Clause 346

Company Law Reform Bill [Lords] – in a Public Bill Committee at 3:15 pm on 29th June 2006.

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Meaning of “political donation”

Question proposed, That the clause stand part of the Bill.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

We now come to part 14 of the Bill, which provides the mechanism for the control of political donations and expenditure and the means by which a company can approve the making or incurring of such donations or expenditure.

Clause 346 provides the definition of political donation for the purposes of this part of the Bill. The Law Society is critical of the breadth and uncertainty associated with the definition. It suggests that the lack of clarity in the provisions of part 14 and their enormous complexity impose considerable burdens and costs on companies,  especially those with large groups that include overseas companies. It is likely that many companies will continue to pass precautionary resolutions. In this area, according to the Law Society, the Bill can hardly be said to be deregulatory. It requested guidance on exchange rate valuation to assist the valuation of non-sterling donations for the purposes of the Bill.

During the Grand Committee stage of the Bill, Lord McKenzie of Luton said:

“We will consider further in consultation with the Electoral Commission whether additional guidance might be provided to companies on the definition of political donation.”—[Official Report, House of Lords, 1 March 2006; Vol. 679, c. GC144.]

I should be grateful if the Minister could provide an update on the situation and whether further guidance will be provided to ensure greater clarity and certainty of the scope and ambit of the definition.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I have to get my head around this. The funding of political parties is important and clearly something that rightly concerns hon. Members on both sides of the House. I hope that we all recognise during the debate on this set of clauses this afternoon that we are looking at the matter from the perspective of companies and their members, and how and when directors of companies need to obtain authorisation from their members to do something that either subsidises a political organisation or, as clause 347(1)(a)(ii) says,

“is capable of being reasonably regarded as intended to affect public support for a political party or other political organisation, or an independent election candidate”.

The reason for that control is simply to prevent directors from subsidising a political organisation for personal reasons rather than in the interests of the company. Effectively, the question we ask when considering whether to burden a company—I recognise that aspect of what the hon. Gentleman is saying—with a requirement to seek a resolution is simply, “Is there a risk of the directors using the company’s money for their own interests rather than for those of the company?” When considering whether to use company funds directly or indirectly to support a political party, there is a risk that directors will be swayed by their preference rather than the interests of the company. Therefore, I believe—I think we all agree on this—that it is right to regulate in this area. Understanding that, the substance of the amendments—I am slightly unclear whether we are taking amendments, Mr. Bercow.

Photo of John Bercow John Bercow Conservative, Buckingham

We are considering clause 346. This is a stand part debate.

Photo of John Bercow John Bercow Conservative, Buckingham

If it would be helpful, I can assure the Minister that it is on the subject of political donations. [Laughter.]

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

Thank you, Mr. Bercow. My apologies for losing my place this Thursday afternoon. As I now have the answer to the question, the most sensible thing to do might be to answer it.

Lord McKenzie said in Committee in another place that the Government would have discussions with the Electoral Commission about whether it would be appropriate to issue additional guidance on the definition of political donation. I am happy to write to all members of the Committee on the outcome of those discussions, which have not yet been had.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

I am grateful that we got there in the end, at least in relation to my question. There seems to be a need for guidance, given what the Law Society said, and obviously Lord McKenzie’s comments in Grand Committee in the other place recognised that. It is important that the Minister provides us with at least an update and clarification on what further guidance is to be provided before the Committee concludes its consideration of the Bill so that we can properly assess it while the Committee is still sitting. I am grateful for that further assurance from the Minister.

Question put and agreed to.

Clause 346 ordered to stand part of the Bill.