Clause 357

Company Law Reform Bill [Lords] – in a Public Bill Committee at 11:00 am on 4th July 2006.

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Subscription for membership of trade association

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

I beg to move amendment No. 261, in clause 357, page 159, line 36, at end insert

‘provided that the association itself makes no political donations or political expenditure as defined in sections 346 and 347 in the relevant year.’.

This is a very short point that relates to trade associations, which are largely associations made up of employers, rather than unions. The clause proposes that subscriptions to trade associations should not count as political donations and leaves it at that. The amendment says that that should be the case as long as the trade association itself makes no political donation. That is important because otherwise it would be an easy way to evade the provisions of the Bill. It is also an easy way to get moneys to particular political parties by way of trade associations.

I do not want to mention particular cases, but there are certain trade associations in the centre of the country that make rather large donations to particular political parties. They can easily be found on the Electoral Commission’s website.

The point of the amendment is quite simple: why should a donation to a trade association, which will be passed on to a political party, not count as a political donation just because it is a called a subscription? The clause goes on to say that subscription does not include any payment to the association made for a special purpose.

If the members of an association were asked for particular donations for the election, that would count as a political donation, but what would happen if a trade association were simply to increase its annual subscription by a substantial amount in a year that just happened to be the one that constituted the run-up to a general election? That is a loophole, and I would be grateful for the Minister’s comments on it.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

The hon. Gentleman has made an interesting point, and the matter bears closer examination, but I am not entirely convinced that the amendment represents the right way to proceed. The clause states that a trade association must further relevant trade interests, thereby making a direct connection with trade and business. However, he has raised an interesting point that needs to be considered, and I look forward to the Minister’s comments.

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

While it appears that the hon. Member for Cambridge is trying to fix a problem, I am not sure that the problem exists. A great deal of the work of trade associations is to lobby Ministers, councillors and so on, but they do not do so in a party political way. We have constantly tried to frame our clauses in a way that makes things as simple as possible for companies, but if the amendment were accepted they would have to check before paying money to a trade association that its business was not party political as defined elsewhere in the Bill in relation to companies making donations to political parties. It would add complexity.

In the real world, we know that trade associations are there to lobby; that is why companies get together and form them. If they suddenly upped their subscription massively to pay money to a political party or to individuals standing for a party in an election, that would be so obvious that it would quickly be shown up and seen by companies. The amendment is an unnecessary complication that would make things more difficult by trying to deal with a problem that does not exist.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

I hear what the Minister says. The matter should be raised in debates on other legislation, but the real problem is the lack of transparency of trade associations and their political activities. We have discussed whether lobbying should count as a political activity, on which the Committee did not agree with my view. I accept that this amendment is partly consequential on the amendments that I tabled on that matter, but there is nevertheless a potential problem. Will the Minister undertake to keep the matter under review should particular instances arise in which that problem causes difficulties?

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

As with all legislation, we will keep it under constant review. If, as the hon. Gentleman says, a problem arises and his judgment is right and mine wrong, we will have to return to the matter.

Photo of David Howarth David Howarth Shadow Minister (Energy), Trade & Industry

I thank the Minister. In the light of that comment, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 357 ordered to stand part of the Bill.