Political Parties and Elections Bill

– in a Public Bill Committee at on 4 November 2008.

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[Frank Cook in the Chair]

Photo of Frank Cook Frank Cook Labour, Stockton North 10:00, 4 November 2008

Before we begin, I have a few points to make. Members may, if they wish, remove their jackets during the sittings. Will they ensure that their mobile phones and pagers are turned off or at least switched to silent running during our proceedings? I would hate interruptions. I will have enough difficulty concentrating on the detail myself, without there being distractions. I remind the Committee that there is a money resolution in connection with the Bill, copies of which are available in the room. Adequate notice should be given of amendments and, to be eligible for selection at a Tuesday sitting, they must be tabled by the rise of the House on the previous Thursday. To be eligible for selection at a Thursday sitting, they must be tabled by the previous Monday. As a general rule, I and my fellow Chairmen do not intend to call starred amendments.

Not everyone is familiar with the process of taking oral evidence in Public Bill Committees, so it might help if I explain briefly what is proposed so that we can all be clear about it, especially me. The Committee will be asked first to consider the programme motion on the amendment paper for which debate is limited to half an hour. We shall then consider a motion to report written evidence, followed by a motion to permit the Committee to deliberate in private in advance of the oral evidence sessions, which I hope that we can take formally to save time.

Assuming that the second motion has been agreed, the Committee will then move into private session. After it has deliberated, witnesses and members of the public will be invited back into the room and our oral evidence session will commence. That should be at about 10.30. We shall not be starting the evidence session before then. If the Committee agrees to the programme motion, it will hear oral evidence today and on Thursday, and revert to the more familiar proceedings of clause-by-clause scrutiny next week. I call the Minister to move the programme motion.

Motion made, and Question proposed,

That—

(1) the Committee shall (in addition to its first meeting at 10.00 a.m. on Tuesday 4th November) meet—

(a) at 9.00 a.m. and 1.00 p.m. on Thursday 6th November;

(b) at 10.30 a.m. and 4.30 p.m. on Tuesday 11th November;

(c) at 9.00 a.m. and 1.00 p.m. on Thursday 13th November;

(d) at 10.30 a.m. and 4.30 p.m. on Tuesday 18th November;

(e) at 9.00 a.m. and 1.00 p.m. on Thursday 20th November;

(2) the Committee shall hear evidence in accordance with the following Table;

Date

Time

Witness

Tuesday 4th November

Until no later than 12.00 p.m.

Ministry of Justice

Tuesday 4th November

Until no later than 1.00 p.m.

Sir Hayden Phillips; Sir Christopher Kelly

Thursday 6th November

Until no later than 10.25 a.m.

Electoral Commission

Thursday 6th November

Until no later than 2.00 p.m.

Professor Keith Ewing, King’s College London; Professor Justin Fisher, Brunel University; Dr Michael Pinto-Duschinsky

Thursday 6th November

Until no later than 3.00 p.m.

Representatives of the Labour Party, the Conservative Party, and the Liberal Democrats

(3) the proceedings shall be taken in the following order: Clauses 4 to 7; new Clauses relating to Electoral Commisioners etc; new Schedules relating to Electoral Commissioners etc; Clauses 1 and 2; Schedule 1; Clause 3; Schedule 2; new Clauses relating to functions of Electoral Commission; new Schedules relating to functions of Electoral Commission; Clauses 12 and 13; new Clauses relating to elections and electoral registration; new Schedules relating to elections and electoral registration; Clause 8; Schedule 3; Clauses 9 to 11; new Clauses relating to political donations and expenditure; new Schedules relating to political donations and expenditure; Clauses 14 and 15; Schedules 4 and 5; Clauses 16 to 20; remaining new Clauses; remaining new Schedules; remaining proceedings on the Bill;

(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 4.00 p.m. on Thursday 20th November. —[Mr. Wills.]

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I wish to say a few words about the programme motion. The sub-committee’s deliberations were a somewhat tortuous affair. We appreciate that a number of difficulties and irregularities involved in the process made it complicated and, as you will appreciate, Mr. Cook, we put our various protests on the record. We have lingering doubts about the timetable, even though we do not intend to oppose the motion. We are worried whether there will be adequate time for the tabling of amendments. I accept that there will be several hours after the close of the final evidence session on Thursday before the rise of the House, as you said in your opening remarks, when we shall have time to table amendments. Having said that, we would have preferred a longer period in which to contemplate amendments, rather than just a few hours following the end of the evidential process. On that basis, we are reserving our position on the timetable to some extent and hope, as discussed in a sub-committee, that the Government will be open-minded if it seems that more time is required.

Photo of Alan Reid Alan Reid Shadow Minister (Northern Ireland), Shadow Minister (Scotland)

I welcome you to the Chair this morning, Mr. Cook. I have one point about the programme motion, echoing what has just been said. If, following the evidence sitting on the Thursday, we have only a few hours or, if the House rises early, no time at all to submit amendments, I ask you and your fellow Chairs, Mr. Cook, to take cognisance of that and perhaps accept starred amendments, if they arise as a result of evidence that we take on the Thursday and they ought to be debated on the following Tuesday.

Photo of Frank Cook Frank Cook Labour, Stockton North

We shall bear that in mind.

Photo of Michael Wills Michael Wills Minister of State, Ministry of Justice, The Minister of State, Ministry of Justice

I shall respond briefly to those comments. As reference has been made to the informal proceedings, in keeping with the spirit in which the Government approached the informal proceedings setting the programme motion, we were determined to do everything we possibly could to accommodate the timetable of Opposition spokespeople. They had a certain amount of confusion about their diaries and we did everything that we could to accommodate them. We shall continue in that spirit. If there is a need to find further time, we shall do everything possible. The subject is important and we want to debate it properly. We would not want the Opposition to be constrained by a lack of time for tabling amendments, if we can possibly avoid it.

Photo of Frank Cook Frank Cook Labour, Stockton North

Thank you. I am sure that is helpful.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I did not participate in the informal sub-committee, so I am not privy to any of those alleged confusions, difficulties or complexities, but it strikes me that the crucial issue, if we are to make sense of the evidence sittings, is to be given enough time to think through how to translate the evidence that we have had into amendments. I am grateful, Mr. Cook, that you will bear starred amendments in mind. It would be hugely helpful if you could give us a feel later in our proceedings, but before Thursday, what your attitude will be on the specific issue of amendments derived from evidence that may have been collected only in the hours prior to what at the moment is the deadline.

Photo of Frank Cook Frank Cook Labour, Stockton North

Like you, Mr. Tyrie, I was not able to attend the pre-meeting, but I am reliably informed that matters have been discussed in considerable detail. It is a matter for the usual channels to sort out on the way through. There is nothing cast in stone or iron here. I am sure that, with the Government’s intention to be extremely reasonable and rational, as we heard, everyone will have every chance.

Photo of Pete Wishart Pete Wishart Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (International Development), Shadow Spokesperson (Justice)

I, too, welcome you to the Chair, Mr. Cook. May I ask, through you, who was invited to the sub-committee last week? How are the invitations delivered? Who from the Committee qualifies to be part of that sub-group?

Photo of Frank Cook Frank Cook Labour, Stockton North

Those who are thought necessary to conduct the proceedings are invited specifically by Mr. Speaker. I am not in a position to question Mr. Speaker from this lowly seat.

Question put and agreed to.

Ordered,

That, subject to the discretion of the Chairman, any written evidence received by the Committee shall be reported to the House for publication.—[Mr. Wills.]

Photo of Frank Cook Frank Cook Labour, Stockton North

Copies of any memoranda received by the Committee will be made available in the Committee Room.

Ordered,

That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—[Mr. Wills.]

The Committee deliberated in private.

On resuming—

Photo of Frank Cook Frank Cook Labour, Stockton North

We shall now hear the oral evidence from Ministers and officials from the Ministry of Justice. Good morning, I welcome you all here today. For the record, perhaps it would be useful if you would each introduce yourselves to the Committee.

Mr. Straw: Thank you, Mr. Cook. I am the Secretary of State for Justice, for these purposes. On my left is Michael Wills, the Minister of State who is handling the Bill. On his left is Mark Sweeney, the director running the division in the Ministry which covers electoral law. Matthew Smith is the lawyer on the Bill. Ruth Sloan, on my right, is the Bill principal.

Photo of Frank Cook Frank Cook Labour, Stockton North

Thank you. Before calling the first Member to ask a question, I should like to remind all members of the Committee that questions should be limited to matters within the scope of the Bill. I call Jonathan Djanogly.

Q 1

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Thank you Mr. Cook. I look forward to serving under the chairmanship of yourself and Sir Nicholas over the coming weeks.

Secretary of State, would you agree that the purpose of this Bill is to deliver confidence in our electoral system?

Mr. Straw: I hope that that is one of the effects. Within that, the purpose of the Bill is also to improve the operation and effectiveness of the Electoral Commission, not least in the light of the significant criticism of its effectiveness which was made by the Committee on Standards in Public Life.

Q 2

Mr. Straw: Yes, in a nutshell. There is probably another question coming, Mr. Djanogly.

Q 3

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

There is indeed, Secretary of State. Given that the vast majority of alleged, or real, crimes in relation to elections occur in respect of electoral fraud—I believe that there were some 450 incidents of reported alleged crimes, of which only 40 were prosecuted in the event—why does the Bill not deal with that issue at all?

Mr. Straw: There is already a substantial body of law in the principal Act, as well as in common law and other statutes. You will be aware that the provenance of this Bill goes back to the establishment of the Hayden Phillips inquiry at the beginning of 2006. I may be wrong about this, but I cannot recall any representations by any political party, or other outsiders, that the law in respect of fraudulent practices needs to be changed or improved. However, we are open to further representations, including from your party. I may be wrong and there have been representations, but I do not recall any suggesting that that should be the focus of the Bill, which, as I said, builds on substantial legislation that, ultimately, was passed with all-party agreement in 2000.

Q 4

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The Conservative party has maintained that that should be the main focus of the Bill for the past three years. I shall move on to the next question. How many incidents of or investigations into malpractice relating to party funding have there been over the past five years?

Mr. Straw: On your first assertion, that the Conservative party says that the Bill should focus on fraud, I was party to the Hayden Phillips discussions over a long period and to the statement that I made in the House in March 2007. The focus was on different things. We are happy to receive representations from your party and, if your party feels that amendments should be made, obviously we shall look at them, as we always do, on the merits. I have made it clear, ever since I started dealing with this area 10 or 11 years ago, that it is important to work on a consensual basis, and I still think so.

Q 5

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I totally accept that the Hayden Phillips discussions were on party funding. What is not the case is that the Bill is anything to do with the Hayden Phillips discussions. In fact, you yourself said on Second Reading that we have moved beyond Hayden Phillips and that you were looking for another way to move forward. Returning to my question, how many incidents have there been of prosecutions, or even investigations, over the past five years?

Mr. Straw: I do not have the figures to hand.

Q 6

Mr. Straw: No. I do not have the figures to hand, but if you want to ask such specific questions—detailed statistical evidence, which I do not know whether my officials have to hand—I would be happy to provide the information.

A matter of correction, Mr. Djanogly, on what I said about the provenance of a significant part of the Bill, although obviously the policy has been developed. Quite a number of clauses relate to improving how the Electoral Commission is constituted and operates. Those parts of the Bill follow from the reports of three, separate, independent investigations, in date order, from the Select Committee on Constitutional Affairs—precursor of the Justice Committee—the Committee on Standards in Public Life and the Hayden Phillips inquiry. All three inquiries addressed the question of how the Electoral Commission could and should be improved.

Q 7

Mr. Straw: What I said was its provenance.

Q 8

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

We are well post-Hayden Phillips. However, given that, I find your further point rather disturbing. You said that the figures relating to the prosecutions for party funding misdemeanours are not known to you, and I think you said that they were not relevant to our discussions. On the basis of what you said, which was that this should be about party funding rather than electoral fraud, the figures are directly relevant and the core of what the Bill is about. That is what you are seriously maintaining the Bill should be dealing with, yet you cannot provide the figures.

Mr. Straw: You are tilting at a windmill, if I may say so. I have been completely inserted into all the discussions since I became Leader of the House in May 2007. As sure as I am sitting here, the focus has been on how we improve the Electoral Commission and the crucial area of dealing with the arms race. It has been acknowledged on all sides that it is absolutely essential to the operation  of good elections in this country that there should be effective limits on the totality of campaign spending—in the generic sense—by political parties, so that we do not get into the position of other countries. Particular concerns have been made by some, though not all, parties, that there is a lacuna in this Act—unintended, I may say—which does not provide for regulation of expenditure by candidates until the election period itself.

Because these were the terms of reference of the Hayden Phillips inquiry, there was extensive discussion within both that inquiry and then the all—party talks, which he chaired, about whether there was scope to introduce donation limits in return for state funding. However, you will be aware that those discussions were aborted when the Conservative party, as it happens, were unable to proceed on the basis of a draft agreement, which had been brokered with those three parties in the early part of 2007.

Q 9

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

It is again very pleasurable to sit under your chairmanship, Mr. Cook.

Unlike Jonathan Djanogly, I agree with you, Secretary of State, that the heart of this Bill is donations and expenditure. The relationship of the Bill with the Hayden Phillips’ compromise, which itself draws on what the Select Committee did, is at the heart of the matter. Can you talk about the Hayden Phillips proposals? Do you agree with me that it is disappointing that, as far as I can see, you are not in a position to submit anything of the major proposals that Hayden Phillips put forward? Those proposals were: a global cap on spending to cover the entire electoral cycle at national level; a donation cap of £50,000; and a way of dealing with the vexed issue of the union relationship with the Labour party, which would separate out donations on the one hand and affiliations on the other.

Mr. Straw: It is disappointing. All three parties went in good faith into the negotiations following the Hayden Phillips final report in March 2007. Certainly, that was the impression that both your party representatives and mine had of the approach of the Conservative party up until the summer break. A draft heads of agreement was then put together by Sir Hayden’s team, which I understand was brokered with each of the party representatives, and has now been made public. Then the original meeting that was to take place on 3 September was deferred at the request of the Conservatives. There was then a discussion about whether it should take place in early October. We finally had the meeting on 30 October last year when—as David Heath, the then Liberal Democrat representative on the inquiry said—the Conservative party walked away. They did walk away—I was present too.

The Hayden proposals required movement by all three political parties—that is in the nature of an effective compromise. We were ready to move; I believe that the Liberal Democrat party was ready to move. But I am clear about one thing—and I have said it repeatedly. Although there will be some heated discussions about what should go into electoral law, our political system is not served if we end up with legislation which is partisan and not accepted by all parties, however reluctantly I come to that view.

It could be said that the political climate was different back in 1999-2000. But since we had a very large majority and there was every possibility at that stage  that we would be in power for a decade, which has turned out to be the case, I and colleagues in Cabinet at that time, and on the Floor of the House, were determined that although we could have pushed a partisan point, we did not, so that we ended up with an agreed Act. That is what I hope we can achieve here, notwithstanding my own disappointment and your party’s about the fact that we came very close to a sensible and reforming set of proposals, which were not accepted.

Q 10

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

The question now is what to do, given that the talks broke down then. Notwithstanding what you said about consensus, two things could have been done: to propose at least what Hayden Phillips proposed, and to challenge parties that were against it to explain why they were against it. One point of view is that at that point a different consensus would break out; a consensus backed by where the public is rather than where the parties are.

Secondly, you talked about the political climate. Is it not possible to say now that the political climate has changed again? We have had a new round of scandals, of possible donation scandals and so on. We have also seen the collapse of the financial sector of the economy from where a lot of donations previously came. Would now not be a good time at least to try to reopen the talks, so instead of having a tiny Bill—I shall come on to its proposals in a minute—that will do virtually nothing about such issues, we do something more comprehensive; more what the public want?

Mr. Straw: As for the new round of scandals, it is important to put things into perspective. If it emerges that a leading spokesman for one party or another has been discussing donations, that could conceivably not come within the 2000 Act regime. It would be a story, but there are proper processes for it to be investigated and, as far as I know, such matters have been referred to the Electoral Commission. It is up to each individual to judge whether they amount to a scandal—they certainly amount to a story. The regime for handling, for example, allegations of donations that have been made unlawfully because they are from overseas, subject to proposals in the context of the Bill, is substantial, but perhaps it needs to be improved.

As for the heart of your question, Mr. Howarth, which is whether we can get the talks going, that would only be if there were suddenly indications from all three parties that the time was right, otherwise we would be wasting our time. If we were to go for a scheme of donation limits, it is fundamental and it was accepted that that would have to be paralleled by the introduction of state funding because there would be a loss of income to all three political parties and to the smaller parties if it were to happen. There have been many proposals for how mechanisms would operate, some of which I personally find attractive, but it is the case that, for example, the Leader of the Conservative party for understandable reasons said explicitly last November that

“there can be no justification for more state funding of political parties unless a tough cap”

is applied on donations.

The difficulty is to arrive at a regime that balances the two issues and there must be a judgment, especially at a time of economic difficulty, about whether it would be  acceptable to our constituents to pay a sum approaching £100 million by way of state funding. It would be their money, not ours. I am nervous about that proposition, as are many others at the moment, so it will take some time, and there might need to be further consideration of the issue down the track, once the revised regime established by the Bill settles down, by a body such as the Committee on Standards in Public Life, which did a good job—although not a perfect job—11 years ago.

Q 11

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

But the amount of state funding that might be required should be revisited in light of what has happened in the US, with Barack Obama raising hundreds of millions of dollars in small amounts in a place where there is a donation cap. It might be worth going back to the talks with the question of how much state funding there should be and how long it would need to last to get us into a completely different system, where parties supported themselves out of small donations.

Finally, may I come to what is in the Bill with regard to the return of triggering? That is the only proposal that tries to deal with those issues, and to a lot of people it seems an inadequate tool. That is because, first, it deals only with candidate spending and not with the heart of the matter, which is party spending outside elections. Parties can continue to pour money into particular constituencies, and as long as they do not refer to a particular candidate’s campaign, that spending will not be covered and therefore there is no change from the current system.

Secondly, when we had triggering previously, it led to a situation where agents would send threatening letters to one another, no case would ever go to court and no one really knew whose election expenses had started. It did not work and was generally considered unenforceable. Instead of bringing back the triggering mechanism, would it not be better to have something like the Hayden Phillips proposal, but targeted at local party spending? We could have the Hayden Phillips proposal for a national cap and, underneath that, a local cap throughout the electoral cycle. That would catch all this, targeting local spending outside elections.

Mr. Straw: Of course there is a case, which was looked at in some detail by Hayden, for comprehensive and continuous spending limits that essentially include all aspects of political parties’ activities, apart from such things as pension contributions for their staff. It would be assumed that political parties existed principally for the purpose of winning elections and that all their activities, national and local, were covered by a cap.

There are various of ways of doing that. One way would be to have a national limit of x million pounds a year, with an increase for the 12 months prior to a general election, and then—either within or outwith that limit—to set a specific local limit as well. That is certainly a proposition and Hayden Phillips came close to endorsing it, but not completely. He was trying to search for a consensus, as I have been trying to do since May 2006. However, Hayden did say, at page 15 of his March 2007 report:

“The parties will need to consider carefully what level of local control is necessary to realise their commitment to limit campaign spending as a whole.”

That is a supplement to the answer that I gave Mr. Djanogly, indicating that on that issue, too, the provenance of the Bill is what Hayden Phillips said.

We might argue about whether the triggering proposals are adequate or fair. My view is that when they existed before, of course they were not perfect—these things rarely are—but they acted as a dampener on activity. A judgment had to be made about what was covered by the definition, as it then stood, in the Representation of the People Act 1983, as expenses incurred

“in respect of the conduct or management of the election”.

Those terms were altered slightly by the 2000 Act.

The Committee will be familiar with the judgment in the Fiona Jones case, in which the Lord Chief Justice, Lord Bingham, said:

“Election expenses are not incurred where a constituency party carries on its ordinary political activity otherwise than with reference to a specific election which is reasonably imminent, even though such activity has the ultimate aim of winning public support and gaining or retaining power in the constituency; nor are they incurred by a candidate who nurses the constituency. An election expense means expenses incurred, by or on behalf of a particular candidate”.

As long as we have a distinction—some of the parties are keen on maintaining it—between the general activity of political parties and activities that are related to

“the conduct or management of the election”,

as in the old definition, or for the purposes of an election, as in the new definition, we must make a judgment about where the division falls.

That said, I have not suggested that I think the reintroduction of triggering is a perfect answer. The reason I put it forward is that there had been, without any question, a consensus for it. I appreciate that there are different views now, but there was a consensus, including when the 2000 Act was considered, and we had experience of it working. In a more perfect world, you would be right. However, unless we abandon the approach that all political parties have adopted for a long time, certainly post war—which is that while we have fairly spirited arguments about the party funding regime, ultimately it is not used as a partisan tool against other parties—we must proceed by agreement. I do not see any alternative.

Q 12

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

A moment ago, you referred to controls over expenditure and the Hayden Phillips process. With your permission, Mr. Cook, I will address only the party funding issues now and come back to triggering after my party spokesperson has contributed, as I think we were originally going to do and if I am able to catch your eye.

Q 13

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

On the party funding issues, is it the case that expenditure caps form part of Hayden Phillips’ terms of reference?

Mr. Straw: They certainly form part of his recommendations, and—

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I would just like an answer to the question.

Mr. Straw: I believe they do, but I can read out the terms of reference for you.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Perhaps you would like to read them out to us.

Mr. Straw: The terms of reference state:

“To conduct a review of the funding of political parties.

In particular, to:

examine the case for state funding of political parties, including whether it should be enhanced in return for a cap on the size of donations;

consider the transparency of political parties’ funding; and

report... by the end of December”.

The terms go on to state that Sir Hayden Phillips will work with stakeholders and that he has been asked to

“produce recommendations, which are as much as possible agreed between the political parties”.

Now, Mr. Tyrie—

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I do not need any more. All I am really after—

Mr. Straw: My answer is yes; your answer, I know, is no. We will have to disagree about it.

Q 14

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I would just like you to have another go at finding the reference to expenditure in Hayden Phillips’ terms of reference. I have them in front of me. I am not going to read them out as you have done, but I would like you to identify the place in the terms of reference where expenditure is referred to.

Mr. Straw: In the first line. If you are reviewing the funding of political parties, I fail to see how you can possibly make judgments about the funding of political parties and not make judgments about expenditure—those are two sides of a balance sheet, or an account. You are from the party of business, Mr. Tyrie, so I would have thought that you would know that.

Q 15

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

The terms of reference actually say

“to examine the case for state funding of political parties.”

Mr. Straw: First, it says:

“To conduct a review of the funding of political parties.

In particular—”

The “in particular”, however, does not exclude anything else, otherwise it would have said “exclusively to consider”. I do not recall that particular issue, a rather theological issue. Unusually for you, if I may say so, Mr. Tyrie, it is one that I have never thought is a strong argument. I know where this is leading. You say that we should not be bothered about expenditure limits, but that is not the view of your party. Mr. Nick Herbert was quite explicit in saying that—

Photo of James Duddridge James Duddridge Opposition Whip (Commons)

On a point of order, Mr. Cook. I seek your guidance on whether we should encourage witnesses to give evidence on things that have already been written, which we could have read before and which are not actually the witness’ own words. We want the people giving evidence to give evidence, not to give other people’s evidence. I seek your advice on what instruction we should give to those called before the Committee.

Photo of Frank Cook Frank Cook Labour, Stockton North

Thank you for your question. It is fairly plain to me that a question was posed to the Secretary of State and that he is giving an answer. If that means referring to other opinions and statements by other recognised agencies, the questioner must be prepared to accept the explanation being put on offer. The Secretary of State may finish.

Q 16

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

To clarify matters, Secretary of State, will you go back to where you felt that I was being theological? You seemed to break off into a series of sub-clauses.

Mr. Straw: You were trying to dance on the head of a pin about the terms of reference. You and I have debated the matter before, Mr. Tyrie. Sir Hayden Phillips will give evidence at 12 o’clock today, so it is better to ask him. He chose to interpret his terms of reference in the way that he did, and he produced the report.

Q 17

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Were you participating in the talks at the time that the matter was discussed with Hayden Phillips?

Mr. Straw: What happened was—

Q 18

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Will you just answer the question: yes or no? It was a very clear question.

Mr. Straw: It depends on what you mean by “talks”. What happened, as you will recall, was that there was a process leading up to the interim report and then to the final report on 15 March last year where Sir Hayden interviewed the different parties. Following that report and its acceptance in general terms by all three parties, there was a detailed process of all-party talks.

Q 19

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Were you at the meeting at which the leader of my party and the then Prime Minister discussed the terms of reference?

Mr. Straw: No, I was abroad at the time. I was Foreign Secretary.

Q 20

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I was at that meeting. I attended every meeting. Do you think it relevant that the then Prime Minister made it clear that the purpose of the talks was to examine state funding, caps on donations and transparency? If you read the terms of reference, you will find that they exactly match the wishes of the Prime Minister and the Leader of the Opposition in that respect. Do you accept that there has been a change of attitude by the Labour party towards the need for fundamental reform, as a consequence of the change of leader?

Mr. Straw: It is worth bearing it in mind that Sir Hayden produced his report when Mr. Blair was still Prime Minister.

Q 21

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

He produced his interim report.

Mr. Straw: No, he produced both reports, with great respect. Mr. Blair was—

Q 22

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

It was the interim report with the first mention of expenditure.

Mr. Straw: No, Mr. Tyrie, there were two reports. There was an interim report in October 2006. There was a final report on 15 March 2007, and then there was the process of negotiations. Tony Blair ceased to be Prime Minister on 28 June 2007.

Q 23

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

When did the talks break down?

Mr. Straw: That was not a final report. The breakdown of the talks took place—as you will recall, because I think you were there—on 30 October 2007. For the life  of me, I do not understand what point you are making. In chapter 4 of the final report, Sir Hayden discussed limits on spending. Your party accepted that report and welcomed it. The shadow Leader of the House said:

“We welcome the publication of Sir Hayden Phillips’ report. We accept his main recommendations...we are happy to discuss spending caps on all year round non-election campaigning and proposals for tighter controls”—[Official Report, 15 March 2007; Vol. 458, c. 469.]

on party spending. In a parallel statement, Francis Maude said:

“We welcome this report. We accept its main recommendations...we also accept Sir Hayden’s call for caps on spending...Sir Hayden’s objectives are ours. We hope that all parties now work together to achieve them”.

I have never understood what point—if I may say so, Mr. Tyrie—that you, in particular, are making. It is completely at odds with the approach that your own party spokespeople were taking at the time that Hayden published his 15 March report and subsequently.

On 11 December, after the breakdown of the talks, Nick Herbert, now the shadow Justice Secretary, said:

“We are much more interested in reducing the cost of politics and that is what David Cameron has made clear”.

Q 24

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

When we had a meeting with Tony Blair, at which you were not present, it was clear that the difficulty in the whole area would be affiliation fees. It would be the extent to which we could include trade unions and a cap on donations. That was the primary task given to Hayden Phillips subsequently. Do you agree that the talks in fact broke down because it was clear that genuine choice of whether to donate would not be given to affiliated members? It was likely that we would continue with a situation in which a large proportion of affiliated members who do not even vote for the Labour party would none the less be forced, in practice, to continue contributing to it.

Mr. Straw: No. For the record, I was not present, but from talking to those who were I do not accept your interpretation of what took place at that meeting, which was in the early part of 2006, nor do I accept your interpretation of the breakdown of the talks. I have already referred, Mr. Cook, to the welcome given by—

Q 25

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

You are not accepting my interpretation of a meeting at which you were not present.

Mr. Straw: No, not least because I have seen what followed from that meeting—that is, how Sir Hayden Phillips, a distinguished public servant, operated. How he interpreted his terms of reference was, with respect, rather different from how you have interpreted them. I think that we are entitled to rely on his opinion there. Secondly, as I have already spelt out, your party welcomed Sir Hayden’s recommendations—not with an aberrant back-of-the-envelope remark to a political journalist, but with a statement in the House, reinforced by Francis Maude outside the House. One of those referred—

Q 26

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I was asking you about affiliation fees, Secretary of State. I am trying to get at whether you feel that the question of choice on affiliation fees was crucial to the breakdown of the talks.

Mr. Straw: And I am answering, if I may. I listened politely, if I may say so, to your question, so I would be grateful if I could answer it in my own way.

You will recall one of the points of Sir Hayden’s recommendations—page 10 of his March report—in respect of trade union affiliation fees:

“In my view, these payments may be regarded as individual donations for the purpose of the new limit if, and only if, the decisions reached are clearly transparent and it is possible to trace payments back to identifiable individuals.”

Co-operatively, up to the end of July, we worked on how that could be put into effect, notwithstanding the fact that it would lead to some quite significant relationship changes. As I have said, there was then a change of approach by the Conservative party.

I have always regarded David Heath as a reasonably independent witness to what happened in terms of argument between the Conservative and Labour parties. On more than one occasion, but here on 3 January this year, David Heath said:

“Frankly, it is entirely bogus what”

the Conservative party are

“saying about trade union funding. Some of the abuses that undoubtedly are there were dealt with and the Labour party had to move a long way on it.

It was interesting that their”—

the Conservative party’s—

“attitude changed on this subject markedly over the summer at about the same time that a certain Lord Ashcroft moved into Central Office.”

That is a matter for you. I do not know the reason, but it was absolutely palpable that the approach of the Conservative party shifted about 180° between March 2007, when this report came out, and 30 October, when the talks broke down.

Q 27

Photo of Martin Linton Martin Linton Labour, Battersea

The Secretary of State may be relieved to know that I am not going to ask about what is not in the Bill, nor about the history of the talks with Sir Hayden Phillips, which I am sure that we can come back to. I am interested in the issue of party funding, which I have always understood to include both income and expenditure of political parties. I regard the Political Parties and Elections Bill as landmark legislation in the field. I support some wider reform of donations and spending limits, but the Secretary of State was right to go ahead with a limited Bill, which deals with the most urgent loopholes in existing legislation, specifically those that allow unincorporated associations to make, effectively, undisclosed donations and candidates to spend without limit at least up until Dissolution.

My questions are specific, mainly designed to draw out detailed points from the Department. Would clause 8 really close the door on all undeclared donations from unincorporated associations, or oblige all donations over £200 to be disclosed? I have another couple of small points to add at this stage. I should like to know whether clause 8 will also catch donations through British companies that are foreign owned. It seems to me that if it does not catch them, that could be put right in this Bill.

I should also like to know—if the Chairman agrees—a bit more about clause 10 on triggering. There are a lot of questions about when it would come into force and what will happen to people who have already declared themselves candidates on the date this Bill receives Royal Assent. Will they have to stop handing out leaflets, or pull down websites that describe them as candidates? Can we have some of the practical details of how this Bill will work? I do not know whether I am anticipating another section of the discussion in asking that.

Mr. Straw: May I respond to the clause 8 point Mr. Cook? How would you like me to proceed?

Photo of Frank Cook Frank Cook Labour, Stockton North

Proceed with the clause 8 interrogation. Mr. Tyrie has already indicated that he wants to come on to the triggering clause, so we can roll those together later.

Mr. Straw: I will ask one of my excellent officials to comment on clause 8 as well. By way of background, there is a consensus that there has to be greater transparency; that was the whole purpose of the 2000 Act. As far as I can see, no one is arguing on the issue of transparency. You can argue about levels of total spending and how it has happened but these days, subject to the minimum limit which I know parties have concerns about, there ought to be transparency about who is giving what. There have been concerns about some of the unincorporated associations. The leaders of all parties have said that they want the source to be made clear. That has been the aim of the parliamentary draftsperson in producing the Bill.

Can I say with absolutely certainty that it will work as we intend? No, because I am afraid that Acts are subject to interpretation and sometimes subject to error—including mine. You can get gaps—as happened unintentionally in this Act. I do not know whether Mr. Sweeney or Mr. Smith wishes to add anything.

Mark Sweeney: Clause 8 is not intended to add any additional requirements, in terms of who may or may not donate, or the way in which they may do so. It is intended to amplify the existing requirements in sections 54(4) and (6) of the Political Parties, Elections and Referendums Act, which deal with agency, or the true source of a donation. The new clause requires that somebody has consciously to consider whether, if they are giving money, those bits of the original legislation are engaged—that is to say whether they are acting as an agent for somebody else. The precise circumstances of whether somebody is acting as an agent will vary from case to case.

You asked specifically about unincorporated association, for example. Where somebody gives money to an unincorporated association and says, “Here you are. I would like you to give this to x party” and that is duly handed on, so that the unincorporated association acts as an intermediary, we would expect that to be “agency”, under the terms of the existing legislation. A declaration under this clause would therefore say, “I have acted as an agent.” The circumstances may not always be as clear cut as that. Somebody may not give an explicit instruction for what they wish to be done with the money and a court might then wish to look at contextual factors, such as the purpose of an unincorporated association and whether the person giving the money would have reasonably expected that anything else would be done with it once it was handed over.

In relation to your specific point about donations by companies that have foreign ownership, the clause does nothing to change the rules in relation to donations by those companies. I shall pause at that point. Matthew, do you want to add to or subtract from anything I have said?

Matthew Smith: No, just to say that on the companies point, the Act is clear at the moment that if a company is carrying out business in the UK and is registered here,  it can give money regardless of ownership, but of course, that takes effect subject to the agency provision that Mark has outlined.

Q 28

Photo of Martin Linton Martin Linton Labour, Battersea

If a foreign-owned company gives a large donation to a political party, is that not regarded as an overseas donation?

Mark Sweeney: Not if the company is carrying on business within the United Kingdom, as PPERA currently requires.

Q 29

Photo of Martin Linton Martin Linton Labour, Battersea

Is that not a loophole in the legislation?

Mark Sweeney: One could take that view, but that is what Parliament settled on in 2000, and it is not something that clause 8 seeks to address directly.

Q 30

Photo of Martin Linton Martin Linton Labour, Battersea

But if we were concerned to close the loopholes in the legislation, we should perhaps close that one as well.

Mark Sweeney: Certainly, this provision would not deal with that particular type of donation, so further legislation would be required.

Matthew Smith: In that sort of circumstance the question would come down to whether the UK company was being used purely as a vehicle through which to channel money, and if that were so, there would then be a question about whether there was an agency relationship. If there is an agency relationship, the Act requires that to be declared, and our provisions will require a declaration to be made about that.

Q 31

Photo of Martin Linton Martin Linton Labour, Battersea

The company may be carrying on legitimate business, but a foreign shareholder might phone up the chief executive and say, “Will you please make a donation of £50,000 to this party?” and the chief executive would be in a poor position to say no.

Mark Sweeney: Subject to anything that Matthew wants to say, without speculating on what would happen in an individual case, the greater the degree to which somebody’s wishes are being followed through by an entity, the more there might be a case for saying that there is agency. In the example you gave, if somebody who wholly owns a company that carries on business in the United Kingdom rings up the chief executive and says, “I command you to give £X,000 to a political party,” it might be the case that that is agency, although it has not been tested in the courts since 2000. Is that fair?

Matthew Smith: I would say that is fair.

Q 32

Photo of Martin Linton Martin Linton Labour, Battersea

Who has to make the judgment about whether an unincorporated association is a conduit for money to political parties or a legitimate organisation? For instance, the East Surrey Business Club, the Billericay Westminster dining club and the Midlands Industrial Council just happen to have addresses that are the same as local Conservative associations, but apart from that, nothing in their titles specifically suggests that they are acting as conduits. However, it is well established that they are. Who makes that decision about whether they are conduits?

Mark Sweeney: Ultimately, it would be the courts. The Electoral Commission is empowered—and would have further powers that we may come on to—to investigate in individual circumstances where there might be cause  to believe that an agency relationship existed and had not been correctly declared. I am sorry to fall back on this phrase, but it would depend on the circumstances of the case. In my earlier remarks I suggested that where an organisation is not named in a way that necessarily suggests it is affiliated to a particular party, it could still be acting as an agent, but that would depend on the circumstances.

I do not want to use one of the organisations that you mentioned, but if there was an unincorporated association that was, for the sake of argument, just called “The Committee”, and some money was given to it by an individual, if the individual said “I want you to pass this to x political party,” that would be agency. If all that the committee did was collect donations and give them to a political party, and that was the only thing on which it spent money, but there was no spoken transaction or contract between it and an individual giving it money stating that that would happen, that would potentially be agency as well. The further that you move away from a direct instruction and an unincorporated association having that as its sole purpose, the less likely it is that a court will find that that is an agency relationship.

Matthew Smith: We have to stress that at the moment the precise confines of agency as given in the 2000 Act—whether something is given

“by or on behalf of”

the donor, for example by an unincorporated association—has yet to be tested by the courts, so it is inherently quite uncertain.

Q 33

Photo of Martin Linton Martin Linton Labour, Battersea

But they would have to make a declaration under clause 8 of the Bill.

Matthew Smith: Absolutely. You talk about who is responsible, and in fact in the first instance it is for the person giving money over to declare whether they are the donor or whether they are giving it on behalf of someone else. The clause is designed to focus the minds of both the person handing the money to the political party and the recipient political party, so that they must consider whether there is agency and so that there is a dialogue between those two individuals or organisations about that very point.

Q 34

Photo of Martin Linton Martin Linton Labour, Battersea

And the declaration would have to give a list of all donations of more than £200, and who they came from.

Matthew Smith: They would have to declare whether anyone had given them £200 with a view to the making of the eventual donation to a political party. So if the money has been handed over on the understanding that it will be passed on, under the new provisions one would expect someone to make a declaration about that. The declaration has to say whether there is an agency relationship, and if there is not, it has to explain why not.

Q 35

Photo of Martin Linton Martin Linton Labour, Battersea

Would the declaration be just to the donor, or would it be a public document?

Mark Sweeney: It would be made to the donor. It is not required to be published, although the Electoral Commission would be able to access it using its powers.

Mark Sweeney: Currently, it is not required for either the donor or the Electoral Commission to publish the declaration.

Matthew Smith: To fill in on that point, as part of its donation report, when the political party records the donation it has to pass on to the Electoral Commission the fact that a declaration has been made. That will form part of its donation report, which will itself be a public document.

Q 36

Photo of Pete Wishart Pete Wishart Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (International Development), Shadow Spokesperson (Justice)

May I gently remind the Secretary of State that there are more than three parties in the UK political process? In fact, some of those political parties are now the Government of some nations, and one of them is also looking to increase its number by a quarter in the course of the next few days.

I have been very disappointed by the way in which the Secretary of State, and probably all the other political parties in the House, have tried to engage the minority parties in the House. Our involvement has been pretty woeful, and the failure to invite us to the discussions with Hayden Phillips was a big omission. However, we will leave that aside just now, especially given our particular role. I am sure that the Secretary of State is eternally grateful to the Scottish National party for highlighting the practice of people being ennobled to the House of Lords for making donations to political parties. I am sure that he is grateful also for the robust and thorough police investigations to challenge whether that was legal.

May I ask the Secretary of State where in the Bill there is any indication that that type of practice could be dealt with efficiently and effectively, and will never be allowed to happen again?

Mr. Straw: I appreciate your concern and your perception of the way that smaller parties in the Westminster Parliament have been treated. Let me say that no offence was intended at all.

I know that you are to hear from Sir Hayden Phillips later, Mr. Cook, but may I say on his behalf that I am absolutely certain that no offence was meant by him either?

Mr. Wishart, you will probably find what I am about to say offensive, too, but there is a practical problem in trying to reach agreement with a very large number of parties. I am not thinking about the Scottish National party in that respect, but I shall leave that point there.

As far as allegations of favours are concerned, you will note that no prosecutions took place notwithstanding what, as you say, was a very thorough and proper inquiry. I hope that no false conclusions are being drawn from that process. I have had no representations that the basic law on the matter—which goes back to the Honours (Prevention of Abuses) Act 1925, as well as much wider law—needs to be changed, although if it does, I am happy to consider it.

Q 37

Photo of Pete Wishart Pete Wishart Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (International Development), Shadow Spokesperson (Justice)

There was a recent issue in the Scottish Parliament when one of Mr. Straw’s party colleagues was found guilty of securing a foreign donation for part of a leadership campaign. A number of us in Scotland believe that foreign donations—or outside donations, if we want to term them as such—should be included in the Bill to cover Scottish elections. Surely it is right and proper that elections fought and contested in Scotland should be contested only with Scottish money. Why should money from London and Westminster, for example, be used to contest Scottish elections?

Mr. Straw: The proposition now is this: if I had a relative living in Scotland, and as it happens I do, who was married—sadly, the person has now passed away—to someone as truly Scottish as you, Mr. Wishart, and they were standing in an election, because I happen to be domiciled in England, I would be banned from making a donation to that person’s campaign. That is an interesting idea, but it is not one that I share.

Q 38

Photo of Pete Wishart Pete Wishart Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (International Development), Shadow Spokesperson (Justice)

The same applies in European elections, so the same criteria could be applied, too. It would be easy to resolve. If you were registered to vote in Scotland, that would be the defining rule that allowed contributions to be made.

Mr. Straw: I understand entirely. Your approach to the future of the United Kingdom and mine—indeed, that of all the other parties represented around this table—are different. We have no such proposals.

Mr. Cook, Mr. Djanogly asked me a factual question earlier, to which I now have the answer thanks to my excellent officials. Would it be appropriate to read it to the Committee? It is short. It gives the number of convictions.

Mr. Straw: It is pertinent to Mr. Djanogly’s question. The answer is that, as at 16 June 2008, 29 people had been prosecuted under the 2000 Act, resulting in 23 convictions. That was shown at paragraph 2.8 of the White Paper. I apologise to Mr. Djanogly for not remembering that, although it was my White Paper.

Q 39

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

The point that I wanted to make, which I think you have made for me, Secretary of State, was that, compared with the relevant prosecutions for electoral fraud, this is a relatively small issue, yet electoral fraud is ignored by the Bill. You say 29, which compares with 450 for electoral fraud.

Mr. Straw: I do not recognise those figures, but I note that the Electoral Commission evaluation reports on the 2007-08 local elections show that allegations of electoral fraud are decreasing. That is certainly my own perception.

Photo of Frank Cook Frank Cook Labour, Stockton North

Thank you for that clarification.

If you have finished, Mr. Wishart, I call Eleanor Laing.

Q 40

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

Thank you, Mr. Cook, but Mr. Djanogly would like to follow up a question.

Photo of Frank Cook Frank Cook Labour, Stockton North

Mr. Djanogly has just indicated to me that everything is satisfactory.

Q 41

Photo of Frank Cook Frank Cook Labour, Stockton North

You want to pick up on another point. Eleanor Laing, are you are using Mr. Djanogly as a runner?

Photo of Frank Cook Frank Cook Labour, Stockton North

Run, Mr. Djanogly, run.

Q 42

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Thank you, Mr. Cook. Mr. Linton asked an interesting series of questions and I would like to look more at that area. If a company wishes to make a donation, what must happen?

Mark Sweeney: We must first be satisfied that the company is complying with the law under, I think, section 54(2) of the Political Parties, Elections and Referendums Act 2000 in respect of carrying on business in the United Kingdom. There are also procedures under the Companies Acts, which I do not have in front of me, to do with the degree to which a company must go through a procedure internally to make it clear that it will make a political donation.

Matthew Smith: A certain resolution has to be made to ensure that the company agrees that a donation to a political party can be made out of its funds.

Q 43

Matthew Smith: I do not have the provisions in front of me. My belief is that it would have to be passed each time that a donation was made.

Q 44

Matthew Smith: At least annually. We can probably provide some clarity on that at a later date, but certainly a resolution must be made, and my belief is that it is each time a donation is made.

Q 45

Matthew Smith: No, I cannot give the details, but we shall provide them to the Committee.

Q 46

Mr. Straw: With apologies for interrupting, I am very happy to ask officials, through Mr. Wills, to provide the Committee with a note setting out exactly how this works, if that would be of assistance.

Q 47

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

For the counter side to that, let us look at a trade union. If a trade union wants to give a donation, what does it have to do in terms of voting, or having a political fund, let us say?

Mr. Straw: You will be familiar with the rules for political funds, which are consolidated in the 1992 Act. I do not apologise for not having that with me, but I am again happy to provide the Committee with a detailed note.

The regime for the operation of political funds was tightened considerably during the 1980s and early 1990s. The regime is now a significant one, because it requires that every 10 years there should be a ballot of all the members of the trade union—regardless of whether they are paying the political levy—to decide whether to continue to operate a political fund.

The regime is very transparent—I am glad you asked the question. There is then a decision made by individual unions whether to affiliate to the Labour party. They either are or are not. Classically, the general unions—ones involved in the private sector—have been and remain affiliated to the Labour party; those involved in the  public sector, for obvious reasons, have not been. There is then a process of further openness, through the certification officer. In one or other of the official documents, which I published, there is reference made to the fact that we checked back, in the context of the Hayden Phillips inquiry and subsequent talks—

Mr. DjanoglySecretary of State—

Mr. Straw: Sorry, if I may just finish this point. I know for certain that, in the 10-year period, there were 10 complaints about the operation of the political levy.

Q 48

Mr. Straw: You asked about what the checks were. Only one of those complaints was ever found against a trade union—that was the prison officers, who are not affiliated to the Labour party.

Q 49

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

I thought that the answer we had about the information not being known was delivered as though it were not relevant to the Committee. This is directly relevant to party funding issues, and I am surprised at the lack of knowledge of the Committee in relation to it.

It would be helpful to the Committee if information could be given as to how often companies and unions have to vote. I think you will find that companies have to vote annually and unions every 10 years. The form of the resolution should be analysed in relation to both. I think you will find that companies have to vote on who the money goes to and how much goes, whereas unions do not have to do either. A full breakdown of the party funding voting issues would be relevant.

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. The purpose of this particular period is to take evidence from witnesses, rather than to make statements about a previous belief. I ask all hon. and right hon. Members to pose questions, rather than to make lengthy statements.

Q 50

Mr. Straw: Yes, happy to do so.

Q 51

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

It appears that the donor declarations will not be sent to the Electoral Commission. Such declarations do not even need to be kept for a minimum period. Does that constitute a lack of transparency? That is what the Bill is trying to get at, but what is the point of such donor declarations at such a low level?

Mr. Straw: Two points. First, I am afraid that I am to blame for this Public Bill Committee process. I long had the gleam in my eye of setting up the process, and I chaired the Modernisation Committee for a year and persuaded colleagues to go with it. Anyway, I happen to think that it is a very good thing, not least because it forces the Secretary of State to engage his brain about the detail and the wider policy behind a Bill. Whether or not this part of the Bill operates satisfactorily is a subject that should be examined in Committee.

We are seeking all the time to secure a balance between ensuring proper transparency and not imposing onerous burdens on political parties. Contrary to myth, political parties are not run by money-grabbing, self-seeking  people. Almost exclusively, they are run by volunteers who do it because they believe in their cause and are willing to go out on wet Wednesdays nights and so on. I feel that passionately, but sometimes, informed as well as ill-informed reporting about how parties operate can give the wrong impression.

I think that I have spoken formally to the House about the limit, and I will speak about it now. We are happy to look at raising clause 8 limits, perhaps bringing them into line with other appropriate limits. That can be discussed outside the Committee as well as inside. A Bill is just that—it is open to improvement. The original limit was set too low, and we have listened to representations about that.

Q 52

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

I am grateful for that. Last year, the Prime Minister promised a liberty test for all new powers of entry. Why does no liberty test accompany new powers of entry for the Electoral Commission? Should we not be more careful about giving the Electoral Commission powers to go into people’s private homes?

Mr. Straw: The Prime Minister not only said that there would be a liberty test, but such a test is inherent in all these proposals. Those powers of entry can be exercised only when the Electoral Commission has a reasonable belief that an offence has been committed and has obtained a warrant from a justice of the peace. It is not its decision, but that of a justice of the peace.

I understand the concerns raised about the precise operation of the clauses. I have heard representations on that subject from all parties, as it came up on Second Reading. I am actively looking at whether we can tighten the test further—it is already tight—and raise the judicial level at which warrants are issued from magistrate to judge. Mr. Wills hopes to come back to the Committee on that.

Photo of Frank Cook Frank Cook Labour, Stockton North

We are moving towards a line after which I intend to switch the discussion to triggering. Mr. Tyrie and Mr. Linton will come in first.

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

Thank you, Mr. Cook. Anticipating what you have just said, I was intending to switch to triggering now.

Photo of Frank Cook Frank Cook Labour, Stockton North

I hope that you did not read my thoughts.

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

Mr. Cook, I would not dream of telling the Committee what you are thinking.

Photo of Frank Cook Frank Cook Labour, Stockton North

Thank you for dreaming.

Q 53

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

Secretary of State, may I take you back to your opening remarks at the beginning of the Committee when you said that one of the main purposes of the Bill was to increase confidence in the electoral system? Without putting the question, I am sure that you will agree that uncertainty reduces confidence in the system and that uncertain law is bad law.

As to my concern about this area of the Bill, which we colloquially refer to as “triggering”—but I think that all members of the Committee understand what we mean by triggering—do you accept, Secretary of State,  that the Bill will have a retrospective effect? How can you justify the retrospective nature of the Bill, when there are people who are now acting perfectly legally and within the law, in preparing for when an election—general or otherwise—may occur, who, when the Bill becomes law, if it becomes law in the form in which it is put before us today, will find that they have been acting illegally? The retrospective nature of the Bill makes it unfair, does it not?

Mr. Straw: It is not my purpose that it should operate retrospectively. I appreciate that I raised the possibility that it might operate in the same way that some tax provisions sometimes do, from earlier dates than is normal with legislation—not in a retrospective way; but again, that point was raised in the House, and we have received other representations about it.

You are correct that currently, under the commencement provision in clause 19, the provisions are planned to come into force on the day when the Bill receives Royal Assent, not retrospectively—clause 10(5), as you will recall, is specifically to avoid that. Even if the clause as drafted and clause 19 were passed without any amendment, subsection (5) of clause 10 states:

“The amendments made by this section do not apply to any expenses incurred before the commencement of this section.”

It is certainly not the case, and it was never the intention, that if a political party is lawfully printing leaflets in support of a candidate at the moment—even though they are dished out afterwards—the provisions would catch that. It would obviously, I accept, be unfair. Clause 10(5) makes that clear.

However, I have also said that we are open to argument about whether commencement should take place on Royal Assent or later. Just to anticipate a point, if I may, Mr. Cook, I acknowledged, I think, on Second Reading, that the Electoral Commission said that it would need to take time to seek guidance once it had seen the legislation. I am certainly willing to consider that.

Q 54

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

This might be a ray of light. Are you saying, Secretary of State, that it is not your intention that the Bill should have retrospective effect, and that therefore if it transpires during the deliberations of the Committee and later in the consideration of the Bill that it will have a significant retrospective effect, the Government will accept amendments to stop that retrospective effect?

Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

Yes. I do not accept that it is retrospective at the moment, but I also want to say that it is a general principle of legislation that it should not have retrospective effect, save in very specific circumstances. The principal one is where a wrong has been done to an individual, and you want to right it. Whatever benefits the Bill has, that is not one of them.

Q 55

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

Indeed. Thank you very much, Secretary of State. That was very helpful. Can I take you further on the question of clarity—about the triggering rules? Again, I am concerned that if the Bill becomes law it should be clear. None of us wants another Fiona Jones case, with its ultimately tragic consequences.

Clarity in election matters is extremely important. At present, the triggering rules, as we refer to them, are not  clear. What is the event that will trigger the spending of election expenses? Is it not the case that the triggering rules are designed, at present, to make it more difficult for a candidate to campaign effectively, thus benefiting the sitting MP? In my constituency, which the Secretary of State knows to be a place of wonderful political activity, as the sitting MP, I can spend £10,000 of taxpayers’ money, not on campaigning—certainly never campaigning on party matters—but on communicating with the electorate in my constituency. Meanwhile, the Labour candidate who might stand against me at the next general election will be prevented from spending money that he might have raised himself, as a result of the Bill.

Mr. Straw: Where I agree with you is on the quality of your constituency. To let the Committee into a secret, I was born and brought up in Mrs. Laing’s constituency and my mother was a Labour councillor for quite a period, into her late 70s, and she still lives there.

On the specifics, I should first explain that I made the decision in the light of discussions that have taken place, using my judgment and not Hayden Phillips’ judgment, but also having considered what he said on page 15, which I have already quoted. Also, given what everybody accepts, that there was an unintended gap in the law because everybody thought that triggering would continue under the 1983 regime and it did not, I thought that we ought to reintroduce it. I thought that there would be a broad consensus for that, not least because Lord Mackay of Ardbrecknish—not Lord Mackay of Clashfern, who was Lord Chancellor, but the late Lord Mackay who was leading on the Bill in the House of Lords—moved amendments to make it clear that the 1983 regime would continue. I regret that Ministers were reassured that that was unnecessary, but there we are. I have never suggested that the trigger arrangements are perfect, but they did act as a dampener.

With respect, I do not accept that with the communications allowance somehow incumbent MPs will be advantaged over those who are candidates. Again, I draw attention to what the then Lord Chief Justice, now Lord Bingham, said in the Fiona Jones Court of Appeal judgment. He drew a distinction, which is there under the 1983 Act and will still be broadly there under the revised definition:

“Election expenses are not incurred where a constituency party carries on its ordinary political activity otherwise than with reference to a specific election which is reasonably imminent, even though such activity has the ultimate aim of winning public support and gaining or retaining power in the constituency; nor are they incurred by a candidate who nurses the constituency. An election expense means expenses incurred, by or on behalf of a particular candidate”

in respect of the conduct or management of the election, which has now been widened slightly to the purposes of the election. That distinction will have to remain in the law for as long as we do not arrive at an arrangement—which Mr. Howarth raised with me, but for which there is currently no consensus—where all spending by political parties at all times is subject to an overall limit, whether national or local.

The Electoral Commission made recommendations for trying to fill what is accepted on all sides as an unintended gap in the law. As we control campaign spending for 12 months before a general election, it was  expected that candidate spending would be controlled, not least by the continuation of the trigger, which is not there. The Electoral Commission said that the way to fill the gap is to have a four-month period before an election where the candidate spending is controlled. We put that forward in what became the Electoral Administration Act 2006, but it did not find favour.

There is agreement about the objective here. I do not say that this triggering proposal is perfect. If there were better ways of doing it and if, for example, we could find a way of improving what went into the 2006 Bill and was then dropped, let us look at it.

Q 56

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

The Secretary of State has, I think, just proved my point, which is that there is a lack clarity in this Bill. I thank him for that long and difficult answer. I appreciate that his intentions are good in the restoration of triggering, but, just by the very nature of his answer, it has become even more obvious that this part of this Bill is not clear. If we have an unclear law, we will end up with election results that are challengeable. Election results that are challengeable means that the validity of a future Government could be challengeable, and the very basis of our whole democratic process is weakened rather than strengthened.

All that I am asking here is that the triggering mechanism should be more clear than it is at present. Our interpretation of the Bill is different from that of the Secretary of State and that proves the point, which is that lawyers on both sides have a different interpretation of this. It must be clear so that the election result will be clear.

Is it not possible that there might be a candidate at this very moment, raising and spending money? It might be the Secretary of State’s mother raising money for the Labour candidate in my constituency, I hope so because we want to make sure that the Liberals do not do too well.

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. Please keep within the scope of the Bill.

Q 57

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

I was merely showing a great respect for the Secretary of State’s mother, who is a fine campaigner in my constituency. My real point is that, at this very moment, there might be candidates out there raising and spending money. It might be that, when this Bill comes into effect, they then find that they have spent up to the limit that will be imposed upon them. Therefore, a candidate could be in the position, after the Bill comes into force, of not being able to spend another pound on electoral matters and an electoral campaign. That would be particularly unfair, since there are far more Conservative, Liberal, Scottish nationalist and other candidates out there than there are Labour candidates, by the very nature of the Government’s majority.

Mr. Straw: First, it is your interpretation of what I said, and not my view that this is not clear. Secondly, the law on what is, or what is not, an expense for the purpose of the 1983 Act, is now more explicit than it was by what was put into that Act by the 2006 Act, on an all-party basis. That is in clause 11, which amends paragraph 14 of schedule 4A to the 1983 Act and which lists election expenses in a way that they were not listed before. That is helpful for people in all parties who have to determine what an election expense is.

My other point, which I am happy to have confirmed to you by Mr. Sweeney or Mr. Smith, is that it is not my, or the Government’s, purpose to make this provision retrospective. It is improper to have retrospective legislation, except in the circumstances that I have described. Clause 10(5) could not be more explicit, stating:

“The amendments made by this section do not apply to expenses incurred before the commencement of this section.”

Q 58

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

But with respect, Secretary of State, if the commencement of the section were, let us say, more than four months before a general election, which of course is difficult to predict because no one knows when a general election is going to be—you might, but not the rest of us—there would still not be certainty. Are you suggesting that you will take steps to ensure that that part of the Bill does not come into effect until, let us say, a year or more from now?

Mr. Straw: I am certainly not proposing that, but as I say, I am happy to consider representations. I have already made it clear, as has Mr. Wills, that the commencement of the clause should not automatically be on Royal Assent but should be by order. I have said that, and I think that I said it to the Justice Committee in answer to Mr. Tyrie. I now recall that it was not on Second Reading. Anyway, it is on the record. The Electoral Commission made representations about the need for guidance.

On the issue of uncertainty, Mrs. Laing, we do not have fixed-term Parliaments—some think that we should, others think that we should not. We have managed to find a way around that problem, which I think has worked reasonably satisfactorily, in the regime for the control of campaign spending, which is from 365 days before a general election—we simply work backwards.

On the trigger, I first stood in a general election in 1974. I cannot remember how many I have stood in, but apart from the October 1974 election, I have stood in every election since February 1974—quite a lot of elections.

Mr. Straw: Tonbridge and Malling. I did not win.

I have been a candidate, as opposed to a Member of Parliament, on two occasions. The trigger had a dampening effect on expenditure. It did not wholly prevent spending, not least for the reason set out by Lord Bingham. I believe that with guidance from the Electoral Commission the trigger, which after all is now clearer than it was under the unamended 1983 legislation, will work. I also say, through you, Mr. Cook, that if there are proposals for other ways of arriving at the same end that are seen as better, we are open to discussion about them.

Q 59

Photo of Eleanor Laing Eleanor Laing Shadow Minister (Justice)

May I ask you finally, Secretary of State, whether you will therefore undertake to ensure that the Electoral Commission is able to publish its guidance and have it examined before that clause comes into law?

Mr. Straw: We are trying to align the two. I cannot give an absolute undertaking on that until I know how long the Electoral Commission will take to do that, but I appreciate that if I were to bring the clause into effect before the commission had a chance to issue its guidance, I would come under some criticism, to put it at its lowest.

Q 60

Photo of Martin Linton Martin Linton Labour, Battersea

Surely it could not be clearer. The Bill is intended to reinstate the legislation passed by the Conservative Government in 1983 in exactly the form that it was in then. Indeed, that applies also to the rules on MPs’ expenditure that were in force in 1983. The situation was exactly the same, and the Bill is reversing an accidental loophole to take us back to the situation that the Conservative Government passed in 1983.

There is only one area that is possibly unclear, and on which I seek the Secretary of State’s explicit guidance. Presumably, when the clause comes into force, those candidates who already have websites up describing themselves as a candidate, or who have leaflets or business cards stacked in their stationery cupboard describing themselves as a candidate, will have to amend them. It does not guarantee that any money spent before the date it comes into force can stand.

Mr. Straw: I am open to correction by officials, but I think—I may disappoint you on this—clause 10(5) means what it says. If a political party has spent money on business cards or setting up a website before this clause comes into force, the amendments made by this clause do not apply to that expenditure.

Q 61

Photo of Martin Linton Martin Linton Labour, Battersea

Then they can publish 50,000?

Mr. Straw: All these things are possible, but the other side of this is that if we were to do what I know you would wish in relation to expenditure incurred before the date of Royal Assent, we would be open to equal opposite complaints of acting unfairly—that is the difficulty—and, certainly so far as expenditure was incurred before Royal Assent, of acting retrospectively. I have already, if I may say so, dealt with that.

There is an inherent difficulty in seeking to change the electoral regime during a Parliament, because it is bound to be the case—we are trying to find a way through this—that political parties, whatever the loopholes, will have worked within the current legal regime perfectly lawfully and they will have grounds for complaint if they say, “Well, hang on. We were working within this. You may disapprove of it; it may be a loophole, but we were working lawfully and then it suddenly changed.” There has to be a process of getting from A to B, which is what I am trying to do.

Q 62

Photo of Martin Linton Martin Linton Labour, Battersea

But surely candidates will have ample forewarning that the law is going to change. Whenever the Act comes into force on Royal Assent, that will still be several months away, at the very least, so they must be aware of the fact that the law is being returned to what it always had been before. A loophole is being closed. They have been told. People know that is going to happen. Surely it is reasonable to expect people not to print extra leaflets when they know that the law is about to change.

Mr. Straw: With respect, I think I have answered that. May I just say this for the avoidance of doubt? Mr. Linton is absolutely right that in broad substance what we are doing is to reintroduce the 1983 Act, whose provenance goes back to the 1883 legislation. There are two differences. They are not particularly significant. One is that the original provision in the 1983 Act said that election expenses were defined as meaning expenses incurred, whether before, during or after the election,

“on account of or in respect of the conduct or management of the election”.

That was changed by the 2000 Act to a reference to the purposes of the election.

The second change, to which I drew Mrs. Laing’s attention, is in the 2006 Act, on page 30. There is clarification of detail about what constitutes election expenses, which was not there before. I think that was agreed on an all-party basis. I am not absolutely certain about that. That is new schedule 4A to the 1983 Act.

Photo of Frank Cook Frank Cook Labour, Stockton North

We must finish this part of the sitting by 12 noon. There can be no argument about that. I do not want to have to interrupt witnesses or Committee members, but four Committee members are seeking to catch my eye. They are, in order of registration, Tyrie, Howarth, Djanogly and Reid, so please make your questions brief, and the answers, too, Secretary of State.

Q 63

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Thank you, Mr. Cook. First, thank you very much, Secretary of State, for the flexibility that you have been showing on making adjustments to the triggering clauses. I have two quick questions. Why was this not subject to consultation?

Mr. Straw: It was and it wasn’t is the answer. We had the Hayden Phillips report and the inquiries. I then published the White Paper in June. The Bill was published on 17 July. We then allowed a period of getting on for three months before Second Reading.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I will take, “It was and it wasn’t”.

Mr. Straw: There was no formal consultation, but I invited comments on it.

Q 64

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I want quickly to get on to one other question. You have made it clear that the MPs’ communications allowance will not be covered by the triggering rules because it is not held to be party political. If an MP was found guilty by the Standards and Privileges Committee of abusing the communications allowance, under the Bill would they be deemed to have triggered their own campaign expenses?

Mr. Straw: That is a very good question.

Mark Sweeney: The answer is potentially yes, but we shall have to reflect and give you a more detailed answer, if that is all right.

Mr. Straw: I thought that yes was the answer. That was my instinct.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

The Secretary of State is saying that yes is the answer.

Mr. Straw: I said that I would have thought that it was yes, but we will come back to it.

Q 65

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

May I come back to the retrospectivity question and put an example to the Secretary of State? It has been bothering me, and possibly other people. The issue is not what counts as an expense, but who counts as a candidate, and when. This cannot be cured by the commencement date. I shall give the example. Let us suppose that either an existing Member of Parliament or a candidate from another party has already acted as a candidate. What happens when the Bill comes into force? Will it mean at that  point that what the person did previously makes them a candidate at that point, so any expenses that they incur from then count as election expenses? It is about not whether expenses before that time count, but whether they have started the ball rolling. That degree of retrospectivity ought to be ruled out.

Mr. Straw: The definition under the 2000 Act, which we are not proposing to change, relates to activities that are for the purpose of any election. It will be subject to further guidance. If the activities are related to the purpose of any election and self-evidently—

Q 66

Mr. Straw: Hang on a second. For the future. In respect of the past, if the expenses were incurred before the commencement, they would not be covered.

Let us take another example. A candidate for the XYZ party decides to produce loads of flyers saying what a great person he is, and a newspaper that is not dated goes round the constituency giving further and better particulars of what a great person he is. If the expenses of printing and preparing the material were incurred before the commencement date, even if they were dished out afterwards, they would not be covered. However, if the material was dished out after the election date, the expenses incurred to dish them out would be covered.

Q 67

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

But what about the content? Can it make him a candidate—anything after commencement of the Act?

Mr. Straw: The content is a different matter. It depends on a proper reading of the term “for the purposes of the election”. In my example, it is likely that such expenditure would be regarded as for the purposes of the election. On the other hand, if the material is simply saying that F. Bloggs who lives down the street has done something about the bus service, it might not be so regarded. That is a matter of fact.

It is inherent in any system that is not all-encompassing that there has to be a distinction made as Lord Bingham made it. It is just there. The judgments were not that difficult to make in the end, when the 1983 Act was in force. It goes back to 1883. With the additional schedule, which is in here, and the greater clarity provided by the phrase “for the purposes”, it should be all right.

Photo of Frank Cook Frank Cook Labour, Stockton North

Order. We must conclude this part of the sitting. I thank the Secretary of State and his team of witnesses, and ask them to vacate their chairs to make way for Sir Hayden Phillips and Sir Christopher Kelly.

Photo of Frank Cook Frank Cook Labour, Stockton North 12:00, 4 November 2008

Welcome, gentlemen. Thank you for coming to help us in our deliberations. You have seen the pattern that we are operating today, and we hope that you find no difficulty with it. In the same fashion as before, we will start with the principal Opposition spokesperson, or have you handed over the armband?

Q 68

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

The questions that I want to ask mainly concern the future, but before that, I wanted to ask one historical question of Sir Hayden. We have an accumulated literature on the matter as the result of the work that you and I did through your committee. Would you have any difficulty with publishing any of the papers or minutes summarising meetings from those talks?

Sir Hayden Phillips: I do not personally have any problem releasing the papers that we prepared for the meetings of the three parties. My only concern, if you will excuse me for not answering with a simple yes or no, is that I need to look carefully at the minutes.

As you know, we had very wide-ranging discussions, and all sorts of things came up. We all agreed to keep our confidences in the nature of the conversations that we had and the results that would be published. I would like to think about it. However, if the three parties, having checked the minutes themselves, were satisfied that they could be published as well, I do not think that I would want to stand in the way.

Q 69

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Just to be clear, you would be happy for both the minutes and the main papers put before the committee to be put in the public domain, provided that all three participating parties agreed?

Sir Hayden Phillips: Yes, I think I would. That is the right way to proceed. I do not think that it is a judgment that I should simply make on my own in my cell, as it were. I would make it in consultation with those involved.

Q 70

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Our party’s view on publication is well known. Turning to affiliation fees, I have only one more question, which will give Sir Christopher a moment or two to think about it. Do you think that it will be possible to find an agreement for a new long-term structure for party funding and control of donations that does not provide each individual affiliated member genuine choice on an annual basis over whether to donate?

Sir Hayden Phillips: Perhaps I may answer that in two ways. The first concerns the proposals that I put before the parties just a year ago. It is a happy, or perhaps unhappy, anniversary that we are celebrating here: the fact that we did not come to an agreement. I think my proposals went as far, at that stage, as I believed the Labour party could manage in ensuring on affiliation fees that the precise amount that was paid in was the precise amount that came out, that it was not mediated by the trade union leadership in any way, and that there was a clear and regular opportunity to opt out.

That is where we got to, and it is very much a matter for the Labour party and the trade unions to say whether they see a prospect down the line of adopting what I know has been the Conservative party’s preferred position of individual affiliated members being given a choice of what to do, and that they should be able to donate to parties other than the Labour party.

The other way of answering the question is to say that I do not think things will necessarily remain absolutely as they are now, because I believe, as you know, that a comprehensive agreement on party funding is essential. If we do not have it, there will be problems all the way along the line, and every single year something will come up and cause a row. That is not healthy.

In Canada, to answer your question elliptically, the relationship between the New Democratic party and the trade unions was similar to the one we have had here. It made the sort of change that you have suggested, and it is fair to say that both the political party concerned and the trade unions have found that system perfectly satisfactory. The world did not fall apart, and people thought the system was clearer and, if I might put it this way, cleaner. If experience from abroad can apply here, that is the example that I have in mind.

Q 71

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

To be clear, what exactly did that Canadian reform consist of with respect to donations by individual trade unionists?

Sir Hayden Phillips: If my memory serves me right, it gave people the opportunity to donate their fee through their trade union to the party of their choice.

Q 72

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Thank you. Sir Christopher, may I ask you the same question?

Sir Christopher Kelly: I am not sure what my answer to that question will be worth, as I have not sat through the detailed discussions that you and Sir Hayden Phillips have sat through, but I shall say two things. First, I very much agree with what Sir Hayden said, which is that some form of agreement between the parties is a very important objective. Secondly, it is clear that some form of compromise on all sides is probably necessary. Quite what the details of that compromise are, and whether it is possible to obtain agreement only on the basis that you put forward, I frankly do not know.

Q 73

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Do you think that in the long term it is sustainable for standards and confidence in the way that parties are funded, given your job as chairman of the Committee on Standards in Public Life, that one party should be subject to a cap with no exceptions, but another should retain a privileged collection mechanism with a unique relationship with a mass pressure group, however august it may be and however much built into our legislative process?

Sir Christopher Kelly: I think that what is important for confidence in the standards that are applied is that all the parties reach agreement on what is an acceptable way of financing political parties.

Q 74

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

But will any agreement do?

Sir Christopher Kelly: Not any agreement, but on this issue, on which so much discussion has taken place, we are not talking about any agreement. We are talking about reaching compromises on issues that go back into the history and constitution of political parties, and clearly raise many difficult issues for everyone.

Q 75

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

May I ask Sir Hayden to comment on the Bill and its contents, compared with his proposed agreement? Is it true that the Bill is a very long way from where the talks that you were brokering had reached?

Sir Hayden Phillips: It is very much narrower than the set of proposals that I published, with the agreement of the parties, at the end of October last year, which covered a whole range of the issues that arise in relation to party funding. On the other hand, the Secretary of State and the White Paper made it perfectly clear that  what he wanted to do, which is what I wanted to do and tried to achieve, was to find an agreement between the parties on all those issues.

In the absence of that consensus, the judgment was that it was not wise or sensible to proceed with something much more comprehensive. It seemed to me wholly reasonable for the Government to say, “Look, one area where we know we can and ought to make an advance is in reforms to the Electoral Commission.” That is the central thread of the Bill. Personally, I think that that is worth doing.

Q 76

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

To come back to your proposed agreement, to what extent at the time did you think that you had a consensus, particularly on the issue of expenditure caps? What place did you think that the expenditure cap had in the overall package?

Sir Hayden Phillips: The point about expenditure in this was to make sure that there was an overall package. The focus obviously began with the issue of donations: I observe from reading the newspapers as a private citizen that issues around big donations continue to vex people, and I fear that they will go on doing so until a change is made. To try to get that balance between those who thought it was more important to control spending and those who thought it was more important to control donations, it seemed to me natural common sense to try to persuade the parties to cover the whole waterfront, which they agreed to do.

I think that we made good progress, although others will have their own views about that. Over a year and a bit, we went quite a long way—as did the Select Committee—in agreeing the principles on which an agreement might be made, but I always made it clear to those I was talking to, and we had all agreed it, that nothing was agreed until everything was agreed. That was the basis on which we did it. Otherwise, it could fall apart at any time when we got down to the detail in a whole range of areas. We did not come on to negotiating the detail of some areas, such as spending limits, although in principle people were in favour of greater and more comprehensive control.

My precise proposals were not agreed. Equally true, the arrangements in relation to donations and affiliation fees, to which Mr. Tyrie referred, were not agreed. Nor had we agreed my precise proposals for additional public expenditure, partly to make up the losses that would otherwise be incurred from donations caps and partly—I thought in a reasonable way in the modern world—to engage the public more directly in a sense of ownership of party politics. That is a long and rather rambling answer, I am afraid.

Q 77

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

I suppose the question arising out of it is whether in your view the talks broke down because of the failure to agree on those details, in the light of the agreement on the principles, or was there any reversal on the principles themselves by any of the parties taking part?

Sir Hayden Phillips: No, I do not think so. If I look back to my report—I published it in March 2007—I was very careful to ensure that the words I used, where I said that we had reached agreement on the principles, were indeed ones that were acceptable to the three parties. I think that Andrew would confirm that that was the case.

No, I do not think that people went back on the principles we had agreed. Translating them into precise reality was the problem. In relation to affiliation fees, I had always been conscious of the Conservative party’s preferred position, so it was not a surprise—it may have been a slight disappointment—that I could not shove the Conservatives a bit further towards the proposals, but that is a different issue.

Q 78

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs

A final detail point. On expenditure caps, you will recall that the methodology you followed was heavily criticised by Mr. Pinto-Duschinsky. Do you have any response to what he said? He will be appearing as a witness later in the week.

Sir Hayden Phillips: I did not really enter into that argument, nor do I think it valuable or interesting.

I think that there was a general feeling on the part of all parties that if we could try to dampen down the amount of money spent, it would probably be a pretty good thing, without going into the question whether there was an arms race or not, what the statistics said or anything else.

To put a personal view about the bill poster expenditure that goes on, if I talk to individual Members of Parliament from all parties, they will mostly say to me with great frankness that it is a waste of time. If you know that as a matter of common sense, you try to do something about it. That is what I was doing.

Q 79

Photo of Nick Ainger Nick Ainger Labour, Carmarthen West and South Pembrokeshire

Sir Hayden, you will be well aware that it is not only funding that is important to political parties; it is also membership and volunteers, because at the end of the day, they are the people who go out and do the work. On Second Reading, a number of Members raised the issue of the new powers that would be given to the Electoral Commission, particularly those involving entering people’s homes to seek information about alleged breaches of the regulation. What effect, if any, do you think that that will have on the cohorts of volunteers on which all political parties depend?

Sir Hayden Phillips: That is something that I was very conscious of in the work that I did with the parties. I was always very conscious that we had to try to have a proportionate regulatory system, and that not every single volunteer was a forensic accountant.

The issue here, as I understand it, is that the existing powers of the Electoral Commission under the present law are pretty extreme and robust. What the Bill has done is reveal that underlying reality, rather than fundamentally changing the position. My personal view is that the Committee will want to ensure if those powers are to be implemented that the safeguards are real, so that we do not find that people who are not experts in the field but are good volunteers are being harried and pursued unreasonably. That is a general position of mine, not a specific issue. It is very much up to the Committee to try to find the sorts of amendment that will make everyone feel comfortable that the powers are not excessive.

Q 80

Photo of Nick Ainger Nick Ainger Labour, Carmarthen West and South Pembrokeshire

What safeguards would you recommend to the Committee, bearing in mind your support for the contentions that we must keep that great cohort of volunteers enthusiastic and not make them increasingly concerned that they may face criminal charges?

Sir Hayden Phillips: There are two key elements. I do not pretend to be an expert on the detail of this; I have not gone into it to the extent that you have done. I think that one would need to be satisfied that the Electoral Commission intended to operate in a way that would be fair and be seen to be fair. That is an area in which it is given powers to issue guidance. I think that we should ask the Electoral Commission to set out guidance about the way that it intends to operate in that area.

The second thing that I would want to assure myself of is that the process through which the authorities had to go in order to get to that point was sufficiently well policed by an independent judicial or other mechanism that that pathway was clear and had to be carefully trodden. But if you want, I will go away and think further about it, and if the Chairman wants me to and I have any thoughts, I will let the Committee have them, but I would need to look at it in much more detail than I have so far to answer your question fully.

Q 81

Photo of Nick Ainger Nick Ainger Labour, Carmarthen West and South Pembrokeshire

Thank you. I believe that draft guidance should be presented to Public Bill Committees so that it can be examined during the scrutiny process. Do you agree that in both this area and the area covering the triggering mechanism, draft guidance should be produced by the Electoral Commission as quickly as possible so that this Committee can look at it?

Sir Hayden Phillips: I heard what the Secretary of State said earlier. It depends how long the Electoral Commission takes. In this sort of area, how and when something is done—talking about triggering, for example—is very important. Having looked at it, I think that although one is, in a sense, going back to a previous regime, no one should assume that because that is the case, all these people out here who might be potential candidates will understand what that means. It is important that Electoral Commission guidance on how that would work in relation to triggering is available as soon as possible. Whether that can be done during the course of your deliberations is another question. The relevant people are appearing before you, so you can ask them directly. I think it is very important that that guidance is in place and has been consulted on well before provisions are brought into effect.

Q 82

Photo of Pete Wishart Pete Wishart Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (International Development), Shadow Spokesperson (Justice)

I am sure that you, Sir Hayden, will agree fully that public confidence about party political donations has been shaken to its core in the past couple of years by what have been seen as abuses. The cash for honours matter, for example, has raised public concern about how public money is spent. Do you believe that the Bill addresses the big public concern about party political donations?

Sir Hayden Phillips: I think that the Bill addresses two issues that ought to be of concern to the public, the first of which is the need for a more vigorous regulator with more flexible powers. That is important in any circumstance. The second is that if we can find a mechanism for dampening down expenditure that is better—or, rather, longer—than the current one, that is worth having. I do not think that the Government have suggested or pretended that the Bill goes to the heart of the anxieties that you and I have expressed, which are the basis of the work that I did for that period. That can be done only if there is a comprehensive new mechanism for controlling party funding in this country.

Q 83

Photo of Pete Wishart Pete Wishart Shadow Spokesperson (Culture, Media and Sport), Shadow Spokesperson (Home Affairs), Shadow Spokesperson (International Development), Shadow Spokesperson (Justice)

Part of that new mechanism could be suggested in the Bill. There is a proposal that four commissioners from the political parties should be added to the Electoral Commission. There is a difficulty with deciding who should be the fourth commissioner, who is supposed to come from the smaller parties. I have not got a clue how that could be decided, and I used to be a joint Whip for all the minority parties in the House. Do you believe that having political party representatives on the Electoral Commission would be a good thing and would help to deal with outstanding issues about which the public are concerned?

Sir Hayden Phillips: Yes, I do. I must be consistent. I was a party to making recommendations, and I agree with that proposal. I think that it is important, and I do not agree that if you want to have party representatives or senior party figures involved that will somehow make the Electoral Commission a non-independent or partisan body. That is way over the top. A regulator has to have the confidence of those whom it regulates. It is not just a question of public confidence; it is also a question of party political confidence. The successful regulators in this country always have the confidence of those whom they regulate and have an open dialogue with them. I think that this will help the Electoral Commission, and will help political parties to feel more comfortable with the Electoral Commission. Those four people will be in a minority, and will never be a majority. Presumably, they will have to be appointed through a mechanism, such as the Speaker’s Conference, in the same way as everybody else.

As for how the minority party representative would be chosen, I bow to your wisdom. I rather cavalierly felt that an agreement could be reached. Men and women of good will could sit down and hammer out an agreement on how that could be done. I think that that is what will happen.

Q 84

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General

Sir Christopher, what, in your view, are the main steps that need to be taken to ensure the integrity of the electoral system?

Sir Christopher Kelly: My Committee, under my predecessor, issued a report, of which I am sure you are aware, that said clearly that there were two important steps. One was to make the Electoral Commission a focused regulator with an appropriate range of sanctions, and the other was to move to individual registration.

Q 85

Sir Christopher Kelly: I am extremely disappointed, as are other members of my committee, that the Bill does not include measures to deal with individual registration, but I cannot say that I am surprised.

Q 86

Sir Christopher Kelly: I heard the same statistics that you did earlier when you were questioning the Secretary of State.

Q 87

Sir Christopher Kelly: Concerns of what kind?

Sir Christopher Kelly: As I have said, I am disappointed, as are the other members of my committee, that individual registration was not included in this matter.

Q 88

Photo of Martin Linton Martin Linton Labour, Battersea

Sir Hayden, I am reluctant to raise issues that are not in the Bill yet, but since they have been raised, I will seek clarification on a couple of points. First, I understand that the terms of reference of your committee include the word “funding”. I have been interested in party funding for a long time and I understand that it includes both income and expenditure of political parties. It has been put to us by the other side that you were asked to look at only income and not at expenditure. Is that how you understood your terms of reference?

Sir Hayden Phillips: Well, no, because I proceeded differently. I agree with the broad interpretation that you take. You can look at the terms of reference and ask where the words “expenditure control” are, and you would find that they are not there. It seems to me that if I was being asked, with the understanding of all the three main party leaders, to try to tackle the subject in a comprehensive way, I would be quite wrong to avoid looking at spending. So we behaved as though that was in the terms of reference.

Photo of Martin Linton Martin Linton Labour, Battersea

I am glad that you did.

Sir Hayden Phillips: I think that it is a matter of common sense, and I do not want to enter into that debate.

Q 89

Photo of Martin Linton Martin Linton Labour, Battersea

Thank you. On another point, on trade union affiliation, you speak as though trade unions have the opportunity to affiliate only with one party. As a matter of historical record, there were trade unions that were affiliated to the Conservative party. Opposition Members may look surprised, but I spoke to the national secretary of the National Union of Small Shopkeepers when the legislation came into force and the union was affiliated to the Conservative party. Therefore, is it right to expect an independent, non-state organisation such as a trade union that has made a decision to affiliate to a particular party also to act as the collecting agent for another party? Given that all its members are free to contribute to any party they wish, why should it be a trade union’s obligation to collect money for a party with which it does not agree?