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Trade Union Political Funds and Political Party Funding — Motion to Take Note

– in the House of Lords at 6:50 pm on 9th March 2016.

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Moved by Lord Burns

That this House takes note of the Report from the Trade Union Political Funds and Political Party Funding Committee.

Photo of Lord Burns Lord Burns Crossbench 7:03 pm, 9th March 2016

My Lords, I am pleased to have the opportunity to open tonight’s debate on the report of the Select Committee on Trade Union Political Funds and Political Party Funding. I am grateful to the government Chief Whip for scheduling it at very short notice.

Some of your Lordships may have noticed that I voted against the Motion in the name of the noble Baroness, Lady Smith of Basildon, to set up the Select Committee. I did so because I thought it would be impossible to conduct a meaningful inquiry in the timescales proposed. I hope that noble Lords will agree that, once again, I have been proved wrong.

In the course of our inquiry, we received oral testimony from 19 witnesses and 40 written submissions. I also hope that both the evidence as well as the conclusions of the committee will be of assistance to the House as it considers—

Photo of The Earl of Courtown The Earl of Courtown Lord in Waiting (HM Household) (Whip)

My Lords, I apologise to the noble Lord. Many noble Lords are very keen to hear what he has to say. Perhaps he could ensure that he is standing underneath the microphone.

Photo of Lord Burns Lord Burns Crossbench

I also hope that the evidence as well as the conclusions of the committee will be of assistance to the House as it considers Clauses 10 and 11 of the Trade Union Bill on Report.

That I have been proved wrong on this is a tribute to my colleagues on the committee, who at very short notice worked intensively and flexibly throughout the inquiry and, more than that, showed a collegiate and constructive spirit which was so necessary if we were to make progress in the very short period that was available. It is somewhat remarkable that there were no votes in the committee and that, after lengthy discussions, the members agreed a report which was unanimous in all but one area—albeit a significant area, as I shall explain in due course.

None of this would have been possible without the outstanding work of the committee staff and Tom Wilson, the clerk to the committee, in particular. They worked against very tight deadlines, organising the written and oral evidence with great skill and preparing evidence for publication very quickly. They also produced a first draft of the report of high quality during the half-term recess. This gave us a firm foundation against which to have the final and decisive deliberations.

I should remind the House of the committee’s remit, which was,

“to consider the impact of clauses 10 and 11 of the Trade Union Bill in relation to the Committee on Standards in Public Life’s report,

Political Party Finance: ending the big donor culture

, and the necessity of urgent new legislation to balance those provisions with the other recommendations made in the Committee’s Report”.

We took the view that our first task should be to assess what the impact of Clauses 10 and 11 would be on the unions and how that would affect the Labour Party in turn. Both clauses concern the political funds that unions must establish if they wish to spend money on the furtherance of political objects. That includes both donations to political parties and spending on political campaigns. Out of the 163 listed unions in the UK, 25 have political funds; and of those, 15 are affiliated to the Labour Party.

Currently, most members of a union with a political fund pay a political levy into the fund unless they take the active decision to opt out of doing so. It is important to bear in mind that the political levy is a very small amount. The average is just over 9p per week or £4.84 per year. In 2013, 89% of members in unions with a political fund have not opted out and therefore were paying the levy.

Clause 10, as drafted, would require unions to move away from the current opt-out system and introduce an opt-in system. In other words, union members would pay the political levy only if they actively chose to do so. In attempting to assess the likely impact of Clause 10, we looked at the evidence of history, at what has happened in Northern Ireland, and we took evidence from behavioural experts. It may be worth saying a few words on each.

We thought that history might provide some clues because political funds have already been moved once from an opt-out system to an opt-in system, in 1927, and then back again in 1946. Although the available data have to be treated with a pinch of salt, they indicate that the move from an opt-out to an opt-in caused participation rates to fall by about one-third, and then the move back again caused the rates to increase by about 50%. Northern Ireland, which of course has a rather different political context, never restored the opt-out system after 1927 and its current participation rates under an opt-in system are about 28%.

The behavioural experts that we consulted gave us some powerful evidence about the impact of inertia on human behaviour. At the moment, the power of inertia benefits the unions because only 11% of their members make the effort to opt out of the political fund. Under the Government’s proposals, of course inertia would work against the unions. People have busy lives and their political levy is very small, so human nature means that it would be extremely difficult to persuade existing members to make an active choice about whether or not to opt in. Indeed, Dr David Halpern of the Behavioural Insights Team said that analogous situations led him to expect a fall of 20% to 30% in political fund participation rates.

In summary, the truth is that nobody can know what the impact of moving to opt-out would be in Great Britain at this particular time. However, the committee agreed that there could be a sizeable negative effect on participation rates. It is, of course, possible that those members who opt in could be asked to pay more, which might, to some degree, mitigate the financial impact.

The committee also agreed that the negative effect would be exacerbated by the particular details of Clause 10, which gives us a short transition period, does not allow opt-in by electronic means and requires opt-ins to be renewed every five years. Taking all of those factors into account, the unions themselves took a pessimistic view that the clause as currently drafted would result in participation rates being as low as 10% or even 5%. Although the committee was not convinced by those estimates, we did agree that the details of the scheme needed addressing and we were pleased at the Government’s apparent willingness look again at those points.

The next question is whether the negative effect on political funds will have a knock-on effect in the funding of the Labour Party. We were told that out of the £22 million that Labour Party-affiliated trade unions raised in political funds in 2014, just under half, £10 million, was given to the Labour Party. The committee agreed that there would be an impact but the scale was uncertain. For example, unions might choose to give a larger slice of the political fund to the Labour Party and to spend less on other political campaigns. So there will not necessarily be a direct correlation between the impact on political fund participation rates and the impact on the Labour Party’s finances. But on balance the committee concluded that there would be a significant reduction in union payments to the Labour Party.

Before I talk further about party funding, I shall say a brief word about Clause 11, which would require unions to provide much more detail about their political expenditure to the Certification Officer, who oversees trade union administration. Although this clause was raised far less often than Clause 10 in the evidence we received, the committee agreed that, as presently drafted, it could be disproportionately burdensome on the unions. The clause would require any union that spends more than a total of £2,000 per year from its political fund to declare the recipient, the amount and the nature of every payment, no matter how small. I repeat: there is no de minimis. To take a striking example, it was put to us that in principle this clause, coupled with subsections (1) and (2) of the 1992 Act, will mean that a union will have to declare the reimbursement of a bus fare to one of its members who attends a Labour Party conference. The committee believes that this clause needs to be looked at again, and accordingly we propose that before the Bill completes its passage, the Government should consult the Certification Officer, who will also be significantly affected by the clause, and come back with revised proposals which better balance accountability and proportionality.

I turn now to the part of the committee’s remit dealing with the 2011 report of the Committee on Standards in Public Life. The remit raised the possibility of,

“the necessity of urgent new legislation”,

to balance Clauses 10 and 11,

“with the other recommendations made in the committee’s report”.

I must confess that the committee had a little difficulty with that wording even after reading it many times. The CSPL report did not address political funds at all. One of its recommendations concerned union affiliation fees to the Labour Party, but they are different. It is also clear that there is no cross-party agreement on the CSPL report and thus no prospect of urgent legislation.

The committee decided, however, that it would be useful and within the spirit of our remit to consider whether there is a convention or some lesser tradition that reform of political party funding should proceed by consensus. We concluded that while there is no firm convention, history shows that both of the main parties have acted with a degree of constraint and that consensus is desirable. There is a widespread view that no Government should use their majority unilaterally to inflict significant damage on the finances of opposition parties. With this in mind, we commended the CSPL’s general approach of seeking to maintain balance so that any package of reform would affect all major parties in a broadly proportionate and fair manner.

However, we have a dilemma. The Conservative Party made a manifesto commitment,

“to ensure that trade unions use a transparent opt-in process for union subscriptions”.

Yet, as I have explained, Clause 10 will certainly have an impact on the funding of one particular party, the Labour Party, and as it stands it is not part of a balanced package that might command a desirable consensus. This dilemma led us to try to seek a way forward which would allow the Government to fulfil their manifesto commitment while also mitigating the worst of the impact on the unions and the Labour Party.

We were agreed that one way of easing this dilemma would be to distinguish between the requirements for new members and those for existing members of trade unions. For new members, we were agreed that opt-in was the correct way forward. Across many different walks of life, such as financial services, in which I have a great deal of experience, it is increasingly recognised that people should be asked to exercise an active choice and that organisations should not rely on inertia. We have therefore recommended that, after a minimum transition period of 12 months, anyone joining a union with a political fund should pay the political levy only if they have actively chosen to do so.

We were also agreed that for members who are opted-in, there should be no requirement to renew that decision at regular intervals, provided that they are reminded every year about their right to opt out. This would also be in line with the requirement of the Financial Conduct Authority for financial services. We have therefore suggested that the Certification Officer should issue a statutory code of practice specifying the minimum communications which unions must have with political fund contributors every year about their right to opt out and to monitor compliance with it. We were also agreed that it should be possible to opt in and opt out electronically, whether by email or on the internet, as well as on paper.

I now turn to the more difficult issue of the treatment of existing members. As I have said, we agreed that we should distinguish between existing members, many of whom have been paying into political funds for years, and new members who can be forced to make an active choice on their union membership form. Human nature means that it would be much harder for unions to persuade existing members to make an active choice as there is no effective trigger point. Large numbers are likely to ignore mailshots asking them to make this choice and repeated prompting is likely to be necessary. The fear is not of existing members choosing to opt out rather than to opt in, it is that they will simply make no choice at all. This raised two questions for the committee: whether and how quickly the opt-in system should be extended to existing political fund contributors as well as to new members, and whether this should be linked to progress on party funding reform.

Our deliberations boiled down to two options. One was that the opt-in system should be extended to existing members, but perhaps on a longer transition period than that for new members. This would recognise the problem of inertia and the likely difficulty of persuading existing members to make a choice, but still set a deadline for that choice to be made. A second option was that existing contributors should be considered as part of future talks on party funding reform and should not be included in this Bill. This was because it was feared that extending the opt-in to existing members would have a significant negative effect on union and Labour Party funding even with an extended transition period. Meanwhile, existing members will also be covered by the proposed statutory code of practice specifying the minimum communications which unions must have with political fund contributors every year about their right to opt out. Of course, the difference between these two approaches depends on the length of the extended transition period on the one hand, and the outcome and timing of talks on party funding on the other. A majority of the committee, including myself, on balance preferred the second option; namely, that extending the opt-in requirement to existing members should be considered only as part of wider cross-party talks on the reform of political party funding.

That brings me to my final point, and in some ways the most important recommendation of the report, as it also has a part to play in resolving our dilemma. The whole committee strongly believes that the Conservative, Labour and Liberal Democrat parties must give effect to their respective manifesto commitments on party funding reform. Accordingly, we urge the Government to take a lead by convening cross-party talks with a view to making a renewed and urgent effort to reach agreement. We cannot hope that this problem is going to go away; it will not. My fear is that until we solve it, the public are going to continue to mistrust political parties and the way that they are funded. I look forward to hearing what noble Lords have to say, and I beg to move.

Photo of Lord King of Bridgwater Lord King of Bridgwater Conservative 7:19 pm, 9th March 2016

My Lords, I think the House will recognise the very real contribution that has been made to the progress of the Bill by the work of the committee. I say that as someone who did not expect anything to come out of it at all. If I remember rightly, we voted strongly against the idea of it being set up in the first place. It has actually been encouraging to see the progress that has been made. The House owes a great debt to the noble Lord, Lord Burns, for the leadership and chairmanship he has given on this matter.

I simply make the very obvious point that the committee has, as I understand it, unanimously agreed that the principle no longer of inertia, but of opting in for new members is the right one and should be adopted. That can certainly be welcomed and I have no objection to the allowance of a year for the necessary procedures to be introduced. I make only that point, because we then move on to the more difficult question of the established members. I simply say that I would not rush that one. We need to think about it quite carefully. I take quite seriously the issue of party funding and whether this can be seen as the action of one party using its majority to abuse the situation of the other major party.

The interesting thing is that we would not be here if trade unions had been loyal to the undertakings given to me by the TUC. In a sense, the TUC was betrayed over this matter. I had the clearest assurances from the then right honourable Lionel MurrayLen Murray as we knew him, and later Lord Murray—with the full support of the unions, that the fullest arrangements would be made to ensure that all new members and all members of every union affiliated to the TUC would be given full information and advice, and be properly informed about what their rights were. As others have said, sadly this simply was not done. I accepted those assurances in good faith, which I said in reply to Mr Murray at the time on the basis of the undertakings that he had given in good faith to me, representing the Government. This is absolutely no criticism of him at all: he thought that he had a cast-iron agreement with the member unions of the TUC on the procedures that would be followed and they simply, sadly, were not. Thirty-two years later, here we are again.

Photo of Lord Lea of Crondall Lord Lea of Crondall Labour

With my TUC background, I would say that the noble Lord, Lord King of Bridgwater, is slightly—if not more than slightly—overdoing it.

Photo of Lord King of Bridgwater Lord King of Bridgwater Conservative

If the noble Lord thinks that I am overdoing it I simply ask him to read again the letter that Mr Murray sent to me. The noble Lord was a deputy general secretary himself at the time, so he has no excuse for not knowing what was said in that letter, or for not knowing the circular that was sent out by the TUC to all the unions, to which they subscribed, and on the basis of which I then accepted that assurance. I invite any noble Lord here to read the correspondence and make their own judgment as to whether I am overegging it.

That is where we are now. I had not sought to see this introduced. I hoped, 32 years ago, that the matter had been resolved. Sadly, my acceptance of the assurance that I know was given in good faith by Mr Murray on behalf of the TUC simply was not honoured and respected by the vast majority of the unions. So new members—this covers virtually all the current union members, since it has been going on for 32 years—were not made aware of the rights that they had, which they should have been, and on whose behalf the TUC had given me those clear undertakings.

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, obviously I accept the noble Lord’s recollection of what happened in 1984 and of the deal that was done. He will be aware that the committee had mixed information and reports on exactly what the unions were doing, and that the evidence from the Government was much challenged by the unions and by independent observers on whether the unions were following the spirit of that agreement. More importantly, over the 32 years, no Minister of any Government—the majority of whom were not Labour—has ever raised with the TUC the fact that there was a serious breach of that understanding and has never proposed, until the Bill appeared before the House, that we should change the situation again.

Photo of Lord King of Bridgwater Lord King of Bridgwater Conservative

The noble Lord makes a very interesting point. I do not know where the Government were at that time. He is absolutely right that it got completely neglected. I went off to Northern Ireland and did not follow it through. Until the noble Lord, Lord Monks, produced the correspondence I had forgotten its existence. I am quite frank about that.

The simple point I want to make, having thought that nothing would come out of the committee, is that we now have a way forward, and that the opt-in for new members should be properly communicated and in legislation. I note that the noble Lords, Lord Burns and Lord Tyler, and the noble Earl, Lord Kinnoull, have tabled an amendment that is currently in the Printed Paper Office, setting out the point of opting in for new members. It is a very helpful amendment, which I have read and noble Lords will be able to read. On that basis, we have made an important start. On the difficult point of established members, we should see how we get on with the first lot and then see where we go thereafter.

Photo of Baroness Dean of Thornton-le-Fylde Baroness Dean of Thornton-le-Fylde Labour 7:26 pm, 9th March 2016

My Lords, I was a member of the Select Committee; it was a privilege to be so. I have read all the debates that took place in the Chamber, including the exchange between the noble Lord, Lord King, and my noble friend Lord Monks on 10 February at col. 2325 and related.

The Motion we were asked to go away and look at I believe was passed with such an overwhelming majority of 94 because there was a feeling in the House that Clauses 10 and 11, which is all I am dealing with, were unfair and in many respects disproportionate. If noble Lords check this long path on party funding, they will see that whatever committee was set up on this—the Committee on Standards in Public Life has looked into it, as have several others—they all honed in on ensuring that there was fairness and balance in what was put forward on party funding and that it was not disproportionate. Indeed, the evidence that we had from Ministers in the other place, from both Tory and Labour Governments, shows that they had demonstrated restraint on dealing with the issue. That was the background and environment within which we conducted our work.

I hope that noble Lords will accept that the report covers a wide range of evidence brought by witnesses, both in person and in writing. When we got into our work, we quickly established that we were talking on average, about 9p a week, or £4.80 a year. That is averaged out over individual union members; the highest amount paid was, I think, 28p a week. Were these clauses proportionate for what we were told was a high-principle issue of opting in?

We tried to look at the evidence coolly, without emotion, and the Committee worked very well together. That is evidenced in the fact that all the proposals for the way forward at pages 134 and 135 are unanimous recommendations to the House. I hope that this is judged to be of assistance to the Government, and the Minister in particular, in finding a way forward when we come back to this next week.

The issue raised by the noble Lord, Lord King, about the unions not keeping their word that they gave him when he was Secretary of State, is challenged very strongly by the TUC in the evidence it gave us. We have a copy of the agreement that was reached. When the Minister, Mr Boles, came before us, he made it clear that his office and the Department for Business, Innovation and Skills looked on the web at union membership forms. No membership form is mentioned anywhere in the agreement. Of course, that set us, as individual members—perhaps not all of us—going on the web and seeing where the evidence was and what unions were doing about telling their members that they could opt out. It is in every rule book. A union will not get clearance from the Certification Officer if it is not in the rule book that the members must have it made clear that they can opt out. Indeed, the Certification Officer was completely puzzled when he came before us as to what the problem was, because he had had, I think, two complaints over quite a number of years.

Let me look at the disproportionality, both financially and in what unions were being asked to do. The impact assessment has been challenged very severely. Some of us did our own figures. The noble Earl, Lord Kinnoull, in particular, was very good at coming up with statistical information and giving it to the committee. One could argue that it would cost the political funds practically the whole of the fund in one year to carry out what the Government were asking the unions to do. It was completely disproportionate, as is mentioned in the report.

We were asked to look at the impact on party funding. No one who came before the Committee said that it would not have an impact. The Minister himself said it would depend on the unions and how they dealt with this, but then did not really show us the way. Paragraph 134 of the report establishes clearly that there will be an impact on the funding of Her Majesty’s Opposition, the Labour Party.

There has been reference to the Tory party manifesto, which we quote in the report. In paragraph 131 it promises,

“to ensure trade unions use a transparent opt-in process for union subscriptions”; it does not say “political fund contributions”. The manifesto goes on:

“In the next Parliament, we will legislate to ensure trade unions use a transparent opt-in process for subscriptions to political parties”.

The contributions do not go to the political parties; they go into the union political fund, half of which, on average, in affiliated unions, goes to the Labour Party. Let us be clear that of 163 trade unions, 25 have political funds and only 15 affiliate to the Labour Party. So we are again looking at disproportionality.

I close by saying that reference has been made to our chairman. He was experienced in the chair and I have to say that he set the tone and the environment from the beginning. I feel that we worked together as a committee in a very constructive way. We were backed up, as we always are in this House, by absolutely superb secretariat support. The secretary to the committee and the clerk worked on a hugely demanding timetable and delivered: I register my thanks to them. This was a report done in a hurry, but we tried to cover everything. Its intention, which I hope it achieved, was to assist this House in going forward and ensuring that the Trade Union Bill, when it is finished, will be fair and not disproportionate.

Photo of Lord Tyler Lord Tyler Liberal Democrat Lords Spokesperson (Constitutional and Political Reform) 7:35 pm, 9th March 2016

My Lords, when I first proposed in January that this Select Committee should be set up, I took the following as my text:

“It has become a well-established custom that matters affecting the interests of rival parties should not be settled by the imposition of the will of one side over the other, but by an agreement reached either between the leaders of the main parties or by conferences under the impartial guidance of Mr. Speaker”.—[ Official Report , Commons, 16/2/1948; col. 860.]

That was Winston Churchill, leader of the Conservative Opposition, speaking in the Commons. That has been much quoted in evidence to the Select Committee and we should note that the one respect in which we did not follow that pattern was that we picked a much better chairman than Mr Speaker. I pay tribute to the noble Lord, Lord Burns, and to the clerks who were indefatigable in making sure not only that we had a very speedy conclusion to our work, as was determined by the Motion before your Lordships’ House, but that it was, of course, very successful. I hope Members on all sides will acknowledge that the report is comprehensive, intellectually robust and very positive. This has already been said by the noble Lord, Lord King, and I am delighted that he, too, recognised this.

The strong recommendations—with only one attracting minor misgivings from a minority on the committee—now await a government response. We should recall the firm double commitments of the 2015 Conservative manifesto, referred to constantly in debates on the Bill. Because, of course, there were two commitments in that manifesto. One has been regularly prayed in aid by Ministers, while they have tended to dodge the other. To remind the House, the first says that,

“we will legislate to ensure trade unions use a transparent opt-in process for subscriptions to political parties”,

while the second says:

“We will continue to seek agreement on a comprehensive package of party funding reform”.

As we have been constantly reminded, those two stood firmly together in the manifesto.

During our debates in January, we heard several contributions from, for example, the noble Lords, Lord Kerslake, Lord Bew, Lord Dobbs, Lord Cormack and Lord Forsyth of Drumlean—some of whom are going to speak this evening, which is welcome—all of whom warned Ministers to be extra careful in this area. I would summarise the concerns across the House as pointing out that this Government have been getting a bit too big for their electoral boots. After all, they were supported by fewer than a quarter of those eligible to vote last May. Unlike the coalition, for example, this is not a majority Government and therefore it behoves them to be very careful in approaching issues of this sort.

In the interest of brevity, I shall not refer to all the issues that the noble Lord, Lord Burns, has spoken of, because I very much endorse his approach, but I want to take up the point just made by the noble Lord, Lord King. We must ask the Government to think very carefully and not rush into these issues, because they are of very considerable long-term consequence. The crucial recommendations of the Select Committee can be easily summarised. They have already been referred to. Paragraph 134 states:

“It is clear to us that clause 10 will have an impact on party funding and that it is very far from commanding the consensus which we have said is desirable in such situations”.

I very much hope that the Minister will recognise that this stands in stark contradistinction to the assertion that the Bill is not about party funding. We unanimously agreed that that was not the case. There can be no pretence now that there is no connection between Clause 10 and party funding: that was the unanimous view of the Select Committee. Incidentally, colleagues on all sides of the House should note our comment in the report on,

“the inexplicable failure of the Impact Assessment to consider this issue”.

Next is the question of how to take forward a comprehensive package of party funding reform, as promised by all the parties. Here the committee, as the noble Lord, Lord Burns, said, was again very firm and unanimous in saying:

“Whether or not clause 10 is enacted, in whatever form, the political parties should live up to their manifesto commitments and make a renewed and urgent effort to seek a comprehensive agreement on party funding reform. We urge the Government to take a decisive lead and convene talks itself, rather than waiting for them to emerge”.

Again, this was unanimous. Whether Clause 10 is improved in ways we all support or not, the Government must simply stop sitting on the fence. It is not good enough for the Prime Minister, who is, after all, a party leader himself—as he is reminded daily at the present time—loftily to blame party leaders for not taking steps to make progress.

The whole logic of the report leads to the inescapable conclusion that the legislative proposals in Clause 10—and, to a lesser extent, Clause 11—should not proceed, even if improved by amendment, if that latter manifesto promise is not actively pursued at the same time. In other words, unilateral legislation is not acceptable.

The only very minor divergence of opinion in the whole report was on timing, as the noble Lord, Lord Burns, said. The clear majority favoured an explicit omission of all existing trade union members from the opt-in provisions of the Bill unless and until this issue could be considered in the context of wider party funding negotiations. A minority simply wanted a longer transition period for them compared with new members, and there was talk of three years or so.

However, all the other recommendations, including those to which I have referred, were supported on every side of the Select Committee, as the noble Baroness said. It is fair to say that we all recognised the need for progress in this field. If we had not been so aware, we were often reminded of it by the evidence given to us. The public are understandably suspicious of the big donor culture referred to by the authoritative CSPL report. They argue that multimillion-pound donations seem to buy preferential access, influence and even—dare I mention it?—patronage in your Lordships’ House.

The CSPL report referred to,

“a high, and unhealthy, degree of public suspicion about the motivations of both donors and recipients”.

This was endorsed in evidence to the Select Committee from the Electoral Reform Society, whose polling in October 2015 found that 72% of the public believed that the current system of party funding was,

“corrupt and should be changed”.

Evidence from Unlock Democracy cites further Electoral Reform Society research which found that:

“77% … believe that big donors have too much influence”,

over our political parties. This is just one of many factors in the current dangerous level of public disengagement with our politics. There is a firm starting point to address this disenchantment set out in the Committee on Standards in Public Life’s report.

It is often said that where there is a will there is a way. The speed and success with which our Select Committee reached unanimous agreement on so many issues shows that there is potential for progress in this area. The parties have all recognised the urgent need for reform in repeated election promises; now Ministers and party leaders have an opportunity to follow brave words at election time with effective action. It is time for balanced legislation to reform party funding not just for one party—Labour—but for all parties in our political system.

Photo of The Earl of Kinnoull The Earl of Kinnoull Crossbench 7:42 pm, 9th March 2016

My Lords, I, too, pay tribute to the noble Lord, Lord Burns, and to the outstanding clerking that we on the committee had the benefit of. The noble Lord showed great clarity of thinking, a good-humoured approach and was able to reduce the difficult problem we had been set to a series of logical steps. Powerful evidence sessions were arranged and we were able to land on those steps. I do not belittle the contribution of the other members of the committee. Everyone contributed. We witnessed the great charm of the noble Baroness, Lady Dean, in eliciting evidence and the scholarship of the noble Lord, Lord Tyler. We will hear from more of my fellow committee members later but the report shows balance and is very fair.

The noble Lord, Lord Burns, has summarised matters carefully and fully. I agree with every word he said, as I do with those of the noble Baroness, Lady Dean, and the noble Lord, Lord Tyler. However, I wish to add a little additional colour around some of the evidence sessions. There were three neutral sets of evidence concerning the effect of Clause 10 on union political fund participant numbers. These were: the lessons of history from 1927; the similar evidence of Northern Ireland; and the very interesting evidence of the Government’s own behavioural insights team, which so starkly rebutted the impact assessment.

The politically influenced evidence, which came largely in the evidence sessions from people who supported the Labour Party, was delivered by people of great passion and integrity, yet the numbers that they foresaw the participant percentages falling to were, for me, unbelievably low. I put that down simply to fear. They feared an existential threat, or certainly a threat of very major damage, occurring to the party they love. I know from the insurance industry that fear is not at all equal to the probability of damage. Therefore, I was able to square the evidence that they gave on that basis.

I turn to the Kelly report, while sticking with the theme of fear—the first report of the Committee on Standards in Public Life that has not been fully accepted by people of all descriptions. We had a very good evidence session with the noble Lord, Lord Bew, and Sir Christopher Kelly, and discussed what was termed “the balance of pain”—that is, the pain that would be felt by the Labour Party in having to make changes to the way in which it got its money, and that felt by the other parties, which essentially get most of their money from large political donors. I think that is almost a balance of fear; again, it is a fear of the unknown. We heard evidence from Nick Clegg MP on his complete failure to convene any form of discussions likely to produce any results in the aftermath of the Kelly report.

We have just heard that public opinion is strongly in favour of adopting some changes in party political funding. Therefore, it is no surprise that the three main manifestos—I shall read out a line from each—were so keen to promote change in the party political funding arena. Looking at the annunciator, I note that the words,

“and Political Party Funding Committee”,

are included in the committee’s title. Therefore, it is entirely right that I should cite these manifestos. The Conservative Party manifesto stated:

“We will continue to seek agreement on a comprehensive package of party funding reform”.

The Labour Party manifesto said:

“We remain committed to reform of political party funding and taking the big money out of politics”.

The Liberal Democrats said that they would:

“Take big money out of politics by capping donations”,

and introduce,

“wider reforms to party funding along the lines of the 2011 report of the Committee on Standards in Public Life”.

I feel, therefore, the time has come to grasp the nettle. In fact, there is no better time to do it because these three manifesto commitments are very similar in their vow to the Smith commission agreement. All three parties have given this undertaking to the electorate. It is incumbent on those parties now to make progress in this area, have meaningful discussions and not just “dance a dance”. The balance of fear that I have mentioned is well understood. There is certainly no appetite for creating an existential problem for any of the three parties. The interim arrangements on party funding would take that into account. It is fair to ask the Minister when the Government intend to make good their manifesto promise in this regard.

I, too, note that we had 33 pages in our main report, 32 of which were wholly agreed; just the last half page was not. For the avoidance of doubt, I was in favour of Option A on the opting in of existing participants only when a comprehensive reform package was in place. I commend the report to the House for its balance and thoroughly practical nature. The committee has reached agreement. We now seek the agreement of the House, and then of the Government.

Photo of Lord Robathan Lord Robathan Conservative 7:49 pm, 9th March 2016

My Lords, having been a member of the committee, I pay tribute to the Cross-Benchers, such as the noble Earl who has just spoken, for their measured contributions. I particularly thank the noble Lord, Lord Burns, for his skilful handling of the committee, which must not have always been easy, and his very good humour. As a new Member of this House, I have noticed that people are sometimes reluctant to intervene. I shall make a short speech and if anybody wishes to challenge me, I would be very happy for them to intervene.

First, I will address the question of opting in or out, and then the second, linked issue of how this will affect Labour Party funding. This discussion of the trade union political levy hinges on one issue alone: is it right in principle for trade unionists to opt in or out of the political levy? I know why the situation is as it is. I know the history. But the world has moved on since the second half of the 19th century.

Nick Boles, the Minister, came to our committee and gave us some very eloquent evidence, which I shall quote at length. He said that,

“there has been a very substantial shift across a whole range of areas of public life and consumer activity towards the idea that it is important, when you are asking someone to make a contribution to some other organisation—it could be a supplier of a good or a charity—that they should actively consent to do so … the consumer rights directive, which was implemented in the UK in 2014 and which applies across the European Union for contracts between a trader and a consumer, reinforces the concept of express consent … pre-ticked boxes are no longer permitted under that directive … Turning to the charitable sector … a review of the approach to self-regulation of fundraising in charities and strongly encouraged that, again, all fundraising organisations should take steps towards adopting a system of ‘opt-in only’ in their communications to donors … The FCA is very clear that when signing up to a financial product, consumers should be provided with clear information and be offered an opportunity to actively consent to a new commitment”.

Would anyone in the Chamber disagree about the principle of active consent—opting in, in this and indeed other fields—in the second decade of the 21st century?

The contributions to the political levy are, frankly, trivial, as we have heard already from the noble Baroness, Lady Dean, so the result is that people do not challenge them. It is just not worth the candle. It is not worth the hassle, after all, for an average of 9p a week—less than £5 a year. But if you multiply that, which the noble Baroness did not do, by nearly 5 million union members, you get not far shy of £24 million a year, of which around half goes to the Labour Party. Can anybody in the Chamber defend that system, where those who vote Conservative, Liberal Democrat or whatever unwittingly give money to a party that they do not support? I opt in to join the Conservative Party, and Conservative associations up and down the land sweat blood each year trying to get members and their subscriptions.

Turning to Labour Party funding, it not my place to advise the Labour Party, it will be pleased to know, but I would suggest that it gets out and gets more members. We were told by the Guardian in January this year that membership of the party has increased from 202,000 to 388,000 since the general election, so perhaps the party is doing exactly that. I am told that more than 100,000 people paid £3 to vote in the leadership election by becoming registered or affiliated supporters. However, trade union membership is falling rapidly. It is less than half what it was in the winter of discontent. I might again advise the Labour Party: it is not wise to rely on these funds. The party needs to get more trade unionists who are committed to the Labour Party to subscribe properly. Perhaps the standard sub of £47 puts them off. In the Conservative Party it is only £25. I think that is too little, but there you go.

The noble Lord, Lord Collins, is in his place, and his review has already started the process of opting in. I will quote—not to him because he will know it backwards—what he said:

“After a transitional period of five years, affiliation fees shall only be accepted on behalf of levy payers who have consented to the payment of such fees”.

Notwithstanding the Motion setting up the committee, the issue of trade union reform is separate from party funding. Indeed, all noble Members will have received the joint union briefing on the Trade Union Bill, which included briefing by USDAW and the NASUWT, both of which have political funds. The briefing did not even mention the opt-in or the opt-out, or political levies or political funding. So those unions saw it as separate. It is, frankly, immoral and unacceptable for any party to be funded unwittingly and unwillingly by people who do not support it. I believe that even those opposite must agree.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

Is there not a bit of a dilemma here with company donations made, say, to the Conservative Party, where some of the shareholders may not take the view that they support the Conservative Party?

Photo of Lord Robathan Lord Robathan Conservative

My noble friend is absolutely right, although he may be slightly—dare I say?—living in the past. We heard evidence—somebody who was on the committee may correct me—that the amount of public company donations has dropped to a negligible level because of legislation brought in by the last Labour Government.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

My noble friend is absolutely right that the amount has certainly gone down but I thought he was making an argument of principle, not of quantity.

Photo of Lord Robathan Lord Robathan Conservative

My noble friend is absolutely right, but of course, in principle, shareholders vote at a company general meeting and the result is that they do not vote for political donations. Of course, one can sell one’s shares, as indeed one can leave a union, but leaving a union may have implications for one’s employment.

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, I am sorry to interrupt the noble Lord—we crossed swords in the committee—but, further to the point made by the noble Lord, Lord Forsyth, does he not recall the evidence before the committee that over the past five years trade unions gave roughly £64 million in political donations? Other organisations gave £80 million, predominantly to the Conservative Party. None of those organisations is required to have a political fund and therefore the issue of opting in or opting out by shareholders or members of those organisations does not apply. Does he regard that as either moral or fair?

Photo of Lord Robathan Lord Robathan Conservative

The noble Lord and I did indeed cross swords but in the committee we heard that these are personal donations. They may be from rich people and one can knock that—

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, I am talking about organisations. There are also very rich donors—to all parties but, again, predominantly to the Conservative Party. But I am not talking about individuals, I am talking about other organisations which together donate more than the trade unions do to the Labour Party—to all parties.

Photo of Lord Robathan Lord Robathan Conservative

Perhaps the noble Lord might like to tell me which organisations, without asking their members, donate to the Conservative Party, because I think he may be mistaken.

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, the point is this: public companies have to have a vote but there is no requirement to have a political fund and therefore those who oppose the majority vote have no option to opt in or opt out. That is a requirement that applies to trade unions only and it will continue to do so in a rather harsher form if the Bill is passed. Why does the noble Lord not regard that as necessary for other organisations if he is indeed trying to make a point of principle?

Photo of Lord Robathan Lord Robathan Conservative

Funnily enough, I would be very happy to examine that but we did not do so in our committee. I think the noble Lord is saying that he will defend the principle of making people opt out rather than having the opportunity to opt in.

Finally, the recent discussion has just illustrated how well the noble Lord, Lord Burns, did, with good humour, in handling our committee.

Photo of Lord Desai Lord Desai Labour 7:58 pm, 9th March 2016

My Lords, I, too, pay tribute to the noble Lord, Lord Burns, for an excellent report. I have known the noble Lord more or less since I landed in this country, 51 years ago. I have always known that he will do whatever he does in an excellent way.

I think most things that have to be said about the report have been said. It is a good report. The recommendations are good. But I want to take a slightly broader point of view. First, we should be realistic about this. We live in a class society and it is a fact that capital has more resources than labour. Labour ultimately has to have numbers on its side because each member can make only a small contribution. So the Labour Party has always needed arrangements such as that with the trade unions to get a little, respectable sum of money together.

As we know, regardless of the nice things that the report says about all parties having exercised restraint, the record in the report shows that there has been class legislation on these questions in 1913, 1927, 1984 and so on. After all, what is political power for? Political power is to serve your people and to put the other people down—that is our system. We have had a bilateral monopoly of power between Conservative and Labour, and that is the way that we have operated. I do not really accept this idea that, somehow, political parties cannot do something because they do not have a majority of voters on their side. We have a first-past-the-post system, where if you get a majority of the seats, you bash the other people’s face in—that is the way politics works, so I do not think there should be any surprise about that.

However, several things have happened. We have a situation in which, for various reasons, the trade unions are in decline. With production technology changing and the economy changing, trade unions are in decline. Secondly, inequality of income has increased remarkably—there is a lot of evidence about that—and so there are these contrasting forces in which the balance of power between the two major groups has changed. Also, because we had a bilateral monopoly of power, the smaller parties had suffered and, more and more, it is becoming clear that the bilateral monopoly’s hold on the electorate is weakening—they no longer command the 99% of the electorate’s vote that they had in 1945 or 1951 but have a much smaller number.

Whatever we do with this system and whatever we do with Clause 10 of the Trade Union Bill, we need to go back to some wider thinking about political funding, and I think this is where the CSPL report will come in. Eventually, we will have to transit to a system that, if not entirely, is substantially publicly funded, because only a publicly funded system—based on the votes obtained by a political party at an election, with some sort of per capita subvention in relation to the number of votes that a party got—will do justice to the smaller parties and do justice to the relative inequality of resources between the two major parties.

Whatever we do with the Trade Union Bill—and I agree, I think, with the recommendations of the committee—we need to think seriously about how we transit, if not fully at least partially, to a mixed system in which all parties have access to public funding, which might be topped up by other arrangements that would also be regulated in a strict way. We need some system like that, because the present system has broken down and, as the noble Lord, Lord Bew, has said in his report, it no longer commands public trust. Neither the trade union funding nor the corporate funding commands public trust. Therefore, we need a system in which public funding is made available to parties, and the sooner we move to that system, the better.

And here we should once again emphasise the advantages of your Lordships’ House. The Trade Union Bill would not have met this big roadblock and the Select Committee would not have been appointed, had it not been for your Lordships’ House. Because of the way that the voting strength is constructed here, we can do that kind of reforming thinking in your Lordships’ House. So, as and when the members of the ruling party have got over their little local difficulties with Brexit—somewhere in high summer, so in July or so—they ought to turn their mind to thinking about long-run reform of political funding. I would again recommend that they use your Lordships’ House for that and, since the noble Lord, Lord Burns, is a very busy man, he would be the ideal person to do the job because he will do it quickly.

Photo of Lord Oates Lord Oates Liberal Democrat 8:05 pm, 9th March 2016

My Lords, I echo the praise that has already been given to the committee for its swift, comprehensive and skilful report. In marked contrast to Clauses 10 and 11 of the Trade Union Bill, the conclusions of the committee are measured, sensible and proportionate; they look beyond party advantage to the interest of our democracy.

The Government’s publicly stated arguments for Clauses 10 and 11 are based on a desire for greater transparency and a concern about a lack of compliance by unions with the King-Murray agreement. If those really are their motivations—and I confess that I doubt that—then the measures proposed unanimously by the committee will fulfil the Government’s desires and put at rest their concerns. With the greater transparency proposed, the active choice about the political fund for people joining a union and the clear annual communications with existing union members about their right to opt out of the political fund, the committee proposes a fair and balanced approached.

I also support the majority view of the committee that the decision on whether to extend the opt-in to existing members must be considered only as part of cross-party discussions on party-funding reform. That is also a fair and balanced approach, and it is vital if party funding is not to become entirely unbalanced.

I want to concentrate on one particular sentence in the report that struck me. Paragraph 115, which was alluded to by the noble Lord, Lord Burns, states:

“If any government were to use its majority unilaterally to inflict significant damage on the finances of opposition parties, it would risk starting a tit-for-tat conflict which could harm parliamentary democracy”.

That is a sobering sentence, because that is exactly what the Government are seeking to do in the Trade Union Bill. I hold no brief for the Labour Party or the partisan campaigns run by some trade unions, but I recognise that there is something greater at stake here than my dislike about the way that the Labour Party and trade unions have sometimes campaigned against my party. What is at stake is the health of our democracy.

The odds are already massively stacked in favour of the Conservative Party, given its immense financial advantage. But now it is the intention of the Government not to redress that balance through the party-funding reform that the Conservative manifesto promised but to further entrench it through the Trade Union Bill. Since the constraints of coalition were removed from the Conservatives, they have brought forward a raft of measures to hobble their opponents, including the measures to cut funding to the Labour Party included in this Bill and the cut to Short money for opposition parties. This also comes at a time when the number of special advisers serving Conservative Ministers has risen: the Chancellor now has nine special advisers and the Prime Minister now has 32 special advisers.

Not only that but, in a move that has largely escaped public scrutiny, the Code of Conduct for Special Advisers has been changed to allow government-paid special advisers to take part in national political campaigns. The previous code prohibited special advisers from taking part in national political activities, including canvassing on behalf of a candidate or party; now it is allowed. The previous code prohibited special advisers from being identified as prospective parliamentary candidates; now it is allowed. The previous code prohibited special advisers from undertaking local political activities in support of national politics; now it is allowed. Of course, such activities may be carried out only in the special adviser’s own time, but I wonder how this will be monitored in practice—the Government have not told us. Compare that with the onerous reporting requirements imposed on trade unions.

All these measures are coming together and, in doing so, they unbalance our politics. I hope that tonight the Minister will not waste too much of her time on protestations that Clause 10 is not a partisan attack on funding of the principal opposition party. No objective person believes that, and they are right not to believe it, because it is not true. The motivation of the Government—or at least of the architects of this Bill, who have been pushing it for the last few years—is entirely partisan. That is not an assumption on my part. It is not a matter of speculation. It is a matter of fact.

We know it is a matter of fact because Conservative Ministers attempted to serve up this Bill during the coalition. Their motivation could not have been clearer. They assumed that because of the money that the Labour Party and the trade unions were pumping into demonising the Liberal Democrats’ role in government and Liberal Democrat MPs in their constituencies, we would go along with their partisan plan. However, much to their frustration and indeed bewilderment, the then Deputy Prime Minister said no, repeatedly. He did not do so, let us be clear, out of a love for the Labour Party or the trade unions—anyone who has seen the absurd and unpleasant campaigns that were run against him nationally and in his Sheffield constituency will understand there was not a lot of love there—but because he thought that sometimes there is actually a wider interest than your own party’s short-term advantage.

He did so because he knew that although trade unions’ political campaigns can be shrill and vindictive, free trade unions play a vital role in any democracy. Anyone who doubts that just should just go and ask a Pole, a Zimbabwean or a South African. He said no because he believes that a functioning and balanced democracy is a cherished gift, and that if you play with it for purposes of party advantage, you do so at your peril and at the peril of your country. Most people in this House understand that. I suspect most Conservatives understand it too. The Conservative Party will be defeated one day, however distant that day may look today, and it would be foolhardy of the Conservatives to start the sort of tit-for-tat conflict that the report warns of. It would be not only their party and the Labour Party that suffered but all of us. I hope, therefore, that the Minister will tell us tonight that the Government have seen sense and will accept the wise and measured recommendations of the committee.

Photo of Lord Leigh of Hurley Lord Leigh of Hurley Conservative 8:12 pm, 9th March 2016

My Lords, I warmly welcome the report and congratulate the noble Lord, Lord Burns, and the other noble Lords who served on the committee. We had a good discussion on Clauses 10 and 11 in Committee, which I think it is generally recognised were instigated by the Conservative Party manifesto. As the noble Baroness, Lady Dean, and other noble Lords have pointed out, perhaps it did not contain the most elegant of wording, but it did none the less convey the message. As a humble treasurer of the party, I did not get involved in writing the manifesto, so cannot claim any credit for that.

The important point about Clauses 10 and 11 is that they are not seeking to prohibit donations to political parties by trade unions but rather seek transparency and ensure that those who wish to donate to a political fund, first, appreciate that this is the home for their money; and, secondly, understand how that money is spent. Those present in Committee will recall the Populus survey from which I quoted, which found that 30% of one union’s members thought that they had opted out of contributing to the political fund and a further third did not know if they had opted out or not. Nearly two-thirds of the members of this union who were polled thought that unions could do more to advance their members’ interests by using the money elsewhere than for political donations to Labour. Of course, a substantial proportion of members of this union and other unions support other political parties, but donations are focused exclusively on the Labour Party.

The report makes clear that it should be a requirement for all members joining a union with a political fund to be asked, on the membership form, to make an active choice to contribute, or not, to that fund. Like the noble Lord, Lord Robathan, who said it very elegantly, I cannot really see any argument against that. Indeed, I served on the Etherington committee, which made the point, in respect of charities, that there has to be an active opt-in before donations are made to avoid it being classified as aggressive fundraising. The current situation is that every 10 years a ballot is opened up for members to approve the continuation of opt-out arrangements. However, we have seen one union which, despite leaving the ballot open for three weeks—one would have thought a proper ballot would take just a day—achieved only an 18% turnout.

Accordingly, it seems to me that the only real issue for Members of this House to decide is whether to implement the opt-in requirements immediately or over a period of time. It would of course be very helpful if, at this point, the unions could enter into negotiations with the Government to reach an agreement on this, and perhaps my noble friend will explain whether that is happening. However, in the absence of any such negotiations, I would find it somewhat extraordinary if the opt-in does not commence for all existing union members, albeit phased in over a year or maybe two. I would not accept that a cross-party consensus on the general and much wider subject of political funding is necessary to implement this one particular aspect relating to trade union behaviour. Indeed, I am somewhat surprised that others think otherwise.

It should be borne in mind that, while the Conservative Party manifesto specifically called for a cross-party consensus on political funding, the Labour Party manifesto was explicit in its determination to impose a cap on political donations. There is no mention of consensus and no mention of agreement; simply that a cap will be put on political donations. Accordingly, if Labour had won the election in 2015, it would either have had to break a manifesto commitment or it would right now be implementing a very dramatic and severe change to party funding. It is clear to me that the Government are not proposing to do that but are simply trying to ensure transparency for those who wish to donate. The debate on the ethics of the state imposing a limit on a citizen’s free will to give their money to a political party of their choice is not for this occasion.

The discussions we are having about this situation must be pretty similar to those when PPERA was brought in in 2000 under the Labour Government. That required private, public and listed companies—the three can be different—to seek approval from members of the company in general meetings before political donations above quite a modest sum were made. Subsequently, the Companies Act required full disclosure of such donations. Both of those are now recognised as steps forward and I welcome them as being appropriate. The actual figures, since some noble Lords have questioned this, are that since 2010, declared donations from listed companies to the Conservative Party have been well short of £1 million. In the same period, well over £50 million has been raised, so the numbers speak for themselves.

Photo of Lord Forsyth of Drumlean Lord Forsyth of Drumlean Conservative

The point that I made, which I think the noble Lord is referring to, was not about the numbers or the amounts, I was responding to my noble friend’s point when he argued that it was immoral for people with money to be contributing to a political party when they did not support it. That applies in the case of some shareholders who may not support the Conservative Party. I am not against that; I was simply arguing that it was wrong to make a moral case which would apply to company donations. The extent of the donations—their number and volume—has nothing whatever to do with the principle. We are not discussing the price here; we are talking about the principle.

Photo of Lord Leigh of Hurley Lord Leigh of Hurley Conservative

I take the point, but the principle I am trying to explain is that a listed company has to have a general motion at a meeting where all shareholders have the right to vote. As a result, such listed companies have dramatically reduced their donations. Private and public companies also have to have shareholder approval.

I would agree with noble Lords who point out, in respect of Clause 11, that £2,000 is a very low level and may not be practicable. I would certainly not want to see unnecessary administrative expense for the unions in the enforcement of these new requirements.

Finally, I believe that further clarification is required on Clause 11. I note the Certification Officer will have to ensure that unions identify moneys spent under Section 72(1) of the 1992 Act, but there is confusion as to whether payments which are not within Section 72(1) should be similarly identified. For example, there are donations that can properly be described, in layman’s terms, as political but are not necessarily made through or to a political party. For example, payments by unions to CND and Boycott, Divestment and Sanctions against Israel made through the fund are not disclosed as such. I would argue that many members of unions would be horrified to find that that is how their money has been spent.

I would hope that a government amendment would clarify this point. I understand that it might be covered by case law, but I agree with paragraph 107 of the report, which states that the current level of reporting for political fund expenditure is insufficient.

Photo of Lord Bew Lord Bew Crossbench 8:20 pm, 9th March 2016

My Lords, I should declare my interest as chairman of the Committee on Standards in Public Life; the committee’s report in 2011 has obviously played a significant role in the discussion of the Select Committee.

I say immediately that if you are going to get something wrong, get it wrong in good company. Like the noble Lord, Lord King, who was an important member of the Committee on Standards in Public Life in its early days, I did not believe in the viability or usefulness of the committee being established in the first place. I have been proven to be quite wrong. I had perfectly reasonable reasons for believing that. I have been struggling for several years—and my predecessor for longer than that—to get movement on this issue. Having failed to do much in five years, I did not think that much would happen in five weeks. Actually, this has been a useful and valuable report.

I had another, more profound reason for scepticism. As chairman of the Committee on Standards in Public Life, although I absolutely identified with the moral thrust of the report, particularly the commitment to the idea that these issues should be dealt with not in a partial way but across the whole terrain, I was also well aware that there were major difficulties.

For example, the report has a section supporting the idea of state funding; the noble Lord, Lord Desai, spoke eloquently about that concept this evening. However, the Deputy Prime Minister in the previous Parliament, who was referred to earlier, made it clear that that was not acceptable at a time of financial stringency, and there was no possibility of getting the major political parties to push forward that idea.

I was also well aware of the fact that neither of the major parties had agreed to our report and both dissented in significant ways. I was worried that there might be a feeling that there was a gold standard that could be returned to which embodied some form of consensus, when I knew there was no such thing. That did not matter to the noble Lord, Lord Burns, and his committee, who approached the problems as they exist today, and offered some very sensible conclusions and suggestions as to the way forward out of what is an impasse.

For the remainder of my remarks, I will register one footnote to the report, raise a slight query as to meaning and then look at where we are left by the report’s conclusions. The noble Lord, Lord Burns, when talking about opting in, mentioned the 28% figure for Northern Ireland. I absolutely agree with the broad conclusion of the report: that it is unknowable what the provisions would mean in practice; we cannot be sure and there are different figures. However, the Northern Ireland figures are a bit deceptive. They are very low and relate to a wider problem, which is that the Labour Party will not organise in Northern Ireland, so it is asking people to buy nothing by opting in, which is a unique situation in that part of the United Kingdom. That is a controversial issue inside the Labour Party. In the most recent leadership election, some important contenders, including the runner-up, made it clear that they were unhappy with their party’s traditional position on the matter. None the less, you cannot really deduce anything from the Northern Ireland figures, not just because of the nature of the local traditions but because the Labour Party, unlike the Conservative Party, does not organise in Northern Ireland. That must be taken into account when looking at that very low figure.

To turn to the main thrust of the report, one important thing that the committee did was to commission certain types of evidence. There is an important document from the Conservative Party, given in evidence to the noble Lord’s committee. Paragraph 35 states:

“Party funding reform has become the embodiment of Waiting for Godot. Notwithstanding our aspirations towards a comprehensive settlement”,

which, implicitly, the Conservative Party thinks might take some time,

“we would practically suggest that—entirely separate to this Bill—there may be smaller reforms that could command some broad support, rather than trying … to achieve an all-or-nothing, ‘big bang’ solution”.

That is an interesting observation. We could address certain aspects of what is a very difficult problem in its totality, in the event that we do not within this Parliament achieve the big-bang solution. I should be very keen to hear the Minister’s reaction to that proposal, which comes from a Conservative Party document.

In conclusion, I want to say something about the Committee on Standards in Public Life. We would be very happy to play any role if a debate is initiated. We certainly intend to modernise our report and carry out new research. From some of the exchanges in the House this evening, we can see a need to do that. There is a debate not just about standards but what the current realities actually mean in political philosophical terms. That is something we can do, but if there is to be a debate and the Government choose to encourage it, we would be very happy to play a role.

Photo of Lord Balfe Lord Balfe Conservative 8:26 pm, 9th March 2016

My Lords, I add my congratulations to the noble Lord, Lord Burns, on his excellent report. I begin by reminding the House that we have this report because of the great unease in the House about the proposition put forward. I say further to my Front Bench that it is highly likely that if the noble Lord tabled an amendment based on the findings of his report, it would be carried—

Photo of Lord Balfe Lord Balfe Conservative

Okay, then it will be carried. I would therefore hope that the Government will devote a good proportion of their thinking power to working out where the acceptable compromise is between where they are and where the majority of the House will be, because I predict that the amendment will be carried.

Paragraph 61, which has not been mentioned, states that after 1927, unions raised the amount that they paid into political funds. That is a far more significant paragraph than has been realised. We have seen this with the political fund ballots. I remind the House that when the Conservative Government proposed political fund ballots, they thought that that would end political funds. Not only has it not: there are more political funds today in more unions than there have ever been. We should not underestimate the power of marketing. Also, if people look forward, they may say, “We may need a political fund to carry out certain functions”.

I am not saying that we should therefore support the clause, but that the law of unintended consequences may well come home to roost. This will not find much favour on the Opposition Benches either. We talk about political funds, but not about giving people any choice within them. There is no proposal to tick a box so that the money can go to the Green Party or the 30% who vote for the Conservative Party. It is a straightforward sledgehammer approach, in the probably mistaken belief that it will somehow break the union political funds.

I notice that the proportion going to the Labour Party is about four-ninths of the amount collected so, for the last time, we can use an old Liberal slogan of ninepence for fourpence: you collect ninepence and you give fourpence to the Labour Party. That was how Lloyd George sold national insurance—for those who are not in the Liberal party.

In paragraph 107, the committee states, “We endorse”. There are no minorities there. The certification officer needs a balance between proportionality and accountability. That is clearly evident, because it seems that things are being pushed on to the certification officer without thought being given to how he is going to carry out his functions. We need to think very carefully about what his role is. Is it just to receive the report? If you say, “Dear certification officer, we have spent £50,000 on Build a Better Society, a front organisation that will organise demonstrations at the Conservative Party conference”, you have fulfilled all that you have asked the certification officer to do. He takes that and puts a stamp on it and says, “Oh, yes, they’ve declared that—it’s jolly good, isn’t it?”. End of story. What are we trying to do with this Bill?

On the subject of funding reform, paragraph 115 has already been mentioned by the noble Lord, Lord Oates. We do not want to get into a unilateral tit-for-tat action; it is not going to do any of us any good. Paragraph 128 cites Sir Christopher Kelly, who is not normally found in the Jeremy Corbyn part of politics, but he called Clause 10,

“a partisan, cynical move that is likely … to bring the whole process into even greater disrepute”.

I think we need to take note of what he had to say.

In conclusion, I hope that we will agree with paragraph 141(a), giving the new members time to opt in, and I hope that we will find a way of coming to terms with paragraph 142(a), which reflects the majority feeling of the committee and what is likely to be the majority feeling of this House. The benefit of this debate is that the Government can think their way out of the problems they have unfortunately got themselves into. I am sure that all noble Lords will be happy to help them to solve this particular, rather difficult problem.

Photo of Baroness Drake Baroness Drake Labour 8:32 pm, 9th March 2016

My Lords, I, too, was a member of the committee, and when we started our task the Government insisted that Clauses 10 and 11 were concerned only with how union members choose to contribute to political funds and were not about party funding. That insistence meant that the Government made no assessment of their impact on Labour Party funding. The Government assumed as their main estimate that there would be no change in the number of union members contributing to political funds. That assumption was not supported by the evidence of other witnesses, including the Government’s own Behavioural Insights Team, whose evidence supported the proposition that a switch from opt-out to opt-in would result in a lower participation rate.

The committee concluded that Clause 10 could have a sizeable negative effect on the number of members participating in political funds and in turn on Labour Party funding. It observed that the question of whether Clause 10 is trade union or party funding legislation is a semantic one. Rather, the more important question is whether it will skew the party funding debate. Clause 10 will have an impact on party funding and is very far from commanding a desirable consensus. It does not deliver what Sir Christopher Kelly sought and the noble Lord, Lord Bew, seeks: that reforms to party funding should be fair and even-handed in their impact.

The committee reached two key conclusions: opt-in will significantly impact on Labour Party funding, and it is desirable that changes affecting the funding of political parties should proceed by consensus. The report acknowledges that the Conservative manifesto committed to an opt-in process. It also notes the Conservative manifesto commitment to seek agreement on a comprehensive package of party funding reform. The committee was disappointed by the Government’s passive approach to this commitment. The overarching view of the committee was that the Government should take the lead and convene cross-party talks with a view to making a renewed and urgent effort to reach agreement. I, for one, sincerely hope that the Government will give that lead and that the other parties will engage positively. Reform is needed to increase public confidence; it needs to be fair in its financial impact on different parties and should not encourage tit-for-tat responses. Otherwise, it will damage our democracy and, importantly, undermine the opposition parties in holding the Government to account. It is the British people who will be the losers.

The Conservative manifesto commits to introducing some form of opt-in but, as the committee reports, the current Clause 10 presents obstacles to the successful implementation of opt-in. It does not make it easy for members; it provides points of friction that discourage opt-in. As Dr Halpern of the Behavioural Insights Team observed, people “go with the friction”. The principle of opt-in is in the Communist—I mean the Conservative manifesto [Laughter]. The detail of the process for implementing it, as set out in this Bill, is not. The greater the obstacles, the greater the impact. Unless the obstacles are mitigated, the extent of the negative impact on Labour Party funding will be greater and even more unfair. The noble Lord, Lord O’Donnell, commented that people will do the simplest thing and that if post is much harder than online, you will not get them doing as much.

The committee looked at three aspects of the opt-in scheme—the transition arrangements; the requirement to opt in on paper, and the requirement to renew an opt-in decision every five years—from a range of perspectives: proportionality, cost to the union and impact. The average political fund contribution is just over 9p per week, and what became increasingly clear was the disproportionate nature of some of the requirements in this Bill in moving to opt-in. The views in the report on the way forward—I stress “on the way forward” because that phrase has not been repeated much—recognise the principle of opt-in going forward but mitigate some of the obstacles and are fairer in what they propose. That is even-handed.

The unanimous and majority views in the report taken as whole do not breach the principle of transparency of opt-in going forward but, taken together, they restore some fairness, proportionality and even-handedness. That is not something the Government should discard lightly. That would be partisan. This evening, several noble Lords have expressed their surprise at what this committee achieved, which says something about what the members of the committee sought to do to respond to the terms of reference they were given. I hope the Government recognise that and embrace the recommendations in the report.

The House set a task to be completed within a tight timetable. The noble Lord, Lord Burns, was an excellent chair, maintaining patience, forbearance and good humour throughout and, as noble Lords can imagine, good humour was an essential quality in moving the committee to its position. The clerks were an exemplar of the support we as Lords receive. They did not allow speed to prejudice quality, and their drafting skills demonstrated a delicacy and sensitivity most appropriate to the task.

Photo of Lord Callanan Lord Callanan Conservative 8:39 pm, 9th March 2016

My Lords, as another member of the committee, I, too, join the paeans of praise winging their way towards the noble Lord, Lord Burns, for the job he did as the chairman of our committee. As a fellow lad from the north-east—I was delighted to discover that that is where he is from—I thought he did an excellent job in marshalling us all towards the inevitable compromises that are required in any report such as this.

This is the first Select Committee on which I have served during my membership of this House, and I greatly enjoyed it. I learned a lot from it. I freely admit that the world of trade unions was not one that I knew much about. I have never been a member of a trade union, I have no intention of ever joining a trade union and I learned a lot, particularly from the noble Baronesses, Lady Drake and Lady Dean, the noble Lord, Lord Whitty, and others about the operation of trade unions, the way they work and what they do.

A lot of points have been made, but I shall make three brief remarks. First, in essence the principle that opt-in is the right way to proceed was accepted. It was accepted unanimously by new members of trade unions, and if you leave it over a long timescale of 20, 30 or 40 years, eventually everyone will be opted in. It will not surprise noble Lords to know that I thought that it should be accepted in a relatively short timescale by existing members. Effectively, what we are disagreeing about is the timescale. If we leave it long enough, eventually everybody will be opted in anyway, and it seems to me that the principle of opting in was agreed by the noble Lord, Lord Collins, in his report to the Labour Party.

Secondly, we were asked to examine Labour Party finances. I was somewhat surprised to discover that only 50% of union political funds go to the Labour Party. Not being an expert on the subject, I assumed that the vast majority of political funds went to the Labour Party. If this legislation results in fewer members opting in to trade unions, trade unions have the option to increase the proportion of funds that they donate to the Labour Party. I was also surprised to discover the relatively tiny contributions of members who are effectively opted in by inertia, which the noble Baroness, Lady Dean, referred to earlier. It is a matter of pence a week. If the unions make sufficient effort to get a positive choice out of people to join and to contribute to political funds, it seems not beyond the bounds of possibility that they could ask for considerably more money. If somebody makes a positive choice to join a political fund, I cannot see anybody positively agreeing to contribute 16p a week. Surely they will contribute a number of pounds, so unions will probably end up with fewer members opted in but with that smaller number making a proportionately bigger contribution; however, that is a matter for unions to determine in their own time. I fully subscribe to the recommendations that the opt-in process should be made easier and more transparent. Members should be able to do it electronically, and I hope the Government will look at extending the transition period to give sufficient time for the new reforms to bed in.

My third point is the knotty issue, which has been explored extensively, of manifesto commitments. I fully accept that the manifesto commitments on which my party is relying were not particularly well drafted, but their intention is clear. There are of course two manifesto commitments in this area: the opt-in provisions that we have been talking about, and the commitment to convene cross-party talks. I accept that I was disappointed in the committee by the failure of the Cabinet Office Minister who came along to commit to convening cross-party talks; he said that he was in favour of them happening but did not say how the three parties would magically arrange to get together in a room and start them. It is for the Minister and indeed the Government to convene those talks; it is a relatively easy and straightforward thing to do, and I hope that the Minister will take that back to her colleagues. While I accept that this legislation is not directly related to the funding of political parties, to avoid it looking vindictive it is important for the Government to take forward the issue of cross-party talks as well.

Before Labour Members become too earnest about extending their argument that it is important for political parties to legislate on political finances only with the agreement of all other political parties, I remind them that in their own manifesto there was, yes, a commitment to take cross-party funding talks but also, not linked to that, a commitment, as my noble friend Lord Leigh has pointed out, to put a cap on political donations. That was not proceeding on a cross-party basis; if Labour had been fortunate enough to win the election, I assume that it would have wanted to pursue its own manifesto commitment. That would have been pursuing political party funding reform without cross-party agreement.

As has also been pointed out in this debate, Labour legislated on a number of political party issues during its time in government. For example, having to record all donations meant that my own lowly little constituency branch had to start recording every dinner donation and small amount of money that we were given. That was legislation implemented by the last Labour Government. Labour also, as has been said, legislated on companies having ballots of shareholders; again, that was political party funding legislation done without cross-party consent. So let us not have too much preaching about this.

I think it is desirable that parties in government should proceed by cross-party funding talks, but that does not alter the fact that in my view this legislation is right in principle. It is right that people should make an informed and transparent decision whether or not to opt in to a political fund. I hope that the Government will bring forward appropriate transitional arrangements, but ultimately the principle that members should opt in is right.

Photo of Lord Cormack Lord Cormack Conservative 8:46 pm, 9th March 2016

My Lords, one person has not yet been thanked today: the noble Baroness, Lady Smith of Basildon. She moved very passionately the Motion that led to the large majority in your Lordships’ House and to the establishment of the committee under the noble Lord, Lord Burns. I opposed her, not because I disagreed; we agreed entirely on the principle but I advocated some form of sunrise clause before clauses that in their present form I regard as pernicious should come into force. She carried the day, though, and I am glad she did. Like the noble Lord, Lord Burns, who voted as I did, I think we were wrong, and he above all has proved that.

Something else has been proved to me: the extraordinary value of your Lordships’ House, and the procedures that allow us to set up this sort of committee. It also illustrates the enormous value of having a sizeable number of Cross-Benchers. Some of your Lordships—indeed, a number are present this evening—know of the Campaign for an Effective Second Chamber, which I have had the honour of chairing since I founded it with the noble Lord, Lord Norton of Louth, 15 or 16 years ago. It argues for a House that is appointed, not elected. One of the central points that we have always argued is that a great virtue of an appointed House is that it is not dominated by a political party and that it has a large number of Cross-Benchers.

The noble Lord, Lord Burns, has been the Cross-Bencher par excellence. His committee, drawn from different wings of different parties, has produced an exemplary report. It is wise, balanced, judicious and precise in its recommendations, and no one can ask more from any report than that. I am entirely happy with its main thrust and recommendations and, had I had the good fortune to be on that committee, I would certainly have been one of those who voted for paragraph 142(a).

Whatever the motivation for these two clauses—and I am not seeking to criticise motivation; I always accept the good faith of people who put forward arguments but I am prepared to challenge their judgment and the good sense of the arguments—the effect is to bear down upon one political party, and I do not like that. I have said in your Lordships’ House before that a passionate belief in fairness was fundamental to the Conservative Party that I joined. These two clauses in their present form are not fair. I said that on 20 January, when we set up this committee, and I repeat it again tonight. I very much hope that when my noble friend comes to respond she will heed the very wise words of my noble friend Lord Callanan. He and I would not necessarily be completely in accord, but we are certainly in accord in recognising that unless and until something is done about political funding which applies to all political parties, this will be perceived to be unfair. Where I differ from him is that he would go for paragraph 142(b) and I would go for paragraph 142(a). However, in every other respect we can be of one accord.

A committee set up to discuss funding should look at many things, such as whether donations to political parties should be tax deductible—I believe that they should—or whether there should be a cap on the amounts that individuals and organisations can give; I believe that there should be. However, it will not be an easy task, as the noble Lord, Lord Bew, made all too plain in his very perceptive contribution to our debate this evening. It will take time, so I hope the Government will recognise the cogency of the arguments in this exemplary report, as I have called it, and put on one side these two clauses—possibly by accepting the very long but extremely well-worked-out amendment tabled by the noble Lord, Lord Burns. They will do that; they will set up cross-party talks, at which all parties should be willing participants, each party realising that it will not get everything it wants. There would be quite a lot to be said—although it is a funny way of passing a vote of thanks—for asking the noble Lord, Lord Burns, to chair a committee of your Lordships’ House that would look into this. If the Government do not act speedily and set this up, let us have another Smith resolution and see whether we can do it. With good will, we probably could.

However, if we can park these two clauses and deal with some of the other mean-minded parts of the Bill such as Clause 14, we can get something on to the statute book which both honours the manifesto commitments of the government party—I always wonder how many people read manifestos, but that is another issue—and does not bear down unfairly on a great party that has contributed much to the evolution of our democracy. I have never been tempted to join it but I have increasingly come to admire it and increasingly to mourn what has happened in very recent months.

We need a credible Opposition which can be seen as a possible Government and we do not want tit for tat when that happens.

I commend the report very enthusiastically, thank again the noble Lord, Lord Burns, and his colleagues from all parts of the House, and I hope that this will give us a sensible, balanced approach on which we can build a Bill in which we can all take some pride.

Photo of Lord Hart of Chilton Lord Hart of Chilton Labour 8:55 pm, 9th March 2016

My Lords, like every other Member of your Lordships’ House, it seems, I am an enthusiastic member of the Lord Burns fan club. I shall make a very short contribution because I was a member of the committee only briefly. I took the place of my noble friend Lord Richard, who had been taken ill. I am pleased to report that he has recovered and has returned to the House, although I expect that by now he is safely tucked up in bed.

On 20 January 2016 in the debate on the Motion to appoint the committee, an important theme emerged concerning the fairness and even-handedness of the approach to the funding of political parties and the effect of Clauses 10 and 11 on only one party. The noble Lords, Lord Forsyth, Lord Cormack, Lord Bew and Lord Kerslake, set the tone, together with the Leader of the Opposition, my noble friend Lady Smith, for constituting the committee and dealing with the issues involved. The concept of fairness, even-handedness and proportionality has lain behind most of the report that we have put forward to the House.

I do not have to repeat that there would be a significant negative impact on the number of union members participating in political funds on the basis of a complete opt-in, and it follows that there would be a significant reduction in the payments to the Labour Party. The first question for me was whether legislation which singles out the unions and the Labour Party for legislative change is even-handed, proportionate, fair and reasonable. I concluded that it is not.

As noble Lords have heard, the committee concluded that while there is no formal convention that all reform of party funding must take place by consensus, in the past both main parties have acted with a degree of restraint. As has been pointed out, the use of a parliamentary majority to inflict significant damage on the finances of opposition parties would risk starting tit-for-tat, which could harm parliamentary democracy. Accordingly, Clause 10 is very far from commanding a consensus.

On the other issues, fairness also featured. I asked myself whether, for example, it was fair, reasonable or indeed proportionate to demand an administrative burden on the unions of millions of pounds in order to change a system speedily when, as my noble friend Lady Dean pointed out, a political levy averages only 9p per union member per week. Was a three-month transition period fair and reasonable when the Certification Officer said that it was not feasible and, by contrast, retailers were allowed more than two years to introduce charges for plastic bags? And was a demand to renew a decision to opt in every five years fair and proportionate when, in similar situations, there is no such requirement? Was a requirement to opt in by paper, and its corresponding cost and risk of deterring members, fair when electronic communications are more effective and less costly? Nevertheless, we had to acknowledge that the Government had a democratic mandate to introduce some form of opt-in for subscriptions to political funds.

It was in that context that we made our recommendations. I shall not repeat them, save to say that they deal with all the points that I have raised this evening. To deal with the manifesto commitment, we suggested an opt-in but for new members only. I declare that I formed part of the majority who recommended that opt-in for all other members must be considered only as part of cross-party talks on party funding, which should be convened in an urgent effort to reach agreement.

I conclude by saying that I, too, think that the Leader of the Opposition has been vindicated in calling for the formation of this committee. We completed our task within time and have illuminated the problems of Clauses 10 and 11 in the Bill ready for Report. I commend the report to the House.

Photo of Lord Lupton Lord Lupton Conservative 9:00 pm, 9th March 2016

My Lords, I declare my various interests in this debate: first, and somewhat posthumously, as the voluntary national treasurer of the Conservative Party until last month; secondly, as a continuing board member of the Conservative Party; thirdly, as a very willing and voluntary donor—past, present and no doubt future—to the Conservative Party. And that goes to the nub of the issue concerning Clause 10, which is not to do with the funding of political parties, despite the Opposition’s attempts to obfuscate their position by claiming that it is. In my view, this clause is all to do with the principle that donations to political parties should be made with active intent, with a willingness and a desire to donate your money to a particular political party. This is, in the Conservative Party at least, a matter of transparency, personal choice and active intent.

As my noble friend Lord Leigh of Hurley reminded us earlier, many years ago, in 2001, the rules about public limited company donations to political parties changed so that the prior consent of shareholders in general meeting was required. Such a rule affected the Conservatives the most, but it became accepted, even though previously the decision had been left to the discretion of a board of directors appointed by those shareholders in general meeting. Although it may not satisfy my noble friend Lord Forsyth’s point of principle, I thought that the numbers would at least inform that particular debate. According to Electoral Commission figures, since the rules changed in 2001, total donations—that is, the aggregate sum of all donations from all public limited companies, including the unlisted ones, which comprise most of those plcs—come to only £7.4 million in those 15 years, of which £4.4 million went to the Conservative Party and £3 million went to other parties. To put that in context—and the number has been declining over those years—that is under 2% of the average annual spending and funding of the political parties. It is a small sum.

The inappropriateness of the current opt-out practice was vividly demonstrated to me by one of my daughters in the usual lively debate over dinner about politics. I am, I mainly think, blessed with four quite brilliant adult children who have been raised to be fiercely independent in thinking, with the result that I think none of them votes for my party—although I live in hope. One of my daughters, who consented to me telling this tale, is in her third year as a fully qualified teacher in an academy school, having completed the remarkable and fantastic Teach First programme. In her first year she joined the NASUWT, which describes itself on its website as “The Teachers’ Union”. She joined mainly, I think, because it was free in the first year but also, I recall, because it offered litigation insurance for teachers. She was very surprised to hear, over our dinner table, that had she been paying union dues some of her money could have been diverted—horror of horrors—to my political party, or indeed to the Labour Party. She did not appreciate that she would have had to opt out of such a donation to prevent that.

Photo of Lord Balfe Lord Balfe Conservative

I point out, if I may, that the NASUWT is not affiliated to the Labour Party.

Photo of Lord Lupton Lord Lupton Conservative

It is not affiliated, but it has donated to the Labour Party according to statistics from the Electoral Commission.

My daughter was graceful enough to acknowledge that at least donations to the Conservatives are all—every one—an act of intentional benevolence.

I remind your Lordships that Clause 10, as the report states, is in effect moving us to the Northern Ireland system of opt-in, which unions, including UK unions, have offered to their Northern Ireland members since 1927.

It is quite wrong that trade unions should be allowed to bury an opt-out in the small print. Clause 10 is quite right to require a mens rea, an intent, to donate through the opt-in mechanism. The Select Committee agreed in its excellent report that all union members should be required to opt in eventually, even if there was disagreement about when and how existing members should be treated. Even if there is scope—and I hope there is—for listening to requests for extending the transitional arrangements in Clause 10, I strongly believe that the principle of manifest intent, as implied by that clause, should be adhered to. I see no reason why that principle should not apply to existing trade union members just as much as it should apply to future members, with appropriate transitional arrangements put in place.

Photo of Lord Judd Lord Judd Labour 9:06 pm, 9th March 2016

My Lords, I join those who have paid tribute to the noble Lord, Lord Burns, for his highly successful and effective chairmanship of the Select Committee. I do not think that any of us should be surprised by that when we look at his distinguished background. We should all be grateful to the committee as well. As has become clear in our proceedings this evening, there was lively discussion within the committee because views were not shared by everybody.

I want to put on record as an older politician who was fashioned in a very different age in British politics my appreciation of the intervention by the noble Lord,

Lord Forsyth, and the contributions by the noble Lords, Lord Cormack and Lord Balfe, the latter of whom I knew in a different context at an earlier stage of my life. They brought to bear the wisdom and objectivity on which a successful parliamentary democracy must work. We are in a hopeless situation if we proceed from one crisis of confrontation to another, and if we slide into highly biased or subjective legislation on key constitutional matters. An effort at all times to generate consensus is indispensable. Those contributions to which I referred were courageous and should be listened to carefully.

This issue must be seen in the context of the reality of our society today. All of us who are serious about the stability and future of our society must be troubled by the increasing alienation of so many people from the traditional political system. It is alarming that the proportion of our population which votes in a general election is steadily declining. That cannot be a strong position for our future. Therefore the public will be watching us at this juncture. How do they think that political parties should be funded, if indeed they think the system of external funding for political parties is permissible at all?

If I had one observation about the committee’s report—although the more I think about it the more I wonder how it could have been included—it is that it does not cover the historical dimension. The trade unions and the Labour Party have always been part of the same family. What has been very strong as a contribution to the health of our democracy is that their relationship has always been transparent. When I was growing up, there were these incredible party conferences at which there were tremendous debates between leaders of the trade union movement and other members of the party. What so many people in society are deeply concerned about at the moment is that on the part of the Conservative Party it is not all transparent. That transparency and vigorous commitment to party democracy is not as evident. I am being very blunt, but it is true.

Within this whole debate that we have been having about the future of funding of political parties it has been conspicuous to a wide section of the public that the Conservatives are just getting away with it. Who is funding what and what are the deals that are done behind closed doors? What do you get in future legislation in return for the money that is being donated? What are the private conversations? What are the dinner parties? In the Labour Party, it has always been much more transparent.

I do not want to conclude on that particular note, but will finish on this. I do not believe that there is a future for our country if we run it on confrontation. We want to build consensus within our country. That is important. What is not helping is that we have a hopelessly piecemeal approach to constitutional change. It is time that we had a large national convention on what kind of society we want to be, what systems of governance we want and what funding systems we want to have within that pattern of governance. Anything short of that will not solve the problems of the future. In the mean time, we have an incredibly helpful report from the noble Lord, Lord Burns, and his committee, and it would be a very sad moment if this House did not, on all sides, seize the opportunity to take that report seriously and see how we can build for the future.

Photo of Lord Sherbourne of Didsbury Lord Sherbourne of Didsbury Conservative 9:12 pm, 9th March 2016

My Lords, as the last Back-Bench speaker, I start at the beginning. The beginning was the Motion that set up the committee on which I sat, which was superbly chaired by the noble Lord, Lord Burns, and superbly served by the clerk, Mr Tom Wilson, and his team. The Motion asked us to consider two questions. The first was the impact of Clauses 10 and 11 of the Bill, which mainly concern the policy of moving from opting out to opting in, and to consider that in relation to the 2011 report on party funding. Secondly, we were asked to consider whether there was a need for urgent new legislation to implement the recommendations of that report.

The clear subtext of the Motion tabled by the noble Baroness, Lady Smith of Basildon, was that the Government should proceed with their policy of opting in only as part of a wider reform of party funding. That presented to me an immediate problem because the Conservative Government had a mandate to introduce opt-in—it was in their manifesto—but nowhere was it said that it should be part of or dependent on the wider policy of party funding. Moreover, as we know, there was no agreement between the parties on the report. I could see no logic in the Motion tabled by the noble Baroness, Lady Smith, which implied that we should not go ahead with the manifesto commitment without proceeding to legislate on a report on which there was no agreement, so I voted against the Motion, but it was passed by this House.

When I was then asked if I would serve on the committee, I gave the required response that I would be absolutely delighted to do so, and indeed as it turned out, I was. It was a real and genuine pleasure to work with the other members of the committee and because I believe that the report has produced some very helpful conclusions. Two of the most important of those conclusions were these. First, no one challenged the principle of moving from opt-out to opt-in. There were differences about when and how to make the move, but the report, without explicitly articulating the principle of opt-in, basically accepts the principle; there is no challenge to the principle. The second clear conclusion is the answer we gave to the question, “Is there a need for urgent new legislation on party funding?”. The answer was a clear no, there is no such need.

However, I understand the concerns of the Labour Party. It is fearful that if we move to opt-in, many union members will decide not to contribute to the political fund. It is fearful that when the eyes of union members are opened to the choice before them they will, at least in Labour’s eyes, make the wrong choice. So the cry goes up, “Not fair”. I happen to believe that the fair approach is to let people decide for themselves. When the right honourable Nick Clegg appeared before our committee, I asked him if he supported the principle of opt-in. This is what he said:

“I regard political opinion, affiliation and support as a sovereign decision for an individual citizen”.

I agree, and I support opt-in because people should not be assumed to support any proposition or organisation, any product or any service simply because they have failed, often through inertia, to say no. Companies were quite rightly pilloried when they assumed that the customer had signed up to something because they had failed to tick the box or see the small print. If a trade union decides that he or she does not wish to contribute to a political fund, that is their decision and theirs alone—no one else’s.

If the trade unions want more members to contribute to their funds and to the Labour Party, they should go out, as the parties do, to persuade people—and it can be done. Last summer thousands and thousands of people could not wait to sign up to the Labour Party because they were inspired by the right honourable Jeremy Corbyn. The party opposite should take great heart from that; we do.

I turn now to the second question the committee was asked to consider: party funding in general. It is true, and the committee agreed, that there is no formal convention that all reform of party funding should take place by consensus, but we all acknowledge that the opposition parties, together with the Government of the day, are an integral part of our constitutional framework. The Opposition are graced with the title of Her Majesty’s Opposition and the leader of the Opposition is paid a salary. The opposition parties also receive public funds to help them oppose the Government. So the wider question of party needs to be considered in the round. That brings me to the Conservative manifesto commitment, a separate commitment, which is:

“We will continue to seek agreement on a comprehensive package of party funding reform”.

That is a commitment to be proactive, not reactive, and it also needs to be honoured.

I should further say in this context that I hope that the Government will think carefully about their policy on Short money. I direct this point not to my noble friend the Minister because she is not responsible for it herself, but to those of her colleagues in government who are. The Government have the right to implement their manifesto commitments on which they were elected and for which they have a mandate. They also have the duty to do so.

Photo of Lord Stoneham of Droxford Lord Stoneham of Droxford Liberal Democrat 9:20 pm, 9th March 2016

My Lords, the debate has shown that it has been very valuable to have this report, and that it was clearly an inspired choice to have the clarity of thinking, humour and diplomacy of the noble Lord, Lord Burns. It has vindicated the House asking for this work to be done. It should also confirm the view that the appropriate reform of political funding, which is long overdue, needs the involvement of independent and impartial voices if we are to overcome some of the differences. We need them in particular, I am afraid, to put pressure on the party politicians to do what is best for the political health of the country and not what is best for us in our respective parties.

The report has exposed the Government’s arguments that these clauses are nothing to do with party funding, but are simply about transparency. As the noble Baroness, Lady Dean, and other several other Peers have reminded us, we are arguing over something worth 9p a week, or £4.68 a year—the price of a Big Mac family meal—for individuals. The Select Committee has also confirmed the view that there would be a sizeable negative impact on the participation rate of union members in political funds.

The report has exposed the partisan nature of the legislation. The noble Lord, Lord Sherbourne, talked about the right honourable Nick Clegg’s views on the political levy, but he also said to the committee that he opposes legislation because of its partisan nature. The partisan nature of the legislation has been exposed by the Select Committee on the detailed transitional arrangements. Who really would have thought of a better way to get people to opt out than to have an unworkable three-month period of transition? The Certification Officer confirmed that individual unions would have to consult him on their rulebooks and that anyone conducting a process of this sort would clearly need a longer period to approach people and send them mailings.

I hope that the Minister will confirm her commitment to the digital world once again by saying that it is clearly inadequate to have a situation where people opt in simply in writing, not electronically. We know that those are barriers stopping people doing what is easy for them to do.

Despite the commitment of every member in a ballot already every 10 years, the Bill proposes that we now have it every five years, at the great expense of £5 million to £10 million—£5 million certainly, according to the input study, but almost certainly double that in reality. The Select Committee exposed the fact that the Certification Officer, amazingly, had never been consulted on the scale of the problem that we are meant to be dealing with in legislation, and, indeed, on how the process should be best implemented. Once again, the scale and proportion of the bureaucracy and regulation involved in the Bill is completely out of kilter with the scale of the problem. If the Government were wise, they would immediately look very carefully at the arrangements they are proposing.

I come back to what has been the theme of the evening. It is very important. We need to look again at whether we can ever get reform of political funding if we leave it simply to the politicians. This committee has produced, in six weeks, an amazingly consensual report. The first thing that should happen following it is that the Standards in Public Life Committee of the noble Lord, Lord Bew, should update its report. It can do it in three or four months—it took a year originally—and plonk a new report on the desk of the Prime Minister for him to receive when he comes back from the referendum in early July. Indeed, the Minister said in the debate on 20 January that there was nothing, in her view, to stop the noble Lord, Lord Bew, taking that action to move this forward.

If we look at what has happened since 2011, a number of new factors have come in. We have had a general election with a great disparity in donations between the main political parties. We have seen the Collins report, which I think shows very significant movement within the Labour Party in recognising the need for some process of opting in. We see a growing problem, still, following the general election, in the fact that the 1983 legislation on controlling expenditure in individual constituencies has completely broken down through the national spending rules being abused in the way they were at the last election.

So we have all these issues and in the mean time we have, as we have seen in the debate tonight, a public contempt for politicians. Despite all the predictions of a close election in 2015, still 35% of the electorate did not bother to vote, because of their disillusion and disfranchisement from our political system. So there is huge scepticism about political funding and the lesson from tonight is that we need independent involvement in trying to resolve these problems—we should not go down the route of partisan tinkering.

Photo of Baroness Smith of Basildon Baroness Smith of Basildon Shadow Leader of the House of Lords 9:27 pm, 9th March 2016

My Lords, we have had a good debate this evening. I admit to a slight pang of guilt when the noble Lord, Lord Burns, started speaking, because I recall that he did not support the setting up of the committee when we first voted on it in your Lordships’ House. I was gratified and reassured by his comments on how well the committee had gone. I know the work that he and his colleagues put in and we are very grateful to them. I am also grateful to the noble Lords, Lord Cormack and Lord Bew, who did not support such a committee originally, but saw the value of it and were prepared to say so tonight.

When we asked that the Select Committee be set up, we did so in the recognition that the only way to have the effective scrutiny we needed and to resolve these issues was to have more detailed information about the impact, both intended and unintended. At the time, I referred, as the Minister will remember, to a fundamental difference of opinion between the Government and the Opposition. For that reason, it seemed wise to have a more detailed examination of Clauses 10 and 11 of the Bill to better assist and inform the normal scrutiny process.

Having read the report and much of the evidence presented, it is very clear that the committee and its support team have, in the short time available to them, undertaken the task they were set in a focused, diligent, forensic and very fair way. It therefore allows your Lordships’ House, as a scrutiny Chamber, to fully understand both the detail and the implications of the legislation before us. The detail is important. I was struck by the comment of the noble Lord, Lord Callanan, who confessed how little he know about trade unions and the terms in the Bill before he served on the committee. The way the hearings were conducted, the quality of the evidence provided, and the committee’s final report reflect the work that was put in and illustrates your Lordships’ House at its very best.

The report is, by any standards, impressive. I have to say that it contrasts very markedly and favourably with the Government’s impact assessment. Noble Lords will recall that when I proposed the Motion to set up the committee, we had still not seen the impact assessment. It was, in fact, published the following day. That is quite extraordinary for a Bill that started its life in July 2015, had been through all its parliamentary stages in the House of Commons, and had had its Second

Reading in your Lordships’ House. After such a delay, we could be forgiven for expecting a comprehensive, analytical assessment of the potential consequences of the Bill. That is what an impact assessment would normally deliver. So let us compare the impact assessment the Government produced with the findings of our own Select Committee. Page 73 of the impact assessment states:

“Our main estimate is that there will be no change in the number of members contributing to the political fund. We do not have reliable data to estimate any changes in the proportions contributing”.

On Page 75, it states:

“We have no evidence of whether there would be substantial attrition in membership participation … of active opting-in after 5 years. Therefore we have assumed no attrition”.

How on earth is it possible to say on the one hand that there is no evidence and on the other reach a conclusion which is based on no evidence? That is pretty fuzzy thinking to my mind. In contrast, the rigorous assessment by the noble Lord, Lord Burns, and his committee colleagues, conducted after considerable evidence-taking and questioning, led to a different conclusion on the impact of going back to an opt-in process. Even without taking into account the Government’s hurdles on opt-in of having to put it in writing on paper within three months, retrospectively including all new and existing members, and renewing every five years, the Select Committee still came to the conclusion that this,

“could have a sizeable negative effect on the number of union members participating in political funds”.

As we heard from the noble Lord, Lord Burns, and the noble Baroness, Lady Drake, the Government’s own behavioural analysis unit—or “Nudge Unit”—confirmed the evidence from Dr David Halpern that he would expect participation rates to be lower. He said:

“Yes, substantially so—20 or 30 percentage points lower”.

The Government have insisted that the impact assessment did not consider the impact on political parties because the Bill—I quote the exact words that the Government used—“is not about” them. That point has been made repeatedly in debate, parliamentary Answers, and in evidence to the Select Committee. I struggle with this, and not just because so much of the evidence points to the contrary. Page 62 of the Government’s impact assessment deals with the reporting of expenditure from political funds and lists the six categories of spending. Top of that list in the Government’s own impact assessment is:

“Contributions to the funds of a political party”.

So how on earth can the Government claim that contributions to a political party would not be affected, and therefore would not even be considered by the impact assessment, when that very same impact assessment puts such contributions at the top of the list of the use of political funds? Again, this is pretty fuzzy logic. That comes back to my point about there being a duty in government impact assessments to consider all and any consequences.

The essential question here is: what effect will the political fund changes have? The Select Committee’s report is again very clear. It states on page 25:

“A fall in the size of union political funds need not necessarily lead to the same percentage cut in union payments to the Labour

Party but, given the expected scale of the reduction in the size of political funds, it seems likely that there will be a significant reduction”.

The conclusions of the impact assessment and the deeper and more rigorous analysis of your Lordships’ Select Committee are clearly at odds on the impact of switching from opt-out to opt-in on both the trade unions themselves and the Labour Party. The Government contend that there is no impact, yet an analysis of the evidence concludes that there is, and that it is significant.

As regards the demand for change, the Certification Officer reported to the Select Committee that he,

“had not received any complaints specifically about a union’s failure to tell members about the right to opt out of the political fund”.

He received not one complaint. Other noble Lords have referred to that. However, the Government claim a mandate for the change on the basis of their manifesto commitment, which states on page 49:

“In the next Parliament, we will legislate to ensure trade unions use a transparent opt-in process for subscriptions to political parties. We will continue to seek agreement on a comprehensive package of party funding reform”.

The committee highlighted that the terminology was inexact and the drafting clumsy, but I think we all know what the manifesto meant by that. The linking of these two issues, side by side in the manifesto, one following on from the other, further weakens the Government’s claim that this is not about political parties. They were not in the same manifesto but separate from each other, they were not even on separate pages or in separate paragraphs; they sat, side by side, one sentence following another, declaring the Government’s intentions. It takes some creative thinking to reconcile the vigour with which one issue is being pursued and the passive approach to the other, on which there is no government initiative.

When Ministers gave evidence to the Select Committee, they claimed that one of the key reasons for the legislation was a lack of compliance with an agreement between the then Employment Secretary, now the noble Lord, Lord King of Bridgwater, for the Government, and the then general secretary of the TUC, Len Murray, in the 1980s. Yet the noble Baroness, Lady Neville-Rolfe, had to admit that she was unaware of this agreement before it was drawn to her attention by the noble Lord, Lord King, a few weeks ago, and it has never been mentioned at any point in any of the debates here or in the other place. So how can that agreement be used in any way now to justify this policy when Ministers did not even know it existed?

I note the comments of the noble Lord, Lord King, who has apologised that he cannot be in his place for the wind-ups this evening and promised to read my comments tomorrow. He said that the agreement was not fully complied with. The evidence varies on that. I think in many cases it has been very well complied with. But even if we accepted that, even if that was the case in its entirety, surely there are cheaper, quicker and more effective ways of dealing with it than through this Bill.

A key issue pursued by the committee was whether the measures proposed by the Government are proportionate and reasonable. The noble Lord, Lord Burns, asked the Ministers, Nick Boles and John Penrose, whether,

“the whole content of 10 and 11, taken together, is disproportionate in dealing with that, particularly in many of the arrangements that are built around it, which are both expensive and make it less likely that—in the short term, certainly—consent will be achieved”.

His point is clear.

One of the great strengths of the Select Committee report is the factual data. It shows that 25 unions have a political fund and, as we have heard already, that the average political levy is less than £5 a year—just over 9p a week. Clearly, to impose such costly bureaucracy on all the existing members of trade unions would be disproportionate for the amounts we are talking about here—a point that was made very powerfully by my noble friend Lady Dean. It also makes the opt-in much harder to achieve, and the financial reporting measures in Clause 11 are unnecessarily detailed beyond any genuine transparency need.

I am pleased to say that the Minister’s tone in response to Lord Burns was conciliatory—I think the noble Lord noted that in the report—and although he would not accept that the proposals were disproportionate, he said that,

“we need to make sure that the transition … is possible for the unions to do in a way that is successful for them and their members and not punishing in terms of costs. I know that Baroness Neville-Rolfe indicated yesterday in the debate that on questions of timing for transition and methods by which the opt-in could be declared she was very much open to arguments and would be reflecting on them before Report. I endorse everything she said”.

To me, that implies that Ministers accept that these measures are disproportionate and that they are willing to consider changes. In Committee, the Minister stressed how she was—and I welcome this quote—“in listening mode” when she made the points referred to by Mr Boles.

I think it is fair that I be honest with your Lordships’ House on this issue. I would prefer that we did not have the Bill at all. It is ill considered, it is likely to make employment relations more difficult, and the funding clauses that we are debating tonight are one-sided and, I believe, damaging to democracy. In a previous debate on this issue, I offered a view that the devil was not so much in the detail of the Bill but in the design. I remain of that view. But this report from the Select Committee is thorough and thoughtful and, in the best traditions of your Lordships’ House, it seeks to find a way forward to resolve these issues—not taking my view or the Minister’s but finding a way through this difficulty. It recognises the first part of the Government’s manifesto commitment and accepts that an option to opt in to a political fund should be made when joining.

It is evident from tonight’s debate, in contributions from across the House, that there is a genuine desire for a more measured, proportionate approach that is designed to ensure that opt-in happens, rather than make that as difficult as possible, as the clauses in their current form would do.

Among the many recommendations made in the report of the noble Lord, Lord Burns, is the conclusion, unanimously agreed by the Select Committee, that it would take, at the very least, 12 months to implement the proposed changes. There is no need to repeat all the recommendations that we have heard from the noble Lord, Lord Burns, and others, but I agree with the majority recommendation that any proposal to make these provisions retrospective—that is, to apply to all existing members—should be taken as part of wider party-funding reforms.

In conclusion, I think that your Lordships’ House should be proud of the work undertaken by the Select Committee and of its report, and I repeat my thanks to those who contributed. The Minister has an opportunity now, and I hope she will grasp it with both hands. As we have heard throughout this debate, the evidence is clear and the committee’s recommendations are clear: this Bill will impact on trade union funding and, by consequence, on Labour Party funding.

I am grateful to the noble Lord, Lord Burns, for tabling his amendments for Report stage next week. On the point raised by the noble Lord, Lord Balfe, on Report your Lordships’ House will have the opportunity to vote to make these reasonable and sensible changes in the amendments of the noble Lord, Lord Burns. However, would it not show some respect for the work and the evidence of the committee if, on behalf of the Government, the noble Baroness could say tonight that they are, at the very least, actively and seriously considering supporting those proposals? That would be not just the House of Lords at its best but government at its best. I look forward to the noble Baroness’s response.

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Culture, Media and Sport, The Parliamentary Under-Secretary of State for Business, Innovation and Skills 9:41 pm, 9th March 2016

My Lords, before I address the substance of the issues before us today, I would like to join others in warmly thanking the noble Lord, Lord Burns, and endorse his warm thanks to the committee members and the clerks and staff for producing a clear, crisp report in such record time. This was an impressive achievement. As the noble Baroness, Lady Dean of Thornton-le-Fylde, said, the committee clearly worked really well together—apparently oiled by good humour.

What is most encouraging is that the committee has found cross-party consensus on the fundamental principle that lies at the core of the debate and our manifesto: that union members should be asked to make an “active choice” to contribute, or not to contribute, to a political fund. There are clearly a range of views as to how this principle should be implemented, but that does not detract from the consensus.

The report covers aspects of the Trade Union Bill, which we will be discussing again in this Chamber very shortly, and party funding. Let me first focus on Clauses 10 and 11 of the Bill. Taking a step back, these clauses are about the relationship between trade union members and trade unions; they are not—this is an important point on which I do not agree with the noble Lord, Lord Stoneham, or with the noble Baroness, Lady Smith—about relations between union members and political parties, although I will come on later to talk about the impact that freedom of choice might have on the Labour Party.

The relationship between trade union members and their unions should be based on transparency and on choice. This Government believe in trusting the people with choice—an “active choice”, as the committee puts it, not a theoretical choice buried away in the fine print—and we were not alone in this. As my noble friend Lord Sherbourne reminded us, Nick Clegg told the committee that he sees the decision to opt in to a political fund as,

“a sovereign decision for an individual citizen”.

At times, our discussions on these matters have covered overlapping matters in a complex way. It is therefore very helpful that the report makes it clear that the Bill does not contain the proposal that was contained in the 2011 report of the Committee on Standards in Public Life. That report referred to union members opting in to the payment of union affiliation fees to the Labour Party, whereas Clause 10 concerns union members opting in to union political funds. Nor is it the same as the proposals in the Labour Party’s Collins review—the work, of course, of the noble Lord, Lord Collins—which also focused on the relationship between trade unions and the Labour Party.

Furnished with the facts provided by the committee, let me examine the argument put up by those who oppose Clause 10. Nearly 5 million trade union members did not opt out of the political levy in 2013. It has been claimed that were these people asked to choose, explicitly, whether they wished to pay money into their union’s political levy, millions would decline to do so. Opponents of the Bill have suggested that that could cause union political funds to decrease by up to 90%. Personally, I doubt this assessment, but if it were true, up to 90% of union members would currently be making contributions when they do not want to. Across the 25 unions with political funds, 17 unions make no clear reference to the right to opt out on their membership forms, four only mention it in the small print requiring members to write in separately to opt out, two do not have membership forms which are publicly accessible and just two provide a clear choice on the right to opt out.

In other sectors, this would be called inertia selling and would normally be seen by this House as a wrong that we should put right. The same should apply here. We want members to make a positive choice to contribute at the point of sale. However, union rulebooks are not easily accessible, so how would a member know to look there unless they had been told of their right to opt out?

Earlier, noble Lords made much of an exchange in 1984 between my noble friend Lord King—who I am glad to see again in his place—and the TUC whereby, in effect, to avoid opt-in, trade unions would in future ensure their members were aware of their ability to make a choice not to contribute to a union’s political fund. Crucially, it was also agreed that opt-in legislation would not be pursued as long as this agreement was adhered to by trade unions. As my honourable friend Nick Boles said in written evidence to the committee:

“We do not believe that the agreement between the then Employment Secretary and Len Murray, then general secretary of the TUC, has been fulfilled”.

There is also an important commitment in the manifesto. It is the Government’s intention to implement that clear manifesto commitment to create a clear and transparent opt-in process. The manifesto commitment is also intended to apply to all union members.

The commitment that matters for this Bill is on page 19 of our manifesto—there are in fact two different references in different places—which says:

“We will … legislate to ensure trade unions use a transparent opt-in process for union subscriptions”.

That is part of the reforms that we are bringing forward in the Trade Union Bill.

I now turn to the impact this freedom of choice might have on the Labour Party. The facts are that of the UK’s 163 listed trade unions, 25 have political funds, of which 15 have an affiliation to the Labour Party. As the Labour Party’s general secretary told the committee, fewer than 50% of the political funds of trade unions affiliated to the Labour Party actually go to the Labour Party. As to the impact on the Labour Party, the committee said,

“we see no obvious reason why union payments to the Labour Party must decrease in size by precisely the same percentage as union political funds”.

I agree. Indeed, according to the report, Helen Pearce of the Trade Union and Labour Party Liaison Organisation accepted that,

“Unions might decide to spend a slightly higher proportion of their political fund to increase slightly the amount of money they give to the Labour Party”.

Clearly, much depends on the key point of how many trade union members decide to part with their money and opt to pay into the political fund.

Photo of Lord Tyler Lord Tyler Liberal Democrat Lords Spokesperson (Constitutional and Political Reform)

I am very grateful to the noble Baroness. She said in the debate on 11 January that this section of the Bill is not about party funding. Does she accept or not the clear, unanimous recommendation of the Select Committee at paragraph 134:

“It is clear to us that clause 10 will have an impact on party funding and that it is very far from commanding the consensus which we have said is desirable in such situations”?

It seems to me that the noble Baroness is dancing on the head of a pin, which is not a desirable prospect at this time of night. Can she be clear: is she now accepting that the clause has a likely impact on party funding and that her previous statement was therefore, to some extent, misleading? Is she accepting the recommendation of the Select Committee or not?

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Culture, Media and Sport, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

I think I have already been very clear on the point. I do not accept the link, but I am trying to answer on the question of Labour Party funding, and to move forward to say something about party funding, because that is the subject of the debate and the report.

There is, in my view, no reason why a union that is using the political fund to advance the interests of its members could not get a large majority of them to contribute. In Northern Ireland, where the system has existed since the 1920s, some unions, such as the Prison Officers Association, have up to 89% of their members contributing. It is clear that if unions are providing a service that people want through their political funds, members will willingly pay for them. It is not unreasonable, as some have suggested, that some union members may want to contribute more.

I move on to what might loosely be described as the mechanics of the opt-in process. The committee has made a useful contribution to the debate on this issue, analysing the Bill’s measures and suggesting changes to the opt-in process. I remind your Lordships that my honourable friend Nick Boles told the committee that he wanted,

“to make sure that the transition from the pre-existing approach to a modern approach of opt-in is possible for the unions to do in a way that is successful for them and their members and not punishing in terms of costs”.

I repeat that because I think it is an important statement.

Photo of Baroness Smith of Basildon Baroness Smith of Basildon Shadow Leader of the House of Lords

I am grateful to the noble Baroness for repeating that quotation, because she talks about a modern method of opting in. Does she think that the hurdles placed in the way—that it has to be within three months in every five years but also that it has to be in writing, on paper—are a very modern approach?

Photo of Baroness Neville-Rolfe Baroness Neville-Rolfe The Parliamentary Under-Secretary of State for Culture, Media and Sport, The Parliamentary Under-Secretary of State for Business, Innovation and Skills

If I may, I will continue and perhaps return to that point in due course.

No doubt on Report, which starts next week, your Lordships will wish to debate the further specific measures and suggestions contained in the report, but an important point is that the Government remain committed to introducing a transparent opt-in system for political funds for all union members, not just new ones. However, we will reflect on both the recommendations of the committee and the views of other Members of the House expressed in Committee on the Bill and this evening on the mechanism of the provisions.

As for the specific recommendations on the operation of Clause 11, I am pleased that the committee has endorsed the principle that union members are entitled to a reasonable amount of detail about the political expenditure of their unions, and agree that the current level of reporting is insufficient. Again, we will reflect on the committee’s technical recommendations and, as I said, continue to engage with the Certification Officer on this and other matters.

I turn to the wider issue that the committee was asked to consider in relation to party funding: the necessity of urgent, new legislation to balance those provisions with the other recommendations made in the Committee on Standards in Public Life report. As the committee itself noted, we have a democratic mandate to introduce the opt-in for political funds. Our manifesto did not state that that depended on there being party funding reform. So the Government agree with the committee’s conclusion:

“While there is no agreement between the political parties, we see no scope for introducing urgent new legislation on party funding to balance the provisions of this Bill. We believe that the political parties should give effect to their manifesto commitments on party funding”.

The Government agree in principle, but for any talks to be productive, there needs to be a sense that all parties agree on the basis for discussion.

Let us not forget that, despite the efforts of its members, the 2011 Committee on Standards in Public Life report did not get cross-party support. Indeed, both parties opposite objected to at least some of its conclusions. It is also important to note that the report predated the Government’s 2015 manifesto.

There are clearly major stumbling blocks to progress. There is no appetite for state funding of political parties. As the noble Lord, Lord Wrigglesworth, a former treasurer of the Liberal Democrats, told the Committee:

“I cannot see a time when political parties will be willing to go to the taxpayer and ask for money for their own organisations”.

So what might the approach be? The unfortunate fact is that inter-party party funding talks over the last decade have failed to reach any consensus, in part because they have focused on controversial and complex structural changes. Evidence to the select committee suggested moving ahead with smaller reforms that might command cross-party support, such as finding practical ways in which to encourage more and smaller donations from wider audiences. As part of the Government’s broader approach of promoting giving to good causes, the Government would be willing to take that forward for further consideration, such as publishing a discussion paper in the first instance, if there was a positive reaction to such a potential step from the political parties. I hope noble Lords will be pleased to hear that; I shall be particularly interested to hear the views of the committee chaired by the noble Lord, Lord Bew, on these issues.

To conclude, we are heartened that the committee agrees on the fundamental principle behind Clauses 10 and 11—that union members should be given an active choice to contribute or not contribute to political funds. We welcome the contribution and ideas on how that mechanism might work and commit to reflecting further on these recommendations, such as the transitional provisions for implementation and the methods of communication that a union is permitted to use in our digital world.

Photo of Lord Whitty Lord Whitty Chair, EU Internal Market Sub-Committee

My Lords, before the noble Baroness sits down, may I just reflect that that was a very disappointing performance, in view of the sentiments that have been expressed all around the House? We all recognise that the present system of funding of political parties has a lot of problems and that we need a fundamental new review. Without a commitment from the Government to engage in that review, the compromise that we have come up with in this committee does not deliver what the committee wants and what I believe this House wanted in its decision to set up the committee, and what has been expressed quite widely in the debate tonight. I hope that between now and Report the Minister and her colleagues will reflect further on whether this is a sensible stance for the Government in the face of such widespread sentiment in this House.

Photo of Lord Burns Lord Burns Crossbench 9:57 pm, 9th March 2016

My Lords, I am very grateful to all the speakers in tonight’s debate. We have heard some very thoughtful contributions—I am particularly grateful for the extent of the support for many of the proposals in the report, as well as the very kind words about the working of the committee. There were some moments tonight when I feared that our carefully constructed agreement was coming under some stress in the Chamber. However, as well as anyone, I recognise the political aspect of these sensitive matters. Like the noble Lord, Lord Cormack, my approach has been to avoid questioning people’s motives and to try to concentrate on those things that we can agree about.

I have listened carefully to the Minister and am very grateful to her for her response. I understand why she is reluctant to go into detail this evening but, as others have pointed out, I have tabled amendments for debate on Report that capture the essence of the majority view on the committee. I hope that at that point the Minister will be able to give us a clearer view of how the Government propose to take this forward.

Motion agreed.

House adjourned at 9.59 pm.