Consideration of Lords message

The Lords do not insist on their amendments to the Political Parties and Elections Bill, to which the Commons have disagreed, but they disagree with the amendments proposed by the Commons in lieu of those amendments, and propose amendments in lieu of those Commons amendments, to which they desire the agreement of the Commons.

Lords message considered forthwith (Programme Order, 13 July ).

I beg to move,

That this House
does not insist on its Amendments Nos. 12A to 12F in lieu of Lords Amendments Nos. 11 and 12, and agrees with the Lords in their Amendments Nos. 12G to 12N in lieu.

As my right hon. Friend the Secretary of State for Justice made clear at the time, amendments 12A to 12F were not fully workable. The Government therefore tabled further amendments 12G to 12N in lieu. Those amendments have been agreed to today in another place.

The Government's amendments seek to address the legal, technical and basic operational deficiencies with the amendments moved by Lord Campbell-Savours. As such, should the amendments be agreed to, we would want to discuss carefully their implementation with the parties and the Electoral Commission in due course before the new restriction came into force.

Amendments 12G to 12N remedy some of the deficiencies in amendments 12A to 12F. They raise the permissibility threshold in relation to taxation status from £500 to £7,500, aligning it with the threshold at which a declaration will be required. That will be far easier for parties and donors to operate. We have required aggregation of donations above £500 which in aggregate exceed £7,500 in a calendar year to the same recipient. The amendments ensure that the new restriction applies to loans as well as donations. They also ensure that for the purposes of the aggregation provisions, donations and loans from the same source must be added together.

We have made it clear that in the majority of cases, a party or other donee will satisfy the requirement to take "all reasonable steps" to verify a donation's permissibility if it receives a declaration from the individual in regard to taxation status. A party would be required to take further steps only if it had reasonable grounds to consider the declaration to be incorrect. We believe that that approach strikes the right balance by minimising the burden on parties and donors and ensuring a workable restriction.

Lords amendment 121 gives the Secretary of State power to make further supplementary incidental or consequential provision at the point of commencement of the new restriction.

I hope that the amendments will be accepted here, as they were in another place. They would be a proportionate and effective way of maintaining the spirit of the amendments originally tabled by Lord Campbell-Savours, and I commend them to the House.

rose-

Order. Has the Minister completed his remarks?

Yes.

The amendments represent a clarification of the Government's new position-set out this time last week-in relation to exceptions to those who can constitute acceptable donors. In practice, they have been clarified on the Government's own terms, because of the deficiencies in their own amendments last week and not on the basis of any kind of consensus.

Once again we were given very little notice of amendments in the Government's rush to finalise legislation, but perhaps I should not be surprised, given that we received the Government's earlier amendments only six hours before we debated them in the House a week ago. That is not how we should be making the laws of this country. We expect to be given an opportunity to scrutinise the major changes in our electoral law that the Government propose.

The Government's performance has been chaotic and confusing. We are here to ensure that effective legislation is produced, and that means dealing with the incredibly detailed legal arguments involved in the amendments in a controlled and balanced manner. In its briefing on the amendments, the Electoral Commission itself says,

"we have not yet had time to analyse the amendments fully".

It is evident from the speed with which we received the amendments, and from the turnaround involved in dealing with them, that the Government have not had enough time in which to consider, in full, their implications and whether they work in practice. We are particularly surprised that the Government are bulldozing them through, given the lengths to which they went last week to secure a carry-over motion so that the Bill could be dealt with after the summer recess. I ask the Minister why, given the depth and complexity of the subject matter, the Government do not consider the issues that we have raised with them over the recess, and allow Parliament to produce effective and fully considered legislation when we return.

These latest amendments, which were debated in the other place this afternoon, attempt to improve technically the amendments that we debated last Monday on the permissibility of donations for those who wish to support our democracy but are currently resident overseas. Again, these amendments have been clarified on the Government's own terms. The Government have ignored a host of important issues, and have pressed ahead with the amendments in the face of strong arguments for our belief that the legislation is flawed.

A week ago, I presented a number of reasons for our inability to accept the fairness of the amendments. The fact remains that the clause will be extremely hard to implement, and we feel that it could be unreasonable to impose requirements that are so difficult to meet when the consequences are so draconian. This proposal may be an infringement of an individual's right to freedom of expression, it is likely to be contrary to EU law, it would certainly contribute to the isolation of UK citizens living abroad, it is contrary to regulatory principles, and it links political rights to taxation. Furthermore, it does not correctly address a mischief that the Political Parties, Elections and Referendums Act 2000 aimed to address, namely a clarification of the rules on party donations.

It is irrational to us that, having been presented with so many strong reasons why these amendments should not be passed, the Government are steam-rolling the matter through at almost 10 o'clock tonight. As I have said previously in the House, this is legislating on the hoof and we do not much like it.

There is a technical difficulty in trying to assess an individual's permissibility by reference to their tax status because, by its very nature, it is both changeable and retrospective. These new amendments are concerned with the individual's tax status in the "current tax year". I need not remind the House that the Secretary of State for Justice has said:

"It is...almost impossible to establish somebody's tax status, and particularly residence status, in the middle of a tax year."-[ Hansard, 13 July 2009; Vol. 496, c. 61.]

Can the Minister explain how these provisions will work in practice and how the Government intend to regulate and enforce them?

Tonight the Government have come the full 180 degrees and completed their spectacular U-turn on the provisions. In brief, if I were to ask whether these amendments improve the drafting after the Government created such an appalling mess last week, I would say yes: on the Government's own terms they make bad law work better. But do these amendments attempt to answer the questions that we raised in order to provide effective, fair and workable legislation? No they do not.

As my noble Friend Lord Bates confirmed in the other place this afternoon, by tabling these amendments, the Government have created an anomaly in our electoral and tax law. A British citizen based overseas will be able to vote in our elections and can even stand in our elections, yet he cannot make a donation over £7,500 to a political party. The implementation of this bad law is going to be difficult given the technical issues and complexities involved, and we insist that the Government do not activate these provisions without the full review of their application that will be required.

Unlike Mr. Djanogly, I am pleased with the progress that the proposal has made through the two Houses, ever since an alliance of Liberal Democrats, Labour Back Benchers and Cross Benchers in the Lords put through an amendment in the name of Lord Campbell-Savours, against the wishes of the Front-Bench teams of the main two parties. It is true that what we are seeing is ping-pong, with the Government instigating both sides of the game, rather like The Beano character Billy Whizz, who was able to go around the table knocking the ball back to himself and playing his own game.

Or Forrest Gump.

Indeed.

There remain two particular issues about the workability, scope and breadth of the proposals that I would like to raise. I tabled a series of amendments in a different motion that I understand has not been selected. Nevertheless, there are still important issues for the Government to respond on.

The first is a change in the definition of the situation in which a declaration has to be made about tax status. The Government's first attempt at definition talked about someone who causes a donation to be made. In the amendments that the Government then tabled in the Lords, that was changed to an individual making a donation. That seems a much narrower definition.

There is a problem that was identified originally by the Government: these proposals do not in terms prevent donations from being made by companies. A lot of the controversy about large donations from abroad has been about companies making donations. It seemed that the Government were attempting to deal with that problem by using the phrase

"causing a donation to be made".

That phrase seemed at least to some of us to be applicable to the situation where an individual who controls a company caused that company to make a donation. However, in the new definition proposed by the Lords to us tonight, only an individual making a donation is covered. The use of the word "individual" seems to rule out the possibility of these provisions covering company donations.

I know the Government will say that in the situation where an individual gives money to a company with the intention of the company then giving that money to a party, that might count as the individual making the donation, but that is a very narrowly drawn situation which is rather unlikely to happen. What is more likely to happen is for an individual who controls a company to cause the company to make a donation, and the Government seem to have ruled out any control over that particular possibility. I regret that, if it is, indeed, the Government's intention.

The hon. Gentleman has just gone on at some length as to how this is applicable to companies, but it is my understanding that it never had anything whatever to do with companies. The Minister might like to say something about that in his winding-up speech.

Well, that is an issue that the Minister has to sort out. My belief is that if the original phraseology-causing a donation to be made-had been used, that could have applied to a situation where an individual who controls a company caused the company to make a donation. That would have been covered.

Is the hon. Gentleman not aware that the Electoral Commission is looking into this particular point right now in relation to Bearwood Securities, to see whether that company is being caused to make a donation which would be against the existing political parties Act even without the very good amendment that is now before the House?

The hon. Gentleman raises the example that is in all our minds.

Order. May I inform the hon. Gentleman that the Speaker has selected his motion for debate?

I am glad to hear that, Mr. Deputy Speaker, but I should explain that the amendments in my name simply carry into legislative effect the points I am making in my speech.

The second issue is to do with commencement. When will this law come into effect? Under the amendments in the form in which they have come back to us from the Lords, the provisions before us come into effect only when the Minister makes an order, which means they may never be brought into operation. My amendment on this issue would change that, so that these provisions would come into effect immediately the Bill receives Royal Assent.

I am raising this matter now because of a story that appeared in The Observer on Sunday about donors to the Labour party who turn out to be non-doms-non-domiciled. The headline read, "Tycoons pledge to stop bankrolling Labour if 'non-dom' tax bill passes". That is a reference to the Bill before us now. The paper gave a number of examples, including Lord Paul and Sir Gulam Noon, who, according to the story, might stop giving donations to the Labour party if the provision before us is brought into force.

It would be a very great shame indeed if the Government were getting cold feet about this provision because they had discovered its effects on the Labour party. The principle here is one that is meant to apply to all parties, and it is one that will affect all parties. It is a good principle: those who have distanced themselves from this country by being non-resident and non-domiciled in their tax affairs should not be allowed to influence the votes of others through making vast donations.

I am listening with great interest to what the hon. Gentleman is saying, but was there not someone who went to prison called Michael Brown-that might not be the right name-who gave a great deal of money to the Liberal Democrats, and was he not offshore somewhere and not paying tax in this country?

As I have said, the principle is one that might well apply to all parties. That is why in principle it should apply across the board. If hon. Gentlemen-they are all gentlemen on the Conservative Benches-just want to use this legislation in a partisan way, then they cannot be surprised if other parties take the opportunity to use the legislation in a partisan way against them.

I simply ask the Government to put on the record precisely when they expect to bring these provisions into force and, specifically, whether they intend to bring them into force before May next year.

The debates about representation and taxation have been well rehearsed, so I wish to make a single point that I sought to make in intervention on the Minister. My hon. Friend David Howarth has exactly underlined the key issue. To those people who agree with the spirit of what is being attempted by this legislation it seems obvious that there is an opportunity to use loopholes to evade its intention. My question to the Minister is this: how does he believe that he can prevent the evasion of this legislation by those who use alternative means? Such means have been outlined by my hon. Friend and do not need repeating by me. It appears to me that those who are hellbent on avoiding the spirit of this legislation can still do so, for example, by using a company, as my hon. Friend has just highlighted.

Although these provisions may be an improvement, the Government have nevertheless probably left enough space to enable those who are absolutely determined to continue their current practices to do so, from a distance away from the United Kingdom. We can legislate for the spirit but we cannot legislate against bad faith without doing some more. I fear that even with the best of intentions, the road to hell will continue to be paved by bad donations.

It has been a short and interesting debate. Mr. Djanogly got extremely indignant about these provisions, although I note that his party did not vote against them when they first came before this House. I shall be interested to see whether his indignation leads him to vote against provisions that he said are an improvement on last time, given that his party did not vote against them, either here or in the other place. As always, I am interested in his contribution and I shall be interested to see whether he takes this through to a vote.

The hon. Gentleman asked one specific question about the tax year definition. We recognise that in many cases "residence" and "domicile" are, in essence-or at least in large part-retrospective terms, so there are practical difficulties in linking the restriction to the current year. However, setting the qualifying point as the preceding year equally contains practical difficulties-we have reflected on that-and, in addition, would create a somewhat odd position, whereby a person who at the time of a donation knows themselves to be a non-resident and non-domiciled could still donate.

Although we recognise the difficulty for individuals and parties of a potential uncertainty about someone's tax status during the tax year, we have concluded that if a person wants to make a large political donation-in other words, one of more than £7,500-it is not unreasonable to require them to take steps to ascertain their current status. Her Majesty's Revenue and Customs already publishes guidance to help such people ascertain their status and, if they are in doubt, they could of course make a donation below the threshold.

David Howarth asked two specific questions, one of which was about "causing" donations, and I understand his concerns. May I say to him, distinguished lawyer that he is, that they were based on a misunderstanding of the intention behind the original amendments? The amendments tabled by Lord Campbell-Savours sought to require a declaration from an individual who makes a donation. We sought to achieve the same effect, and it has never been our intention, as the hon. Member for Huntingdon pointed out, to place a restriction on donations made through companies by these standards. Notwithstanding that, I am not even sure that the hon. Member for Cambridge is correct to say that if we used "cause" in the sense that he would like us to use it, it would capture companies. Even if he were correct, it is not the Government's policy to do that.

The hon. Member for Cambridge also asked when the arrangement would come into effect. As everyone who has spoken so far has mentioned, these are complex clauses that raise considerable practical difficulties. It is the intention of this House and the other place that the spirit of these clauses should be put into effect, and that is what we are endeavouring to do, in keeping with our longstanding policy of pursuing consensus on these matters. Given their complexity, we are practically unable to commence provision before the summer of 2010, so we are not proposing to commence the arrangements before then. Equally, we are not envisaging undue delay after that date. I hope that that will give the hon. Gentleman some comfort about our intentions in this matter.

Lembit Öpik made a brief but powerful contribution about evasion and he said that what is being proposed would not prevent those who were "absolutely determined" to evade the provisions. He is right: there is no legislation that will make it certain that we can prevent people from evading who are determined to do so, but we have made the intention behind these provisions clear here and in the other place, and we expect all political parties and donors to abide by that.

Question put and agreed to.