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New Clause 19 — Increased thresholds in relation to donations etc

Political Parties and Elections Bill – in the House of Commons at 3:38 pm on 2nd March 2009.

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'(1) In the following provisions of the 2000 Act, for "£200" there is substituted "£500"—

section 52(2)(b);

section 54(4)(b) and (6)(b);

section 71F(12)(b);

in Schedule 7, paragraphs 4(3)(b) and 6(2) and (4)(b);

in Schedule 7A, paragraph 2(4)(b);

in Schedule 11, paragraphs 4(2) and 6(4) and (6)(b);

in Schedule 15, paragraphs 4(2) and 6(5) and (7)(b).

(2) In the following provisions of the 2000 Act, for "£1,000" there is substituted "£1,500"—

section 62(6A)(a) and (b), (7)(b) and (11)(b);

section 71M(7)(a) and (b), (8)(b) and (11)(b);

in Schedule 7, paragraph 10(1A)(a) and (b) and (2)(b);

in Schedule 7A, paragraph 9(2)(a) and (b) and (7)(b).

(3) In the following provisions of the 2000 Act, for "£5,000" there is substituted "£7,500"—

section 62(4)(a) and (b), (5)(b) and (11)(b);

section 63(3);

section 71M(4)(a) and (b), (5)(b) and (11)(b);

section 71Q(3);

in Schedule 7, paragraph 10(1A)(a) and (b) and (2)(b);

in Schedule 7A, paragraph 9(2)(a) and (b) and (7)(b);

in Schedule 11, paragraph 10(2)(a);

in Schedule 15, paragraph 10(2)(a).'.— (Mr. Wills.)

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Photo of Michael Martin Michael Martin Chair, Speaker's Committee on the Electoral Commission, Speaker of the House of Commons, Chair, Speaker's Committee on the Electoral Commission

With this it will be convenient to discuss the following:

Amendments (a) to (c).

Government amendment 94.

Amendment 126, in clause 8, page 6, line 2, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 95.

Amendment 125, page 6, line 3, leave out '£1,000' and insert

'£3,000 plus an annual upwards-only indexation allowance'.

Government amendment 96.

Amendment 123, page 6, line 7, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Amendment 122, page 6, line 12, leave out 'best of individuals' and insert 'individual's reasonable'.

Government amendment 97.

Amendment 127, page 6, line 18, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 98.

Amendment 124, page 6, line 35, leave out '£1,000' and insert

'£3,000 plus an annual upwards-only indexation allowance'.

Government amendment 99.

Amendment 121, page 6, line 38, at end insert—

'(6A) A person does not commit an offence if, in the reasonable opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration under this section'.

Amendment 8, in schedule 3, page 38, line 19, at end insert—

'Schedule 6 of the 2000 Act (details to be given in donation reports)

A1 (1) In paragraph 2 of Schedule 6 to the 2000 Act (details to be given in donation reports), after paragraph (b) of sub-paragraph (10), there is inserted—

"(c) the names and addresses of all the members of and donors donating £5,000 or more annually to the association.".

(2) In paragraph 2 of Schedule 6A to the 2000 Act (details to be given in transaction reports), after paragraph (b) of sub-paragraph (10), there is inserted—

"(c) the names and addresses of all members of and donors donating £5,000 or more annually to the association.".

(3) In paragraph 2A of Schedule 6A to the 2000 Act (details to be given in transaction reports), after paragraph (b) of sub-paragraph (11), there is inserted—

"(ba) the names and addresses of all the members of and donors donating £5,000 or more annually to the association;"'.

Government amendment 100.

Amendment 128, in schedule 3, page 38, line 24, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 101.

Amendment 129, page 38, line 26, leave out '£1,000' and insert

'£3,000 plus an annual upwards-only indexation allowance'.

Government amendment 102.

Amendment 130, page 38, line 30, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 103.

Amendment 131, page 38, line 32, leave out '£1,000' and insert

'£3,000 plus an annual upwards-only indexation allowance'.

Government amendment 104.

Amendment 132, page 39, line 3, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 105.

Amendment 133, page 39, line 5, leave out '£1,000' and insert

'£3,000 plus an annual upwards-only indexation allowance'.

Government amendment 106.

Amendment 134, page 40, line 18, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 107.

Amendment 135, page 40, line 23, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 108.

Amendment 136, page 40, line 36, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 109.

Amendment 137, page 42, line 2, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 110.

Amendment 138, page 42, line 7, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

Government amendment 111.

Amendment 139, page 42, line 20, after '£5,000', insert 'plus an annual upwards-only indexation allowance'.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

In line with the indication I gave in Committee, we have considered raising the recordable and reportable thresholds in view of the concerns expressed by parties about the burden of compliance with the Political Parties, Elections and Referendums Act 2000. As the House knows, the 2000 Act was a landmark piece of legislation that brought, for the first time, transparency to the sources of political funding. It has been a huge step forward for democracy and I am sure that all in the House agree that we are all the better for it, and that our democracy works better as a result.

However, we must also address legitimate concerns about the burden of reporting relatively small donations in the context of the public's interest in bigger political donations. We had a lot of discussion on this matter in Committee, and there is a balance to be struck. We have to act in a way that is transparent and accountable to the public whom we serve, but we must never forget that political activity in this country is largely carried out by volunteers—selfless people who give their time and effort to political parties across the House. Without them, none of us could function effectively in representing our constituents.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

As my right hon. Friend says, without those volunteers, none of us would be here. We have to be careful about placing burdens on them, or about putting barriers in the way of their activity, which might discourage those selfless volunteers from giving their time and effort in the future. There is a balance to be struck.

When we considered this matter, we became convinced that it is the significant donations, either individually or in aggregate over time, that the public want to know more about, and it is right that they should. All parties agree that it is right that they should know more about such donations. If one looks at media reports on this subject, which are frequent and extensive, one certainly gets that impression. We have come to the conclusion that the levels for recording and reporting such relatively small donations impose a high burden of compliance that is not matched by the transparency gained from recording and reporting them.

I should note in passing that the thresholds have not been changed since the 2000 Act. I am not suggesting that the changes that we are introducing are merely designed to take account of inflation—they are not—but some increase for that reason would be merited in any event.

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Photo of Bob Spink Bob Spink Independent, Castle Point

The right hon. Gentleman must be cognisant of the level of public distrust that there is in this place, and particularly in political parties campaigning locally. An amount of £200 is not seen as an insignificant sum, and £500 is a considerable sum. Why is he pushing the matter so far? Why is a 250 per cent. increase proposed, which can only reduce transparency for local people? People in Castle Point want to know who is funding the Castle Point Tories and Castle Point Labour party. Those people may be developers or businesses; they may have a vested interest in what goes on in local government and in this place.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

The hon. Gentleman has a great deal of experience in party politics, and he is part of the select group in this House who has had the distinction of belonging to two political parties here. Obviously, I listen with great attention to what he has to say on this question. He is right to draw attention to the importance of the issue and, implicitly in his remarks, I think that he accepts that a balance has to be struck. How do we strike that balance between accountability through transparency, which is essential, and taking account of the fact that parties—even the party to which he now belongs—are also dependent on the efforts of volunteers. How do we put measures in place that square that circle? How do we have accountability through transparency on the one hand and, on the other hand, not put unreasonable burdens on the volunteer armies that sustain our democracy?

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Photo of Bob Spink Bob Spink Independent, Castle Point 3:45 pm, 2nd March 2009

I am delighted that the Minister has allowed me to intervene again in order to explain that I belong to no party. I am an independent, so I have no workers. I take no money whatever from any businesses, political parties or developers, or from anyone else, and I will deliver no favours to anyone after the election. If he thinks that those people give their hard-earned cash to political parties in order to return a particular candidate without expecting their pound of flesh at the end of the day, he probably believes in the tooth fairy as well.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I am grateful to the hon. Gentleman for his intervention and I am happy that he has put the record straight in the way that he has. However, I was saying that I thought that he had made an important point. Implicit in what he was saying was the need to strike a balance between transparency, which those in all parts of the House subscribe to as a fundamental principle in party funding, and not putting unreasonable burdens on the volunteer armies that sustain the activities of us all and on which our democracy depends. We have to strike that balance.

As I was saying, there has already been an increase since 2000 that would have been merited by inflation, but such an increase would not, on its own, account for the increases that we are suggesting. However, I want to stress one thing, before I deal with the substance of the amendments and the Government's response to the Opposition amendments. This Government are fundamentally committed to transparency. It is worth noting that the Bill before us makes important provisions to increase transparency. In particular, clause 8 and the Government amendments relating to unincorporated associations, which we will come to shortly, do a great deal to enhance transparency.

The increases in the thresholds in the 2000 Act should be considered in that context. We have proposed to increase the recordable threshold for recording donations, loans and other transactions from the current limit, of to donations of more than £200, to a new limit, of to donations of more than £500. As the House will know, the recordable threshold requires recipients to verify the permissibility of the donor and to keep their details.

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Photo of Pete Wishart Pete Wishart Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (International Development), Shadow Spokesperson (Justice)

The Minister is proposing to increase what is permissible by 150 per cent. Has he taken into account the Electoral Commission's concerns about that, given that people may be able to make quite substantial donations regularly, thereby compromising transparency?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I have great respect for the hon. Gentleman. He makes a valuable point about transparency and we agree with him about its fundamental importance. However, we have to be proportionate in all measures. We have to do what is necessary to increase public confidence and public trust, but we all have to make judgments on this, and we are making the judgment where we thought best.

What I hope is not in doubt is our commitment to transparency. We have made significant progress already. The Bill makes further progress in increasing the transparency of party funding in this country. That is a good thing and everyone in the House will welcome it, as will the public as a whole, whom we all serve. However, we have to ensure that those measures are proportionate. That is the point. We cannot ignore the fact—I am sure that the hon. Gentleman will know this from his party activists, just as every other hon. Member will know it from theirs—that we have to be clear that we are not putting unreasonable burdens on those volunteers.

The overwhelming majority of people who participate in political activity are decent, honourable citizens who do so from the best of motives. We may disagree on particular policy areas and our political values may be different, but the people who sustain us in this place are decent, honourable people who are fighting for the political values that they believe in.

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Photo of Martin Linton Martin Linton Labour, Battersea

Is my right hon. Friend not concerned that foreign residents, such as Sean Connery, who are currently unable to make donations to political parties would now be able to make donations of amounts of less than £500, which could amount to quite a lot over the course of a year?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

As always, I pay tribute to my hon. Friend, and on this occasion, I also pay tribute to his ingenuity. I have no doubt that we shall return to that issue as the proceedings progress.

Of course I accept the points made by Opposition Members about the importance of transparency. We agree with them, but we must ensure that the measures are proportionate and that we do not put such burdens on volunteers that we choke off their contributions.

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Photo of John Redwood John Redwood Conservative, Wokingham

I have a lot of sympathy with what the Minister is trying to do; there is a burden involved, and there are many decent people who want to give relatively modest sums and who have no wish to influence an individual candidate or policy. Will he help the House by explaining how he arrived at the figure of £500? Was the decision based on some sort of rule of thumb?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

It was a judgment. From memory, if we had increased the thresholds in line with inflation, the figure would have been about £250, give or take; I hope that I will not be held to a precise figure. The increase is not quite as great in percentage terms, but we had to take account of anecdotal experience and make a judgment. This was a judgment, and it is entirely a matter for the House if it wants to reject the threshold that we are proposing. We are doing our best, and we are making a judgment about where to strike the balance. It is in the nature of the task of striking a balance, as I am sure the right hon. Gentleman knows, that it is, to some extent, a matter of judgment. There is no rule for this and no science; it is a matter of judgment. This is our judgment about where we think the balance should be struck. Others might wish to strike it differently; that is a matter for them, and I am sure that there will be further contributions to the debate.

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Photo of Bob Spink Bob Spink Independent, Castle Point

Was any research done into the sums that ordinary people—the volunteers, the grass-roots workers—give to a party? I recollect that it is usually between £20 and £100, and that the sums that businesses and developers give to political parties are in the £200 to £500 bracket. I suggest to the Minister that many grass-roots people will give small sums of up to £200, while the number of people giving £300, £400 or £500 is extremely limited. Why should not the public know who those people are, so that the public can hold their elected officials to account for the money that they receive?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

We are talking about recordable thresholds at the moment, not reportable thresholds, so the hon. Gentleman's last point does not quite stand up. However, I do not disagree with him about the fundamental principle: of course the public have a right to know who is giving money to whom. That is the fundamental principle of transparency, and of course we agree with it. However, sometimes in life—political life and all other areas of life—fundamentally important principles can conflict with each other. It is important to have a vibrant democracy. That is a fundamental principle, and it is sustained by the efforts of volunteers, who are also fundamental to the health and vibrancy of our democracy. We have to ensure that, as far as possible, the two principles are kept reconciled.

Of course the hon. Gentleman is right to say that we have to set these thresholds at a level at which the public can be confident that no one is buying influence. Most Members would be utterly appalled to think that anyone believed that their voice in the House could be influenced or bought by a donation, however large or small. We would be utterly appalled by that prospect, but that is not the only issue. I paraphrase the hon. Gentleman here—I am sure that he will intervene on me if I am doing so incorrectly—but I think that he is saying not only that that must not happen, but that the public must be confident that that is not happening. In that, I am entirely at one with him.

The question is: at what level do we strike the balance? No one would think that it was worth placing a huge burden of compliance on those volunteers for the sake of the odd fiver here or there. However, I am sure that everyone would agree that £1,000 was worth recording, let alone £10,000, £50,000 or £100,000. There is no argument about that. The question arises about the relatively small sums of money, and, as I have said, that is a matter of judgment. The hon. Gentleman's judgment on the matter might be different from ours, and that is a matter for him. It is implicit in what he is saying that there is a balance to be struck. The question is not one of whether there is a balance to be struck, but one of how and where to strike it. That is what we are discussing.

There is no science here, and there is no way of knowing for certain what will reassure the public; we have to make our best guess and proceed with it. If we on the Government side have got this particular threshold wrong, we will happily revisit it. There is nothing at stake here other than the desire to strike the right balance. If we have inadvertently struck it in the wrong place, I gladly pledge that we will come back to the House and change it—in whatever direction: whether we are imposing excessive burdens on volunteers that are not justified by the increased transparency, or conversely, if we set the threshold too high. I hope that Opposition Members will agree with that approach. If they feel that this is the right level, experience shows that they will support it in future and not seek to change it.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I agree with everything the Minister says about the need for a balance between compliance and transparency. Will he be prepared to share with the House the advice that he no doubt will have received from the Labour party's accounting officer on the dangers of imposing excessive burdens that will come with a low threshold? I am to some extent aware of what such advice is likely to have been and I think it would be helpful to have it as a matter of public record.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I think that the hon. Gentleman, who was a member of the Public Bill Committee, was present at the sittings where officers of both the Labour and Conservative parties—and, indeed, the Liberal Democrats—gave evidence about the dangers stemming from the excessive burdens of compliance on volunteers, on whom every party depends. I think that this is a matter of public record and of common sense; every Member knows about it from their own experience. We must be very careful. Throughout the lengthy Public Bill Committee stages, this issue came up over and over again, and it was raised by all parties. Broadly, there is, I think, a consensus. What we are debating is the fine detail of exactly where and how to strike this balance between transparency and excessive compliance. It is inevitably a judgment.

It might help Bob Spink if I explained more about the difference between the recordable and the reportable threshold, so let me say a few words about that. The recordable threshold requires recipients to verify the permissibility of the donor and to keep details about it, but the information is not reported to the Electoral Commission unless, in aggregate, donations from the same donor exceed the reportable threshold in a calendar year. We believe that the burden for parties and others of keeping records of really quite small donations—those of £500 or less—exceeds the benefits of verifying their source.

We also propose to increase the thresholds for reporting donations, loans or other regulated transactions to the Electoral Commission from the existing level of more than £1,000 to more than £1,500 and from the existing limit of more than £5,000 to those with a value of more than £7,500. We believe again that increases of that order are proportionate and that they strike the right balance between the transparency that everyone agrees is so necessary and the burden of compliance. A certain increase would have been merited by inflation, but we decided that to increase the thresholds by more than inflation alone was merited for precisely the reasons that I have set out in respect of recording donations, loans and other transactions.

Overall, the Bill's provisions will increase information in the public domain about significant political donations. In our view—it is our view—this is the key area of public interest, and the moderate increases in reportable thresholds should be considered in that context. I know that hon. Members have referred to percentage increases, but I think that this is one of the occasions where percentages can be misleading—more misleading than the numerical figures themselves. I hope the House will focus on the number of pounds involved rather than on the percentage increases. As I say, they may be misleading about the overall impact of these changes.

As with the other provisions in the Bill, the Government and I are determined that we move forward on those measures, which are aimed, as I say, at striking the right balance between transparency and the compliance burdens on party officials and other donees. We want to do that on the basis of a broad political consensus. I am open to views and further consideration as to the precise levels of the thresholds. I note that Conservative Members have tabled amendments relating to donation thresholds and will turn to those in a moment. I will be happy to give them further consideration, if that is the will of the majority of the House. I ask hon. Members to support new clause 19 and consequential amendments 94 to 111.

I want to discuss amendments (a) to (c) to new clause 19, and amendments 123 to 139, which were tabled by Conservative Members. Amendments 124, 125, 129,131 and 133 would increase the £1,000 threshold set out in clause 8 and schedule 3 to £3,000. That means that donations of more than £3,000 to party accounting units and regulated donees, except members' associations, would have to be accompanied by a declaration as to the source of the donation. We understand that the intended effect would be to increase across the board the local reporting threshold for donations made to accounting units of parties to £3,000. I am sure that Conservative Members will speak to their amendments shortly but, in doing so, I hope that they will correct me if I have misunderstood the purpose of their amendments.

The thresholds in clause 8 and schedule 3 mirror the thresholds for the reporting of donations, so that all donations that are reported to the Electoral Commission will be accompanied by declarations as to their source. We have therefore tabled amendments to increase that threshold to £1,500, in line with new clause 19, which would increase the threshold above which party accounting units and regulated donees, except members' associations, must report donations to £1,500.

We have believed that aligning the thresholds above which donations must be accompanied by declarations with the levels at which donations must be reported would provide clarity for recipients of donations. We think that having different thresholds could make the system unnecessarily complex. These proposals would set the reporting and declaration thresholds at different levels. That might be an unnecessary and unhelpful complication, although I understand that it might not be the intended effect. It might be that hon. Members are suggesting—again, I would be grateful for their correction if I have misunderstood—that the threshold for both reporting and declaration in relation to donations to party accounting units and regulated donees, except members' associations, should be £3,000. Mr. Djanogly is nodding, so I think my understanding at that point is correct.

Increasing the threshold in such a way would undoubtedly be a significant change, but, having reflected, we are prepared to agree to it in principle—in the interests of consensus and on the ground that there is a judgment to be made here as to how best to strike the balance. We decided to strike it in one way; Opposition Members decided to strike it differently. In the interests of achieving consensus, we are prepared to concede the point. However, we see some problems with the proposals, and they reflect in particular the point about indexation.

Again, we understand what Conservative Members are trying to do with indexation. We want, as far as possible, to secure a consensus on these measures and we do not think it a fitting use of the House's time to keep returning to those issues. Some years, they will be overlooked, for whatever reason—pressures of business, perhaps, or other things might be happening. We may find ourselves again in the position that we are in today, when the thresholds have not been examined for a long time. Some Members have drawn attention to the percentage increase, but in numerical terms the sums are relatively modest, and, as I have said, we think that the right balance has been struck.

We take the point that we think the Opposition are making—no doubt we shall hear from them shortly—about indexation and the need to provide some automaticity in the process. However, they are proposing a rather simple form of indexation. I am usually all in favour of simplicity, which has great merits, but in this instance the thresholds might become unbelievably complex. We might end up with pennies being added to them. I do not think that anyone wants a threshold of £3,223.33, for example. That really would impose an unnecessary compliance burden.

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Photo of Bob Spink Bob Spink Independent, Castle Point 4:00 pm, 2nd March 2009

I believe that indexation as proposed in the Opposition amendments would complicate the Bill and lead to a lack of clarity. It would also add very small, insignificant sums that would not substantially change the position on party funding or the complex process that donors must undergo. In fact, it would change things very little and would only introduce massive complexity. Tiny percentages would be added, creating a rather strange figure for the Electoral Commission to monitor, at a time when we are increasing these sums by massive percentages—150 per cent., or 50 per cent.—which would wipe out the impact of any indexation over a very long period. Does the Minister not think that the Opposition parties are trying to have cream on their sticky buns?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

Let me take a moment in which to contemplate that enticing image. [Laughter.] No—I have calmed down now.

As always, the hon. Gentleman makes an interesting point that has some merit. We did consider it, but I am afraid that in the end we rejected it. Let me explain why. Obviously, I cannot speak to the Opposition amendments—no doubt the Opposition will do that very well themselves—but I will explain why I was persuaded on this point, in an effort to reassure the hon. Gentleman.

Of course the hon. Gentleman is right about complexity. We should always try to avoid it, for precisely the reasons that he mentioned. We want to make the compliance burden as light as possible, although there has to be a compliance burden: let there be no doubt about that. Compliance is essential, transparency is essential and accountability is essential, for all the reasons that I have already given. Complexity can militate against those elements—I will concede that point to the hon. Gentleman—but, as always, it is a matter of striking a balance. I think it important for us to accept and entrench the principle of a threshold—that is implicit in all previous legislation, and it is implicit here—along with the principle that, although where we strike the balance is a matter of judgment, wherever we strike it there is a threshold below which donations should not be recorded.

What persuaded me of the merit of the Opposition amendment—and the reason for our intention, subject to a condition that I shall explain in shortly, to table our own amendments in the House of Lords to achieve the same effect—was the fact that one part of it does entrench the principle of there being a threshold. That means that we will not have to return to the threshold, because we will not see it being eroded over time by inflation. Of course, under this Government we have had record low levels of inflation thanks to the prudent management of my right hon. Friends the Prime Minister and the current Chancellor of the Exchequer, and as a result of that historic achievement we face a global recession much better equipped than we would have been otherwise. Nevertheless, we cannot legislate for future Governments, and we do not know how successfully they will handle whatever inflationary challenges may emerge in future. We all remember what happened under the previous Conservative Government—I know the hon. Gentleman does—

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

It was 22 per cent., which was a huge burden on my constituents and those of every Member. It is a time we all regret; even Conservative Members now regret that they let the economy get so badly out of hand. Sadly, we cannot be confident that they have learned the lessons and the situation may just happen again. At that point, we have to be clear about the advantages of indexation, so I am glad that Opposition Members have recognised the danger that inflation may let rip again should the Labour Government—for whatever reason—not be in power indefinitely.

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Photo of James Duddridge James Duddridge Opposition Whip (Commons)

I fear the Minister may be losing his way. Although I disagree with his history lesson, which was somewhat more enjoyable than sitting on the Bill's Committee, despite that being enjoyable too, I welcome his concession on indexation. Will he outline the methodology for his approach in the Lords to overcome some of the problems of indexation that have been mentioned—such as the small increases—so that we do not have to come back to those issues, as we have had to do since the Political Parties, Elections and Referendums Act 2000, with the 25 per cent. increase, and can allow for the sensible increase the Minister proposes?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

Those are important points, but if I may I shall conclude the point I was making about the value of the Opposition amendment. I look forward to hearing what Opposition Members have to say and I have no doubt they will correct me if they think I have misunderstood the purpose of their proposal. I am merely setting out why I am persuaded that we should accept the principle behind it. The hon. Gentleman raises an important point about how we can do that and I shall deal with it in a moment.

To return to my earlier point, it is important to entrench the principle of indexation; we do not want to find that the thresholds fall a long way behind inflation and that we have to come back to the House. Every time we come back to the House for these sorts of discussions, we hear contributions such as those from the hon. Members for Castle Point and for Perth and North Perthshire (Pete Wishart). They are quite properly scrutinising what the Government propose and our approach to Opposition amendments. That is what they should be doing. They scrutinise us vigorously and I am grateful for it, because it will enable the Bill to be more muscular and to achieve its effect. I have no doubt whatever about that. However, in doing so they call into question public trust not just in the Government, the Opposition or any of the minority parties, but in the whole political process. That is not necessarily helpful. We need to be scrutinised and we must be accountable, but constantly having to revisit subjects such as these feeds a pervasive cynicism in the political process, which is not always justified. We have to be careful about that.

Indexation seems a practical and sensible way forward, subject to the important point made by James Duddridge, to which I shall return shortly. In the meantime, I hope the hon. Member for Castle Point is reassured by my understanding of the point behind the proposal—that we entrench the principle of a threshold. Once the House has collectively agreed what it should be, it will be entrenched and can be uprated in line with an appropriate measure of inflation.

The hon. Member for Rochford and Southend, East made an important point. The measure of indexation should command public confidence, which is what I think the hon. Member for Castle Point wants to achieve. We all agree that we want a measure that commands public confidence. The hon. Member for Rochford and Southend, East was alluding to the fact that we could use a variety of indexes—with or without housing costs or earnings. In the past, those matters have been of great contention in the House in relation to other areas of public policy, so we have to be careful about which measure we choose. We also have to be careful about how exactly it will translate into practice. We do not want to put an excessive burden on volunteers; nor do we want to put an excessive compliance burden on the Electoral Commission, which has other valuable missions to perform.

As I said, I propose to resist the Opposition amendments for the reasons I have given, but I shall consult statisticians and Members to see if we can come to an agreement about the measure of inflation that would command the broadest possible consensus and then introduce amendments in the Lords.

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Photo of David Winnick David Winnick Labour, Walsall North

Many times today I have heard my right hon. Friend talk about consensus, reaching the right balance and the rest of it, but given the impression that some Labour Members have, and bearing in mind the decision that was reached when we last debated the Bill, may I suggest that we should not surrender too much? Otherwise, it is not consensus; surrender would be a more appropriate word. I hope that my right hon. Friend bears that in mind when he says that he will consider other aspects of the matter.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice 4:15 pm, 2nd March 2009

My hon. Friend makes an important point, and I was about to address it. Whatever the uprated figure is, we will almost certainly need to lay a statutory instrument before Parliament to make the figure clear. The House will have an opportunity to express a view on it. Each change will mean a change to the figure in primary legislation; a statutory instrument is probably the best way of achieving that.

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Photo of James Brokenshire James Brokenshire Shadow Minister (Home Affairs)

The Minister is making an important point, not just about the methodology and what rate or index is used, but about the method by which it would be implemented. Does he agree that there is some merit in setting out in the Bill the approach that is to be taken? We are considering transparency, and are seeking not to give the impression that things are being hidden away or swept under the carpet. However, sometimes simply putting the information in a statutory instrument may inadvertently give an impression that that is happening. Perhaps the best way to emphasise transparency is to express the information as clearly as we can in the Bill.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

That is a good point, and it is certainly one of the issues that we will bear in mind when formulating the amendments that we propose to bring before the Lords.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

On indexation, my right hon. Friend has already talked about simplicity, and we are all well aware that most political parties are run almost purely by volunteers. May I put it to him that when he considers what indexation regime to introduce, he should consider indexing only once in the lifetime of each Parliament? Volunteers in particular get a figure in their head and then do not move with the times. I understand that; it is not their job to do so—they are volunteers. We could make the change once each Parliament—perhaps, say, within two months of a general election. That would have the virtue of simplicity, which would assist volunteers.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

As always, my hon. Friend makes an extremely important point. That is one of the issues that we will have to consider. As I have said, we cannot guarantee that this Government will be in power indefinitely. We have to cater for the risk of inflation taking off, as it has in the past. We have to be careful and sensitive to what may happen in future. However, he makes an important point about volunteers. As I say, we will consult hon. Members from all parts of the House informally on that. I hope that, in the Lords, our amendments will command a broad consensus. As long as this House expresses its view on the principle, we will go forward. For the reasons that I have given, I hope that Opposition Members will withdraw their amendments, but I look forward to hearing what they have to say.

Amendments 121 and 122 are Opposition amendments on limits on donations. During the passage of the Bill, we have heard a good deal of debate about what is a reasonable excuse for non-compliance with the regime in the Political Parties, Elections and Referendums Act 2000. I think that we can all find some sympathy for an individual who makes a small, inadvertent error and who subsequently fears criminal prosecution by the police, or action by the Electoral Commission. However, we have also been clear that if we want to deal with such concerns, we must ensure that we do not create a loophole to be exploited by the less scrupulous individual, who might seek to conceal a larger wrong behind the claim of a small-scale error. We have considered those concerns and believe that there is merit in addressing them. I am happy to confirm that we intend to introduce amendments in the other place to reframe some of the offences in the 2000 Act that might currently be so widely framed as not to take full account of inadvertent errors for which there is a genuine, reasonable excuse.

I hope that that approach will be welcomed by Members who are concerned that the current framing of certain offences is too stark, binary and polarising. I hope that they will be reassured that the Electoral Commission will be better able to apply its reasonable judgment at the outset of considering a potential case. We have listened carefully to all the concerns that have been expressed about that and taken account of them.

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Photo of Bob Spink Bob Spink Independent, Castle Point

I am not consoled or persuaded at all. In fact, I am deeply concerned that, yet again, the Opposition parties are seeking to relax the high standards to which political parties and donors are to be held. Those standards are intended to ensure that what they do is transparent and available to the public. The public will look at the House with deep suspicion and wonder where the Opposition parties are coming from. Why do they not want to be held to account? Why do they want to create little loopholes and escape routes for their friends, to enable them improperly to give more money to political parties?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I am afraid that I do not accept that for one second. We are not creating a loophole or relaxing the criteria at all. The British people, on whose behalf the hon. Gentleman professes to speak, are driven by the principles of fairness and justice. We are trying to ensure that those principles are applied. People can make small, inadvertent, genuine errors. Who among us can hold his hands up and say, "I have never made a single mistake, no matter how small, at any cost to anyone else"? I am not sure that even the hon. Gentleman will say that. If he wants to stand up and tell me that he has never made a mistake with the best of motives, I am happy to let him do so. Is he going to? I think not.

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Photo of Bob Spink Bob Spink Independent, Castle Point

Amendment 121 would insert an escape clause, stating:

"A person does not commit an offence if, in the reasonable opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration under this section."

Surely we are placing too much responsibility on the commissioners to judge the political climate of the time. Why would anyone want to stick an escape clause in legislation such as this? Do they anticipate that their supporters and donors will make small, inadvertent errors?

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

We intend to resist that amendment. The hon. Gentleman is not reading from the amendments that we propose to introduce in the other place, because they have not been written yet. Before he criticises what we are planning to do, he might want to see what it is.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice

There are dangers of the sort that Bob Spink mentions, and I hope that the Minister will take them into account when producing his own amendments. In particular, it is right to point out the danger of defining the existence of a crime according to the later opinion of the commission. That is never a correct way of framing a criminal offence.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

As always, the hon. Gentleman makes an extremely important point. He is right that we have to strike a balance, and we are sensitive to such concerns. We made it clear in Committee that the perception of the public is paramount, and we will abide by that principle. However, there is a problem that we cannot ignore, and we must address it in the best way we can. We are addressing it by reframing the offences in question so that they are applied only when necessary.

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Photo of Bob Spink Bob Spink Independent, Castle Point

I was making a point about the Minister's attitude towards the Conservative amendments. I would be more sanguine about the amendments if I did not know the Conservative party's track record in driving a coach and horses through election law and the public test of what is acceptable—for instance, by taking money from people who do not pay tax in this country to fund marginal constituencies by £20,000, £30,000 or £40,000 a year before the election is even declared. I do not want to give the Conservative party any loophole through which it can jump; nor do the public and nor do those in the media, who are watching us carefully in the House.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

The hon. Gentleman's relationship with the Conservative party is infinitely fascinating—it is the stuff of drama—and I should be delighted to explore it with him at some other time, but I should like now to make a little progress with the new clause and amendments. As I say, we want to table amendments in the other place, and I hope that most Members will welcome that.

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Photo of Martin Linton Martin Linton Labour, Battersea

Without wishing to disagree with Bob Spink in any way, may I say that I welcome my right hon. Friend's announcement that he will introduce an amendment in the other place on the issue, and I hope that it will not simply reflect the Opposition amendment, which puts the onus on the Electoral Commission to determine what it regards as a reasonable mistake, but give some latitude to candidates to seek relief through the courts where they feel that they have made a late declaration that was unintended.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I am grateful to my hon. Friend; I was about to make exactly that point. Specifying the phrase

"in the reasonable opinion of the Commission" is not a factor that adds anything useful on a practical level. The commission is already compelled to act reasonably when it considers civil sanctions. If it fails to do so, that is grounds for appeal against any decision to impose a sanction. So what I suspect is the desired effect of amendment 121 is already achieved in the Bill by other means. In fact, although I accept that that amendment is well intentioned, it would be distinctly unhelpful in that—I think that this is the point that has been made—it would make the commission's opinion central to the offence. Accordingly, in a case where the police and the Crown Prosecute Service decided that an offence was so serious that it warranted criminal prosecution, rather than civil proceedings instituted by the commission, a court would still be required to consider what the commission thought to decide whether an offence had been committed. Surely, that cannot be the intention, and I certainly do not think that it would be right.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I urge my right hon. Friend to resist amendment 121, which would put the onus on the commission and make life very complicated. However, I also urge him to look very carefully at amendment 122, which would change a subjective test into an objective test of whether something was an individual's reasonable belief and would therefore make it much easier for any tribunal, court or whoever to decide whether any shenanigans had taken place. Therefore, although my right hon. Friend and the Government might not like the exact wording of amendment 122, it would tighten things and it contradicts amendment 121. We would be better with amendment 122, not amendment 121.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

Again, I have heard what my hon. Friend says, and he has got a point. I will come to our view on amendment 122 very shortly, and I then want to conclude because there is a lot of business to get through and I need to let other Members speak.

On amendment 121, I am also concerned by the use of the phrase "innocent mistake". I think that we all agree that the commission must act proportionately. It has repeatedly said that the new range of civil sanctions that we propose will help it to achieve that, but the phrase "innocent mistake" carries no legal weight. Indeed, it is quite vague and confusing. I do not believe that it is helpful. In any event, given the nature of the conduct required for the offence, which I have already described, that or similar wording would not add much to ensuring that inadvertent errors were not unfairly penalised.

Amendment 122 would insert a requirement for an individual to make a declaration about their reasonable belief, rather than requiring them to act to the best of their knowledge and belief, as the Bill is currently drafted. To adopt that wording would substantially weaken the requirement and make it inconsistent with other declaration requirements contained throughout the Political Parties, Elections and Referendums Act. I think it is right that we ask the best of people, rather than something less, given that they will be penalised for a failure only if they act intentionally or recklessly in making the relevant declaration. As I have said, the requirement for an act to be carried out knowingly or recklessly will not, in my view, catch a person who makes a statement in good faith. That strikes the right balance between rigour and fairness in this context, and I do not think we should disturb that balance.

Given that, and given the assurances I have given about amendments we intend to introduce in the other place, I hope Opposition Members will see that these amendments are unnecessary, and that they will withdraw them.

Amendment 8 would alter the regulation of unincorporated associations by requiring that names and addresses of their members and those who donate to them are provided to the Electoral Commission in donation reports or transaction reports, depending on whether the unincorporated association is giving a donation or loan to a party. It is very similar to an amendment tabled and discussed in Committee. We recognise the concern that a number of Members expressed on Second Reading and in Committee about a perceived lack of transparency with regard to unincorporated associations. As I said in Committee, we have been actively considering improvements in this area, and I am pleased to report that we have tabled amendments that will address this issue. On the basis of that, I hope my hon. Friend Mr. Hamilton will support the Governments amendments and withdraw his amendment.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General 4:30 pm, 2nd March 2009

As the Bill stands, clause 8 creates a new requirement for a donor to make a declaration in respect of donations for a sum exceeding the specified threshold. The intention behind the clause, and the related schedule 3, is to clarify the source of donations. Essentially, transparency is the goal. Schedule 3 makes changes analogous to those made by clause 8 in relation to donations made to individuals and members' associations so as to recognise third parties and permitted participants. Although we support the goal of transparency, earlier in the Bill's passage we had many concerns about the provision. In particular, we were concerned to ensure that small donations were not subject to a potentially burdensome and demanding declaration system. After much negotiation and effort, we have, thankfully, made great progress since then, particularly in increasing the thresholds for declaration from the low original sum of £200. In this day and age, using that sum was particularly out of touch.

The Government have also removed the unworkable requirement that parties verify the donation. In combination with the £200 threshold, that requirement would have made the administration of donations almost impossible. It was agreed by all, including the Electoral Commission, that amendments increasing the thresholds and removing the verification requirement were the way forward. Again, the verification requirement would have placed a great burden on local and national party officers alike. Of greatest concern was the potential impact on local party officers. As the Minister said, they are frequently volunteers, and we felt that the Bill in the form considered in Committee risked permanently discouraging those at the grass roots of politics from engaging with the political system. Even for lawyers or experts in money laundering, the requirement would have been almost unworkable, let alone for busy unpaid local volunteers.

When the Bill went into Committee, any donation of more than £200 would have come within its ambit. That would have resulted in approximately 100,000 declarations being required in relation to Conservative party donations alone, leading to an administratively unworkable work load. As a result, we felt that the political system would be damaged, rather than enhanced. After much effort in Committee, the thresholds were increased to £5,000 at national level and £1,000 at local level. We still had concerns, however. It is a simple fact that political parties need funds to fulfil their democratic roles, and the thresholds are still set at a lower level than we had expected. Fortunately, the Government have come back again and admitted that the clause is still deficient, and have tabled these amendments that we are discussing today.

Government amendments 94 to 111 and new clause 19 are a response to widespread objections to the surprisingly low thresholds for declaration originally proposed in the Bill. The Government amendments increase the sums to £7,500 for donations made nationally and £1,500 for donations made locally. I shall return to the thresholds in discussing our amendments. I can confirm that we are reasonably satisfied with the national threshold, but that we have tabled amendments to increase the local threshold from the £1,500 proposed by the Government to the more appropriate figure of £3,000. We had considered increasing this figure to match the national threshold, as that would have been simpler for all concerned, but £3,000 is where we are at on this issue.

New clause 19, which addresses the so-called "permissibility threshold", serves two important purposes. First, it introduces further consistency to the 2000 Act by amending relevant sections so that the figures are in line with the proposed increased thresholds in amendments 94 to 111. Secondly, it increases the recordable threshold to £500 from £200—another improvement. As it stands, part IV of the 2000 Act imposes restrictions on the sources of donations; it prevents certain foreign and anonymous donations to political parties and makes registered parties subject to reporting requirements when in receipt of donations of more than a certain value. The new clause serves to amend the relevant sections of PPERA, specifically in part IV, and the related schedules 7, 7A, 11 and 15. The Act specifies which payments or services to a party are not to be regarded as a donation and are therefore not subject to any requirements—any donation of £200 or less is to be disregarded. The new clause amends the sum, increasing it to £500. Accordingly, any donation of £500 or less would not be subject to the regime.

The increased figure serves a number of goals, and the threshold, generally, is a significant one. Principally, the increased sum aims to reduce administrative burden—a reduced strain will be placed on parties in relation to less financially significant sums. The sum should also prevent donors of smaller sums—those up to the more realistic figure—from being discouraged from contributing money. I am thinking of, for instance, ticket prices for attending local fundraising events. It is important that less significant sums donated in that manner are not caught up in the complexities of this Bill. Again, I stress that we should be encouraging engagement at the grass-roots level of politics; by having a higher level, we carve out individuals who are involved at the base level of politics and who are in no way targets of the legislation. It is sensible to remove entirely from any such conversation those lower sums. I am sure that all hon. Members will be aware that the voluntary levels of party structures and local fundraising are normally entirely divorced from the more complex upper echelons of party funding. Furthermore, as the Minister has pointed out, it should not be forgotten that the PPERA provisions that set the £200 level were debated almost a decade ago. Given the time lag, there is a need for a more valid and fair level at which to disregard the potentially oppressive PPERA restrictions.

Although we approve of increasing the threshold, we remain concerned that £500 is not enough. That sum is still very low in the grand scheme of party financing, and for the reasons I have highlighted, extra caution should be exercised to ensure that minor donations do not end up falling within the ambit of this substantial and intimidating—for individuals—legislation. Although we appreciate that the Government have attempted to address these widespread concerns, new clause 19's changes to part IV of the 2000 Act may not go far enough; a greater sum of £1,000, for example, might be more appropriate.

As the Minister said, this is a matter of judgment and balance. The potential for excessive burden does not extend solely to the donor; in particular, I draw hon. Members' attention to the potential for requirements to be placed on local volunteers in relation to small donations that nevertheless remain above the proposed level of £500. The accounting rules are extremely technical and complex, as is even the guidance produced on the rules. In addition, we need to consider the fact that, because of the voluntary nature of local associations, many of those responsible for accounting are volunteers. Again, I suggest that it is sensible to remove entirely the possibility of an unnecessary burden being placed on donors and volunteers; extending the threshold to a sum such as £1,000 would ensure that there was far less room for doubt.

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Photo of Martin Linton Martin Linton Labour, Battersea

Does the hon. Gentleman agree that raising the level to £1,000 would make it relatively easy for a donor making a weekly donation of that sum to give £50,000 without it even showing up on the radar of the political parties legislation? Would that not open the door to large-scale donations that would go unrecorded and unreported?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I do not think that that can happen, because it is a catch-all provision. However, we are not opposed conceptually to anti-avoidance provisions. I am talking about the good guys who want to give money for the right reasons, not the loopholes, which we would be happy to see addressed.

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Photo of Martin Linton Martin Linton Labour, Battersea

But this provision would create a loophole, because it would set the recording level. The recipient of donations of as much as £999 would not even be obliged to write down the name of the donor on a piece of paper. The donor could be someone from overseas, and they would be able to make large donations.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

My understanding is that there are anti-avoidance provisions. Taking the hon. Gentleman's point at face value, the same problem could be held to exist for a limit of £500, £200 or any other amount. If the anti-avoidance provisions need to be tightened up, we would not be averse to considering that.

If the threshold were extended to £1,000, there would be less room for doubt. It has already become increasingly difficult to recruit and retain volunteers, but we need to encourage enthusiasm for politics at a local level. In that context, I do not understand the Electoral Commission's concerns that the Government's proposed increase has the potential to reduce confidence in the transparency and integrity of party and election finance. From previous conversations, we know that the Government have an open mind on this issue, and it may be that their low-bid amendment reflects the concern held by the Electoral Commission. When it comes to setting a level, however, I would argue that it is a matter for Parliament to decide the limit. While we accept new clause 19, we are concerned that the permissibility threshold is reviewed further in the later stages of the Bill.

Our amendments 124, 125, 129, 131 and 133 would increase the threshold for local donations to £3,000 from the current level of £1,500. They would also provide for indexation, about which we are concerned because of the likely high levels of inflation as we come out of Labour's recession. Such sums can look out of kilter after only a few years. I should note that we have tabled other amendments, such as amendments (a), (b) and (c) to new clause 19, which would provide for indexation for all the threshold figures in the Bill.

The declaration requirement is considerable and should be required only in the case of considerable donations. Smaller donations, which will comprise the majority in number, should be less rigorously regulated. Increasing the reporting threshold figure to £3,000 would remove the lower-level donations from the ambit of the Bill and further reduce the administrative burden locally.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

I do not understand, especially given the state of the world economy and the prospect of deflation haunting us, why the hon. Gentleman is talking about upwards-only indexation. That seems strange to me.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

We have provided that indexation should be upward only on the basis that to date none of the thresholds has been reduced. If the hon. Gentleman is concerned about complexity, I put it to him that having an upward and downward measure would certainly increase the amount of complexity involved.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

It would not do so if the Government adopted the excellent proposal that someone made earlier—that the adjustment should be made only once in each Parliament. In that case, the complexity for the individual volunteer would be the same whether the figure was £450 or £550 or stayed at £500. It is no more complex to adjust to a figure going from £500 to £450 than it is to adjust to one that has gone from £500 to £550.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General 4:45 pm, 2nd March 2009

The hon. Gentleman has made his point, which is worth looking at. We would not be averse to debating his proposal along with others that will hopefully be considered in the context of the Government's response.

More specifically, an increase in the threshold would further emphasise the importance of catching the larger and more significant sums. Narrowing the ambit of the Bill would focus the commission on the more serious tasks that it faces, avoiding donors, local associations, volunteers and electoral commissioners being bogged down in misunderstandings and disputes over lesser sums.

The amendments would serve three connected purposes. First, they would reduce the administrative burden for donors and parties. Again, I remind hon. Members that the measure will place a significant obligation on a great number of donors. Secondly and simultaneously, an increased limit would emphasise the importance of declarations of larger donations. That would ensure that an appropriate level of scrutiny was applied to the more significant sums. Indeed, it is in relation to the larger sums that suspicious and offending activity is most likely to take place. Finally, an increased limit would remove the discouraging requirements in relation to smaller donations. Accordingly, fewer people donating at the very important grass-roots level would feel exposed to the declarations regime and such people would therefore not be discouraged from giving.

We must avoid pushing interested persons further away from political engagement by importing complex legal requirements into the local party funding scheme. The wrong that the measure is intended to tackle is very far departed from the vast majority of scenarios involving sums under £3,000. If we succumb to the temptation to over-regulate, we will succeed only in taking the political system further away from the general public. In this way, we will defeat some of the Bill's key goals in the process.

By tabling their own increases, the Government have shown that they support the principle behind increased thresholds. We therefore believe that the further increase introduced by our amendments would reinforce the theme of the Bill, rather than detract from it. The Minister's acknowledgement of the fairness of our £3,000 proposal is welcome. In the light of his kind offer, we shall not press the amendment to a Division. We look forward to seeing the Government amendments in the other place. I take the Minister's point on certain technical issues that he mentioned, which his draftsmen will no doubt address in their drafting of his amendments.

As I stated, clause 8 creates a new responsibility for donors to political parties to declare any outside source of a donation. Although I repeat our support for the concept of transparency, there must be sensible limits in place to protect the vast majority of honest and genuine participants in the democratic process. The general impact of clause 8 could be costly in both time and money for parties locally. It is at this most fundamental and important level that such burdens are most heavily felt. Bearing in mind this negative potential, our amendment 121 seeks to provide a positive defence for those who have made an innocent mistake.

As we have emphasised throughout our deliberations, this is a complex Bill and it may prove easy innocently to fall foul of the law in PPERA. Even a brief review of the provisions on a declaration reveals the lack of certainty for a lay person—for example, the concept of "value of the benefit" and the provision of a benefit "in connection with" a donation. Although we do not dispute the need for such provisions, it is important to ensure that a positive defence is in place if the complex measures are unwittingly not complied with.

By including the commission in the process, amendment 121 aims to place adequate and specialised scrutiny on any person who asserted the defence. By positively confirming that the defence exists, we can ensure that the Bill is in kilter with other legislation that creates criminal offences. It is important to remember that guilt of a criminal offence, with the obvious stigma attached, is at stake. As it stands, the drafting of proposed section 54A(6) to the 2000 Act does not adequately address our concerns. It merely states:

"A person who knowingly or recklessly makes a false declaration under this section commits an offence."

There is no confirmation that a person would not commit an offence in the case of an innocent mistake. From our perspective, the drafting of section 54A(5), as proposed in clause 8(2), is not sufficiently prescriptive in that respect. The Bill is silent, and might unfairly cast a doubt over the honesty of an innocent person. There may be a lack of clarity about how the law works in practice, especially when the legislation is first enacted. As such, it seems fair positively to provide a clear defence.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

The hon. Gentleman will correct me if I am wrong, but according to my recollection, he is a lawyer; in fact, I believe that he still moonlights as one. I suggest to him that amendment 122 would change a subjective test into an objective one, and that amendment 121 would introduce a subjective test. He is proposing contradictory amendments that would create great complexity. Were both amendments agreed to, we would end up with the replacement of a subjective test by an objective test and then the reintroduction of a subjective test.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

That is not the case, because the defences are different. They are not put together. Let me continue my line of thought; the hon. Gentleman can then come back, if he likes.

I should like to draw a comparison with section 167 of the Representation of the People Act 1983, which shows the point that we are making. It stated that when a person had to be charged with an offence under its provisions, they could apply to the High Court, an election court or other court as appropriate for relief from liability, on the grounds that

"the act or omission arose from inadvertence or from accidental miscalculation or from some other reasonable cause of a like nature, and in any case did not arise from any want of good faith".

The 1983 Act is an effective example of our amendment in practice. We tabled a near-identical amendment in Committee, but the Minister dismissed it. He said:

"Hon. Members spoke about the 1983 Act, but that framework was replaced by the 2000 Act...We do not believe that the amendment is necessary, but of course we hear the concerns about the dangers of an overzealous approach to enforcement—of the minor, technical breaches." ——[ Official Report, Political Parties and Elections Public Bill Committee, 20 November 2008; c. 379.]

The 1983 Act may have been replaced, but that does not mean that it is not a good example of what we want to get to. The Minister concedes that there is a concern about an over-zealous approach by the commission and that we should address that concern by clarifying the defence.

We should act now to avoid the dangers that we have identified and that the Minister has confirmed. There should be no harm in adding this extra layer of protection. Perhaps the technical point that David Howarth made earlier is valid, but I say here and now that the Conservative party has been the only one to have supported the concept of an innocent mistake—and we are sticking by it. I am pleased that the Minister seems to be coming around to our way of thinking.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I rise on behalf of my hon. Friend Martin Linton. On a point of record, I should say that, as the hon. Gentleman may recall, my hon. Friend also had a lot to say about the issue in Committee.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

He did, and I congratulate him on having done so, but he was not speaking from the Front Bench, unless I am mistaken; the Minister may wish to put me right on that.

The Electoral Commission seems to have concerns about the amendment. It says that it could considerably weaken the eligibility of declarations made under clause 8. However, I put it to the commission that we need a mechanism to deal with the issue. To that extent, the policy of straight rebuttal that the Minister advanced in Committee was not productive. However, he seems to have made a significant about-turn on the issue, at least in general terms; I was heartened by what he said. Nevertheless, so far there have been no specifics, so we will press amendment 121 to a Division at the appropriate stage this afternoon.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I am anxious that the hon. Gentleman should not be under any misapprehension. I said to him that I did not believe that the offence in new section 54A(6), with which these Opposition amendments are primarily concerned, is one of the offences that we consider too wide at the moment. We are bringing the amendments forward in the other place, and as I have said, we will reframe some of this. We have, as always, listened carefully to what hon. Members have said, particularly the cogent arguments made by my hon. Friend Martin Linton in Committee. We want to achieve the stated aim, but not in this context. Some specifics have already been given today, and I would not want the hon. Gentleman to be under any misapprehension.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I am thankful for the Minister's putting the record straight. That makes it more important that we request a Division on amendment 121.

Amendment 122 would change the requirement for a declaration under new section 54A(1) to be made

"to the best of the individual's knowledge and belief" by inserting a less oppressive requirement of "reasonable" knowledge. As it stands, the Bill imposes a considerable obligation on the donor by requiring them to apply the highest level of their knowledge and belief in stating whether subsection (2) applies. Subsection (2) applies if another person has provided the donor with money or another benefit in excess of the threshold in subsection (2)(b). It therefore has two layers: the fact of the provision and the value of the provision. In the case of the latter, subsection (2)(b) applies if the "value of the benefit" exceeds the threshold. Satisfying that requirement could be especially difficult. Likewise, it may be equally tough to apply one's best knowledge in deciding whether another person has provided a benefit

"in connection with the making of the donation".

That is emphasised by the lack of an obligation in the Bill for the commission to provide guidance on valuing benefits, so the potential to catch out honest donors is considerable. The provision implies that the person must use all efforts to ascertain whether a vague link or high value of an obscure benefit requires a declaration. When we consider the sanction for failure in this respect, we see that that is a tough standard to satisfy.

In short, the provision can serve only to discourage donations and engagement with the political system. I remind the Minister that he accepted the principle at stake in Committee, where he said:

"Of course reasonableness is important. For instance, when someone is required to give an opinion it should be a reasonable one." ——[ Official Report, Political Parties and Elections Public Bill Committee, 20 November 2008; c. 371.]

That being the case, why not incorporate it clearly in the Bill? This requirement is oppressive and potentially counter-productive to the wider goals of the legislation. Our amendment seeks to temper the Bill and bring it into line with the mutual expectation that reasonableness, rather than best knowledge, is the correct requirement in these circumstances.

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Photo of James Brokenshire James Brokenshire Shadow Minister (Home Affairs)

My hon. Friend, and indeed the Minister, talked about the concept of acting in good faith. To that extent, there is some commonality of approach in trying to deal with good faith actions and bad faith actions, if I may use those terms. That is difficult to frame in a legislative way. Does my hon. Friend agree that there is an issue as regards the "best endeavours" obligation—the extent to which people need to make investigations to ensure that they are satisfied—and that there is, equally, a correlation with the recklessness test that appears later on as to whether an offence is triggered? Does he agree that a combination of those steps could lead to uncertainty, which I assume relates to the good faith that he is trying to achieve?

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

My hon. Friend makes an interesting and valid point that I hope will be taken on board and considered by the Minister as he reviews the provision as a whole.

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Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

As I understand amendment 121, the hon. Gentleman seeks to apply a subjective test to actions that may have taken place under new section 54A(2)(a) and (b). However, the amendment does not narrow things that much. I can see the mischief in subsection (2) that he is trying to address, but his amendment does not refer to that subsection, so it seems too widely drawn.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The hon. Gentleman may have a point. We presented two defences that need to be reviewed, and perhaps they are not as connected as they should be—something that we can review. He agreed conceptually with one of the defences that I advanced, and found interest in the other one as well, so we are talking along the same lines to a great extent. I agree that we would want to look at amendment 122 further as we moved on to the later stages, and that will be done in the other place.

Amendment 8 was tabled by Mr. Hamilton. It would require future donation and transaction reports published pursuant to section 62 of PPERA which relate to a relevant donation by an unincorporated association to include the names and addresses of all donors donating £5,000 or more to that unincorporated association, and the names and addresses of all of the members of that association. Essentially, it is a look-through provision in respect of which we agree with the Electoral Commission; it is too widely drawn, such that it is onerous and disproportionate. I do not want to spend too long on it because it has been effectively superseded by Government new clause 20, which we will come to in a later grouping.

Finally, I address our amendments 123, 126, 127, 128, 130, 132, 134, 135, 136, 137, 138 and 139, which all provide for indexation of the remaining threshold sums. As I said, we believe that they are important provisions that will ensure that inflation does not leave the thresholds at an excessively low real level, and that the figures will increase in line with inflation. Some have said that they do not like the proposals or that there is no practical need for them for various reasons, including that section 155 of the 2000 Act already allows the Government to increase thresholds to reflect changes in the value of money. That is all very well in theory, but in practice, Parliament will have other things to do than reconsider those figures annually. That is why such provisions should go into the Bill, and why we were happy to hear from the Minister that that point has been conceded by the Government. We look forward to receiving his amendments during further stages in the other place; I also appreciate his point about the need for a rounding figure to keep the figures clear and unconfusing. We will be open-minded on how such a provision is best put into effect.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice 5:00 pm, 2nd March 2009

This is one of those odd occasions where I was in favour of the new clause the Minister was proposing until I heard his reasons for it. I could have understood an argument that said, "These figures take no account of the rate of inflation since 2000, and there is a need to stick to round figures because people do not understand small fractions, so one may as well increase the number upwards to the next round figure and leave it at that for a long time." The figures are nine years short of where indexation would normally get us, so one could then have said, "We don't intend to change the figures for a while." That would be especially important given the fact that inflation is now very low—in fact, we are looking at deflation.

Unfortunately, however, that was not the Minister's argument. He suddenly came out in favour of some form of indexation and said that the figures should be increased now and then indexed. That is going too far in the direction of reducing transparency. The Minister quite rightly said that we do not have any scientific evidence about public opinion on this matter, but I caution him against making too many assumptions about whether public opinion would find what he proposes acceptable. I would be happy for him to do some research to show me that I am wrong, but to increase the figures by 50 per cent. and also to index, is to lay ourselves open to a charge that we are going too far in one go.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I do not want to interrupt the hon. Gentleman unduly, but I did make the point that we are all making judgments about the matter. I am not making any assumptions and we are making the best judgment that we can. I have certainly said, quite explicitly, that if our judgment about the matter is proved wrong, we shall be happy to revisit it. There is no science about the matter and I can assure him that I am not making too many assumptions.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice

I am glad to hear the Minister being suitably modest about his proposal, but I would have preferred him to have given a more positive reply to the suggestion made by Martin Linton to have a review only once a Parliament, given the uplift suggested in the figures. Indeed, a revision once every two Parliaments might be appropriate, given the size of the initial uplift.

There is also an interaction between new clause 19 and new clause 1. In a way, it makes no sense to decide on new clause 19 until we have decided on new clause 1, because we have to decide whether transparency will be the only mechanism for controlling donations, as it currently is. Where transparency is the only mechanism, there is a very strong case indeed for making that transparency provision as strong as possible and for keeping the limits as low as possible.

However, if we were to adopt a cap, that would be the primary way of maintaining the public's confidence that—to use the Minister's words—people are not buying influence in politics. The transparency provisions would then provide a secondary way of maintaining that confidence. In those circumstances, one might come to different conclusions about where the transparency line should be drawn. I do not intend to divide the House on new clause 19, but given what the Minister said, I am rather more worried about it now than I was when we started our consideration of it.

Mr. Djanogly said that he would like a Division on amendment 121. However, I will not be able to support him, and not just because of the technical reason—in fact, it is far more than a technical reason; it is an important reason—that I gave in an intervention. His amendment 121 would make the commission of a criminal offence dependent on what an administrative agency later decided about the circumstances that prevailed when the defendant acted. That can never be the right way to write a criminal offence.

However, that is not my only reason. Rather, I am entirely puzzled about how the defence would work in the precise circumstances that the hon. Gentleman described. As was made clear in an intervention on him, the Bill suggests that

"A person who knowingly or recklessly makes a false declaration under this section commits an offence."

However, after that he wants the Bill to say that it is not an offence if,

"in the reasonable opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration".

I just cannot see how one can knowingly make a false declaration innocently. If someone makes a false declaration and they intend it to be false, it can never be made innocently.

The only circumstances that have been raised are those where someone has been reckless, but what does recklessness mean in such circumstances? It means knowingly—consciously, subjectively—not caring whether what one says is true or false. I cannot see how that can ever be done innocently either. I am afraid, therefore, that I cannot support amendment 121.

The crucial question in all the amendments that we are considering is public confidence.

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Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Is the hon. Gentleman therefore saying that he will not support the insertion into the Bill of any provisions to deal with innocent mistakes?

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice

As the Minister said, it depends what the offence is. There is scope for an innocent mistake defence where the offence is strict, or somewhat strict, in the way that it is drawn up. However, where the offence is one of knowingly or recklessly making a false statement, it is difficult to imagine any circumstances where that could be done innocently.

As I said, the key criterion in all these debates is public confidence, and my doubts about new clause 19—although not enough to encourage me to divide the House—are based on precisely that issue. Will the changes maintain public confidence? My reason for opposing amendment 121 is exactly the same, because I do not think that making contradictory laws ever maintains public confidence.

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Photo of James Duddridge James Duddridge Opposition Whip (Commons)

I welcome the Minister's attitude towards new clause 19. As a result, my comments will be quite brief. I welcome the increased donation limits, because they will mean that political parties will be less reliant on public money, trade union money and businesses' money, which is bound to be a good thing.

I would welcome hearing from the Minister by how much he predicts overall private donations will increase as a result of the increased thresholds. Some people who now donate at a level just below the threshold will donate at a level just below the new, higher threshold. That is not for any criminal reason, or for any other reason that might make us uncomfortable. I can give the House three examples of people to whom I have spoken about this. The first is a bailiff, who wanted to contribute to a political party, but who did not want his name in the public domain, and who has a policy of keeping his name and address private. The second was a constituent who had won quite a bit of money on the national lottery, and who was conscious of the need to keep their name out of the public eye for fear of receiving unsolicited requests for donations. The third was a relatively junior civil servant who wanted to make quite a large contribution to a political party, but who felt that that might go against them in their workplace.

Conversely, some people might increase the amount of money they donate because they want it to appear on the register. For example, I was considering making a £50 donation, having met Rebecca Harris, the Conservative candidate in Castle Point. That would have been below the £200 threshold. I am actually incredibly proud of wanting to make that donation, and I think that I shall increase it to £201, so that it can go on the record, as part of the attempt to bring greater democracy and accountability to Parliament, rather than having to wait until the threshold goes up to £500 to make the same point. That would also be an awful lot more expensive for my pocket. So Castle Point Conservatives can expect a £201 donation from me as a result of this debate.

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Photo of James Duddridge James Duddridge Opposition Whip (Commons)

This seems to be quite popular. Perhaps I will arrange a whip-round after the debate.

I am grateful to the Minister for taking on board the points that have been raised about indexation. I am slightly concerned, however, given the very useful evidence sessions and the large number of very useful Committee sittings, that the Government did not table these amendments earlier. It would have assisted them if there had been a greater gap between the evidence sessions and the Committee sittings, so that they could have tabled amendments to be considered by this House rather than another place. Sometimes, the devil is in the detail and, all things remaining equal, I can imagine the House of Lords being less aware of electoral practices, and our getting into a position in which the system becomes more complex than it needs to be.

In addition to indexation, I want to talk about how the threshold is raised. I am minded to think that the idea of raising it at a general election is a good one. In that way, there would not be a problem with raising it from £500 to £512. I think that we should raise it to a round number—perhaps £550 or £600. In relation to wanting to raise the maximum amount of revenue from private individuals, will the Minister give consideration to years in which there are two general elections, as happened in 1974? Heaven forbid that we should find ourselves in that position in 15 months' time, or before, if the country remains undecided about who they want to solve the problems that the Government have got us into. However, if we do end up in that position, we, as politicians, would surely want private individuals to be able to contribute twice the annual limit, rather than being constrained by that limit.

On new clause 19, which I shall deal with before briefly concluding on amendment 121, will the Minister look at connected parties? Although I fully endorse the movement from £200 to £500, if a family of five adults all contributed a smidgeon under £500, that would amount to £2,500 and over an electoral cycle of four years—the norm, if the Government are not running scared and so go the full term—it would mean a donation of £10,000. In addition, if those five individuals living under the same roof set up an unincorporated association, they could yet again make an even larger contribution. I would appreciate it if the Minister, as well as making concessions on new clause 19, looked again at connected parties.

Finally, if we are to get people to donate the maximum amount from their own pockets rather than relying on the state, the trade unions and business, it is essential for the Government to take a close look at amendment 121 and associated issues. People wishing to donate money should not be assumed to be buying influence or to be potential criminals. Innocent mistakes can happen, and everything the Bill does should encourage people to make political donations, and, indeed, to be proud of making them and proud to back the vitality of our democracy. They should not be fearful of being hauled through the courts for a minor misdemeanour.

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Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice 5:15 pm, 2nd March 2009

We have had an interesting discussion. We have heard what people said and we have taken most of the concerns into account. I am not sure that I agree that we are striking the wrong balance, as David Howarth suggested we were; we have done our best to strike it in a way that will sustain and endure. As I said, if we have got the judgment wrong, we will be happy to return to it. We think that this is a sensible way forward and we hope that the Opposition will reconsider their decision to vote on amendment 121, which I think they might regret in times to come, but it is a matter for them. I commend the Government new clause.

Question put and agreed to.

New clause 19 accordingly read a Second time, and added to the Bill.

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