Political Parties: Funding

– in the House of Lords at 3:07 pm on 20th March 2006.

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Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor 3:07 pm, 20th March 2006

My Lords, the Government intend to move amendments to the Electoral Administration Bill, currently before this House, to make it compulsory for political parties to disclose any loans they receive.

This issue affects all political parties and I hope that the Government, political parties and the Electoral Commission will be able to work constructively together to find a solution which allows for transparency and fairness.

My intention is to achieve as great a transparency for loans made to political parties as applies to donations under the regime in the Political Parties, Elections and Referendums Act 2000.

I have today written to the leaders of all political parties represented at Westminster, and to the Electoral Commission, seeking their views on the elements of a reporting regime, including whether it should be retrospective. I have placed a copy of my letter in the Library.

The Prime Minister has announced that Sir Hayden Phillips will conduct a review of the funding of the political parties. The terms of reference of the review were announced earlier today. I have placed a copy in the Library.

Photo of Lord Strathclyde Lord Strathclyde Leader of the Opposition In the House of Lords, Parliament 3:08 pm, 20th March 2006

My Lords, I thank the noble and learned Lord the Lord Chancellor and Secretary of State for Constitutional Affairs for coming to the House and making that Statement. But does he not share my feeling that it is "here we go again", with the noble and learned Lord the Lord Chancellor touring the television studios all morning and turning up here after lunch to clear up another mess caused by the Prime Minister? That seems to be one role that the Lord Chancellor will never be able to abolish.

This is a deeply dispiriting day, and the Prime Minister should hang his head in shame. I have sympathy for many of those caught up in this affair—sympathy for those who were asked—I repeat, asked—to give loans to Labour, then saw No. 10 deliberately leak their names to the media in an attempt to bounce the Appointments Commission. As a direct result, those people have faced criticism of the worst sort, in which the good that they have done has been lost in a storm of scandal. The culture of spin and leak that besmirches this Government, besmirches them, too.

I have sympathy for those noble Lords in this House who legitimate and openly donated money to political parties in the past, but who came here by a lifetime of public achievement and service. Their names should not be dragged into this scandal.

Noble Lords:

Oh!

Photo of Lord Strathclyde Lord Strathclyde Leader of the Opposition In the House of Lords, Parliament

But, my Lords, I have no sympathy at all for the Prime Minister and his coterie of cronies who are at the heart of this affair. They have dragged politics, their party, and, sadly, this House, into disrepute. The buck stops firmly at No. 10. I accept that the noble and learned Lord the Lord Chancellor did not know about loans for peerages. Can it be true, however, that the Deputy Prime Minister did not know, that the Chancellor did not know, that even the Labour treasurer did not know? As it concerns the honour of this House, who in the government machine knew that certain individuals had loaned money to the Labour Party before they were nominated for peerages in the current list? Was it the Patronage Secretary, or perhaps the noble Baroness the Leader of the House or the noble Lord, Lord Levy? Just who did know, apart from the Prime Minister?

I welcome this Statement, as far as it goes. We on this side supported the moves made in recent years to improve the law on party funding, since Mr Major set up the Committee on Standards in Public Life in 1994. We will join in talks with Sir Hayden Phillips. My right honourable friend Mr Cameron has been working on proposals to reform the law on party funding. I hope that the noble and learned Lord the Lord Chancellor will consider all those proposals, rather than rush to push through his own ideas—which, with the best will in the world, must have been cooked up in the No.10 kitchen after the story broke only a few days ago. Would it not be sensible to delay the Committee stage of the Electoral Administration Bill so that these critical matters can be considered in detail? If he cannot agree to that, will he use his considerable influence with the usual channels to ensure that time is made available to recommit any provisions that may be tabled on party finance, especially since we are already halfway through the Committee stage on that Bill? I know, for instance, that the noble Lord, Lord Grocott, the Government Chief Whip, hopes that some time could become available—time that is now scheduled for the Legislative and Regulatory Reform Bill.

I do not suppose that I was the only Peer who was amazed to hear the noble and learned Lord the Lord Chancellor say on television that he had found a loophole in the legislation that he now wanted to close, and that he had a Bill he could use to do so. It sounded all too much like the burglar caught in the back garden, with a bag of swag, who says he only wanted to polish the silver.

Noble Lords:

Oh!

Photo of Lord Strathclyde Lord Strathclyde Leader of the Opposition In the House of Lords, Parliament

My Lords, it was the Prime Minister who introduced that legislation; the Prime Minister who saw the loophole and exploited it; the Prime Minister's people who told donors to give loans, not gifts, so that they could be kept secret; it was the Prime Minister who offered the peerages. For all the talk of using the Electoral Administration Bill to right this wrong, there was not a peep about it from Ministers when it was introduced just a few weeks ago. I fear that this House has been gravely damaged by what will inevitably be remembered as the loans for peerages affair. It is vital to restore public confidence in our political system. We will play our part in what is now needed—a fresh start and a change of values behind the best known front door in the world.

Photo of Lord Goodhart Lord Goodhart Shadow Lord Chancellor, Law Officers (Constitutional Affairs), Advisory Team On Legal Matters, Non-Departmental & Cross Departmental Responsibilities 3:14 pm, 20th March 2006

My Lords, we on these Benches welcome this Statement and the announcement of the review to be carried out by Sir Hayden Phillips. Under pressure first from the Appointments Commission, then from the media, the Government are being forced to consider doing things that they should have done long ago—which the Liberal Democrats have advocated for years. The mechanism of using huge loans as a way of evading the obligation to disclose donations has horrified the general public and has done much to increase public disdain for politicians and the political process. I am aware that the terms of the Political Parties, Elections and Referendums Act 2000 do not require disclosure of loans made on commercial terms. That reflected the recommendations of the Committee on Standards in Public Life. I confess I was a member of that committee at the time. We were, I am afraid, na-ve in not realising that loans—even at full market rates of interest—could and would be used for the evasion of the duty of disclosure. We therefore welcome the commitment to treat loans as donations, whatever the rate of interest. Last week, we on these Benches tabled amendments to the Electoral Administration Bill which will achieve this. We will probably reach them in the debate on Thursday. Perhaps the noble and learned Lord the Lord Chancellor would like to accept the ready-made alternatives that are available.

Our amendments would also treat as donations guarantees given by wealthy supporters of political parties of the bank loans and other debts incurred by those parties. If that is not done, it will obviously be the next loophole for evading disclosure. Therefore, will the Government also treat guarantees as donations of the amounts guaranteed for the purposes of disclosure? Otherwise, their amendments will be totally flawed.

My next question—I wish to ask it of the Conservatives as well as of the Government—is whether any loans have been used to evade the ban on donations by non-residents of this country. If so, that is another, perhaps even more serious, breach of the spirit of the law in the Political Parties, Elections and Referendums Act. Then, will the Government speed up Sir Hayden Phillips's timetable? He has been asked in his remit to report by the end of this year. It is extremely important that there should be legislation to deal with these matters in the 2006–07 Session, and that means legislation being written into the Queen's Speech. Therefore, will the Government be prepared to ask Sir Hayden to report by, say, mid-October so that that can be done?

Will Sir Hayden look at the evasion of restrictions on constituency spending limits by, for example, the national parties sending leaflets to voters in target seats, which escape treatment as constituency expenditure because they do not mention the name of the party's candidate? Will Sir Hayden consider the proposal of the Committee on Standards in Public Life that something equivalent to gift aid should be available to enhance the value of small donations? Or will he consider the recommendations of the Power report that voters can tick a box on the ballot paper to donate £3 out of their taxes to the party for which they voted?

Previously, the Government's answer to such ideas has been that they would take money which would otherwise go to schools and hospitals. Do the Government not realise that, alongside the billions which are rightly spent on schools and hospitals, it is vital to spend a tiny fraction of that amount on ensuring an honest and transparent electoral system?

We are faced with a crisis of confidence in the entire political system and, indeed, in your Lordships' House. It is essential for the Leaders of all parties to display proper leadership. We need a recognition by all parties—of course, I include mine—that they have to comply with the spirit, as well as the letter, of the law, and that clever schemes to evade the law will rebound on those who use them and on the whole political system, as these undisclosed loans have rebounded on the Government and on the Prime Minister.

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor 3:18 pm, 20th March 2006

My Lords, I am grateful for the unequivocal support of the noble Lord, Lord Goodhart, for the proposals that I am making. I deeply regret that the noble Lord the Leader of the Conservative Opposition does not appear to see, as the noble Lord, Lord Goodhart, said, that it is a problem for every political party in this country. The problem has arisen precisely for the reason that the noble Lord, Lord Goodhart, gave. The Committee on Standards in Public Life proposed the exception for loans on commercial terms. Everyone thought that it was perfectly sensible that the borrowing from the National Westminster Bank should not have to be disclosed. The consequences of that exception have been revealed over the past few weeks, and we need to do something about it to restore public confidence.

Like the noble Lord, Lord Strathclyde, I deeply regret that individuals' names have been brought into the press in the way that they have. I have absolutely no reason to suppose that that came from No. 10, but I share the noble Lord's deep concern that people who have given to public life in the way that many on the list have done have had their names besmirched in this way.

I agree with the noble Lord, Lord Goodhart, that we also need to look at other issues, such as guarantees. There is a difference between what I am proposing now and what Sir Hayden Phillips will be looking at. As the chair of the Electoral Commission said in the Times this morning, we need to have political parties and they need to be funded. They need to be funded in a way that improves and impresses public confidence. That is a longer-term issue than that which can be dealt with by an amendment to the Electoral Administration Bill. But there is no need to delay introducing an amendment about transparency regarding loans. That is why I am making my announcement today.

The noble Lord, Lord Strathclyde, is absolutely right that I spoke on the radio and television about this issue today. I apologise to the House for that. It was entirely my decision and responsibility. It was an issue of great public importance, so I thought it right that the public debate should continue. I hope that those on the Benches opposite will support the proposal for greater transparency.

Photo of Lord Waddington Lord Waddington Conservative

My Lords, does the noble and learned Lord the Lord Chancellor agree that it might be salutary after these revelations if a few prosecutions were brought under the 1920s legislation that forbids the sale of peerages? Perhaps he will have a word with his noble and learned friend the Attorney-General.

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, I think that there is great public disquiet, and it is right to put in place a legal framework in which everybody has confidence.

Photo of Lord Fowler Lord Fowler Conservative

My Lords, surely this question goes beyond loans and even cash for honours. Does the noble and learned Lord the Lord Chancellor agree that it is wrong for any organisation—whether a trade union or any other—to buy political influence through political donations? I remind him that in leading the attack on the Conservative Party in 1993 when I was party chairman, the then deputy leader of the Labour Party, Margaret Beckett, said that, in contrast to the Conservatives, the Labour Party reveals,

"from where we obtain almost every single penny that we receive".—[Hansard, Commons, 22/6/93; col. 187.]

When did that policy change?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, the noble Lord is right. This issue goes way beyond loans. That is why we have asked a respected independent figure, Sir Hayden Phillips, to look right across the board at the question of party funding. The issues are much more than just about loans; they are about donations, and relationships with donors and organisations that support the parties. We have never stopped our policy of being as transparent as the law requires. A new legal framework is required.

Photo of Lord Mackie of Benshie Lord Mackie of Benshie Liberal Democrat

My Lords, have any of these loans ever been repaid?

Photo of Lord Stoddart of Swindon Lord Stoddart of Swindon Independent Labour

My Lords, it is entirely reprehensible that by accepting these loans, the Government—or at least Mr Blair and some of his colleagues—sought to undermine the safeguards that they put in place regarding donations. Will Sir Hayden Phillips's committee consider voluntary or compulsory donations by taxpayers? Does the noble and learned Lord agree that when political parties get their snouts into the taxpayers' trough, there will be no limit to the expenditure, and it will by no means eliminate problems and corruption regarding such expenditure?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, Sir Hayden Phillips's committee has a completely unlimited term of reference to look at the funding of political parties generally. It will consider voluntary and even compulsory donations. The noble Lord refers to a concern that many people have: is it a sensible use of money to give it to political parties? That is one of the issues that the committee will consider. Everything is open, and I fully agree with everything that the noble Lord, Lord Fowler, says. There is a much more profound problem than simply loans, which we need to address, because the health of our political system depends on the health of our political parties.

Photo of Lord Tebbit Lord Tebbit Conservative

My Lords, does the noble and learned Lord agree that although the Labour Party is in the dock this week, some distinctive and distinguished members of that party are particularly angry about the way in which they have been deceived in this affair? Problems with party financing have been going on for a long time—even before Lloyd George's day and the Liberal Party. In future, will the Prime Minister desist from saying that his Government will be whiter than white, and say, "greyer than grey"?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, I entirely agree that there has been a problem with party finance for many years, decades, generations and centuries. We have tried to deal with it; we did not deal with it adequately. That is why all the political parties and the Electoral Commission must come together to find a durable solution to this problem.

Photo of Lord Campbell-Savours Lord Campbell-Savours Labour

My Lords, could we not introduce enabling provisions within the Electoral Administration Bill to cover the possibility of introducing regulations on state funding and donations at a later stage?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, we need to see precisely what would be the best amendment to the Electoral Administration Bill in relation to the loans issues. In relation to the wider issues, we need consensus across the political spectrum, embracing all parties. That way we will have a durable solution. I do not think it is possible to pre-seed the way in which one would do that in the Electoral Administration Bill. I do not know what the Delegated Powers Committee here would say, but introducing an enabling power to deal with an as yet unknown proposal does not seem to be a sound way of proceeding.

Photo of Lord Smith of Clifton Lord Smith of Clifton Spokesperson in the Lords, Northern Ireland Affairs

My Lords, will Sir Hayden Phillips's remit enable him to look at the ceiling of expenditure at election times? After all, that is part of the root cause of why parties want ever-increasing funds. Will he be able to comment on whether this should be reduced?

Photo of Viscount Bledisloe Viscount Bledisloe Crossbench

My Lords, the noble and learned Lord avoided answering the question asked by the noble Lord, Lord Waddington, about prosecutions, by saying that it was desirable to put in place a good statutory regime for the future. Does the noble and learned Lord think it is desirable that, if an offence has been committed under existing legislation, a prosecution should be brought? If so, would the noble and learned Lord bring that to the attention of the appropriate person?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, of course it is desirable if any offences have been committed, but I have no reason to suppose that offences have been committed.

Photo of Lord Shutt of Greetland Lord Shutt of Greetland Chief Whip

My Lords, political funding is needed because there are political costs. Would the noble and learned Lord the Lord Chancellor agree that these costs are often at ward level, constituency level, the level of groups of constituencies in a city, and at regional level? Will Sir Hayden Phillips's review look—particularly in terms of what we call "state funding"—not only at nationalised state funding, but really take account of costs at all levels of political activity?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, his terms of reference certainly embrace that. The noble Lord's point is very important. There is state funding that can promote strong political activity of integrity at every level, including at local level. The stronger and more respected that political activity, the better for the health of our political system. We need to look not just at the issues of funding, for example, general elections, but funding local activity in communities.

Photo of Baroness Carnegy of Lour Baroness Carnegy of Lour Conservative

My Lords, does the noble and learned Lord agree that the number of people who vote in general elections, which is worryingly low, is not unrelated to the way parties are funded, and would be closely related if there were certain changes to that way of funding? Would he also agree that it would be very much in the interests of the Phillips committee to look carefully at the report of the Power committee, chaired by the noble Baroness, Lady Kennedy of The Shaws? This has a number of very interesting findings and comments on that subject. Would he further agree that it would be wise of the committee to pay a good deal of attention to that report?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, I would certainly expect Sir Hayden Phillips's committee to look at the Power report, because it specifically addresses this issue. Political funding is one of the issues in the political system that causes the public concern. That is why it is so important that we operate together in a unified way to try to reach a solution.

Photo of Lord Marsh Lord Marsh Crossbench

My Lords, the noble and learned Lord referred to the need for consensus on this subject. It is obvious that there is a consensus among the three parties to come together on the best way of taking more money from the public and to reach that consensus so quickly that the public will not notice. That may well be the intention. But the serious point is that all politicians—I was an offender in the past—can do one thing above all else, which is to spend public money, in this case, for the benefit of the Government.

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, I hope that people will not perceive what emerges as political parties coming together and thinking of ways of getting public money for themselves. One of the critical aspects of this matter is that there is not public confidence in funding arrangements at the moment. If funding arrangements involve state funding, that must be done on a basis that the public regard as satisfactory. The points made by the noble Lord, Lord Shutt, are very important because funding that improves the role of political parties at a local level may well be much more acceptable than state funding for, for example, posters in a general election campaign.

Photo of Lord Craig of Radley Lord Craig of Radley Crossbench

My Lords, will the examination by Sir Hayden Phillips include the subject of Short money? If so, will the noble and learned Lord invite him to look at the level of funding for the Cross-Benchers?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, at the forefront of the crisis on political funding is the funding for the Cross-Benchers. Of all the people in the world who will put their concerns to the fore, Sir Hayden Phillips is the man.

Photo of Lord Mackay of Clashfern Lord Mackay of Clashfern Conservative

My Lords, I understood that recommendations for the peerage are confidential until the time at which they are decided upon. The noble and learned Lord the Lord Chancellor said that he has no reason to suppose that the particular publications had come from No. 10. What investigation has he made about where they came from, and what was the result?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, I have made no investigation, but I make absolutely clear how much I deplore these names becoming public before any proper process has been gone through. I also regret that allegations were made by the Leader of the Opposition in this House that they had come from No. 10. I have no reason to suppose that that is right. It is wrong that people should make allegations about such a serious matter without first knowing the facts.

Photo of Lord Dubs Lord Dubs Labour

My Lords, does my noble and learned friend agree that if we were to separate serving in this House from having a title, we would have clarity in the process and the enthusiasm to be here that apparently exists outside the House would be lessened?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, I have assumed that noble Lords come here only to help with legislation and that they are not at all interested in the question of titles. However, I agree that when we come to second Chamber reform, we need to address the question of whether honours should be separated from one's role as a legislator.

Photo of Baroness Walmsley Baroness Walmsley Spokesperson in the Lords (Children), Education & Skills

My Lords, will the transparency and level playing field to which the noble and learned Lord has referred include the financial relationships between political parties and trades unions?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, it will include the relationships between political parties and any organisations, including trades unions. Sir Hayden Phillips's inquiry covers the whole of the funding of all political parties, and we need to look at how those relationships are affected by financing.

Photo of Lord Richard Lord Richard Labour

My Lords, in the interests of the transparency that the Opposition is now demanding, and which the Government are prepared to accept, can my noble and learned friend tell the House whether, in the interests of that transparency, the Conservative Party has told him the extent of its loans and the Liberal Democrats have told him the extent of comparable loans to that party? Otherwise, it does not seem awfully transparent.

Photo of Lord Pearson of Rannoch Lord Pearson of Rannoch Conservative

My Lords, now that the Attorney-General has joined us in the Chamber, will the Lord Chancellor care to advance a little on his answers to my noble friend Lord Waddington and the noble Viscount, Lord Bledisloe, and say whether he and the Attorney-General will encourage prosecutions relating to the sale of peerages under the Honours (Prevention of Abuses) Act 1925?

Photo of Baroness Williams of Crosby Baroness Williams of Crosby Liberal Democrat

My Lords, I agree with the Lord Chancellor that we face a very serious crisis of confidence in our political system, but one of the aspects of political fundraising is that it sometimes goes beyond traditional methods. Will the Phillips committee discuss the activities of the noble Lord, Lord Levy, the fundraiser for the Prime Minister?

Photo of Lord Falconer of Thoroton Lord Falconer of Thoroton Secretary of State, Department for Constitutional Affairs, Secretary of State for Constitutional Affairs and Lord Chancellor

My Lords, Sir Hayden Phillips's remit is not to investigate individual cases but to consider the whole system of political funding, and that is what he will do.