need to think about that carefully when we come to the Committee stage. However, I am sure that during the crucial election period—the four weeks, or 33 days on average, which elapse between the Prime Minister announcing an election and polling day—moneys should be strictly controlled. If they can be equalled on one side and the other, that is wholly to our advantage. But the placing of a limit on what can be spent, and the requirement to declare on a weekly basis (if need be) during the election period what is flowing in, is important. It is an enormous advantage.

I could say a great deal more about the Bill's positive features; however, I shall content myself with reference to two matters of concern. The first is the idea of placing a limit on what people can contribute during an election campaign and then saying that it will apply retrospectively over the previous 365 days. That is nonsense, and we know it. I know that the Government will rethink that provision. I cannot believe for a moment that they would be satisfied with such obvious nonsense. So we have to get rid of that.

Another much more serious matter is that touched on by the noble Lord, Lord Jopling, who perhaps did not have sufficient time to develop the point. I refer to control over the foreign funding of British politics. I do not believe that any of us cavil with the general aim of the Bill in that regard. Page 2 of the Explanatory Notes states that, Part IV imposes restrictions on the sources of donations so as to prohibit foreign and anonymous donations". I wish that it did—as I believe do the Government. However, when one turns to a later paragraph in the same paper one comes to "permitted participants"; that is, those who can spend money in British politics. One finds a reference to those individuals who are registered in an electoral register and to companies incorporated in the European Union", not the UK. This may be a coach and horses to be driven right through the integrity of British politics. We must not imagine for a moment that vested interests on the other side of the Channel do not exist. Does one imagine that in something like a referendum on the single currency money will be withheld from European companies or the agencies of the European Union? This must be stopped. The only reason it has not been stopped so far is not that the Government do not want to do so, but because they fear that they are under the jurisdiction of the European Court of Justice. That must stop, and I shall be interested in all those who, like me, will want to table amendments to bring that about.

Having said that, I conclude on a more optimistic note. I wholly endorse the observations of my old friend the noble Lord, Lord Jopling, about the merits of the British electoral system compared with that of the United States. Gosh, we are lucky$ The noble Lord, Lord Neill, referred to the tremendous advantage in being able to control television and radio. That is a real boon. I do not know anyone engaged in American public life who is not in debt, at least to begin with, in order to finance his own political activity as a candidate or member. Just imagine a member of Congress facing an election every two years without any limit on campaigning and the need to raise money to reach his electors. Awful$

The other matter of which we can be proud is that there is a tradition of honesty and fair play in this country which extends to politics and political parties. The noble Lord, Lord Neill, mentioned en passant that it is one thing to have laws but another thing to obey the spirit of them and to wish to see them carried out. Frankly, the revelation about Kohl, Mitterrand and others and the way that they have manipulated and misapplied rules and transferred money across frontiers is something that we do not want to emulate. We have something of which we can be quite pleased and proud. Let us hold on to it and strengthen it, as I believe we can do if we get the Bill right.

5.53 p.m.

Lord Lamont of Lerwick

My Lords, it is always a pleasure to follow the noble Lord, Lord Shore, who is a man of passion. For a moment I thought that his passion would be uncharacteristically modified by the inhibition he felt by being part-author of the Bill. However, towards the end we saw the noble Lord's usual passion, and impressive it was, as always. Like my noble and learned friend Lord Howe, I apologise to the Minister and my Front Bench that I cannot be present for the winding-up speeches tonight owing to a long-standing engagement. That is a practice to be deprecated and it is not one that I normally follow.

I accept the broad thrust of the Bill. When he introduced it the Minister referred, perhaps a trifle heavily, to sleaze. It is right that we should seek to improve and achieve the highest standards in public life in the world, but I wish that we would view the problems in perspective and see that often our so-called sleaze is, as the noble Lord, Lord Shore, said, very small beer compared with what is manifest on the Continent.

This Bill is the product of the committee chaired by the noble Lord, Lord Neill, to whom I pay tribute. The House is indebted to the noble Lord for his lucid and cogent speech today.

It is always good to be predictable and not to surprise anyone. I should like to concentrate on those aspects of the Bill which deal with referendums. I appreciate that this is not just a Bill about the forthcoming referendum on the single currency, but inevitably that is in many people's minds and we must judge the provisions in that light. It is right to achieve fairness to both sides in a referendum, and that is very important in a referendum on the single currency. That point is illustrated by what is going on at the moment in Denmark, which should be a warning to us. Denmark is holding a referendum on the single currency, and much more money has been spent on the side which favours joining the single currency.

This is a far-reaching Bill. As my noble and learned friend Lord Howe and my noble friend Lord Jopling have said, it is very intrusive, bureaucratic and probably unworkable. We must be careful that in seeking to address one problem we do not affect the rights of the individual to campaign and propagandise. I regard the phrase "permitted participant" as rather chilling. We have come a long way when we write into legislation such an expression as applying to politics.

The electoral commission is a very important body with huge responsibilities. I question the desirability of Clause 12 which enables the commission to carry out programmes of education, including programmes related to the institutions of the European Union. Do we really need this? A vast budget for informing people about the institutions of the European Union is already spent by the EU itself. Could this education programme include the European Central Bank, which is one of the institutions of the European Union that is central to the issue of the single currency yet to be decided in a referendum?

But the main objection is not a European one but the fact that, as the noble Lord, Lord Neill, said, the commission already has a vast range of responsibilities. It is too easy to say that if there is a problem it should be left to the commission. As the Neill Report itself said, the commission cannot solve all problems. If that body is to be involved in educative publicity about electoral reform, or becomes embroiled in the pros and cons of the additional vote versus the single transferable vote, not just proportional representation, it will undermine its authority as a regulator. I believe that the two roles are in conflict.

I turn to the issue of referendums. The report addressed itself manfully to the very difficult issue of trying to ensure fairness. It was not asked to go into that territory but did so. It referred to the experience of the Welsh referendum and expressed unease that the Government had been very active, and all the money had been spent on one side. The result was extremely close and might have been very different if the arrangements had been otherwise. As a consequence, we have the proposals in the Bill.

Clauses 97 and 98 define the referendum period. That is particularly important because it is the period in which the umbrella organisations have their expenses calculated. The Bill tries to ensure fairness and prevent votes being bought. None the less, I suggest that it ends up giving an advantage to the organisation with the biggest pocket; namely, the Government.

Perhaps I may take as an example a theoretical referendum on the single currency. I accept that the Government cannot shut down for several months their activity on European matters. However, under the Bill any organisation campaigning to retain our national currency will have its affairs and expenses regulated for up to four months in the period between the Bill for the referendum being introduced and polling day. The period between the introduction of the Scottish devolution Bill and the vote on Scottish devolution was 119 days. The umbrella organisation is monitored and its expenses start to tick. But the Government are able, free of scrutiny, to carry on issuing press releases—let us say in favour of the single currency—until 28 days before polling day. That does not seem equitable.

It was argued in another place that that is no different from the practice in previous general elections. The Bill seeks to make different provisions. It seeks to provide that expenditure is controlled in the run-up to elections. But elections are different from referendums. Referendums are about single issues; elections are about many issues. One cannot expect the Government to close down for the whole period leading up to an election, but one could reasonably expect the Government to close down for a longer period than 28 days in the period leading up to a referendum on the single currency. Under the Bill, if the noble Lord, Lord Owen—he was present earlier—were part of an umbrella organisation, his press releases would be costed against his total permitted expenditure. However, there will be no restraint on Ministers until 28 days before polling day. I do not wish to over-emphasise the point, but it is important.

I turn to caps on permitted expenditure by political parties during referendums. The Neill Committee saw no objection to caps in principle but concluded that in practice they were impractical. None the less the Government have put forward Clauses 108 to 111. The key mistake the Government have made is to define the caps by reference to political parties. One reason that we have referendums—notwithstanding the remarks of the noble Lord, Lord Jopling—is to settle issues which cut across party lines. While parties are essential to general elections in order to simplify choice on many different issues, referendums are single issue campaigns. In some referendums in future parties may not even he the main movers in the campaign. By placing caps on the party's expenditure rather than on the umbrella organisation, and by placing caps calculated on the basis of votes cast at the last election, the Government have produced a situation which would be unfair in any referendum relating to the single currency. On the basis of the last election the pro-single currency parties—the Labour and Liberal parties—would be able to spend £8 million to £9 million while the anti-single currency campaign would be able to spend only £5 million.

When the Home Secretary was asked about the matter in another place he replied, "Well, of course, there is no way that the Liberals will ever be able to raise their £3.5 million, or anything like that". I do not know about that. But it seems bad law to put down on the statute book arrangements which are manifestly unfair and then say, "It doesn't matter because it won't work out like that in practice". How does he know that money cannot be transferred to the Liberal Party? From debates in another place there appears to be nothing to stop other organisations channelling their money to the Liberal Party. I refer to the European Union. The question was put to the Minister today about how caps affected the European Union and the Commission. I do not wish to be harsh but the Minister gave a somewhat lame answer. My noble friend Lord Jopling is right. We need an answer to the question of how the caps bite, if at all, on the European Union. How will its expenditure be controlled in a referendum on the single currency?

In the debate in another place, Ministers gave a rather pathetic impression of simply appealing to the European Union not to interfere in the single currency referendum because it might well boomerang and be counter-productive. That slight note of panic in their voices merely fuelled further suspicions.

Then there is the question of whether caps can work. There is a limit of £0.5 million for other organisations which are not the umbrella organisations referred to in Schedule 13. It was confirmed in debates in another place that organisations can split themselves into two, three, four or five bodies, all with different names. Each body will be entitled to spend £0.5 million if it can raise that sum. I do not see how the caps can work. The provision is futile and self-defeating.

The same argument applies to caps at the other end of the scale, to the individual. Clause 112 states that no individual can spend more than £10,000. But individuals can band together and create campaigns in specific areas. It would be next to impossible for the commission to stop that; and it would be questionable whether it would be right to do so.

I understand the Government's problem. They fear that if there are no limits money may dominate the campaign. On the other hand, it is important not to prevent individuals expressing themselves and communicating their views. Therefore they believe that they must strike a balance. However, I fear that in pursuing that elusive balance, they have merely produced bias. What they have produced is unlikely t o be effective. In their efforts to be effective, they have produced a system which in the single currency referendum will favour the Government.

The Government have one other overwhelming advantage. They can choose the date of the referendum. Any anti-single currency organisation may fritter away its money, not knowing whether or not the Bill to trigger the referendum is about to be introduced next week. The Government have a huge advantage through timing.

In trying to control spending, the Government have made the wrong choice. There are three alternatives. To cap umbrella organisations is difficult. A cap on each participant is difficult. I am inclined to favour no cap on spending as the Neill Committee recommended. In pursuing perfection we are out of touch with reality. The reality is that the publicity on the matter will be huge and unlimited—in the newspapers and the media. The reality is that any money raised will be spent one way or another and no legislation will stop that.

It is all very well for Ministers in another place to say, "Something has to be done". That is always a poor recipe for policy; it invariably leads to trouble. It is all very well asking, "What is your alternative?" The alternative to jumping out of the window is not to jump out of the window. The Government have gone down the wrong road. I applaud much of the Bill. However, I fear that the proposals applying to referendums are unfair. I shall watch out eagerly for any opportunities to amend the Bill.

6.8 p.m.

Lord Goodhart

My Lords, I am very pleased to be speaking in the debate. I am particularly pleased because I, too, am a member of the Committee on Standards in Public Life. I echo the tribute paid by the noble Lord, Lord Shore, to our chairman, the noble Lord, Lord Neill of Bladen. I was going to say that I am delighted to follow the noble Lord in this debate. Unfortunately, that would not be true as the noble Lord has already said more or less everything I was going to say. Therefore, what I shall say will sound somewhat familiar.

It is gratifying to us on the committee that not only have the Government accepted almost all of our recommendations, but have proceeded to implement them quickly. It is still only 18 months since the publication of our report and this major piece of legislation has reached the half-way stage of its process through Parliament.

Before discussing the Bill in more detail, I should make my position clear. The recommendations in the report and the provisions of the Bill are not wholly consistent with the position of my party. The Liberal Democrats strongly welcome the Bill, but believe that in some respects it does not go far enough. In particular, as my noble friend Lord McNally pointed out, the Liberal Democrats would like a good deal more emphasis on state funding. No doubt my party will want to table amendments on those issues, but it would not be proper for me to move or support amendments which are inconsistent with a report which I signed. Therefore, I shall participate in debates on the Bill from the Back Benches.

There are four central proposals in the report. The first and foremost is transparency. The identity of donors of gifts above a minimum size and the amounts given by them must be disclosed. Money often buys influence and it can certainly buy access. Perhaps I may take a non-controversial and well-known example. The influence of the trade unions on the Labour Party, particularly in the past, has been due at least in part to their financial support of that party.

If we know where the money is coming from, we can scrutinise the behaviour of the party which receives it. Is the party going out of its way to take action, or to avoid taking action, in ways that will benefit the donor? Is there a quid pro quo for the donations? If the information about the donations is in the public domain, the press and the other political parties will be watching to see what the donor gets out of it. If the information is kept secret, the watchers do not know where to start.

Secondly, funding must come from those with a real interest in the outcome of the election—that is, from people who are on the electoral register or from companies carrying on business in the United Kingdom—not from long-term tax exiles. In that, I disagree with my colleague on the committee, the noble Lord, Lord Shore. Overseas companies usually carry on business in the United Kingdom through subsidiary companies incorporated in the United Kingdom. Under our original proposals, such companies would be permitted donors. The only extension made by the Bill is to a business carried on in the United Kingdom which is carried on by a branch rather than a subsidiary of a company incorporated elsewhere in the European Union. There must still be a business carried on in the United Kingdom. That seems to me to be a relatively minor extension and a perfectly acceptable one. In any event, wherever quoted companies are incorporated, their shareholdings are increasingly international.

The third central element is the limit on national campaign expenditure. The fund-raising "arms race" increased greatly at the previous election. Vast sums were spent on billboard advertising by both Labour and Conservative Parties. Those, as a member of the Conservative Party later admitted, were almost certainly wasted, but each party felt that it had to keep up with the other. An uncontrolled "arms race" means that parties become ever more willing to solicit and accept dodgy donations and ever more dependent on Finding and keeping supporters who can give them individually millions of pounds.

The fourth essential element is the electoral commission, whose role will be central to the enforcement of rules under the Bill. The commission will also enable existing rules on local spending limits to be enforced more effectively and will enable election rules to be updated much more regularly than at present. Indeed, it is necessary to say that the other reforms proposed in the Bill would not work without an electoral commission.

On all of those central issues, the Government have accepted the recommendations of our report more or less as they stand. Indeed, in one respect, I believe that the Government have improved on our proposals. We proposed an exemption of £50 for anonymous gifts. The Government propose to exempt from the reporting obligations, and therefore from a considerable amount of record keeping, donations whether anonymous or not up to £200. That will reduce the burden of record keeping for parties, particularly at constituency level, without opening a substantial loophole. There are anti-avoidance provisions to prevent people giving more than £5,000 by means of a large number of small donations. That change also remedies an unintended defect in our proposals. It was that those too young to be on an electoral register could not pay membership subscriptions to parties and therefore could not be party members.

I turn to other issues. The Government have dealt sensibly with the difficult issue of the political activities of third parties, in particular various single-issue pressure groups. The decision of the European Court of Human Rights in the Bowman case shows that denying such groups the right to intervene in elections or referendums is an unacceptable infringement of freedom of speech. I have to say that having read that judgment I am persuaded by it. However, experience in the USA shows that some limits on third-party spending are essential. The Bowman judgment makes it clear that the courts would be prepared to accept reasonable limits on third-party spending.

I do not want to discuss the special treatment of Northern Ireland parties in detail, but I believe that it is a regrettable necessity.

The treatment of referendums has been one of the more controversial issues in the Bill. The Neill committee did not recommend spending limits because we thought them impracticable. However, as we made clear in subsequent correspondence, we have no objection in principle. The Government differed from our view and decided to impose spending limits. On reflection, I believe that they were right to do so. The problem with the Government's original proposals was that the limits were entirely based on parties. The spending limit for each party represented in the House of Commons in a national referendum was to be £5 million. I believe—and slightly to my surprise I find myself in agreement with the noble Lord, Lord Lamont—that the party-based ceiling produces unfair results where most parties are on the same side. That was the case in, for example, the Welsh referendum, in which Labour, the Liberal Democrats and Plaid Cymru were on one side, and the Conservatives effectively played no part.

It is fair to say that the preference of the committee was to direct spending much more through umbrella groups, where it was possible to form them, than through the parties. In the Bill the Government have moved a little way towards that by scaling down spending limits for parties with less than 30 per cent of the national vote, but it is questionable whether they have gone far enough.

Finally, there is one major issue on which I believe the Government got it seriously wrong. I refer to the question of tax relief on political donations. There is a precedent for giving tax relief on political donations; there is, and ha; been for many years, relief from inheritance tax on donations to political parties, if those political parties either have two Members in the House of Commons or have one Member and the party received a total of at least 150,000 votes. The proposal of the Neill committee was modest and was targeted on smaller donations in order to avoid giving disproportionate advantages to parties with wealthy supporters.

We proposed a limit of £500 a year on donations on which relief can be claimed. To ensure that there was no extra benefit to wealthier donors, we proposed that relief should be given only at the basic rate of tax and not, as in the case of gifts to charities, at the higher rate of tax as well. I believe that it is in the interests of democracy that parties should be funded by a large number of small donations rather than by a small number of large donations. I believe that anything that increases the value to political parties of small donations is to be encouraged. Further, the giving of tax relief on small donations sends out the message that, for ordinary people, giving to political parties, like giving to charities, is good. It is to be encouraged because it contributes to the democratic process.

What, therefore, are the Government's objections? Originally, the Government objected on the ground of administrative burden. It seems that that objection has now been dropped. Of course, the administrative burden of dealing with claims for relief from a handful of political parties is as nothing compared with the administrative burden of dealing with claims for relief from literally thousands of charities. Charities are now able to claim relief on one-off gifts of any amount because the £250 floor on gifts that are eligible for gift-aid relief is no longer applicable.

However, the main argument, which we heard again in the Minister's opening speech, is that the giving of tax relief reduces tax receipts and therefore less money is available for schools and hospitals. That has been argued time and time again—and it remains totally absurd, as it always has been. Let us compare £4 million or £5 million with, say, the £92 million which, I believe, was the Government's advertising budget last year; the Government estimate the cost of tax relief to be only £4 million or £5 million a year. That amounts to 0.001 per cent of government revenues. In other words, tax relief on donations to political parties will reduce the revenue by approximately £1 in every £100,000. It seems to me to be a total absurdity to complain about that on the ground that it will make less money available for schools and hospitals. Plainly, it is a price that is worth paying for the protection of democracy.

Of course, tax relief is a matter for the Budget and would not in any event have been dealt with in this Bill. However, I hope that the Government will reconsider their objections and that there will be such tax relief in next year's Budget. With regard to what is in the Bill, I can welcome it virtually without reservation. Democracy is about the power of people, not about the power of money. The power of money thrives on secrecy and darkness. I believe that throwing light on the funding of political parties will weaken the power of money and thereby strengthen democracy.

6.23 p.m.

Lord Norton of Louth

My Lords, I wish to make a general comment about the Bill and then to focus on its particular parts. There is much to welcome in the Bill. However, I believe that there is a problem in terms of what it does not do and what it seeks to do, and that there is a danger of missing the broader picture.

When he introduced the Bill at Second Reading in another place, the Home Secretary said that parties were vital to the functioning of any representative democracy. He was absolutely right and I can fault nothing in his comments about the role of parties. However, I am not sure that the Bill goes quite as far as he suggests in addressing the problem that now faces political parties and, indeed, the political system.

People are now less likely than they were 30 or 40 years ago to join a political party. Fewer people become involved in political activity. The MORI Omnibus polls show that young people between the ages of 16 and 24 are less politically active now than they were at the beginning of the 1970s. Voting among that group has fallen by almost one-third.

The Home Secretary said that we should celebrate the fact that so many supporters of political parties recognise their civic responsibilities by contributing to their party's financial well-being. I agree. However, the real issue that needs to be addressed is why so few people contribute to political parties and, indeed, why so few people join and are actively involved in political parties.

The Bill seeks to restore public confidence in the political process by providing for greater transparency and accountability in funding and for limited campaign spending. It is difficult to disagree with the aim of the Bill. However, I am not altogether certain that it is as well crafted as it might be for fulfilling that particular aim. Nor am I sure that it does a great deal to address the wider problem that I have identified. As some noble Lords have mentioned, some of the provisions may serve as a disincentive to political activity.

That is not to argue against the Bill but rather to call attention to the fact that we should be looking at the causes of political alienation and why people do not become involved in the political system. I believe that there is a danger of placing too much reliance on the Bill, and also the Representation of the People Bill, to improve the health of the political system. Such measures may help but, if they do so, it is likely to be at the margins. We need to devote more time and resources to addressing the more fundamental questions.

I turn to what is in the Bill. I welcome many of the provisions but I believe that it contains a number of problems. One concerns the remit of the electoral commission. It is given certain duties to fulfil which are not appropriate, while it is denied a role that I consider central to its existence. Under Clause 12, the commission is empowered to promote public awareness of electoral systems, systems of local and national government, and the institutions of the European Union. That takes the Bill beyond what the Neill Committee recommended.

I can see the case for the commission to promote awareness of electoral systems. That is perfectly sensible and proper. However, as do other noble Lords, I fail to see why promoting awareness of systems of government—be it local, national or the European Union—falls within the remit of an electoral commission. That is to confer an educative function that takes it beyond its obvious sphere of competence. Indeed, I shall be interested to hear from the Minister how he reconciles Clause 12(1)(b) and (c) with the Long Title of the Bill.

Therefore, the commission is given things to do that are not appropriate. At the same time, it is not given a role that I would consider fundamental to its existence; that is, to advise on the question to be asked in a referendum. I appreciate that the Neill Committee did not recommend explicitly that it should be given that role. However, I believe that it should be a central function of the commission. Although there is provision for the commission to review and report on the conduct of referendums and to offer advice to relevant bodies, there is nothing on the face of the Bill that requires it to be consulted on the wording of a referendum.

I suggest that the question in any referendum must fulfil two fundamental criteria. It must be unbiased and, equally important, it must be unambiguous. This second criterion has not received the attention that it deserves. If the meaning of a question is not clear, it is possible for voters to cast what, quite simply, are termed "mistaken" votes; that is, voting contrary to what they believed they were voting for. Research has shown that in some state referendums in the US, between 10 and 20 per cent of voters have cast "mistaken" votes.

Surely, the electoral commission has an obvious role in ensuring that both criteria are met. It will have the professional expertise, as well as the organisational capacity, to undertake pilot surveys. However, the fact that a question permits of ambiguity may not be apparent until it has been tried out in such a survey. One needs a body—a qualified body—to undertake such work. I believe that the case for conferring such a responsibility on the electoral commission is compelling. At a minimum, the Bill should embody the requirement that the commission be consulted on the wording of the question.

I turn to the provisions which govern the funding of political parties. I appreciate the argument that motivates this part of the Bill. In the other place, the Home Secretary stressed the need for funding to be transparent. In fact, the Minister said that it should be "open and transparent" and I look to him to explain later the difference between openness and transparency.

However, the Minister missed two other essential criteria. For the Bill to be effective, it has to provide for transparency, enforceability and equity. The regime created by the Bill is overly detailed and bureaucratic.

It imposes a massive burden, arguably an intolerable burden, on party treasurers, not just nationally but also locally. I am not sure that the parties at local level have the capacity to meet the phenomenal compliance burden. I suspect that the Bill lays down rules that will be difficult to enforce and which, in some areas, can be circumvented. Any wealthy foreigner resident in the United Kingdom could acquire economic citizenship of one of a number of Commonwealth countries and then, by virtue of that status, register to vote in this country, thus becoming a "permissible" donor. There is a serious problem of equity in terms of donations made by companies. That point has already been made and I will not expand upon it.

The provisions governing Northern Ireland—again as we have heard—clearly create an inequitable situation. And what is the justification for a Swedish citizen resident in the United Kingdom being a permissible donor when a Norwegian citizen resident in the United Kingdom is not? There may be a case for re-casting the provisions of the Bill to provide for a much simpler regime. I should be inclined to slim down drastically the excessive degree of regulation, especially in distinguishing between types of donors. To be enforceable, the real need is to be simple and straightforward.

Finally, I turn to the provisions governing referendums. I have spoken already regarding the role of the electoral commission in respect of referendums. I believe that other changes are necessary. Like my noble friend Lord Jopling, I have a principled objection to referendums. I should prefer that we did not have them. However, if we are to have them, then they should be subject to rules that are clear and consistent. We should not have rules which are made up each time a referendum is held. There are two problems with referendums: first, ensuring a fair and unambiguous question; secondly, ensuring an adequate turn-out of electors. I have already addressed the first problem. What about the second problem? The excellent book, Referendums Around the World, edited by David Butler and Austin Ranney, embodies research that shows that turn-out in referendums tends to be lower than that in elections of candidates to public office. Indeed, we have experience of that in the United Kingdom.

A low turn-out in a referendum is not only more likely than in an election to public office, it is often a greater cause for concern. With elections to public office, the candidates who are elected can be removed in a subsequent election. In many cases, the outcomes of referendums are difficult to overturn. Once something has been approved by referendum, it may be set in stone for some time.

There is a powerful case to be made for introducing a threshold requirement, providing that a certain proportion of eligible voters vote yes in order for the vote to be valid. Various countries impose thresholds. Thresholds were of course, stipulated by statute for the referendums in Scotland and Wales in 1979. I do not think we can chop and change from one referendum to another. Either we have a threshold or we do not. The case for a threshold is compelling.

Referendums tend to be held on important issues and there is the danger of some irrevocable step being taken on the basis of the votes of a minority of electors. Therefore, I believe that a threshold, including the precise percentage to be reached, should be written into the Bill.

This is something of an omnibus Bill. We must not lose sight of the wider problems that it does not address. In terms of what it does cover, it is clearly a substantial and important Bill. It deserves the most detailed scrutiny in Committee in order to ensure that the various criteria that I have outlined are met. If Government accept those criteria, then I hope that they will respond positively to the proposals that I have put forward.

6.34 p.m.

Lord Harris of High Cross

My Lords, we have heard some good speeches. What interested me especially in the unusually cheerful speech of the noble and learned Lord, Lord Howe, was his outspoken dismissal of seeking salvation through legislation. That encourages me to cast caution to the wind. It seems to me that the case for the Bill takes only a moment's thought. If we accept limits on spending for parliamentary elections, then why not have limits for referendums on an issue of exceptional significance, like the euro, that cuts across party lines? At first blush, equal spending by two sides seems the plainest of fair play. To use the over-worked European slogan, why should we not have a level playing field? A referendum offers two sides. It is either yes or no. I confess that "two sides, equal spend, fair's fair" was my initial reaction at first reading, after only a moment's thought.

Doubts on the application of the Bill to the referendum arise only on a second reading, following more mature thought. It is true that there may be only two sides, but as in geometry there could be three, four or more angles. On the euro, the "Yes" men would range from the European payroll vote—rather well-represented in this House—to the outright federalists who support anything labelled European whether from unfounded optimism about the Continent or equally unfounded pessimism about their own country. We are told that the "No" vote would range from the extreme xenophobic nationalists to the enlightened, internationally-minded, classical liberal economists, such as myself.

Let me come clean at the outset. Old hands in politics say one must never say "Never". Thank heavens I am not in politics—perhaps because no one will have me. But my considered formula, which differs from the Tories' compromise, is that I cannot visualise any circumstances in which I would wish Britain—or, if it comes to it, England—to sign away its economic freedom by submerging the pound into the euro, or, for that matter, into the dollar. Who will present that emphatic opinion?

Should there ever be a referendum on the euro between the baddies and us goodies, how should the permitted limit on spending be allocated between the rival factions on both sides? Even if some objective authority could be found to fix quotas for the three main parties, how would the noble Lords, Lord Shore and Lord Stoddart, be able to organise the pro-Labour, anti-euro group, or the noble Lord, Lord Owen, appeal to his distinctive constituency of sophisticates who appear enthusiastically to support all things from Brussels except the euro? Then, I am told, there is at least one discerning Liberal Democrat whose true liberal principles lead him to oppose this example of naked price-fixing of currencies. Is he to be prosecuted for campaigning among his confused colleagues? What is all this about "permitted participants", "responsible persons" and "designated organisations"? 4 agree with an earlier speaker who said there was some faintly anti-democratic, authoritarian ring about that.

We have heard about the one-sided propaganda from Brussels; we know of it from our own radio and television programmes. And, of course, we have had it for some years from Her Majesty's Government, not least in the schools. As for the British press, I can only say, thank heavens, that the majority, anti-euro voice predominates in the most successful newspapers. I would argue that they provide a better reflection of public opinion simply because they have to take account of their readers' preferences. But do our would-be controllers think that space devoted by newspapers to arguing the pros and cons of Europe should be controlled or influenced by such independent arbiters as, perhaps, Alastair Campbell or Peter Mandelson?

Whatever our first instinctive feelings on the merits of this Bill as it applies to referendums, I believe that more mature reflection leads to serious doubts that a simplistic rationing of the argument is either feasible or necessary. It is not feasible because strict quotas could not in practice be enforced nor arbitrary time limits imposed on campaigning.

How on earth could approved limits on spending be measured or fully monitored? What debit would be charged against a campaign for using up stocks of leaflets or promotional videos which had been deliberately piled up in advance? What is to happen in relation to the CBI or less easily organised small businesses or straightforward patriots spending their own money to air their anxieties? How is it possible to monitor badges or T-shirts with appropriate "Keep out" slogans? Are they chargeable? Do they become chargeable if the noble Lord, Lord Stoddart, buys thousands of them to distribute freely among his trade union supporters?

One noble Lord mentioned the Internet which will plainly play an increasing part in all future campaigns. Is the organisation of tens of thousands of messages to be tracked, counted and charged against the financial quotas of one side or the other?

Fixed budgets are neither feasible nor necessary. The only rough justice must be rigorously to check government spending to prevent the ruling party using voters' money to influence the voters' choice. As we have learned recently, that happened on a shameless scale under Ted Heath in the early 1970s.

As the noble Lord, Lord Shore, acknowledged, it is no longer true that the Tories can automatically outspend the rather more furtive moneybags of new Labour and the trade unions. So long as governments do not cheat, we must assume that the ability of both sides to raise campaign funds, not to mention recruit voluntary canvassers and other help in kind, is an approximate reflection of public support for their respective positions.

My conclusion is that we should stop searching in vain—like Tony Blair's army of advisers, dreamers and interfering nannies—for a new deal, a fair deal, an ideal world with a perfectly level playing field. Let us settle for the rough and tumble of the real and admittedly messy world of democratic politics.

6.42 p.m.

Lord Cocks of Hartcliffe

My Lords, I support what was said by the noble Lord, Lord McNally, and my noble friend Lady Gould about the difficulty of finding somebody suitable to be a commissioner who had no recorded views and had never taken a stance on any subject. Such paragons, if they could be found, would not really be suitable for the job. In fact, if someone reaches the age at which he is considered suitable to be a commissioner and it is not possible to detect anything on which he has taken a stance, everyone automatically thinks, "What is wrong with him? What has happened there?" So we really must try to keep in touch with reality in that regard.

The noble Lord, Lord Neill, mentioned the referendum in Wales and the disparity of funds on different sides. But he did not go on to mention that the Rowntree Trust gave money to the "Yes" campaign but not to the "No" campaign. When I asked it why it had not contributed to the "No" campaign, it said it believed in proper democratic debate. At that stage, I gave up.

The noble Lord, Lord McNally, raised the question of state funding. It is not through lack of will by the previous Labour government that that was not introduced because, as Chief Whip, I was charged with implementing the Houghton report which recommended state funding. But I did the arithmetic and I simply could not get it through because several of my Members objected on conscientious grounds. They felt that they could not stomach making the general public pay for the political parties to indulge themselves. I tried to reason with them but I could not do it. That is why we did not get the Houghton report through. I must tell your Lordships in frankness, with my non-conformist background, that had I been a Back-Bencher being approached by the Chief Whip, I should have taken the same stance myself. But in no way did I ever give any idea to the victims that that was my feeling.

The noble and learned Lord, Lord Howe, was quite right when he talked about the plethora of advice which this will generate. We shall almost have a new profession of advisers. Those people will advise that in order to be completely free of any possible legal action, in every committee room and every room used by the volunteers, on the wall there should be a list of offences and the penalties so that everyone is clear about the matter. One look at that lot and you could shut up the shop because people simply will not want to be associated with it.

I support the Front Bench on the question of no tax relief on donations. The working classes are already paying for the luxuries and entertainments of the middle classes through the lottery. It is said that the lottery is a voluntary matter and that they do not have to buy tickets. That argument just about stands up but it is touch and go. Why a bus driver—I will not refer to somebody digging holes in the road out of deference to the noble Lord, Lord Peyton—or a manual worker should pay tax in order that the Liberal Democrats, the Conservatives or the Labour Party can thrive is absolutely beyond me. It is so basically inequitable that there would be a massive rebellion by taxpayers who would pay in their money and deduct that portion of it.

I regard this Bill as hybrid, not in the parliamentary sense but in the sense of its origin. I believe that its parents are, first the chattering classes and, secondly, the spin doctors. I have referred to the chattering classes before in this Chamber. The noble Lord, Lord McNally, put hip finger on the issue when he said that the Bill is part of a package. It is part of a plethora of reforms to our constitution which have been pushed by pressure groups, including Charter 88, to which I have alluded before in this Chamber, which has a minority of academics and lawyers as members. It is highly organised. According to its advertisements in the newspapers, it has 80,000 signatures. It was foolish enough on one occasion to reveal that 1.5 per cent of those signatures came from social groups four and five. So we are dealing with a highly organised body which bounced the Labour and Liberal Democrat parties into constitutional change. At the time, I warned that the result of that would be that we should have an increasing amount of litigation. I made that point in particular when the human rightslegislation was passing through the House.

In the Daily Telegraph of 30th March the headline was: Warning on Euro rights `panic'". Jack Straw was addressing a meeting of the Institute of Public Policy Research. He said: There is no need to get panicked about this". The article goes on to say that one of the people behind the scenes in Whitehall—we know that there are a few of those—said: It's a litigants' charter. The lawyers will make a fortune". Private hospitals, schools and security companies are said to be panicking over the introduction of that legislation which will bring a flood of claims.

That is not the only area in which that could happen. In 1995, I spoke in your Lordships' House on the question of single-issue groups. I expressed my fear then that the constant working up of grievances in society, with the suggestion that legal action is the answer, will cause us all a great deal of anguish.

I gave the example of an appointments card which I had from the Chelsea and Westminster Hospital. I turned it over and it said: Had an accident? Road accident, accident at work, tripped on the pavement? You may be entitled to compensation", and it gave the name and address of the firm of solicitors. That was a hospital appointments card. No doubt the hospital had a vested interest in promoting that sort of thing.

But matters are growing worse. That was 1995. Noble Lords have probably watched commercial television and seen the advertisements by Claims Direct which say that if you have had an accident and so on, you may be entitled to get compensation. You telephone and are given examples of successful cases. The financial section of the Mail on Sunday has a "new issue alert", which I read religiously for purely academic interest. Recently, it featured the fact that one of the new issues coming to the market is Claims Direct, the estimated capital value of which was £150 million. That is a value of £150 million for that company whose adverts are seen on television. The figure has been increased over the past two issues to £200 million plus, which comes out of exploiting people's anxieties over such matters.

The other side of the coin is that if the litigation culture grows much worse no one will go into the caring professions. Yesterday's Sunday Telegraph carried the headlines, Old NHS wards used in nurses' homes crisis", Police shortages leave 999 calls unanswered", and the Times Educational Supplement this week: Recruitment crisis spurs ministers to offer postgraduates up to £10,000 a year". No one will go into the caring professions if we continue piling on legislation in all areas.

The spin doctors have placed an emphasis on donations, a topic that was all worked up before the last election. One of the subjects which has not been properly explored by the Neill Committee is the abuse of charitable funding for political purposes. I raised the issue in a Question in your Lordships' House about the Pilgrim Trust on 13th March 1997. I asked for an investigation to ascertain: whether the grant by the Pilgrim Trust towards the funding of the Constitution Unit is compatible with the trust's status as a registered charity".—[Official Report, 13/3/97; col. 425.] The Minister said that he would pass the matter on to the Charity Commission. The noble Lord, Lord Jenkins of Hillhead, then spoke, because he was a trustee. He said that, the implication of the noble Lord's Question that the Pilgrim Trust and the Constitution Unit are politically motivated bodies is an example of the extraordinary malign fantasies which occasionally seize the mind of the noble Lord, Lord Cocks". I put that unsolicited testimonial beside the two accusations of being like Senator Joe McCarthy which have come from the same Benches, but not from the same noble Lord.

The Minister went on to say that he would pass the matter on, but I then asked him about my inquiry about the Charter 88 Trust. He replied, The inquiry is soon to be finalised. I understand that emerging findings are that the trust will be required to clarify and, where necessary, review and revise its relationship with other organisations".—[Official Report, 13/3/97; col. 426.] In other words, to put it bluntly, the trust had been rumbled. It was abusing its position and the matter had to be put right.

A question has recently arisen over the matter. On 20th March this year I received a Written Answer from the Government. I had asked them to, publish in the Official Report a table stating which government departments have used Electoral Reform Ballot Services in each of the past six years". The Answer I received from my noble and learned friend Lord Falconer stated, Information in the form requested is not held centrally by departments and could only be obtained at significant cost".— [Official Report, 20/3/2000; col. WA10.] There is the old chestnut about significant costs, but in that case I found it entirely unconvincing. When I was Chief Whip in government in another place, I knew that if I had asked my staff for that information I would have received it within hours. I was extremely concerned about the matter.

What have we found since? The Electoral Reform Ballot Services organisation boasts in its brochure that, The Society has an unrivalled reputation for independence, integrity and impartiality which has been built up over the past 100 years". It goes on to state that it has won major contracts from the Government and that it has, successfully tendered for a major contract from the Department of Education and Employment to run ballots on the future of Britain's remaining 166 Grammar Schools". Substantial amounts of money are paid by the balloting services into the Electoral Reform Society's coffers; well into six-figure sums in dividends. It receives also money from two other commercial units in the Electoral Reform Society's structure. That is taxpayers', the general public's and trade unions' money going into the Electoral Reform Society to propagate a massive programme of constitutional change. I feel that that is particularly pertinent because currently, as we know, in Scotland the businessman Souter wished to run a referendum and was in negotiation with the Electoral Reform Ballot Services, which has suddenly pulled out.

The editorial of Friday's Daily Record states, The name of the Electoral Reform Society has become a byword around the world for integrity, fair play and democracy. But not any more". It then goes on to criticise the way in which support for the ballot has been pulled out on grounds which it claims are extremely thin. I shall not weary the House with any more of it. But if a reputable organisation such as that suddenly caves in to what must be some kind of political pressure, it undermines the integrity of the entire political system. If we are talking about getting individuals interested in supporting and running our democratic system, that kind of example simply will not do. I hope that we shall keep the Bill as simple as possible and explain to people that it is meant to help them and not to hinder them and threaten them with a lot of penalties.

6.55 p.m.

The Earl of Onslow

My Lords, we have come quite a long way in this country since Lord Holland could, as Paymaster-General for Forces, take the army pay, put it on deposit for his own account and pay the army at the end of the Seven Years' War, having retained the interest to his own benefit. We have come a long way even from Clive of India, who, when surrounded by piles of gold moidores, pieces-of-eight, rubies and diamonds beyond price, lakhs of rupees beyond count and accused of helping himself from Mir Jaffier's treasury, said, "Gentlemen, I stand astonished at my own moderation".

We have even come a long way from, or never went near, Talleyrand who, when appointed French Foreign Secretary, is reputed to have rubbed his hands together and said, "Une fortune immense, une fortune immense". That story was possibly invented by Madame de Stal, who did not like him. We are not at all near to the shenanigans up to which Chancellor Kohl has been seen to be got.

That applies even to Mr Hamilton, who is reputed to have accepted 20 grand from our Egyptian friend. The reason our Egyptian friend got cross with him was not because he accepted the 20 grand, but because he refused to have anything to do with him after he became a Minister. The point I am trying to make is that actually we live in a fairly nice, non-corrupt society. We should always bear that in mind. We should bear it in mind too because we have an active media who keep us politicians more or less up to scratch—although they do not always tell the stories about how badly they behave at media award parties; or of how one member of the press is seen to get rather drunk, which I suppose is human nature. I believe that we can be thankful—I nearly said, "to ourselves", but that is too smug—that we have a rather nice and uncorrupt society.

I accept that the Bill is probably necessary because of the great cries of sleaze, and this and that, and the third thing which went on before. But when we compare that with what happened under Holland or Clive, we see that the element of sleaze was so small. When I was at Eton, there were two members of my house—one was David Sainsbury, the other was me—neither of whom were ever considered a possibility for government office. They were wrong about one and right about the other. But I do not have a supermarket chain behind me.

There have been other examples of people who have handed out money for the privilege of sitting on your Lordships' Benches. It almost always works out that they have spent their money quite well and they have made a contribution. But I am still sure that the Bill is needed because of the climate in which we live.

I have but two points to make. One is the point made by the noble Lord, Lord Cocks, and other noble Lords, about the commissioner having to be basically someone who cannot have thought anything at all. Three Speakers of the House of Commons were members of my family. They were all to begin with rather gutsy politicians. They then became impartial Speakers. One of them admittedly had to be stopped by the House of Commons for fighting a duel, but then he was made the first Baron Onslow and that is why I am here indirectly, so I thank him for that. Then there was Lord Selwyn-Lloyd, who was hated for his pay pause and for being Foreign Secretary at the time of Suez. Lord Tonypandy was fairly Left-wing in his youth, but he became an excellent Speaker. It is perfectly possible for party politicians to become impartial even when they have had jobs that have required them not to be. There are many examples of that.

I refer, with delicacy, to the fact that since November—when noble Lords were made newly legitimate by Mr Anthony Blair—your Lordships' House has been able to argue more strongly with the Government. I believe that it is right that the House should do that. On this Bill, we must be careful how we argue with the Government for the reasons to which I alluded earlier.

I was encouraged by the noble Lord, Lord Bassam, which is a one-off if ever there was one! In his speech he indicated that he would listen to argument. That is vital if the House is not to be difficult over some of the amendments. I rope that we shall not have to argue seriously with the Commons over anything as it will be difficult for us to argue on this matter.

I have one major reservation. For the sake of argument, let us assume that Mr Reagan—unfortunately, he is not well—or conservative American friends give money to the Conservative Party, but that, however, would be illegal. It would be illegal for Mr Clinton's Labour friends to give money to the Labour Party. Those two parties, which are loyal subjects of the Crown, do not advocate bumping off soldiers or the forcible removal of a border. However, it will be perfectly possible for Noraid to give financial help to Sinn Fein, whose stated aim is to alter the boundaries of the United Kingdom and to force a change of sovereignty.

Are we to allow people who advocate such behaviour to accept foreign donations, when people like Mr Anthony Blair or Mr Hague, who are loyal subjects of the Crown and who wish to work within our system, will not be allowed to receive subsidies from their foreign friends? I have a major difficulty with the fact that those in Northern Ireland who advocate armed rebellion should receive foreign subsidies.

It is not quite within living memory—although nearly within the living memory of the Queen Mother—that an Irish Home-Ruler was elected in Liverpool. Sometimes Irish politics spills over into this country. However, I give this Bill my support. I hope that the noble Lord, Lord Bassam, will be as reactive and constructive in the light of criticism as he has been constructive in some of his remarks today.

7.3 p.m.

Lord Beaumont of Whitley

My Lords, I am highly qualified to bore your Lordships into the ground on this Bill. I am an ex-major benefactor of a political party; an ex-treasurer; an ex-full-time organiser of a political party; and the man responsible for having unleashed the rampant national political party spending on election advertising when I sought counsel's opinion as to whether the law was as the other party believed it to be. In addition, like. I imagine, a number of people in your Lordships' House and certainly the noble Lord, Lord Rennard—if I libel him in his absence I am sure that the noble Lord, Lord McNally, will advise him of it—I have cheated on returns of by-election expenses and thereby achieved getting people into Parliament who have served satisfactorily as Members of Parliament for a long time.

I expect that we shall have a long Committee stage and probably a long Report stage when all such matters will come out. I am afraid that we shall be kept very late at night for a long time. There is a great deal to be argued about, and I shall play my part.

Tonight I merely want to touch on a couple of matters which affect my present party. The Green Party welcomes this Bill as part of the loosening up of the constitution which we see as the most obvious benefit that we can acquire from this Government. We have possibly lived too long in, A land of settled government, A land of just and old renown, Where Freedom slowly broadens down From precedent to precedent". That is all very well in its way, but it is a recipe for the hardening of the arteries. If we want the blood of democracy to flow freely through the veins of the country, those arteries have to be softened.

To say that we give the Bill a general welcome is not to say that it is perfect. I hope noble Lords will forgive me if I reflect for a moment on the two elements that my party finds particularly interesting and which it would like to amend. In Clause 11 a "registered political party" is regarded as, represented' if there are at least two Members of the House of Commons", who satisfy the conditions. We would widen that to deem it as represented if there are at least two Members of the European or Scottish Parliaments or the Welsh or regional assemblies. If we can obtain the level of voting that we achieve in fairer systems than the "first past the post" system—two representatives of a very high calibre in the European Parliament—we believe that we should qualify for fair treatment under this Bill, even under the unfair electoral system in place at present. We intend to try to amend Clause 11 and possibly add a new clause after it to that effect.

My party is interested in the debate about donations from Europe. I do not yield even to the noble Lord, Lord Shore, in my opposition to the euro and the single currency. I believe that is an absolutely dreadful thing, and I hope that we shall succeed in resisting that for ever. However, while we are in the European Union, I believe that there is little moral reason why there should be a prohibition against various parties of the same persuasion helping each other across national boundaries. I do not understand such a prohibition. There are a large number of representatives of the Green Party in the European Parliament.

The Earl of Onslow

My Lords, are they gnomes or elves?

Lord Beaumont of Whitley

My Lords, did the noble Earl say, "name them"?

The Earl of Onslow

My Lords, I said, "Gnomes or elves".

Lord Beaumont of Whitley

Oh, my Lords, but not fairies$ I beg your pardon. That is politically incorrect and I hope that Hansard will remove it from the record. We have fellow representatives of the Green Party in Europe and I believe that it would be ethically and morally reasonable for there to be a right for parties to donate to each other. They have more representatives because they have in place a fairer electoral system. We have more votes, but fewer representatives. Such discrepancies occur across national boundaries and I look forward to a detailed discussion of this point in Committee. I am far from clear on which way to make a decision, but it is certainly a point that needs to be looked at carefully.

With those exceptions, I look forward to devoting the immense amount of time that will be required to improve the Bill in Committee. It is a good Bill and we are in favour of it, but undoubtedly it is far too complicated and needs amending in various ways. I hope that we shall be able to do so.

7.10 p.m.

Baroness Fookes

My Lords, I was deeply impressed by the exposition of the noble Lord, Lord Neill, on the work of his committee. He set out the five key points with admirable clarity and simplicity. However, I wish that they had been more fully reflected in the Bill before us today, because there are certain policies which have not been adopted by the Government. Furthermore, the Government have put such detail and over-elaboration into the Bill that I fear that it may fail in its purpose, or at least not succeed to the extent that we would all wish for it.

For a politician, my noble and learned friend Lord Howe was extraordinarily frank in his contribution. He said that over-elaboration in some legislation for which he had been responsible, or at least partially responsible, had led to a certain amount of failure in the Acts concerned. I think he was absolutely right to make that point. From my own experience I can remember some of the Bills that he mentioned.

We have a more recent example in the working of the Child Support Agency. No one could quarrel with the principle; namely, that absent parents should contribute to the upbringing of their children. However, in the end, over-elaboration of the requirements led to a bureaucratic nightmare. We saw chronic delays in the system and fathers wriggling out of their responsibilities. A simpler scheme might have dealt with the matter far better, even if it had been a little rough and ready. That is the kind of situation that I fear for this Bill.

I am appalled at the number of offences that are to be created, as well as the number of penalties that could be imposed. I believe that the noble Lord, Lord Cocks of Hartcliffe, was absolutely right to point out that the average voluntary worker going into a committee room in an ordinary constituency will take fright and rush out again if he or she sees such rules and regulations. Instead of encouraging participation in the political process through political parties and enhancing democracy, I fear that the Bill will in fact have the opposite effect. This point worries me very much.

I think that many people will agree that the Bill attempts to tackle too many subjects all at once. In my view it would have been better to have addressed only the key matters such as the origin of donations and the amounts concerned. It could then have been left to the electoral commission—which I believe to be a good idea—to work out in easy stages what matters it felt were appropriate for further legislation. Indeed, that is provided for under Clause 5, where the commission is asked to keep under review a number of matters and to make reports to the Government. After that, presumably, further legislation could be enacted. In my view it would have been far more sensible to pay greater attention to that rather than attempt to deal with the whole gamut of subjects that are contained in this extremely long Bill.

Many noble Lords have discussed the matter of referenda this evening. I hope that your Lordships will forgive me for using the old-fashioned term—I cannot get used to saying "referendums", any more than we might say, "agendums". Because the hour is late and others have dealt adequately with the matter, I shall not go into any detail, save to say that, like several other noble Lords, I dislike the system intensely. I believe that it is virtually impossible to formulate neutral questions that can be answered properly with a simple "yes" or "no". Even if it is possible to do that, I am distinctly disconcerted by the detailed administrative arrangements set out in the Bill. The situation seems to me to be far from satisfactory, especially as regards the issues of whether there should or should not be a limit on expenditure, the role of the Government in promoting their own case, and time limits. As I have said, others have dealt with these matters in some detail and I agree strongly with the points that have been made. I hope that we shall think long and hard before these provisions are allowed to go through unamended.

I should like to make one final point which I believe may be the only one that has not already been touched upon in the debate today. Oddly enough, it relates to what is not in the Bill. I refer to a section in the Representation of the People Act 1983 which, in effect, allows a single candidate in an election to veto an appearance in a broadcast. All the candidates have to agree to the broadcast. I personally came across this as a candidate on more than one occasion. It irritated local broadcasters no end, with good reason. Even if a minor fringe candidate—only one candidate—said, "No, I do not wish to take part", lo and behold, the entire broadcast was cancelled. I cannot think that that is a democratic: way of proceeding. Since almost everything else has been touched on in the Bill, I was surprised to see that this relatively simple suggestion was not taken up and dealt with. I hope that, in Committee, we shall be able to look at this point.

In common with others, I believe that we shall need a long Committee stage because there is a great deal in the Bill that must be discussed. No one could object to the general spirit and principle of the Bill, but certain provisions go far beyond that and I believe that there are significant weaknesses that we shall need to address. However, given the lateness of the hour, I shall forbear to say more.

7.17 p.m.

Lord Stoddarl of Swindon

My Lords, I am a little sorry and indeed a little worried that the noble Baroness, Lady Fookes, has adopted such a pessimistic attitude towards the Bill. I wish to welcome it as a Bill that deals with some anomalies that have long been overdue for correction. However, now I am anxious about whether I have read the Bill correctly because I believe that it will help to increase public confidence in oar political institutions, rather than the reverse.

As the noble Lord, Lord Mackay, and others have pointed out, in many respects the Bill departs from the Neill report. One of those departures is the proposal to establish a Speaker's committee. This was certainly not envisaged by the report of the Neill Committee. I have some doubt about the desirability of establishing a committee of Parliament to oversee the work of what is meant to be an independent commission. On the one hand, it is stated that the electoral commission must be independent and that no politicians may serve on it—apparently politicians are pariahs these days, although it is they who engage in the rough and tumble of politics—but on the other hand, a committee is to be established that will provide for politicians to supervise the commission. That is quite ridiculous. We shall need to examine this provision, especially when it appears that, as envisaged, the Speaker's committee will be weighted in favour of the government of the day. I doubt whether any Member of this House would welcome such a move, except perhaps those on the government Front Bench.

I have a number of other questions that I shall raise later in my speech. One provision which I welcome limits expenditure by political parties on a national basis. That is something which I very much welcome, because expenditure at national level really is getting out of hand. I believe this provision will help to reverse this trend at general elections and indeed at some other elections to prevent them becoming just another media show which is played out by elite broadcasters and elite politicians.

There really is a need to get back to real electioneering at constituency level, face to face with the electors. That is what politicians should be doing, getting down to constituency levels—at public meetings, door-to-door canvassing, open air meetings—and we must get back to making MPs attend meetings at which they can tell their constituents what their policies are about and what they are going to do so that people can see what kind of persons they are. That will enable them to be questioned by those whom they are asking to represent. I believe it is about time that Members of Parliament became responsible once again and answerable to the electorate, rather than to the leader of their party.

Before passing on to referendums, I should like to ask for an assurance from my noble friend the Minister that the new arrangements for the registration of political parties cannot lead—I repeat, "cannot lead", not "may not lead"—to draconian conditions of legislation that would prevent new entrants coming into the political field. I really do hope that we can get that assurance.

I should now like to turn my attention to referendums, and I am particularly concerned that they should be made absolutely fair to the contenders in any referendum there may be. There certainly has been no fairness in many referendums that we have had so far, notably in the 1975 referendum as to whether Britain should remain in the Common Market. It was estimated in The Times that at least 20 times the money available to the Opposition, to the No vote, was available to be spent by the Pro campaign. That really cannot be right. I hope this Bill will prevent that sort of thing happening again. Furthermore, at that time the Government engaged themselves on one side of the argument—the Pro side that is—and used taxpayers' money to promote that argument. They also issued an official pamphlet supporting continued membership, which went out together with another pro-Common Market pamphlet, and only one "anti" pamphlet. The noble Lord, Lord McNally, remembers it well. Thus the Yes case was financed by millions from private sources and from the taxpayer's pocket. The media were one-sidedly "yes" and the government machine was also on the side of the pro-Common Market lobby.

Under this weight of one-sided advocacy it really was quite remarkable that 33 per cent of the British population still voted to come out. That is a lesson which some of us remember well and have learned well. It seems indeed that even the Government might have learned something from it as well: and so they should, because this sort of one-sided government intervention has occurred very recently, in the case of the Northern Ireland referendum on the Good Friday Agreement, where the civil servants certainly became involved and the Government became highly involved. They got the result they wanted.

They also got the result they wanted in the Welsh Assembly elections, where public money was used ad lib on the Yes side, whereas one individual had to finance the No campaign. It was quite outrageous: and even after all that the Welsh decided by only 6,000 votes that they wanted this awful assembly which they are now saddled with. If there had been a fair referendum there is no question that the Welsh, quite rightly, would have discarded the idea of an assembly which does them no good and which costs them a lot more. So the Yes case was financed by millions from public sources and the No campaign got nothing.

I hope that the provisions of this Bill will at least help to remedy the situation I have just described, but there are still some worries that must be addressed. The Government machine is to be partly restricted for only 28 days before the date of the referendum. That, as has already been pointed out, is too short a period. Even then, as I understand the Bill, they will be able to issue factual information—I put that in inverted commas: "factual information"—because if some of the "factual information" on the European Union being issued at the present time by the Government is anything to go by, then "factual" has taken on an entirely new meaning.

Then there is the question of spending during the period of the referendum campaign. Why did the Government ignore Neill's view that there should be no undue restriction? Another question is indeed the question itself, as has already been raised from the Benches opposite. Who is to decide the question and say whether it is a fair and balanced one which voters can understand and answer properly?

Finally, should all referendums be decided by simple majority or should constitutional matters have to be decided by, say, a 60 per cent majority or, as in the case of the 1979 Scottish referendum, by a 40 per cent vote of the total electorate rather than those who voted? There are some serious questions to be answered, and among them is the matter of whether Parliament should take a decision before a referendum rather than afterwards.

This is an important point, since a decision by Parliament in advance could, first of all, sway the result in many ways and not least by causing a feeling among the people who might be engaged in the election and could engender in them the view that "they up there—them, the parliamentarians—have decided the question anyway and so it really does not matter what we say". As I have said, there are still many matters to be discussed and resolved at Committee stage.

There is one final issue that I should like to raise, which is the question of television and radio coverage. Although equal broadcasting time will be given directly to the contenders in any national referendum to get over their message, outside that the broadcasters will be able to engage in the issues and the arguments at will. They are of course supposed to be impartial, but doubt is bound to arise in the light of some recent disclosures. First, there was the BBC radio programme on 3rd February this year which dealt with the turn-round of opinion about the Common Market in the early 1970s. I do not know whether any of your Lordships heard it, but there were a series of regular breakfasts and the sort of thing that went on there was quite amazing. I really must read one or two of the extracts from the summary of the broadcasts. The speaker was a Mr Tucker, who was the head of the Foreign Office Information Research Department. He said: We decided to pinpoint the "Today" programme on radio… So round the table came people like Marshall Stewart, who was the brilliant editor of the "Today" programme, which was a key programme, and they sat down with people who were actually negotiating in Brussels. During that time we achieved a thing we couldn't have achieved today, which is we got an extra five minutes on the ITN news in the evening added on which was purely informative. The interviewer said: And that five minutes came out of a direct negotiation with Nigel Ryan who was the editor of ITN across one of those breakfast tables". The answer from Mr Tucker came, Yes across one of those breakfast tables. It was a wonderful, wonderful news opportunity. Even Alistair Campbell could not have done better I feel". That is what was happening at that time. Then we come to this gem: Tucker: Jack De Manio was a presenter who was terribly anti European and we protested privately about this and he was moved … Ian Trethowan listened and De Manio was replaced". It was also disclosed that not only were the British Government involved, but also the CIA. Dr Richard Aldrich, who teaches in the Department of Politics at Nottingham University, was astonished to discover that, the [Washington] library had the entire archive of a CIA front organisation which documents from start to finish funnelling millions of dollars into Europe, into Britain, with all its accounts, with all its receipts with correspondence for example from British Labour MPs to individuals in American intelligence organizations". We must ensure that that sort of thing does not happen at future referendums. The BBC and ITV are supposed to be impartial. But I understand that those breakfasts are still going on at the present time. We need to ask whether James Naughtie and John Humphreys attend those breakfasts. And we are entitled to an answer.

My last point concerns the behaviour of broadcasters during the recent European elections. Global Britain, of which I am chairman, commissioned a report from the Minotaur Monitoring organisation. It discovered that the broadcasters failed adequately to cover the Euro elections, and indeed played them down, which was certainly the policy of one political party. They gave inadequate coverage to parties of the sceptical tendency. They were boosting the campaign of the breakaway Tory candidates and emphasising the split in the Tory Party while at the same time ignoring the Euro-realists in the Labour Party.

There ought to be a full inquiry into the role and behaviour of the BBC and ITN. If that is unlikely, perhaps when the freedom of information provisions come into force they will enable us to ask questions as to what is going on and how we can have much fairer coverage not only of the European Union issue, but also of other issues in the broadcast media.

As I said in the beginning, the Bill will be helpful and I shall certainly follow it closely through Committee.

7.33 p.m.

Lord Willoughby de Broke

My Lords, I shall be mercifully brief and limit my remarks to that part of the Bill involving referendums, in particular the proposal to regulate third-party campaigning bodies and their spending limits.

Under Clause 111 and Schedule 13 the Bill will impose limits on what a designated campaign group may spend. That is currently set at £5 million. Schedule 9 specifies that the spending limits will apply for the year before an election. As noble Lords have said, those proposals are not entirely consistent with the Neill report recommendations, which specifically ruled out any time period and recognised the difficulties of imposing a spending cap. The proposals in the Bill, far from being fair, appear to be designed with the express purpose of tilting the balance in a referendum in favour of the euro.

We have been promised a referendum on the euro and, under the Bill as it now stands, any anti-euro campaign groups would be limited to spending £5 million in the year before a general election is announced. As my noble friend Lord Mackay of Ardbrecknish said, that would be perfectly all right if Parliament had a fixed term; then everyone would know where they were. But Parliament does not have a fixed term. So how do third-party campaigners know when the button has been pressed and the year-clock starts ticking? The answer is that they will not know until the Government call an election.

In other words, the 365-day period during which expenditure will be controlled, as set out in the Bill, will be known retrospectively. That seems very unfair. Any organisation which spends more than £5 million during the year preceding an election will be liable to criminal proceedings under the proposals in the Bill when it could have no certainty as to when the period started during which it was spending money. That is retrospective legislation at work.

The noble Lord, Lord Shore—ever the optimist— said that that provision would be knocked out at Committee stage I trust he is right and I hope to be here to help knock it out. But the Government's answers in another place when this matter was raised were not wildly encouraging. Members of the other place were told that campaign groups could avoid committing an offence by operating to expenditure limits during any 365-day period. That effectively limits them to any 365-period whether it is one, two or three years before the election; in other words, they will have to limit their spending to £5 million during each 365-day period.

Even less helpfully, the government spokesman in the other place at Report stage suggested that third party campaigners might like to make what he called an "educated guess" as to when a general election might be called. What is an "educated guess" as opposed to an uneducated guess? We do not know. But those who make educated guesses are probably the same people who suggested that the euro would be a stable and hard currency. They have not been awfully clever so far.

The third-party campaigners are being asked by the Government to guess whether or not they will be committing a criminal offence, for that is what the Bill will charge them with if they spend more than £5 million in any 365-day unspecified period. That is not good enough. I hope that amendments will be tabled to make this part of the Bill much fairer.

Another area of concern, as the noble Lord, Lord Stoddart, mentioned, is the ban on central and local governments campaigning during the 28-day period prior to an election. The noble Lord, Lord Neill, mentioned that in his report, saying that the 28-day period did not go quite the whole way. From that I infer that he would have preferred a longer period of abstinence from government campaigning so close to a general election. But, as the Bill stands, the Government will be able to push the case for the euro virtually up to the election, while other organisations will be regulated for up to six months before an election.

All this looks as though the Government are trying to rig the rules governing a referendum in their favour. They have already spent some £29 million on the euro preparation programme. As my noble friend Lord Lamont pointed out, they can issue discussion papers and pro-European propaganda disguised as information; they can issue documents such as the national hand-over plan. If the Bill remains unamended, the Government will be allowed to spend whatever it takes, for as long as it takes, to push the case for the euro while organisations which campaign against the euro will be subject to legal spending limits, time limits, retrospective legislation and even imprisonment.

Many speakers have said how keenly they are looking forward to the Committee stage in spite of the threats of my noble friend Lord Mackay to read out numerous schedules. I hope that I shall be able to join the party. Although the Bill has its good parts, the part dealing with referendums needs to be improved radically before the measure is returned to another place.

7.40 p.m.

Lord Rennard

My Lords, this has been a good debate about the health of our democracy. The measures proposed in this Bill are a prescription from the Committee on Standards in Public Life. They arise from a generally shared diagnosis that something is rotten in the state of our politics when it can be seriously suggested that money can buy undue influence in an otherwise democratic system.

There appears to be widespread consensus that the committee chaired by the noble Lord, Lord Neill, prescribed the right kind of medicine. I refer to national limits on party spending; transparency and openness about where the money comes from to finance political parties; and an independent electoral commission to take much of the responsibility for initiating and overseeing changes to our electoral machinery out of the hands of the governing party and the parties themselves. There may, however, be some disagreement about the dosage of the medicine. Some of us may believe that a few extra drugs should be prescribed in addition.

It was the issue of funding, the constant scandals which surrounded the previous government and the addition of the word "sleaze" to our common political vocabulary which led to the formation of the Committee on Standards in Public Life—initially under the guidance of the noble and learned Lord, Lord Nolan.

I do not believe, however, that the problem in this country is as bad as it is in, for example, the United States of America, to which many noble Lords have referred in this afternoon's debate. In America the huge costs of modern campaigning, especially through TV advertising, force candidates and legislators to devote more of their time to chasing money than to campaigning for the votes of the ordinary citizen or to doing their job of legislating. Indeed, it is estimated that a US Congressman will need to raise 12,000 dollars each day he is in office simply to stay in office. The need to raise such huge sums has a corrupting influence.

Therefore, as the noble Lord, Lord Neill of Bladen, argued in his report, and this afternoon, the time has come to call a halt to our own party political "arms race" before we all fall further into the trap into which politicians in the United States have already fallen, and where there is considerable disquiet but little action on the subject of campaign finance reform.

In this country, our laws to prevent the widespread buying of the ballot date back to 1883 when campaign expenditure was almost wholly at the constituency level with virtually no national expenditure by national party organisations. There were many scandals at the time with the purchase of constituencies. Some of your Lordships may remember the famous episode of "Blackadder" in which the late and much missed Vincent Hanna reported from the by-election in "Dunny on the Wold" where Lord Blackadder had bought the seat by purchasing the vote of the only person entitled to participate.

The political corruption scandals of the 18th and 19th centuries were largely ended—as the noble Baroness, Lady Gould of Potternewton, pointed out earlier—with legislation against bribery, the introduction of the secret ballot and the introduction of constituency expenditure limits. But our electoral laws have scarcely changed in many ways since 1883, while the way in which elections are fought has changed considerably. For many years the constituency limit, together with rules making it illegal to hire canvassers or vehicles to convey voters to the poll, helped to prevent a rich candidate or party from effectively buying a seat.

However, elections are no longer fought primarily at the constituency level. If we look at the increase in spending at national level by the Conservative Party over the past 25 years, we see how things have changed and we can look ahead to the problems we may face in future unless we act now.

In each of the 1974 elections the Conservative Party was calculated to have spent less than £100,000 on its national campaigns. By 1979, with the services for the first time of the noble Lord, Lord Saatchi, in charge of advertising, the Conservative Party is estimated to have spent £2 million nationally. By 1983 the sum was £4 million; by 1987 it was £9 million; by 1992 it was £11 million; and by 1997 it was a staggering £28 million.

Of course, I have heard some politicians argue that this money simply does not buy votes. But why then would the parties seek to raise and spend such huge sums of money? I can tell your Lordships that it is not simply for fun. The requirement for political parties to raise funds on this scale encourages a most unhealthy syndrome of dependency on a few very wealthy individuals. It strikes at the core of the democratic principle of one person, one vote, if we reach the point at which £1 million brings about a change in policy which millions of votes have failed to achieve.

The dependency, for example, of the Conservative Party on the tobacco industry to provide advertising sites during the 1992 general election cannot have encouraged that government to tackle the problem of the 300 people who die every day from tobacco-related illnesses, or the burden which that habit places on the NHS. It was not without reason that the Labour Party was advised to return the £1 million donation from Mr Bernie Ecclestone, following its delay in banning tobacco advertising from Formula 1 events.

Parties should be free from pressures to seek contributions of this kind. Therefore, the core proposal of a maximum expenditure limit in general elections is a welcome one. However, the precise limit needs to be considered carefully.

The current proposal for a national limit is calculated on the basis that for every seat fought there should be £30,000 of allowable national expenditure. Therefore, for a party fighting virtually every constituency, the limit will be nearly £20 million. But the limit for constituency-based campaigning will remain at about £8,000 per seat or an aggregate for all constituencies across the country of about £5 million.

It seems to me that the balance is wrong when four times as much money can be spent on national campaigns as on the constituency campaigns. It cannot be fair that a candidate is effectively prohibited because of electoral expense limits from placing an advert in his local paper explaining why people should vote for him while candidates from richer parties are able to benefit from huge national advertising campaigns, full-page advertisements in national newspapers, and expensive bill-board advertising. Ideally, I should like to see a national limit which matches the aggregate of the constituency limits. I believe that there is a strong case for lowering the proposed national limits and for increasing the amounts which can legally be spent in constituencies.

Many of the reasons for which it is proposed to increase spending limits for parliamentary by-elections also apply to constituency campaigns in a general election. The same innovations in campaigning methods and technologies apply. It seems to me that the disparity between the constituency limit of about £8,000 and the proposed by-election limit of £100,000 is simply too great.

Too much emphasis is put on the national campaign if £20 million is the national limit and only £5 million is the aggregate constituency total. I ask the Minister to look carefully at these totals and at arguments advanced in another place. Both Mr Martin Linton and Mr Andrew Stunell argued that £75,000 should be the limit for parliamentary by-elections; I agree. Furthermore, I agree with them that a notional national limit based upon £30,000 per constituency fought is too high. I think that the figure of £22,500 which they suggested is quite high enough. But I would reduce this further and increase the constituency limits to, say, an average of between £12,000 and £16,000.

However, there is more to ensuring a level playing field in elections than introducing national expenditure limits. A system in which two parties can raise and spend £20 million each and their nearest rival—with more than half the support of one of them, and almost hall the support of the other—can raise and spend only £3 million hardly seems like a fair fight. My noble friend Lord McNally earlier made an eloquent case, as ever, for state funding.

I should perhaps declare an interest in this subject as the director of campaigns and elections for the Liberal Democrats. The noble Lord, Lord Cocks of Hartcliffe, referred earlier to the previous Labour government's attempts to implement the Houghton commission report. I regret that they failed on that occasion.

I also remind the House that it was not long ago—in 1994—that the Labour Party, in opposition, argued in its evidence to the Select Committee on Home Affairs that there should be an element of state funding for political parries and that the public were prepared to pay for this. But even if, as I accept, the public are not delirious about the prospect of paying a small contribution to make democracy work, I believe that they would consider that more attractive than the alternative proposition of having our democracy depend on the favours of a few millionaires.

In evidence to the Neill committee, my party argued that £50,000 was quite enough for any one individual to donate to a political party. Maximum limits for donations apply in many countries. If they applied here, I believe that a number of noble Lords to my left would have bean spared their blushes last Friday morning. Only a sensible limit on donations will prevent the suspicion of money buying undue influence in the political process and thwarting the democratic principle that each vote has equal value. But sensible levels of campaigning will take place thereafter only if that funding is replaced to some extent by a modest element of state funding.

So far, I have addressed my remarks to the issues of fairness, democracy and a more level playing field between the political parties. But there is, I believe, a greater danger in the Bill that, despite the best of intentions, the Government may unwittingly permit the proverbial coach and horses to be driven through their intention to make the rules on election spending somewhat fairer. The proposals for expenditure by so-called "third parties"—I do not mean the Liberal Democrats—intend to allow those who are not standing in an election to express their views on issues, for and against particular candidates. That is right and proper; to prevent them doing so would be in breach of Article 10 of the European Convention on Human Rights, but they should not be able to exercise disproportionate influence on a campaign through massive financial advantage over those who are standing for election.

The attempt to subvert the democratic choice of voters in the recent Scottish parliamentary by-election through massive and misleading advertising highlights the dangers we face if people with more money than sense are allowed to spend disproportionate sums of money on trying to influence electoral outcomes. I therefore welcome the Minister's statement today that there will be a £500 limit proposed for such constituency expenditure. But there must also be a much smaller national limit than that currently proposed for third party expenditure in national elections. This will also help to prevent the so-called "cheating" to which the noble Lord, Lord Mackay of Ardbrecknish, referred.

There are a number of other issues in the Bill which will require further examination. I refer in particular to the practicalities for the parties of implementing the detailed requirements for disclosure of financial information. I think that all parties accept the principles in the Bill, but as largely voluntary organisations, with significantly fewer staff than many civil servants may believe, it will not be as easy as they think to fulfil the very detailed requirements. In particular, there needs to be more understanding of the different ways in which parties organise. My own party has a federal structure, which is quite distinctive. I thank the Minister for confirming in his opening remarks that he is considering how this can be taken into account.

As the Minister also indicated, we need to consider the genuine differences between sponsorship and advertising at conference events, and unconditional donations—up to a certain level of course. We need to define more carefully the differences between local and national expenditure so that it is clear who is responsible for what.

In relation to the difficulties faced by all parties, I concur entirely with the comments made by the noble Baroness, Lady Gould of Potternewton, on this subject, and with some of the comments made by the noble and learned Lord, Lord Howe of Aberavon, the noble Lord, Lord Jopling, and the noble Baroness, Lady Fookes. I hope that in future the electoral commission will address some of these issues, but it may not have time to address them before the parties have to gear up for their new legal and financial responsibilities.

I hope that the electoral commission will be a great success. Indeed, I look forward to the day when it will be able to go further than its initial remit and ensure that in future general elections we will have proper televised debates between the three main party leaders and between the four main party leaders in Scotland and Wales.

The electoral commission will, I hope, ensure that our electoral laws never get so out of date again as lifestyles and technology move on. Civic education will be an important part of its remit. Impartial explanation of the political process is an essential prerequisite to encouraging participation and sustaining the health of our democracy.

Taken as a whole, this Bill will help to cure some of the ills in our failing democracy. Let us make sure that the treatment provided is as effective as possible.

7.54 p.m.

Viscount Astor

My Lords, the noble Lord, Lord Cocks of Hartcliffe, said that this was a Bill derived from the chattering classes and spin doctors. That may be the case, but it is a Bill from his Government's Front Bench. I do not wish to draw analogies as to who on the Government Front Bench is the spin doctor and who is a member of the chattering classes. I shall leave that to the noble Lord, Lord Cocks.

While we agree with many of the principles in the Bill, it is long, badly-drafted and will no doubt be subject to a whole raft of government amendments even before we get to the Committee stage and before we on this side of the House have tabled any of our own amendments. Almost every noble Lord followed my noble and learned friend Lord Howe in complaining about the complication and over-elaboration of the Bill. My noble friend Lady Fookes showed how the Bill could discourage rather than encourage local involvement in politics.

I am sure that there will be government amendments. We shall want to see them in good time. Perhaps I may plead with the Minister that the Committee stage will be after the Easter Recess so that there is ample time for debate. I hope that the Government will table the amendments in good time in order that we may consider them carefully. Indeed, that may give the Minister time to understand the complications of his own Bill. The number of days in Committee will be purely relative to the complication of the Bill brought forward by the Government.

The noble Lords, Lord McNally and Lord Goodhart, want state funding. I thought it was rather interesting how much they spent at the previous election. I think that they said they spent £3 million.

Compared with the percentage of the vote that the Liberal Democrats received, that was rather good. They did better than we did; they got more bangs for their bucks. They probably did rather better than the Government. I am not sure that they made out a case at all for state funding; they should carry on as they are. We have always been against state funding.

The noble Baroness, Lady Gould of Potternewton, said we should not get too bogged down in detail but should stick to the principles. We are not going to get bogged down in detail today, but I am afraid we shall get terribly bogged down in Committee and at Report stage. But that is why we are here; that is what this House is for.

Baroness Gould of Potternewton

My Lords, I did not actually say that. I am sorry if I was not clear. I said that I hoped that when we discussed the detail we did not forget the principle.

Viscount Astor

My Lords, I accept entirely what the noble Baroness has said. We shall try always to remember the principles as we wade through the detail of the Bill.

I turn now to some of the issues which derive from the Bill. The first issue is political party donations. We agree that blind trusts should not be used. They have been abused in the past; it is extraordinary how many prospective Cabinet Ministers suddenly turned out to have one. The two main points about donations amplified by the noble Lord, Lord Shore, are that there should be a disclosure of names and a limit on expenditure in elections. We agree with all of that.

Turning now to something more difficult—that is, the electoral commission. The noble Lord, Lord Cocks of Hartcliffe, was concerned about membership. We agree. My noble friend Lord Norton is concerned about membership. It seems to us that membership should be open to include, for example, members of the judiciary. The idea that former politicians should be disbarred seems totally illogical. It is rather like asking Members of another place to come to this House, to forget that they are politicians and to sit on the Cross-Benches and have individual views. That does not make any sense. Many distinguished politicians and former politicians have been chosen by this Government and the previous Government to sit on commissions; they have carried out their roles with great impartiality and have done extremely good jobs. To disbar a whole number of people who have a wealth of experience is utterly illogical.

My second point about the commission concerns the extraordinary power it will have under Clause 12. Clause 12 is extraordinarily wide-ranging. Under Clause 12 the commission can promote EU institutions. How can that be justified? After all, these institutions have their own vastly expensive PR machines and are quite happy to promote themselves. They certainly do not need our help.

The commission is to have an educational role. The noble Lord, Lord Neill of Bladen, was concerned about overloading the commission with an educational role. Clause 12 does that. Indeed, subsection (4)(b) even gives it the power to make, grants to other persons or bodies for the purpose of enabling them to carry out such programmes". What kind of "other bodies" could these be that the commission will substitute for its own role in education?

That brings me to another point regarding the commission and the proposal in the Bill that we should suddenly be within or without 365 days of a general election. That proposal puts the Government in a totally privileged position. The noble Lord, Lord Shore, said that this was obvious nonsense. We agree. We shall certainly wish to return to this point at the Committee stage.

Perhaps I may leave general elections and turn to referendums. My noble friend Lord Lamont, the noble Lord, Lord Harris of High Cross, and my noble friend Lord Willoughby de Broke were concerned about the clauses in the Bill on referendums. The central issue about a referendum is who decides the question and whether the question is fair. My noble friend Lord Norton said that the commission should have a central function. The Bill as currently drafted will allow the Government to gerrymander any referendum in favour of, for example, the euro. At the very least the commission should have to be consulted and perhaps should even have to approve or frame the question. It must be for Parliament to decide what the final question is, but surely the commission should have a role in that. The same applies to determining thresholds, turn-out and period issues. Surely the commission should play a part in determining that policy.

The whole point of a referendum is that a party does not necessarily have a view and questions cross party lines. With regard to the previous referendum on Europe, parties were split in ways that were perhaps surprising when we look back to those days. The idea that there should be arbitrary limits, as set out in Schedule 15, is unfair. It should come under umbrella organisations. We shall have to look closely at whether EU organisations should be able to play a part and become permitted participants, as the Bill currently allows.

Perhaps I may say a few words about broadcasters. It is surprising that the commission should not play a greater role in party political broadcasts and determining how many there should be. I understand that that has been resisted by both the ITC and the BBC. We know that in the past there have always been arguments about how long they should be and how many there should be. Indeed, the Liberal Democrat Party felt on one occasion that it had been left out of that process and complained bitterly. It would seem sensible to look at whether the commission should have a greater role in deciding what is fair. Very often the ITC and the BBC do not necessarily agree. We shall therefore want to look closely at Clause 10. We shall also want to look at advertising and poster advertising in general elections. Control of advertising has concerned many of those who have spoken in the debate.

We shall want to look at other issues—for example, bequests, the definition of campaign expenditure, compliance costs, and Clause 94 and the order allowing the Secretary of State to make changes regarding referendums. My noble friend Lord Lamont is concerned about referendums and defining caps by political parties. We agree that it should be for umbrella organisations with regard to referendums. The Bill needs to be amended in that area.

Perhaps I may now turn to trade unions. Trade unions are generally affiliated to the Labour Party—the Bill should recognise that fact but it does not—as are often co-operative societies, which, like trade unions, are major funders of the Labour Party. The Bill gives the Labour Party a way round the limits on campaign expenditure. Unions pay political levies. Unions are part of the Labour Party's nomination process. They have a vote in who is to he chosen as, for example, a mayoral candidate. Indeed, they have a vote in who is to be chosen to be the leader of the Labour Party. How can they be separate bodies as defined under the Bill? That cannot be right.

My noble friend Lord Onslow is concerned about Northern Ireland. So are we. We believe that if Sinn Fein wants to be a credible political party it, too, should not rely on overseas donations when other parties cannot receive them. We know that in reality the Bill could be a cover for the funding of terrorist acts against our own people. We know that that could happen and we must guard against it. We shall want to look closely at this issue. The way that the Bill is presently drafted cannot be right.

Perhaps I may come back to political funding and local treasurers. It seems to us that weekly donation reports are unnecessary and are far too burdensome. With the chaos of party machines, as it often is, during general elections, how can local treasurers manage to take control of this issue? Under Clause 62 the Secretary of State—I am reading from page 13 of the Delegated Powers and Deregulation Committee's report—may, after consulting the Commission, by order, extend the provisions on weekly donation reports in relation to the specified election period in relation to one or more relevant elections". That means that the Secretary of State, by order, will be able to expand the provision. The point I am making is not a particularly Conservative Party one. It is the same for any local party. If we are going to encourage democracy, if we are to encourage people to come forward and play a part in local elections and if we are to encourage donations, we must have sensible rules. They must be enforceable, so they must be simple and straightforward. The rules in the Bill are not.

That brings me to tax relief. All noble Lords were in favour of it, except possibly the noble Lord, Lord Cocks. Tax relief was recommended in the report. It would cost between £4 million and £5 million a year. That is what the Government spend on spin doctors.

As we have heard, they spend £92 million on their advertising budget. There would be no great administrative burden. Tax relief would prevent state aid and not encourage it or be a substitute for state aid. The costs are so small in comparison with what has been raised by the Government's stealth taxes that the Government's reason has to be political and not fiscal. There can be no argument that it is a fiscal reason. It cannot be argued on budgetary grounds. In his report, the noble Lord, Lord Neill, encouraged the giving of small amounts. All noble Lords on this side of the House agreed with that. The Government are going to have to reconsider the matter.

I turn now to company donations. There seems to be a loophole here, left by the Government for some reason, I know not why. European companies will be able to give money without restrictions. I hate to sound harsh to the Minister, but we all know how the socialist parties in Germany and elsewhere in Europe have benefited from company funding. I am sure that that is not the Government's intention, but they will have to tighten up that clause of the Bill. The noble Lord, Lord Shore, described the provision as driving a coach and horses through British politics. We agree.

We have always wished to see the Neill recommendations implemented in full, not with parts missing. The noble Lord, Lord McNally, described the Government's thinking behind the Bill as, "It's now our turn to draw up the rules". I am afraid that that is only too true. The Bill has in part been written by a responsible Government; but in part, I am afraid, it shows too much influence of the party chairman and the Labour Party machine.

I warn the Minister that if a clause is too complicated, if it is not understandable, and if the Minister cannot explain it, we shall have to look closely at amending it in Committee.

8.11 p.m.

Lord Bassam of Brighton

My Lords, I spent Saturday evening—I cannot resist saying this because the noble Lord, Lord McNally, is present—in the company of a body of citizens who come under the heading, the National Society of Allied and Independent Funeral Directors. I held out great hopes for the society's annual banquet. I was given a very entertaining time. I wagered that this evening would not be so interesting or entertaining, but I have to tell noble Lords that they have matched the National Society of Allied and Independent Funeral Directors in every respect.

Lord McNally

My Lords, the last time the Minister addressed the House he had spent his evening reading the local government journal. Last Saturday, it was the funeral directors. For his own good, the Minister really has to give up life in the fast lane.

Lord Bassam of Brighton

My Lords, at least I have succeeded in one respect: I have brought some added levity to the proceedings.

I take great encouragement from the debate. I enjoyed all the contributions in their different way. I enjoyed particularly that of the noble Lord, Lord Mackay of Ardbrecknish. It was witty and ingenious and up to his usual standard. We heard many important comments from the noble Lord, Lord Neill, who made a telling contribution. The noble Lord, Lord Jopling, displayed his command of the issues. The noble Lord, Lord Goodhart, helped greatly to advance the debate as a result of his work on the Neill committee, as did the noble Lords, Lord Rennard, Lord McNally and Lord Norton of Louth. I enjoyed also the contributions of the noble Baroness, Lady Fookes, and my noble friend Lady Gould of Potternewton. It is invidious to single people out, and wrong to do so, but all noble Lords made separate points and I shall try to deal with them as best I can.

The debate was positive and constructive, reflecting what happened in another place. With some notable exceptions, particularly on tax relief, there was a large measure of support on all sides of the House. I stopped writing down the number of welcomes given to the broad swathe of measures set out in the Bill. That is as it should be for a Bill dealing with the regulation of political parties and with electoral matters. One consistent criticism, essentially from the Benches opposite but reflected in comments from other parts of the House, was that the Bill is elaborate. The noble Baroness, Lady Fookes, said that it was too much at once and other noble Lords said it was very detailed.

There has been a failure to regulate in this area over many years. That is why we have a long, detailed, and, in some regards, complex piece of legislation to consider. No doubt the House, with its reputation for giving matters very close inspection and scrutiny, particularly in Committee and on Report, will seek to sort out many of the problems that we have perhaps imagined at this early stage in our discussions.

The noble Lord, Lord Mackay, described the Bill as too bureaucratic. We recognise that there is a lot of detail in the Bill. It is an inevitable consequence of the Neill scheme. I remind the House of 'what the Neill committee said in response to our initial White Paper. It said: We congratulate you. Home Secretary, on its clarity and conciseness. We appreciate the effort required to translate recommendations into legislative form and are impressed by your success in doing so". That is a tribute to our efforts to reflect the majority of the 100 recommendations set out by the committee.

The noble Lord, Lord Mackay, raised a number of other important questions and political points. He asked how we can expect political parties, and third parties, to comply with controls on expenditure in the 12 months' run-up to an election, the date of which cannot possibly be known in advance. It was claimed that this was in some sense skewing the way in which politics would go. We believe that the provision ought to be on the face of the Bill in the interests of clarity and effective enforcement. It is important that political parties should know the period during which controls on campaign expenditure are to apply. In the case of parliamentary general elections, recent experience suggests that the main political parties begin campaigning in earnest about a year in advance of the expected date of the election. In spite of the fact that the precise state of a general election is not known well in advance, there is no hindrance to the operation of the scheme set out in the Bill. In practice, a political party can ensure that its campaign expenditure remains within the prescribed limits by adhering to those limits during any 365-day period. Parties will, in any event—

Lord Mackay of Ardbrecknish

My Lords, will the noble Lord give way? If that is the case, why do the Government not come clean and write into the Bill a provision to control the expenditure of political parties every month of every year? If they are always having to look over their shoulder, as it were, in an attempt to work out their expenditure in relation to a date in the future, surely it would be far better just to impose that limit on them. Secondly, will the limits apply to the expenditure of constituency parties as well?

Lord Bassam of Brighton

My Lords, I shall reflect on the second point. On the noble Lord's first point, it is inevitable in a scheme of regulation such as is envisaged and described in the Bill that there will be increased regulation of the day-to-day expenditure of political parties. It is an implication that follows as a consequence— The Earl of Onslow: My Lords, this point is important. Let us assume, for the sake of argument, perfectly reasonably, that the Government say, "We are doing so well, we want another big bite of the cherry. We love being in government and bossing people about, and we therefore want to go to the country in October of this year", which is well within the year in which the expenditure of political parties should be controlled. How on earth is anyone to know whether the Government are likely to call a snap election, say, three and a half years into a Parliament? It is a perfectly legal thing to do, and it has been done many times. It presents terrible complications.

Lord Bassam of Brighton

My Lords, I thank the noble Earl for Lis point. Clearly, it is a matter that political parties will have to consider seriously in planning their expenditure over the years which—

The Earl of Onslow

They cannot.

Lord Bassam of Brighton

With respect, it is a matter to which political parties will have to give more thought. That will apply to all of us.

Parties will, in any event, want to keep in reserve a significant proportion of their expenditure allowance for the formal campaign period during and following the announcement of the date of the poll.

The noble Lord, Lord Mackay, made the point: why not apply expenditure controls just over the period when the election is called? The Neill committee's objective was to reduce significantly the level of campaign expenditure that was evident at the last election. It seemed to me that there was a consensus on the issue. The figures quoted were £28 million for the Conservative Party, £26 million for Labour, and £3 million for our colleagues in the Liberal Democrat Party. The figures were for expenditure over a 12 to 16-month period. If we want to end the arms race in election spending we must control expenditure over a period of about 12 months. To control spending only during the four or five weeks before the date of the poll would leave the parties free to spend millions in the run-up to the final election period.

The noble Lord, Lord Mackay of Ardbrecknish, quite rightly, questioned the effect of the Bill on foreign funding because EU and Commonwealth nationals are permissible donors. In the Bill we have linked the definition of a permissible donor to those cases in which individuals are entitled to vote. We believe that this is a simple test which will be relatively easy for parties to follow. Our electoral law allows for Commonwealth citizens to register and vote in all elections and for EU citizens to vote in local and European parliamentary elections, as we have debated in the past. If a person is entitled to vote it must be right that he or she is also allowed to donate to a political party.

The noble Lord also raised the question of third party expenditure in elections. The provisions in Part VI of the Bill reflect the recommendations of the Neill committee in this respect. The committee proposed that third parties should be allowed to spend up to 5 per cent of the limit for political parties, and the Bill makes clear provision for that. We cannot prevent third parties spending money in an election campaign or impose unrealistic limits. We are already aware, from the judgment in Bowman, of the view that the European Court of Human Rights would take of such restrictions. While we must allow third parties to have their say, nevertheless we recognise that the political parties are the main players.

The noble Lords, Lord Mackay of Ardbrecknish and Lord Marsh, referred to the position of third parties in referendums. The spending controls in Part VII will apply to all organisations, not just political parties, that campaign in a referendum. The Bill provides that an organisation registered with the electoral commission may spend up to £500,000 in a UK-wide referendum. That trade unions and others should be allowed to campaign is simply a matter of free speech, which many Members of your Lordships' House have defended over the years. To prevent them spending money in a campaign would be contrary to Article 10 of the ECHR in the same way as the £5 limit on third parties under the 1983 Act has been held by the European Court to be contrary to convention rights.

The noble Lord, Lord Mackay of Ardbrecknish, referred to shareholder approval of donations by EU companies. The provisions of Part IX reflect the relevant recommendations of the Neill committee. The requirement to obtain the prior consent of shareholders for political donations will, and can, apply only to companies incorporated in Great Britain and registered under the Companies Act. The fact is that we cannot legislate here in respect of companies incorporated in another member state of the European Union. I am afraid that, imperfect as it is, this is a situation with which we must live.

The noble Lord, Lord McNally, dealt with an issue which I always expect noble Lords on the Liberal Democrat Benches to raise: state funding of political parties in this country. That issue is related to the question of tax relief, which was also raised in the debate. We believe that that is a form of state aid by the back door. Although we are always open to argument, it is our consistent view that it is wrong to use that form of subsidy for major political parties, particularly when there are many other calls for the funding of important public services. That is a well-rehearsed and understood argument.

My noble friend Lady Gould asked a number of important questions, not least whether it was realistic to expect central party organisations to supervise and account for the expenditure of each and every constituent branch or association. That matter was also touched upon by the noble Viscount, Lord Astor. That must be done if the controls set out in Part V are to apply to all campaign expenditure incurred by a political party. Expenditure incurred on behalf of individual candidates will continue to be regulated by the 1983 Act, and the party centrally will need to concern itself with that issue. My noble friend Lady Gould also asked about the list of items to be counted against expenditure limits. The Neill committee suggested that any list of items to be set against expenditure limits needed to be comprehensive. For that reason the list has been placed on the face of the legislation.

The Bill also provides for the electoral commission to produce a code of practice to give guidance as to what kinds of expenses are to be covered by the list and the allocation of overall costs. If we adopted a less comprehensive approach by setting aside the costs of staff and premises a reassessment in general terms of the appropriate limits of expenditure might be required.

A number of noble Lords focused on trade unions. In particular, my noble friend Lady Gould asked about their role and status. It is our understanding that they are incorporated associations and, therefore, are capable of becoming recognised third parties under the terms of Part VI of the Bill. However, I undertake to investigate the matter further since it has importance and will no doubt be reflected in our further deliberations.

Lord Mackay of Ardbrecknish

My Lords, having listened to the noble Lord, he may ponder the fact that there are various professional groups within political parties. For example, if the Society of Conservative Lawyers decides to register as a third party, can it spend up to the half a million pound limit?

Lord Bassam of Brighton

My Lords, I shall ponder that point with my usual eye to detail and return to it when I have the opportunity. No doubt I shall not be allowed to forget it.

The noble Lord, Lord Neill, was, quite understandably, concerned, as was the noble Lord, Lord Norton of Louth, about overloading the work of the electoral commission. We agree that the first priority for that commission is to put in place the controls over parties' income and expenditure. Other functions of the electoral commission will not be brought into force until some time after that body has been established. We are rather more optimistic than the noble Lord about the ability of the electoral commission to take on its broader non-regulatory, and perhaps educational, functions.

The noble Lord, Lord Jopling, spoke about the need for a clear statement on the face of the Bill to make the buying of air time illegal. I have a great deal of sympathy with that point. However, the ban is set out in a longstanding code of practice which covers the Independent Television Commission and the Radio Authority. There is absolutely no doubt about the operation of that code, and we are not immediately persuaded that the prohibition on political advertising needs to be given any further statutory force. That is something which the electoral commission will regard as an important part of its regulatory function, and no doubt it is an issue to which we can return. We are at one on that point, which was well made by a number of noble Lords.

Lord Jopling

My Lords, although it may be made clear in one place, what harm would it do to say it again clearly a second time in this Bill?

Lord Bassam of Brighton

My Lords, when we return to debate the matter at a later stage perhaps that is something to which we can give further thought.

I should like to focus on one or two points raised by the noble Lord, Lord Norton. The noble Lord asked whether consideration should be given to giving the electoral commission the job of setting referendum questions. We believe that separate legislation is required in order for any particular referendum to be held, and the questions to be asked will need to be considered in that context. It is right that the wording should be a matter for Parliament to decide. Surely, that is part of our primary purpose. It has been suggested, however, that the electoral commission should have an advisory role in setting the wording of a referendum question. That may well be an appropriate role for it to undertake. It is a suggestion to which the Government are prepared to give further consideration, although the Neill committee did not envisage that as one of the roles of the commission.

I was interested in the point raised by the noble Viscount, Lord Astor, about the commission's neutrality and independence. In another place Members of the noble Lord's party moved amendments which explicitly sought to have on the face of the Bill that no serving or former Member of the House of Commons, the Scottish Parliament, the National Assembly for Wales, the Northern Ireland Assembly or the European Parliament shall be eligible for appointment as an electoral commissioner. Do I now understand that the noble Viscount argues against that point?

Viscount Astor

My Lords, has the Minister not heard of probing amendments? They are tabled in this House and another place.

Before the Minister leaves the issue of the commission, why does it need to promote public awareness of the institutions of the European Union?

Lord Bassam of Brighton

My Lords, I shall turn to that point, but I had hoped for some consistency across both Houses on the need for the independence of the electoral commission. When we return to the point at a later stage, I hope that that wish will be fulfilled.

It is clearly important that the commission has the broader, educational role of explaining and underpinning governments' civic responsibility in promoting greater awareness of all our important political institutions. Some Members of your Lordships' House—the noble Lord, Lord Lamont, made this point—took a rather sinister view of the role. I have a more generous view. There is an important educative role for the commission to fulfil. However, we shall undoubtedly return to that issue.

I said that I would pick up the point raised by the noble Earl, Lord Onslow, about funding of parties from the US. An order made under Clause 65 will disapply the previsions of Part IV of the Bill in respect of Northern Ireland parties. Such an order will apply for four years in the first instance. The effect of such an order will be that parties operating in Northern Ireland will, as now, be able to accept donations from the Irish Republic and elsewhere, including the United States. The Neill committee recognised that as an inescapable consequence of its proposals. We agree that it would be preferable not to make any distinct provision for Northern Ireland parties.

The Earl of Onslow

My Lords, this seems so fundamentally true. Why is it morally wrong for a Chinese supporter of the Conservative Party to send a cheque to the Conservatives, or a Clinton supporter of the Labour Party to give the Labour Party a cheque, but not for No raid to send a cheque to Sinn Fein? I cannot see the moral difference, except political cowardice. That is the only reason for it.

Lord Bassam of Brighton

My Lords, the noble Earl is entitled to his opinion. We have set out our stall on the issue of transparency. We believe that to be right. But we have to be realistic about what can be achieved. It was in that spirit that the Neill committee recommended that in the light of the Good Friday agreement it would be wrong to place barriers in the way of parties operating on an all-Ireland basis. That was essentially the range of its argument.

Lord Mackay of Ardbrecknish

My Lords, before the Minister leaves that point, I am trying to follow his argument. The noble Lord cannot pray the Neill committee in aid when it comes to taking money from the United States. Recommendation 29 states: In relation to donations to political parties in Northern Ireland, the definition of a 'permissible source' should also include a citizen of the Republic of Ireland resident in the Republic subject to compliance with the Republic's Electoral Act 1997". I do not know what the Electoral Act does, but if it does not include American citizens I do not understand how the Government can pray in aid the Neil committee.

Lord Bassam of Brighton

My Lords, the noble Lord makes an important point on which we shall undoubtedly have some vigorous discussion. I do not have the report before me. However, I shall study carefully those points when I read Hansard.

The hour is getting late. The noble Lord, Lord Rennard, raised the issue of expenditure limits. The limits of £100,000 for by-elections and £20 million for national expenditure by parties were clearly recommendations of the Neill committee. We feel bound by those. We believe that they are right and proportionate.

In conclusion, political parties have a vital role to play in our representative democracy. Parties provide the link between the citizen and the government of the day. It is the political parties which formulate and articulate the clear choice between competing values and their practical manifestation in a coherent set of policies as set out in a manifesto. By presenting these competing choices at elections, political parties offer the people that fundamental right in a democratic society to determine for themselves how they are governed.

These are onerous responsibilities. People place their trust in politicians and political parties and it is incumbent on them not to abuse that trust. The secretive funding of political parties, including by foreign donors with no direct stake in how we run our national affairs, has served, we believe, to undermine that trust and weaken the compact between the citizen and the state. It is vital to the health of our democracy that the funding of political parties is open and transparent.

Lord Norton of Louth

My Lords, perhaps I may raise a small point. As did the noble Lord, Lord Rennard, the Minister refers to an open and transparent system. I am still unclear as to the difference between openness and transparency.

Lord Bassam of Brighton

My Lords, I enjoyed the observation. The noble Lord is being precise; and that is fine. But I believe that openness and transparency go to the heart of the issue. I am sure that noble Lords opposite understand and appreciate that.

The Bill will ensure that openness and transparency and it will strengthen the accountability of parties not just to their members but to the wider electorate. I should have thought that that is the biggest benefit of this legislation. In short, the Bill will strengthen the very fabric of our democracy. For too long the closed door approach has obstructed that process. For that reason, I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.