Amendment 63

Elections Bill - Report (2nd Day) – in the House of Lords at 6:15 pm on 25th April 2022.

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Baroness Hayman of Ullock:

Moved by Baroness Hayman of Ullock

63: After Clause 60, insert the following new Clause—“Permissible donors(1) Section 54 (permissible donors) of PPERA is amended as follows.(2) In subsection (2)(a), after “register” insert “at the time at which the donation is made, but not an individual so registered as an overseas elector”.”Member’s explanatory statementThis new Clause would prevent overseas electors donating to political parties in the UK.

Photo of Baroness Hayman of Ullock Baroness Hayman of Ullock Opposition Whip (Lords), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Levelling Up, Housing, Communities and Local Government)

My Lords, I thank the noble Lord, Lord Wallace of Saltaire, and the noble Baroness, Lady Bennett of Manor Castle, for their support. This amendment would prevent overseas electors donating to political parties in the UK. We had quite a debate about this in Committee so I will not go over all the points, but I want to talk about the reasons behind our concerns and to raise a few key things.

We are concerned that the change to remove the 15-year limit on registering overseas electors creates a loophole in donation law that would allow wealthy donors unlimited access to our democracy and the opportunity for unprecedentedly large donations. We do not believe that foreign donors should be allowed to financially influence our democratic processes; that right should be reserved for citizens who actually live in this country. The Electoral Commission recommended introducing new duties on parties to enhance due diligence and risk assessment of donations based on existing money laundering regulations, which would protect parties and build confidence among voters, so that sources of party funding would be thoroughly and properly scrutinised.

We are therefore disappointed that the Bill does nothing about this and does not bring in what is urgently needed—an effective regulatory and enforcement regime to ensure that foreign money and dark money cannot enter our political system through donations to political parties. We have tabled Amendment 63 to protect our democracy from this foreign money, which we know is already impacting our politics. Concerns about how our democracy is being influenced by malign foreign influences has been highlighted already in the Russia report. That was debated at length in Committee, so I will not go into that any further, but it provides a clear example and concern.

Our fear is that the Government have, potentially inadvertently, created a system vulnerable to overseas interference. It allows a person to call up any or every local authority to say they were resident in the area 30 or 40 years ago with pretty flimsy proof and then be able to be registered and donate enormous sums of money. That is our key concern. When this was debated in Committee, the Minister said that if you have the right to vote, you should have the right to donate. Although I understand entirely the principle behind this, it does not address our very real concerns. If I am not satisfied by the Minister’s response that there is genuine recognition of this concern and that action will be taken by the Government to stop this potential foreign influence on our elections and political parties, I will wish to divide the House.

Photo of Lord Wallace of Saltaire Lord Wallace of Saltaire Liberal Democrat Lords Spokesperson (Cabinet Office)

My Lords, my name is on Amendment 63. I strongly support it and I trust the House will give it its support. The absence of any detail from the Government on how they will implement the idea of overseas votes for life is quite remarkable. There is nothing on how they would check the bona fides of expatriates claiming to be citizens and to have lived in particular UK constituencies, perhaps half a century ago, in contrast to the proposals to tighten domestic identity checks. There is nothing on new measures for getting ballots out to these new voters and returning them in the span of our short campaigns. From the hundreds of messages I have had from expatriate voters, that is one of the issues about which they are most concerned: how difficult it is to get the ballots out or get them back. There is nothing on the current distribution of overseas voters in constituencies or how the expansion might affect the current balance of our constituencies in terms of size and the equalisation of the numbers of voters in each. The Government do not know what the current distribution of voters by constituency is—at least, the Minister did not when I submitted the Written Question to him—or how overseas voters are distributed by overseas countries or how many would be likely to register.

In these circumstances, one has to conclude that the Government’s main objective in extending expatriate votes for life is to tap wealthy donors who long ago moved abroad to avoid paying UK tax to increase the structural advantages from which the Conservatives already benefit in funding electoral campaigns. All the amendments in this group address the huge question of how to maintain a level playing field in the financing of political campaigns. This is one of the many issues on which the Bill falls short. Noble Lords will recall that the Committee on Standards in Public Life published a substantial report on political finance last summer, just two days after the Government had published the Elections Bill. The Government have made no effort since then to incorporate its proposals into the Bill, in spite of introducing a number of other significant amendments.

We all recognise that uncontrolled flows of money into political campaigns can unbalance and corrupt democratic politics. We see the extent to which American politics has become the plaything of the super-rich. Noble Lords may have noted that in the last three months of 2019, in the run-up to our last general election, two-thirds of the money reported by the Electoral Commission to have been contributed to UK parties flowed to the Conservatives. Quite possibly, as much again flowed to the think tanks of the right, including from non-UK citizens in the USA and non-democratic states. We are drifting closer to the American situation, with the difference that only one of our major parties has easy access to large-scale donors.

As other amendments in this group suggest, we need a broader review of political funding than the Bill permits. Amendment 63 thus offers a stop-gap measure. Those who have moved to Monaco, the Channel Islands, the Isle of Man or Caribbean tax havens to avoid paying UK tax should not be permitted to bias our domestic politics by funding political campaigns. Yes, we should allow them to vote as citizens. But we have learned from flows of money from Russia and right-wing foundations in the USA that the buying of influence over British politics from overseas undermines the level playing field that democratic campaigns depend on and that I hope the Minister still supports. It also corrodes trust in the integrity of our democratic process. I regard Amendment 63 as an important stop-gap measure until, perhaps, a different Government tackle the question of political finance and its regulation. I hope the House will support it.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green 6:30 pm, 25th April 2022

My Lords, it is a pleasure to follow the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Wallace. They have already very clearly outlined Amendment 63, to which I attached my name, so in the interests of time, I will comment just on Amendments 66 and 68 in my name. These are advances, derivations or different approaches that arose from the debate we had on these issues in Committee. As the noble Lord, Lord Wallace, just said, I would not necessarily suggest that these are the complete answer—although Amendment 68 certainly takes us in the direction that he referred to of reviewing our current situation—but they are an attempt to raise the issues and continue the debate from Committee.

I begin by noting—I owe this to the Forbes website—that a superyacht costs on average about $275 million. I cannot personally attest to that, but we can take it as a ballpark figure to start with; of course, there are probably quite a few going second hand at the moment, which might make them a bit cheaper. This is a demonstration of the fact that, in our current economic system, with the corruption and extractivism, we have people in the world who have access to massive sums of money. Amendment 63 and most of the debate around this have focused very much on foreign influence. Indeed, the noble Lord, Lord Wallace, talked about bringing influence over our democratic politics. But what my Amendments 66 and 68 do is ask: why should any individual, wherever they reside, have that kind of influence over our democratic politics?

If we look at what a typical political party—one of the two largest parties, or perhaps particularly the party that draws the most funds, as the noble Lord, Lord Wallace, said—spends on a general election, it is about 10% of the cost of a superyacht. It is not quite small change down the back of the sofa for the oligarchs, but it is not a really large amount of money. I asked in Committee what would happen if one of our existing political parties or a new political party drew all its funding from one source—one highly questionable source or any source at all. For example, we have just had the French election, and the far-right candidate, Marine Le Pen, who got more than 40% of the vote, got a very large loan from a Hungarian bank linked to President Putin. If noble Lords want to see how this plays out in Australian politics, they might like to look at the role of Clive Palmer in the election going on now, since I raised that issue in Committee.

This amendment developed from the Committee work. Of course, we do not have exact parallels to the two examples I have just cited in the UK, although I note, looking back over the past decade or so, that in the run-up to the 2010 election, Lord Ashcroft donated about 20% of the money that the Conservative Party spent in preparing for and running that election campaign. In 2021, the Conservative mayoral candidate, Shaun Bailey, received about 40% of his funding from the same source. I am not in any way casting aspersions on those cases; I am merely asking what happens to our politics when one person is hugely influential and a party is dependent on that one person.

Amendment 66 is an attempt to say that there should be a limit on how much one person can influence a political party. I came up with the figure of 5%, which I think is a reasonable estimate. This was debated at some length with the noble Earl, Lord Howe, who is not in his place today. He said that he would go away and think about whether one person should be able to donate 100% of the cost of an election campaign for a party or major character. I give notice to the Minister that I raise that question again. The noble Earl said he would go away and reflect on what the maximum percentage should be; maybe the Government do not think my 5% figure is right, but do they really believe that 100% of the funding for a political party’s campaign for a general election should be able to come from one source? Maybe they think it should be 50% or 25%. I give the Minister fair warning that if I do not get an answer to that, I will be bouncing back up again. I am sure that, if they engage with Amendment 66, the Government are likely to say that this might be drafted differently. I have attempted to address some of the main issues. I will not push this to a vote. I do not believe that I have necessarily found all the answers here, but there is a really important question that needs to be asked about whether we should limit anyone’s, not just foreign residents’, percentage of influence over our parties.

Some will say that we have rules about declaring donations and, providing they are followed—your Lordships’ House did its best earlier to keep an independent Electoral Commission overseeing that—voters can use that information to influence their choice. However, even if it is all open and transparent, voters have many reasons to make the choices that they do. Elections do need to be funded, which is why I have put down Amendment 68, which would require a 12-month consultation on public funding of political parties. This very much draws on the amendment the noble Lord, Lord Sikka, tabled in Committee and on which, unfortunately, due to the hour, we did not have time to have a full debate. None the less, the noble Lord put forward—as he has again in an amended form here—a proposal for how to do this and get state funding of political parties. We could have lots of debates about the nature of that and the way it should be done, so rather than do that, I have put down this amendment for a review.

I will stop there, but I remind the Minister that I will be asking him if he thinks that 100% of the funding for a campaign should be able to come from one source.

Photo of Lord Grocott Lord Grocott Labour

My Lords, I strongly support my noble friend’s amendment, although I do not think it goes to the source of the problem. The source of the problem is the massive increase in the electorate contained within this Bill. We know from the impact assessment and I know from written replies I have had from the Minister that it increases the electoral roll of people living abroad—many of whom have lived abroad for decades—from around 1 million to 3.3 million, an increase of 2.3 million names. I remind the House that these will overwhelmingly be people who have lived abroad for more than 15 years—for many, 50 or 60 years —and who have no reasonable expectation of ever returning to this country. The Bill makes it easier for this registration to persist as, once on the register, names now remain for three years as opposed to one year previously, and you can get on the electoral roll by the process of attestation—in other words, providing you can get someone to attest that you lived at 22 Station Road 60 years ago, even though 22 Station Road has been demolished and you have not been back since, and that you are a bona fide former resident of the United Kingdom.

To me, that is wrong in principle, but I shall also apply it at a constituency level—the noble Lord, Lord Wallace, raised this and I can give him some of the answer. Under the present system, with the 15-year rule on residence that is allowed, in London and Westminster, 2.43% of voters at the last election were overseas voters. Let us assume that that increases by three, once these 2.3 million are added to the register. You could then have constituencies in the United Kingdom with 6,000 or 7,000 voters in an electorate of 73,000 who have no obvious connection whatsoever with the constituency in which they are voting. That, it seems to me, is wrong.

Whatever your view is, the absolute basis of our electoral system—which I cherish; I have to be controversial here by saying I am a powerful supporter of first past the post and single-member constituencies—is that representation, for a general election, is based on where you live. That is a very good basis for registration and voting, it seems to me. But, no, we are going to add 2.3 million people to the register who never lived in the country—not in recent memory.

In order to do this, the Government are spending some £15 million. I wish that they would show the same anxiety and commitment on making sure that people resident within the United Kingdom and not on the register at present were added instead of spending £15 million on getting people to vote in individual constituencies—possible decisively, affecting the result—who simply do not live in the area.

I am very sorry that this Bill has extended the period of residence from 15 years to life. I hope that the Minister can improve on his answer when I raised this before; he asked what on earth is the basis for objecting to supporting a 15-year rule, which says that—I quote him loosely—if you have been abroad for 15 years, you can vote in an election, but if you have been abroad for 15 years and a day, you cannot vote in an election. That really is a thin argument; he really can do better than that. That applies to any boundary—why do we say people can vote at 18 but not at 17 and 364 days? We can all find numerous examples of how people draw boundaries.

The problem of overseas voting—and here I find myself agreeing with the Green Party, which I do not on every occasion—is that with the possibility of this initial problem, which is that you can vote however long you have been away from the country, you can also now provide funds for parties. It means, as has already been said, that, in theory, a party could be almost entirely financed by people living abroad with no intention of returning to the United Kingdom or of living with the consequences of their vote. That is the other crucial element in our democracy: you live to see the consequences of your vote. People who voted Conservative—I hope a lot of them vote Labour at the next election—bear some responsibility for what is happening in the country at the moment. It is not the same responsibility as the Minister, of course, but they have some responsibility. Of course, if you live abroad, vote from abroad, remain abroad and intend to remain abroad, then you do not live with the consequences of your vote.

I very much regret that, somehow or other, this massive extension of the franchise is in this Bill, without any compensating extension of the franchise for people in this country who are not on the electoral roll. I have seen no sensible, adequate defence of it so far. I am sure that the Minister will do his best, which he is bound to do, but we have made a step in our democracy that violates the principle of representation by place of residence and adds the problem of enabling parties to be massively financed by people living and working permanently abroad.

Photo of Lord Sikka Lord Sikka Labour

My Lords, it is a great pleasure to follow the noble Lords who have already spoken. I will speak briefly about Amendment 67. This amendment would require the Secretary of State to establish an independent committee to report on the creation of what I call a foundation for democracy, whose sole aim is to prevent the rich and corporations from directly funding political parties and hijacking the political system. Private money in our political system is a cancer, and the issue has not really been adequately addressed by this Bill.

In 1863, US President Abraham Lincoln visualised democracy as a

“government of the people, by the people, for the people”.

Some 160 years later, that remains elusive—we are light years away from it. Yes, people vote, but political power is increasingly concentrated in the hands of those who can fund political parties and get favour in return. Their preferences are prioritised.

If we had a Government of the people and for the people, we would not have millions using food banks to make ends meet, even though they work full-time. We would not have 14.5 million people, including 4.3 million children, living below the poverty line. We would not have 3 million people suffering from malnutrition and undernutrition, of whom about 1.3 million are retirees. We would not have a situation where the poorest 10% of households pay 47.6% of their income in direct and indirect taxes, while the richest 10% pay only 33.5% of their income in direct and indirect taxes. None of this suggests that we have a Government of the people and for the people.

The phrase “political donations”, which has been used throughout this debate, is a misnomer. Corporations and the rich do not make donations; they make an investment, and they want a return on that investment. That is usually in the form of poor laws and poor law enforcement. Does anyone know how many banks have been prosecuted for banking frauds? Why has the Lloyds bank fraud, going back to 2005, still not been investigated? Why is it that no accountancy firm that has sold unlawful tax avoidance schemes—that is what the judges have said—has yet been investigated and prosecuted? It is because we do not in fact have Governments that are closer to the masses. Party funders have the inside track to Ministers and policymakers. They get the private phone numbers of Prime Ministers and then, on the phone, Prime Ministers tell them, “Yes, we promise there will be no tax increase if you conduct business in the UK”—as Prime Minister Boris Johnson told Sir James Dyson.

Big accounting firms could not get into the public sector audit market because the Audit Commission did not think that they were up to the task. So they campaigned for the removal of the Audit Commission and contributed extensively to the Conservative Party. Hey presto—the Conservative Party decided to kill off the Audit Commission through the Local Audit and Accountability Act 2014. Big accounting firms are now raking in fees of more than £100 million a year from local authority audits. That is the investment that they made, and it paid off.

Private funding of political parties is destructive. Political parties are now addicted to corporate money for their election campaigns. Trade unions have had to join this kind of nuclear war as well, but of course they do not have sufficient resources to match those of corporations. Ministers and party leaders are more likely to have lunches, dinners and meetings with corporate grandees than with the victims of corporate abuses. I cannot recall a Minister meeting victims of banking frauds or those suffering the abuses of the insolvency industry. I am told that around £50,000 enables the wealthy to buy a seat at a party conference dinner table with senior members of the Cabinet and so that they can burn their ears and suggest what kind of favours they need. I cannot remember Ministers sharing dinner tables with homeless persons, a pensioner who is freezing to death or those queuing for food banks. They simply cannot afford to enter that kind of a bargain or that market. So we do not have a citizen-led democracy; its possibilities are increasingly stymied by political parties selling themselves to the highest bidder, regardless of the adverse consequences for the people. Urgent action is needed to build democracy and remove the corrosive effect of private money from politics.

Some would like to ban corporations and rich individuals from funding political parties altogether, but banning things becomes difficult. No doubt those who are addicted to funding the political parties would say it is a violation of their democratic right, or some right, to fund political parties. These people would always find ways of getting around the laws. We need to think of smarter ways of dealing with this.

My amendment advances an alternative approach. Under this, there would be absolutely no ban on political contributions: anyone from anywhere in the world would be able to donate money. However, no political party would directly receive a penny from these individuals. All the money would go directly to this foundation for democracy, which would be under the control of the Electoral Commission. Then, at regular intervals—it could be monthly—the foundation would allocate the money to political parties on the basis of a formula based upon their share of the vote in local, regional and national elections and party membership. So, if a party improves the quality of life for the people and therefore has higher membership or a higher share of the vote, it would get more resources. Parties like to compete on ideas, so this policy would say, “Go ahead: compete and persuade people to see what good you can do for them.”

Many corporations have obviously got used to buying political influence, and they will not be happy about such a proposal. They may cease funding the political parties. If that is what they do, we will know that they were in it only so that they could get political advantages and that there was absolutely no other reason. Perhaps at that point, we may also begin to consider other alternatives, some of which have been mooted, such as capping political donations.

Photo of Lord Cormack Lord Cormack Conservative 6:45 pm, 25th April 2022

Is the noble Lord not aware that Report is for short, sharp speeches, not this endless diatribe he is currently inflicting upon us?

Photo of Lord Sikka Lord Sikka Labour

I am very grateful to the noble Lord for his observation. I am sure that members of the public would be quite interested to note that when an alternative proposal is put forward, it is called a “diatribe”. That kind of confinement of alternative, competing discourses to negative spaces does not do any good. But the message I want to get across is that there is a corrosive element at the heart of our democracy that can be dealt with only by ending the receipt of any private money by any political party.

Photo of Lord Rooker Lord Rooker Labour

My Lords, the purpose of Report is to report back on things that were inadequately dealt with in Committee. Amendment 69, which I am speaking to, was inadequately dealt with in Committee. We had a debate and a very unsatisfactory answer, so I want to return to it—not at the same length as in Committee, but nevertheless in some detail that might make for uncomfortable listening for different parties in the House.

The idea is for risk assessment and due diligence policies to be used to control and look at procedures on political donations. What is the problem? Dirty money in the UK leaves parties exposed to malign influence, risks fostering dependence on the proceeds of crime and other dubious funds, and undermines the integrity of the electoral system. PPERA does not require UK political parties to run anti-money laundering checks on donors. In fact, there are no indications that parties do robust checks on the source of donations, nor that parties reject donations after such checks have been made. As the UK’s anti-money laundering framework has been progressively tightened over the last decade—I pay tribute to the current Government on this issue, as I have done before—political parties’ minimal checks have become an increasingly glaring anomaly. Examples from the media suggest that if parties check the source of donations at all, they are inadequate and fail to prevent the flow of tainted money into UK politics.

The Electoral Commission has argued since 2018 that risk management principles from anti-money laundering checks by businesses could apply to election finance. In July 2021, the Committee on Standards in Public Life recommended that parties have anti-money laundering style procedures to determine the true source of donations.

How would Amendment 69 address the problem? It would update PPERA to require parties to develop and publish reasonable and proportionate risk-based policies for identifying the true source of donations above £7,500—we are not looking at small donations here. Parties would need to have reasonable and proportionate risk assessment and due diligence controls and procedures in respect of those policies, as provided for in a statutory instrument. For any donation or an aggregate amount exceeding £7,500, parties would need to undertake enhanced due diligence checks, with a simplified process thereafter. Donors giving over £7,500 would need to declare whether their business is in a high-risk sector, which is defined in the amendment, and whether they have been under formal investigation or convicted of certain offences. Parties would need to include a statement of risk management in their annual accounts identifying that.

What have the parties done about due diligence checks on donations? The Committee on Standards in Public Life’s report, Regulating Election Finance, identified broad support for exploring anti-money laundering style regulations from the Liberal Democrats, Labour and the Scottish National Party. Both Labour and the Liberal Democrats agreed that there was merit in exploring this style of regulations but that it would be important to think about how the process would work and the administrative workload involved. The Conservative Party told the Committee on Standards in Public Life that it thought that current regulations for donations were sufficient.

In their response to the Committee on Standards in Public Life’s recommendation that parties should have procedures in place for the true source of donations, the Government said that

“it is very important to balance the need for parties and other campaigners to generate funds against the cost of actually carrying out checks on donations, to ensure they come from permissible sources. We think the current rules are proportionate and achieve this balance.”

When a version of Amendment 69 was debated in Committee—it was rather longer; it is still long but it has been tightened up a bit—the noble Earl, Lord Howe, said that

“all we can do is keep the rules under review. I am suggesting that in this particular area, the balance is about right.”—[Official Report, 28/3/22; col. 1378.]

Let us look at the balance: due diligence checks would be a relatively low administrative workload. If due diligence checks had been required on donations above £7,500 in 2021, the Liberal Democrats would have conducted checks on just 11% of donors, or 72 donations out of 642; Labour on 25%, or 133 out of 536; the Greens on 29.2%, or 19 out of 65; and the SNP on 63%, or seven out of 11. This means that, at most, Labour would have had to do checks on one donation every 2.7 days over the course of a year, and the Liberal Democrats would have had to do one check every five days. Obviously, because some donations come from the same donor, it would probably be less frequent than that.

Now we come to the Conservatives; no wonder we get complaints from the Tory Benches about what is being said. I apologise to the noble Lord, Lord Cormack, but that was a very unfortunate intervention. The Conservatives would have checked 51.5% of donors— 457 donations out of a total of 887 were of £7,500 or more. Of course, this reflects their greater resources, with donations of almost £19 million in 2021—around double what Labour received.

I have three examples of potentially suspect donations. I gave a lot more in Committee, and I stand by them all; they are all there on the record. All major political parties have accepted potentially suspect donations from individuals and companies that were under investigation or later found to be involved in economic crime. The media has reported on a catalogue of such donations, with Spotlight on Corruption providing most of the information. The Conservatives received £2 million in cash donations from Lycamobile, a company whose premises were raided by French authorities in 2016 on suspicion of money laundering, leading to the arrest of the company’s directors. Despite evidence emerging in 2015 that Lycamobile employees were dropping off rucksacks full of cash at post offices across London, the party took a further £587,000 from the company until July 2017.

Labour, of course, had its hands dirtied with the Hinduja brothers. A £1 million donation was made in 1998, at the same time as one of them was attempting to obtain a British passport. At the time the gift was accepted, the brothers were under investigation in India for paying commissions into Swiss bank accounts as part of alleged kickbacks in a major arms deal between India and Sweden, in the Bofors gun scandal.

The Liberal Democrats, of course, have a famous example, which goes back a long time—I am not sure whether there is a more recent one. In 2005, they accepted an infamous £2.4 million from the fraudster Michael Brown and declined to pay it back after it emerged that the money had been stolen. Mr Brown later said that he regretted the donation; he thought that the Liberal Democrats should not have accepted it.

Those are just three examples but the point is simple. There ought to be a requirement. The Committee on Standards in Public Life is where I rest my case, in a way; it has been absolutely clear about this. There is a strong case for requiring parties to make these checks. Businesses have to do it, and rightly so. The checks, as I have shown, are not onerous, with a £7,500 limit. I would not argue if the limit were £10,000, but I would not go beyond that. The fact is that it is not onerous on the parties. There is plenty of evidence that requires us to see that these checks take place, so that tainted, dirty money does not come into British politics. The Minister will have to have a much better answer than the noble Earl, Lord Howe, had; otherwise, I might push this.

Photo of Lord Butler of Brockwell Lord Butler of Brockwell Crossbench 7:00 pm, 25th April 2022

My Lords, I have added my name to the amendment of the noble Lord, Lord Rooker, and I really need to add very little to what he has said. It is very difficult to see why there should be opposition to a requirement that political parties should have

“a reasonable and proportionate risk-based policy for identifying the true source of donations.”

The Government’s answer to this, which the noble Earl, Lord Howe, gave in Committee, is that there has to be a balance. It is clear, however, that where the balance is now is not satisfactory, because, as the noble Lord, Lord Rooker, said, there have been a series of donations to all political parties that have been not to the credit of the parties, not good for their reputations and not good for the reputation for cleanliness of our politics.

As I understand the position, the Government have not ruled out acting on the recommendations of the Electoral Commission and the Committee on Standards in Public Life, but regard this as a complicated matter—perhaps it is—and need more time to work on it. If the noble Lord, Lord Rooker, seeks to test the opinion of the House, I will support him. I would be gratefully comforted, however, if not only the Minister but the spokespeople for the other political parties said tonight that they duly take this issue seriously and regard donations from foreign sources and people who want to influence our politics in an unhealthy way as a growing danger to our politics. If the spokespeople for the parties and the Government will say that they take this seriously, and the Government do not rule out acting on the recommendations of the Electoral Commission and the Committee on Standards in Public Life in due course, I will be very comforted.

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee

My Lords, I was thinking that others would wish to intervene, but that does not appear to be the case.

These are important amendments, but I shall not encourage anyone to think that the Government will accept them. The context is a shared concern about dirty money, a phrase that the noble Lord, Lord Butler of Brockwell, used. I do not think any Government have been stronger in response to the Russian invasion, or in bearing down on oligarchs, than this Government. However, following our robust debate in Committee, I am pleased that we are again returning to this important issue of political donations. I do listen to contributions of noble Lords and these debates will certainly serve as a key reference point for the Government as they keep rules on political donations under review, to ensure that they continue to provide an effective safeguard that protects the integrity of our political system. In that context, the Bill bears down very heavily on foreign donations and makes them much harder.

Turing to the specific amendments tabled by the noble Baroness, Lady Hayman of Ullock, and the noble Lord, Lord Rennard, Amendment 63 would remove the rights of overseas electors to make political donations. Amendment 69B would place a £7,500 limit on any donation or series of donations from overseas electors. I fear that many will not be surprised when I reiterate that the Government cannot support these amendments, as we intend to uphold the long-standing principle, first introduced by the Committee on Standards in Public Life itself in 1998, that if you are eligible to vote for a party, you are also eligible to donate to that party. These amendments would overturn that principle by removing the right of overseas electors to donate. Overseas electors are British citizens who have the right to vote and, despite what the noble Lord, Lord Grocott, said, the Labour Party has acknowledged that for many years. They are reasonable participants in our democracy. Furthermore, due to the interaction of Amendment 69B and the existing legislation, there would be no provision for either the return of donations exceeding the £7,500 threshold or the reporting of such donations to the Electoral Commission. This leaves a significant gap, which means that the amendment would simply not have the intended impact.

The Government do not support the proposal of the noble Lord, Lord Sikka, to which I listened carefully. It was fair for him to set out his case because he wishes to establish an independent committee to report on the creation of a foundation for democracy. The concept here, however, which is where agreement falls away, is that he submits that this body should be responsible for collecting all donations made to registered political parties and mandatorily allocating them based on membership and vote share at certain elections. The Government can find no justification for this amendment and believe it would place unreasonable restrictions on an individual’s freedom to donate to the political party of their choosing. It would go against the fundamental principle of allowing members of the public to get involved in our democracy by giving their support, be it at the ballot box, via a cup of coffee or via donations, to any party or parties that they choose.

Moreover, this proposal would risk disproportionately penalising smaller parties, which may not have such high levels of membership and vote share as the larger parties, but form an integral part of our democracy. Indeed, it is not clear to me how any new parties would emerge under the noble Lord’s system, as they would not be able to fundraise for themselves and would therefore struggle to get their message out to the public to encourage members to join and voters to support them in the future. The Government are therefore simply not convinced that there is a demand or evidence to support the noble Lord’s radical idea; nor do we think it necessary to establish an independent committee to come to this conclusion. Should other parliamentarians share the noble Lord’s view, the existing framework of parliamentary committees obviously provides an ideal place to consider the proposal further, so I urge the noble Lord not to press his amendment.

Next, I turn to Amendments 66 and 68, spoken to by the noble Baroness, Lady Bennett, and the noble Lord, Lord Sikka, which address a similar theme. Amendment 66 would seek to cap donations that any one individual or organisation can make to a political party to 5% of that party’s maximum campaign expenditure limit at the preceding election. This cap would apply to all donors, whether individuals or organisations, such as trade unions for example. What effect would it have on a large trade union donation?

Amendment 68 would require the Government to publish a report on proposals to establish state funding of political parties and limitations on private donations. In essence, the noble Baroness and the noble Lord are seeking the Government’s views on these two fundamental principles. I will underline our position.

First, fundraising is a legitimate part of the democratic process. Consequently, there is no cap on political donations to parties, candidates and other types of campaigner but, instead, strict limits on what they can spend on regulated campaign activity during elections. These maintain a level playing field in elections. In particular, the noble Baroness’s amendment has the potential to create a very uneven and complicated playing field. Under the proposal, each political party will have different amounts it can fundraise, given that spending limits are calculated according to the number of constituencies it contests. New political parties in particular, again, would be affected and this change could encourage quite unnatural growth, whereby new parties are incentivised to contest seats they have no intention of winning to give them a more competitive funding limit in the next cycle. I will not be drawn on what percentage of a party’s overall donation might be permitted because the Government simply do not accept that there should be such a percentage figure.

Secondly, there is absolutely no public support for expanding the level of public funding already available to political parties. The Government are not going to go down that road.

Finally, I wish to address Amendment 69, retabled by the noble Lord, Lord Rooker. This would introduce requirements, as he said, for registered parties to carry out risk assessments and due-diligence checks on donations. Only those with a legitimate interest in UK elections can make political donations and there are strict rules requiring companies making donations to be both incorporated and carrying out business in the UK. Parties must check that companies meet these criteria. It is also an offence to circumvent the rules through proxy donors—for example, an impermissible donor seeking to make a donation through a company that is itself a permissible donor. Political parties must already report all donations over a certain value to the Electoral Commission, which are then published online for public scrutiny.

The Government have heard the concerns that donors may seek to evade the rules and, in principle, the point of strengthening the system to provide greater levels of assurance on the sources of donations to ensure they are permissible and legitimate is important. Indeed, the Government recently published, ahead of introducing necessary legislation, the Corporate Transparency and Register Reform White Paper.

Reforms to Companies House will deliver more reliably accurate information on the companies register by introducing mandatory identity verification for people who manage or control companies and other UK-registered entities, providing greater powers for Companies House to query and challenge the information it receives, and introducing more effective investigation and enforcement powers for Companies House. This, in combination with a new power for the Companies House registrar proactively to pass on relevant information to law enforcement and other public and regulatory bodies, including the Electoral Commission, will indirectly support the enforcement of the rules on donations by providing greater confidence in the accuracy of the data held at Companies House, including when seeking information on UK-registered companies and other UK-registered entities that have made political donations.

The Government have not dismissed the fact that this is a significant area, which is why we are instituting these reforms to corporate transparency, but for the reasons I have outlined to the House on various amendments, I urge that noble Lords consider not pressing their amendments.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green

Before the Minister sits down, may I confirm what he said? I wrote down his words: “The Government do not accept that there should be a percentage limit.” On the percentage of contribution from one person or organisation to a political party’s campaign, would the Minister confirm that the Government believe it appropriate for 100% of the funding for a political party’s campaign to come from one source or organisation?

Photo of Lord True Lord True Chair, Intergenerational Fairness and Provision Committee, Minister of State (Cabinet Office), Chair, Intergenerational Fairness and Provision Committee 7:15 pm, 25th April 2022

My Lords, again, I think that is a false question. In our democracy an independent person is entitled to stand in a constituency, for a cause that he or she believes in, and may choose to fund that campaign. Nobody else may want to give any money. That would be an example of 100% funding of a campaign by a small campaign or individual. There are complexities here, and the fundamental position to stand on is that in free democracy, people should be able to make a contribution of whatever sort they choose, provided it is permissible and legal.

Photo of Baroness Hayman of Ullock Baroness Hayman of Ullock Opposition Whip (Lords), Shadow Spokesperson (Environment, Food and Rural Affairs), Shadow Spokesperson (Levelling Up, Housing, Communities and Local Government)

My Lords, it has been very clear from the debate we have just had and the other amendments that have been discussed, as well as my Amendment 63, that there are some really broad concerns about political donations, electoral finance and the procedures and systems that underpin and manage this. I urge the Government to take away those concerns more broadly and consider how they may be addressed in the future.

In response to the noble Lord, Lord Butler of Brockwell, I thought I had made it really clear, both in Committee and in my opening remarks today, that we are very concerned about the potential for dirty money infiltrating and influencing our political system. If I was not clear, I am very happy to confirm that we do have those very deep concerns.

I thank the Minister for his very detailed response, but I disagree with him that the Bill makes it harder to make overseas donations. Instead, our concern is that part of removing the 15-year limit actually makes it easier for people from foreign locations to donate to our political system. We are concerned that often it allows very wealthy donors unlimited access to our democracy, through what we could see to be unprecedentedly large donations. That is our big concern with this and why we have put this amendment forward. To avoid that kind of outside influence in our democracy, the right to make those kinds of donations should be reserved for citizens actually living in this country.

As I say, I thank the Minister for his detailed response, but do not believe he has addressed the real concerns expressed by us and other Members who have taken part in the debate. Therefore, I wish to test the opinion of the House on my Amendment 63.

Ayes 194, Noes 220.

Division number 2 Elections Bill - Report (2nd Day) — Amendment 63

Aye: 194 Members of the House of Lords

No: 220 Members of the House of Lords

Ayes: A-Z by last name

Nos: A-Z by last name

Amendment 63 disagreed.