New Clause 1 — £50,000 cap on donations

Political Parties and Elections Bill – in the House of Commons at 5:15 pm on 2nd March 2009.

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'(1) In section 54 of the 2000 Act, after subsection (1) there is inserted—

"(1A) A donation received by a registered party from a permissible donor must not be accepted by the party in so far as the amount of that donation and of any other donations accepted by the party from that donor during the same calendar year exceeds £50,000.

(1B) Subsection (1A) does not apply to donations to which subsections (1) and (2) of section 55 apply.".

(2) In section 56 of the 2000 Act, after subsection (2) there is inserted—

"(2A) If a registered party receives a donation which it is prohibited from accepting by virtue of section 54(1A), subsection (2) applies to that donation only in so far as the amount of that donation and of any other donations accepted by the party from that donor during the same calendar year exceeds £50,000.".

(3) In subsection 58(1)(a) of the 2000 Act, after "(b)", there is inserted "or (1A)"'.— (David Howarth.)

Brought up, and read the First time.

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

I beg to move, That the clause be read a Second time.

New clause 1 simply introduces a £50,000 cap on donations to political parties by any particular person in any calendar year. In the long discussions about the Bill, which is supposed to be about political parties and their funding, this is the first time that we have been able to debate the central issue of whether transparency in donations—as we have discussed over the last hour and a half—is enough, or whether, as I and my party believe, there should be far stricter control than just knowing who donated money, as we need to limit the amount donated itself.

Our proposals in this new clause were part of the compromise package put forward as a result of talks under the chairmanship of Sir Hayden Phillips—talks that seemed fruitful for a while, but in the end failed to produce proposals that all parties supported. However, while those talks were going on, this particular proposal for a donation cap at around £50,000 gained support on all sides, so I would be astonished if it were opposed today by parties and politicians who previously supported it.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

I hope to expand on this point if I catch your eye, Madam Deputy Speaker, but does the hon. Gentleman accept that Hayden Phillips made his proposal for a donation limit of £50,000 as part of a comprehensive package, which included state funding, and that he said words to the effect, "You cannot have one without the other"? I think he used the phrase, "There can be no cherry-picking; this is a comprehensive package."

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

Sir Hayden Phillips did say that it was a comprehensive package, but I understand that the talks never got to the discussion of state funding. Later in my speech, I shall get to precisely that point, because it is important to understand exactly what effect a £50,000 cap would have on the existing parties, the extent to which it would produce a funding gap for the parties and the extent to which state funding would be required to fill that gap, if at all. If the Secretary of State will forgive me, I shall return to that.

The point of a donation cap is to undermine the perception and the reality that big money buys access to political power. There is no point going through all the examples that have been thrown by one party against other parties over the past 10 or 15 years—cash or donations for peerages, changes in policy, support for this initiative or that. The bandying about of names, on all sides, gets us nowhere.

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Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

I am listening with great interest to what the hon. Gentleman has to say. Given his concern in relation about the perception that big money, as he puts it, is buying influence, why set the cap at £50,000? Surely it should be considerably lower, although the great British public at large would think even such a sum one that could influence decision making or give access to politicians.

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

I was going to come to that point later, too, because my view—as well as that of my party and my party leader, my right hon. Friend Mr. Clegg—is that to restore public confidence we will have to set the cap much lower than £50,000. We tabled an amendment in Committee, which was never discussed, that the limit should be £10,000. We have suggested £50,000 because it is what the Conservative party and its leader proposed. If Mr. Field wants to oppose his party leader's view, so be it, but we are trying to operate within a rough consensus that previously existed.

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Photo of Mark Field Mark Field Conservative, Cities of London and Westminster

The issue, in part, is that we, as Members of Parliament, have a limit set of 1 per cent. of our salary. We have to be transparent about any donations we have or any moneys that come in relation to any entertainment—in other words, about £620. I fail to understand why—other than purely for party political advantage to the Liberal Democrats—the hon. Gentleman wants to set a limit of £50,000, or as he now desires, £10,000. Surely the issue here is transparency, as we discussed earlier in the debate. Provided everything is transparent, surely that is the right way forward that will reassure the public that there is openness on those matters.

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

No, the issue is not only transparency, but whether public confidence can be maintained solely by transparency. The conclusion that all the parties reached as part of the Hayden Phillips process was that transparency by itself was not enough. The perception that access could be bought and that donations were being given with strings could be challenged only by having a cap on the size of the donation.

Throughout the debates in Committee, the Minister said—this is right—that some people give money to political parties without strings and for the good of the cause, and that that is a good thing. The trouble with that is that everyone knows that sometimes the money is given, or offered, not for that purpose but in return for the prospect of access or in return for influence. The question of perception is vital to the issue before us.

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Photo of Tony Lloyd Tony Lloyd Chair, Parliamentary Labour Party

The hon. Gentleman will be aware that I have an interest as chair of the trade union group of Labour MPs, but does he not recognise that there is a fundamental difference between the donations of an individual and the donations of a corporate body such as a trade union that operates collectively, which consist of small contributions from many people? The passing of the new clause would thus do real damage to the historic relationship—of which, admittedly, the hon. Gentleman may not approve—between my party and the trade unions.

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

I was going to deal with that point later, but let me make something absolutely clear now. Hayden Phillips also said that there must be a fair way of dealing with the relationship between the Labour party and the unions. I do not seek to undermine the existence of the Labour party through any measure that I propose today. A later group contains a new clause which I hope will deal with the question in a fair way by distinguishing between donations from trade unions and affiliation fees that are in reality—this meets the hon. Gentleman's point at least to some extent—the agglomeration of many small donations. I am perfectly happy to allow that situation to continue, as long as the trade union itself makes clear to its members that they can choose whether or not to donate to a political party.

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

If I can be allowed to finish this point, I will let hon. Members intervene afterwards.

I propose that the trade unions follow a code of practice issued by the Electoral Commission relating to information that they give their members about their ability to opt out of the political fund, including information about what members must do to opt out, and what was done with the money paid into the fund in recent years. As long as the code of practice was followed, I should be happy to allow affiliation fees to continue to be paid as they are now.

Beyond affiliation fees are donations from trade unions, which are a different matter. A donation from a trade union should be treated in the same way as a donation from a plc or other limited company to the Conservative or, indeed, the Labour party. Let me return to my central point: I am not proposing measures that would destroy the funding base of the Labour party. That is not my intention.

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Photo of Tony Lloyd Tony Lloyd Chair, Parliamentary Labour Party 5:30 pm, 2nd March 2009

This goes to the heart of the debate. Although the hon. Gentleman—supported by the Scottish nationalists, incidentally—says that he does not wish to attack the link between the unions and the Labour party, his new clause would have precisely that effect.

The hon. Gentleman may honestly argue that he sees a distinction, but he should bear in mind that many trade union members, even those affiliated to the Labour party, do not contribute to the political fund and thus do not contribute to the Labour party, because union membership is not synonymous with support for the Labour party, either political or financial. The distinction that the hon. Gentleman thinks he draws does not exist, and, what is more, his new clause in its present form would damage the Labour party. He may say that that is not his intention, but he should understand that the new clause would do precisely what he claims that he does not want to do.

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

If the hon. Gentleman looks at new clause 8, he will see the overall intention of the Liberal Democrats. To some extent, it is unfortunate that the grouping of the new clauses means that new clause 1 is being considered alone, so I concede the technical point that new clause 1 without new clause 8 would indeed have the effect of stopping donations of any sort, including affiliation fees, by a trade union to the Labour party. However, the hon. Gentleman needs to look at new clause 8 as well as new clause 1 to see our overall intention, which is not to undermine in any radical way the relationship between the trade unions and the Labour party, but to control that relationship in a way that is fair and equitable across the other political parties and their financial relationships.

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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 debate is becoming more complicated, but does the hon. Gentleman accept the basic premise that new clause 1 is unacceptable without at the same time putting in place provisions for dealing with trade unions?

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

One of the fundamental points from the Hayden Phillips talks was that we need to come together on three issues: donation caps, how they specifically affect trade unions and the relationship between the unions and the Labour party, and spending caps—it is a shame that the grouping does not allow us to talk about them all in one go. The national situation with regard to spending needs to be controlled as part of the whole package.

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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)

Does the hon. Gentleman agree that the Labour party's attempt to evade unions being part of the whole settlement solution stretches credibility to the absolute limit? More than anything else, the measure is about transparency and choice—individual trade union members having choice about where their political fund money goes and transparency in the process so that they can see throughout exactly what contribution that money makes.

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

That is precisely right and it is what we are trying to achieve. Tony Lloyd is correct in that trade union members who do not contribute to the political fund should not in any way be contributing to a political party, because donations other than those from a political fund are not allowed in law. Nevertheless, the political fund is not limited to affiliations; it can spend on donations as well as affiliations, so it does not follow, as the hon. Gentleman seems to think, that if a union makes a payment from the political fund it is automatically an affiliation. That is not the case.

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Photo of Martin Linton Martin Linton Labour, Battersea

Does the hon. Gentleman not accept that any money that finds its way into the political fund of a union affiliated to the Labour party or any other party has done so only after the union has collectively voted to set up or continue a political fund and only after individual members have used, or not used, the procedure for individually opting out? I support the general concept of a cap on donations, but surely the hon. Gentleman is doing precisely the opposite of what he proposed—he is bringing forward one element of the package without resolving the key issue of the status of donations from trade unions, which I maintain should not be captured by the limit.

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

The hon. Gentleman must forgive me. I am not bringing forward the single element of the package; the House authorities have managed to do that by not grouping new clauses 1 and 8 together as I would have done if I had had my way.

The hon. Gentleman makes a crucial point about individual affiliation and payments to a political fund. The key point is that individuals know what is happening and are clearly able to opt out if that is what they want. All Members who have had anything to do with unions in the course of their lives—I have had a lot to do with them from my early childhood—know that some unions are more open and their political fund is easier to opt out of than others. As I mentioned at Second Reading, when my wife tried to join the union Unite she found it very difficult to opt out of the political levy, even though in the circumstances she did not feel like donating money to a party that was trying to oust me from my seat—[Hon. Members: "She might have."] She might, but I can assure the House that she did not. The point is that the Electoral Commission should lay down clear guidelines about what counts as sufficient clarity in union rules and documentation to satisfy the commission that the union is giving its members a clear, open and transparent choice.

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Photo of Bob Spink Bob Spink Independent, Castle Point

The hon. Gentleman is right to say that public perception is the acid test. I tend to support the direction of new clause 1, provided that it is linked to new clause 8, as he explained it was. It achieves the balance for which Labour Front Benchers called in an earlier debate. On the Hayden Phillips spending-caps pillar, can the hon. Gentleman advise the House? If there were a £50,000 limit, except for trade unions in certain circumstances, what would that give the main political parties? Has he done any research on that? I congratulate him on the way in which he has brought the debate forward; it is excellent.

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

A set of figures available from the Electoral Commission and on the parties' websites gives us a clue as to what might happen if there were a £50,000 cap. We have to make certain assumptions. One of them is that a donation of more than £50,000 would become a donation of £50,000—that is, that the whole donation would not be lost, and that only anything above £50,000 would be lost. We also have to make assumptions about how a scheme like that in new clause 8 would apply, because there is a distinction between affiliation, which would continue to be allowed, and donations to which the cap would apply.

With all those caveats, I suggest that the situation would be as follows. The three main English parties, if I may put it that way in the presence of Pete Wishart—the British parties, or, as the First Minister of Scotland says, the London parties—spend about £62 million in a typical non-election year, if we take 2008 as a typical year. However, it is worth saying that in a non-election year, they often have, between them, a surplus of about £10 million, so they actually raise about £72 million. If a £50,000 cap or something similar were in place—I think that this goes some way towards answering the question that the Secretary of State posed—it would have the effect of reducing the total income of the parties by some £10 million. Of course, that £10 million would not be distributed evenly among the three parties, but then the Labour party spends about £25 million a year, and the Conservatives about £32 million. The Liberal Democrats spend about £3 million or £4 million a year. The losses for the Liberal Democrats would be proportionately small, but at about the same sort of level as the losses of the other parties.

To come back to the point that the Secretary of State raised, the question is whether that would be such a devastating loss for the political parties that they would have to go cap in hand to the Government and ask for state funding. For a number of reasons, I do not think that they would necessarily be in that bad a position. The first reason is the surplus. The loss is about the same as the annual surplus, although the counter-argument is that the surplus is accumulated in non-election years and spent in election years. Even if we put the surplus to one side, a reduction of 15 or 16 per cent., although difficult to make in one go, is not, in my view, entirely out of the question for the political parties, especially the two bigger parties.

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Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

Is not the hon. Gentleman making the case that new clause 1 is unfortunately detached not only from new clause 8, but from new clause 10, which his party put forward? As Hayden Phillips—and, indeed, Select Committees—suggested, such arrangements need to lean on each other and cannot be separated from each other, if the logic is to work. Proposing an amendment that is entirely separated from a number of others as though it stood on its own appears to defeat the logic, which is to show how things might work overall.

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

My view is that those three elements stand together. I would never have separated new clause 1 from new clause 10 either. The spending cap goes along with the donation cap, because it would remove part of the problem of parties trying to outspend one another for the sake of it.

It is right that the effect on the parties of a £50,000 cap should be seen in the context of having a spending cap as well. What could the parties do in the medium term to deal with the gap that would be created by such a cap? It seems to me that they could do a lot of things. First, the Conservative party employs several very highly paid people, whose salaries are said to be in the region of a quarter or a third of a million pounds a year. Certain economies are therefore quite easy. Secondly, we all know that parties waste a lot of money on campaign techniques whose efficacy is far from established. The best example is billboards, which are massively expensive and do not seem to shift any votes at all.

Thirdly—I suppose I would say this, as a Liberal Democrat—the Government are fond of benchmarking public services. They say, "Let's look at an area of the country that provides a service the most cheaply and ask the other parts of the country, which supply the same thing more expensively, why they are so expensive." As a Liberal Democrat, all that I can say is that we manage to run a national political party with £3 million, and the other parties should be asked why they need 10 times that amount to run their parties.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

The other parties have rather more seats, and they aspire to Government, which makes a difference. If the hon. Gentleman wants benchmarking, I would be delighted for the Advertising Standards Authority to be given the role of benchmarking "Focus" leaflets.

May I press the hon. Gentleman on state funding? Hayden Phillips was clear that state funding should be part of any donation limit package, but so too was the hon. Gentleman when he signed up to the Select Committee on Constitutional Affairs report, which stated, at paragraph 109:

"However, such a limit"— on donations—

"should only be considered within the broader context of a discussion about alternative sources of funding, including state funding, for political parties."

There is nothing there about reducing overall funding. I have checked the minutes, and he did not demur from that recommendation, so why has he changed his mind now?

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

As the Secretary of State says, the conclusion was that a donations limit should be considered in the context of state funding and other forms of funding. One obvious form of funding is to raise money in small amounts, as Barack Obama's campaign in the US did. One of the great attractions to party fundraisers of the possibility of very large donations is that only a few big donations are needed for the required money to be raised. In the United States, where the donation cap is very low, techniques have been developed to raise money in smaller amounts but in large numbers.

The question to consider is whether it would be necessary for parties to receive large amounts of state funding on a permanent basis, which the Government keep implying would be the inevitable result of a donation cap. I do not believe that it would be necessary. The amount of state funding required would be quite modest, and whether there would be any need for it to be provided on a permanent basis is an open question. We must therefore ask whether it is true that we could not introduce a donation cap without already having worked out some elaborate and permanent state funding scheme. I do not believe that that would be necessary, because in the context of the spending cap and the relationship between the Labour party and the unions, the donation cap stands by itself. It does not need those further measures.

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Photo of Martin Linton Martin Linton Labour, Battersea 5:45 pm, 2nd March 2009

Surely, the hon. Gentleman knows that we already have a system in this country that long pre-dates what is now current in the United States or Canada and that involves marshalling a large number of small donations—it is known as the political levy—and he still has not answered my point. Quite apart from affiliation fees, does he not recognise that the money that ends up in the political funds of trade unions has been put there after a collective decision in the political fund ballot and after a series of individual decisions not to contract out of the political fund levy? The money is there as a result of many small decisions by individuals.

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

Yes, the money goes in by individual decision, but it comes out by collective decision and, for that precise reason, it should be treated as a donation, unless one can show that it is, indeed, an affiliation fee being passed on individually. That is the whole point of the distinction between affiliation fees and donations that Hayden Phillips was trying to make. I do not want to delay the House much further.

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

Yes, I will give way, because the right hon. Lady probably wants to deal with the point that I am making.

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Photo of Hilary Armstrong Hilary Armstrong Labour, North West Durham

No, my intervention is not on that point, although I should like to debate it with the hon. Gentleman at some stage. He started off by saying that the main thrust of the new clause came from the wish to change the public's perception of political giving and raising money for political parties. Has he any evidence that his proposed cap would have any effect on public perception?

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

Any cap would make such a big gesture in the direction of self-control by those of us in politics that it would have an enormous effect, simply by saying that we are willing at long last to control ourselves in a way that we have never been willing to do until now.

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Photo of Tony Lloyd Tony Lloyd Chair, Parliamentary Labour Party

I am grateful to the hon. Gentleman; he is being very generous with interventions. Many people—I am one of them—believe that the public really want restraint on spending and transparency about donations. Clearly, that is almost the opposite of what he is proposing and of what the Liberal Democrats believe in.

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

I cannot understand how the hon. Gentleman thinks that our proposal is the opposite, because we want both an effective national spending limit all year, every year, not just sometimes, and an effective local spending limit all the time as well, in combination with a cap. The restoration of public confidence depends on having both those things, not just one of them. We often hear arguments that one side wants transparency on donations but is willing to have a cap on spending and that the other side wants things the other way around, depending on what is to its short-term advantage. That is not good enough; we need both spending and donation caps simultaneously all the time.

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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)

I agree wholeheartedly with what the hon. Gentleman is trying to achieve. Is not one of the good things about his proposal that we would end the obscene situation whereby individuals gave the Labour party £1 million and found themselves sitting in the House of Lords?

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

We would also end the situation whereby individuals gave the Labour party £1 million to change a policy and it all came out in public, so the Labour party gave back the money, but the policy still stayed changed. That seems to me to be the best-value donation of all time. However, it does not do a lot of good for any of us to bandy around the names of individuals in one party or another who have been found to have done something of no credit to politics. The question is whether what we are allowing is a credit to politics and to our democracy.

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

Before the hon. Gentleman draws his comments to a conclusion, I just want to make sure I fully understand what he is saying about the funding gap and the interrelationship between his proposal and the need for state funding or other sorts of funding. I think he was implying that he felt that that was not necessary. However, when he and I sat on the Constitutional Affairs Committee and produced the report on party funding, it was accepted that there would be a funding gap, and that, in essence, the sorts of individualised funding that could come through would do so only after a time, and that something would be required for that transition period.

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

Yes, I concede that there would be a gap, but it is a gap in time rather than a permanent gap in terms of money. I agree that there might well be an interim period when something will be needed, but that would not have to be on a straightforward Treasury grant model, as the Government seem to assume.

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Photo of David Winnick David Winnick Labour, Walsall North

I hope I am not making a party point here—heaven forbid!—but although the hon. Gentleman, whom I respect, was speaking about not bandying names around, may I ask him whether he feels it would be appropriate for his party to return money given by Michael Brown, who, as the hon. Gentleman knows, was convicted of criminal offences? Should not that money be returned, and would that not help the Liberal Democrats, in the sense that it would demonstrate—

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Photo of Sylvia Heal Sylvia Heal Deputy Speaker

Order. We are discussing a specific amendment, and the hon. Gentleman must be careful in what he says.

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

I do not want to stray from the subject of the debate, Madam Deputy Speaker, but in that particular case if the authorities were to say that the money ought to be given to the Electoral Commission—rather than back to the individual concerned as that would be inappropriate in the circumstances—I am sure my party would comply immediately. I might add that the parallels between that situation and what has happened in the cricket world are very striking.

Let me cover the final argument that the Government have used for not going ahead with the Hayden Phillips compromise: that there is no consensus in favour of it. That is simply a cop-out. What we should be doing is looking at where the public are at, not at where the individual parties are at, and we should be going to where the public want us to go. On the specific question of consensus, I would be surprised if there were consensus today about the unincorporated bodies issue—there is agreement between my party and the Labour party, but I would be surprised if the Conservative party were massively enthusiastic about the proposed regulation of unincorporated bodies—yet the Government have decided to move on that. My party's view is that they should move on the reform of this whole area, not just on individual items of it.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

I am glad that we have an opportunity to discuss the crucial issue of the role, if any, of donation caps in a properly transparent system of party funding that commands the greatest degree of public acceptability. This issue was first considered at great length by the Committee on Standards in Public Life, which examined it in 1997, after the general election of that year; and in its landmark report of 1998, under its then chairman, Lord Neill, it set out its view of the case for and against donation caps, because—surprise, surprise!—the Liberal Democrats were at that time urging on the Neill committee donation caps of £50,000. At least on this occasion, therefore, the Liberal Democrats have the benefit of consistency on their side. That is an accusation that can rarely be made against them, but I do so today, although it also suggests that they might have been somewhat immune to experience in the meantime.

The Neill report placed the burden of its recommendations on the crucial issue of transparency. On that issue, David Howarth made a very bad point for himself, but a good point for the rest of us, when he referred—in rather delphic terms, but we might as well refer to it publicly—to the Ecclestone donation to the Labour party, which emerged, with a certain amount of excitement, in the autumn of 1997. That donation was made under the old regime—the untransparent regime—whereby donors were entitled to request confidentiality for their donation, and I recollect, although I am open to correction, that that is what happened. The profound change made by the Political Parties, Elections and Referendums Act 2000 was that that donation, which was well above the £5,000 limit, would have had to be on the record and be declared by the Labour party. People could then have made up their own minds about whether undue influence was being brought to bear. If the purpose of giving the money was, as it were, to purchase a policy, the donor might well have decided that, as there would be total transparency, it might not be such a good idea. I am pretty certain that none of the problems that arose would have arisen had the provisions of the 2000 Act been in force in 1997. Therefore, this is a point for those of us who believe above all in transparency, and in doing nothing that might undermine a transparent regime.

Neill considered the whole issue of transparency and donation caps. He was very clear about the need for transparency and the caps, which have broadly stood the test of time, notwithstanding the fact that we and the Opposition accept that the limits must be increased. The committee came down against a donation cap, however, and I ask the House to weigh its words with great care:

"The individual or company wanting to give might consider that the cap infringed a basic right and there would be a strong temptation to seek to evade the limit, perhaps by spreading resources amongst friends and relations or by setting up subsidiary companies in order to legitimise any donation by sub-dividing it. There would be no easy way to detect such a stratagem, nor to enforce the cap. In our view, the panoply of rules and bureaucracy which we believe would be required to enforce such a system would not be justified by the purpose of the cap".

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Photo of Hilary Armstrong Hilary Armstrong Labour, North West Durham

I intervened on David Howarth precisely because his new clause would create such diffusion and lack of clarity about who had given a donation that, far from public confidence being improved, public cynicism would be increased.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

I agree with that, and there is a nice paradox, which I am sure political scientists will exercise themselves in exploring in years to come: the more, quite properly, the public know about our activities, the less they appear to like them, even if they are entirely legitimate and above board. I think that Members will be aware of the very nice passage in Roy Jenkins's biography of Churchill, in which he records all the money Winston Churchill hoovered up from various nefarious sources, and suggests, with good evidence, that Churchill's career would never have got to the starting line had the degree of undue influence to which he was subject, and the extent of the donations that would now be regarded as wholly unacceptable, come out publicly. My right hon. Friend is absolutely right in what she says. There was a logical flaw in what the hon. Member for Cambridge was arguing: there is a balance to be achieved between transparency and complexity and artificiality, and the more there is the

"panoply of rules and bureaucracy" to which the Neill committee referred, the less likely there is to be true transparency, and the more likely there is simply to be avoidance.

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Photo of David Heath David Heath Shadow Leader of the House of Commons

I am very disappointed by the position that the Lord Chancellor is now adopting, because the position that he and the then general secretary of the Labour party took in Sir Hayden Phillips' committee, on which I also served, seemed to accept the broad consensus on the need for caps on donations and on expenditure, on a recognition of the difference between affiliation fees and donations outside those fees on the part of trade unions, and on some of the abuses among what I accept is a small number of unions. They were affiliating more members than they had and were paying over a greater amount than they were collecting in affiliation fees, and that needed to be addressed. I am sad that the Lord Chancellor seems to be resiling from that broad consensus that we reached, albeit that the Conservatives, for reasons of their own, walked out at a later stage.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice 6:00 pm, 2nd March 2009

The hon. Gentleman was a very participative member of the Hayden Phillips working party over many months. I did, indeed, on behalf of my party—I do not apologise for this—accept a number of compromises for the greater good. However, I have always made it clear that my starting point—I do not think that there is any dubiety about this—was that, in principle, I am not in favour of donation caps.

I shall deal with the hon. Member for Cambridge's dismissal of the idea of seeking a consensus between the parties—such a consensus is more essential in the area of party funding than in almost any other area. If there is no consensus, those who happen to be in the majority end up using their majority for partisan advantage, and that is completely antithetical to the idea of democracy. As both James Brokenshire and I have mentioned, this idea of a donation cap was reconsidered when the Select Committee on Constitutional Affairs considered party funding in the 2006-07 Session. I was struck by the hon. Member for Cambridge's amnesia about what had happened in that Committee. I was not a member of it then and I am not now, but I do remember what it said—it made it clear that it was proposing a donation cap and state funding as part of a "package". Indeed, that was exactly how Hayden Phillips read those proposals, because he was considering the matter in parallel to the Constitutional Affairs Committee and, in a sense, took as his starting point for his proposals what was in its report, to which the hon. Member for Cambridge signed up.

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

Before the Secretary of State leaves that report, I just wish to understand why the Government's response to the Constitutional Affairs Committee report stated:

"At present, all three main parties in the UK are agreed in principle to some form of donation limit."

He seemed to suggest that he was not in favour of that in principle and was, therefore, in some way, demurring. It would be helpful to understand why that statement was made in those terms.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

As I say, my starting point has always been the position that was taken by Neill and by my party, and by the Conservative party, its Front-Bench spokesman, the shadow Home Secretary and a panoply of Conservative Uncle Tom Cobleighs, who all said that they are not so keen on donation limits, for perfectly sound reasons. What we were involved with at the same time as Hayden Phillips—the hon. Member for Hornchurch will recall that the interim report was published in October 2006—was seeking a compromise with the other parties. We were not so keen on donation limits, but we were keen on spending limits—I have always been keen on those—and other parties were keen on other elements of this, and we came together to agree what I thought was a comprehensive package. Inevitably, in a negotiation, for a greater good, both for oneself and the purpose being served by the negotiation, one gets some things one wants and one has to accept some things one does not want—there has never been any dubiety about that.

When Hayden Phillips reported on 15 March 2007, he said:

"In this chapter"— chapter 5—

"I recommend that the time is now right to introduce a higher level of public funding for political parties."

He set out a number of reasons, all of which the hon. Member for Cambridge appeared to dismiss. Sir Hayden stated:

"First, other measures proposed in this report would impose significant restrictions on the parties' freedom to raise their own funds, and new obligations in terms of compliance and reporting. These measures are in the public interest, and it is fair and reasonable to use public funds to help offset their financial impact.

Second, our political parties all face long-term financial instability because of the rising costs of their business, and it is this which has prompted them to follow the trend among large non-profit making groups to pursue large donations from wealthy individuals and organisations. Financial instability is the enemy of healthy politics, and an injection of public funds is merited if we are to maintain public confidence in our democracy.

Third, there is a widely discussed and lamented decline in democratic engagement in this country, manifested in falling election turnouts and falling party membership rolls. Properly targeted, public funding can make some contribution to reinvigorating the parties' drive to involve and engage more members of the public in political debate."

As I said to the hon. Member for Hornchurch, everybody accepted that in the spirit of compromise.

Hayden Phillips reflected those principles in his proposals at the end of July. It is simply inaccurate for the hon. Member for Cambridge to assert, as he did in his speech, that Hayden Phillips did not make specific proposals on party funding, because he did so in his report in March and again in the draft all-party agreement. The Liberal Democrats and the Labour party had initialled it but, for reasons that we need not go into at length, the Conservative party was unable to support it.

The agreement contained a great chunk on public funding with two linked schemes, stating:

"Two new schemes for public funding of political parties will be introduced".

It did not say "could" be introduced; it is explicit on the point, which is repeated in the annex to the White Paper on party funding that I published last June as a precursor to this Bill. The truth is that unless one is willing to accept gratuitously a major shortfall in party funding, one cannot —[Interruption.] The extent to which this would fall on one party as opposed to another depends on where one sets the limit, but it would never have an equal effect on all three parties, or even on the two main parties; at some levels it would hurt the Conservative party more than the Labour party and at other levels the opposite would be the case. I admire the way in which the hon. Member for Cambridge, in a spirit of alleged liberal non-partisanship, says that the Liberal Democrats will not be affected and that the fact that the Conservatives and Labour party will between them lose about £5 million or £6 million is neither here or there, because they would just cut their spending, thank you very much. That is not the way to achieve a consensus.

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Photo of Philip Davies Philip Davies Conservative, Shipley

Perhaps the Secretary of State has hit the nail on the head. Does he agree that the problem we face in this debate is that the outside world probably thinks that each party's position depends on its own self-interest and that the bigger picture is lost? I believe that anybody, including trade unions, should be able to give whatever money they have freely. If trade unions wish to give their money, they should be free to do so—it is their decision. Does he agree that this subject often gets bogged down in the fact that most people think that each party is simply arguing a point on the basis of its own self-interest?

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

I agree with that. May I say something else on the issue of donation limits? I shall do so briefly, as I know other hon. Members wish to contribute. There is no doubt that the proposals from the Constitutional Affairs Committee, which were agreed by all sides, were predicated on the basis of state funding, as were the Hayden Phillips proposals and those that were discussed in the Hayden Phillips all-party talks. A donation limit would make any sense—and could gain my support and the Government's, for similar reasons to those that I believe have been expressed on many occasions by Mr. Djanogly—only if it were part of a comprehensive package.

That then prompts the question about whether the time is now ripe for state funding. It would have been difficult to introduce in 2007, but in the midst of the worst recession we have seen since the war and when there is great demand on public finances and will be for some years to come, we would need to take leave of our senses to propose that hard-earned taxpayers' money should be used to support our political parties. If we wanted to make one decision that would ensure that the esteem in which we are held—which is not that high anyway—rocketed through the floor, it would be to introduce extensive state funding.

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Photo of Andrew MacKinlay Andrew MacKinlay Labour, Thurrock

In Committee and earlier, I have been trying to follow the impact of the Bill on Northern Ireland political parties. In their terms, £50,000 would be a very large amount. For example, is Sinn Fein required under existing legislation to have a separate cocoa tin for their moneys for Northern Ireland? If not, and it is a national party in terms of the whole of Ireland and can raise money in the Republic of Ireland—not to mention the US—how can we measure the cut-off point? If the national organisation in Dublin donates money to the north, is that seen as money from a donor? It is important that we know how all that will work, because Northern Ireland is a critical area for elections.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

My hon. Friend raises a further issue of complexity, and we would have to think very hard before we went down that route. If he will forgive me, I will try to provide him with a more detailed answer should I catch your eye, Mr. Deputy Speaker, later to sum up the debate.

One last point that I wish to make about state funding and donation caps is something of a gypsy's warning. The Constitutional Affairs Committee waxed eloquent about the Canadian example, and how Prime Minister Chrétien had introduced a system of state funding with low spending and donation caps. This was the future, it said, and so it was—for a period. However, if political parties were to be significantly funded by the state, we should all remember the temptation for a Government who might be under pressure in terms of public finance to seek to use the money going to their opponents to political advantage.

Last year in Canada, notwithstanding the clear all-party agreement about state funding for political parties, Stephen Harper, the Prime Minister, decided—as part of an austerity package and without consulting the other parties—to propose that the state funding should be significantly cut. He was entitled to do that, but it led to paralysis in the Canadian Parliament. Had he not then prorogued Parliament peremptorily, it would have led to a motion of no confidence in him. It led to Parliament being suspended for many weeks, and he has now had to withdraw the proposal. That vulnerability to partisan advantage shows that not much good may flow from extensive state funding.

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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)

That was an interesting lesson from Canada, but the Secretary of State suggests that we should make no change in this critical and crucial part of this Bill, and continue with business as usual. The public will find that staggering, because it means that people will still be able to buy political influence by donating to political parties. It will be back to cash for honours and people giving £1 million to the Labour party so that they end up in the other place.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice 6:15 pm, 2nd March 2009

First, the hon. Gentleman knows very well that there is not a shred of evidence in those allegations. Secondly, to the extent that the public know about donations, they do so because of legislation that we introduced. Unless there were good reasons for introducing donation caps, they would lead to less transparency, not more. That is not just my argument, or the Conservative party's. It was made, independently, by the Neill committee. Thirdly, if the hon. Gentleman wants donation caps, he will have to explain to Scottish electors why their taxes should be increased to pay for political parties. Finally, it is an insult to donors small and large to all political parties to suggest, imply or insinuate that the overwhelming majority do it to curry favour or to buy advantage. They do not. They do it because—and this may be a surprise to the SNP, which has only one, negative policy—they believe in the values of the party.

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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

New clause 1, tabled by David Howarth, proposes a cap on donations set at £50,000, which would be an annual limit. It would insert a new subsection 1A into section 54 of PPERA requiring that parties do not accept donations from a permissible donor if that donor had already donated £50,000 in the same calendar year.

Taken by itself, the new clause looks fairly straightforward, so I agree with the hon. Member for Cambridge that taking this new clause on its own is somewhat misleading, because it is of course a very complicated issue, as the Secretary of State set out. It is the unfortunate backdrop to the debate on new clause 1 and other new clauses tabled by the Liberal Democrats that secrecy and suspicion have long tainted the donation regime. However, as the Secretary of State pointed out, most people who make donations are honest and want to contribute to the societies in which they live through their donations to political parties.

As the Secretary of State said, the process started with Lord Neill's Committee on Standards in Public Life, and the subsequent inquiry, "The Funding of Political Parties in the United Kingdom". The Neill report was published in October 1998 and suggested, among other things, greater transparency in donations. While the Committee's report is relevant to the new clause, it did also pave the way for further work in the area of electoral reform, and the gauntlet was recently taken up by Sir Hayden Phillips. His report, published in March 2007, made several suggestions intended to breathe life into the democratic system and revive political engagement. Indeed, by his calculations, party membership had sunk from one in every 11 citizens 50 years ago to about one in 88 in 2007. That is a grave statistic that we should all think long and hard about.

Whatever Hayden Phillips thought about individual caps—and I heard a difference of opinion between the Secretary of State and the hon. Gentleman—we can accept for the purposes of this debate that his suggestions are, as a package, behind the new clause and others that the Liberal Democrats have tabled. However, we are concerned about the timing and whether this Bill is the correct forum in which to discuss such wide-scale reforms that have, for better or worse, been discounted so far.

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

The hon. Gentleman asked about the timing of the proposal. If not now, when? The Bill is about party political funding and comes after the Hayden Phillips talks. I cannot think of a better time to discuss caps.

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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 Hayden Phillips talks took place and, for one reason or another, were not completed. As far as we are concerned, they are ongoing business, but for the purposes of the Bill, they are not on the table. We can debate for ever and a day why the Hayden Phillips process failed. I hope my hon. Friend Mr. Tyrie, who was present, will give us the benefit of his experience. The harsh reality, which the Liberal Democrats seem to fail to recognise, is that what is on the table today is a Bill that, I agree, is somewhat lacklustre. The debate surrounding individual and collective caps is therefore a debate for another day.

In the report Hayden Phillips was keen to emphasise that a common approach cannot be delivered in the short term, and that consensus must be reached in finding a long-term solution. The Bill is designed to ensure that that Electoral Commission has adequate powers to deal with the provisions of PPERA. It introduces some transparency through reporting requirements and adjustments to thresholds. Yes, the Bill is a tinkering exercise rather than an overhaul, but the Conservative party will remain willing to seek that overhaul, even if that means moving back to the Hayden Phillips process or, as seems probable, beyond it.

Let us be clear that when we have that further debate we shall require a thorough review of the relationship between the trade unions and the Labour party. If we were to review the need for caps, we maintain that any legislation must address the whole spectrum of donations. We need to ensure that thorough coverage of all equivalent sources of funding is guaranteed. That, of course, includes donations from trade unions.

We understand and agree that limits on funding and spending should be up for debate, but implementing them in the Bill and allowing the union funding of Labour to remain unreformed—including, as the hon. Member for Cambridge said, the use of opt-out rather than opt-in to political funds and the inability to choose the party destination of political funds—would be very damaging.

There is a self-perpetuating cycle, and if we are to address comprehensively the issue of party funding, we need to deal with it in the same way as the Companies Act 2006 rightly provided for companies to have member votes to enable the company to give stated amounts to stated recipients. If any Labour Member thinks that we conceded that only to allow unions to vote on having a political fund every 10 years, they should think again. The hon. Member for Cambridge will not have our support for his amendment, although we recognise his position as a matter to be included in the wider debate on party funding that will take place in due course.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

This has been a very interesting debate. The proceedings of the Neill committee have been set out in some detail, so I shall not repeat them.

The intentions of new clause 1 go to the heart of what we are trying to achieve in any reform of party funding, which is to restore trust in the source of donations. I would like to support new clause 1 in principle, as my Front-Bench team probably would, but not without qualification, as David Howarth agreed when he referred to a number of other clauses that he had tabled and other points that were not in those clauses. That is why he wanted to speak about trade union affiliation fees, state funding and other issues.

This is an area that we must clean up. The means by which parties fund themselves have contributed substantially to the loss of trust in them on the part of the electorate. The plain fact is that people believe that parties can be bought, and they may be right. Access, influence and even changes to legislation all appear to have been tradable over the past decade, not to mention the honours system. Those seem to have been traded for party cash by many parties for a long time, Lloyd George being the most salient example.

Allegations about my own party's activities and the relationship between the award of honours and senior corporate directorships at times in the 1980s did not always look 16 annas to the rupee to me. Then we have had Labour's recent crop of life peers, with a fair sprinkling of big donors among them. The big donor culture has created a perception of corruption and we must do something about it. No debate on the subject should fail to mention Michael Brown's millions donated to the Liberal party—he is now in jail—and the trade unions' donations, with which they appear to have bought considerable influence, in the Warwick agreement and in other ways.

The clause would end the big donor culture at a stroke. Some may argue for a cap of less than £50,000. I notice that the Liberal Democrats started to do that today. That, as the Lord Chancellor pointed out, is a flat contradiction of the Liberal party policy that has been around for several years.

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Photo of David Heath David Heath Shadow Leader of the House of Commons

The hon. Gentleman's memory deserts him. He must remember that during the talks I made it clear that I would have preferred a lower limit, but that I thought the £50,000 to which his party had agreed was a workable compromise. He must remember that.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I am on the record as saying many times that I would have preferred a lower limit, but my party's position is £50,000, and the hon. Gentleman's party's position was £50,000 at the time of the talks, in published documents. It seems now that that has gone, and the Liberal party has another public position.

It is a sad irony that while the issue has led to the public perception of corruption in politics to a higher level than I can remember, that has taken place at a time when politics has probably been less corrupt than in any previous era. One has only to cast one's mind back to Gladstone and the trading of consols in 1870s, his trading of Suez canal stock, and Lloyd George and the honours sales, which I have mentioned before. I am sorry that I keep going on about the Liberals. No doubt other parties were at it as well.

If we agree to new clause 1, we are still left with a crucial question: can parties fund themselves on so much less? The hon. Member for Cambridge started to discuss that. Could Labour do without trade unions, the Liberal party without its Browns or the Conservatives without their big donors? I think so, provided that several conditions are fulfilled. One is that there should be an overall spending cap nationally at a lower level than we have at present for general elections. The general election cap is £20 million and should be reduced to £15 million. That is Conservative party policy. I do not know whether it is Labour party policy; I could not tell after what I heard today. That is a cut of a third in real terms, which is a reasonable step.

Secondly, if we go ahead with the proposals, we must have some state funding, but I agree with those who said today that at a time of financial stringency, the public opposition to more state funding would be enormous, and my sympathies would be with the public on that. We would do well to recall that existing levels of state funding for political parties are already very high. Roughly half of our party politics is funded by the state directly or indirectly—a much higher figure than is commonly supposed.

If there were more state funding along the lines set out in new clause 1, however, it would have to be based on a principle that the electorate could accept. It would have to be designed to encourage very local campaigning and a regeneration of grass-roots politics, and that would mean tax relief or match funding. It would also mean that cash-per-vote schemes, such as the Liberals have supported and the Conservatives considered in the 2005 proposals, and which were published at that time, would not be serious runners again for some time. I was never enthusiastic about those schemes, and I do not support them now. However, I do support match funding.

Could the Conservative party cope without its big donors? It probably could; any campaigning benefits that parties pick up from the use of such money have to be offset against the negative publicity that comes with it. Something must also be made of the Lord Chancellor's point that a very high proportion of donations are honourably intended. It should be—and is, I think—a mark of a healthy democracy and polity that donors big and small should be prepared to donate money. It would be wrong to assume that all big donors are in it for access, honours and influence, although unfortunately a few of them are.

Any answer to the question whether parties can cope with the donations cap must also address the special and unique needs of the Labour party. As it stands, new clause 1 would limit trade unions to £50,000, because affiliation fees—rightly, in my view; there are also many supporters of the same view on the Labour side of the House—are treated as collective donations in law. The consolidation of the trade union movement would make the new clause particularly punitive for the Labour party, because that consolidation would reduce even further the number of donations that the trade unions could make to it. The trade unions are, of course, the Labour party's paymasters, directly and indirectly, on a huge scale. As I mentioned, the unions make no secret of their desire to influence Government policy; they often boast about their successes in print and in public.

We have to decide whether it is in the interests of British politics for us to carry on in that way. In my view, it cannot be right that in the 21st century a pressure group, or a collection of them, however steeped in tradition, should retain such an influential place in the life of a major political party. Parties, like democracy itself, must be aggregations of the decisions and will of individuals. The age of corporatism should be long gone. New clause 1 would end it, and that key ingredient of it attracts me.

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Photo of Philip Davies Philip Davies Conservative, Shipley 6:30 pm, 2nd March 2009

For me, the most important thing is transparency rather than a cap. My hon. Friend said that some people give donations to political parties seeking influence or something else in return. That may be so, but he seems to be suggesting that political parties are incapable of taking people's money without offering something in return. Surely the onus is on the political parties to take people's money but make it clear that absolutely nothing will be given in return.

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

There are two problems with that. First, we do not need to look in a crystal ball. We can read the book: we can see that political parties—this Government and previous ones—do appear to have given things in return for money, and on a sizeable scale. Secondly, even if the problem is only one of perception, it will not go away, and we need to deal with it.

I want to allude to the Hayden Phillips negotiations, which centred on the treatment of affiliation fees. Throughout that period, the Conservative position was absolutely clear, as it still is. Special treatment of affiliation fees can be considered as part of the introduction of a £50,000 cap. I mean "special" treatment, because logically a £50,000 cap should be accompanied by a complete restriction, meaning that only direct payments by individuals should be permitted as a legitimate source of funding for political parties. Corporate donations and donations from institutions and intermediaries, including trade unions, in which the individual is subsumed, should in the long run be restricted—and brought to an end after an interval. That point was set out in the Conservative party's proposals published in 2005.

Incidentally, this is also the view of many in the Labour party, although only a few are bold enough to speak up and say so. Matt Taylor, former adviser to Tony Blair, has set out in detail in print and in a number of speeches exactly the position that I have described. A good number of Blairites on the Government Benches have told me privately that they agree, although very few are prepared to put their heads above the parapet.

We are left with a crucial question. How could affiliation fees be allowed to cheat the logic of the £50,000 cap while upholding the principle that those donations are matters of individual choice? There are three requirements. First, there should be a genuine choice for an affiliated member. In the course of the Hayden Phillips investigations, we discovered that many affiliated members scarcely knew that they had made a donation to the Labour party. That, no doubt, accounts for the absurdity that, when polled, a majority of affiliated trade union members turn out to vote for political parties other than Labour. It beggars belief that they should want to donate to Labour while voting for the Scottish National party, the Liberal party or the Conservative party.

The second requirement must be that the choice should be extended to donations from other parties. Therefore the means by which the choice is presented to the affiliated member as he joins the trade union must enable him not only to choose not to give to one party, but to choose to give to another. The third requirement must be that the individual must periodically be given an opportunity to review his decision—in practice, that does not happen in many trade unions. That opportunity should be provided annually.

Before a decision is taken on whether to vote for the new clause, there is one large question to address. What would happen if the clause were introduced on to the statute book, but without any of the qualifying points that we, including the hon. Member for Cambridge, have made this afternoon? That question determines whether I would recommend to my party that it should support the clause. There would be several effects. The first would be that all parties were short of money. Does that matter? I have already discussed that question. Spending on party politics in this country is already high and it could probably be brought down. Billboards have been mentioned, and numerous other savings could be made with no material damage to the fabric of our party political system.

Incidentally, I did a comparison, taking into account per capita income, between the amount spent in the recent US presidential election and in this country's last general election. To my surprise, I found that the numbers were broadly comparable—and without taking into account a costing of the party political broadcasts, which parties get free in this country but pay a fortune for in the United States. We already spend a lot of money on party politics in this country and I think that we could do the job with less. Of course, that is why we Conservatives support the reduction of the cap on general election spending from £20 million to £15 million.

New clause 1 would have a second big effect, which I would not find acceptable. The playing field would no longer be level; it would be fundamentally altered to the detriment of the Labour party. It would be grossly unfair to disadvantage a party without giving it any time to adjust, however reasonable the principles on which that adjustment was taking place. What kind of adjustment would it be? Well, Labour Members could start to devote some time to thinking about how to make use of their party's huge databases of affiliated members and find ways of turning some of them into genuine individual Labour party members like members of other parties, instead of just sitting there moaning about how this is an assault on the fabric of their constitution, which is, in legal terms, complete nonsense. However, I recognise that that process would take time—perhaps a long time—and that a long transitional period would therefore be required.

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Photo of Danny Alexander Danny Alexander Shadow Minister without Portfolio

Perhaps amendments might be tabled in another place to allow the change to take place in the more moderate way that the hon. Gentleman is talking about, but would not passing this new clause be the best way to concentrate minds in this House? Is not the problem that the minds of those on the Labour and Conservative Front Benches do not wish to be concentrated?

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Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I am happy to support motions to concentrate minds, but I get wary about supporting fundamental new clauses when they are intended to act as itching powder. However, I understand the sentiment behind the hon. Gentleman's intervention, and I hope that we will make some progress on this issue before long.

For the avoidance of doubt, let me conclude my point about Labour and affiliation fees. It should not be in anyone's interests—indeed, it would not be in the Conservative party's interests—to bankrupt the Labour party, and I am sure that that is not what the hon. Member for Cambridge would want to achieve. In the long run, however, cash raised locally from local party activism must be allowed to influence outcomes. The idea that there should always be a level playing field with the same amount spent in every area must be wrong. If we are to encourage and revive genuine local party grass-roots activism in British politics, it must be right that different parts of the country, and different constituencies, should have widely different levels of spending. That is why, quite apart from the administrative impossibility, local caps on spending are a non-starter. A global cap of some sort is the way forward. I might initially have been prepared to recommend something that would be unfair on Labour if I thought that Labour Members were going to start responding in a positive way, but I see absolutely no sign of that.

We have to be cautious, but in doing so we must keep thinking about what measures are required that will command public confidence. Most of us agree—I sometimes wondered during the Lord Chancellor's speech, however—that we do not have that confidence now. The Conservatives set out three principles that should govern how to establish such confidence— [ Interruption. ] I will not go through them in detail, in response to the comment by my hon. Friend Mr. Shepherd, but if he reads page 3 of the proposals, he will see that a cap is an essential element.

When the Conservatives get back into office, we will do absolutely everything to seek consensus on this issue, with the objective of restoring trust. Equally, however, we cannot leave this matter at the mercy of an indefinite veto on any meaningful change by any one party. That is why, while not supporting new clause 1, I am confident that my party in government will look to a donations cap as the way forward. As this debate progresses in the country, and as the degeneration of respect for parties proceeds—as I predict that it will unless we take action—the pressure will reach a point whereby even the Labour party will be prepared to come seriously to the negotiating table to discuss a change in the relationship between it and the trade unions with regard to affiliation fees.

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Photo of Richard Shepherd Richard Shepherd Conservative, Aldridge-Brownhills

I am only surprised that the proposed cap in the new clause is so large. If I look back over what has happened to politics in my time in this House, certainly over the past 15 years, I see, election by election, a decline in voters' attention to a fundamental necessity in their lives—the political process. If donations can be allowed to be so large, that makes things unequal because, naturally and understandably, it is an obvious observation that political parties become very interested in the large donor and let go of the little donor. As a consequence of that detachment from political processes over the years, revenues at local level have fallen and political parties are contracting. In many constituencies, parties are shadow organisations with very few members exercising, for instance, choice over who should be the candidate. Big donations have enabled the centralisation of political choices through party headquarters. The parties in London seek to garner all this money, so they run campaigns aggrandising the centre, but the vitality of the political history of this country comes from the grass-roots. All the great movements that have swept this country, including the extension of suffrage, were intensely public, popular movements supported by the many, not the few.

If I have a criticism of the proposal, it is not of the intent behind it, but let us stand back from Hayden Phillips, and the new spokesman for the Conservative party—I thought that they normally sat on the Front Bench—who expressed views to which I could not sign up. We used to have an expression in this country: "You cut your coat according to your cloth." Political parties are bypassing that by seeking very large donations that will determine the future of our political processes from the centre, whereas I profoundly believe that constituency parties from each part of this kingdom are the dynamic that should determine what it is we are about.

I support the new clause, although the cap is set much too high. I also dislike the idea of state funding beyond what we have now, which is far too gross. To think that we can only fight an election with £15 million or £20 million, which requires large donations or, as a substitute, the poor, oppressed taxpayer having to reach into their pockets. The process by which we are trying to determine an ideal or a principle has not been gone about in the right way. Parties should run on the small donations that they can raise. Someone mentioned what Barack Obama had succeeded in achieving through new communications—although those communications are well beyond my pay grade. If one has a cause and stands for something, one can reach the people in this country. I want local constituency parties, and therefore constituencies, to have the opportunity to choose and determine for themselves who their candidate should be, rather than for that person to be selected from the centre, because of money.

For all the havering that I have heard, I shall support the Liberal amendment as a matter of principle: we need any measure that can reduce the interest shown in the multi-millionaire, the billionaire or the individual who can contribute £50,000. That is not representative of the nation as a whole.

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Photo of David Howarth David Howarth Shadow Secretary of State for Justice 6:45 pm, 2nd March 2009

I am grateful for the support of Mr. Shepherd. The sentiment behind his speech is precisely that behind the new clause, which is that we have to do something to reduce the gap between us as representatives and the people whom we represent. At the moment, one of the things coming between us and those people is big money. The process that the hon. Gentleman described, where parties turn their attention to those who give big donations, and therefore away from the ordinary people of the electorate, is profoundly important and profoundly dangerous.

I am also grateful for the rather more qualified support of Mr. Tyrie, but one of the things that he said about the new clause is vital— it would, at a stroke as he put it, get rid of the big donor culture. That is precisely its intention. Conservative Members argued against the new clause on the ground that the amount of £50,000 is too large, and I agree. It is too large, and I would like to see the amount reduced, but we have to start somewhere and so we have started with a proposal to which the Conservatives, as a party, agreed in principle, as part of the Hayden Phillips process. I urge Conservative Back Benchers to think about what they will be doing if they fail to support the new clause.

It was profoundly disappointing to hear the Conservative Front-Bench spokesmen simply say that the time is not ripe—according to them, the time never seems to be ripe. This Bill is about political parties and the funding of those parties, and if now—before the next general election—is not the right time to discuss the issue, and to pass such safeguards, when is?

As for the Government, I was even more disappointed with what the Secretary of State had to say. The position that he took rows back immensely from where we all imagined the Labour party to be. The idea that transparency is all that we need in the regulation of donations is extraordinary, and it does not meet the obvious objection that if we know the system is corrupt, it is still corrupt. If people can see that the system is corrupt, that makes it worse. We cannot move on from where we are simply through measures of transparency; we must set a cap on the influence that individuals have on politics through money.

The final thing I say to the Government is simply this: if they refuse to move on the issue of donation caps now, and if they ignore the view in society at large and in other parts of the political system that this is something that must be done, they will put their own party at risk because when reform does come—as it must—it will come at a time far less favourable to it. The relationship between the Labour party and the trade unions, which we discussed, it is at the heart of that very point. I and my party have offered a very moderate solution to that problem—one with which the Labour party could easily live, and one which the public would recognise as fair. But if the Labour party will not move on the principle, it might find itself, after the next election, in political circumstances where this House's solution is profoundly less favourable to it—a solution that will, in the end, put the very existence of the Labour party on the line.

I warn the leaders of the Labour party to bear in mind the consequences of how they are telling their Members to vote tonight. With that, I intend to press the motion to a Division.

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Question put, That the clause be read a Second time.

The House divided: Ayes 70, Noes 299.

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Question accordingly negatived.

Proceedings interrupted (Programme Order, 9 February).

The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).

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