Second Reading

Part of Political Parties and Elections Bill – in the House of Lords at 4:16 pm on 18th March 2009.

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Photo of Lord Bach Lord Bach Government Whip, Parliamentary Under-Secretary, Ministry of Justice, Government Whip, The Parliamentary Under-Secretary of State for Justice 4:16 pm, 18th March 2009

My Lords, the legislation before us forms part of a long-standing debate on the regulation of UK party funding, and this is the context in which it must be considered. I think it is therefore worth briefly reminding noble Lords of the recent history which has informed the Bill's objectives and provisions, before turning to the detail of the Bill itself.

In 1998, the Government asked the Committee on Standards in Public Life—the CSPL—chaired by the noble Lord, Lord Neill, who will, I am delighted to say, be speaking in this debate,

"to review issues in relation to the funding of political parties ... and make recommendations as to any changes in present arrangements".

The Committee's report recommended an overhaul of the system of party funding and expenditure based on tighter controls on spending; restrictions on who could make political donations in the United Kingdom; and greater transparency.

These principles—which I believe all parties continue to support today—formed the basis of the Political Parties, Elections and Referendums Act 2000, which established the Electoral Commission and required parties to record and report to the commission donations above certain thresholds. These reforms were enacted in the spirit of consensus across the political spectrum and support from the public.

Notwithstanding this, and the indisputable fact that the 2000 Act represented a significant step towards a more transparent and better regulated political system, it is now clear that it has not fully addressed all of the concerns which exist about the financing and expenditure of political parties. Where there has been agreement on what change is necessary, the Government have sought to take this forward. It was in this vein that we incorporated provision in the Electoral Administration Act 2006 to subject loans to parties and other donees to the same disclosure and permissibility rules as donations.

In 2006, the Constitutional Affairs Committee recommended further reform to the system; and in 2007 the CSPL recommended changes to the governance and powers of the Electoral Commission. The recommendations of both committees attracted widespread support.

In March 2006, Sir Hayden Phillips was appointed to carry out a general review of political party funding and expenditure in the United Kingdom. His final report, published in March 2007, found that there was significant pressure on parties to raise and to spend large amounts of money, and proposed a package of reforms designed to tackle its effects on the political system. His proposals had three main strands: first, tighter and more comprehensive spending controls; secondly, a cap on donations coupled with increased public funding to mitigate its effect on political parties; and, thirdly, a strengthening of the regulatory capacity of the Electoral Commission. However, subsequent inter-party talks designed to produce an agreement on the way forward were suspended in October 2007 on the basis that there was no prospect of a comprehensive agreement being reached.

The Government are clear that any reforms in the area of party funding must attract broad consensus. Without that, they would lack legitimacy, and we would risk making these matters the focus of partisan dispute, which would be to no one's advantage. The Government regret that fundamental reform was not possible. We are also clear, however, that the absence of agreement on the model of long-term reform put forward by Sir Hayden should not prevent us taking what steps we can now—that is, where there is broad party political agreement on them—to make improvements to the system and, in the process, help to increase public confidence in politics and politicians.

The Government's White Paper, Party finance and expenditure in the United Kingdom, published in June last year, therefore proposed some immediate steps in the areas where we believed that consensus existed. These measures formed the basis of the Political Parties and Elections Bill, as introduced last July in another place.

The Bill before us today has evolved significantly from the Bill which had its Second Reading in another place. It has benefited from constructive engagement and scrutiny and, in its amended form, reflects the Government's commitment to moving forward on the basis of consensus and willingness to listen to representations from all those who place the health of British politics above partisan concerns. This is the spirit in which my right honourable friends guided the Bill through another place; I hope to do the same here.

I turn to the provisions of the Bill. Clause 1 clarifies the Electoral Commission's regulatory role, in line with a recommendation of the CSPL. Clause 2 strengthens the commission's powers to compel the disclosure of information. It was the subject of detailed discussion in another place, and has been extensively amended to take account of the concerns expressed there about the extent of the powers in the clause as introduced.

Clause 3 gives the commission access to a flexible range of civil sanctions, again following a CSPL recommendation. The range of sanctions and the safeguards to which they are subject very closely follow the scheme established by the Regulatory Enforcement and Sanctions Act 2008. I should like it to be clear that none of the 93 offences and requirements currently in the 2000 Act will be removed from the criminal sphere by this Bill or by subsequent secondary legislation. This clause was also amended in another place to take account of concerns expressed there about how the commission might apply sanctions.

Clauses 4 to 7 reform the Electoral Commission's governance arrangements so that it can benefit from commissioners and staff with more recent experience of politics. Here, again, we are implementing recommendations made by the CSPL.

Clauses 4 and 5 will allow the appointment of four commissioners with recent political experience. Each of the three largest parties represented in another place will be entitled to make nominations for appointment as a nominated commissioner. Clause 5 originally required the nomination of two or more people by each party, but was amended at the request of the Speaker's Committee so that parties may nominate a single person. The remaining nominated commissioner will be selected by the Speaker's Committee from among the nominees of all other qualifying parties represented at Westminster. The recruitment and selection process for the appointment of electoral commissioners is ultimately a matter for the Speaker's Committee, and the Government have sought to ensure that the provisions in the Bill provide for a selection process which is acceptable to it.

Clauses 6 and 7 increase the overall number of commissioners to nine or 10 to ensure that the nominated commissioners will be in a minority, and relax the restrictions that apply to political activities for other commissioners and Electoral Commission staff.

Clauses 8 to 15 relate to political donations and expenditure. The House will be relieved that I do not intend to go through each of these in detail, but I shall touch briefly on those which have been amended significantly in another place.

Clause 8 is intended to increase the transparency surrounding the true source of donations. It places a new responsibility on donors giving over £7,500 to political parties and members' associations, or over £1,500 to party accounting units and holders of elective office, to declare whether they have received money or benefits with a value in excess of these thresholds,

"with a view to, or otherwise in connection with", the donation. The intention is to ensure that, when an individual or organisation may be making a donation as an agent for another, is made clear to the recipient of the donation, as the law already requires. The Government amended the thresholds at which donations must be accompanied by declarations in another place in response to concerns about the administrative burden which the new provision might place on parties.

Clause 10 allows MPs and other office holders to appoint compliance officers to help them to fulfil the requirements of the 2000 Act in relation to reporting donations. The Government added this provision to the Bill in another place in response to representations received there. I stress that holders of elective office will remain liable for breaches of the law. Clause 12 was added to the Bill in another place to address concerns that there is less transparency of donations from unincorporated associations than those from other types of donors. It requires unincorporated associations, giving donations to regulated donees in excess of the recordable thresholds in the 2000 Act, and which in total amount to more than £25,000 in a calendar year, to provide information about the source of significant gifts which have been made to them during a three-year period.

Clause 13 increases the threshold in the 2000 Act for recording donations from £200 to £500; the threshold at which individual donees and party accounting units must report donations to the Electoral Commission to £1,500; and the threshold at which national parties must report donations from £5,000 to £7,500.