HL Deb 12 October 2000 vol 617 cc507-616

3.31 p.m.

The Parliamentary Under-Secretary of State, Home Office (Lord Bassam of Brighton)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Bassam of Brighton.) On Question, Motion agreed to.

House in Committee accordingly.

[The CHAIRMAN of COMMITTEES in the Chair.]

Clause 32 [Assistance by Commission for existing registered parties]:

Lord Beaumont of Whitley moved Amendment No. 108: Page 20, line 8, leave out ("initially").

The noble Lord said: The representatives of small parties have their difficulties, not least in getting into the places which they have selected on the Benches in time to move their amendments.

It is true to say that the Government have been most understanding about the problems faced by small parties following the implementation of this Bill. We welcome the proposed contribution towards the start-up costs that the extra financial reporting will require. However, we think that there will probably be a need, not only for a one-off start-up grant, but for continuing grants that should run for at least a while afterwards.

I am by way of being a slight expert on the subject of the treasurers of growing parties. In my experience, I have found that, on the whole, when parties are very small their voluntary treasurers can cope with the workload. But as they become bigger the time comes— whether or not they have honorary treasurers— when the people who do the real work must be paid professionals. By observation, I notice that some of the biggest parties reach the stage where, in order to secure a treasurer, they find someone who will pay for the entire upkeep of the party for quite a period of time.

The Green Party is growing and has now reached the stage where the chairman of the executive has stated that the contribution towards the start-up costs should be extended to assist with the annual recurring costs. Currently, the treasurer of the party is a voluntary post, but the workload that will be created by this legislation—the need to collect information from 200 local parties and then collating and reporting it quarterly—will probably mean that this task can no longer be fulfilled by a volunteer. It will need to become a paid post and thus will considerably increase the party's running costs. State funding should therefore be provided for the changes which the state has ordered should take place. I beg to move.

Lord Mackay of Ardbrecknish

These issues were touched on in another place as long ago as 25th January. On that day the Minister, Mr Tipping, commented in relation to the sum of £500,000 towards the start-up costs that: It remains to be seen whether the sum in the Bill is sufficient".—[Official Report, Commons Standing Committee G, 25/1/00; col. 63.] The noble Lord, Lord Beaumont of Whitley, has raised an important point with his amendments which relate not to capital costs but to ongoing costs. The noble Lord has touched on an issue which the Government should certainly examine afresh, if they are not doing so already.

On Tuesday, the noble Lord, Lord Bassam, admitted to what we on this side of the Committee, and I believe certain noble Lords on his side, have been saying for some time. In one of his more candid moments, at col. 272 the noble Lord referred to the Bill as, "cumbersome and bureaucratic". It is unusual to encounter such refreshing honesty from this Government, but it is always a pleasure when we get it.

The Bill is indeed bureaucratic and cumbersome and I am happy to agree with the Minister. I believe that the clear effect of complying with the provisions of the Bill is that the three main political parties will each incur additional annual costs running into at least six figures. The Conservative Party will certainly have to employ some additional staff on a permanent basis who will be dedicated to policing the new bureaucracy laid down in the Bill. I do not believe that any of the parties—not even the Labour Party—would claim to be so awash with cash at the present time that they could easily meet the costs now being imposed by the Government.

As we heard on Tuesday, as the Bill progresses a number of government amendments are now imposing even more bureaucratic burdens than perhaps we had anticipated at the beginning. That bureaucratic burden has now reached right inside the door of No. 10 Downing Street, where the Prime Minister will be bothered on almost a daily basis to sign papers regarding changes in treasurerships for constituency Labour parties.

As we said in another place, at present we do not believe that there should be blanket state funding of political parties—I know that we disagree with the Liberal Democrats on that point. However, the provision of assistance to all political parties to ensure that they can comply with the provisions of this Bill is essential. That would not count as "funding a political activity". The costs imposed by the Bill will be significant; as I said earlier, the Conservative Party, for one, will need to employ additional staff on a permanent basis. No doubt the problem faced by the smaller parties will be even more acute.

For that reason, I can see merit in the approach of the noble Lord, Lord Beaumont. It may be that, after the Bill is enacted, it proves to be even more burdensome than we had thought. After all, given the number of government amendments to the Bill that have been brought forward over the past few months, it is clear the Government themselves have had plenty of second thoughts about it. No doubt the Minister will he delighted to know that I shall expand on the point that the Bill will be even more cumbersome than we thought when we reach later groupings in the Marshalled List.

It may certainly he the case that some of the smaller political parties will be placed in a position of real difficulty when they try to comply with the provisions of the Bill. The majority of registered parties are not represented in this place or in the other place and therefore cannot make known their views directly. I shall be interested to know if any assessment has been made about the recurring compliance costs for those smaller parties. I should have thought that the last thing we would want to see as a result of the Bill is the stifling or even bankrupting of political parties, in particular the smaller ones which are not represented here.

I could rehearse the arguments I made on open lists during the passage of the European Parliamentary Elections Act which, sadly, were rejected by the Government. However, I think that noble Lords and in particular the Government Front Bench will be pleased to hear that I shall not do so. However, I will say this: diversity and choice are good for the political process, whether that is achieved through the number of political parties or through an open list for the European elections. I do not say that the Government are imposing impossible burdens on small parties in order to shut them down. I am sure that is not their intention, but that may well be the law of unintended consequences as a result of this Bill.

I hope that the Minister will be able to respond in a positive way. The noble Lord, Lord Beaumont, has chosen a figure of £100,000. Perhaps it should be higher; perhaps—although I think that it is unlikely—it should be lower. Perhaps the commission should be given the power to make grants on the basis of financial need. In any event, the figures we are talking about are relatively small in the grand scheme of things—although they may be very large when it comes to the funding of an individual political party.

I am not calling for huge amounts of money to be poured into political parties; I am asking the Government to consider the ongoing costs of this burdensome Bill. They already accept in this clause that there are capital costs which the public purse will meet. The Government should turn their mind to the question of ongoing costs as well.

Lord Rennard

I support the amendment and the arguments advanced by the noble Lord, Lord Beaumont of Whitley. In particular, I welcome the apparent conversion of the Conservative Party to the cause of at least limited state funding for political parties and their operations.

This legislation imposes a considerable burden on parties. The legislation recognises that there are considerable start-up costs and justifies the payment of up to £500,000 to the parties for these start-up costs. But the burdens are ongoing.

Wearing another hat, I recently met some of the Minister's civil servants dealing with this issue. They made it plain that they would expect the political parties to check each and every one of the contributions they receive to make sure that that contribution is made by a permissible donor—that is, someone on the electoral register. Checking each and every donation in this way will involve a considerable amount of work for parties, whether it is done by computer or, in the first instance, by making a telephone call to the electoral registration officer in each case to check that the person making the donation is on the electoral register.

I discussed this issue some time ago with Margaret McDonagh, the General Secretary of the Labour Party. She felt that this legislation might require her party, for example, to hire 10 more officials to deal with the accountancy procedures required. Political parties are not profit-making organisations; they do not have the resources to deal with this legislation at present. Expecting them to do so would mean that they would have less money available to make their democratic case. That would not be in the best interests of our democracy.

3.45 p.m.

Viscount Cranborne

I support the amendment. I always find it difficult to support amendments brought forward by even former members of the Liberal Party, but, in this particular case, the logic of what the Government are proposing in this legislation rather dictates that we should listen to the arguments of the noble Lord, Lord Beaumont, with a great deal of sympathy.

Perhaps I may ask the noble Lord who is to reply on behalf of the Government to cast his mind back into the dim recesses of history and to think about how the Labour Party came into being. Noble Lords opposite will, I am sure, be the first to recall that in those days the dominant opposition party against my party was the Liberal Party. During the course of the famous—indeed dramatic—political events in the first half of the 20th century, the Labour Party came to be transmogrified from a small sectarian group of people into the principal opposition party to the Conservatives. The fact that this happened was largely facilitated—apart from the support of the trade unions—by the extremely ill defined rules governing party regulation. That is something which this legislation seeks to restrict very dramatically.

One of the great difficulties in the constitutional arrangements of our country is that there is an ill defined relationship between parties, which are an essential part of our system, and the more carefully defined constitutional elements of our system. We agree that parties are necessary to make the system work and yet, up until now, parties have not been clearly constitutionally defined. One of the effects of the Bill is that parties will be much more clearly defined as part of the constitutional arrangements of this country.

Although that may be an inevitable consequence of a number of things which have occurred, particularly in the past three years, what is also happening is that the flexibility which allowed the Labour Party to come into being as the dominating party against the Conservatives in the last century will become a thing of the past. In a curious way, the Labour Party, having taken advantage of that flexibility, is, perhaps rather belatedly in its view, beginning to pull the ladder up behind it.

I suggest that if the result of this legislation is to make it more difficult for the long-term shift in the main parties to occur, the long-term flexibility which has been one of the advantages of our system will be reduced. It is important that we should mitigate these effects by at least ensuring that other parties are not inhibited from developing and challenging the main parties over a period of time.

The noble Lord, Lord Beaumont, has put his finger on an important point. Looking at the matter in the long term, it would be a great inhibitor if the government of the day were to impose rules on parties which made it much more difficult for them eventually, over a period of years, to challenge the dominating position of one or other of the two main parties.

Although I deplore a great deal of what is contained in the Bill, if we are to accept the main thrust of it—I fear that we must in view of the present position in another place—we would be wise at least to take the logic of the Bill and to ensure that we retain as much as possible of the ability for long-term shifts in the relative balance of power between parties over a number of years. We should not begin to incorporate the position of the two dominant parties into the constitution in the way in which they have across the Atlantic with the Democrats and Republicans.

The noble Lord, Lord Beaumont, is putting forward an amendment which may seem rather modest in terms of what he proposes but, in terms of the logic of the Bill, if parties are to preserve a certain internal dynamic within the body politic, it would be wise to excise the word "initially". That would give lesser parties at least an element of freedom, which I suspect the Bill would deny them if the word "initially" were to be left in.

Lord Renton

In relation to this amendment and other amendments which follow, we should bear in mind that parties can come into operation, naturally and legitimately, at very short notice before a general election.

I was a Liberal, and, when the Liberal Party split in 1932 on the issue of free trade and protection, I became a National Liberal. If I remember rightly, there was a general election within 18 months—or it may have been a shorter period—and the National Liberal Party had to assert itself as a new political party. It succeeded in doing so. There was no red tape to prevent it. At the following general election, in 1935, it won more seats than the Liberals. So we must remember the need for flexibility in this area. The point that I have made is not the only one that arises, but in relation to this and other amendments it should be borne in mind.

Lord Phillips of Sudbury

In his reply, will the Minister be so good as to tell the Committee how the total expenditure referred to in subsection (5) is to be calculated with regard to non-financial benefits provided under subsection (2)? The point is not so arcane as it would appear, and it goes to the issue of whether the £100,000 annual figure inserted in the amendment is likely to prove adequate. With regard to non-financial benefits, one could envisage a wide range of possible valuations to be accorded under this clause.

Lord Bassam of Brighton

The debate has been more wide-ranging than I had anticipated. There have been some interesting contributions. I was particularly interested in that of the noble Viscount, Lord Cranborne, which was rather more extensive than the briefing on the amendment, but interesting for all that.

The noble Lord, Lord Mackay, credited me with being candid, which I take as a compliment. Interestingly, coming from the Benches opposite, the noble Lord began to make a case for the extension of state funding—

Lord Mackay of Ardbrecknish

I did not bother to intervene during the remarks of the noble Lord, Lord Rennard, because I am used to such comments coming from that quarter, but I really must intervene in the Minister's reply. I think I made it absolutely clear that that is not what I am asking for. Frankly, if the Bill, and the cumbersome bureaucracy involved in it, had not been brought forward, I should not be talking about this matter at all. It is not a question of asking for help with political activity but of asking for help for political parties with the bureaucracy that is being imposed on them by the Government. There is a difference.

Lord Bassam of Brighton

But I think the noble Lord might accept that it is state funding. If one departs along that road in the way suggested by the amendment—that is certainly how the Liberal Democrat Benches see it—it becomes difficult to see where to draw the line.

The state might help in some instances with start-up costs; indeed, that is what we are doing here. The state does not help charities to conform with the Charities Act or, for that matter, companies to comply with the Companies Act in terms of regulation. What we are establishing through the Bill is a system of regulation for political parties.

Clause 32 simply gives effect to the Neill committee's recommendation that state funds should be made available to political parties for the purpose of meeting start-up costs alone in complying with the new disclosure regulations.

It is worth emphasising that these are merely start-up costs. What the committee had in mind were the possible costs of, for example, computer equipment and software which might be required to handle the aggregation of donations received by the disparate parts of a party's organisation over the reporting cycle.

Amendments Nos. 108 and 109, however, would make state funds available to meet political parties' continuing compliance costs. That is not what the Neill committee recommended. Political parties, as with other bodies subject to statutory regulation, cannot expect to receive ongoing financial assistance to help them meet the cost of regulation. Moreover, once initial start-up costs have been made it seems reasonable to assume that any subsequent compliance costs will be very much more in proportion to the number of donations received by a political party. It would be difficult in those circumstances to justify any ongoing assistance to political parties from the public purse to relieve them of the administrative burden created by the need to record the receipt of large numbers of donations.

The proposition is a clear departure from the principles of the Neill committee. It would take us further along the road of limited state funding, and further towards funding on a continuing basis. We cannot take that course.

The noble Lord, Lord Phillips, asked a question. The £500,000 figure in Clause 32 includes both cash and non-cash benefits. The Neill committee clearly thought that in terms of compliance with the Companies Act there would be much more of the latter than the former. I hope that that answers the noble Lord's point. If it does not, I shall reflect on it again and see what more can be done to provide additional information.

Lord Harris of Greenwich

I wonder whether the noble Lord would like to think again about this matter between now and Report. I can see the case for the legislation. The noble Viscount, Lord Cranborne, professes not to understand the case for legislating—which is rather surprising, given that one of the reasons for it is the large-scale abuse by political parties in terms of fund-raising. The noble Viscount, Lord Cranborne, will recall the discussions that he and I had when he was Leader of the House. I asked about Mr Asil Nadir, a fugitive from justice in northern Cyprus, who stole over £400,000 from those who had shares in his company. The stolen money, having been passed to Conservative Central Office, should have been repaid. It has not been repaid, and that is, no doubt, one of the reasons why there has been so much public disquiet about the way in which political parties in this country have been funded.

A great deal of humbug is talked about state funding. There is state funding: a substantial proportion of the funding of the Conservative Party's research department comes from Short money. So when people place their hand on their heart and say that they are wholly opposed to state funding, they should consider for a moment how their own party is being financed.

Notwithstanding that, there is a serious problem which has been identified by the noble Lord, Lord Beaumont of Whitley. I refer to the problem relating to smaller political parties such as the Green Party. It would be right for the Government to consider this matter carefully. One does not want to be oppressive in the way in which legislation is implemented so far as it concerns the smaller parties. It would be most unfair were that to be an unintended result of the Bill.

As I said, I hope that the noble Lord will reflect on this matter between now and Report. Otherwise, an unfair view will be created that there are reasons for the rigidity of the Government's position other than the merits of the argument.

Lord Mackay of Ardbrecknish

Before the noble Lord, Lord Beaumont, sums up the debate, I asked the Minister whether any assessment had been made of the likely ongoing costs to small parties. I noted that he did not answer that question. The Green Party springs to mind, as does Mr Tommy Sheridan's Scottish Socialist Party. It may be that the Government would quite like to squeeze out Mr Tommy Sheridan's party and to see it go bankrupt or be unable to fulfil its obligations. Much as I disagree with Mr Sheridan, he brings a certain sparkle into politics and I do not think that he ought to be squeezed out by means of this Bill. So I wonder whether the Minister can say whether any assessment has been made. Or perhaps he can assure me that, if we return to this matter on Report, he will be in a position to give an assessment of the likely costs to the smaller parties.

Lord Bassam of Brighton

I am grateful to the noble Lord for prompting me again on this matter. I understand that there have been a number of discussions with the smaller parties on start-up costs. But unfortunately—regrettably, one might say—for reasons that I do not understand, and perhaps officials do not understand either, the discussions never managed to get beyond start-up costs. It is a reasonable question to ask. I shall take the matter away and see whether there can be further discussions on it. Looking at the amendment, the noble Lord, Lord Beaumont, seeks £100,000 in subsequent years. I should be most interested to know on what basis that calculation was made.

I understand the point behind the amendment; namely, that we do not want to squeeze out the "choice and diversity", as the noble Lord, Lord Mackay, put it, of smaller political organisations. That is not the intent of the legislation. Indeed, I rather welcomed the noble Lord's contribution in that respect, coming, as he does, from one of the major political parties in the country—in other words, that they, too, see diversity and pluralism as being extremely important. However, I cannot undertake to do any more than I have already stated at this stage. When the commission is established, it will no doubt take a view about ongoing compliance costs. But that is not a matter for us to judge.

4 p.m.

Lord Beaumont of Whitley

I am extremely grateful to all noble Lords who have taken part in this mini-debate, not least because everyone, except the Minister, supported the amendment that I put forward. I am obviously disappointed with the Minister's response, but I am delighted to know that he will reconsider one or two points that I mentioned. If I were to return to the matter on Report—which I can assure the Minister I shall, if the Government do not produce an amendment of their own—I should modify the amendment so that it would be quite clear that the extra money was to be spread over the earlier part of the implementation, so that, in a way, it would be part of implementation for the first few years.

Unlike other noble Lords, I shall not embark now on the whole question of state funding. However, I should not like it to be said that this particular amendment was just about that; it is not. This is about learning to comply and the extra costs that are put on small parties in particular under the provisions of this Bill. I beg leave to withdraw my amendment, but, as I said, I shall be returning to the matter.

Amendment, by leave, withdrawn.

[Amendment No. 109 not moved.]

[Amendment No. 110 had been withdrawn from the Marshalled List.]

Lord Bassam of Brighton moved Amendment No. 110A: Page 20, line 27, leave out ("immediately before the appointed day") and insert ("at the commencement of this section").

The noble Lord said: This group of amendments is concerned with the commencement of the Bill and the transitional arrangements for moving existing registered parties to the new registers of political parties to be maintained by the electoral commission. Such matters normally fall to be considered towards the end of a Bill, but we are discussing them now because the transitional arrangements set in the new schedule (to be inserted by Amendment No. 322W) will supersede those contained in Clause 31. Accordingly, that clause may now be omitted from the Bill.

I believe that it is a common desire of the three main political parties to see the controls on donations and campaign expenditure, as set out in Parts IV and V of the Bill, brought into effect as quickly as possible after Royal Assent. It is clearly right that these controls should be in place in good time before the next general election, whenever that may be. These amendments are dedicated to that end.

Amendment No. 320D provides for Part I of the new schedule, to be inserted by Amendment No. 322W, to come into force two weeks after Royal Assent. Thereafter, existing registered parties will have a period of six weeks to supply the electoral commission with certain documentation and information, including a copy of their draft scheme setting out the party's organisational and financial structure, together with details of the person to be registered as party treasurer. At the end of the six weeks' "compliance period", we envisage that there will be a short interlude to allow time for the electoral commission to transfer parties to the new registers before Part II of the Bill comes into force. It will then be possible to bring the controls on donations and campaign expenditure into force.

On the assumption that the Bill is passed in the latter part of November, we are looking to commence Parts II, IV and V of the Bill on or about 1st February 2001. The controls on third party expenditure would come into force at the same time. This will allow the controls to operate for a minimum of three months if, for example, the general election takes place on 3rd May 2001. Whether there is an election on that date, is, of course, a matter for my right honourable friend the Prime Minister. It is not for me to predict the date of the general election, but rather to ensure that the long overdue limits on what a party may spend at an election are in place in good time.

The timetable that I have set out is, I believe, both realistic and achievable. A similar commencement timetable applied in the case of the Registration of Political Parties Act 1998. The transitional arrangements ran smoothly on that occasion. I see no reason why existing registered parties should not be ready in time to comply with the requirements placed upon them by the new schedule.

To prepare existing political parties for the new Act, the Home Office Electoral Commission Project Team has issued a comprehensive package to registered parties setting out the steps that they will need to take by the end of the six-week compliance period. Officials will continue to offer advice and guidance to existing parties over the next few weeks. However, if an existing registered party fails to submit the necessary documentation and information by the end of the compliance period, there must be some consequence for the party concerned. Paragraph 5 of Part I of the new schedule provides that, in such circumstances, the party's registration will be terminated. However, the party will have a further period of three months from the end of the compliance period to submit the necessary documentation to the commission, without the need to submit a fresh application for registration.

Part II of the new schedule contains a number of other transitional provisions, the most significant of which I shall now highlight. Paragraph 8 will enable the appointment of the electoral commissioners to proceed as quickly as possible after Royal Assent. Under Clause 3 of the Bill, the commissioners may be appointed only with the agreement of the Speaker of the House of Commons and after consultation with the leader of those parties with two or more MPs. If the necessary consultation could only take place after Royal Assent, we would not be in a position to appoint the commissioners until the new year. Paragraph 8 of Part II will validate consultation undertaken prior to Royal Assent. Letters have been sent to the leaders of the relevant political parties. The new Speaker will be consulted when he or she is selected.

Paragraph 9 of Part II of the new schedule will enable the Home Secretary to make the first order under Clause 23(8)(c) of the Bill on his own initiative; that is, without a recommendation from the electoral commission. We discussed the purpose of Clause 23(8) a short while ago, so I shall not repeat the detail. Suffice it to say that an existing registered party would need to know at the start of the compliance period whether its draft scheme should include all the party's constituent or affiliated organisations. It follows that an order under Clause 23(8)(c), specifying organisations that are not to be regarded as part of a party for the purposes of the Bill, must be made immediately after Royal Assent and before the electoral commissioners have been appointed—hence the need for the provision.

Similar timing considerations explain the need for paragraph 10 of Part II of the new schedule. This will enable a replacement for the Registration of Political Parties (Prohibited Words and Expressions) Order 1998 to be put in place without the need to consult the electoral commission.

Most of the other government amendments in this group are paving or consequential amendments to Amendment No. 322W. However, I should say a little about two of these. Amendment No. 110A adjusts the definition of an "existing party" in Clause 32. In effect, the amendment brings forward the cut-off date for determining those registered parties eligible to receive assistance with meeting their start-up costs. In order to speed up the payment of grants to parties, it is now proposed that Clause 32 should come into force two weeks after Royal Assent. It follows that only those parties registered at that time should qualify for startup grants.

Finally, Amendment No. 320C provides for paragraph 10(4) of Schedule 20 to come into force on Royal Assent. This paragraph inserts a new Section 34A into the Government of Wales Act 1998. The new section empowers the National Assembly to make payments to groups of Assembly members to assist the members of such groups to discharge their functions as Assembly members. Such financial support to party groups in the Assembly is equivalent to that paid to opposition parties in another place—that is to say, "Short money"—and, in this House, "Cranborne money".

There is unanimous agreement in the Assembly that this power should come into force as soon as possible, not least so that party groups can properly meet their responsibilities as regards bilingualism. The Scottish Parliament has had equivalent powers—conferred by Section 97 of the Scotland Act 1998—since its inception.

Before I sit down, I should also say a few words about Amendment No. 320. By removing subsection (3) of Clause 151 this amendment would delay the establishment of the electoral commission and consequently delay the introduction of the controls on parties' income and expenditure. As I indicated at the outset, I believe that both Government and Opposition have a common desire to see these controls in place as soon as possible after Royal Assent and in time for the next general election. I very much hope therefore that the Opposition Front Bench will not press the amendment. I beg to move.

Lord Mackay of Ardbrecknish

One of the reasons some of these amendments have had to be moved by the Government is that it has taken so unconscionably long to put this Bill through Parliament. If we had dealt with it in May and June—as we could reasonably have expected—we would not be asked to breach the usual time intervals and the usual procedures by which parliamentary legislation is put in place. The noble Lord pointed out that some of his amendments give approval to work which will take place prior to Royal Assent. The Committee will be aware that that is not usual procedure. Until Parliament has agreed a measure, by and large government cannot undertake work on it. The Committee will remember that that was the excuse the Government used to delay the establishment of the Appointments Commission for this Chamber. The Government said that the relevant Bill had not received Royal Assent and therefore the necessary steps could not be taken.

I do not complain about the procedure that is being followed; I simply point out that that is what the Government are doing. Work is going ahead before this Bill has received Royal Assent. I hope that will not set a precedent for other Bills which take too long to pass through Parliament because of the Government's incompetence. If I heard the Minister aright, one of the reasons he wants some of these early dates—

4.15 p.m.

Lord Bassam of Brighton

I do not wish to labour the point but I well recall that when the party opposite was in power the then government undertook preparatory work before the implementation of legislation. One or two pieces of legislation come to mind. I remember that much preparatory work was undertaken before the poll tax legislation was implemented. I remember that when the Meat Hygiene Service was created work was undertaken to ensure that the body was speedily established after Royal Assent of the relevant legislation. This practice is not uncommon. I am sure that the noble Lord understands that point.

Lord Mackay of Ardbrecknish

I cannot recall that the then opposition supported us on the poll tax. However, I put that to one side. The noble Lord has not addressed the matter of the excuse that was given for delaying the establishment of the Appointments Commission. There are differences here as regards the kind of work that is undertaken before Royal Assent is given to a Bill. To appoint an electoral commission is a major step. With all due respect, I do not think that is quite the same thing as the detailed work departments sometimes undertake as Bills proceed through Parliament.

As I say, if I heard the Minister aright, one of the reasons he wants to see the measures established as quickly as possible is that the Government want the provisions of the Bill to be in place in time for the general election they intend to call at the beginning of May next year. As I understand the position, that means that the control on expenditure will cover only a period of three months. Have the Government given any indication of what they think the pro rata expenditure will be in a three-month period?

The Committee knows that I do not approve of registration of political parties because that rather implies that at some stage a political party will be refused registration and that seems to me profoundly anti-democratic. Will the electoral commission write to all the parties which have already registered under the existing legislation to ensure that none of them thinks that it has already registered and therefore it does not need to go through the process again? Will the electoral commission write to those parties to ensure that they all realise that they must reregister in a short period of time? I am not talking about the parties represented in this Chamber because they all know what is happening.

Lord Bassam of Brighton

I do not have a ready prepared answer to the noble Lord's final point. I should have thought that we shall want to ensure that good practice is adopted and that it would be sensible to adopt the procedure he mentioned. However, that is a matter for the electoral commission. I shall seek further clarification on that point.

We shall also want to consult the main parties before coming to a view on the appropriate expenditure limits that will apply during any truncated relevant period prior to the next election. I should have thought that we are probably talking of a fraction in terms of the number of days in that truncated relevant period. However, that is another matter that we can clarify later.

Lord Mackay of Ardbrecknish

I certainly hope that it will not be a proportionate fraction. If a three-month period were involved, as opposed to a 12-month period, it would be unrealistic to say that the relevant figure should be only a quarter. Even the simplest person who follows these matters knows that the bulk of expenditure on election campaigns is incurred not even in the final few months of campaigning but in the final few weeks. Therefore, I hope that the noble Lord does not really mean a proportionate fraction.

Lord Bassam of Brighton

I knew that I should not have tangled with a mathematician! However, I understand the point perfectly well.

On Question, amendment agreed to.

Clause 32, as amended, agreed to.

Clause 33 agreed to.

Clause 34 [Amendment of parliamentary elections rules]:

Lord Bassam of Brighton moved Amendments Nos. 111 and 112: Page 21, line 1, at end insert ("or, where the candidate is the Speaker of the House of Commons seeking re-election, the words "The Speaker seeking re-election" "). Page 21, line 2, leave out subsection (3) and insert— (13) In rule 6A (nomination papers: name of registered political party)—

  1. (a) in paragraph (1), after "unless" there shall be inserted "the party is a qualifying party in relation to the constituency and"; and
  2. (b) for paragraph (3) there shall be substituted—

"(3) For the purposes of the application of this rule in relation to an election—

  1. (a) "registered political party" means a party which was registered under Part II of the Political Parties, Elections and Referendums Act 2000 at the time by which the notice of the election is required to be published by virtue of rule 1 ("the relevant time");
  2. (b) a registered political party is a qualifying party in relation to a constituency if—
    1. (i) the constituency is in England, Scotland or Wales and the party was at the relevant time registered in respect of that part of Great Britain in the Great Britain register maintained under that Part of that Act, or
    2. (ii) the constituency is in Northern Ireland and the party was at the relevant time registered in the Northern Ireland register maintained under that Part of that Act." ").

On Question, amendments agreed to.

Clause 34, as amended, agreed to.

Clause 35 agreed to.

Clause 36 [Interpretation and application of Part II]:

Lord Bassam of Brighton moved Amendments Nos. 113 to 117: Page 21, line 14, leave out ("21") and insert ("(The new registers)"). Page 21, line 16, at end insert— (" "parish or community election" means an election of councillors for a parish in England or a community in Wales;"). Page 21, leave out lines 18 and 19 and insert— (" "the register" shall be construed in accordance with section 25(5); registered" (unless the context otherwise requires) means registered under this Part (whether in the Great Britain or the Northern Ireland register), and other references to registration shall be construed accordingly; the registrar of companies" means the registrar or other officer who performs the duty of registering companies under the Companies Act 1985;"). Page 21, line 20, at end insert— ("( ) For the purposes of this Part a registered party contests an election—

  1. (a) by one or more candidates standing for election in the party's name at the election, or
  2. (b) by the party itself standing nominated at the election.").
Page 21, line 21, leave out subsection (2).

On Question, amendments agreed to.

Clause 36, as amended, agreed to.

The Deputy Chairman of Committees (Lord Skelmersdale)

In calling Amendment No. 118, I inform the Committee that if this is agreed to, I cannot call Amendment No. 119.

Clause 37 [Duty to keep accounting records]:

Lord Bach moved Amendment No. 118: Page 22, line 15, leave out from ("period") to end of line 19 and insert ("as may be determined by the Commission under subsection (7), whether in relation to—

  1. (a) registered parties generally,
  2. (b) any description of registered parties which includes the party, or
  3. (c) the party itself.

(7) The Commission may determine that the period which is to be a financial year of a registered party shall be—

  1. (a) a period of twelve months specified by the Commission, or
  2. (b) a shorter period specified by them for any transitional purposes:
and different determinations may be made under this subsection in respect of financial years beginning on different dates.

(8) The Commission shall notify registered parties of any determination under subsection (7) which affects them.").

The noble Lord said: Clause 37(6) gives effect to the Neill committee's recommendation that the electoral commission should have the power to prescribe a common accounting year for all political parties. It will be for the commission to decide whether it sees real advantage in moving to a common financial year. It is possible that the commission may decide that this is not a priority for it. In such circumstances the commission's powers in this area will need to be sufficiently flexible to enable parties to continue using their existing financial year. In due course I shall inform the Committee which financial year each of the major parties has at the present time. Subsection (6)(b) therefore provides that the commission may specify different periods in relation to different parties. Amendment No. 119, which the noble Lord opposite will address in due course, would remove that flexibility. I hope that on reflection the noble Lord will see the advantage of retaining it.

In preparing for the establishment of the electoral commission, we have discovered that subsection (6) as drafted does not cater for all eventualities. As it stands, the commission may specify a period shorter than 12 months only for a party's first financial year. But one possibility is that the commission may decide after consultation with registered parties to move to a common accounting year with effect, say, from 1st January 2005. In such circumstances, there would need to be transitional arrangements for any party that had a financial year which commenced on any date other than 1st January. For example, where a party had a financial year commencing 1st October the commission would need to be able to specify that during the transitional phase that party would have the financial year 1st October to 31st December 2004. As Clause 37(6) stands, the commission would not be able to do this. That is why I move Amendment No. 118, to make good this omission and thereby ensure that the commission is not compelled to adopt a common financial year as soon as Part III comes into force.

It is as well to put on record that in the event that the commission decides to specify a common accounting year it will necessarily mean changes for one group of parties or another. Of the parties represented in another place, four—namely, the Labour Party, the Liberal Democrats, the SNP and the UUP—use the calendar year. The Conservative Party and Plaid Cymru have accounting years which run from 1st April; and the SDLP uses the year commencing 1st October. We have no information about the DUP.

On the basis of going with the majority, the commission might opt—I emphasise "might"—for a calendar year. As I have said, that will be a decision for it, as will the decision on the priority of taking that course. However, whatever it decides, there would need to be a lead-in time to enable parties to make the necessary adjustment. I hope that the noble Lord may be persuaded not to move Amendment No. 119. I beg to move.

Lord Mackay of Ardbrecknish

Amendment No. 119 is a probing amendment. Amendment No. 118 was added a good deal later. I shall not move my amendment.

I understand about the different accounting periods. I should have thought that in time the same accounting period would be better. I suspect that comparisons will be made between one set of accounts and the other. The complexity of having different periods would make such comparison extremely difficult especially at times, for example, of general elections or elections of another kind.

I wish to ask the Minister one question. I think that he answered it but I want to be sure. I understand from the provisional implementation timetable sent out to the parties that the date for implementing this provision is 1st January 2002. From his example, I presume that for the Labour Party, which works on a calendar year, it will be 1st January to 31st December 2002 and it will not look back to 2001.

As the noble Lord rightly pointed out, the Conservative Party follows the government and exchequer system of the financial year. What will happen about the period between 1st January and 1st April 2002? A similar question can be asked about one of the Northern Ireland parties whose financial year would not start until 1st October 2002. The noble Lord will see where I am coming from. He may answer that the Conservative Party will have to present accounts from 1st January to 1st April. It may have to look back into 2001. I do not think that that would be right given the cumbersome and bureaucratic nature of everything in the Bill.

I accept that the noble Lord may not be able to give me an answer now; if he can do so I shall be grateful. If not, on this occasion I might even allow him to write to me. It is an interesting point.

Lord Bach

The noble Lord is right: 1st January 2002 is the provisional date. It is the date for commencement only. Part III would apply in respect of a party's financial year beginning on or after 1st January. I commend the amendment.

On Question, amendment agreed to.

[Amendment No. 119 not moved.]

Lord Bach moved Amendment No. 120: Page 22, line 19, at end insert— ("( ) Nothing in this Part applies in relation to a minor party.").

The noble Lord said: This amendment has already been spoken to. I beg to move.

Lord Renton

The amendment refers to "a minor party". I sought to find a definition. I have not succeeded. Is there one? What does it mean?

Clause 36(1) states: 'party' includes any organisation or person". With that definition in mind, I again ask: what is a minor party?

Lord Bach

I am extremely grateful to the noble Lord for the time he took in asking that question. The answer is that a party that contests only parish or community council elections is the definition of a "minor party" in this context.

Lord Shepherd

Is the definition in the Bill?

Lord Bach

I had hoped the noble Lord might take a little longer to ask his question!

Lord Shepherd

If the definition is not in the Bill, in order to avoid any misunderstanding it should appear. There is a considerable difference between the various parties.

Lord Bach

I bear in mind what my noble friend says.

Lord Renton

I suggest that the definition should be in Clause 36.

Lord Bach

It will be in the Bill. Amendment No. 319 deals with Clause 150. I hope my noble friend Lord Shepherd and the noble Lord, Lord Renton, will be satisfied.

On Question, amendment agreed to.

Clause 37, as amended, agreed to.

Clause 38 [Annual statements of accounts]:

Lord Bassam of Brighton moved Amendment No. 121: Page 22, line 44, leave out from ("hand)") to end of line 46 and insert ("parties registered in the Great Britain register and (on the other) those registered in the Northern Ireland register.").

On Question, amendment agreed to.

Clause 38, as amended, agreed to.

Clause 39 [Annual audits]:

Lord Mackay of Ardbrecknish moved Amendment No. 122: Page 23, line 12, leave out ("£250,000") and insert ("£1,000,000").

The noble Lord said: In moving this amendment, I speak also to Amendments Nos. 123 to 125.

Amendment No. 125 follows on from the debate on the amendment in the name of the noble Lord, Lord Beaumont of Whitley. It suggests that when we are discussing the question of audit, the compliance costs—that is, the costs of the audit which will be imposed on the political parties—could be paid for by the commission. It seems a reasonable request but I think that we know the reply we shall receive from the Government and I shall not continue for too long. The Government should consider the costs they are imposing on political parties with an audit of this nature. It will be hard to say to our members in the political parties, "We are looking for more money from you and this raffle is entirely in order to fund the additional expenses imposed on us by the Government". I am not sure that it would be a successful raffle. However, I do not suppose that I shall make progress on that issue.

The other amendments came to my mind when I came across a Department of Trade and Industry press release dated 4th April. It announced that Mr Stephen Byers—although I notice that he is called Steve Byers; that seems to be a habit of the Government—had told the British Chambers of Commerce annual conference that he intended to raise the turnover threshold from £350,000 to £1 million before companies are required to obtain a professional audit, thus saving them approximately £1,200 a year. The press release, which I shall not read out, made a virtue of the fact that the Government were reducing some of the costs on smaller businesses by raising that threshold. Indeed, in the light of the proposals of the company law review, the Government are considering raising it further to £4.8 million.

I am trying to ensure consistency in government and to ensure that they appreciate the importance of political parties in the political system, as they have not always done during the creation of this cumbersome and bureaucratic Bill. If the Minister doubts me, I suggest that he talks to his friend, the Secretary of State for Trade and Industry, who will explain why he made that announcement on 4th April to the British Chambers of Commerce. Why should not political parties be given the same treatment?

The amendment would not be of great help to major parties, but it would help minor parties. I shall not rehearse my argument about minor parties, but we ought to consider them, even if they are sometimes an irritant, particularly the one that I mentioned earlier, to great parties such as the Labour Party. I beg to move.

4.30 p.m.

Baroness Fookes

I support my noble friend in the reasonable amendment that he has put forward. Why have the Government introduced uncertainty further on in the clause by giving the commission the power to require an audit of parties that come under the threshold if it thinks it desirable? In what circumstances would that apply?

Lord Bach

Clause 39 requires that a party's annual accounts be audited if the party's income or expenditure exceeds £250,000 in a financial year. The amendments would raise the threshold to £1 million and require that it be kept in line with that applying under the relevant section of the Companies Act. As I suspected, the noble Lord, Lord Mackay of Ardbrecknish, pointed out the press release of 4th April this year, in which we announced that the audit threshold for small companies would be raised from £350,000 to £1 million.

It does not follow that the audit threshold for political parties should also be raised. In fixing on the figure of £250,000, we took our lead from the Charities Act, not the Companies Act. That properly reflects the fact that political parties have much more in common with charities than with companies, not least because both rely to a significant extent on voluntary donations from the public. For that reason there is a public interest in providing an assurance by means of an audit of the financial probity of parties at a lower threshold than that applicable to companies.

That leads me on to the point made by the noble Baroness, Lady Fookes. Members of a political party may complain to the electoral commission about alleged fraud within the party. The power to require an audit will enable the commission to investigate such circumstances.

In any event, there seems little reason to believe that the £250,000 threshold will place an unwarranted additional burden on parties and their accounting units. I hope that the noble Lord, Lord Mackay of Ardbrecknish, will forgive me if I mention that in another place, speaking from the Conservative Front Bench, the honourable Member for North Dorset pointed out that even small branch units of the Conservative Party with a turnover of less than £1,000 per year had their accounts audited by a chartered accountant. He went on to suggest that the electoral commission might in due course consider whether the threshold might be reduced. There may have been a shift in point of view among the Conservatives in the corridor between one House and another.

I am sure that the commission will want to keep the threshold under review. Clause 145 enables this and other monetary limits in the Bill to be varied by order, on the recommendation of the commission.

The noble Lord, Lord Mackay, is right; I am afraid that I am not going to accept his Amendment No. 125, which would require the commission to meet the costs itself if a party failed to appoint an auditor to audit its accounts. It would clearly be wrong in principle for costs arising from a party's failure to carry out its obligations under the Bill to be met from the public purse. The party might end up being rewarded for failing to comply with the audit requirement. I am sure that that is not intended and I invite the noble Lord to withdraw the amendment.

Lord Mackay of Ardbrecknish

I am not surprised by the last answer, given what the Minister said to the noble Lord, Lord Beaumont of Whitley. I was just trying to be helpful by ensuring consistency in government. I think that it is called "joined-up government". Clearly there is to be no joined-up government in this case.

I wonder how many parties have a turnover between £250,000 and £1 million. How many would be affected if the limit were raised? I wonder whether small parties are being asked to go through hoops unnecessarily. I suspect that the Government cannot tell me, because they have not even considered the impact of the Bill on major political parties to any great extent, so I do not believe that they have given any greater consideration to the impact on minor parties that are not represented in this House. We may come back to the issue if the Minister cannot answer. Can he help me?

Lord Bach

I cannot. One of the purposes of the Bill is to ensure that there is proper accounting of political parties. That has not always existed. Of course it has in the Conservative Party, my party and the Liberal Democrats, but maybe not in all parties. As I understand it—I hope that I am not wrong—there are no figures to enable me to give an accurate answer.

Lord Mackay of Ardbrecknish

I am grateful for that answer, which proves that the Government have made no effort to ascertain the impact of the Bill on smaller parties. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 123 to 125 not moved.]

Clause 39 agreed to.

Clause 40 agreed to.

Clause 41 [Submission of statements of accounts etc. to Commission]:

Lord Bach moved Amendment No. 125A: Page 24, line 40, after ("than") insert ("7 days after").

The noble Lord said: I shall speak also to Amendments Nos. 125B to 129, 130A and 130B. I shall be brief. The amendments make minor technical and drafting changes to the accounting requirements in Part III. I shall confine my comments to the more significant amendments but shall, of course, attempt to answer any points which arise on the other amendments in the group.

Amendment No. 125A to Clause 41(2) relates to the period for submitting audited accounts to the electoral commission. As the Bill stands, a party which is required to have its accounts audited has six months from the end of its financial year to complete the audit. However, the party must also submit the accounts and the auditor's report to the commission within six months. Clearly, if a party does not receive its auditor's report until the end of the six-month period, there may be little or no time left to forward the documentation to the commission. This amendment gives a party a further seven days leeway.

Amendments Nos. 126 and 127 relate to Clause 43, which creates criminal offences for failure to comply with the provisions of this part of the Bill. The clause includes a number of defences, but the formulation employed is at odds with that used elsewhere in the Bill; for example, Clause 60(5) refers to both the taking of all reasonable steps and the exercise of all due diligence. Our Amendments Nos. 126 and 127 bring Clause 43 into line and, we hope, ensure consistency across the Bill.

Finally, Amendments Nos. 128 and 128A enable regulations to make provision for the delivery of revised statements of accounts, prepared under Clause 44, to the electoral commission. Amendment No. 129 concerns the public inspection of such statements.

Under Clause 42 such requirements already apply to the original statement of accounts prepared by a party treasurer. I beg to move.

Lord Mackay of Ardbrecknish

I am grateful to the noble Lord, Lord Bach, for explaining those amendments. He is perhaps the right Minister to answer at least one of the questions that I want to put. But, first, I believe that Amendment No. 125A is welcome and sensible.

I turn to Amendment No. 126. Although I hear what the noble Lord says with regard to making Clause 43 consistent with another part of the Bill, the relevant sentence in that clause currently states: It is a defence for a person charged with an offence under subsection (1) to prove that he took all reasonable steps for securing (as the case may be)", that the requirements were met. The amendment changes that to, and exercised all due diligence, to ensure". Am I right in thinking that that increases the test—that is, that it makes it harder—and therefore that the defence will find it harder to answer? It may be able to answer "reasonableness", but "all due diligence" may be more difficult. As I said, the noble Lord is probably the right Minister to answer because he will understand those legal points even if I do not fully understand them myself. However, even to an amateur such as me, there appears to be a difference between "reasonable" and "all due diligence". One can discuss whether or not the steps taken were "reasonable", but I believe that adding the words "all due diligence" increases the test.

With regard to Amendment No. 128A, I wonder whether the Minister can give examples of the type of scenario that might occur if a decision were taken to disapply some of the provision. I am not entirely sure what circumstances might pertain in such an eventuality.

The Minister did not mention Amendment No. 130B. That amendment makes the treasurer of an accounting unit, which may be—and, in many cases, will be—a local association, personally liable for the costs in relation to a revised statement of accounts. I wonder whether the noble Lord considers that it is right to make treasurers of accounting units personally liable. I have said on a number of occasions that I am sure that all our political parties find it difficult enough to find treasurers. The very fact that the noble Lord, Lord Bach, was for 15 years a treasurer may tell us that he was an excellent treasurer, but I suspect that it also tells us that he could not find anyone to replace him during many of those years. Therefore, I wonder how that will work.

When I read this clause and considered the question of something being amiss with accounts or of someone reporting that something was wrong, I wondered what procedures would be set up in order to investigate and prosecute. If someone reports to the electoral commission that he believes that something is wrong either with his own party's accounts or, as is much more likely, with another party's accounts, who will carry out the investigation? Will it be the electoral commission? Will the electoral commission decide to ask the police to intervene? Who will decide whether to prosecute and who will carry out the prosecution? I am intrigued to know what steps will be taken. Will the electoral commission have a type of detective force in its midst in order to carry out such investigations? This may not be the appropriate moment to raise the matter, but it has come to my mind because we are discussing offences in this clause. I hope that the noble Lord can help me with those points.

4.45 p.m.

Lord Bach

I shall do my best to help the noble Lord. Yes, he is right: and exercised all due diligence, to ensure", is a higher test than mere "reasonableness". However, I do not believe that one should exaggerate the height that it reaches in terms of the Bill. It clearly adds something, otherwise we would not add it. Therefore, he is right to say that it is a tougher test.

So far as concerns Amendment No. 128A, the noble Lord asked me to give examples. I am afraid that I shall have to write to him with those rather than give them to him today.

So far as concerns Amendment No. 130B, I deliberately did not refer to it. The amendment is necessary in order to remove an erroneous reference to the registered leader of an accounting unit. As the noble Lord knows, Clause 24 currently provides only for the registration of a treasurer of an accounting unit. That treasurer will be liable.

So far as concerns the electoral commission, where a party member complains about possible fraud, either in his or in another party, I imagine that the electoral commission will investigate. It may, as may anyone, bring in the police if it feels that it needs to do so. If it does, then in the normal way the question of whether or not a prosecution takes place will, in the last resort, depend on the Director of Public Prosecutions.

Lord Mackay of Ardbrecknish

I am grateful to the noble Lord for those explanations. However, if the electoral commission does not call in the police, what will happen? Will that mean that the case has been dropped or will the electoral commission be able to prosecute?

Lord Bach

The electoral commission will obviously try to sort out the difficulty but, as I understand it, powers exist under the Bill to prosecute and the electoral commission will be in a position to do so. The position often changes when the police are brought into matters of this kind.

On Question, amendment agreed to.

Lord Bach moved Amendment No. 125B: Page 24, line 44, at end insert ("(unless the auditor was appointed by the Commission under section 39(4))").

On Question, amendment agreed to.

Clause 41, as amended, agreed to.

Clause 42 [Public inspection of parties' statements of accounts]:

On Question, Whether Clause 42 shall stand part of the Bill?

Lord Mackay of Ardbrecknish

I have not tabled an amendment but I wish to raise a point. It is possible that my question relates more appropriately to Schedule 4, but I believe that it applies also to Clause 42.

Clause 42 provides for the electoral commission to make public the accounts submitted to it by political parties. Schedule 4 includes accounting units—that is, constituency parties—with an income or expenditure of more than £25,000 a year. This clause and its application to accounting units was the topic of some debate in the other place. In the Standing Committee my honourable friend Dominic Grieve raised concerns about the fact that, while some larger local parties would have their accounts made public by the commission, their smaller opponents in the same constituency who did not reach the £25,000 threshold would be able to keep their accounts secret. My honourable friend advanced the argument that that would provide some local political parties with a potential advantage over their opponents.

My honourable friend made this point when he said that, local association finance is likely to be a matter of considerable political interest to others—with respect not to financial probity, but to the details of how campaigns are funded, which areas provide most money and a host of information that might be useful to political opponents … the matter needs to be considered, because otherwise, some unfairness may be perceived. For example, two local political associations, representing different parties, might be at more or less level pegging—equally successful at fundraising and campaigning. If one of them generated an income or expenditure of £24,900, no one would need to know anything about its accounts, whereas if the relevant figure for the other association were £25,100, the whole of its affairs would be disclosed and information that might be of use to its political opponents would he accessible to them".—[Official Report. Commons, Standing Committee G, 25/1/00; col 76.] In fact, in the Committee that day, the Liberal Democrat spokesman described those points as not being without merit.

To give the Home Office some credit—and I do not do it very often so I am happy to do it today—it consulted on the point raised by my honourable friend. An official wrote to the main political parties asking for their views on the matter and suggesting the solution of allowing public access to the accounts of all accounting units, both above and below the £25,000 threshold.

I know that the Conservative Party responded positively to that suggestion, but, unless I am being particularly thick, there does not seem to be anything in relation to that in the amendments that we have before us. Given that that consultation was carried out more than seven months ago, it is safe to assume that the Government rejected that course of action, or else they have forgotten all about it.

I hope that the Minister will be able to discuss this issue with the Committee this afternoon. As it stands, it seems to me that the Bill could provide the local parties with some considerable advantage in that they can pore through the accounts of their opponents but their opponents cannot look at their accounts.

That seems to me wrong. There is no way round it, if one wants to be open about it, other than to have all parties' accounts open, whatever the threshold. So fairness all round may be the better principle here. I look forward to hearing what the Minister has to say on this point.

Lord Molyneaux of Killead

As a former election agent, an allied point comes to mind. I note that the electoral commission is given powers to regulate the requirements in relation to the annual statement of accounts. Can we have an indication as to whether the regulations will be published and at what stage that will happen?

Lord Swinfen

I wonder why the commission should not be liable to produce copies of accounts for the whole time throughout which it keeps accounts, as stated in Clause 42(b). Nowadays, accounts can be quite easily scanned on to a computer and, once on the computer, can be printed off at leisure for as long as they are held on it.

I should assume that in this computerised age all accounts will be put on to a computer. Why, therefore, should they not be available for the whole of the time that the commission keeps those accounts?

Lord Hylton

Is it not the case that from time to time computers crash and others get viruses?

Lord Bach

The noble Lord has taken the Government Benches slightly by surprise but there is nothing wrong in that at all. I may not be able to give as complete an answer as he would like, but it may be that that is not possible in any event.

As the noble Lord knows, we consulted the main parties on the £25,000 threshold for the audit of accounting units' accounts. I must tell the Committee that there was no consensus in favour of reducing the limit. But the noble Lord has a point; one cannot deny that. I can answer it only in this way today by reminding the noble Lord that the electoral commission can keep the threshold under review and it can be varied by order if it is being abused or if it is thought that it is being abused.

While I am on the subject of the electoral commission, I may have inadvertently misled the Committee when dealing with the last group of what I described as minor and technical amendments. The electoral commission itself will not be a prosecuting authority. I want to make sure that that is on the record and I apologise if my reply on that was misleading.

The regulations on the form and content of accounts will be a matter for the electoral commission, as will the timing of any publication of draft regulations for consultation.

Lord Molyneaux of Killead

I am grateful to the Minister for that reply. Can he indicate whether the regulations will be standard throughout the United Kingdom?

Lord Bach

I cannot give an answer as to that, but I shall write to the noble Lord and make sure that a copy of that letter is placed in the Library.

Lord Mackay of Ardbrecknish

I am glad I raised that because I have been given one answer but, of course, every answer raises another question, and the question has come to my mind because the noble Lord, Lord Molyneaux, has intervened in this debate.

We have discussed the question of the need to keep secret the donors to political parties in Northern Ireland. Of course, a political party in Northern Ireland with a turnover of over £25,000 may well list some of its donors in its accounts. If those accounts are open to the public, then it seems to me that the Government are frustrating one of the defences which they raised earlier in relation to treating Northern Ireland differently from the rest of the United Kingdom. So the Government might like to think about that particular aspect of this part of the Bill and how it relates to that other part of the Bill, about which some of us are very unhappy but which, nevertheless, the Government are very keen to see enacted.

I am not pleased to hear the Minister's answer. As the original letter from the Party Funding Unit was on 21st February and the Conservative Party replied on 10th March, it might have been a good idea, when the Government concluded that there was no clear agreement among the parties, to tell the parties that. That might have saved the last nine minutes when I raise the issue on the Floor of your Lordships' Committee.

Lord Swinfen

I wonder whether the Minister will reply to my question.

Lord Bach

I dare say that the accounts will be put on computer and, subject to the pessimistic view of the noble Lord, Lord Hylton, as to what can sometimes happen to a computer, they will last for as long as the computer lasts. But that does not take away from the minimum requirement which appears in Clause 42(b).

Clause 42 agreed to.

Clause 43 [Criminal penalty for failure to submit proper statement of accounts]:

Lord Bach moved Amendments Nos. 126 and 127: Page 25, line 25, leave out ("for securing") and insert (", and exercised all due diligence, to ensure"). Page 25, line 36, after ("steps") insert (", and exercised all due diligence.").

On Question, amendments agreed to.

Clause 43, as amended, agreed to.

Clause 44 [Revision of defective statements of accounts]:

Lord Bach moved Amendments Nos. 128 to 129: Page 26, line 44, after ("accounts") insert ("and their delivery to the Commission"). Page 26, line 46, at end insert— ("( ) for disapplying, to such extent or in such circumstances (or both) as regulations under this subsection may specify, any of the provisions of section 43(1)."). Page 26, line 46, at end insert— ("( ) Section 42 applies in relation to any revised statement of accounts received by the Commission in accordance with regulations under subsection (9) as it applies in relation to any statement of accounts received by them under section 41.").

On Question, amendments agreed to.

Clause 44, as amended, agreed to.

Clause 45 agreed to.

Schedule 4 [Accounting units: application of accounting requirements]:

Lord Bach moved Amendments Nos. 130 to 130B: Page 109, line 42, leave out ("register of political parties") and insert ("Great Britain or Northern Ireland register"). Page 110, line 43, at end insert— ("(2) In sub-paragraph (1) any reference to a treasurer or other officer includes a former treasurer or other officer."). Page 111, line 41, leave out paragraph 9 and insert— ("9.—(1) Subject to sub-paragraph (2), section 44 shall apply in relation to any accounting unit and the treasurer of any such unit as it applies in relation to the party and the treasurer of the party. (2) In its application in relation to any such unit—

  1. (a) section 44(7) shall have effect with the omission of the reference to the registered leader of the party; and
  2. (b) section 44(8) shall accordingly have effect with the omission of paragraphs (a) and (b) and all references to the registered leader of the party.").

On Question, amendments agreed to.

Schedule 4, as amended, agreed to.

Clause 46 [Donations for purposes of Part IV]:

5 p.m.

Lord Bassam of Brighton moved Amendment No. 130C: Page 27, line 25, at end insert— ("(aa) any sponsorship provided in relation to the party (as defined by section (Sponsorship));").

The noble Lord said: Perhaps I may apologise for the number of amendments in this group. It is, however, less daunting than it may appear at first sight. The size of the group is largely a product of the fact that a change to the controls on donations to political parties in Part IV requires a whole range of consequential changes to the parallel provisions in Schedules 6, 10, 14 and 15, which set out the detail of the controls on donations to individuals and member associations, recognised third parties, permitted participants in a referendum, and parliamentary and local government candidates.

I turn to the substance of the amendments, which seek to do three things. First, they clarify what constitutes sponsorship. Secondly, they clarify how sponsorship and other forms of donation are to be valued. Thirdly, they make clear the position of a reasonable payment for the hire of an exhibition stand at a party conference in terms of constituting a donation.

Before I come to the detail of the key amendments, it may help if I set out the background to the treatment of sponsorship in the Bill. The Neill committee expressly recommended that the term "donation" should include sponsorship and donations in kind. The committee recognised (in paragraph 4.45) that, looking at the matter from the point of view of a company, sponsorship constituted a commercial activity. The same may be true, at least to some extent, if the matter is looked at from the point of view of the party which benefits from it. Nevertheless, the committee observed that the effect is to release for other purposes funds which the party would otherwise have to spend on the activity in question, and concluded that the arguments in favour of disclosure apply with equal force to both donations and sponsorship.

That said, the Government fully accept that the rather stark reference to "sponsorship" in Clause 46(2)(f) is unhelpful to political parties and companies alike. But simply removing that paragraph and the associated provision in Clause 48, as Amendments Nos. 131 and 133 seek to do, is not the answer. As it happens, the Government are ready to accept those two amendments, but only because we propose to replace them with equivalent provisions elsewhere in the Bill.

The way to deal with the uncertainty surrounding the meaning of "sponsorship" is to set out on the face of the Bill what the term is intended to cover. The new clause to be inserted by Amendment No. 132A is the core provision. The new clause defines "sponsorship" by reference to the transfer of money to help a party in meeting any of the "defined expenses" set out in subsection (2). The "defined expenses" are expenses in connection with any conference, meeting or event organised by the party; the preparation, production or distribution of any publication, or any study or research.

Subsection (3) of the new clause sets out a number of exclusions, including admission charges to a conference and any payment at a commercial rate for placing an advert in a party publication. We have included in subsection (4) a power to amend by order the list of defined expenses or exclusions in subsections (2) and (3). Such an order-making power will enable the clause to be kept up to date with current practice. I should add that the exercise of the power is subject to two safeguards. First, any order may be made only on the recommendation of the electoral commission. Secondly, by virtue of Amendment No. 315A to Clause 146, the power is subject to the affirmative resolution procedure.

The new clause is not complete as it stands. As I indicated at Second Reading, there is consensus among the main parties that it would be unduly restrictive to require the cost of exhibition stands at party conferences to be regarded as sponsorship or other form of donation. The Neill committee has similarly accepted that the hire of exhibition stands at or below a commercial rate should more properly be treated as a commercial transaction and not as a donation. Accordingly, Amendment No. 133B to Clause 47 provides that the payment for a stand at a party conference shall not constitute a donation or sponsorship for the purposes of the Bill, provided that the payment did not exceed such reasonable rate determined by the electoral commission. The role given to the electoral commission as arbiter of a reasonable rate will ensure that the cost of an exhibition stand is not inflated in order to disguise a cash donation.

When we consulted the Neill committee earlier this year about exhibition stands, it made the helpful suggestion that the definition of a "donation" should also include payments made to a political party in return for property or services provided by the party but at a rate that exceeds the commercial rate. Amendments Nos. 131A and 133E are directed to that end. One effect of the amendments would be to place transactions that are plainly of a purely commercial character, such as a company leasing property from a party at the market rate, outside the ambit of the controls. The amendments would also make it clear that funds raised by making a disproportionate charge for goods or services would fall within the definition of a "donation". A case in point would be a fundraising dinner where the party supplied a dinner worth £30 but charged £300 a plate. The value of the donation to a party in such circumstances would be £270.

We have adopted a different approach in Amendment No. 133D when valuing sponsorship. There is no direct commercial equivalent to sponsoring the stair treads or nursery at a party conference. Consequently, it would be difficult to put a price on any benefit conferred on the sponsor. In any event, as we have seen, the view of the Neill committee was that any consideration received by the sponsor was irrelevant. The value of the donation should, in the case of sponsorship, be taken to be the full value of the payment made by the sponsor.

Amendment No. 132B adds to the exclusions in Clause 47(1). Under Section 9 of the Local Government and Housing Act 1989, groups of councillors may receive assistance in the form of a seconded officer to help them to discharge their functions on the council. The amendment would make it clear that the provision of such assistance did not constitute a donation.

As I indicated at the start, the amendments to Schedules 6, 10, 14 and 15 simply repeat the substance of the amendments made to Clauses 46 to 48. In addition, Amendments Nos. 218J, 221A, 239H, 242A and 248J to Schedules 10, 14 and 15 address a number of minor drafting changes to ensure consistency across the equivalent provisions.

Finally, the new clause to be inserted by Amendment No. 319B ties up a number of loose ends in relation to donations. In particular, the new clause would ensure that references to donations for meeting a particular kind of expenditure include donations designed to save the donor incurring that kind of expenditure. An example of that might be a donation to a pressure group to pay the salaries of the members of staff for a year with the explicit intention of freeing up the group's funds in order that it can campaign as a third party in an election.

I turn to the amendments in the name of the noble Lord, Lord Mackay. I have already indicated that I am prepared to accept Amendments Nos. 131 and 134, although for rather different reasons from those the noble Lord may have in mind. As regards Amendment No. 133, I understand that the noble Lord's concern may be to ensure that the ban on foreign donations does not prevent United Kingdom political parties developing links with their counterparts overseas. The amendment would achieve that by adding payments made in respect of the provision of educational activity by the party for the benefit of its members to the list of payments which are not to be regarded as constituting a donation.

The Opposition also voiced those concerns in Committee in another place. The Government indicated then that it was not their intention to prevent members of political parties in this country receiving reasonable travel and subsistence payments in order to participate in, for example, conferences organised by their sister parties overseas. Clause 50(3), inserted by government amendments on Report, provides that payments received by a registered party to cover reasonable costs associated with an overseas visit shall be regarded as a donation from a permissible source. I think that that provision should meet the noble Lord's concern. The Opposition certainly welcomed that approach when it was floated in response to the similar amendment proposed in Committee in another place. I trust, therefore, that the noble Lord can be persuaded to withdraw Amendment No. 133.

Lord McNally

We broadly welcome this batch of amendments. But we must be careful to ensure that we give parties sufficient freedom to raise funds. As a Labour Party official, I remember a first application from a body to put up a stall at the Labour Party conference. It was supported by Mr Wedgwood Benn at the time and rejected by the rest of the executive as being far too radical a thought. That was around 30 years ago.

Now of course all the political parties make a substantial profit from their party conference trade exhibitions. I would not want to see the regulations so pernickety as to destroy that source of finance. Two benefits arise from it. First, it is a legitimate source of finance; and, secondly, one of the healthier things that has happened at all our party conferences has been the arrival of interest groups, both commercial and campaigning groups. They pass on their ideas, make contact with political parties, and so influence them.

Obviously, there is always a danger that those who want to get round the regulations can try to pay inflated fees. That is why the commission and the powers exist. But the amendments have the balance right and offer parties the prospect of legitimately earning much-needed cash. It is better to do it in this transparent way than in some other ways which give rise to concern. Basically, therefore, we welcome the amendments.

Baroness Gould of Potternewton

I, too, welcome these amendments. At Second Reading, concern was voiced throughout the Chamber. At the same time we heard from the CBI of its concern about the Bill as it stood then. So there was a need to look at the whole question of sponsorship versus donation and what we could do about companies' bona fide commercial and advertising activities being seen purely as donations, and at the consequences of that. I am delighted that we now have a much clearer definition of what constitute normal commercial relationships.

In relation to party conferences and stalls, the noble Lord, Lord McNally, referred to the days when stalls were not acceptable. In fact, if you were lucky you would have got not so much a "stall" as a six-foot trestle table! But life has changed considerably and the exhibitions at party conferences are now very big events.

I have a query in relation to the electoral commission defining what is a reasonable rate for hiring a stand. Every conference is different. Each has a different audience and therefore different numbers of people will see the publicity, which is what the stands are. Also, there may be big stands and little stands. I wonder how that definition will be arrived at to ensure that a level is not set which may be too high for small organisations which would also like to participate in conference exhibitions.

5.15 p.m.

Lord Mackay of Ardbrecknish

This is an important and, to a large extent, a welcome group of amendments. As the Minister said, they define what the Bill means when it talks about "sponsorship" in the context of political "donations". As the noble Lord, Lord McNally, indicated, exhibitions involving sponsorship now form a considerable part of the sideshow at major party conferences and provide the parties with income which helps with the expensive cost of conferences. I am glad to see that many of the concerns raised by my honourable friends in the other place have been addressed in the amendment. I particularly welcome the fact that the cost of hiring stands at party conferences will not be included in the definition of political donations.

The amendments will enable companies—or at least I hope that they will—to continue to interact with political parties on a genuinely commercial basis while retaining the requirement for shareholder consent in respect of gifts of money and sponsorship, among other things. I hope that their effect will be that intended by the Minister in the other place, Mr Tipping, who said on 25th January at col. 86 in Standing Committee G: it is important to devise a system that allows for commercial contracts and distinguishes them from sponsorship". But once again I am puzzled. We have been asking for these amendments for months. In fact, my right honourable friend Sir George Young said as long ago as 10th January in the other place at col. 49: We shall need a better definition of a donation and of sponsorship'. On 13th March we initiated a debate in the other place on this very issue when my honourable friend Nigel Evans said, "We need clarification".

So it has taken a long time. I understand that the Home Secretary wrote to the Neill committee in early January raising these issues. The committee responded positively and in good time. Yet we had to wait until the end of October for the amendments to be tabled. That is all part and parcel of the way the Government have handled this Bill.

Amendment No. 133 seeks to exclude payments made to political parties in respect of educational activities for the benefit of members. I apologise if the wording is a little imprecise. A similar amendment was tabled in Committee in another place when my honourable friend Robert Walter raised points about overseas visits to sister parties by party officials and MPs. The Government took those points on board in their own amendments, which are now part of the Bill. But my intention in tabling Amendment No. 133, which is a probing amendment, was to look at another aspect of educational activity: educating the party membership at large.

What if a party were to receive money from a source which is not permissible under the Bill, but that money were to be used to fund activity of a purely educational nature within the party itself and not political campaigning? Perhaps it could be education about a sister party abroad, or about political developments in another country. It could be money given by an individual benefactor, a charity or a company in order for the party better to inform its membership about an issue with no relation to political debate. Should such a payment be classed as a political donation, with all that that entails?

I have no particular example in mind. But I want to probe this issue, especially with regard to whether or not the restrictions on what is and what is not classed as a donation might be a little too narrow. I shall be interested to hear the Minister's comments.

I have a number of other questions which I hope are more straightforward. First, what are the implications of the amendments defining sponsorship for recognised third parties, members' associations and individuals? Will any meetings they organise or research they undertake, even if the issue is not a politically relevant one, be able to be sponsored only by permissible donors? What research has the Home Office done into the implications of that for organisations and people that are likely to fall within the categories I mentioned, especially for candidates at elections, under Amendment No. 248H?

I should also like to know why the Secretary of State and the commission are being given power to amend the definition of what is and what is not sponsorship by order. I recognise that such an order will be subject to affirmative resolution—I welcome that—if Amendment No. 315A is agreed to. But perhaps the Minister could shed a little light on the circumstances behind the inclusion of the power and the circumstances in which the definition might be so amended. Why is subsection (2)(b) of Amendment No. 319B so worded? Who will be making the reasonable assumption, having regard to all the circumstances that it mentions?

Moving away from sponsorship, what is the intention behind Amendment No. 131B, which relates to trustees? In what circumstances could a political party or a members' association receive assistance under Section 9 of the Local Government and Housing Act 1989, which will henceforth not count as a donation if Amendment No. 132B is agreed to? Finally, I should add that I look forward to moving Amendments Nos. 131 and 134, to which the Minister has added his name. Such consensus really pleases me because, as the noble Lord, Lord Bassam of Brighton, knows, that is what I am looking for in this Bill.

Lord Bassam of Brighton

I am astonished and delighted by the noble Lord's positive reaction. I am afraid that I must answer to some of his questions in writing, but they are good questions. In fact, I am interested in hearing the answer to some of them so they must be good questions!

I am grateful for the welcome the amendments received. The noble Lord, Lord McNally, was obviously an innovator in his time. He appears to have stormed ahead when the forces of reaction were battling hard against him. I am sure that that is true, but I shall check later with my noble friend Lady Gould.

The question which my noble friend raised about the reasonable rate is helpful. The commission will be expected to set an upper limit on what it might be. No doubt it must discuss the matter with the parties before doing so and take account of the existing range of charges. I hope that they are assisted in that regard so that the not-for-profit organisations are not squeezed out and are afforded the opportunity of discounted rates. I have tried to afford that opportunity to parties and organisations in small conferences which I have organised. It seems to me a sensible way forward.

I take the point raised by the noble Lord, Lord Mackay, about educational activity within the party. However, the problem is that it will be difficult, if not impossible, to differentiate how moneys are used and it could be open to a form of manipulation. I can accept that someone might make a donation purely for educational purposes but because of the way in which parties account for the cash which comes in and the way in which they use it, the proposal will be difficult to achieve.

The noble Lord, Lord Mackay, asked a number of questions about sponsorship and so forth and I shall have to write to him about them. However, I may be able to answer his question about the Local Government and Housing Act 1989. That legislation established and enabled special advisers to be in place to advise political groups within local government. That might not be the answer, but it is the one point which occurs to me.

I am pleased with the genuine welcome that has been given to the amendments. I apologise for their complexity but that is due to their knock-on effect throughout the Bill. I commend them to the Committee.

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendment No. 130D: Page 27, line 28, leave out ("the party or a person acting on its behalf)") and insert ("or on behalf of the party)").

On Question, amendment agreed to.

Lord Mackay of Ardbrecknish moved Amendment No. 131: Page 27, line 35, leave out paragraph (f).

The noble Lord said: With the support of the noble Lord, Lord Bassam of Brighton, I beg to move.

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendments Nos. 131A to 132: Page 27, line 36, leave out subsection (3) and insert— ("(3) Where—

  1. (a) any money or other property is transferred to a registered party pursuant to any transaction or arrangement involving the provision by or on behalf of the party of any property, services or facilities or other consideration of monetary value, and
  2. (b) the total value in monetary terms of the consideration so provided by or on behalf of the party is less than the value of the money or (as the case may be) the market value of the property transferred,
the transfer of the money or property shall (subject to subsection (3B)) constitute a gift to the party for the purposes of subsection (2)(a).

(3A) In determining—

  1. (a) for the purposes of subsection (2)(d), whether any money lent to a registered party is so lent otherwise than on commercial terms, or
  2. (b) for the purposes of subsection (2)(e), whether any property, services or facilities provided for the use or benefit of a registered party is or are so provided otherwise than on such terms,
regard shall be had to the total value in monetary terms of the consideration provided by or on behalf of the party in respect of the loan or the provision of the property, services or facilities.

(3B) Where (apart from this subsection) anything would be a donation both by virtue of subsection (2)(aa) and by virtue of any other provision of this section, subsection (2)(aa) (together with section (Sponsorship)) shall apply in relation to it to the exclusion of the other provision of this section.").

Page 27, line 40, after ("member") insert (", trustee").

Page 28, line 1, leave out subsection (5) and insert—

("( ) Except so far as a contrary intention appears, references to a registered party in the context of—

  1. (a) the making of donations to, or the receipt or acceptance of donations by, a registered party, or
  2. (b) any provision having effect for or in connection with determining what constitutes a donation to such a party,
shall, in the case of a party with accounting units, be construed as references to the central organisation of the party or any of its accounting units.").

Page 28, line 14, at end insert—

("( ) Nothing in this Part applies in relation to donations received by a minor party.").

On Question, amendments agreed to.

Clause 46, as amended, agreed to.

Lord Bassam of Brighton moved Amendment No. 132A: After Clause 46, insert the following new clause—


(".—(1) For the purposes of this Part sponsorship is provided in relation to a registered party if—

  1. (a) any money or other property is transferred to the party or to any person for the benefit of the party, and
  2. (b) the purpose (or one of the purposes) of the transfer is (or must, having regard to all the circumstances, reasonably be assumed to be)—
    1. (i) to help the party with meeting, or to meet, to any extent any defined expenses incurred or to be incurred by or on behalf of the party, or
    2. (ii) to secure that to any extent any such expenses are not so incurred.

(2) In subsection (1) "defined expenses" means expenses in connection with—

  1. (a) any conference, meeting or other event organised by or on behalf of the party;
  2. (b) the preparation, production or dissemination of any publication by or on behalf of the party; or
  3. (c) any study or research organised by or on behalf of the party.

(3) The following do not, however, constitute sponsorship by virtue of subsection (1)—

  1. (a) the making of any payment in respect of—
    1. (i) any charge for admission to any conference, meeting or other event, or
    2. (ii) the purchase price of, or any other charge for access to, any publication;
  2. (b) the making of any payment in respect of the inclusion of an advertisement in any publication where the payment is made at the commercial rate payable for the inclusion of such an advertisement in any such publication;
and subsection (1) also has effect subject to section 47(3).

(4) The Secretary of State may by order made on the recommendation of the Commission amend subsection (2) or (3).

(5) In this section "publication" means a publication made available in whatever form and by whatever means (whether or not to the public at large or any section of the public).").

On Question, amendment agreed to.

Clause 47 [Payments, services etc. not to be regarded as donations]:

Lord Bassam of Brighton moved Amendment No. 132B: Page 28, line 28, at end insert— ("( ) the provision of assistance by a person appointed under section 9 of the Local Government and Housing Act 1989;").

On Question, amendment agreed to.

[Amendment No. 133 not moved.]

Lord Bassam of Brighton moved Amendments Nos. 133A and 133B: Page 28, line 35, leave out from ("which") to ("and") in line 37 and insert ("(in accordance with any enactment) falls to be included in a return as to election expenses in respect of a candidate or candidates at a particular election;"). Page 28, line 39, at end insert— ("(3) Nothing in section 46 or (Sponsorship) shall have the result that a payment made in respect of the hire of a stand at a party conference organised by or on behalf of a registered party is to constitute a donation to the party for the purposes of this Part if or to the extent that the payment does not exceed such of the maximum rates which the Commission determine to be reasonable for the hire of stands at party conferences as is applicable to the hire of the stand in question.").

On Question, amendments agreed to.

Clause 47, as amended, agreed to.

Clause 48 [Value of donations]:

Lord Bassam of Brighton moved Amendments Nos. 133C to 133E: Page 29, line 1, at beginning insert ("the total value in monetary terms of"). Page 29, line 1, at end insert— ("(2A) The value of any donation falling within section 46(2)(aa) shall be taken to be the value of the money, or (as the ease may be) the market value of the property, transferred as mentioned in section (Sponsorship)(1); and accordingly any value in monetary terms of any benefit conferred on the person providing the sponsorship in question shall be disregarded."). Page 29, line 4, leave out paragraphs (a) and (b) and insert— ("(a) the total value in monetary terms of the consideration that would have had to be provided by or on behalf of the party in respect of the loan or the provision of the property, services or facilities if—

  1. (i) the loan had been made, or
  2. (ii) the property, services or facilities had been provided,
on commercial terms, and

(b) the total value in monetary terms of the consideration (if any) actually so provided by or on behalf of the party.").

On Question, amendments agreed to.

Lord Mackay of Ardbrecknish moved Amendment No. 134: Page 29, line 8, leave out subsection (4).

On Question, amendment agreed to.

Lord Bassam of Brighton moved Amendments Nos. 134A and 134B: Page 29, line 13, leave out ("or (4)"). Page 29, line 19, leave out ("or (4)").

On Question, amendments agreed to.

Clause 48, as amended, agreed to.

Clause 49 [Permissible donors]:

[Amendment No. 134C not moved.]

[Amendment No. 135 had been withdrawn from the Marshalled List.]

Lord Norton of Louth moved Amendment No. 135A: Page 29, line 32, leave out ("registered in an electoral register") and insert ("wheresoever resident").

The noble Lord said: In moving Amendment No. 135, I shall speak also to my Amendments Nos. 140A and 146. When I moved an amendment to Clause 25 late on Tuesday evening I said that it was not the most crucial we would be debating. I believe that this amendment falls into the category of a crucial amendment because it challenges one of the core provisions of the Bill.

The Bill embodies the recommendations of the Neill committee which recommended that donations from overseas donors should be prohibited. The Bill introduces extensive regulation in order to give effect to that recommendation. In order to meet the exceptional circumstances of Northern Ireland, it embodies a notable, and to some people unpalatable, inequity: certain parties of Northern Ireland will benefit from the provisions of the Bill in a way that other parties will not.

The more amendments the Government introduce to cover the exception of Northern Ireland—they have introduced a large number—the more complex and messy the Bill becomes. I believe that all this could be avoided and that my amendment provides a way out.

The Government believe that regulation is necessary but not sufficient in order to ensure that political parties receive donations from what may be termed "legitimate sources". The sufficient condition is that of transparency. I want to argue that extensive regulation of the kind embodied in the Bill is not necessary. I believe that transparency is the key. I believe that transparency provides both the necessary and sufficient conditions to police the giving of money to political parties. If one ensures that there is openness in terms of money flowing into party coffers, adequate non-statutory policing will follow.

I believe that the report of the Neill committee addressed a problem which was already being dealt with by other means. The political parties already have the message as to the need to regulate the acceptance of donations. If one ensures that there is transparency in the giving of donations, effective limitations will follow. The policing will be done not by the courts but by the media and the parties themselves. It is unlikely that a party will risk the public censure which will flow from headlines claiming that it has received money from a disreputable source. My amendment removes the requirement that only an individual registered on an electoral register is a permissible donor. Under my amendment, any individual qualifies, whether living in the UK or overseas.

I appreciate that at first glance it may seem to be an amendment which goes too far. However, when one thinks of the anomalies created by the Bill, it looks increasingly attractive.

The Bill introduces a major anomaly in respect of Northern Ireland. My amendment ensures equity. As the Government have acknowledged, the case for the provisions that govern Northern Ireland has nothing to do with the principle but everything to do with enforceability. I believe that the more amendments they introduce to deal with this exceptional case, the more attractive my amendment becomes.

Inequity in respect of Northern Ireland is not the only problem inherent in the Bill. The effect of the Bill is to equate a permissible donor with an acceptable donor. I do not believe that, under the provisions of the Bill, that equation is sustainable. Under the legislation the parties are perfectly entitled to accept donations from devious characters as long as they are on the electoral register. The provisions are not watertight. The Bill does not prevent dubious individuals who are UK citizens from giving money; nor will it necessarily be effective in preventing non-UK or non-EU citizens from giving money. There are various ways in which those who wish to get round the provisions can do so. Citizens of overseas countries resident in the UK can acquire economic citizenship of a Commonwealth country and thus be eligible to make donations.

As long as a permissible donor is equated with an acceptable donor there is a danger that the media will not take too much of an interest in party donations. The parties may be rigorous in refusing money from those who are not permissible donors but have few qualms about accepting money from those who are permissible donors. I believe that under my proposal the parties would be more careful about from whom they took money, conscious that they would be subject to public condemnation if they took money from dubious sources: the media and their political opponents would see to that.

The Bill creates artificial barriers between people who are resident in the United Kingdom. Why should a citizen of Mozambique resident in the UK be eligible to give money to a political party when a citizen of Angola also living here is not? Why should a Swedish citizen living in London be eligible to give money to a political party when a Norwegian citizen similarly resident is not?

I understand the demarcation drawn by the Bill but I am not convinced that it provides a justifiable dividing line between the acceptable and the unacceptable. In order to ensure compliance with the provisions on donations, the Bill introduces extensive regulation. This regulation adds to that provided by control of election finances. The effect of it is to impose a massive and, in many cases, I suspect, intolerable burden on party treasurers. The more complex the Bill becomes the greater the burden that they must shoulder.

I realise that this amendment is radical and challenges a fundamental component of the Bill. The Minister may challenge it on the ground that it changes the whole nature of the legislation. However, given all the government amendments to the Bill, I do not believe that on that score Ministers are in a position to complain. I also realise that I may be accused of trying to let the parties off the hook, but I do not believe that that is so. For the reasons I have given, the burden will be upon them to put their financial arrangements in order. The key to effective regulation is transparency. I have no objection to lowering the level at which donations must be made public. Greater openness rather than extensive regulation is the answer. I believe that openness will ensure better and more effective regulation than the provisions of this increasingly cumbersome Bill.

I have little doubt that the Minister's response will be negative, but the case I make gains greater strength the more the Committee considers all the amendments to the Bill. I invite the Minister to reflect on what I have said, and I beg to move.

5.30 p.m.

The Deputy Chairman of Committees (Lord Brougham and Vaux)

I must advise the Committee that if Amendment No. 135A is agreed to I cannot call Amendment No. 136.

Lord Beaumont of Whitley

I am slightly thrown by the absence of the noble Lord, Lord Lamont. The lead amendment in this group has not been moved, and Amendment No. 140 in my name follows very neatly after that. As I understand it, the debate may also fall within the amendment moved by the noble Lord, Lord Norton. Before I embark on a short speech in defence of Amendment No. 140, perhaps the Minister will tell the Committee whether he intends to speak to that amendment in dealing with this group. If not, I shall move the amendment separately.

Lord Bassam of Brighton

If the noble Lord asks whether I accept Amendment No. 140, the answer is no. I suspect that I shall cover that point in my response.

Lord Beaumont of Whitley

There is a strong case for allowing European parties which are publicly linked to parties in this country to send donations. In Europe there is a growing belief that political parties work together. The Green Party has two Members in the European Parliament, and certainly there are very strong links between various parties. Since this amendment deals also with those kinds of elections, we believe it should be perfectly permissible for members of brother and sister parties in the European Union to be able, without any restriction, to subscribe to parties in this country, and vice versa. Although the Minister indicates that he does not intend to accept Amendment No. 140, I hope he will deal with the point so that we can decide whether the matter should be brought back at Report stage.

Lord Molyneaux of Killead

In general terms I support the amendment moved by the noble Lord, Lord Norton of Louth. The noble Lord said that he, and perhaps others, regarded the amendment as somewhat radical. If we review progress on this Bill thus far we are perhaps entitled to believe that certain radical remedies are called for. Successive governments exhort the citizens of Northern Ireland to behave as their counterparts in the other three parts of the kingdom. However, far too often in legislation every effort appears to be made by successive governments to make us different and then complain that we are different. It is hardly surprising that, as the noble Lord, Lord Norton, forecast, certain rather unscrupulous bodies and parties will regard these exotic parts of the Bill as challenges that they are duty bound to subvert and get round. As in many other cases in this Bill, ways and means will be found to get round what Ministers may regard as safeguards—certain study groups already at work will probably succeed—that in due course are exposed as very flimsy.

Lord Goodhart

On this occasion I wear my hat as a member of the Neill committee. The position of that committee is substantially that which has been accepted by the Government, although with one amendment, with which I shall deal in a minute or two. The position of my party was somewhat different. In its evidence to the Neill committee it proposed that donations from overseas, other than foreign governments, should be acceptable, subject to the principle that there should be a general ban on donations of more than £50,000. As that limitation was not accepted by the Neill committee, the proposal put forward by my friends in my party is left somewhat in limbo. The view taken by the Neill committee was that what I might broadly call "overseas donations" should be banned. There are serious arguments for saying that they should be permissible. Those arguments were rehearsed within the committee and in the evidence given to it.

The ultimate view—it was a unanimous view—was that it is for those who are entitled to vote in elections in the United Kingdom to fund the parties which take part in these elections. It is not appropriate that people who are not resident in this country—I cannot avoid referring to Michael Ashcroft in this context—and who do not have the commitment to be resident in this country should be allowed to donate what is in many cases a very substantial sum to the coffers of their party.

In Mr Ashcroft's case, he has indicated that he intends to return and take up residence in this country and qualify as a voter. Indeed, I think he has since registered himself as a voter in the constituency of Maidenhead and is therefore eligible to donate money. There are other examples. There was the notorious example of someone from Hong Kong with a dubious background who donated a substantial sum. This is an important principle. It is one which, certainly at the time we received the evidence, was shared by the party to which the noble Lord, Lord Norton of Louth, belongs. In its evidence the Conservative Party said: Although, we have no reason to believe that any money received by a Party in the past should not have been accepted, Mr Hague has made it clear that in the future we will not accept foreign donations. No such donations have been offered or received since the General Election". I wait with some interest to hear what the noble Lord, Lord Mackay of Ardbrecknish, will say—to find out whether that is still the view of the Conservative Party.

Nothing that has happened in the interval since the Neill report was published leads me to suggest that the view that was taken by the Neill committee should now be reversed. There are of course difficulties. I said that the Neill report was accepted by the Government with one alteration. The Neill committee proposed that it should be possible for anyone eligible to vote in this country to make a donation to a political party. The Government proposed that it should be restricted to those who were on the electoral register.

The Government put that forward—this was stated in their reply to the Neill committee—because administratively it is a relatively simple matter to check who is in fact on the electoral register, but it is much more difficult to find out whether someone who, let us say, sends a cheque drawn on a British bank in a letter from an address in London is in fact eligible to be on the register. It is not of course difficult for anyone who is eligible to be on the register to put themselves on the register. For that reason, the Neill committee, when this proposal was put to it, did not object to it being brought forward in the form in which it is brought forward by the Government.

I am not here to put a party view, but merely to explain why the Neill committee took the view that it did and to express the view that there are no grounds subsequent to the publication of our report for departing from that view.

5.45 p.m.

Lord Mackay of Ardbrecknish

We now come to an important group of amendments which relate to the whole question of a restriction on donations to register parties and who is a permissible donor. It is easy enough to make the general observation that political parties should not take donations from foreigners. Indeed, the noble Lord, Lord Goodhart, is well aware that Mr William Hague has made it clear that the Conservative Party will not do so. It is much more difficult to define who foreigners are. Although I have not actually sat down with a map of the world and counted, I understand that the citizens of about 80 countries can come to this country and register to vote. They then become eligible to make donations to political parties.

That seems to me to be a very large coach and horses through the general and easily accepted principle about foreign people not being allowed to donate. Even though they may be allowed to come here and vote, they are not citizens of the United Kingdom. They are not expected to become citizens. They remain, in any kind of common use of the word—if I can be allowed to be so politically incorrect on a day when I am supposed not even to think of myself as British, let alone Scottish, which might be considered worse—not British. They are not citizens of this country. But because of the Empire of the past and one thing and another, they can come here, they can register and they can actually donate money.

Other people manage to live in Britain, vote in Britain, but remain non-domiciled for the purposes of paying their taxes in Britain. We begin to get into a very difficult issue when we discuss that. If you live here, think you can vote here and therefore donate here, but then you manage in some mysterious way to avoid paying any taxes here, I am not entirely sure whether you are on the same footing, certainly as myself, and probably as most Members of the Committee.

We get into very difficult territory here. It is some of that difficulty that we are attempting to explore in these amendments. The amendments are not closely related but they are all related to the question of donors. One is almost confronted with the problem of disentangling a grouping or not. I decided not to. But it means that we need to take many of these amendments quite separately because they address separate issues.

As my noble friend Lord Lamont is not present to move Amendments Nos. 134C and 239P, we will not hear a ministerial response to the amendments. Therefore, at this time we need not discuss them.

I shall start with Amendment No. 137. If we are supposed to be prohibiting foreign donations, why does the Bill allow foreign donations from companies incorporated in France, Spain, Germany, Austria or any other EU country? Clause 49(2)(b)(ii) states that a company incorporated within the European Union is allowed to donate. I do not understand that. If we are against foreign donations, how can we possibly accept donations from companies incorporated in other countries? They may be our partners in the European Union, but they are foreign countries for the purposes of donations. I think I am right in saying that a citizen of Italy cannot give a donation to a British political party. So why should a company incorporated in Italy be allowed to do that? That is the first puzzle.

I am also baffled by government Amendment No. 137A. If we are not allowed to talk about the European Union but have to talk about the United Kingdom or another member state", then it is time we grew up. "Members of the European Union" is straightforward and easily understood. We do not need, United Kingdom or another member state". If that is the way it has always been done, it is time we stopped, because, on the principle of the noble and learned Lord, Lord Simon of Glaisdale, we would save a few words. If we saved those few words every time they appeared in Bills, Bills might just be slightly shorter than they tend to be.

My noble friend Lord Norton and I have both tabled amendments in relation to bequests. It is somewhat unfortunate that the issue should be entangled in the wider issues raised in this grouping. I believe that we ought to be able to find some agreement across the Committee on the amendments concerned with bequests, although I do not think that we will necessarily find agreement across the Committee on some of the other amendments in this group.

Amendment No. 142 seeks to allow bequests from people who are not actually registered in an electoral register at the time of their death but were at that time, ordinarily resident in the United Kingdom and had within the previous five years been registered in an electoral register". The provision on bequests as it now stands is far too narrowly drawn. There are many reasons why a person may wish to make a bequest to a political party but has failed to register to vote before his death. He may simply have forgotten to register; he may have been missed off the registration form because he was in hospital or in a nursing home; he may even have become disillusioned with the political process and decided not to register but to give money to a political party in the hope that the position might improve after his death. But in any case I cannot see why we should refuse people's last instructions in their wills about what will happen to their money after their deaths simply because they do not happen to have been registered to vote at the time they died. Unless something is happening that I do not understand, I cannot see what advantage someone will gain from a political party receiving money from him after he is dead—unless the Labour Party is going to claim even greater powers than the Prime Minister occasionally claims for himself. I just do not see what the problem is.

I turn to Amendment No. 138. Why does the Bill allow one political party to donate to another? In what circumstances does the Minister envisage that will happen? Is it a device to accommodate the Labour Party and the Co-operative Party, or does it have a more sinister intent? As noble Lords will be aware, the spending limits in referendums, which we shall discuss in due course, are deliberately and quite cynically being rigged by the Government. Under the Bill, there will not be a level playing field on referendum expenses and costs. In a referendum on the euro, if one were to be called, the Labour Party, the Liberal Democrat Party, Plaid Cymru in Wales and the SNP in Scotland would be able to spend a combined total of £9 million to run their campaign to abolish the pound, whereas the Conservative Party would be able to spend only £5 million to save the pound. Whatever noble Lords may think of the arguments, that is not a level playing field.

Nor would it be a level playing field, using exactly the same kind of arithmetic, with regard to the referendum on Scotland and the referendum on Wales, where three parties were on one side and one was on the other. Of course the levels of expenditure were considerably lower than the millions I mentioned, but it was still relevant. It is not a level playing field. There is no point in anyone pretending that it is.

The Home Secretary defended that imbalance in a most amazing way. He said that the limits were not rigged because the poor Liberal Democrats—I do not know whether they were consulted about this—would not be able to raise the £3 million they are allowed to spend under the Bill. Ah, but they do not have to! The Labour Party, which will no doubt have more than its £5 million limit to spend on scrapping the pound, will be able to top up the Liberal Democrats because of Clause 49(2)(c). I cannot believe that that is why the provision is there. But there are more suspicious people in your Lordships' House who may well think that that is exactly why the provision is there. But regardless of one's position for or against the euro, or for or against devolution, or for or against any other issue that may go to a referendum in the future, it cannot be right that one political party can donate to another. I hope that the Government will explain why one political party will be able to donate to another.

I presume that the provision excludes a political party in Northern Ireland donating to a political party in Great Britain. If it does not exclude that, the whole point of the separate Northern Ireland register is blown out of the water. I look forward to hearing what the Minister has to say about that.

I am sorry to say to the noble Lord, Lord Beaumont of Whitley, that on this occasion I cannot support him on Amendment No. 140, which seeks to allow donations from other EU political parties. As well as going completely against the Neill report and driving a coach and horses through the ban on foreign funding, the noble Lord's amendment would make even worse the situation I have just described in relation to Amendment No. 138, because political parties on the Continent could fund political parties in this country to run referendum campaigns on, say, the euro.

I turn to Amendment No. 139. It seeks to give effect to one of the recommendations of the Neill committee in that it would allow citizens of the Republic of Ireland resident in the republic to donate to Northern Ireland parties. Indeed, it would allow them to donate to all parties in the United Kingdom. We had this argument at fair length on the previous Committee day. What is interesting, I suppose—I have not seen any statistics—is that the one group of, if I may call them this, foreign citizens who come to this country in greater numbers than any other group and are entitled to vote are citizens of the Republic of Ireland. Many of them spend a little time in this country—perhaps working or whatever it may be—and then go back to the republic. If they are here, they will be able to register to vote, and therefore will be able to donate; but if they are in the republic, they will not be able to do so.

When one considers that the Northern Ireland Act 1949, of which the Neill committee reminded us, stated clearly in relation to the republic that it was not a foreign country, it seems to me that we should accept the logic of a previous piece of legislation put through this Parliament and accept that voters in the Republic of Ireland are in a quite different position from voters in every other country in the world.

Lord Molyneaux of Killead

I am grateful to the noble Lord for giving way. Does he accept that the situation is far more serious than just citizens of the Republic of Ireland subscribing to parties in Northern Ireland or in the United Kingdom? The largest contributor is bound to be Sinn Fein, which obtains its funds not from any part of the British Isles but from the United States of America, where £7 million or £8 million is raised by its sympathisers, all of whom are American citizens and will never be registered as United Kingdom electors.

Lord Mackay of Ardbrecknish

The noble Lord is absolutely right. We raised that point on the previous Committee day but received no satisfactory answer.

But the position is even worse than that. An American citizen who is against terrorism and does not approve of some of behaviour in which Sinn Fein/IRA has indulged over the years and who comes to live and work in this country—my goodness, there are a quite a lot of them in London—will never be entitled to vote for any of our legitimate parties. Yet he will be able to give money to Sinn Fein/IRA if that is his wish. That underlines the hopelessness of the Government's position over Northern Ireland and it underlines the real problem with the whole concept of foreign donations.

The American living and working in London for a short time for one of the great international banks may become very interested in politics. He may think that Tony Blair is such a marvellous man that he wants to give money to the Labour Party. He will not be allowed to do so. But his Canadian chum working in the same bank will be able, as a Commonwealth citizen, to register here and will be able to give money. They may live just a few miles apart back in north America. It is a little illogical to make these distinctions and to try to defend them when we come to banning foreign donations. Frankly, as far as concerns intervening in British elections, my view is that the citizen of Canada and the citizen of the United States who are here for a short time are in exactly the same position. Either both should be able to give money or neither should be able to give money. But I do not suppose that we will make any progress there.

If Amendment No. 139 were to be agreed, I think that the situation we have discussed—a situation which has not been at all satisfactorily defended by the Government—about Sinn Fein/IRA, the United States and elsewhere, would not arise. The problem addressed by the Neill committee, to which I have already referred in other debates and to which I have given my sympathy and support, would be resolved. Citizens of the Republic of Ireland, as was stated in the Government of Ireland Act 1949, would not be considered to be foreigners. That would resolve one of the problems.

The amendment tabled by my noble friend Lord Norton of Louth, Amendment No. 135A, along with my Amendment No. 136, address a key issue where the Government have directly rejected the recommendations of the Neill committee. I know that the nameless and faceless spin doctors of the Labour Party in the House of Lords claimed on Tuesday that the Bill was in line with the Neill committee recommendations, but here that is demonstrably not the case. The committee recommended that an individual should be eligible to register to vote in order to donate; in other words, eligible to register, not actually register, but merely eligible to register. The Government have applied a far narrower definition. The Neill committee noted the distinction between its own position and that subsequently adopted by the Government when it stated in paragraph 521 of its report that, we think that a donation could be properly received from a person who was eligible to be put on the electoral register because such a person has, under existing legislation, the right to participate in the electoral process". The Government have departed from Neill and, indeed, have moved in another direction. I believe that the argument in favour of my amendment is that we would then be implementing exactly the suggestion made by the Neill committee.

The Bill as it stands makes it clear that an individual can make a political donation only if he or she is actually registered on the electoral register. The rolling register, which is to be introduced when the relevant provisions of the Representation of the People Act 2000 are brought into force, will provide some relief to those unable to donate because they are not registered. But delays will still occur between an individual discovering that he is not allowed to donate because he is not registered to vote and the subsequent registration coming into force.

The rolling register does not take into account people who choose not to register to vote in the first place. Some people choose not to register for very good reasons. The register is made available for public inspection in town halls. I shall refer again to examples that we discussed during our debates on the Representation of the People Act. Some people, such as police officers and others, choose not to register because they fear that their addresses will become known to criminals or to stalkers. As the Minister will know, the issue of people registering to vote is of considerable importance when it comes to personal safety. I suspect that even some Members of this House or the other place are in exactly the same position because of positions they have held in the past and the dangers they now face from terrorists and such like.

In another place, where an all-party consensus was reached that this matter should be addressed, the Minister, Mr Mike O'Brien, said that, there is a real issue here which deserves further study".—[Official Report, Commons, 12/1/00; col. 385.] The situation may have deserved further study, but I am not aware that any subsequent action has been taken by the Government to change the position. Perhaps the Minister will enlighten me.

Under the provisions of the Bill, a British citizen, resident in the United Kingdom, who has chosen not to register to vote for quite understandable reasons of personal safety, will be barred from contributing to a political party or other political organisations or even to a referendums campaign and thus denied the chance to contribute to the democratic process. I believe that there is here a powerful argument in favour of my amendment, which would bring the Bill into line with the Neill committee. I cannot believe that the effect that I have described in relation to the Bill—where people will be deprived of the right to donate because they do not wish to be named in the public register for reasons of safety—is the intention of the Government.

Perhaps I may say that there may also be implications under the Human Rights Act relating to Articles 9, 10 and 11 of the convention, as well as Article 3 of the First Protocol. I hope that the Minister was advised on this before he signed the Section 19 statement which certifies that the Bill is compliant with the Human Rights Act. I hope that he will be able to do that without seeking some help from the Liberal Democrat Benches, but I do not see the noble Lord, Lord Lester of Herne Hill, in his place, so perhaps that help will not be as forthcoming as usual.

Some of these points were raised in another place by my honourable friend Mr Robert Walter. He cited examples of students who fail to register or those who, for other reasons, are inadvertently missed off. On those occasions the arguments were not fully addressed by the Minister, Mr Tipping. I hope that the Minister will defend the reasons why the Government have declined to accept the recommendations of the Neill committee in this regard and I hope, too, that he will address the problem of how to accommodate those who, for reasons of security and safety—a point on which we all agreed during the passage of the Represention of the People Act—do not wish to register on the electoral register.

As I have said, many of these amendments are different from each other. I look forward to the Minister's detailed views, but I should warn him that if I do not receive some satisfactory answers, I may be tempted to test the opinion of the Committee.

6 p.m.

Lord Shore of Stepney

The noble Lord has covered an enormous range of extremely important subjects in his remarks. I feel, as I am sure do many other Members of the Committee today, that, in spite of the pressures of time we are currently experiencing, these matters are too important to be brought together under huge umbrella-like collections of amendments and then decided in a debate conducted over a few hours.

I shall not attempt to follow the noble Lord, Lord Mackay, by touching on such a wide range of issues. I shall simply concentrate on speaking to one of the amendments tabled by the noble Lord; namely, Amendment No. 137. It seeks to delete subparagraph (ii) of Clause 49(2)(b) which forms part of the list of permissible donors. It includes companies, incorporated within the European Union", which is to be amended by my noble friend, rather dramatically, from the "European Union" to the "UK and other member states". I do not know what "other member states" could mean, unless the words "European Union" are added.

However, the very serious and earnest point that I wish to make, and which I ask my noble friend to take on board, is this. The words "coach and horses" are often employed to describe parts of Bills which appear to contradict their main purpose. If ever there was a "coach and horses", here it is.

I, too, was a member of the Neill committee and I largely concur with what was said about its approach by my committee colleague when he spoke from the Liberal Benches. We began with the aim—shared by the two major political parties as well as the nuanced difference of the Liberal Party—of trying to make British politics healthier in the future than they had been in the past. We aimed to do this by excluding foreign money; in other words, we deeply objected to the notion of British party opinion makers being to some extent "bought" by interests outside our own country. In the case of foreign governments, it is clearly a disgrace for anyone even to contemplate that as being acceptable.

In the case of foreign corporations, however, a whole flood of money could be used for the financing of British political parties. I hope that we have in place good internal defences against that, but those internal defences are crucially dependent upon our sense of ourselves as a country as well as our sense of honour about how we behave politically. In a Bill of this kind, it is not enough to assume that undesirable influences and foreign contributions would not have a bad effect on decision-making here in Britain. For that reason we went over the ground very carefully in the Neill committee—with, I may say, the encouragement of the Labour Party manifesto and with a declaration from the Conservative Party leadership.

We looked at cases for possible partial exemption—that is, those companies which were only branches in Britain of companies overseas, for which a case can, to some extent, be argued—and we came unanimously to the conclusion that we should oppose it. We opposed it.

Where I differ from my colleague on the Neill committee is that, unfortunately, the case he cited was not the only one where the Government, almost unbelievably, departed from not only the Neill recommendation but from their own commitment. For reasons which we shall have to hear explained—I do not believe that there is an explanation—we have exempted the companies of the countries of the European Union from the control that otherwise applies to foreign companies in the rest of the world.

This raises matters of very grave importance. Is the implication that we are no longer, as it were, a nation state? Are we hearing that the European Union, with whom we hope to have a good, productive, co-operative alliance and friendly relations, has been turned into a single unit of which we are only a part, and that we have no longer the right and the power even to decide the rules that apply in our own democracy?

I questioned my noble friend on this very point. His reply indicates why this provision goes wider than the Neill committee's recommendation. It states: As we indicated in our White Paper…to confine the ability to make donations to companies incorporated in this country"— which I take for granted. It is perfectly all right for a British company incorporated in our own country, possibly subject to some rules and limitations, to make contributions to political parties; that is not seriously in dispute— would be an infringement of EU rules on freedom of establishment". The letter then goes on to try to spell that out. It states: All EU nationals…have the right to establish themselves in the United Kingdom and to carry on business here in any appropriate legal form". Of course they have—but this has nothing to do with setting up businesses and operating without discrimination within the United Kingdom. The so-called limitations imposed on us by, I think it is, Clause 43, and others in the European treaties, is totally, bogusly misapplied to this regulation concerning the conduct of our own internal democracy and the moneys available to our political parties.

I should say to my noble friend that this is not at the fringes of the issue; it is absolutely basic. I cannot believe that the Government have got themselves into such a corner where they accept that they have no longer the right to determine the rules that govern our democracy. I cannot believe the answers they have given to me and the worries they have expressed: that it may infringe EU rules; that one or two ECJ judgments in areas very adjacent to this might be cited and quoted against us.

Even if EU rules and judgments were clearly applicable on the basis of precedent or the basis of treaty, I say defy them, and let us control our own affairs according to our own interests and our own standards.

6.15 p.m.

Lord Wedderburn of Charlton

It may be convenient to the Committee if I speak to Amendment No. 137B. I must start with an apology for the fact that, through accident, the amendment did not appear in the Marshalled List. But I gave my noble friend notice earlier in the week that it would be brought forward.

My reason for speaking to that amendment now is that it will lead me to disagree with both the noble Lord, Lord Mackay of Ardbrecknish, and, to some extent, with my noble friend Lord Shore—whose basic sentiments I share on this matter—when we come to look at what Clause 49 does.

The object of my amendment is to make, as far as possible, the position of incorporated bodies broadly the same as that of unincorporated bodies, especially in view of the resources available to large companies. This is not a technicality; it is a matter of great importance to our political life. With that I wholly agree.

The Government's position was set out in another place in Standing Committee G on 25th January by my noble friend Mr Tipping. He said: We asked Neill to stop foreign donations". He then went on to say: We would like to restrict this Bill to British-based companies…We are advised that it is not possible to draw the Bill in such a way as to exclude companies that are incorporated in the EU and operate and register here. I wish it were possible".—[Official Report, Commons, Standing Committee G, 25/1/00; col. 109.] He went on to say that his advice on European law was that it was not possible.

Even after those debates, the Government stuck to their structure of what is now Clause 49. With the greatest respect to my noble friend and to the noble Lord, Lord, Mackay, it is no good trying to understand Clause 49 by picking out bits of it. Clause 49 has a great strength on this matter for our political processes. My amendment seeks to reinforce that.

Clause 49(2) tells us who can be permissible donors. It is true that subsection (2)(b) deals with "a company". If I read it fully, the Committee will see that there are three requirements—not merely one or two—before a company can get into this bracket. This clause is widely misunderstood and I should be grateful if the Minister will say whether he agrees with this interpretation of it.

The Bill states that a company can be a permissible donor if it is a company, (i) registered under the Companies Act 1985"— or under the equivalent order in Northern Ireland— and"— it states "and", not "or"— (ii) incorporated within"— it used to be "the European Union". I congratulate the Government on dropping those words because they are meaningless. The Government now want to use the words "incorporated within the United Kingdom or another member state". The end of the subsection then states, which carries on business in the United Kingdom". As the Bill stands, surely these three requirements are cumulative; they are not disjunctive in any way at all. The word is "and" not "or" between paragraphs (i) and (ii), and the third requirement clearly applies to all such companies. The reason the Government's Amendment No. 137A is superior is that it will make the second requirement read: "incorporated within the United Kingdom"—the company already has that from registering under the Companies Act—"or another member state". It is a matter of company law which is partly harmonised, but not entirely so.

I agree with those who say that the technicalities in the European harmonisation of company law are supposed to produce a level playing field in company and financial markets for blocks of capital. They were never devised to control the central features of political life in each and every member state. They should not be permitted to creep into our political system unless what they are doing is absolutely clear. The Government's three-part structure in Clause 49 follows the advice that they were given according to debates in another place.

So it is not enough for a company registered in a member state in Europe merely to come forward and state that it is registered there and can, therefore, be a permissible donor. The question will arise: have you registered also under the Companies Act 1985?

That raises a number of important issues. Perhaps I may give one example in order to make the point stick. Having registered under the Companies Act 1985, the company will come under the provisions relating to "shadow directors". Shadow directors are persons, in accordance with whose instructions directors of the companies [named directors] are accustomed to Act". (other than acting only in a professional capacity). A company incorporated in, let us say, Italy would be required, on registering in Britain, as is required by Clause 49, to disclose in the relevant documents and records the shadow directors—and they would have to do this much more directly and strictly than under Italian company law—if the directors were under the instructions of some eminent person in Italian politics or the media such as Mr Berlusconi, or even Professor Prodi. That would have to be disclosed under the provisions of the 1985 Act. Similarly, hidden controllers of the company would have to be revealed in the company's register and returns, whether they controlled the company from Bologna, Borneo or Belize.

It is at this point that my amendment points to the inequalities that will remain, if it is not accepted, between incorporated and unincorporated bodies, even after the acceptance of government amendments such as Amendment No. 137A.

Clause 49(2)(f) deals with unincorporated associations. It requires that, in order to be a permissible donor, an unincorporated association must carry on a business, wholly or mainly in the United Kingdom". and have a "main office" there. Those are two requirements of a quite strict character. Those conditions afford some assurance that the unincorporated body at least has some direct concern for interests within our jurisdiction and, therefore, the interests of the country as a whole.

But let us contrast the incorporated company and the third requirement in Clause 49. After it has been incorporated in another member state, and has gone through the formalities of registering as a company under the Companies Act 1985, it can then qualify merely by carrying on business in the United Kingdom. There is no assurance in that formula that its British "business" is more than vestigial or wholly ancillary to its main business or activities, still less to any business in a group of companies of which it may form part. To be a permissible donor, it need do no more—even though it may run a massive business in services or manufacturing in some other member state—than set up a sweet shop in Brighton; then it will be considered as carrying on a business in the United Kingdom. That is not satisfactory.

There are internal and external reasons for that provision. I shall touch on both before concluding my remarks. The first reason is that it would leave the Government's amendments in the Bill in an absurd state. Unincorporated associations looking at the provisions of the Bill when it becomes an Act will say, "We have to have a business wholly or mainly in the United Kingdom, and our main office must be there".

I say in parenthesis that I have not laid down a requirement for the company to have a main office or site in the United Kingdom. However, I ask the Minister to consider the question: is it because of the first company law harmonisation directive that they seem to think that that demand cannot be made? I am not sure that that is correct. There are arguments both ways. I have not included that point in the amendment, but the question of the company's main office or its main site might perhaps be raised in a correct discussion of this matter on what I submit is the correct interpretation of Clause 49.

Returning to the argument, the unincorporated association would say, "We do not want to have 'wholly or mainly' our business in Britain and our main site within the United Kingdom. Let us incorporate"—and it is often in many member states a pure formality that a business can be incorporated there, as it is here—"let's satisfy the British Act by also incorporating under the 1985 Act; we shall be all right if we just run some kind of business in Britain". My amendment does not discriminate between British and European companies; and I see no objection, even in the stringent advice that the Government were given on the matter, in any European base for discussion of company law to placing such a requirement on a business which is wholly or mainly carried on in Britain—especially, to return to our own affairs, in the light of the conclusions of the noble Lord, Lord Neill. It promotes government policy in so far as they think it is possible, but it goes a little further, without in any way infringing European provisions in the direction suggested by the Neill committee of excluding foreign donations. If a company is registered in France or Italy, and then registers in this country and has to comply with the disclosure provisions, and has a business which is wholly or mainly carried on in this country, I can see the argument for allowing it to make some kind of donation. I do not particularly like the idea, but I can see the argument.

If my noble friends in government wish to go further than my suggestion, they should examine the rest of Clause 49. I mention one of only two points on trade unions and on limited partnerships. They have tabled an amendment on limited partnerships which is limited to partnerships under the Limited Liability Partnerships Act 2000. If they are following the advice that they have been given, they must be careful about that, because limited partnerships have been known to several systems of commercial law on the Continent for many years, if not, in one case, for centuries.

On the question of trade unions, Clause 49(2)(d) allows, a trade union entered in the list kept under the Trade Union and Labour Relations (Consolidation) Act 1992", to be a donor. But it goes no further. It does not allow trade unions within the Community outside Britain to donate as permissible donors. I accept that, and I submit that the line is drawn correctly, with trade unions being under a much stricter provision than companies, as is so often the case in our statute law. In this case, I would accept and promote that distinction. I do not see why an Italian trade union—much as I like most of the people in those unions— should be allowed to put money into our political processes. Similarly, I do not really see why companies in Europe need to be in that position. However, as things stand, the Government have been advised that, unless they go as far as they have gone in Clause 49, the matter will be upset in the Luxembourg court.

The position of trade unions at least strengthens the case—my basic case—for not treating companies in a different manner as far as is possible. It is matter of requiring that the company registered in Europe and here does not merely go through steps that are pure formalities; it must be an entity that carries on, mainly or wholly, its business in this jurisdiction. Only then should it be allowed to give donations—possibly colossal donations—which might affect our political processes. I hope that my noble friend the Minister will accept my Amendment No. 137B. However, if he cannot, I hope that he will at least agree that the matter is worth discussing further.

6.30 p.m.

Baroness Fookes

I have two small queries to put to the Minister who will respond to this debate. First, as regards the phrase, an individual registered in an electoral register", I presume that we are not unique in this country in having electoral registers. How can we be sure that this is the British one? Could not a citizen of another country, who is registered on that electoral register, presume to make a donation?

My second query relates to Amendment No. 137A tabled in the name of the noble Lord, Lord Bassam, which is an amendment as regards the company that is able to donate. Under the amendment, the paragraph would refer to a company, incorporated within the United Kingdom or another member state". Can the Minister tell the Committee what is meant by "another member state". Clause 150, which gives interpretations of meaning, does not contain any reference to a member state; indeed, with the omission of the reference to the "European Union", it could be a member state of anything.

Baroness Gould of Potternewton

I, too, have a few questions to ask. The first is directed to the noble Lord, Lord Norton, regarding Amendment No. 135A and the inclusion of the words, "wheresoever resident". I have a problem here because I do not know how one would define "residence". Perhaps the noble Lord could interpret that for the Committee. One may have an address, but it could be an accommodation address. Because someone has an address, it does not necessarily mean that he or she is living there. The noble Lord talked about getting the parties off the hook, but I think that it would be very difficult for parties to police themselves here in the way that he suggested. Although I accept the noble Lord's first premise without any doubt—namely, that transparency is the key to all—I do not accept his solution.

I also have a little problem in connection with Amendment No. 136, tabled in the name of the noble Lord, Lord Mackay. Again, it is a question of definition; for example, in the phrase, or eligible to be registered in an electoral register", how can one define who is eligible? I take on board all the arguments about the people who do not register for safety reasons. That is why we had such a long discussion over the question of two registers when we debated the Representation of the People Act, as mentioned by the noble Lord. That may well have solved that particular problem. However, if there are other criteria for people who do not register but are eligible, does that have be laid down? Does the electoral commission have to determine who it is? Indeed, how would the political parties know? In itself, that raises an important question.

As regards the noble Lord's point about the rolling register, the idea is that it will take a maximum of six weeks to get on the register. I cannot see that as a major problem for anyone who has not already put himself on the register. The simple way to ensure absolute transparency is to accept what the Bill says.

The noble Lord, Lord Mackay, may be a little surprised to learn that I very much support his Amendment No. 142. This relates to quite a serious problem. A person may not, through no fault of his own, be on the electoral register but may have made a will in which he donates money to a political party. That person may be seriously ill in a hospice and have missed the registration time. It would be very remiss of this Bill not to allow political parties to accept such a donation. I do not believe that the clause should be deleted, as suggested by the noble Lord, Lord Norton. The proposal put forward by the noble Lord, Lord Mackay, is a better solution.

Lord Bassam of Brighton

This has been a very wide-ranging debate. I agree with the noble Lord, Lord Mackay, that today's proceedings encapsulate a very broad range of amendments, which makes my task of trying to pull these threads together rather more difficult. Primarily, this group of amendments is concerned with the definition of a "permissible donor", as set out in Clause 49. The Neill committee conceived the concept of a "permissible source" in order to effect a workable ban on foreign donations. The Government have sought to adhere, as far as they possibly can, to the recommendation of the Neill committee as to what should constitute a permissible source.

The consideration of this particular issue makes our debate much more difficult. However, perhaps I may turn to some of the contents of the Bill. Clause 50(2) provides that any payment to a party from public funds is to be regarded as a donation from a permissible source. The term "public funds" is not presently defined in the Bill, but government Amendment No. 319A makes good that omission. The Committee will see from the definition to be inserted into Clause 150 that the term is intended to cover UK public funds; that is, payments out of the Consolidated Fund or payments by a UK government department. By putting the meaning of "public funds" in Clause 50(2) beyond doubt, there is no longer an avenue by which a party could accept payments from an institution of the European Union, other than payments covered by Clause 47(1)(c).

I turn now to the amendments to Clause 49(2)(a). In the case of individual donors, the Neill committee proposed that only those who are registered voters, or those who are eligible to register, should qualify as a permissible source. I believe that that goes to the heart of the interesting comparison of the noble Lord, Lord Mackay, between American and Canadian business people working in this country. Surely the principle is that the right to donate follows the right to vote. In those circumstances, does the noble Lord advocate giving the vote to foreign nationals resident in the UK? I suspect that he does not.

This issue was examined by the Home Affairs Select Committee in its October 1998 report on the conduct of elections. The committee unanimously came out against any such change in the franchise along those lines. It must surely be right in principle that only those who have the right to participate in the electoral process by means of voting should have the right to influence that process by financially supporting a political party—

Lord Mackay of Ardbrecknish

I accept where the noble Lord is in his argument. He is saying that someone with a right to vote in this country should be allowed to donate. I return to my Canadian friend who is working in London. He has not registered, but undoubtedly has a right to vote. Does that mean that he can in fact donate?

Lord Bassam of Brighton

The noble Lord asks a neat question, to which I shall have to find an equally neat answer. The link between the right to vote and eligibility to be a donor has the merit of providing the recipients of donations, and the electoral commission, with a practicable test for establishing whether or not a donation can be accepted.

However, it is on the latter point that the Government have considered it necessary to depart to a limited extent from the committee's recommendation and to restrict the definition of a permissible donor only to those individuals who are registered voters. Amendment No. 136 would bring the definition into line with the committee's recommendation. But it would be no easy matter for a registered party to establish whether a donor whose name did not appear on an electoral register was nevertheless entitled to register. The difficulty would be all the greater where the donor lived overseas. Under the current rules for overseas registration, a party would need to establish that the person was registered to vote on the "domestic" register anything up to 20 years previously.

Moreover, I am not convinced that any benefit would accrue as a result to offset the added complication. It seems reasonable to suppose that a person with sufficient interest in the politics of this country so as to donate more than £200 to a political party will also have taken the trouble to register to vote. This, of course, will be considerably easier with the introduction of the rolling register. In these circumstances, we do not believe that much is lost by the small departure from the Neill committee's recommendation, but there is a considerable net gain in terms of the integrity and ease of operation of the regime for the control of donations.

There would also be practical difficulties for the parties themselves in working to these amendments. It is not specified what is meant by the term, resident in the United Kingdom". There is a concept at law of being "ordinarily resident". If we assume that that is what is meant, the recipient party would have to establish in each and every case whether the donor was ordinarily resident. That would not be an easy or enviable task.

I turn to Amendment No. 135A in the name of the noble Lord, Lord Norton of Louth. He described his approach here as radical. I certainly agree with that description. I consider that it takes a battering ram to the ramparts of the Bill. Amendment No. 135A, and consequential Amendment No. 146, would take matters a step further by allowing a party to accept a donation from any individual, wheresoever resident. The noble Lord appears to want a free market, as it were, whereby one might name and shame people out of making donations because of where they are resident rather than having a system of regulation. The noble Lord clearly believes that there is a distinction to be had between donations made by individuals and those made by companies or other organisations. I can only say that this was not a distinction recognised by the Neill committee; nor is it one that the Government can accept.

Amendments Nos. 142 and 140A are concerned with bequests. I cannot commend Amendment No. 140A to the Committee as deleting Clause 49(3) would cast doubt on whether a party could accept a donation which takes the form of a bequest. However, I have rather more sympathy with Amendment No. 142. I can see that as someone gets older and frailer he or she may drop off the electoral register in their twilight years. In such circumstances the person would not be a permissible donor at the time of their death and the party named as a beneficiary of the estate in the person's will could not then accept the intended bequest.

I accept that it would be wrong to frustrate the deceased's wishes—perhaps the wishes of a whole lifetime—in such circumstances. Accordingly, I am ready to accept the spirit of that part of Amendment No. 142 which provides for a five-year period of grace. For reasons I have already explained, I am not attracted to, nor do I see the need for, the ordinary residence test in the amendment. It ought to be enough that the deceased had been registered to vote at any time in the five years before his or her death. If the noble Lord, Lord Mackay of Ardbrecknish, agrees to withdraw Amendment No. 142, we shall bring forward an acceptable provision on Report.

The noble Lord, Lord Mackay, has argued that Amendment No. 137, as with Amendment No. 136, is intended to bring Clause 49(2)(b) in line with the Neill committee's recommendation. I might first concede that the Government have departed from the committee's recommendation on that point. The Neill committee recommended that the definition of a permissible source should include companies which are incorporated in the United Kingdom. I make no bones of the fact that we might have preferred to adhere to that principle, but the Government are firmly persuaded that such a restriction would be contrary to Community law, as at least two Members of the Chamber acknowledged. People might not like that, but that is the case. We have to work within that framework.

The argument is, briefly, that companies incorporated elsewhere in the European Union must be allowed to carry on business here on the same terms as companies incorporated within the United Kingdom. If the latter are permitted to make donations, on the basis that they are entitled to seek to influence the political process in this country, so must the former be. I cannot, obviously, recommend the Committee to accept an amendment which would result in the Bill being contrary to European Union law.

Lord Shore of Stepney

How can my noble friend explain and justify that this is, as it were, a discrimination or a breach of Articles 43, 46, 48, or whatever they are, of the treaty when those concern a freedom of establishment and the right of companies outside the UK to conduct their business in the same way as ours? This is nothing to do with that and they know it. I am sure that my noble friend understands this point. All I want from him is not just acquiescence but some resolve to do something about it with his right honourable friends in the Cabinet.

6.45 p.m.

Lord Bassam of Brighton

I greatly respect the noble Lord's trenchant views on this matter. However, if we are in the European Union, we have to comply with European Union law. It is not enough simply to say that we should defy it. That does not work; we must play by the rules.

Amendment No. 137B in the name of the noble Lord, Lord Wedderburn, seeks to narrow the circumstances in which a company would qualify as a permissible donor. The noble Lord made an interesting and compelling case in one of the most interesting speeches in the debate; namely, that in order to qualify as such a donor a company would have to carry on its business wholly or mainly in the United Kingdom. The amendment does not attempt to define the criteria against which the "wholly or mainly" test is to be judged. Is the test to be based on the percentage of a company's turnover in the United Kingdom; the number of staff it employs in this country; or by some other criteria? Whatever the criteria may be, it is not a test that I can recommend to the Committee.

Lord Wedderburn of Charlton

I am most grateful to my noble friend for giving way. Does he therefore still stand by the test applied to unincorporated associations in paragraph (f) of Clause 49(2), which is that business is carried on, wholly or mainly in the United Kingdom"?

Lord Bassam of Brighton

I believe that we do. As I say, whatever the criteria may be, it is not a test that I can recommend to the Committee. In the global economy in which we live it is neither here nor there whether a company conducts more than half or less than half of its business in this country. If we adopted the amendment, many multinational British companies would no longer qualify as permissible donors. I do not have the relevant figures, but I suspect that a company such as British Petroleum—which is clearly identified as a British company, having the word "British" in its title—does not conduct its business wholly or even mainly in the United Kingdom. It cannot be right to prevent such leading blue chip companies donating to a political party in this country. It is sufficient to require—

Lord Goodhart

I am grateful to the Minister for giving way. Does he accept that multinationals would almost certainly—whatever their overall field of operation—operate in the United Kingdom, at least in part, through subsidiaries whose business was conducted wholly or mainly in the United Kingdom and which would therefore be permissible donors?

Lord Bassam of Brighton

I accept that that appears to be the case.

Lord Wedderburn of Charlton

I am sorry to interrupt my noble friend again and I am most grateful to him for giving way so often. Would it be more acceptable if the "wholly or mainly" business test were applied to those companies which fell within the provisions of paragraph (b)(ii) of Clause 49(2), rather than merely across the board? Exactly what are the sources of European law which are cited in the advice given to the Government? If my noble friend cannot answer that point immediately, I hope that he will write to me or place the information in the Library.

Lord Bassam of Brighton

I am grateful for the noble Lord's comments. With his background and understanding of these matters he has much greater experience of company law than I. I am happy to write to the noble Lord on the matter stating the position with regard to the European Union.

I turn to government Amendment No. 137A which simply replaces the words "European Union" with the words United Kingdom or another member State". The noble Lord, Lord Shore, referred to that point. This is simply a drafting point—a company will only be registered in a particular member state, not the European Union as a whole. Amendment No. 139 returns—

Lord Molyneaux of Killead

Does the Minister intend to reply to the question posed by the noble Baroness, Lady Fookes: member state of what? I am not being facetious. I hope that I do not weaken the strong case made by my noble friend Lord Shore. In Clause 49 there is no mention of the European Union. Does membership refer to NATO, the Commonwealth or the Council of Europe?

Lord Bassam of Brighton

The noble Lord anticipates the fact that I shall attempt to do justice to the noble Baroness's questions by responding to them.

Amendment No. 139 returns us to territory which we have already addressed at some length. However, as the noble Lord well knows, the Neill committee made it clear in its report that the limited extension to the definition of a permissible donor as set out in its Recommendation 29 was to apply only in relation to donations to political parties in Northern Ireland. The effect of this amendment is that any registered party could accept a donation from a citizen of the Republic of Ireland. This is clearly contrary to the general scheme in Part IV which is designed to implement our manifesto commitment to ban the foreign funding of political parties. Even if the amendment applied only to Northern Ireland parties we have reluctantly concluded that an extension to the definition of a permissible donor along these lines is impractical.

The Neill committee itself recognised that under its formula there would exist the possibility of overseas donations, for example from the United States, reaching the Republic of Ireland, where there is no ban on foreign funding, and then being re-routed to the north by an individual or via one of the parties' offices in Dublin. The committee fully acknowledged that it had not been able to devise anything that would prevent this other than statutory provisions which would arguably be incompatible with the letter and spirit of the Good Friday agreement.

In these circumstances extending the definition of a permissible source in the manner proposed by the Neill committee would in practice leave a Northern Ireland party free to accept donations from any source. In addition, if Northern Ireland parties are exempted from the requirement to disclose donations there will be no way of checking where they have come from. It seems preferable simply to acknowledge these facts and exempt, regrettably, Northern Ireland parties from the controls on foreign donations using the order-making power in Clause 65.

The purpose of Amendment No. 138 is to prevent one registered party from making donations to another registered party. The Bill adopts the concept of a "permissible donor" as a means of giving effect to the ban on foreign donations. I do not see that regarding a registered party as an impermissible source will further that objective. Given the application of the controls set out in this part of the Bill, registered political parties should in future be "clean" as regards foreign money. The exception is the possibility of a Northern Ireland party which has received foreign funding then making a donation to a party based elsewhere in the United Kingdom. This possibility will be addressed by government Amendment No. 180.

There is otherwise no particular reason why one registered party should otherwise be precluded from making a donation to another. It is possible that where particular parties share the same objectives on an issue, one of those parties may see fit to provide some financial support to the other. That is a matter for the parties concerned and their members.

Lord Mackay of Ardbrecknish

The Minister opens up a Pandora's box. He may recall that when we debated the Scotland Bill we discussed whether a party could encourage the setting up of satellite parties so that it could defeat some of the objectives of the list system. The Labour Party might separate itself from the Co-operative Party. The Labour Party would put up candidates on the first-past-the-post but not-in-the-list system. The Co-operative Party would put up candidates in the list system and between the two they would gain many more seats. I shall not debate that again. Noble Lords who heard the discussions on the issue will recall, I am sure with delight, the long discussions we had. I am happy to say that, perhaps due to those long discussions, no one contemplated doing that—despite advice from one academic that it should be considered.

The point is this. The same little trick could be done under the provisions of the Bill. A party which finds itself with pots of money but up against the limit could decide to create another political party and to give it some money in order to campaign. In that way it would have two bites at the cherry. I do not understand why the Government have made an exception for political parties to give donations to each other. I should have thought that that defeats the object of the exercise. A donor might be irritated if his money went to party A and was then slid over to party B. If we are trying to prevent underhand arrangements I suggest that the Minister looks carefully at my amendment.

Lord Bassam of Brighton

I did not hear the noble Lord's learned treatise during debate on the Scotland Bill. No doubt if I were to undertake research, I could consider carefully that argument. The points he puts before us today are interesting. We see no particular reason why one registered party should not be precluded from making a donation to another.

Lord Mackay of Ardbrecknish

I am grateful to the Minister for giving way. I am grateful that he says my points are interesting. Interesting they may be but they are questions which require answers. Has any political party ever given a donation to any other political party? If they have not, in what circumstances is it envisaged that they might? Does that justify having this provision in the Bill?

Lord Bassam of Brighton

It might occur with a coalition; or perhaps the relationship between the Co-operative Party and the Labour Party could be so described.

As I said, it is a matter for the parties concerned. It is vital to ensure that where one party provides a large amount of financial assistance to another, voters should be aware of that. The noble Lord might like to observe this point. The disclosure requirements of the Bill will ensure that that is the case. So where such a donation is made, the requirements of the Bill are transparently plain—the noble Baroness, Lady Gould, made this powerful point earlier—and are the key to ensuring that these matters are effective.

Finally, Amendment No. 140 would extend the list of permissible donors to include political parties elsewhere in the European Union. The noble Lord, Lord Beaumont, has drawn attention to the close links that exist between some political parties in this country and their counterparts on the continent. No doubt he has the Green Party in mind. It is, of course, perfectly healthy that such links are developed and the Government have sought to ensure that the ban on foreign funding of political parties does not prevent members of the United Kingdom parties participating in visits and conferences intended to foster such links. But it would be quite another thing to allow funds raised by a party in another country to be brought to bear on elections here. The noble Lord, Lord Wedderburn, made the parallel point on the position of trade unions.

The amendment of the noble Lord, Lord Beaumont, would run a large coach and horses through the proposed ban on foreign donations.

I promised an answer to the noble Baroness, Lady Fookes. The electoral register is defined in Clause 49(8). The general definition of member state is taken as referring to the European Union as respects all legislation. That is a term which is common across all legislation.

I have tried to answer as many points as possible which have arisen in the debate. I shall read Hansard carefully and, if I have missed some, I shall provide further responses in writing.

Lord Mackay of Ardbrecknish

Perhaps I may respond before my noble friend Lord Norton decides what to do. No doubt the noble Lord, Lord Beaumont, will wish to say some words on his amendment.

I do not support the amendment of my noble friend Lord Norton. It would envisage foreign donations. I have made clear that the Conservative Party accepts the recommendation; we have imposed that on ourselves voluntarily without legislation. My noble friend makes a good point. Sometimes I wonder why we do not make all donations over £5,000 open and above board. It would then be up to the parties to decide whether they wanted to take a donation from whatever source. All the other parties and the press would know where they had got it from. They wound simply have to decide whether they could justify it. The Neill committee did not suggest that and neither do I, but my noble friend, as an academic, has made a good point.

7 p.m.

Lord Bassam of Brighton

Does the noble Lord accept the point made by the noble Lord, Lord Norton of Louth? Would he prefer such a provision, or is he just postulating that as a view?

Lord Mackay of Ardbrecknish

The Minister has missed the point. I have said that we accept what the Neill committee says on the subject and have already implemented the recommendation voluntarily. In a more sensible world, without all the accusations that go to and fro, it might have been easier to adopt my noble friend's suggestion. That would certainly have made for a much simpler Bill.

Lord Bassam of Brighton

But the crucial point is whether that would have satisfied public concern. That is why, ironically, we have ended up with a slightly heavier-handed form of regulation than many of us would have desired at the outset.

Lord Mackay of Ardbrecknish

I am not sure whether it would satisfy the public. I am not sure that the public are nearly as concerned as the press about the subject. We are in danger of self-flagellating too much. There have been a few problems in politics, but the noble Lord, Lord Harris of Greenwich, did no service to any politician or political party by suggesting that there was widespread corruption. Everybody in this country knows that there is not.

Lord Harris of Greenwich

That is pure invention. I did not say that there was widespread corruption. I said that there had been a number of episodes, including a matter that I had discussed with the noble Viscount, Lord Cranborne, involving a fugitive from justice who gave stolen money to Conservative Central Office. I did not say that all British politicians were involved in such enterprises.

Lord Mackay of Ardbrecknish

Of course the noble Lord did not say that. Perhaps my memory is deceiving me, but I thought that he implied that unease about the more general problems was widespread. I do not believe that it is. We should he cautious before we do more damage to the political system in this country than has been done by any of the examples that we can all think of. I shall continue to resist naming any particular cause célèbre. The Minister has not played that game, so I shall not mention one or two people whom I could mention who might be as embarrassing to him as some of the others are to me.

I was trying to suggest that the point made by my noble friend Lord Norton of Louth might have been worth a lot more consideration, but we have gone too far down the road for that. However, when he was talking about being on the register, I wondered which register was meant. That relates to the issue of donations from European companies. Going back to the Scotland Bill, if my Italian voter comes here, he can register to vote in local government elections, but he cannot vote in parliamentary elections.

Lord Bassam of Brighton

He can also vote in European elections.

Lord Mackay of Ardbrecknish

But he cannot vote in Westminster elections. Can he donate to the campaigns of political parties for Westminster elections, for which he is not a registered elector? The Government want to stop foreign donations, but in this case they will allow donations from someone who cannot vote in Westminster elections. I have a lot to say about the importance of having the right to vote in our elections.

Lord Goodhart

Is the noble Lord suggesting that Members of your Lordships' House should not be able to donate to political parties?

Lord Mackay of Ardbrecknish

Nice point. We could make an exception for Members of your Lordships' House. Such exceptions are made in various ways to get round that problem. For example, I was allowed to vote in the election for the Scottish Parliament even though I am not allowed to vote in Westminster elections. That would not be a great problem. If your Lordships all wanted to donate vast amounts of money to political parties, I am sure that the Government would find a way to except Members of the House of Lords. It is easy to do and is well documented. However, I am grateful to the noble Lord, Lord Goodhart for pointing that out. Never trust a lawyer; that is my view.

My point is that the Italian voter would be able to contribute to the general election campaign even though he could not vote. The Government should address that problem.

Amendment No. 136 would incorporate what the Neill committee says. The noble Baroness, Lady Gould, asked who was eligible. That is easily answered, because everybody knows who is eligible. It is well defined in various Acts of Parliament. There is not a problem there. Interestingly, the Minister said that the right to donate followed the right to vote. I wrote that down very carefully this time. That is exactly what the second part of the Neill suggestion said. When the Minister checks Hansard or his notes, he will find that he said that.

Parties should not have a problem deciding. If somebody makes a donation without being on the electoral register, the party can ask whether they have a right to vote. If they do, for whatever reason, it is easy enough for the party to check that and accept the donation. That applies particularly to people who are not on the register for security reasons. Such a person would not be on any of the registers. If I remember correctly from when we passed the provision, we have two registers, but one is used only by companies for junk mail. The full register is open to public scrutiny. It is not a private document. We can all go to the local library or our electoral registration office and study the full register.

Lord Wedderburn of Charlton

There are three sorts of register and they are all defined in subsection (8).

Lord Mackay of Ardbrecknish

I look forward to reading that in a second or two. I presume that I will find the answer there.

Lord Wedderburn of Charlton

Yes, the noble Lord will find the answer. I am on an electoral register under one of those provisions; and if he has been efficient in the conduct of his affairs, he should be also.

Lord Mackay of Ardbrecknish

I am grateful to the noble Lord. I was about to say some nice things about him! It would be wise to follow the Neill committee on the issue. The Government should reconsider their view.

Amendment No. 137A refers to member states of the European Union. I am puzzled as to why the words "another member state" should not have "of the European Union" added to them. I am not sure that I was given an answer. Perhaps I missed it and I shall find out when I read Hansard. We shall have to look at that.

I am not as suspicious of the European Union as the noble Lord, Lord Shore of Stepney, but I am amazed that a provision of our electoral law could be overridden by treaties that we have made and obligations that we have entered into about the ability to trade and conduct business. I do not understand that. Does the Minister believe that anybody would go to the European Court to challenge our right to adopt the policy that we are suggesting? If they did, frankly I should wonder what their motives were. I should wonder why they wanted to give money to a British political party and were prepared to go to court in order to do so. It is not as easy to get money out of people who are legitimate donors—

Lord Bassam of Brighton

I thought that the noble Lord was rather good at that.

Lord Mackay of Ardbrecknish

I believe that there is a huge difference between having a free trade area and ensuring that companies are on a level playing field when it comes to business and trade—I have no problem with that—and saying that we cannot define who can or cannot pay into our own United Kingdom parties.

Although I prefer my amendment, I rather hoped that we would have a more sympathetic response to the amendment of the noble Lord, Lord Wedderburn. I believe that it attempted to bridge the gap between the Minister and myself. Therefore, I was not very happy about that answer.

With regard to Amendment No. 138, which concerns political parties, I am as bemused as I was when I intervened on a number of occasions to try to elicit a response from the Minister. Perhaps between now and Report he can try to find examples of where political parties have given money to each other.

In the case of seats which are safely held by one or other great party but where the third or fourth party is having severe difficulty in obtaining money to get its candidate round and a danger exists that its vote might migrate to the challenger, there are always unconfirmed stories that money has been slipped across in order to allow the player in last position to make an effort at electioneering. I say "stories", of course. I do not believe that that type of practice would ever be carried out by any of our great parties, and I shall not embarrass the person about whom the story was told. It centred around the need to obtain for him a small second-hand car rather than a bicycle in order that he could travel around the large rural constituency. I shall draw a veil over where that occurred.

However, I am suspicious about the idea that political parties will be so philanthropic that they will give money to each other. The noble Lord will have to provide a better answer next time.

We have discussed Amendment No. 139, which relates to the Republic of Ireland. I noticed that the Minister said that "regrettably" they would have to exempt Northern Irish parties from the regulations. They do not have to regret it: they do not have to do it. However, that is another matter. I stand by the arguments that I made. I have no problem with citizens who live in the Republic donating to British political parties because, as I said, many of them come in and out of this country at various stages in their life, and that would seem to solve the Northern Ireland problem.

I end on an agreeable note. I am pleased to hear the noble Lord accept the spirit of my amendment about wills. I am sure that the noble Baroness, Lady Gould, and I are very pleased to hear that. Of course, I accept that I could not possibly draft amendments as ably as his officials, and I look forward to seeing his amendment on this issue on Report.

Lord Norton of Louth

This has been a wide-ranging and somewhat disparate discussion. On that, I rather agree with the point made by the noble Lord, Lord Shore. I believe that there may have been a case for decoupling some of the amendments. That would have given the Government time to reply in more detail to some of the points. None the less, I believe that the discussion has covered a range of important issues relating to Clause 49.

As the noble Lord, Lord Goodhart, touched upon earlier, that clause seeks to give effect to a principle. However, the more the Bill seeks to put the principle into practice, the more we see the problem. Indeed, in saying that he would not go along with my amendment, and the more that he identified problems, the more my noble friend Lord Mackay seemed to make the case advanced by the amendment.

Arguably, the point that I made earlier is that the restriction in Clause 49(2)(a) is unnecessary—in part, I believe, for the reasons given by the noble Lord, Lord Goodhart. I believe that parties are getting their acts together and the noble Lord touched upon examples. I believe that changes are taking place because of public exposure and not because of the impending passage of this Bill. Therefore, I believe that we should pursue the path of transparency and not the path of this cumbersome and bureaucratic measure.

I shall respond briefly to two points put to me by the noble Baroness, Lady Gould. I believe that both points were perfectly fair. She is quite right with regard to my Amendment No. 140A, and I believe that Amendment No. 142 moved by my noble friend Lord Mackay is preferable. The Minister has already indicated movement in that direction. Therefore, I have no intention of moving Amendment No. 140A. I am quite content to go along with what is being proposed.

I believe that the point raised by the noble Baroness in relation to the phrase "wheresoever resident" and the problem of accommodation addresses is perfectly fair. There is an inherent problem in that, as there is with regard to the accommodation addresses of trading companies. One may be able to track them down, but I concede that there is an inherent problem. However, given all the problems associated with this clause, I believe that the amendment is preferable. My amendment addresses Clause 49(2)(a), but I believe that the discussion that we have had this afternoon has thrown up a raft of problems in relation to the whole clause. The Minister referred to my amendment as a "battering ram", and I believe that that is a perfectly fair description. It is being levelled against increasingly weak battlements.

Given the problems, we shall have to return to the clause at a later stage when the Government have had time to reflect further on it. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Mackay of Ardbrecknish moved Amendment No. 136: Page 29, line 32, at end insert ("or eligible to be registered in an electoral register").

The noble Lord said: As this issue relates to a recommendation of the Neill committee, I should like to test the opinion of the House.

7.16 p.m.

On Question, Whether the said amendment (No. 136) shall be agreed to?

Their Lordships divided: Contents, 55; Not-Contents, 103.

Division No. 1
Astor, V. Cox, B.
Astor of Hever, L. Craigavon, V.
Attlee, E. Crickhowell, L.
Baker of Dorking, L. Darcy de Knayth, B.
Beaumont of Whitley, L. Denham, L.
Blatch, B. Dixon-Smith, L.
Boardman, L. Fookes, B.
Brookeborough, V. Forsyth of Drumlean, L.
Brougham and Vaux, L. Gilmour of Craigmillar, L.
Burnham, L. [Teller] Glenarthur, L.
Buscombe, B. Glentoran, L.
Byford, B. Hayhoe, L.
Clark of Kempston, L. Henley, L.[Teller]
Colwyn, L. Higgins, L.
Cope of Berkeley, L. Hodgson of Astley Abbotts, L
Hooper, B. Norton of Louth, L.
James of Holland Park, B. Park of Monmouth, B.
Lamont of Lerwick, L. Patten, L.
Lyell, L. Prior, L.
Mackay of Ardbrecknish, L. Rawlings, B.
Marsh, L. Rees, L.
Miller of Hendon, B. Renton, L.
Roberts of Conwy, L.
Molyneaux of Killead, L. Seccombe, B.
Moynihan, L. Skelmersdale, L.
Murton of Lindisfarne, L. Strathclyde, L.
Northbrook, L. Thomas of Gwydir, L.
Northesk, E. Vivian, L.
Acton, L. Hughes of Woodside, L.
Addington, L. Hunt of Kings Heath, L.
Ahmed, L. Jay of Paddington, B. (Lord Privy Seat)
Alli, L.
Amos, B. Jeger, B.
Andrews, B. Jenkins of Putney, L.
Archer of Sandwell, L. Judd, L.
Ashley of Stoke, L. Layard, L.
Ashton of Upholland, B. Lea of Crondall, L.
Bach, L. [Teller] Lipsey, L.
Barker, B. Macdonald of Tradeston, L.
Bassam of Brighton, L. McIntosh of Haringey, L.
Bernstein of Craigweil, L. McIntosh of Hudnall, B.
Blackstone, B. MacKenzie of Culkein, L.
Bragg, L. McNally, L.
Brennan, L. Maddock, B.
Brett, L. Mallalieu, B.
Brooke of Alverthorpe, L. Massey of Darwen, B.
Brookman, L. Miller of Chilthorne Domer, B
Burlison, L. Molloy, L.
Carter, L.[Teller] Morris of Manchester, L.
Chandos, V. Nicol, B.
Christopher, L. O'Neill of Bengarve, B.
Clarke of Hampstead, L. Pitkeathley, B.
Crawley, B. Prys-Davies, L.
Currie of Marylebone, L. Puttnam, L.
Davies of Oldham, L. Rendell of Babergh, B.
Desai, L. Rennard, L.
Donoughue, L. Sainsbury of Turville, L.
Dormand of Easington, L. Sawyer, L.
Dubs, L. Scotland of Asthal, B.
Eatwell, L. Scott of Needham Market, B.
Evans of Watford, L. Shepherd, L.
Farrington of Ribbleton, B. Shutt of Greetland, L.
Faulkner of Worcester, L. Simon, V.
Filkin, L. Stoddart of Swindon, L.
Gale, B. Strabolgi, L.
Geraint, L. Symons of Vernham Dean, B.
Gibson of Market Rasen, B. Thomas of Walliswood, B.
Goldsmith, L. Tomlinson, L.
Goodhart, L. Tordoff, L.
Gould of Potternewton, B. Turner of Camden, B.
Grabiner, L. Walker of Doncaster, L.
Graham of Edmonton, L. Warner, L.
Grenfell, L. Warwick of Undercliffe, B.
Harris of Greenwich, L. Wedderburn of Charlton, L.
Harrison, L. Whitaker, B.
Hayman, B. Whitty, L.
Hollis of Heigham, B. Wilkins, B.
Howells of St. Davids, B. Winston, L.
Howie of Troon, L. Woolmer of Leeds, L.
Hoyle, L. Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

7.25 p.m.

[Amendment No. 137 not moved.]

Lord Bassam of Brighton moved Amendment No. 137A: Page 29, line 36, leave out ("European Union") and insert ("United Kingdom or another member State").

On Question, amendment agreed to.

[Amendments Nos. 137E and 138 not moved.]

Lord Bach

This may be a convenient moment at which to adjourn the Committee stage. I suggest that the Committee stage begins again at 8.30 p.m.

[The Sitting was suspended from 7.26 to 8.30 p.m.]

Lord Bach moved Amendment No. 138A: Page 29, line 41, at end insert— ("(da) a building society (within the meaning of the Building Societies Act 1986); (db) a limited liability partnership registered under the Limited Liability Partnerships Act 2000, or any corresponding enactment in force in Northern Ireland, which carries on business in the United Kingdom;").

The noble Lord said: Although long in number, this group of amendments deals with a comparatively short point. In moving Amendment No. 138A, I shall speak also to the other amendments in this group.

The amendments respond to representations that the Government have received from the Building Societies Association. As Clause 49(2) currently stands—we discussed this clause at some length before the adjournment—a building society could not be a permissible donor to a political party. The association has argued that it would be inappropriate to exclude building societies from the list of permissible donors when companies, friendly societies and others are included in the list and therefore able to make donations. We agree. Accordingly, Amendment No. 138A seeks to add building societies incorporated under the Building Societies Act 1986 to the list of permissible donors. Whether a building society chooses to make a donation to a political party is entirely a matter for the society concerned.

Amendment No. 138A also adds limited liability partnerships, or LLPs, to the categories of permissible donor. The Committee will be aware that earlier this Session the House passed what is now the Limited Liability Partnerships Act 2000. That Act creates a new form of legal entity, the limited liability partnership, which will be a body corporate and exist as a legal person separate from its members. This new legal status and the limited liability that goes with it will be attractive to firms of solicitors, accountants and other professions which currently operate as partnerships or, in some cases, as companies. In their current guise, those firms would come within the definition of a permissible donor. It is right that they should continue to be able to make donations to political parties in the event that they changed their legal status to that of an LLP.

Where a building society or LLP has made a recordable donation to a registered party, Amendment No. 168B to paragraph 2 of Schedule 5 sets out the information about the donor that the party concerned must submit to the electoral commission. Having established building societies and LLPs as permissible donors, it is appropriate that they should also be able to become recognised third parties in an election campaign or a permitted participant in a referendum campaign. Accordingly, Amendments Nos. 210A and 231A make the necessary changes to Clauses 83 and 100 respectively to enable them to do so.

As a result of the last two named amendments, the categories of recognised third parties and permitted participants will exactly mirror the categories of permissible donor, save in one important respect. This one exception relates to individuals. Under Clause 49(2)(a) only a person registered to vote may be a permissible donor. In Clauses 83 and 100 we have not sought to prevent foreign nationals resident in the United Kingdom, who are ineligible to vote, from spending money in their own name in order to express their opinion and by extension influence the outcome of an election or referendum. It is one thing to prevent a foreign national donating money to a political party to help further that party's political objectives, but we believe that it is quite another to place absolute or disproportionate restrictions on the ability of a person to publicise his or her own views.

Amendments Nos. 210C and 232F would amend Clauses 83(3) and 101(4) respectively in order to clarify the information that must be provided to the electoral commission by a body wishing to become a recognised third party or permitted participant. The other amendments in this group are of a minor, technical or drafting nature. I beg to move.

Viscount Astor

I have a few questions for the Minister. Perhaps I may start with building societies. I understand that his amendment would make a building society a permissible donor. Under the rules, if a company wishes to give money to a political party, it will have to obtain shareholder permission. Indeed, under existing rules, that has to be put in the company's accounts. How will that proposal work with a building society? What is the analogy? A building society does not have shareholders but depositors, all of whom are, in effect, part of the building society. What will happen? Will the building society be able to give political donations whether they want to or not? Will they have to ask permission of all depositors or will a decision be made by the board, which would be rather different from the position in relation to the rules regarding companies?

Under the proposed system, a board of a company cannot arbitrarily say that it wishes to give money to one party or another. There has to be a form of shareholder approval for political donations. Perhaps the Minister could enlighten the Committee on building societies and how the Government's proposal will work.

Amendment No. 138A would allow limited liability partnerships to make political donations. I am not an expert on the law relating to partnerships. I rather hope that the Minister is. Indeed, I am sure that in his prior incarnation he knew much about limited liability partnerships, and I look forward to his reply. The amendment concerns limited liability partnerships. What about partnerships which are not limited? I refer, for example, to veterinary practices or even, indeed, firms of solicitors. Will they be bound by the rules relating to individuals or the rules relating to partnerships? Who will decide? Will non-limited liability partnerships be allowed to make donations? If so, what provision will they fall under? Perhaps the Minister could enlighten the Committee on those two important points.

I turn to the final point made by the Minister: foreign donations. I am sure that the Minister explained this matter clearly. I tried to follow the thrust of what he said, but I have slight reservations about it. However, I shall carefully study Hansard. If I have any questions on the point after having done so, perhaps I may write to the Minister, rather than have a discussion now. I should be grateful for his reply on building societies and non-limited liability partnerships.

Lord Hodgson of Astley Abbotts

I have to declare an interest as a director of a building society. This is something that has arisen at our board meetings and I shall be interested to hear the Minister's response.

We are a mutual society in the urban West Midlands. I find it hard to conceive of circumstances in which we would wish to make donations to a political party, bearing in mind our mutual nature and the fact that we regard ourselves as the "safeguarder" of people's savings and, for most people, probably the most important single transaction in their lives: the purchase of their home. It is important that we have clear guidance as to how the provision will operate and how mutual societies will be able to ensure that the wishes of their members, which will cover the entire political spectrum, are properly complied with.

Lord Bach

Extremely apposite questions have been posed to me by noble Lords opposite. Of course the noble Viscount, Lord Astor, may write to me at any time regarding any of the matters in this Bill.

This amendment was tabled as a direct consequence of representations received from the Building Societies Association. It may be that the noble Lord, Lord Hodgson, is right; it is not easy to conceive of circumstances when a building society would wish to donate to a political party. But one never knows.

In response to the specific question posed to me I can say that building societies will not have to seek the authorisation of their members if they wish to make a donation to a political party. That is apparently the current position and it will not be changed by this legislation. So it will be the kind of board on which the noble Lord, Lord Hodgson, sits—no doubt with great distinction—which will make that decision.

In relation to partnerships, the people who may be attracted to the new limited liability partnership in order to gain limited liability may be firms of solicitors, accountants and other professionals. If they were a non-limited partnership, they would have been an unincorporated association and would thus come within the purview of Clause 49 anyway. Those that have limited liability as a consequence of changing their status will be companies and therefore will be subject to Part IX in any event. I hope that that answers the noble Viscount's questions. Those that become limited liability partnerships, in their previous existence would have been able to donate to political parties if they so wished.

Viscount Astor

I am grateful to the Minister for that explanation and he cleared up the questions relating to partnerships.

However, I am somewhat concerned about his reply in relation to building societies. We know that companies may wish to give to a political party because they wish that party to promote policies that enhance their shareholder value, in the same way as a trade union might give money to a political party so that the party enhances policies that will be helpful to its members. But building societies have a limited range of activities. They look after money and lend it for housing. I am sure that not many give large sums to political parties, though I do not profess to be an expert on building societies.

It strikes me as odd that we will allow a building society—some have vast assets, running into billions of pounds—to give money to political parties on the say so of a majority of the board, whereas a company will not be allowed to do so. An anomaly appears to exist in that regard and it is something that both we and the Government might consider before Report stage. There could be a limit set or rules introduced within which they must work. But it seems strange that we are exempting a whole group of wealthy institutions from the rules by which normal companies and limited partnerships must abide. That is something that we shall have to consider before the next stage of the Bill.

Lord Bach

Perhaps I can make it clear that everything depends on the rules of the individual building society. Some will be at liberty to consult their members. But as has been said, they may receive a very mixed response to such consultation. In the end they may find themselves giving donations to all political parties, including some minor ones.

On Question, amendment agreed to.

8.45 p.m.

Lord Bach moved Amendment No. 138B: Page 30, line 3, leave out ("other unincorporated association of two or more persons") and insert ("unincorporated association of two or more persons which does not fall within any of the preceding paragraphs but").

On Question, amendment agreed to.

[Amendments Nos. 139, 140, and 140A not moved.]

[Amendment No. 141 had been withdrawn from the Marshalled List.]

[Amendment No. 142 not moved.]

Viscount Astor moved Amendment No. 143: Page 30, line 9, leave out subsections (4) to (7).

The noble Viscount said: Amendment No. 143 seeks to eliminate regulations applying to a former donor. This is perhaps a small amendment and I shall not detain the Committee long.

What is laid down in subsections (4) to (7) is yet another piece of "excessive bureaucracy" dreamt up somewhere in the Home Office—I shall not say which part. In addition, I note that a criminal offence is created for failure to comply with that bureaucracy. Can the Minister justify to the Committee such a system being put in place?

The remaining amendments are more significant; they relate to trusts. Trusts are an important issue. We all know about the so-called "blind" trusts with supposedly anonymous donors such as were used to fund the Leader of the Opposition's office in the last Parliament. They were quite rightly rejected by the Neill committee in Recommendation 21.

The original version of the Bill banned political parties from receiving donations from any trust. But that perhaps is not right. The Neill committee specifically recommended in Recommendation 22 that open trusts should be allowed. Recommendation 26 makes clear that trusts based in the United Kingdom should be allowed to donate to political parties.

I recognise that, after concerns were raised by my right honourable friends in another place, the Government tabled amendments to improve the situation. But they have not gone far enough. In Clause 50(5) the Government only want to allow donations from trusts if the person who donated the money to the trust is a permissible donor or if the trust was set up by a bequest and the person making the bequest was actually registered in an electoral register at the time of his/her death.

We believe that that is a narrow approach. It takes no account of trusts set up before the new rules come into force. What would happen to money from a trust set up by a woman as recently as 90 years ago, when women were still not even allowed to vote and therefore could not even be on an electoral register? What would happen to money placed in a trust under the terms of a will when it was perfectly possible to prove the identity of the donor but impossible to prove that he or she had been registered to vote at the time of death because the registers are no longer available?

In adopting this narrow approach the Government cannot have considered these scenarios. We are not talking about "blind trusts" or about dodgy donations. I do not believe that the Neill committee can have intended to prohibit political parties from benefiting from such trusts. In taking such a course the Government are riding roughshod over the wishes of the people who have established trusts in their wills, or indeed many years ago, and who could never have been aware of this legislation or even thought of it. The Bill as drafted is unfair and I urge the Minister to reconsider it.

I am also advised—I am not a trust lawyer but can no doubt rely on expert advise from the Government Front Bench—that the Bill as presently drafted contains fundamental errors of law in relation to trusts. I am advised that in law there is no such thing as a "blind trust", as all beneficiaries of trusts are supposed to know who is giving money to the trust. Only if the beneficiary specifically waives this right to know can the trust be called "blind" in any sense.

Perhaps the Minister can advise me whether it would be simple to scrap the current wording of Clause 50(5) and replace it with a prohibition on donations from trusts where the beneficiary has waived his right to know the identity of those whose money is in the trust. Would that not be a better way of doing things?

I am not a lawyer but I hope that the Minister, having had legal advice, will assure me that Clause 50 as it presently stands has been written or approved by experts in trust law. I am sure he has such facilities available. I hope that the clause has been examined carefully and, if not, the Minister will reassure the Committee that he will do so. I beg to move.

The Deputy Chairman of Committees (Lord Lyell)

I must advise the Committee that if Amendment No. 143 is agreed to I shall not be able to call Amendments Nos. 144, 145 and 146.

Lord Rennard

I rise to speak to Amendment No. 146A. It is concerned with the rights of political parties to receive money from trusts. It is entirely consistent with the principles of the Bill. It is quite possible that someone perfectly entitled to donate to a party has in the past decided to do so via a trust. Often a person has done that in his will so that a trust fund makes disbursements to a party after his death.

Clause 50(5) makes it plain that it is acceptable for a party to receive such funds provided that the donation or bequest to the trust was made by someone who was a permissible donor at the time. But for trusts established many years ago, it is now impossible in some cases to prove that the donor would have been a permissible donor. His desire to donate or leave money to a party in his will should not necessarily be frustrated.

For example, a trust fund was established by Sir Arthur Robotham, who was Liberal Mayor of Stockport in 1915. He was a great philanthropist who supported many worthy causes. When he died, he left a trust for the maintenance of Liberalism in Stockport. It was his will that the money he left would continue to support the work of his party in that area. It is clear from the Bill that it is permissible for the Liberal Democrats to receive money from this trust provided it can be shown that Sir Arthur was a permissible donor. In his case, that may or may not be possible.

However, the wishes of donors in the early part of the century to leave money to a trust for the benefit of a political party should not be frustrated simply because of a technicality that printed copies of the electoral register did not exist for this period. I am sure that that is not the Government's intention.

It would be particularly unfair to women who were excluded from the electoral register in the earlier part of the century for the very reason that they were not entitled to vote, but they sometimes gave or left money to a party via a trust. Their wishes should be respected. Therefore a donation from a trust should be permissible.

However, I accept that there are a couple of issues related to the amendment which the Government will need to address in order to ensure that the principles of the Bill are consistently maintained. First, I do not believe that it is appropriate that overseas trusts, or trusts created outwith UK legislation, should be afforded such protection. Foreign donations are specifically prohibited in the Bill. Secondly, I accept that it may be possible that a trust may have been recently established for the purposes of subverting the legislation. This seems to me unlikely since any money up to now could simply have been handed over. But that is a possibility.

I accept the argument that recently established trusts—say, since the publication of the Government's White Paper on the issue or perhaps during the past five years—should be excluded. We should not now change the rules on donations to parties in order to prevent parties benefiting legitimately from trust funds established in the UK some time ago, because that would unfairly frustrate the wishes of those who gave money in that way.

Lord Bassam of Brighton

This group of amendments is concerned with donations made through the agency of another person. I was surprised to see Amendment No. 143 because I could not think why anyone should want to table it. The amendment would remove what I should have though were self-evidently necessary components of the scheme. The Neill committee thought so and in paragraphs 4.63 and 4.66 noted that a wealthy individual might evade the disclosure requirements simply by persuading a number of relatives to make separate donations on his behalf.

Alternatively, large donations might be made to a front organisation, which would in turn make a single consolidated donation on behalf of the individual donors, thus ensuring their anonymity. Such arrangements would not only offer scope for the evasion of disclosure but also for the evasion of restrictions on foreign donations.

The Neill committee therefore recommended (Recommendation 19) that any person or organisation transmitting to a political party any consolidated donation which consists of contributions received from two or more persons should be required to supply a list of any individual donations received which are at or above the disclosed threshold. Subsections (4) to (7) give effect precisely to that recommendation. They are good provisions, ensuring transparency and shoring up the overall scheme of the Bill. I could not advise the Committee under any circumstances to remove the provisions.

But from this point onwards I can be more helpful and conciliatory. The remaining amendments in the group are concerned with donations made by trusts, whether established in a person's will or in his lifetime.

The amendment tabled by the Liberal Democrats deals with both matters and the four tabled by the Official Opposition deal with them separately. These various amendments are much to the same end and as currently drafted would have an overlapping effect.

If only for that reason, they cannot all be accepted. Nor at this stage would I care to choose between them. I can, however, give a commitment that the Government are sensitive to the points made in favour of the amendments. There is not a great deal with which I can disagree. We will consider the issue further with a firm view to bringing forward government amendments on Report.

There is, plainly, an issue about whether it is right to prevent parties from continuing to receive benefit from trusts which may have been established many years ago. Our attention has been drawn to the difficulty which may be encountered in determining whether the person who established the trust was a permissible donor. Clearly, if it was an aged widow back in the Victorian times she would not have been a permissible donor. She would not even have been on the electoral register and there is no way in which we can reach a hand into the grave to find out. In any event, we accept that to find out whether or not they are permissible would be very difficult; indeed, it would be an impossible task. Therefore, there is an issue which merits careful attention.

In undertaking to consider the matter further, I should point out some of the considerations in our minds. All of the amendments before the Committee would create a cut-off point. In the case of trusts established before that date, it would not be necessary to establish that the settlor (as I believe he is called) was a permissible donor; for trusts established after the date, it would be. Basically, we are sympathetic to that approach. However, when the Bill returns to the House I reserve the right to propose that the cut-off date should be earlier than proposed in the present amendments, although obviously I am open to suggestions on the matter. I ask noble Lords to write to me or contact my officials so that we can be as accommodating and practical as possible.

As far as concerns the Liberal Democrats, the proposition is put on the basis of having to go back many years to establish whether the person who provided the funds is a permissible donor. It is a different matter if trusts have been established in more recent years and the difficulty of tracking back is not so apparent. Foreign funding has already been an issue in public life.

We also want to ensure that, as the Neill report recommends, parties do not receive money from blind trusts at least in the future, or whatever period is exempted from the normal restrictions. As the Bill stands, it affords no possibility of money being received from blind trusts. Thus, Amendment No. 149 is unnecessary and, taken on its own, redundant. However, I agree that these points need to be watched carefully if other amendments are made to Clauses 49 or 50. I trust that, on the basis of my comments, the noble Viscount is able to withdraw his amendment.

9 p.m.

Viscount Astor

I do not know whether the noble Lord, Lord Rennard, wishes to speak before I respond to my amendment.

I am grateful for the Minister's reply. I appear to have discovered a deep vein in the Liberal Democrat Benches. Obviously, there are some very old trusts, perhaps left over from the Lloyd George era, which still put pennies, pounds or perhaps even tens of pounds, into the coffers. Far be it from me, or even the Minister, to deny the Liberal Democrats that important funding that has been trickling down for many years. That funding has probably trickled down from some of the ancestors of noble Lords who sit in this place. I am sure that we are all delighted to help them.

As to the cut-off date, I do not know for how long electoral registers are held. Can one find them in county libraries? Is there a statutory rule that they are kept? I do not know the answer to that question, but perhaps it is a matter that the Minister will take into consideration—I do not require an answer now—when he considers the date. Councils may or may not keep everything. I am grateful for the enormously helpful response of the Minister. We look forward to seeing his proposals at the next stage. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Mackay of Ardbrecknish moved Amendment No. 144: Page 30, line 15, leave out ("not less") and insert ("more").

The noble Lord said: In moving Amendment No. 144, I should like to speak also to a number of other amendments, all of which deal with the same problem. I hope that in this case the Minister's brief says "Accept". Although it is not a very important matter, in a way it has significance.

I deal with the first amendment. The existing provision reads: for the purposes of this Part each individual contribution by a person falling within paragraph (a) or (b) of not less than £200". That is repeated in other places. One then sees a reference to £5,000, which is to be reported to the electoral commissioner. Again, the wording is "not less than £5,000".

When I go shopping I do not like to receive change of a penny. Lady Mackay would probably say that I do not like going shopping—full stop. I referred to this matter at Second Reading. Although it is a serious point, it is slightly amusing. All of us have seen items in shops marked £9.99 or £99.99. It is not a tribute to mathematics teaching; rather, it is a poor reflection on it. Clearly, we have not taught children to round up. Consequently, they do not realise that £9.99 is really £10 and £99.99 is £100.

The wording "not less than £200" means that any donation of £200 or above falls within the scope of the Bill. It also means that when donations are reported any amount of £5,000 and above must be reported. Following the trail of the noble and learned Lord, Lord Simon of Glaisdale, "more than" saves a couple of words. As this expression appears a number of times in the Bill, it adds up to quite a saving of words. It may reduce the Bill perhaps by only half a page, but every half-page counts.

The more important point for all parties is that someone may want to give some money but does not see why it should be made public. If he signs a cheque for £5,000, fine; it is not reported. If he signs a cheque for any amount above £5,000, it will be reported. To be realistic, I do not believe that his donation would be £5,001; perhaps it would be £5,100. People who can afford to give £5,000 will not make a distinction between that and £5,001. I believe that the next step would be a little above £5,000; and the same would apply to £200.

I believe that those who want to maintain their privacy should be allowed to write a cheque for £5,000 instead of £4,999.99. It is so much easier to say that the sum should be "up to and including £5,000", except that I do not suggest that it should be expressed in the Bill in that way; otherwise, it would require more words and so infringe my principles. I believe that it would be easier for all of us if we said that someone could sign a cheque for £200 or £5,000. There would then be no hassle. It is daft to invite us to indulge in amounts such as £199.99 and £4,999.99. I do hope the Minister's brief says "Accept". If that word does not appear on it, may I suggest to Ministers that I do not think the world will fall in on the Home Office if they ignore "Reject", if that is what is written on it?

Lord McNally

If it helps the Minister come to a decision, we on the Liberal Democrat Benches support the amendment.

Lord Hodgson of Astley Abbotts

My noble friend has an important point here. Nowadays the buzz word is making things "accessible". Arts must be accessible; literature must be accessible; our political system should be accessible. By accessible I think we mean comprehensible.

This piece of legislation, as we discussed the other night, will drive down into the very roots of our democracy at the humblest constituency level. People who carry the flag for our various parties at constituency level often do so in the face of insurmountable odds. They deserve our encouragement. They are volunteers; they are not lawyers. We owe it to them to make their task as comprehensible and easy as possible.

The use of the words "not less than" as opposed to "more" is Whitehallspeak. There is only £2 in it. It is easier for the everyday political supporter in the constituency to understand the word "more" rather than "not less than". We should use everyday language wherever we can to make our deliberations and our results as easily comprehensible as possible. I cannot for the life of me see why we cannot have this amendment now.

Lord Bach

It is a relief to turn from some of the important and controversial issues we have discussed to what I think even the noble Lord, Lord Mackay, would concede is the slightly less vexed question of whether the Bill requires the disclosure of donations of "more than £5,000" or "£5,000 and above". We were warned at Second Reading that the noble Lord had a bee in his bonnet about this issue. I am afraid we still see some difficulty with it. There is one real difficulty. I shall now tell the noble Lord the difficulty that is not so real.

He divided the Committee a few minutes before dinner tonight on the basis that the Government were not adopting the Neill proposals. I want to remind the noble Lord of what the noble Lord, Lord Neill, and his committee said about that. I particularly want to remind the noble Lord, Lord Goodhart, of what was said. He probably does not need reminding as he may have been responsible for the wording I am about to outline.

The Bill simply follows the formula used by Neil, which recommended the disclosure of donations of £5,000 or more. I give way.

Lord Goodhart

I am grateful to the Minister for giving way. I have to say that had this point been considered by the Neill committee in this degree of detail, I am by no means sure that we would not have agreed with the proposals of this amendment.

Lord Bach

I was going to ask the noble Lord whether that was a majority view or one that the whole Neill committee agreed. If the noble Lord can divide on this issue when we go against Neill, I wonder whether we can do the same when we go with Neill. I do not consider that a particularly serious argument in this context.

There is a problem with the noble Lord's amendments, particularly Amendments Nos. 144, 145, 184, 185, 219, 220, 240 and 241. There is a problem with those amendments in that the provisions with which they are concerned derive from the de minimis limit fixed by Clause 47(2)(b). It is not proposed in these amendments to amend the latter. As a consequence, the amendments to which I have just referred will be flawed.

What I suggest is—I hope the noble Lord is agreeable to this—that we take the matter away, look at it again—no promises—and we will meet again at Report.

Lord Mackay of Ardbrecknish

I am grateful for the support of the Liberal Democrats. I do not want in any way to annoy the noble Lord, Lord Goodhart, after his support by saying that perhaps there were not any nit-picking mathematicians on the Neill committee. But I am afraid that nothing annoys me more than this obsession with phrasing things the way they are phrased here and ending up in the kind of position I have explained. I have made my point. I fully accept that perhaps all my amendments are not quite right, but I hope the Government think carefully about the matter. It would be a sensible way to deal with it and would make life easier for all our parties. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 145 and 146 not moved.]

Clause 49, as amended, agreed to.

[Amendment No. 146A not moved.]

9.15 p.m.

Lord Mackay of Ardbrecknish moved Amendment No. 146B: After Clause 49, insert the following new clause—


(" .—(1) The Commission shall keep and make available in electronic form to all registered parties a national register (in this Act referred to as "the national register") of all individuals for the time being registered in an electoral register.

(2) Any donation received by a registered party shall be regarded as being received from a permissible donor if it was received from an individual appearing in the national register at the time of its receipt by the party, whether or not that individual was registered in an electoral register at the time the donation was received by the party.

(3) Any donation received by a registered party shall be regarded as being received from a permissible donor if it was received from an individual registered in an electoral register at the time of its receipt by the party, whether or not that individual appeared in the national register at the time the donation was received by the party.

(4) In this section, the term "electoral register" has the same meaning as in Section 49.").

The noble Lord said: Amendment No. 146B seeks to insert a new clause into the Bill. That goes against my principle of trying to slim down the Bill, but there you are! Consistency is not the hallmark of politicians.

I should first apologise to the Committee and to Ministers for having tabled this amendment only a few days ago. However, as I hope to be able to explain, the amendment comes about only because of recent developments. We discussed, albeit very briefly, the £200 limit. The Bill will require all political parties to verify that all donations of £200 or more come from permissible sources. As I have explained on other occasions, that will place a heavy burden on all parties, especially on the central organisations. That will particularly be so in the case of donations from individuals. As drafted, the Bill will require political parties to verify that the individual donor actually appears on an electoral register.

That might sound simple enough, but it is not. There are literally hundreds of electoral registers throughout the country. They are held by individual registration officers across the whole of the United Kingdom. I shudder to think how many individual registers there are. But what will happen if a donor knows he is registered, but cannot remember which register his details are on, or the name of the council that holds it? Checking each register every time will be a massive task. I could direct my party's treasurer, if I was going to give the party lots of money, to the constituency register I am on, but he would then have to delve into which register inside the constituency would lead him to my street.

The Conservative Party raised this issue with the Home Office in June. Our nominating officer wrote to the Home Office on 28th June and asked, what plans there are to provide parties both locally and nationally with a central, collated and up-to-date version of the electoral register". He continued: In our view, this would aid both the smooth running of the new system and ensure that no impermissible donations from individuals were accepted. This is especially important given the Home Secretary's stated aim of implementing the rolling electoral register in February 2001, which will add to the administrative complexities of ensuring that donors are registered to vote". A Home Office official responded quite positively on 11th August, saying: You asked about progress towards a national electoral register. The Home Office and the Association of Electoral Administrators commissioned … a study into the issues of a consolidated electoral register … I will keep you in touch with developments".

That was a reassuring statement and further developments were awaited. But there have been further developments in recent days because it appears that the Labour Party has also been concerned about this problem, a problem which will arise if no central register is available to us. The Labour Party has written to the Home Office as well. In a reply dated 3rd October from the Home Office to the Director of Finance at the Labour Party, Mr Neil Bendle, which was copied to officials in Conservative Central Office, and, I presume, officials in the Liberal Democrat Party, the same Home Office official wrote: The simplest solution would be some form of 'on line' access so that parties and the Electoral Commission could check whether a donor was on a register when the donation was made".

That is fair enough. That is what our nominating officer was getting at in his letter of 28th June. But the Home Office official's letter of last week revealed: The aim would be to have such a system in place for next October". But the restrictions on donations will come into force at the beginning of next year, some eight or nine months before then. The letter concludes by saying: Alternatively parties could check directly with the registration officer whether someone was on the register at a particular time but clearly whether any such arrangement was feasible would depend on the volume of calls. Or we try to consolidate the registers and issue parties with perhaps a CD Rom with the data on it and regular up-dates. We are giving some thought to how this could be achieved and what the cost implications might be".

A great deal of thought had better be given to how this could be achieved because the first situation envisaged by the Home Office is wholly unacceptable. Can noble Lords really imagine political parties, for a period of eight or nine months, telephoning registration officers up and down the land every time a donation of £200 or more is received? We shall be in the run-up to an election on the first Thursday in May, I understand, so our political parties will be getting more than £200. I see that the noble Lord, Lord Bach, is not going to fall for that one, but it was worth a try.

Even at that, there will be a good many £200—or, rather, £199.99, when I think about it—coming into our political parties. What will happen if the registration officer says, "I'm sorry. I am not giving that information over the telephone"? How will it be verified? If one sends faxes, the registration officer will have to reply. What about the Data Protection Act and the right to privacy?

I think that the situation is quite difficult. It will build up into a mammoth task both for the political parties—adding to the bureaucracy in the Bill—and also as regards problems for the electoral registration officers. We ought not to put any additional burdens on them, especially if they are busy thinking about running a general election in the same period.

I have tabled this new clause, along with Amendment No. 319D, because I do not believe that it should be left to the political parties to telephone up and down the country to check whether someone is included on an electoral register. As I have said, the Bill already imposes burdens on the political parties. In the Minister's own words—I said that he would hear them again and again—it is cumbersome and bureaucratic. This new development will add yet more bureaucracy. I do not think that this will be tolerable. The Home Office cannot expect to impose new obligations on political parties without giving them some way of checking whether donors are on the electoral register other than telephoning hundreds of registration officers every week. Indeed, the fact that they have commissioned a study indicates that they recognise the problem.

Of course, the Home Office has now admitted that the political parties will be quite literally left in the lurch for most of next year. Who will carry the can if impermissible donors are accepted simply because it is either very difficult or even impossible for the political parties to make their checks? I would bet that it will not be the Home Office, nor will it will be the electoral commission. It will be the national and local officials of political parties, many of whom are volunteers.

Perhaps I may remind Ministers that if a treasurer in the Labour Party resigns during this period because of the trouble he is having, one of them will have to go to Downing Street to get the Prime Minister to sign the form. If that does not bring some sense to the Government Front Bench, I do not know what will. I commend the new clause to the Committee and I beg to move.

Baroness Gould of Potternewton

I shall not repeat all the points made by the noble Lord, Lord Mackay, but I agree with the principle of his comments. I am not entirely sure about the wording of the new clause because I have only recently had an opportunity to read it. However, I do know that the Labour Party has been concerned about this. This matter has been discussed at length at meetings. We have been talking about how it is going to be possible to identify whether people are permissible donors by checking on electoral registers.

I hope that the Minister will be prepared to reconsider this, or at least to think again about how to handle it. Furthermore, as regards the point made about the new system not being in place until next October, although we may not have a general election before then, the system ought to be in place before the next general election is called, whenever that may be.

Lord McNally

I hope that Ministers, who are sometimes rather isolated and cocooned from the political world, have taken note of the unity expressed on this issue. I, too, shall not repeat the arguments put forward by the noble Lord, Lord Mackay. All I shall say is that I certainly believe that all the parties are receiving serious warning signals about the application of this provision from our administrators and organisers at the sharp end.

Although we on these Benches have supported the main thrust of the Bill—namely, to try to bring higher standards to bear as regards political financing—the noble Lord, Lord Mackay, and I have made the point before that all our political parties are dependent on volunteers. Those volunteers are people who have more urgent things to do than attempt to fulfil such complex rules. The implications of this measure as regards fundraising are truly horrific. My noble friend Lord Rennard has informed me that over 400 electoral registers are kept on 28 different computer systems.

The Minister has now heard the message from three party headquarters: real problems to be sorted out here. Whatever the Minister decides to do with the noble Lord's proposed new clause, I recommend that he should think hard about this matter once again.

Lord Bassam of Brighton

My briefing contains the headings "Resist" and "If pressed".

Lord McNally

May I recommend that the Minister reads the section headed "If surrounded"?

Lord Bassam of Brighton

The clause defines a permissible source. However, as we know, it also raises the question of access, both in order that political parties can check donors against the register—and the noble Lord, Lord Mackay, said that he felt political parties could easily check potential donors against the register, but I shall put that point to one side—and the commission can verify that those checks have been made.

Amendment No. 146B would require the electoral commission to maintain a national register of electors and to make the register available to registered parties. In principle, I have a great deal of sympathy with the proposal. Given the nature of the controls set out in the Bill, it would make sense for a national register to be compiled and maintained centrally, and the electoral commission would be the obvious body to do that.

But realism enters the debate. The present legislation places the duty of compiling and maintaining the register on local registration officers.

The noble Lord, Lord McNally, after seeking advice from the noble Lord, Lord Rennard, confessed there were more than 400 registers and 28 different systems—perhaps even more.

The Representation of the People Act 1983 spells out the duties of those officers in detail. It cannot be pretended that shifting the burden of those duties to another body would be a small task—therein lies the rub— and the legislative implications would be great. We do not feel that this is the Bill in which to do it. Against that background, it would not be appropriate to place the commission under the duties set out in subsection (1) of Amendment No. 146B.

We have some difficulty with the drafting of Amendment No. 146B. Subsection (1) of the amendment is perfectly to the point, but subsections (2) and (3) go on to address the question of when a donation may be deemed to have been received from a permissible donor. It seems to me that this matter would be better addressed by means of a consequential amendment to Clause 49.

However, it seems desirable that there should be easy access to the registers to enable parties to carry out the checks to assure themselves that a donor is permissible. The commission will also need to carry out some verification checks on the donation reports it receives—for example, checks will need to be made to see whether the donor was on the register when the donation was received. With rolling registration and the regular amending of the register as electors are added or subtracted, these checks are best carried out on registers maintained at a local level.

However, the Government are in discussion with the Improvement and Development Agency (IDA) for local government and with the Association of Electoral Administrators on how on-line access to the local registers—this is a point raised by the noble Lord, Lord Mackay—can be arranged for the commission and political parties. Ensuring the compatibility of locally-held registers is likely to assist in making those registers more accessible.

Amendment No. 321C seeks to amend Section 52 of the Representation of the People Act 1983 to enable the Secretary of State, on the recommendation of the commission, to give directions requiring registration officers to maintain the electronic forms of their registers in a common format. That would be very helpful. The putting in place of the infrastructure to allow on-line access will not be a trivial task and, as has been acknowledged—the noble Lord, Lord Mackay, made this point—it will not happen until next October.

To assist parties and the commission, from next February, when the donation controls come into force, the Home Office is examining with the IDA and the AEA an interim solution which will provide parties and the commission with information from the registers. This could involve consolidating the registers onto a CD ROM and issuing regular updates. It is a quite sensible interim measure and I hope that it will answer the point. I confess that I think the best solution is to have a centralised register—there is no doubt about that—but this and other options should be urgently explored.

I accept that the Government's proposal is more modest. I think that the CD-Rom option is a viable interim option. I have listened carefully to the eloquent and persuasive contribution of the noble Lord, Lord Mackay. I shall study his remarks carefully with officials and see whether there is more that we can do. The CD-Rom solution is probably the best that we shall be able to do for the next election—depending, of course, on when that takes place.

9.30 p.m.

Lord Mackay of Ardbrecknish

I was not too worried about whether my amendment was right, wrong, well drafted or badly drafted. I was concerned with the principle behind it. By way of advice, I have always tried to avoid nit-picking amendments when it is clear that they are being used merely as vehicles in order to make an important point—and in this case one with which the Minister has some sympathy.

It is relatively easy for a constituency party receiving a donation to check because it has the registers there. But it will clearly not be easy for the national party to check the registers. The noble Lord accepts that. I had not thought about it, but the commission will also have to check, so the poor registration officer might receive two phone calls, one from the political party and one from the commissioner.

I hear what the noble Lord says, and I hear that he understands the point that we have made. He could not be deaf to it, as it has come from all three main parties. We have all been briefed by the people who run our parties.

My only slight worry is that the letter to Neil Bendle of the Labour Party dated 3rd October uses the words, Or we try to consolidate the registers and issue parties with perhaps a CD Rom with the data on it and regular updates". I can understand the difficulties, but there is a deal of uncertainty. I am sure that Mr Bendle, David Allworthy of the Liberal Democrats and Stephen Gilbert of my party were not greatly cheered by the limited commitment in the letter, with so many caveats.

However, the Minister has heard all that has been said. We shall probably return to the matter on Report, if only to see what progress has been made. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 50 [Payments etc. which are (or are not) to be treated as donations by permissible donors]: [Amendments Nos. 147 to 150 not moved.]

Lord Rennard moved Amendment No. 151: Page 31, line 28, at end insert— ("( ) Any donation received by a registered party which exceeds £50,000 or makes the cumulative donations of an individual or organisation exceed £50,000 in a financial year shall be regarded as a donation received by the party from a person who is not a permissible donor.").

The noble Lord said: The amendment seeks to impose a maximum limit on donations to political parties of £50,000. It is a provision for which my party argued in evidence to the committee chaired by the noble Lord, Lord Neill. It is not an uncommon provision. Many countries have a maximum limit for donations to a candidate or party and insist also that the donations come from personal bank accounts. Indeed, in the United States the maximum that any one individual can donate directly to either, say, A1 Gore or George W. Bush is just 1,000 dollars. Of course, there are many other problems with campaign finance in the United States connected with the so-called "soft money". But the principle that someone should not be able to buy influence with a particular candidate is a good one and I believe it should apply here.

There was a time when the existence of constituency spending limits and the requirement to list donations on an expense return would largely have dealt with the potential problem of buying undue influence. But 90 per cent of expenditure in elections is now at national level, not constituency level, and requirements to declare donations will not be sufficient to ensure that someone is not able to buy considerable influence over the party and potentially, therefore, over policy direction.

The prospect of having to raise and spend £20 million in a general election campaign will undoubtedly mean major parties having to go cap-in-hand to a few wealthy organisations and individuals. There is an old adage, which I believe to be true, that he who pays the piper calls the tune. There is a clear perception in this country that large donations to parties can buy influence over public policy.

Let us take as an example what I believe to be the pernicious influence of the tobacco industry. Smoking kills 300 people each day in Great Britain. Every one knows, and the British Medical Association has long argued, that tobacco advertising should be prohibited. But the fact that the tobacco industry donated poster sites worth probably millions of pounds to John Major's government for their 1992 election campaign cannot have hastened that government's progress towards banning tobacco advertising; nor will many people believe that the "infamous"—if I may call it that—donation of £1 million to the Labour Party at the last general election by Mr Bernie Ecclestone did not change government policy in relation to tobacco advertising and Formula One racing.

The only way to prevent large donations buying influence, or appearing to buy influence, is to prevent those large donations. It simply cannot be right that millions of pounds can achieve more than millions of votes, as is sometimes the case at the moment.

The point has been made to me by members of the Neill committee that denying the parties access to these very large donations—and all parties, including my own, must seek them—will deprive them of sufficient resources to make their case to the country. That is exactly my point. Only in these circumstances will all the parties be forced to agree that a very small amount of government money will be required to allow greater democracy, free from the potentially tainted influence of very big donors. I beg to move.

Lord Hodgson of Astley Abbotts

I have some difficulty with the arguments being advanced from the Liberal Democrat Benches. I accept that a broad base of funding is entirely desirable. The more that the parties can seek to diversify their sources of income, the better. Indeed, the more that we can persuade people, whatever our political colours may be, to support us, the better. However, the contrary argument—namely, that wealthier people should not be able to support their party to a greater extent—is not a good one. People are free and are entitled to spend their money as they wish. I do not see why political parties should be an exception to that rule.

The noble Lord kept using the word "perception". That word is always being used. Behind this Bill is the real answer to perception: we talk about reality because we are going to discuss disclosure. The answer to the noble Lord's point is this. Where wealthy people make donations, they must be seen to have made them. If they are seen to have made them, the public, the press and the country in general will draw the appropriate conclusions. It is surely much better to leave people free to spend their money as they wish and disclose publicly how they have spent it, rather than to interfere with someone's right to dispose of his income as he sees fit.

Lord Renton

I warmly endorse what my noble friend says. I should like to add one or two further thoughts on the matter. First, I do not see how New Labour could have won the general election if trade unions and some of the rich donors who helped the party had been limited to the sum of £50,000. Indeed, I should not have thought that this would have appealed very much to the Government.

Secondly, £50,000 is a fairly modest sum of money. With inflation, which does take place, it would become of much less value between two general elections spread over five years. Therefore, it is unrealistic to put such a sum on the statute book without any arrangement for its increase in the case of inflation.

Lord Norton of Louth

I rise to reinforce the points just made by both my noble friends. I agree completely with my noble friend Lord Hodgson that transparency ought to be used here rather than imposing limits on an individual's decision on how to dispose of his own money. That is a very valid point and I do not want to continue at great length just to reinforce what my noble friend said. However, there is an important principle involved here. He is right to say that a transparent process is the way to deal with the problem rather than limiting the capacity of the individual to give.

Earlier today I think the noble Lord on the Government Front Bench said that political parties were being equated with charities rather than with companies. As far as I am aware, there is no limit on personal giving to charities, so why should there be a limit on giving to political parties?

Lord McNally

That is because charities do not decide the government of this country; political parties do. I refer to the idea that wealthy people should be able to spend their money as they wish. During most of the 19th century and a good part of the 20th century people have attempted to get Eatanswill out of our politics. Perhaps this amendment constitutes part of that process.

Part of the problem stems from the fact that, particularly during the '80s, political parties indulged in increasingly extravagant campaigning. I remember doing a party political broadcast with George Brown which cost the Labour Party precisely nothing. We went to the BBC studios and George did the broadcast face to camera. Now I suspect that the Labour Party spends £50,000 or £100,000 on some commercial quality advertisement, as do the other political parties. There has been inflation in campaigning costs. However, that does not detract from the fact that the idea of people giving £1 million to a political party is nauseating. I recall the time—although the Conservative Party backed off quickly—when an individual offered to bankroll the entire £20 million cost of a campaign. If the Committee does not regard that as a profound undermining of our political system, I despair.

We need to return to a system—we hope this was the whole thrust of the Neill committee's recommendations—under which parties abandon the "quick fix" of big donations and return to raising modest amounts of money from a broad base of support. That is what makes a healthy democracy and it is the principle behind the amendment. Having listened to the comments made on the Conservative Benches, it seems to me that they have learnt nothing from the shame of the big donations scandal that ended their 18 years of rule. The Labour Party still has much to learn about getting the big money out of politics. It is the big money that causes the corruption.

Lord Norton of Louth

Does the noble Lord agree that we are not saying that there should he no change? We disagree on the means of achieving change. We believe that transparency is the route to take. Is the noble Lord saying that pressure groups—some of which are charities and some of which are not, although charities certainly fall within the rubric of pressure groups—do not seek to influence government and that many people do not back pressure groups to promote a particular party? One can think of several groups in this country that probably exert a greater influence on government than those parties which are out of government.

Lord McNally

Pressure groups may influence governments; they do not create governments—political parties do. The noble Lord, Lord Norton, overemphasises the point about openness. I believe that transparency is an important discipline but all the transparency in the world will not help if, transparently, big money is going into a political party so that it is awash with money for campaigning. That is what we must guard against. We only have to look back at recent history to see that time and again big donations have aroused public concern and, in my opinion, have diminished the political process in the eyes of the public.

Viscount Astor

I believe the noble Lord, Lord McNally, talked about getting rid of "Eatanswill". I am an old Etonian but I assume that the noble Lord did not refer to me. I presume that he referred to his noble friend Lord Goodhart, who I now understand has another reason—in addition to his membership of the Neill committee—for sitting on the Back Benches this evening. I leave that to the noble Lords, Lord McNally and Lord Goodhart, to sort out. It was an extraordinary attack on one of the noble Lord's colleagues.

The noble Lords, Lord McNally and Lord Rennard, will know that I do not support the amendment. This important issue was debated at some length in another place in Committee and on Report. It is well known that the Liberal Democrats favour a cap on donations. They argued for it in their evidence to the Neill committee and in another place. However, I wonder whether such a cap might fall foul of the Human Rights Act so strongly supported by those noble Lords.

The Neill committee disagreed with the Liberal Democrats. At paragraph 6.7 of its report, it described allowing individuals freely to contribute to political parties as, part of a healthy democracy". As my honourable friend Dominic Grieve told another place on 13th March, at col. 129 of the Official Report: It is an essential part of our civil liberties that individuals should be allowed to dispose of their money as they see fit. Whatever may happen in other countries, it is wrong to put a fetter on that". In his evidence to the Neill committee, my noble friend Lord Parkinson said that it was, a very serious invasion of people's rights to place a cap on donations. He said that it was an intrusion on people's liberty to say, "You can give your money to the local dogs home but you can't give it to the party of your choice".

Some analogies were made with America which has such a limit. We all know that American election campaigns are funded by increasingly large sums of money and that they have elaborate and careful ways of getting vast amounts of money from large donors for those political parties by using "names" and so on. So such a provision does not work; large donors do financially support parties in America.

The important point is that the system must be open. We want to know who donors are. I do not see the difference. All these people seek to influence government, whether it is Bernie Ecclestone, trade unions or noble Lords on various Back Benches giving money to their own political parties. The League against Cruel Sports has given vast amounts of money—it may be £1 million; I do not know rile exact figure—to the Labour Party as it seeks to influence the debate on field sports in this country. Some bodies claim to be charities; some are and some are not. The system should be open.

The mischief of the amendment in the name of the noble Lord, Lord Rennard, is that it has nothing to do with sums of money. It is a disguised plea for money from the biggest pot of all—from the Government. It is a plea for government funding. If limits are set, it will be said, "We haven't enough money to fight the next election. Let's have government money". The amendment is a disguised plea. I suggest that the noble Lord buys lottery tickets. He probably has a better chance of gaining lottery money than government funding for his next political campaign.

9.45 p.m.

Lord Bassam of Brighton

I thought for a while we were going to have an outbreak of class warfare on the Benches opposite. I checked on the front of the brief and it definitely says, "Not contentious".

The noble Lord made a well argued case. I was tempted towards it by some of the contributions but, finally, I have to say that I cannot accept the amendment largely because the Government have accepted the Neill committee's conclusion on the matter. It is perhaps worth while rehearsing some of the reasons.

The Neill committee adduced a number of reasons against limits on donations. First, the committee argued that we should fight shy of restricting individual rights—the noble Viscount, Lord Astor, made that point—unless there are compelling reasons for doing so. If individuals have the capacity to make large donations to a political party of their choice, the committee believed that they should he free to do so. Equally, political parties should be free to seek such donations. I agree that it would be unhealthy for a party to be over-reliant on a handful of very wealthy donors. But, as the Neill committee said, that would be a matter for the party concerned. That picks up the point made by the noble Lord, Lord Norton. Provided that the party's dependence on such donations is a matter of public record, people can draw their own conclusions—and no doubt they will, as the two major parties have found, sometimes to their cost.

That brings me to the key argument against a cap on individual donations. Much of the concern about the way in which some parties have been funded in the past arose because of the secrecy surrounding that funding. Secrecy inevitably gives rise to suspicion and strained perceptions, sometimes justified, sometimes unjustified. The disclosure of the source and amount of all donations of £5,000 or more will finally lift the veil on parties' income. The full glare of publicity that will shine on any future large donation will minimise any illegitimate influence or pressure. The Neill committee put its trust fairly and squarely in transparency and we shall seek to do the same.

The subsidiary argument put forward by the Neill committee was the difficulty of enforcing any donations limit. That is not an overriding argument, but we should certainly not belittle the additional raft of what I have described in the past as bureaucratic and sometimes cumbersome enforcement measures—as I am constantly reminded—to plug all possible methods of evasion.

I suspect that I may not have wholly persuaded the Liberal Democrats of the case against limits on donations, not least because I have a bit of sympathy with the idea, but Neill made some powerful points, which I have rehearsed. On that basis, I hope that the noble Lord, Lord Rennard, will feel able to withdraw the amendment.

Lord Rennard

I thank the Minister for that reply and the small amount of sympathy that he expressed for our arguments. It is strange how people in this place withdraw their amendments, thanking the Minister for not doing whatever they have just asked him to do.

We are entering into a debate. I am sure that the climate of opinion in this country is changing in the long run. The donations that have bought public influence in the past may not be so acceptable in future.

The issue is not just transparency over the amount of a donation. What is never transparent is the influence that such donations buy. How are we to know how far the donations by, for example, Mr Paul Sykes have changed Conservative Party policy on Europe, or to what extent donations from the League Against Cruel Sports, worthy organisation though it is, may have changed Labour Party policy? We may know the amount of money but we do not know what policy change the donation has bought. On that note, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 50 and 51 agreed to.

Clause 52 [Return of donations where donor unidentifiable]:

Lord Mackay of Ardbrecknish moved Amendment No. 152: Page 32, line 43, leave out ("paid by them into the Consolidated Fund") and insert ("distributed, in proportion to the number of Members of the House of Commons each registered party has, among those parties to which two or more Members of the House of Commons belong").

The noble Lord said: I approach the amendment with some hope that the word "accept" might be on the Minister's brief.

The clause refers to donations that subsequently turn out not to be permissible. It says, quite fairly, that if the identity of the donor is known, the political party should return the money to the donor, as in the case of Bernie Ecclestone, I suppose. In any other case, such as when the donor's identity is not known or when, once the register is checked, he turns out not to be who he says he is, the money has to go to—needless to say—the Consolidated Fund.

My view is that the right honourable Gordon Brown, the Chancellor of the Exchequer, gets more than enough money into the Consolidated Fund. He does not need any more. As we have all said—and the Government have not disagreed—the Bill will add to the costs of political parties. We have come up with a way to give at least the major political parties the odd pound or two to offset the costs of the Bill without the need for state funding.

When donations are returned to the electoral commission, it should do a little calculation, divide up the money and dish it out to the parties that have two or more Members in the House of Commons. I am sorry that the noble Lord, Lord Beaumont of Whitley, is not here, because the proposal would clearly not benefit his party, but we cannot go too far. I believe that it would benefit the parties which will incur the greatest expenditure as a result of this Bill.

If someone wants to donate money to politics but does not do it properly, it seems to be much fairer that the money should then go to all the political parties. That will make it slightly frustrating for the donor because the money will not have gone only to the party for which it was intended. The noble Lord will notice that I am not even suggesting that a proportion should be taken away from the party which would have received the donation. I am being very even-handed. I believe that it would be much fairer to divide the money which the commission receives from those sources rather than to give it to the Chancellor.

Baroness Gould of Potternewton

Perhaps I may ask the noble Lord, Lord Mackay, a question. I find that I have a problem with what he has suggested. If the donation comes from an impermissible source, the political party for which it was intended should receive no benefit from it. However, if the donation goes to Members of Parliament in proportion, do not the political parties who should not have benefited from it then receive it? I am rather puzzled about that.

Lord Mackay of Ardbrecknish

I believe that I answered that question. The donation will go to the political parties in proportion to their membership in the other place. I said that very generously I was allowing the party for which the donation was originally intended to receive its share, but that is simply a sign of my even-handed nature in these matters. I am obviously not explaining the proposal very well.

Baroness Gould of Potternewton

If the donation is not from a permissible source, it should not go to any political party. That is why I do not understand the proposal.

Lord Mackay of Ardbrecknish

I understand the point that the noble Baroness makes. However, in this Bill we are attempting to ensure that the donation does not go to the political party for which it was intended. I am suggesting that it should go to all the political parties and not to the Chancellor of the Exchequer. I believe that it is a thoroughly good amendment. As I gather that the Chancellor is being most generous with his money these days, surely he would not need the small amount that would come from this source. He could give it to the political parties to enable them to cover some of the additional costs that, dare I say it, this cumbersome and bureaucratic Bill will impose on them.

Lord Norton of Louth

Perhaps I may intervene briefly to support my noble friend in part. It strikes me that a variation on a theme which I believe would meet the point made by the noble Baroness, Lady Gould, would be to distribute the donation to the parties other than the one for which it was intended. I believe that, when one considers the matter, there is a benefit in that suggestion. If parties knew that the money would go to their opponents, it would produce a greater incentive for them not to accept impermissible donations and it might make them even more rigorous. Not only would they have the threat of law over them, they would know that the money was going to their opponents.

Lord Rennard

I believe that it is a splendid idea in particular that the money should not go to the Chancellor of the Exchequer but to the parties for whatever purposes they require it. I believe that this represents yet a further step by the Conservative Party towards the state funding of political parties, which of course we welcome. My only disagreement with the amendment is that the noble Lord, Lord Mackay of Ardbrecknish, referred to fairness in distribution. Let us suppose that the money has come in from whatever source. If it is to be distributed fairly, surely it should be in proportion to the votes cast at the previous general election rather than according to the proportion of Members in the other place, who, as we know, are elected by a wholly unfair electoral system.

Lord Bassam of Brighton

I am becoming seriously worried about this debate. Earlier we had class warfare declared by the noble Lord, Lord McNally; now a redistribution of wealth is being proposed by the noble Lord, Lord Mackay. That cannot be right.

Clause 52 requires that where a political party is unable to ascertain the identity of a donor or establish that the donor is a permissible source, it must endeavour to return the donation to the donor. We believe that that is right. However, given our party's current strength in another place, I am rather tempted to accept the amendment as a useful source of party funds. But the proposition set out here is rather extraordinary, as I am sure that the noble Lord, Lord Mackay, willingly accepts. The consequence of this amendment would be to enable a political party to benefit from a donation made by a foreign source. Of course, not all the benefits will be derived by the party for which the donation was intended but such an outcome goes against what is attempted to be achieved by the Bill.

Nor does it seem plausible to imagine that, if a party did receive a large amount of money which it could not accept, but was unable to return it to the donor, it would be happily forwarded to the commission, knowing that a large chunk of the money would end up filling the coffers of its political opponents. In such circumstances, the party might be tempted to draw a veil over the money's existence. We cannot accept the amendment. Yes, the Exchequer may well end up benefiting, sadly, on this occasion but I must encourage the noble Lord to withdraw the amendment.

Lord Mackay of Ardbrecknish

I am sorry that the noble Lord takes that attitude. As he was arguing against it, he warmed me to it even more. The idea is that money donated by a foreign donor to a British political party, which could not be returned, should be distributed among all the parties. That is the price to be paid.

I see that I have half the support of my noble friend Lord Norton of Louth, so it will be interesting to see which Lobby he will go in. I almost have the support of the Liberal Democrats and I am interested to see whether they will come into my Lobby. On that basis, I am tempted to ask the opinion of the Committee.

10.2 p.m.

On Question, Whether the said amendment (No. 152) shall be agreed to?

Their Lordships divided: Contents, 22; Not-Contents, 59.

Division No. 2
Astor, V. Hodgson of Astley Abbotts, L
Attlee, E. James of Holland Park, B.
Blatch, B. Lyell, L.
Brookeborough, V. Mackay of Ardbrecknish, L.
Byford, B. Northesk, E. [Teller]
Cox, B. Norton of Louth, L.
Crickhowell, L. Park of Monmouth, B.
Denham, L. Prior, L.
Fookes, B. Rawlings, B.
Hayhoe, L. Renton, L.
Henley, L. [Teller] Selborne, E.
Acton, L. Gould of Potternewton, B.
Addington, L. Greaves, L.
Alderdice, L. Harris of Greenwich. L.
Alli, L. Harris of Haringey, L.
Amos, B. Harrison, L.
Archer of Sandwell, L. Hayman, B.
Ashton of Upholland, B. Howells of St. Davids, B..
Bach, L. Jay of Paddington, B. (Lord Privy Seal)
Barker, B.
Bassam of Brighton, L. Judd, L.
Bernstein of Craigweil, L. Layard, L.
Bragg, L. Lea of Crondall, L.
Brooke of Alverthorpe, L. Lipsey, L.
Burlison, L. Macdonald of Tradeston, L.
Carter, L. [Teller] McIntosh of Haringey, L. [Teller]
Dholakia, L.
Donoughue, L. MacKenzie of Culkein, L.
Falconer of Thoroton, L. McNally, L.
Farrington of Ribbleton, B. Maddock, B.
Filkin, L. Miller of Chilthorne Domer, B.
Gibson of Market Rasen, B. Pitkeathley, B.
Goodhart, L. Puttnam, L.
Rendell of Babergh, B. Warner, L.
Rennard, L. Warwick of Undercliffe, B.
Sainsbury of Turville, L. Watson of Richmond, L.
Shutt of Greetland L Wedderburn of Charlton, L
Whitaker, B.
Simon, V. Whitty, L.
Stone of Blackheath, L. Williams of Crosby, B.
Thornton, B. Woolmer of Leeds, L.
Turner of Camden, B. Young of Old Scone, B.

Resolved in the negative, and amendment disagreed to accordingly.

10.10 p.m.

Clause 52 agreed to.

Clause 53 [Forfeiture of donations made by impermissible or unidentifiable donors]:

Lord Mackay of Ardbrecknish moved Amendment No. 153: Page 33, line 9, leave out subsection (3).

The noble Lord said: I can speak briefly to Amendment No. 153. It relates to forfeiture of donations and refers to the proof required if the commission takes the issue to court to ask it to order the forfeiture of any donation by the party concerned. As always in these matters, the provision does not say, "of any donation"; it says, of an amount equal to the value of the donation". That may be because, if the donation was a cheque, it could not require the return of the cheque because it is made out to somebody else. So I understand the long-windedness of the provision.

But it is the next part in which I am interested; that is, The standard of proof in proceedings on an application under this section shall be that applicable to civil proceedings". I simply ask why, if this is a criminal offence, the standard of proof demanded is not that required in criminal proceedings?

Lord Bach

It is not a criminal offence. Criminal offences arise under Clause 51. This is in effect civil proceedings for forfeiture and that is why the burden of proof required is the civil burden. I can say no more other than to ask the noble Lord to withdraw his amendment.

Lord Mackay of Ardbrecknish

I am grateful to the Minister. I accept his advice—it is probably one of the few bits of legal advice I shall get this week. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 153A not moved.] Clause 53 agreed to.

Clauses 54 to 56 agreed to.

Clause 57 [Quarterly donation reports]:

Lord Mackay of Ardbrecknish moved Amendment No. 154: Page 34, line 41, leave out from ("subsection") to end of line 3 on page 35.

The noble Lord said: Amendment No. 154 is part of a large group in which I tabled amendments along with my noble friend Lord Norton and the Government. They concern the donations regime and the reporting period.

Amendment No. 154 seeks to question whether, if we are correct in placing a requirement on political parties during a busy election period to report weekly, we will achieve a great deal. It will certainly show what a party received. But it will not show what it spent. At the end of the day both could equally easily be revealed.

It is particularly important to recognise that all our parties, especially constituency associations, wish to raise, through their fighting funds, more than they can spend in an election campaign. They will then have a bit of help for the following few months or perhaps even pay off the overdraft accumulated in the preceding few months—I cannot believe that the other parties are any different from the Conservative Party in that regard.

Most Members of the Committee present have been involved in elections and I am sure will agree that they are busy times. So I question whether we want to put this extra burden of weekly reporting on to the treasurers of our constituency parties.

The same argument applies to headquarters parties, but they are more likely to have systems and staff in place. Many of our parties at local level depend on one person. I have never been a constituency agent at general elections but those who have will know how extremely busy they are. I wonder about imposing such a duty on someone who may be a professional or a volunteer and on a treasure who will be extremely busy trying to persuade people to part with money for the fighting fund.

I hope that the Government will re-examine the detail of the provision and look again at the burden they will impose on our parties at an extremely busy and important time. I beg to move.

Lord McNally

I shall not repeat the argument put forward by the noble Lord, Lord Mackay, but it is a plea for the people at the sharp end. I have probably been in more political parties than most Members of the Committee, and I can say that the one thing they have in common is a difficulty in persuading someone to be treasurer. It is the most difficult job of all.

It will be extremely difficult to persuade anyone to take on the job of treasurer if some of these onerous responsibilities are built into the Bill. We must make it sensible for organisations which, in all our political parties, still rely heavily on volunteers. The idea of weekly reporting is extremely burdensome and we on these Benches support the noble Lord, Lord Mackay, in suggesting that Ministers look hard again at their proposal.

Lord Norton of Louth

I support my noble friend's amendment. I have an amendment in the group which relates to the opposition to Clause 58. Amendment No. 154 seeks to move from quarterly to annual reports. The opposition to Clause 58 relates to the weekly reports and is for the reasons given.

The point has been made during debates on this and previous Bills that political parties in this country are, to some extent, under threat. There is a problem with persuading people to participate in politics, particularly in political parties. We have variously addressed the need, although we have not come up with any answers, to revitalise parties in this country.

They are an essential part of the democratic process and the need for them becomes arguably greater as more and more people channel their interest through pressure groups. There needs to be a balance. I start from the belief that we must be careful when introducing measures which impose important and significant burdens on the political parties. That might reduce their capacity to do the job which we look to them to do and might discourage people from participating in political parties and keeping them going. That is my starting point.

What flows from that is the belief that, if there are to be impositions on parties—given the principles underpinning the Bill, I accept that it imposes burdens—we must impose a test on each burden that is introduced. That is a compelling justification test: is there a compelling justification for a particular burden imposed by the Bill? There may be a justification—perhaps using the criterion might be whether the obligation appears in the Neill report. However, it has not become clear from our deliberations that it is necessarily a compelling one. Looking at the Bill, I cannot see what is the compelling justification for the frequency of reports.

One can see the case that parties must report and produce accounts. I do not believe that anyone would disagree with that. What is at issue is the frequency with which they are produced. Furthermore, in respect of Clause 58, why should it be at the rate of one each week when, as has been mentioned, the parties will face a major burden? It imposes a burden at a difficult time and I cannot see why. Yes, they should report for the election campaign but why should they be weekly reports?

To some extent my worries are reinforced by the Minister's earlier response to Amendment No. 146B. We are imposing significant burdens on the parties, and we must be wary of building burden upon burden. No doubt the Minister will provide a compelling justification for this, if there is one. I do not see why parties should be burdened in this way. The Minister must provide a compelling justification if the Committee is to accept the provisions in Clause 57 relating to the frequency of reports and, more especially, Clause 58 relating to weekly reports.

Lord Hodgson of Astley Abbotts

This amendment covers some significant points. I do not repeat the arguments which have been powerfully advanced, except to say that I am involved in the regulatory system in the City. One finds that regulators always want to capture a bit more information. They believe that if they just have a little more information they will be in a better position. Regulators are never inhibited by the realities of life or, in this case, political and commercial operations. They seek a neat world in which nothing can possibly go wrong; otherwise, it may reflect badly upon them. Regulators are by their very nature totally risk averse.

I should like to hear from the Minister what the regulator—in this case the commission—will do with the information that it gets every week and what its value is. Why is it of value to know what a party has collected in the past seven days? The regulator knows that it will receive a report at the end of the campaign, quite properly. There will be a disclosure of total funds. However, I have not yet heard a proper answer to the question why it should make any difference to the commission to know what is happening out there at seven-day intervals. I have heard that it imposes on the political system, which is weak and creaking at constituency level, a huge amount of bureaucracy which, as several Members of the Committee have said, will deter people from participating and thus set at nought the purpose of the Bill, which is to reinvigorate our democracy.

Lord Bassam of Brighton

This important group of amendments is concerned with reporting requirements in respect of donations. I shall respond first to the Opposition's amendments to Clause 57 and Schedule 5 and the Question that Clause 58 stand part of the Bill. The noble Lord, Lord Mackay, spoke only to the weekly reporting measures contained in the Bill but did not look at the other parts covered by his amendment. I shall go through all of them in turn.

Amendments Nos. 154 and 155 to Clause 57 would have the effect of requiring that only one donation report be prepared in respect of each year. As it stands, the clause reflects the view of the Neill committee that there should be quarterly reporting. The committee was concerned to ensure that information about disclosable donations entered the public domain as quickly as possible. It is not difficult to see that the aim of transparency is not well served if a significant donation is only disclosed anything up to 13 months after it is made.

The amendments to Schedule 5, together with the removal of Clause 58, would similarly restrict the reporting requirements. In this case the effect would be to dispense with the weekly reporting requirement that applies in the immediate run-up to a general election. In providing for the preparation of weekly donation reports during the period of an election campaign, the Bill simply gives effect to another of the recommendations of the Neill committee. I should like to quote a very telling passage from paragraph 4.58 of the report which justifies such an arrangement: in the period immediately before a general election a much more peremptory system of reporting will have to be interposed. The information is urgently needed at that time. It may have an immediate bearing on the response of other potential donors and it may impact upon voters' intentions". The committee recognised that during the period leading up to an election hard-pressed party officers might not be able to produce comprehensive information as to donations. The Bill takes account of this in two ways. First, the weekly reporting requirement does not apply to donations made to the accounting units of a party. Therefore, there is no burden imposed there. That may pick up part of the concern expressed by the noble Lord, Lord McNally. Secondly, such reports will provide details of donations received rather than of donations accepted, thereby leaving a party the usual period of 30 days to establish whether a given donor is a permissible donor. That, too, is a very important point. So it provides for transparency during the course of the election period. That is the key to it. That is why it is there.

Lord Hodgson of Astley Abbotts

Perhaps I may ask one question. Is it envisaged that the commission will publish the weekly reports? If it is, then transparency is achieved.

Lord Bach

My understanding is, yes, it will have to publish because that provides the transparency. That must be the purpose of creating the data, the information.

The Official Opposition has repeatedly said that it supports the Neill committee's recommendations. If that is so, I trust that the noble Lords will, with one exception, agree to withdraw their amendments and will support the inclusion of Clause 58 in the Bill. I say "with one exception" because the Government are content to support Amendment No. 165, although for rather different reasons to those advanced by the noble Lords opposite. I shall come to that in a few moments.

The government amendments in the group are concerned with a number of technical or drafting points. In particular, they clarify the information about donations to be reported to the electoral commission under Schedules 5 and 6 and to be entered in the register of donations maintained by the commission under Clause 64 and Schedule 6.

Amendments Nos. 165 and 168C relate to the information to be included in weekly donation reports. As I have indicated, weekly donation reports differ from quarterly reports in that they include details of disclosable donations received as opposed to donations accepted by a party. Given the timetable to which these weekly reports have to be made, a party may not have established by the time a report is sent to the commission whether a particular donation listed in the report is from a permissible donor. As drafted at present, Paragraphs 2(4) to (8) of Schedule 5 envisage that the details required relate to permissible donors. While that approach is appropriate to quarterly reports, it does not fit the circumstances of weekly reports. Amendments Nos. 165 and 168C would therefore provide that in the case of a weekly report a party is simply required to give the name and address of the donor to the extent that such details are known at the time.

Amendment No. 176A to Clause 64 relates to the content of the register of recordable donations reported by party members and members' associations and to holders of elective office. Clause 64(4) provides that the address of individual donors is not included in the register of donations reported by political parties. The amendment, when read with paragraph 14 of Schedule 6, ensures that this principle is carried through to the register of donations reported by regulated donees—that is a new expression! Amendment No. 189B ensures that the information about a donation made to a regulated donee, as is mentioned in paragraph 9(4) of Schedule 6, is included in the register of donations maintained under that Schedule.

The other government amendments in this group, Amendments Nos. 160A, 168A, 172A, 174A and 187B, address a number of minor technical or drafting points. I beg to move.

Lord Norton of Louth

Perhaps I may pursue a point in relation to the Government's amendments. I understood from what the Minister was saying and from what was in the Neill report that one of the principal justifications for transparency—the frequency of the reports to ensure transparency during election campaign—is that electors might know what money is coming in because it might influence how they voted. That was the justification provided by the noble Lord.

I understand that what the Government want to do, recognising the practical problems, is to allow parties to receive money and to report they have received it, even though the givers may be impermissible donors because at the time the parties are not sure that they are permissible donors as they may not have had a chance to check them out. Is there not a situation, therefore, where money may be coming in which is potentially tainted? The impression may be given that the parties are nonetheless accepting it, even though afterwards they have to give it back. But they may have suffered from the perception in the meantime.

10.30 p.m.

Lord Bassam of Brighton

I can see the noble Lord's argument. But, having listened to him for much of the evening, is that not the argument that he has adduced previously for not having a more regulated system? In other words, let transparency deal with it all. Surely the noble Lord does not intend to use that argument against this clause.

Lord Goodhart

I am not in entire agreement with what has been said by my own Front Bench on this occasion, although I think that what my noble friends are concerned about is the possibility of a requirement of reporting by local parties, which, as I understand it, will not be required by Clause 58. It seemed to the Neill committee—I strongly endorse this point—that it is necessary that substantial gifts made to central party organisations should be disclosed as soon as is reasonably practicable if those donations are made during an election campaign.

If it were to emerge during the course of the campaign that, shall we say, Mr Paul Sykes, or perhaps someone less reputable than him, had made a donation of £10 million to a political party, that could well have a significant effect on the attitude of the electorate to that party. If there is no such requirement of disclosure, it would make it entirely possible for someone to donate during an election campaign and for that donation not to become knowledge until well after the election even though, had it been disclosed, it might have had a significant effect. It seemed to us in the Neill committee, and I think rightly, that a seven-day disclosure period during an election campaign was a central plank of the whole obligation of transparency. That is why I feel that I cannot support the amendments put forward from the Conservative Benches.

Lord Mackay of Ardbrecknish

My amendment was very much a probing amendment, to get us into a debate. I am not so concerned about quarterly reports, although I rather hope that when parties are asked to make their quarterly reports, those will be donations which they have accepted and which are legitimate. It is only during the weekly report period before an election that the Bill expects parties to report just the donations when they have not had time to check them. I think I am right. The Minister will no doubt be able to confirm that.

Lord Bassam of Brighton

On the first point, given the timetabling of the quarterly reports, the noble Lord is right. They will be from permissible donors at the point at which they are finally reported.

Lord Mackay of Ardbrecknish

That is fine, but I am really then homing in on the weekly reports. I am pleased that the Minister has added his name to Amendment No. 165 because in some ways he is accepting the burden of work which weekly reporting will place on the headquarters of political parties. I assume that the electoral commission will say every Friday, "You will report what has happened in the previous week and we will publish it on Monday or Tuesday", or whatever may be the case.

Perhaps I may refer to my real worry. I think that this is what my noble friend Lord Norton was getting at; and, with all due respect, the Minister failed to make the point. I shall paint a scenario. Someone wishes to support the Conservative Party, but is not a permissible donor. Perish the thought that we have anyone shady who would support us! He decides that he will send £1 million to the Labour Party. The Labour Party is then obliged to report to the electoral commission that it has received £1 million from Joe Bloggs. That immediately allows the Conservative Party to say, "Disgraceful! Look at what the Labour Party is doing"—and up will get the tabloids, and so on. It would be extremely embarrassing for the Labour Party. Frankly, one could play it the other way round as well. That is what my noble friend was getting at. It may be far-fetched but there is just a chance of a dirty tricks operation if a political party receives a donation and is obliged to report it before it can check it because it simply does not have time. It could be confronted with a very embarrassing situation the following week when the commission publishes it.

Perhaps I may move back a step: if the party receives the donation and realises, because it has put in place the appropriate systems or simply that someone is sufficiently sharp to spot it and says, "Oh no, that's not right. There's something wrong here", and establishes that something is amiss, must it still be reported to he commission, even though the donation will be returned? That scenario could be almost as damaging as the first scenario.

One of the problems of encountering an example of this kind on the hoof, as it were, is that it is difficult to tease it out. Nevertheless, I think that my noble friend has alighted on a very serious point. The system could be abused, perhaps not by any of our great parties but by other parties which might well indulge in that kind of practice against a bigger competitor. The Minister should give this a little more thought and ask his clever officials to put their minds to it, otherwise we might be opening the way to abuse.

If I can think of it—I should not say that my noble friend could think of it; he is much cleverer than I and he is an academic—then others with minds far more twisted than mine will also think of it. This is a serious point and is worthy of consideration. Having said that, I am at least grateful to the noble Lord for adding his name to my amendment.

Lord Harrison

The same thought passed through my mind. However, if such a thing happened, would the party not denounce the donor as a scoundrel and still accept the donation?

Lord Mackay of Ardbrecknish

I suspect that the donor would not be a permissible donor. However, he might also be a scoundrel who was a permissible donor. I do not know. I still think that this is a serious problem.

Lord Bassam of Brighton

I, too, must have a mischievous mind because I had thought of that scenario. Perhaps I may return to the refrain of the noble Lord, Lord Norton of Louth, throughout these debates; namely, that it is best to rely on transparency. I suspect that the full glare of publicity would flush this ruse out.

Nevertheless, the noble Lord has made a valid point and one certainly worthy of reflection. However, the purpose of the weekly donations reporting process is to provide a high level of transparency and integrity 10 the system. Neill relied on it very strongly and we, too, think that it is the right principle to adopt.

To respond to the point made by the noble Lord, Lord McNally, I have made it plain that we do not intend to place burdens on individuals merely for the sake of it. A genuine purpose lies behind the measure. The way in which the weekly reporting and accounting will work should not unduly affect local organisations. It will focus on national accounting units. Quite understandably, from a political point of view as regards his organisation I doubt whether the problem will be as great as he first thought. Having said that, I shall think further on it.

Lord McNally

I believe that the noble Lord, Lord Norton, has made a very sound point. No doubt all these regulations have a purpose, but do they match the size of the problem? The Government have asked the noble Lord, Lord Haskins, to look at red tape and the burdens imposed on business. Perhaps it would be a good idea to let him run his expert eye over some of the burdens being imposed on politics, in particular the burdens being imposed at the local sharp end.

Lord Norton of Louth

I should like to reinforce my point and to respond to what was said by the Minister. There is no compelling justification in terms of transparency. My point is that it is not transparency of full information in any case and therefore it is potentially misleading. It does not in any way conflict with the point I made earlier. As an academic, I was keen to ensure that I was being consistent.

I believe that there is a problem in terms of what is apparent; namely, that the perception could be misleading. If one is aiming for transparency, one must aim for transparency of full information. Here I return to the point just highlighted by the noble Lord, Lord McNally—there has to be a compelling justification. I have not heard the Minister provide one.

Lord Mackay of Ardbrecknish

Before the Minister replies, we all agree that there should be transparency for accepted donations, but we are talking about offered donations. There is a difference. I am attracted by the suggestion of the noble Lord, Lord McNally, that the noble Lord, Lord Haskins, could come to your Lordships' House and join the Committee to discuss whether these regulations are necessary.

Lord Bassam of Brighton

Very good. I enjoyed that one. I think the compelling argument relates to the politics of what happens during a general election period. The noble Lord, Lord Norton of Louth, made an important point. It would be much more desirable if there were fuller information surrounding the register of donations reported on a weekly basis.

I shall give the matter more thought and reflect on it, but we have been content until this point—I think we shall remain content—with what has been set out in the Neill report on this issue.

Lord Mackay of Ardbrecknish

We have had a good short debate about this matter. We have raised a number of issues on which I hope the Government will reflect. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 155 to 160 not moved.]

Lord Bach moved Amendment No. 160A: Page 35, line 45, at end insert— ("( ) For the purposes of subsections (4) to (7) as they apply in relation to any year— (a) each payment to which section 50(2) applies and which is accepted by the party during that year shall be treated as a relevant donation in relation to that year, and (a) each payment to which section 50(3) applies and which is received from a particular donor and accepted by the party during that year shall be treated as a relevant donation in relation to the donor and that year; and the donation reports for the year shall accordingly comply with subsections (4) to (7) so far as they operate, by virtue of paragraph (a) or (b) above, to require any relevant donation falling within that paragraph to be recorded in a donation report.").

On Question, amendment agreed to.

Clause 57, as amended, agreed to.

Clause 58 [Weekly donation reports during general election periods]:

[Amendment No. 161 not moved.]

Clause 58 agreed to.

Schedule 5 [Details to be given in donation reports]:

The Deputy Chairman of Committees (Viscount Simon)

In calling Amendment No. 162, I should say that if this amendment is agreed to I cannot call Amendments Nos. 163 and 164 due to pre-emption.

[Amendment No. 162 to 164 not moved.]

Lord Bach moved Amendment No. 165: Page 112, line 14, leave out ("or weekly").

On Question, amendment agreed to.

[Amendments Nos. 166 to 168 had been withdrawn from the Marshalled List].

Lord Bach moved Amendments Nos. 168A to 168C: Page 112, line 30, after ("company") insert ("falling within section 49(2)(b)"). Page 112, line 42, at end insert— ("( ) In the case of a building society within the meaning of the Building Societies Act 1986, the report must give—

  1. (a) the name of the society; and
  2. (b) the address of its principal office.
( ) In the case of a limited liability partnership falling within section 49(2)(db), the report must give—
  1. (a) the partnership's registered name; and
  2. (b) the address of its registered office.").
Page 113, line 5, at end insert—

("Identity of donors: weekly reports

2A. In relation to each recordable donation a weekly report must give all such details of the name and address of the donor as are for the time being known to the party.").

On Question, amendments agreed to. [Amendments Nos. 169 to 172 not moved.]

Lord Bach moved Amendment No. 172A: Page 113, line 44, leave out from beginning to ("and") in line 45.

On Question, amendment agreed to.

[Amendment No. 173 not moved.]

Schedule 5, as amended, agreed to.

Clauses 59 to 61 agreed to.

Clause 62 [Weekly donation reports in connection with elections other than general elections]:

Lord Mackay of Ardbrecknish moved Amendment No. 174: Page 40, line 2, leave out ("after consulting") and insert ("on the recommendation of").

The noble Lord said: I should not like the Government Chief Whip to think that we are making progress too quickly through the amendments, so we shall stop and have a look at Amendment No. 174, which is very short.

The amendment is concerned with reporting requirements. As it stands, the Bill states that, The Secretary of State may, after consulting the Commission, by order make provision"— to vary some of the sections we have been discussing. As the Committee will appreciate, the problem is that the Government may consult the electoral commission but decide to ignore its advice and go their own way. I want to firm up the provision. The electoral commission will be the referee of our systems, and that will include the reporting systems. All things considered, I would rather depend on the electoral commission's views of these matters than on the views of whatever government are the government of the day.

The amendment seeks to firm up any orders made under this section by providing that, The Secretary of State may, on the recommendation of". In other words, the orders that the Secretary of State makes will come from the electoral commission; they will not come from the Secretary of State or from the department. This is not a very big amendment, but it is important to make sure that when we set up the electoral commission it is the body that is actually calling the shots on this matter, and not the Government. I beg to move.

10.45 p.m.

Lord Bach

I noted that the noble Lord did not speak to his Amendment No. 175. He may briefly like to do so.

Lord Mackay of Ardbrecknish

Amendment No. 175 is absolutely unnecessary, because once I had worked my way through the labyrinthine passages of the Bill, I found out that an affirmative order was already in place. My only defence is to say that if the Government look at the number of amendments that they have withdrawn, they will see that they are nothing like the one that I have just withdrawn!

Lord Bach

I congratulate the noble Lord on having found Clause 146(4)(a).

Dealing with Amendment No. 174, the point is to require any order under Clause 62 to be made on the recommendation of the electoral commission rather than merely after consultation with the commission. In other words, no order could be made unless the commission recommended that it be made. We advise the Committee not to accept the amendment.

The intention behind Clause 62 is to set up a clear expectation on the part of Parliament that the special provision for frequent donation reports should apply to the elections specified in the clause as well as to Westminster general elections. It is one of those matters on which the opinion of the electoral commission is not necessarily required. But the consultation with the commission which Clause 62, as presently drafted, already requires would enable the commission to make any observations that it sees fit with regard to when the special reporting requirement should kick in and any modifications proposed in the draft order. I invite the noble Lord to withdraw his amendment.

Lord Mackay of Ardbrecknish

In this case I shall say, perhaps for the first time today, that I shall read what the noble Lord has said. I understand the point that he is making, but I would rather that the electoral commission had a little more weight in this process than it will under the Bill as currently framed. I may return with a slightly varied amendment that takes into account what the Minister has just said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bach moved Amendment No. 174A: Page 40, line 4, leave out ("section 57(3) to (12) and").

On Question, amendment agreed to.

[Amendment No. 175 not moved.]

Clause 62, as amended, agreed to.

Clause 63 [Reporting of multiple small donations]:

[Amendment No. 176 not moved.]

On Question, Whether Clause 63 shall stand part of the Bill?

Lord Mackay of Ardbrecknish

Instead of taking a fine knife to insert amendments into a clause, this time I am using a blunderbuss. I am seeking to take the whole clause out. That is the easiest way to address this question.

The clause states that donors—not the parties that receive the donation, but the donors themselves—must make a report to the commission in respect of donations that they give in certain circumstances.

This is a serious point. I know that as the days have gone, we have traded back and forward obedience or otherwise to the Neill recommendations, but in this case the Government really have not taken on board what the Neill committee said. It is a major departure so far as donors are concerned.

In his report, the noble Lord, Lord Neill, discusses the persons or bodies responsible for reporting or disclosing (at paragraph 4.50 and thereafter). Perhaps I may quickly quote from this section of the report, because it is well written and better explained than any paraphrase I could do attempt: In theory there are three possibilities: the obligation could be placed on the donor, or on the political party centrally, or on each sub-unit within the political party's national or regional structure … We exclude the donor. It would be wholly unreasonable to saddle a donor with a legal obligation to report backed by criminal sanctions. The donor should be entitled to make his gift and walk away without further obligation". There are not too many "ifs" and "buts" in that quote. Indeed, it is very bold: "It would be wholly unreasonable".

I believe that the noble Lord, Lord Bassam, is to reply, but his noble friend Lord Bach knows all about the tests of "reasonableness", and so on, that lawyers enjoy. It seems to me that the phrase, "wholly unreasonable" is pretty well shutting the door on this one. The noble Lord, Lord Neill, and his committee were very positive about this. The obligation should not be placed on the donor. This clause places it on the donor. I do not believe that to be right; and I agree with the Neill committee.

The donor makes his donation; it is then up to the political party concerned to decide initially whether it is a permissible donation. If it is, the party should accept it and report. To ask the donor to report this and to introduce criminal penalties in this respect is going far too far. Political parties are legitimate organisations. If someone gives them money, he must think that that is fair. He should not have to report to a body to say that he has given money to a political party.

It is late at night. I shall not go on about this clause. However, I feel quite strongly about it. I shall want to know in some detail—indeed, I shall need some convincing—why the Government have decided to part from the Neill committee and place this obligation on the donor. I do not know whether they are trying to scare off donors to political parties. But, returning to points made from the Liberal Democrat Benches by the noble Lord, Lord McNally, earlier on, it is clear that all our parties find it hard enough to persuade people to give donations. Frankly, we may find that, suddenly, every donor will begin think, "My goodness, what will happen if I don't report—what is the level?" How are they to know? The end result will be that we shall all find it much more difficult to persuade people to give the reasonably modest donations referred to in this clause. I hope that the Government will reconsider this clause. Indeed, I may even receive some support from the Liberal Democrats on this point.

Lord Hodgson of Astley Abbotts

I should like to speak briefly in support of my noble friend. In my earlier comments, I referred to the regulator's search for neatness and "regulatory capture". This is another example of the latter and gives me an opportunity to have another crack at it from a different angle. This clause would duplicate what is being done for political parties. I am not clear what it will add to the sum of human knowledge, let alone that of the commission and of the public. It will simply impose an unreasonable burden on people seeking to support the political process.

I am all for disclosure, but such information needs to be disclosed only once. As I understand it, that disclosure will take place via the political parties.

However, we are now to have a duplicate system under this clause. It is proposed to impose obligations on individuals that otherwise political parties could properly fulfil. I am anxious about this because it seems to me that what we are seeking here is neatness at the expense of reality and effectiveness. I can envisage a situation where either inadvertent non-compliance takes place though ignorance rather than through malice aforethought, or where people are scared off from supporting the political party of their choice. My noble friend has made a serious point.

Lord Goodhart

I, too, should like to express some concern about this clause. I understand to some extent why it has got into the Bill. The significant fact is that the Government are proposing—for reasons which I believe are correct—to alter the original proposals of the Neill committee that all donations should be recorded, except for anonymous gifts of less than £50, to a rule that any gift of less than £200 can be accepted without having to be recorded. There are good reasons for that in that it would simplify the administration involved. However, I can also understand why the Government feel that that may open up a method of evasion.

However, I believe that the measure will hit a good many people who are not aware that they are being hit. I have a standing order for a payment of £200 a month to my constituency association. If the rule were changed so that gifts of more than £200 had to be reported—rather than gifts of £200—that would shift on to me the responsibility to report my gift. If the rule is changed, at least I shall be aware of that. However, a number of other donors in my situation simply would not realise that the rule had been changed and that they were under a personal obligation to report.

I believe that rather than having this clause the Government would do better to make it an offence deliberately to split up donations into a number of gifts not exceeding £200 for the purpose of evading the disclosure requirement. That offence may be difficult to prove. However, serious evasion would involve many gifts of £200 or more being given. A few innocent cases may slip through the net where no reporting takes place because no individual donation is more than £200. It is better to accept that that may happen rather than put donors in a position where they may unwittingly find themselves in breach of an obligation to report of which they are unaware. I hope that the Government will reconsider the matter.

Lord Bassam of Brighton

I shall take some care in explaining our position on this matter. Clause 63 places a duty upon donors to report to the electoral commission multiple small donations to a registered party where these, in aggregate, would exceed £5,000. Paragraph 13 of Schedule 6 applies similar requirements in respect of donations to individuals and members associations where these would exceed £1,000 in aggregate.

It may be helpful if I explain the purpose of these provisions. The definition of donation set out in this part does not include contributions the value of which is less than £200. As the Neill committee concluded, a de minimis limit is necessary if political parties are not to be placed under an unnecessarily heavy administrative burden. That is why we adopted that course. However, there is no doubt that the existence of a de minimis limit would offer some scope for evasion of the reporting requirements in respect of disclosable donations. It would be possible for a donor determined to evade the disclosure requirements to make a number of donations just below the de minimis limit to a political party. Someone could make 10,000 20,000 or 50,000 donations of £199, perhaps by computer.

Clause 63 and paragraph 13 of Schedule 6 are intended to deter the evasion of the disclosure requirements in this way. I should emphasise that in this situation the duty lies wholly with the donor. As I understand the position, that is the only case where that applies in the Bill. It would be possible to require that the donor make his or her report to the political party concerned, which could in turn be required to include the details in its quarterly donation report. However, as the party may well not have kept records of donations below the de minimis limit—that is not an unreasonable assumption—it would have no way of verifying the contents of the donor's report. So it is more appropriate to require that the report be made by the donor direct to the commission.

In placing the reporting requirement on the donor rather than the recipient of the donation, these provisions depart from the underlying and main body of controls set out in the Bill. But the problem which these provisions are intended to address is an inevitable consequence of applying a workable scheme to the parties themselves. These are necessary provisions if one of the more obvious means of evading the controls set out in the Bill is to be countered while still containing the burden on parties within reasonable limits. It is that balance that we seek to strike.

I remind the noble Lord, Lord Mackay, that at Recommendation 18 the Neill committee recommended that, it should be a criminal offence to attempt to evade or render nugatory the statutory reporting requirements relating to disclosable donations". Clause 63 is one of a number of provisions in Part IV of the Bill which gives effect to that recommendation.

I accept that it is a difficult issue but it is essential if we are to regulate that intermediate range of donations. The noble Lord, Lord Mackay, said, rightly, that we were departing from the Neill committee in this regard. We believe that this is the most efficient way to achieve this without placing too heavy a burden on the political parties. Throughout the debate, that point has been a clarion call from the Benches opposite. We need to deal with the situation where someone could make a number of donations, perhaps of less than £200, with some sinister intent.

I ask Members of the Committee to reflect carefully on what we say. I can envisage some of the difficulties but we seek to ensure that we have a fair system of regulation which protects the political parties as much as anything else.

11 p.m.

Lord Norton of Louth

I understand the argument that the Minister advances and the problem he seeks to address. However, there is the problem of the onus it places on the donors. How does the noble Lord expect donors to be in a position to comply with the requirements of the clause? The clause requires the donors to put in a report to the electoral commission by 31st January of the year following the year in which the donations are made. How will donors know where the electoral commission exists? How will they be aware of these requirements? Someone may be fully aware of them and seek to evade. But there may be those who give money generously but without being fully aware of this requirement. What is the mechanism for ensuring that donors are aware that they have to comply with this requirement?

Lord Bassam of Brighton

The noble Lord raises a reasonable and intelligent point. Clearly we shall have to give considerable publicity to the effects of the legislation. We might do so through the local authority. We might hope that that approach would be supported by local political parties. It would be open to the electoral commission to advertise its existence—I am sure that it will want to do so—and to promote some of the factors in the scheme which require compliance by the parties and, on this occasion, by a donor.

Lord Mackay of Ardbrecknish

1 t has been an unsatisfactory debate. The Minister's reference to an advertising campaign makes me wonder what it will say. Will it say, "If you donate to a political party you may be committing a criminal offence"? I believe that the clause is wholly unreasonable. The noble Lord is taking a sledgehammer to crack a nut.

Lord Bassam of Brighton

In the noble Lord's opening comments, he went through the Neill proposals which covered this area. Perhaps he will rehearse again his preferred way of dealing with the situation. I thought that he had acknowledged that there was a problem. The noble Lord, Lord Norton of Louth, accepted that there was a real problem which requires to be dealt with. If not, there will be adequate scope for mischievous circumventing of the intention behind the measure.

Lord Mackay of Ardbrecknish

I was going to go away and think about whether there was a real problem. If someone is making dribble donations to the headquarters of a party, presumably the party will check up. When a dribble of donations comes in from the same quarter, something is bound to click in one of their computers and they will start to wonder whether they are exceeding the £5,000 limit. If someone goes round the country giving small donations to constituency parties, they will be quite busy. I am not convinced that that is realistic.

I am much more attracted to the Neill committee suggestion that the noble Lord, Lord Goodhart, mentioned—that is, that if someone is found out and it can be proved that he was trying to get round the rules, we might make that an offence. I shall not proceed with the issue any further at this stage, although we may come back to it later when we have had a chance to think about it. We should not put the obligation on the donor and threaten to make him a criminal if he makes a mistake. No doubt some of your Lordships have connections with three or four constituencies, all of which will be looking for money at election time or at other times. It is easy for someone to forget how generous he has already been to another constituency party.

Lord Bassam of Brighton

Some of your Lordships have connections with whole counties of constituencies, but not too many of them are on our Benches.

Lord Mackay of Ardbrecknish

I suspect that the Minister may be wrong. Some of his colleagues will have fought two or three seats before they got to the House of Commons and will live in another constituency now that they have retired from the House of Commons. It is not unreasonable to have links with three or four constituencies. I did not say 30 or 40. For the most part, the days are long gone when there were many such people in my party—perhaps they are now more likely to be in the Labour Party.

Joking apart, we should give some thought to finding another way of dealing with the problem. If I can tempt the noble Lord, Lord Goodhart to put his legal mind to the issue, I should certainly be interested in an amendment along the lines that he suggested. That would be a better solution than the blanket provision in Clause 63. In any case, I shall let it go this evening.

Clause 63 agreed to.

Clause 64 [Register of recordable donations]:

Lord Bassam of Brighton moved Amendment No. 176A: Page 41, line 27, leave out ("(2)(b)") and insert (2).

On Question, amendment agreed to.

Clause 64, as amended, agreed to.

Lord Bach

I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.

House adjourned at eight minutes past eleven o'clock.