Political Parties: Funding

Part of the debate – in the House of Lords at 3:14 pm on 20th March 2006.

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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.