Clause 359

Company Law Reform Bill [Lords] – in a Public Bill Committee at 11:30 am on 4th July 2006.

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Political expenditure exempted by order

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

I beg to move amendment No. 263, in clause 359, page 160, line 23, at end add—

‘(5) No order under this section shall discriminate in favour of or against any political party or parties.’.

The amendment is probing, but it would do no harm if it were accepted. The clause relates to the power of the Secretary of State to exempt political expenditure under this part of the Bill. The Secretary of State is to be given what seems a reasonable power to declare particular types of expenditure not political. Such powers are often required in Bills such as this to allow the Government to deal with new situations that arise after they become law. I said that it would be a reasonable use of the power in the clause to exempt very small expenditure, such as the expense and time taken in writing a letter.

I do not object to the existence of the power, but the clause as drafted would allow that power to be used in a political way. It allows certain types of company and not others to make political expenditure. I do not wish to predict the behaviour of the current Government, but a hypothetical future Government might be tempted, having seen the lie of the political land, to make exceptions in a way that favoured themselves. I am sure that that is not the Government’s intention, and the amendment, which would ban discrimination in the use of the power, is largely intended to allow the Minister to say so, which I hope she will.

Photo of James Brokenshire James Brokenshire Conservative, Hornchurch

The hon. Gentleman’s amendment touches on an important point. I originally intended to raise the subject in the stand part debate, but the amendment provides me with the opportunity to do so now.

Although the language in the clause reflects the existing wording of section 347B(8) to (11) of the Companies Act 1985, it appears to allow wide  discretion on the part of the Secretary of State. While I am sure that the current office holder would in no way want to use the power in an inappropriate or partisan way, we must legislate for the future. Who knows when we will have an opportunity to consider the matter again? It is therefore important to consider how protection can be provided against the eventualities and circumstances that the hon. Gentleman highlighted. His amendment states that the power should not be used in a discriminatory way, and he puts forward a fair and powerful argument, particular considering that clause 359(2) covers political expenditure and situations in which a company could produce literature or take out advertisements in support of a political campaign.

The Government have defended rigidly the need for political expenditure to be controlled, and they are right to maintain that. However, if through this power there is a means of exemption, the question that is raised is in what circumstances would that be used: could it be used to favour one argument or another? By its nature it must favour one side, otherwise we would not, in the first place, be making the expenditure that is viewed to be political.

It is important that the hon. Gentleman has raised the issue. I am certainly sympathetic to the desire to address the potential mischief that may arise, and I look forward to the Minister’s comments.

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

I shall give a brief history of why we have the provision and set out three arguments to show that it is appropriate. It was originally inserted because we recognised that the definition in the Political Parties, Elections and Referendums Act 2000 could inadvertently catch activities that could not reasonably be considered as political. The power has been used once, and an order was made, before the 2000 Act came into force, exempting from the need for prior shareholder approval political expenditure by

“Any company or subsidiary undertaking whose ordinary course of business includes, or is proposed to include, the preparation, publication or dissemination to the public, or any part of the public, of material relating to news, and to public and political affairs and events, and to views, opinion and comment on the news and on public and political affairs and events”.

A company putting out press cuttings or whatever would be able to do so under that order.

I hope that my three specific points give Opposition Members the assurances that they seek. First, I do not think that the amendment targets a substantive issue. The order-making power has never been used in a way that discriminates in favour of one political party or against another. Indeed, the exemption that I have described is the only time that we have ever used that order-making power, and we have retained it only to correct similar unforeseen problems were they to arise in the future.

Secondly, the amendment would not make the order-making power any less partisan as it stands. I think the hon. Gentleman would accept that the interpretation of

“No order under this section shall discriminate in favour of or against any political party or parties”,

would be highly subjective and will probably have the effect of making it very difficult to use the order-making power should we ever need to do so.

Finally and perhaps most importantly, clause 359(4) ensures that if any order under the section is proposed, it is subject to the affirmative resolution procedure, so Parliament would have the opportunity to reject or accept any order that is made. That gives the added protection that the hon. Gentleman seeks.

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

I cannot say that I am particularly reassured by the Minister’s remarks. The point about the requirement for non-discrimination being subjective is not well made. The concept of discrimination is well known legally and the amendment would restrict the validity of orders that were discriminatory. If a discriminatory order were put into operation, it would be open to any person who so wished to challenge it in the courts and to have it set aside. The purpose of that would be to deter the Government from making discriminatory orders. That would be the object of the exercise.

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

I am no lawyer, but I know that there has been a great deal of litigation on the concept of discrimination and that the definition is not, of itself, clear and straightforward.

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

It is possible that people might have different standards of what counts as clear and what does not. Nevertheless, there is a long history of legal discussion about the meaning of the term “discrimination”. It has been subject to a degree of contestation. The issue to be dealt with is the degree to which those outside this place can challenge orders that discriminate against them. The use of the affirmative resolution procedure is a safeguard, but not for political parties that are not represented in the House. The Green party, for instance, would not be protected by the procedure.

However, in the interests of the efficient dispatch of business, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 359 ordered to stand part of the Bill.