Tax relief on political donations.

HL Deb 18 October 2000 vol 617 cc1040-63

1. 379A.—(1) Tax relief shall be available to an individual (the donor) in accordance with this section on qualifying political donations made by him of up to £500 in any year of assessment.
2. (2) A donation is a qualifying political donation for the purposes of this section if it is made to an eligible political party and—
1. (a) it takes the form of the payment of a sum of money,
2. (b) it is not subject to a condition as to repayment,
3. (c) it is not conditional on or associated with, or part of an arrangement involving, the acquisition of property by the political party, otherwise than by way of gift, from the donor or a person connected with him, and
4. (d) the donor is resident in the United Kingdom at the time the donation is made.
3. (3) For the purposes of this section a political party is an eligible political party if, at the last general election preceding the donation in question—
1. (a) two members of that party were elected to the House of Commons, or
2. (b) one member of that party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.
4. (4) If an individual makes a qualifying donation he shall be entitled, on making the payment, to deduct and retain out of it a sum equal to basic rate tax thereon.
5. (5) Where a sum is deducted under subsection (4) above the sum deducted shall be treated as income tax paid by the person to whom the payment is made.
6. (6) Any person by whom a qualifying donation is received shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (5) above is treated as income tax paid by him; and any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the qualifying political donation to which it relates.
1041
7. (7) The following provisions of the Management Act, namely—
   1. (a) section 29(1)(c) (excessive relief) as it has effect apart from section 29(2) to (10) of that Act,
   2. (b) section 30 (tax repaid in error, etc) apart from subsection (1B),
   3. (c) section 86 (interest), and
   4. (d) section 95 (incorrect return or accounts),
   shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable in accordance with regulations made by virtue of subsection (6) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.
8. (8) In the application of section 86 of the Management Act by virtue of section (7) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment ("the relevant year of assessment") under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date—
1. (a) is 1 January in the relevant year of assessment in a case where the person falling within subsection (5) above has made a relevant interim claim; and
2. (b) in any other case is the later of the following dates, that is to say—
1. (i) 1 January in the relevant year of assessment; or
2. (ii) the date of the making of the payment by the Board which gives rise to the assessment.
9. (9) The Board may by regulations make provision—
1. (a) for the purposes of any provision of this section which relates to any matter or thing to be specified by or done in accordance with regulations;
2. (b) with respect to the furnishing of information by donors or recipients, including, in the case of recipients, the inspection of books, documents and other records on behalf of the Board; and
3. (c) generally for giving effect to this section.
10. (10) In this section—
• "financial year" in relation to any person, means a financial year of that person for the purposes of the relevant regulations;
• "interim claim" means an interim claim within the meaning of the relevant regulations;
• "relevant interim claim" means, in relation to an assessment made for a period coterminous with, or falling wholly within, a person's financial year, an interim claim made for a period falling wholly or partly within that financial year; and
• "the relevant regulations" means regulations made under subsection (9) above.
11. (11) Section 839 of this Act shall apply for the purposes of this section to determine whether one person is connected with another."").

The noble Lord said: This amendment seeks to insert a new clause which attempts to implement recommendations 38 and 39 of the Neill committee that small donations to political parties represented in the House of Commons should be eligible for tax relief. That is not a wholly novel principle as donations to political parties are already exempt from inheritance tax. Indeed, the wording of the new clause is based on the existing wording of the tax relief provisions and also on the recommendations of the Neill committee.

The noble Lord, Lord Beaumont of Whitley, who energetically represents the Green Party in this House does not appear to be in his place just at the moment. The wording provides that that benefit would be available only to political parties represented in the House of Commons. The reason for choosing this wording is, as I say, that it follows the explicit recommendation of the Neill committee and we wish to stick to that recommendation.

That recommendation was not an isolated one-off in the Neill committee, a stand-alone recommendation. It was an integral part of what it was trying to achieve. The committee recognised that the base of political funding in this country needed to be broadened. But it also rejected, as do the Opposition, state funding of political campaigning.

At this juncture I should point out that the Neill committee did not regard tax relief along the lines set out in this proposed new clause as state funding any more than I do. No one argues that charities, which benefit from tax relief on the donations that they receive, are funded by the state. The right honourable gentleman the Chancellor of the Exchequer has extended considerably that charitable relief. But for a long time the principle has been that in tax law certain charitable donations, as defined and with the conditions expressed, were regarded as the income of the charity rather than the income of the donor; in effect, that the donor was diverting part of his income to the charity concerned.

In paragraph 8.7 of the Neill committee's report it is argued that tax relief is not only not state funding but that it would be necessary, given the reduction in large donations which the committee envisaged, to allow tax relief on small donations in order to prevent parties coming cap-in-hand to ask for direct state funding.

This amendment was tabled by my colleagues in another place to the Finance Bill in 1999 and also to this Bill when it was before another place.

It may be thought inappropriate to have a tax-relieving provision in a Bill of this character. Indeed, Her Majesty's Treasury would have judged it as such when I was a Treasury Minister because, generally speaking, tax relief has been restricted to Finance Bills. But that is not the view of the Treasury now. Indeed, in Committee on the Finance Bill in another place in June 1999, the Economic Secretary to the Treasury, in the course of rejecting the tax relief proposals along these lines put forward by my honourable friend, s said that this Bill—which was then a gleam in the eye, although the Bill was known to be on its way—would be the Bill in which such a measure should be included. That has the additional advantage of giving your Lordships the opportunity to consider that particular recommendation of the Neill committee.

In another place, this proposal was supported by my right honourable friend John MacGregor, who was a Member of the Neill committee. I hesitate to express the views of that committee in the presence of the noble Lords, Lord Shore and Lord Goodhart, who were both members of that committee and who will obviously speak on this issue if they wish and give more detail. But my right honourable friend made the point that, because of the new restrictions on donations which are involved in other recommendations of the committee and in other clauses of the Bill, and the reporting and disclosure requirements, large donations to political parties would be less forthcoming.

As I understand it, the committee wished to deal with that. It saw tax relief on smaller donations as, a means of ensuring that sufficient funds to serve our democratic purposes were attracted to political parties".

That is why I say that it is an integral party of the other recommendations of the Neill committee and not a stand-alone provision.

The committee recognised that the new restrictions would reduce the political parties' income, perhaps significantly. It was intended that this measure would, in part, address the imbalance which would otherwise be created.

I should say that in another place this proposal was supported also by the Liberal Democrat spokesman and by the independent Member of another place, Mr Martin Bell, who said that it would encourage the little people to get involved in politics which would help our democracy and make it much healthier. The particular circumstances of his membership of another place makes that view of interest.

Of course, that would be of benefit to all the main parties, including the Labour Party. This measure would benefit that party as well as other parties because it would enable it to broaden the base of its finances and to move away from significant large donations to many smaller ones. That is what the Neill committee intended and is the spirit of other parts of the Bill.

There was also the question of cost, and no doubt the Treasury had a view on that aspect too. The estimate was that it could be expected to cost the Exchequer in terms of lost revenue £4 million or £5 million per year. I am sure that everyone would agree that that is not a particularly huge sum of money in the scale of things in the operation of Her Majesty's Treasury. Hundreds of millions have been spent on the Dome and tens of millions have been spent on the national changeover plan for the euro. That £4 million or £5 million, small as it is, would be well spent on the preservation of our democracy—and many of us believe that our political parties are an important matter in relation to that.

I should add that the noble Lord, Lord Neill of Bladen, wrote to the Home Secretary in October of last year to respond to the Government's White Paper. He said: During the Committee's investigation of the funding of political parties we found widespread support for the view that political parties should be funded by a large number of small donations rather than by a small number of large donations. My colleagues and I remain of this view … We are disappointed that you have decided against our proposals in relation to a tax relief system".

It is no good the Labour Party or its spin doctors claiming that the Bill implements the Neill committee's recommendations because in this important respect it does not. As I have made clear, this is one of the key recommendations in the report. It is right in principle and in practice and it should be supported. I beg to move.

Lord Shore of Stepney

I support the amendment without any inhibition whatever. The nominees of the three political parties together with the rest of the Neill committee agreed with this point. It is important that the financing of political parties is put on a correct basis. Political parties are at the heart of British democracy and they are not to be run on the cheap. To conduct the research and organisational presence that is required throughout the length and breadth of the land costs money so that our democracy can be operated effectively.

From where does such money come? Some money comes from the state in various forms. What used to be called "Short money" is now I believe in this "other place", as we used to refer to it, called after the then Leader of the Opposition in this House. A certain amount of money is made available from the state to help in purely parliamentary activities. However, we do not want the state to finance political parties too much because that could lead to worries about independence and the independence of political parties is crucially important.

So we must look to external sources. Traditionally, for the Conservative Party external sources have included corporations. Businesses have traditionally looked upon the Conservative Party as their party. The trade unions and the Co-operative movement have heavily financed the Labour Party. Things are changing. In the Labour Party we now draw much more money from corporations than in the past. I shall not go into the reasons for that; I shall put it on one side as it is not germane to this debate. I believe that most people would agree that, on the whole, although it is not desirable to receive funds from large corporations and from trade unions, we do not want to be in a position where they dominate our political parties financially.

What is left? If we do not want our political parties to be run by large corporations and we do not want them run by trade unions and other collective bodies, we are left with one further possibility: donations from individuals. Increasingly, the tendency has been for very rich men and women to make donations. Now that all the parties are agreed that in future there has to be a declaration of any amount donated over £5,000, many people will be sensitive about making such donations. We now live in a world where people are cynical about other people's motives and inevitably a large donation, publicly acknowledged, will attract rigorous and detailed press and media scrutiny, if not hostility. Therefore, in future, the tendency will be for large donations to be less forthcoming.

So we are left with the donations of ordinary members. I believe that there are 300,000 individual members in the Labour Party, but I do not know the present score for the Conservative Party. If both parties rely more heavily on donations from individuals, that would be to the advantage of all. More people would become directly involved in politics and that will be important in relation to the internal democracy of political parties. It will not be good for party headquarters to be dependent upon a dozen or so rich donors. It would be much better if the funds were supplied by tens of thousands of people making an annual contribution. I am sure that the same argument applies to the Conservative Party.

On the Neill committee's recommendation, the arguments in relation to democracy are overwhelming. The proposal has been carefully thought out. We have the agreement of the Inland Revenue that such a scheme would attract tax relief and the major administrative work of collecting tax rebates from the Treasury would be carried out by the political parties. Not only has the practical scheme been worked out, but I believe that all possible criticism has been met by saying that the ceiling would be £500 a year. It is not a matter of rich people financing political parties through tax relief. Hopefully, ordinary citizens will be able to afford £100 or £200 a year, and some even £500 a year, without corrupting the system in any way. It is a workable, modest scheme. The noble Lord, Lord Cope, mentioned £4 million to £5 million—that depends on the assumptions made about the number who will contribute—and I have never heard anyone mention a sum beyond £8 million.

That being so, why on earth are the Treasury and a Labour Government, which on the whole give a special emphasis to contributions and democracy, saying no? I followed the debate when it first took place in the House of Commons and the reason given is difficult to take seriously. Perhaps it was possible to take it seriously a year ago, when it was forthcoming from the Treasury Front Bench Minister, but it clearly is not possible now. The reason given was that the country, in a period of great public expenditure stringency, would not like the thought of political parties benefiting even to the extent of £4 million to £5 million—or at the outside £8 million—a year. People would feel that that money should go towards a couple of schools here and there. Maybe, in those clays of great public expenditure stringency, that was so. I simply remind my Front Bench that we are committed to spending an additional £50 billion in the next three years. The sheer flimsiness of that argument has to be judged against that background.

Once again my noble friend has the unhappy task of trying to justify the unjustifiable. My advice to him is do not try; take up the matter with your colleagues. We know that there is now a different political and expenditure environment and that they will not seriously object.

4 p.m.

Lord Goodhart

I too speak in support of the amendment. I do so principally wearing my Neill committee hat along with the noble Lord, Lord Shore. My party gives more qualified support to this amendment than I do. My party takes the view that tax relief is second best to state funding. My purpose is not to speak against the state funding of political parties, but to speak in favour of tax relief on small and medium-sized donations.

The Government have accepted virtually all of the 100 proposals made by the Neill committee. In a few cases they have modified them somewhat, but 1 believe that this is the only one—certainly the only important one—that the Government have rejected outright. The main purpose of tax relief is to give an incentive to parties to seek to obtain a larger proportion of their income from smaller donations.

Tax relief on donations to political parties is given in many other countries. The Neill committee visited several countries and we were particularly struck by a highly successful scheme for the funding of political parties in Canada. That funding included what might be called "direct" public funding, in particular matching contributions for campaign expenses, and also tax relief. The system for tax relief appeared to be both popular and effective.

In Canada there is tax relief on gifts at the federal level up to 1,150 dollars, which is somewhat more than the limit of £500 proposed by the Neill committee. On a gift of 1,150 dollars, tax relief is available in an amount of 500 dollars—again, considerably more generous than we are proposing for this country, though the system is different in some technical respects from that proposed.

I should like to quote briefly from paragraph 8.6 of our report, which is in very much the same terms as the letter read by the noble Lord, Lord Cope. It reads, We have found very widespread support for the view that it is more democratic, and therefore in the public interest, that political parties should be funded by a large number of small donations rather than by a small number of large donations. A system of tax relief which increases the value to political parties of smaller donations is likely to encourage the parties to make greater efforts to obtain them". We proposed to do that by allowing tax relief on the first £500 of a donation by individual taxpayers on a basis similar to that provided for charities by Gift Aid. It would mean that on each donation of £100 by a member, the party to which the donation was given would receive something in the order of £28 as the refund of tax from the Revenue. There are certain differences from the Gift Aid scheme. Unlike donations to charity, there would be a ceiling—as I said, £500—on the amount of donation qualifying for tax relief and, further, the donation could not be taken into account when calculating the donor's liability to higher rate tax, something which can be done in the case of donations to charity.

So the whole benefit of the tax relief, as we proposed it, would have gone to the party and none of it to the donor. There would be no great administrative burden on the Inland Revenue. If it can deal with Gift Aid claims from thousands of charities, it can plainly deal with claims for refunds from a small number of political parties.

Of course, there are arguments against tax relief. One is that, even with a ceiling, it would favour parties whose members have higher incomes, notably of course the Conservatives. There is some truth in that; £500 is a substantial sum and not many donors would be able to pay so much. Even so, there would be a considerable benefit both for my party and, to a greater extent, the Labour Party. There may have been some misunderstanding as to how substantial that would be. For instance, in evidence before us the finance director of the Labour Party, Mr David Pitt-Watson, said at paragraph 8.12 of our report, Tax relief is of value only to people who pay tax and where the donations given are of significant size. It would be of little value to the Labour Party, which has 400,000 members who are paying an average £20 each to the Labour Party's coffers. It would be of enormous value to our opponents". The fact is that what Mr Pitt-Watson was speaking of was a total of £8 million and the value of tax relief, under our proposals, to the Labour Party on that would be of the order of £2 million—a substantial sum.

The second argument against the scheme was that it would discriminate against donors who pay no income tax because they would not be able to confer any additional benefit on the party to whom they gave the donation. But, again, the fact is that, given the low level at which the basic rate of tax becomes payable in this country, few donors, except perhaps students, would be people who are not themselves taxpayers, at least at the basic rate.

The third and main argument on which the Government relied in rejecting our proposal was what I might call the schools and hospitals argument, which was mentioned by the noble Lord, Lord Shore. It was said that there would be less money available for public expenditure. When one asks how much less, as we have already been told, the Government estimated the cost of the proposal at £4 million to £5 million a year.

The Government's spending is rapidly approaching £400 billion a year. So £4 million amounts to around 0.001 per cent of government spending. That is not £1 in every £1,000; it is not even £1 in every £10,000; it is £1 in every £100,000 of government spending. It is the equivalent of someone earning £100,000 spending £1. That is far too small an amount for the schools and hospitals argument to be remotely credible.

I should emphasise the fact that tax relief is already given in the United Kingdom on bequests to political parties which are exempt from inheritance tax. That stems from a provision in the Finance Act 1975 which introduced what was then called capital transfer tax and is now called inheritance tax, and of course it was introduced by a Labour government. Given that inheritance tax is not payable on estates of less than £250,000, it is clear that that relief is directed at wealthy donors.

Let me conclude by saying this. I started by talking of the need to give incentives to parties to obtain more funding from small donations. But there is more to it than that. We give tax relief on charitable gifts in this country because we believe that support of charity is part of the role of a good citizen. Tax relief sends a message to people that giving to charity is a good thing. We need to send the same message about giving to political parties. We live in a time of cynicism about politics and politicians. Party membership is falling across the board in all parties. But parties are an essential element of the democratic process. They need members and they need money. Of course it is not a citizen's duty to belong to a political party or to contribute to it. But we should recognise that citizens who do that are supporting the democratic process and one effective way of recognising that is to allow tax relief on relatively small donations to political parties.

Baroness Gould of Potternewton

I should like to make just one or two points which concern me in respect of the amendments before us and in respect of the Neill committee report.

I understand the sentiment that we want to try and widen the base of donations. That is absolutely right and I am sure nobody would disagree. My problem is that I understood the aim of the Neill committee report—we have been discussing the report for many days and will no doubt continue to discuss it—was to try and arrive at some sort of equity and remove discrimination wherever it lies. We have two forms of discrimination in the amendment before us.

First, we have the point at paragraph 8.10, which the noble Lord, Lord Goodhart, did not quote and is one of the arguments against the scheme, where it says, From the viewpoint of the donor, the unfairness of the system is that it would cost a non-taxpayer more to provide the same benefit to the party than it would cost a taxpayer". That was picked up by Professor Vernon Bogdanor, who said, it would be thought in this country to be inequitable, that people who do not pay tax … should not get the benefits that taxpayers would". So there we have an inequity which would be built into this legislation and that cannot be right.

The noble Lord, Lord Goodhart, quoted David Pitt-Watson from the Labour Party. We believe that the amendment would have little value to the Labour Party. However the figures are interpreted, the clear view of the party is that the amendment would be of greater benefit to our opponents. That is a political point which perhaps is not as valid as the other points, but nevertheless it is true.

The noble Lord, Lord Cope, pointed out that the noble Lord, Lord Beaumont, who represents the Green Party, is not in the Committee today. I believe that the amendment is discriminatory against the small parties. The idea that the criteria should be two members of the party elected to the House of Commons or one MP and not less than 150,000 votes discriminates against small parties. We all know that the real force of our democracy is that we do not try to preclude small parties from having equal status to the big ones.

As regards state aid by the back door, when the House of Commons Select Committee reported in 1994 it identified tax incentives as a form of public subsidy; in other words, state funding. At that time, the Conservative Party put in very strong evidence to support that view. It is interesting to note that that view has changed.

The Neill committee did not believe that the arguments against tax relief by deduction at source are very strong. I believe that the way they have been included in the Neill report and in the amendment is strong because it creates a discriminatory practice.

The Earl of Sandwich

I warmly support the amendment moved by the noble Lord, Lord Cope. I speak as the son of a Member of Parliament who sat on the Conservative Benches and who for a long time was an Independent Conservative. I warmly support what was said by the noble Lord, Lord Shore, about the loss of individual commitment. The noble Baroness, Lady Gould, has poured a great deal of cold water on what has been said and I am sorry that she has made party-political points. The noble Lord has opened up a much bigger debate than we ought to be having on this small part of a large Bill. However, I hope that what the noble Lord, Lord Cope, said will cause the Government to reflect—and although perhaps they will not accept this amendment, I hope that they will come back with one tabled in another form at a later stage. It is time that the Government gave some ground on what is of universal interest.

4.15 p.m.

Lord Shutt of Greetland

I am in the same position as the noble Lord, Lord Hodgson, who spoke last week; neither of us were Members of your Lordships' House when debate on the Bill began earlier in the year. I must first declare an interest as a member and director of the Joseph Rowntree Reform Trust. I have held that position for the past 25 years. Its principal activity is the making of grants, often for political purposes, as it is one of the few organisations able to do so. We deliberately do not have charitable status, thanks to the good thoughts of Joseph Rowntree back in 1904.

Like all other Members of the Committee, except perhaps a handful of Cross-Benchers, I have a vested interest in the party to which I belong, but I want to speak in favour of the amendment in context of the Bill as a whole.

Throughout my adult life I have been involved in a political party at either national, regional, constituency or ward level. Last week, a great deal was said about the national parties and the constituencies but nothing was said about ward organisations or village associations. In the context of the Bill as a whole, I am concerned about who on earth will take on the responsibilities of treasurer and all that that will mean in terms of the regulation of political parties. The more I examine the Bill, the more I wonder who will take on the job of director general of a political party these days, bearing in mind the onerous burdens that the Bill imposes. It seems to me that the Bill introduces more regulation into this voluntary activity in life in Britain than perhaps is the case for any other voluntary activity.

I believe that as regards political parties, the Bill is all downside. Although I am persuaded that that must be so when it comes to cleaning up politics, there is a tremendous amount of downside to the Bill. It seems to me that the amendment we are considering is the only piece of upside for the political parties.

Other parts of the Bill relate to political parties straightening up their record keeping. Records must be kept not only so that parties can claim back tax on individual donations but also for other purposes. The other interesting feature of the amendment is that it relates to individuals and not to corporate donations to political parties. Political parties are hardly vibrant at the present time. They may well be keeping up appearances. Perhaps they are doing so because of large donations.

I believe that political parties need something to attract volunteers. I do not know who will wake up tomorrow morning and say, "I think I will join a political party today" and then go and do so. The likelihood is that some people will join political parties at some stage tomorrow but that may be because someone appears on the doorstep with a receipt book and suggests that it is appropriate.

A provision which would encourage a growing involvement in political life in this country would redeem the Bill. People should be given the opportunity to join and those who sign them up should be able to say, "Yes, if you join, from your donation we can get a small sum from the Exchequer to assist the party".

During the past five months as a Member of this House it has been my experience that it is unusual for a Minister to reply, "I accept this amendment with acclaim". However, I trust that on this occasion consideration will be give to the proposal. As was indicated by my noble friend Lord Goodhart, we are talking not only about £500 or £200 donations, but as likely as not about £20 or £10 donations. Provided that the donor is a taxpayer and that proper records are kept, there is no reason why tax relief should not be available on very small sums.

In giving an upside, £500 might be thought of as on the high side—I believe that it is about right—but if the sum were £200 it would, in my view, still provide an incentive and reinvigorate our political parties and, indeed, our democracy. I support the amendment.

Lord Norton of Louth

I, too, support the amendment and rise to reinforce the points made by the noble Lord. I am in complete agreement, although I would go slightly in the opposite direction as regards the amounts involved. For reasons which I shall indicate, I would go further than the recommendations of the Neill committee.

The amendment is extremely attractive for the reasons which have been given. The proposal is not for the benefit of the donors but for the benefit of the parties. Indeed, the noble Baroness, Lady Gould, may find that if the amendment were agreed to, the number of donors to the Labour Party would increase.

The Bill imposes a substantial burden on political parties. That argument has been made in various ways during the passage of the Bill. That burden occurs at a time when the parties are already under tremendous pressure. I have also made that point in various debates on the Bill. We must address how to sustain and revitalise political parties. To allow certain donations to be tax deductible may act as an incentive to people to give, or at least to give to a greater extent than before, and the parties will benefit. I do not pursue the matter further given the points powerfully made by other Members of the Committee.

I go further than the amendment and the direction suggested by the noble Lord who has just spoken. Perhaps one should increase the amount that may be allowable against tax. To raise the limit somewhat has the attraction that in all likelihood the amount given to parties will increase. It may also be an attractive means of discouraging non-compliance with the provisions of Clause 63. Under that clause someone who gives a total of £5,000 in small donations is required to report it to the electoral commission. However, there is a problem about ensuring compliance because, apart from the donor, no one may be aware that the aggregate donation is £5,000. Let us say that £5,000, or a proportion of it—but perhaps more than the amount proposed in the amendment—is allowable against tax, subject to the donor providing a certificate from the electoral commission that a report has been submitted. That would ensure more effective reporting.

I appreciate that there may be powerful and compelling arguments against that proposal. With considerable regret, I do not speak as an expert on tax allowances. It would create problems and involve a greater loss to the Treasury than the figure mentioned by my noble friend Lord Cope. However, there is a case for giving thought not only to allowing donations to be tax deductible but perhaps to a proposal along the lines that I have just indicated. I reinforce the points already made. If we accept that political parties are under threat and need to be revitalised—I believe that they do—perhaps this is an amendment worthy of serious consideration.

Lord Hayhoe

I also support the amendment. I first became involved in politics in campaigning in the North Croydon and Hammersmith by-elections before the 1950 general election, and I have been involved ever since. That rather dates me. One of the worries about the present situation is that the growth in cynicism about politics and politicians and lack of interest in the political process have led to a steady decline in the average turn-out in general elections during the period to which I have referred. This amendment may help in a small way to redress the balance.

A person may become a little more interested in politics if he knows that in making a donation the political party will benefit from some tax relief. The benefit goes to the party, not the individual. One would have thought that interest in politics generally would benefit from that. If we continue as we have, our precious system of democracy which we have built up over the years will gradually erode. We saw an indication of that perhaps recently when some of our fellow citizens believed that it was more appropriate to demonstrate and blockade the streets than to seek their political ends through the normal political processes.

Having listened to powerful speeches by members of the Neill committee in support of the recommendation of that body—only the noble Baroness, Lady Gould, was critical of it—the balance of argument in favour of the amendment is overwhelming. One can never have a proposal that is not susceptible to nit-picking at the edges. Having been in a somewhat similar position to that of the noble Lord, Lord Bassam—I have had to defend government decisions which are fairly indefensible—I hope that when the Minister comes to reply he will hold out the hope that he and his colleagues will give further consideration to this sensible, useful and important amendment.

Lord Clinton-Davis

I support the noble Lord, Lord Hayhoe, in one respect. I believe that the Minister should give more careful thought to this matter. I do not know whether this is the right kind of amendment, but I have come to this debate with an open mind and have listened carefully to my noble friend Lord Shore. He was my first Secretary of State, but that is no reason for supporting him today. As one who has looked carefully at the propositions advanced over the years, first as an opposition spokesman and then as a government Minister in this House, I know that the most that we can expect of the Minister today is an emphatic statement that he will think about it. I do not believe that we can ask him to do anything more.

I hope that the Minister has listened carefully to the representations made today on behalf of the Conservative, Liberal Democrat and Labour Parties. This is not a matter of party advantage or disadvantage, but it should be thought about carefully. I beg the Minister to think about this amendment most carefully rather than to reject the idea, which I suspect is indicated in his brief. The proposition has been well advanced from all quarters of the Committee today.

Lord Rennard

In this debate I should like to strike a rather different tone from that of a number of Members of the Committee who have argued enthusiastically in favour of the amendment. The argument that I make indicates that I support the amendment with slight reluctance rather than that I am totally convinced by it. When I looked at the proposition in the report of the Neill committee I was reminded of the words of Winston Churchill, who described democracy as the worst possible system of government apart from all others.

Lord Renton

Sir Winston Churchill added that one could not have any other system.

Lord Rennard

Indeed he did, and perhaps that is the conclusion to which I shall come in a few moments. I do not believe that the amendment puts forward a good scheme. However, it is not the worst possible system for the financing of political parties and it is better than the status quo. I understand some of the Government's reservations about the scheme, in particular those voiced a few moments ago by the noble Baroness, Lady Gould. I find it somewhat strange to hear the Government hiding behind the Neill committee in defence of other proposals but ignoring its conclusions on this issue.

I do not believe that the Government's objections can be based on expense. The estimated cost of £4 million, which is less than one-hundredth of 1 per cent of the additional £43 billion that the Government propose to spend on public services—the "schools and hospitals" argument—will not break the bank. I do not believe that the Government's objections can be the size of the sum involved or other priorities. The Government's objection must simply be that the £4 million would go disproportionately to parties with supporters able and willing to donate up to £500. I understand their legitimate concern that there is already an uneven playing field in our democracy and that this scheme may make the slope steeper in the Labour half of the pitch.

There is an easy answer to this problem. The election commission could distribute the estimated £4 million fairly on the basis of levels of support for the parties. That would address the objections made from the government side. It will not be a great additional burden on the commission as it will also be distributing the £2 million fund to the political parties for policy development. But in the absence of such a scheme based on fairness, I shall have to support a tax concession scheme in spite of its drawbacks.

4.30 p.m.

Lord Bassam of Brighton

I feel like I am encircled by the debate and put into a very interesting position. Before I get to the heart of the issue I must say that this has been a very wide-ranging debate. I have been very impressed by the breadth of the debate and many of the contributions made. I enjoyed the last contribution. I thought it was very helpful. I also took very careful note of the contribution of the noble Lord, Lord Norton of Louth. I thought he made a very useful and telling point. As ever, I pay great respect to the noble Lord, Lord Clinton-Davis, for his very careful political advice and guidance.

Of course, the Government will have to listen and reflect on all that has been said in this important debate. Members of the Committee have made some very telling points. I want to advance the case against giving this tax concession because I think it is important that that case be heard. The purpose of the new clause is to introduce, as the Neill committee recommended, tax relief on donations to political parties of up to £500. The Government have sought to implement the Neill committee's recommendations, as the committee intended, as a package. However, the Government remain unpersuaded of the case for tax relief on political donations.

In chapter 7 of its report, the Neill committee came down squarely against any general system of financial support for political parties. The Government agree with that conclusion. A tax relief scheme for political donations would, in our view, amount to general state aid by another route, one which the noble Lord, Lord Rennard, fully grasped and acknowledged in his contribution. If the case has not been made for direct grants to political parties paid for out of public funds, nor has it been made for a tax relief scheme. When it comes down to it, a scheme of this kind is simply another method of securing the same undesirable end.

In its report the Neill committee reviewed the arguments against state aid. It is perhaps worth spending a little time examining those various arguments. A number of the arguments were put succinctly by the Conservative Party in its written evidence to the Neill committee. In its memorandum of evidence it indicated that its view on public funding had not changed since the party gave evidence to the Home Affairs Select Committee inquiry in 1993. In its evidence to that inquiry the Conservative Party's memorandum stated: The Conservative Party is opposed to the direct funding of political parties. State funding would either unduly favour established parties or encourage the formation and growth of extremist parties". As well as those commendable objections to the public funding of racist or anti-democratic parties, the Conservative Party's memorandum to the Neill committee went on to advance other arguments against state funding. It said that such funding, would reduce the dependence of the parties on their own activists for fund-raising and would increase the distance between parties and the electorate".

Lord Goodhart

As regards that argument, if the tax relief is given linked to the donations, surely it would increase rather than decrease the urge to go out and recruit new members and get subscriptions from them.

Lord Bassam of Brighton

That may be a consequence. I accept the point. But these are powerful arguments which cannot be sidestepped by portraying tax relief as something other than state funding; because that is what it is, state funding by another means.

To those arguments I would add two more. The first is that I am not aware of any great public clamour for general state funding of political parties. One of the core objectives of the Bill is to clean up British politics by ensuring that there is full transparency in the way the political system is financed. I do not believe that this objective would be well served if, at the same time as banning foreign funding and requiring the disclosure of donations, we awarded political parties a public subsidy—that is what we would be doing—to help them with their campaigning activities. With the Conservative and Labour parties having spent £28 million and £26 million respectively at the last election, there is little evidence that the political process is being run on a shoestring!

My final argument is that, even if there was a case for public funding to be made, few would identify the needs of political parties as a priority in terms of public expenditure. Another point bears consideration. The administrative costs of such a scheme have not been the subject of any precise estimate, but it seems clear that they would be significant and they would offset the benefit, particularly, as the Neill committee recognised, in relation to smaller donations.

I recognise that the proposed new clause would give effect to one of the Neill committee's recommendations. The Government have sought, wherever possible, to adhere to the committee's recommendations. But for the reasons I have set out, this is one issue on which the Government have concluded that they must depart from the committee's recommendations.

It has been an important and valuable debate. I shall take stock of what has been said. No doubt we in government will want to reflect carefully upon it. But the points I have made in response to the wide-ranging contributions from many Members of the Committee will, I trust, begin to set the balance of the argument back in the other direction too.

Lord Norton of Louth

Before the noble Lord sits down, a large thrust of his argument is that there should not be a public subsidy of political parties. But surely there already is. I refer to what is provided for parties at election time in terms of mail distribution and election broadcasts. In effect, it is already there; so the principle surely is already conceded.

Lord Bassam of Brighton

I accept that there is state support, but it is very limited and it is for specific purposes. This takes us a stage further. It would, by another route, be indirect state funding. Most people would accept that whether it is tax relief or direct grant aid, it is state funding. This is a big leap to take in that direction.

Lord Cope of Berkeley

It has been an extremely interesting debate. As the Minister rightly acknowledged at the start of the debate, the majority of the argument has been against him. Nevertheless, there are some points to which I should like briefly to respond.

The noble Baroness, Lady Gould, picked up the view expressed by the Labour Party representative which is quoted in the Neill committee report. The idea that all Conservative Party members are rich is absolute nonsense, as those of us who have been involved in the party for many years know, and certainly as every Conservative MP, or, for that matter, candidate finds out every weekend in his or her constituency. It is also true—we on these Benches have come to recognise it—that some wealthy and generous individuals support the Labour Party and occasionally turn up to contribute to our debates.

However, there is also what I might call "the Green Party point". That was specifically considered by the Neill committee in paragraph 8.23 of its report. We have chosen very precisely in the amendment the definition recommended by the Neill committee. Of course it was open to any Member of the Committee to modify the definition in whichever way he thought appropriate. We stuck to the definition of the Neill committee, not just for the sake of sticking to the recommendation but also because we agreed with the argument. If registered political parties were chosen to be the beneficiaries, that would include all kinds of campaigning groups and so on, where it would be less appropriate.

The same point applies to the choice of £500 as the cut-off limit. We accepted the Neill committee's figure. I agree that it can be argued about in both directions—up or down. But no amendments were tabled in either direction. We support the Neill committee's recommendation but are keen also to establish the principle that lies behind it rather than confuse the debate by arguing about the detail of it. Similarly, on the administrative costs, we are entirely open to suggestions which might help the work of the Inland Revenue in ensuring that the scheme proceeded smoothly and was able to be managed in the most appropriate way to avoid misuse. I am not undertaking to accept any Inland Revenue amendment. I have seen enough Inland Revenue amendments to know that some of them go too far in stamping on these matters. But there it is.

The Minister discussed the question of direct state funding and rightly said that we do not think that that is desirable. The Conservative Party does not think that it is desirable, although I am not arguing against the ways in which it already happens—either through the Short and Cranborne moneys, which were referred to, or through the assistance in kind at the time of elections, with free broadcasts and so on. Sometimes we look across the Atlantic with horror at the enormous amounts of money being spent by American candidates in the elections. I refer not only to the presidential candidates but, particularly at this time in the American election cycle, all candidates. They seem to spend absolutely huge quantities of money. But most of that—or a large proportion of it—goes on buying television time. In order to get a comparable figure in this country, one has to take into account the free broadcasts that political parties are allowed, particularly at election times, although not only at election times. So there is already state funding in that sense. There is also tax relief at least as far as concerns inheritance tax.

The difference of this proposal from straight state funding for the ordinary activities of political parties centrally is, as the noble Lord, Lord Goodhart, pointed out, that it would directly link the relief received by the parties to the donations. However, I thought that theMinister might slightly have given the game away when, as another of his arguments against the proposal, he said that there is no public clamour for it. That means that it has not so far turned up in a focus group, or not very definitely, or for that matter in a poll of some kind. That is not necessarily a very good way to decide on policy, particularly when an extremely senior, wise and expert committee, appointed for the purpose to review the matter and to go into all the details—I refer to the Neill committee—made this recommendation.

The noble Lord, Lord Clinton-Davis, suggested that the Government should consider the matter. I recommend to the Committee that we should give them time to do that, particularly as the Minister said that the Government would reflect on the debate, although he argued in the opposite direction. I certainly think that he should reflect on the debate. While he is doing that, please will he ensure that the Labour Party stops putting out press releases saying that the Bill implements the Neill recommendations? It is quite clear from the Minister's response to what has been said in the past hour that it does not do that in this very important respect. However, as I said, we should give the Government time to reflect. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6 [control of donations to individuals and members associations]:

4.45 p.m.

Lord Bach moved Amendment No. 182A: Page 114, line 28, leave out ("and") and insert ("or").

The noble Lord said: In moving this amendment, I wish to speak also to Amendments Nos. 182B, 182C, 186A, 187A and 189A. There are three opposition amendments in this group, Amendments Nos. 182D, 182E and 182G. If I may, I shall speak to them before they are moved.

The government amendments in this group fulfil a commitment given by the Parliamentary Secretary, Privy Council Office, Mr Paddy Tipping, during the Committee stage of the Bill in another place. It was suggested by the honourable Member for North Dorset, Mr Walter, that the disclosure threshold for donations to members' associations should be £5,000, rather than £1,000. His argument ran that members' associations, such as the Tribune Group or the Tory Reform Group, were national bodies not local bodies, and that in the interests of consistency the disclosure threshold should match that for donations to the central organisation of a political party.

We agree that there is some force in his argument, although members' associations will not exclusively be national bodies. The group of Labour councillors on Brighton and Hove Council could, for example, constitute a members' association for the purposes of Schedule 6 to the Bill. That said, we accept the point made by the Opposition Front Bench in another place and are content to raise the limit accordingly.

Government Amendments Nos. 182A, 182B and 182C address a matter of drafting only. The definition of a "controlled donation" for the purposes of Schedule 6 presently refers to a donation received by a person or members' association for their "use and benefit". However, the test should be whether a donation is made for either the use or benefit of the recipient. For example, a donation which took the form of services in kind could not be said to have been made available for the recipient's use but the recipient would nevertheless reap a benefit.

I turn to opposition Amendment No. 182D. It is not precisely clear to me why the noble Lord, Lord Mackay, whose name is attached to the amendment, wishes to exclude from the ambit of Schedule 6 donations made to elective office holders in connections with their official functions. He may have in mind routine gifts given, say, by a visiting leader of a European centre-Right party to the Leader of the Conservative Party. I should be surprised if many gifts of that kind came above the £1,000 disclosure limit or even perhaps the £200 de minimis. In any event, the amendment does not make a distinction between such gifts and, say, a donation of £10,000 to the Leader of the Opposition to help him to run his office. Such a donation—£10,000—would be in connection with the discharge by the Leader of the Opposition of his official functions and ought to be subject to disclosure in the usual way.

Amendment No. 186E would require the electoral commission to issue guidance to regulated donees about what constitutes political activities. I remind the Committee that Clause 9 already enables the commission to issue advice to regulated organisations and individuals, so we do not see the need for a provision along these lines in Schedule 6. We are sure that the commission will be ready to assist regulated donees to meet their obligations under the Bill, including by offering guidance. But we should recognise that it would be difficult to compile comprehensive hard and fast rules on what is or what is not a political activity. The message to regulated donees is: if in doubt, ask.

In responding to Amendment No. 182G. perhaps I may say that we are grateful to the Opposition for drafting it. We accept the amendment. It is an improvement. I beg to move.

Viscount Astor

Perhaps I may respond to the Minister and speak to Amendments Nos. 182D, 182E and 182G. I had wondered what the difference is between "use and benefit" and "use or benefit". I sometimes wonder whether guidance should be issued to the draftsman about the words "and" and "or". We are always having arguments about whether it should be "and" or "or" and sometimes we are told that it should both. It would be helpful if the right form of words could be devised. A clever parliamentary draftsman should be able to think of a form that would cover all these eventualities.

I shall turn now to the amendments. I welcome government Amendments Nos. 186A, 187A and 189A. They place the disclosure limit for members' associations on the same level as those for parties' central organisations. That reflects a point raised on 1st February by my honourable friend Robert Walter in the Standing Committee of another place. However, I shall not detain the Committee by going further into the detail.

More significant amendments have been moved by the Minister in this grouping on matters that have not previously been debated in another place. I refer specifically to matters addressed by Amendments Nos. 182D and 182E. Amendment No. 182D seeks to clarify the definition of a donation in relation to an individual who holds an "elective office"; that is, a Member of Parliament. I am confused by the Bill. I had assumed that that would include those Members of your Lordships' House who have been elected. However, if one reads Schedule 6, paragraph (8), at line 20 of page 115, "relevant elective office" means a Member of Parliament. Precisely how would that fit with your Lordships' House?

I have the advantage over the noble Lord in that I have been elected, not to this House, but to remain in this House, whereas the noble Lord has not. Perhaps the Minister could define the term.

Lord Bach

I have conceded Amendment No. 182G which is the amendment to which I believe the noble Viscount is presently referring. It should read, "Member of the House of Commons". The noble Viscount and his colleagues are right and we have accepted that.

Viscount Astor

I am grateful to the noble Lord. I was about to acknowledge that he has conceded the point. We shall see an improvement on the definition.

Paragraph (8) of the schedule includes Members of the European Parliament, the Scottish Parliament, the Northern Ireland Assembly and so forth. It also includes members of any local authority, the Greater London Assembly and the Mayor of London; a long list is included here which embraces a huge number of people. Can the Minister tell the Committee how relevant information as regards donations is to be disseminated? What consultation is to take place? Has Mr Ken Livingstone, the Mayor of London, been told about paragraph 8(g)?

I shall turn to Amendment No. 182D, tabled in the name of my noble friend, concerning control over donations. This relates to political activities. Can the Minister provide a definition of what is a "political activity"? Does a donation to fund a meeting or drinks reception between a Member of the House of Commons and his constituents count as such, even though that could not be defined as a party political meeting? How will this affect Members of the European Parliament as regards any funding they receive from that body? Would that be prohibited because such funding would be seen to be funding from abroad, even though it would relate to their official duties?

These matters deserve some consideration and I should be grateful for the noble Lord's thinking here. As the Minister will realise, this amendment is of a probing nature to establish the Government's reasoning and to provide an opportunity for the Minister to cite relevant examples.

As regards Amendment No. 182E, the Minister rightly pointed out that the electoral commission will have wide powers to offer advice. However, we would feel much more comfortable if the commission had conferred on it a duty to provide guidance, which is perhaps a stronger term than advice. A great many people will be affected by the rules and regulations being introduced by the Bill. Given that, the commission should have a clear duty, set out in the Bill, to disseminate appropriate advice to all those different groups of people who are going to need it. Significant implications lie behind the provisions of Schedule 6. It will affect, for example, the register of interests not only in the other place but also in your Lordships' House. The commission will need to consider what should and should not be declared.

Furthermore, the way in which the provisions of Schedule 6 will affect the rules by which your Lordships' House presently governs itself means that noble Lords will be directly affected by it. Can the Minister confirm whether that will be the case, because that is how I read it? I feel that the Government should have consulted the Procedure Committee and the Committee for Privileges in this House—and possibly the relevant committees in another place—to gauge their reaction to these provisions. After all, noble Lords have taken the view that it is their right to regulate their own affairs.

Schedule 6 is extremely wide ranging and covers a great deal of territory. Furthermore, it will affect a vast number of people, ranging from senior figures in political parties to Members of Parliament, moving on to mayors, councillors and so forth. The provisions will affect not merely hundreds of people, but possibly thousands or even hundreds of thousands. A positive duty should be put on the commission to offer guidance on how Schedule 6 will work.

I have put a number of questions to the Minister in response to this grouping of amendments, in particular as regards the effects they will have on this House and on Parliament in general. I shall be most grateful for the Minister's response when he comes to sum up our debate.

Lord Norton of Louth

Perhaps I may raise a point which has been highlighted by Amendment No. 182G. I should like to use that amendment as a peg on which to inquire into a matter that is related to the matters covered by it. I understand that the Minister has accepted the amendment and I hope that he, in turn, will understand why I am raising a point in the light of that acceptance.

Amendment No. 182G refers to paragraph 8 of Schedule 6 where the term used is "relevant elective office". The Minister conceded that in his acceptance of the amendment to subparagraph (a), where reference is made to a "Member of Parliament", so that it will be refined to refer to a "Member of the House of Commons"—because it refers only to elected offices. Because of that, I should like to raise a point which has been triggered in my mind in relation to subparagraph (f), which relates to a member of any local authority. I believe that it is possible for a member of a local authority not to be an elected member, but to be co-opted. I am not sure what would be the status in that case.

I chair the standards committee of Hull City Council. I am not an elected member; indeed, the whole point of the committee is to include people who are not elected because they are then completely detached from the process. To that end, I understand that I and the other members are co-opted. Would that mean that we would be included in the definition of "members of a local authority" by reason of co-option? It may be that subparagraph (f) needs to be refined to clarify that point. Alternatively, perhaps the paragraph's opening term, "relevant elective office" should be changed to reflect the fact that it refers only to those elected to serve on one of the relevant bodies. I hope that this point will be helpful to the noble Lord.

5 p.m.

Lord Bach

I shall deal first with the point raised by the noble Lord, Lord Norton of Louth. He has made an extremely helpful point. There is a nice question here as regards whether he is in fact a member of the local authority in the important capacity he plays within it. Perhaps I may take the point away and look at it.

So far as concerns the comments made and points raised by the noble Viscount, I am most grateful to him and I shall do my best to respond as fully as I can. I shall then return to the point made by the noble Lord, Lord Norton, because I now have some more information on that.

Members of this House are not covered by paragraph 8 of Schedule 6. That is why we have accepted Amendment No. 182G. I know that the noble Viscount was elected—we were all delighted at how high he was on his party's list. But the voting was for a party list as opposed to an election. I am sure that he will understand the distinction. I wish some of his noble friends would see that as clearly as he does. So the answer to that question is, no, the House of Lords is not included.

There has been consultation; we have brought forward a White Paper and a draft Bill. We will ensure that Members of Parliament, councillors and others are notified of the coming into force of Schedule 6—which, as the noble Viscount indicated, is an important schedule to the Bill—and the obligations that it places on them.

The noble Viscount mentioned that under Clause 9 there is no compulsion on the electoral commission to offer guidance. He is right about that. But in reply I ask him, perhaps rhetorically, is it not hard to believe that an electoral commission with these powers would not see one of its primary tasks as being to advise relevant people and organisations of where they stand on issues raised by Schedule 6? Indeed, we expect that, in practice, advice on such matters will be given on a case-by-case basis. In other words, a party will go to the electoral commission and will expect—and get—a reply to a particular query. We do not think that any overall guidance could be expected to cover all possible circumstances.

Turning again to the point raised by the noble Lord, Lord Norton, co-option is limited to parish councils, not principal area councils, in terms of becoming a member of the local authority. We all remember the days of aldermen, but, whether for good or for bad, those days are past. Those who are co-opted in a parish council or town council are members of that council for these purposes. I hope that I have answered most of the questions that have been raised.

Viscount Astor

The Minister's reply in regard to the electoral commission was helpful. I shall study it and think about the matter again before Report stage. The Minister recognised that the electoral commission may have to give advice to a huge group of people; he said that some of it will be given on a case-by-case basis. But it is important that the electoral commission recognises that it will have to lay down some rules for people to follow. If it ends up having to respond to every individual request, it will be extremely busy. The commission will have to set out what it believes to be the ordinary way to behave, and then respond to requests that are outside that—otherwise it will he swamped by inquiries from people who do not know what to do. Perhaps the Minister will consider that issue.

I was perhaps not as effusive as I should have been in thanking the Minister for accepting the one amendment which removes the complication of your Lordships' House coming under the schedule. I am grateful to the noble Lord for his acceptance of that amendment.

On Question, amendment agreed to.

Lord Bach moved Amendments Nos. 182B and 182C: Page 114, line 34, leave out ("and") and insert ("or"). Page 114, line 39, leave out ("and") and insert ("or").

On Question, amendments agreed to.

[Amendments Nos. 182D and 182E not moved.]

Lord Bach moved Amendment No. 182F: Page 115, line 5, after ("2") insert (", 2A").

The noble Lord said: This amendment was spoken to on an earlier day in Committee. I beg to move.

On Question, amendment agreed to.

Viscount Astor moved Amendment No. 182G: Page 115, leave out line 21 and insert ("member of the House of Commons;").

On Question, amendment agreed to.

Lord Bach moved Amendments Nos. 183 to 183P: Page 115, line 36, at end insert—

("( ) Where—

1. (a) at a time when any order is in force under section 65(1) a donation is received by a regulated donee resident or carrying on activities in Great Britain, and
2. (b) the order provides for this sub-paragraph to apply to any such donation,

section 49(2)(c) shall have effect in relation to the donation as if it referred only to a registered party which is registered in the Great Britain register."). Page 115, line 40, at end insert— ("(aa) any sponsorship provided in relation to the donee (as defined by paragraph 2A);"). Page 115, line 41, leave out ("the donee or a person acting on his or its behalf)") and insert ("or on behalf of the donee)"). Page 115, leave out line 48. Page 116, line 1, leave out sub-paragraph (2) and insert— ("(2) Where—

1. (a) any money or other property is transferred to a regulated donee pursuant to any transaction or arrangement involving the provision by or on behalf of the donee 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 donee 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 sub-paragraph (2B)) constitute a gift to the donee for the purposes of sub-paragraph (1)(a). (2A) In determining—

1. (a) for the purposes of sub-paragraph (2)(c), whether any money lent to a regulated donee is so lent otherwise than on commercial terms, or
2. (b) for the purposes of sub-paragraph (2)(d), whether any property, services or facilities provided for the use or benefit of a regulated donee 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 donee in respect of the loan or the provision of the property, services or facilities. (2B) Where (apart from this sub-paragraph) anything would be a donation both by virtue of sub-paragraph (1)(aa) and by virtue of any other provision of this paragraph, sub-paragraph (1)(aa) (together with paragraph 2A) shall apply in relation to it to the exclusion of the other provision of this paragraph."). Page 116, line 4, after ("member") insert (", trustee"). Page 116, line 13, at end insert—