Clause 8

Political Parties and Elections Bill – in a Public Bill Committee at 12:00 pm on 20 November 2008.

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Declaration as to source of donation

Amendment proposed [18 November]: No. 153, in clause 8, page 5, line 43, leave out ‘£200’ and insert

‘£5,000, or £1,000 where subsection (4A) of section 54A applies,’.—[Mr. Wills.]

Question again proposed, That the amendment be made.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

I remind the Committee that with this we are discussing the following: Amendment No. 3, in clause 8, page 5, line 43, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 135, in clause 8, page 5, line 43, leave out ‘£200’ and insert

‘£5,000 donated to a registered party or £1,000 donated to an accounting unit of a registered party’.

Government amendments Nos. 154 and 155.

Amendment No. 4, in clause 8, page 6, line 3, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 156.

Amendment No. 5, in clause 8, page 6, line 14, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 134, in clause 8, page 6, line 14, leave out ‘£200’ and insert

‘£5,000 donated to a registered party or £1,000 donated to an accounting unit of a registered party’.

Amendment No. 179, in clause 8, page 6, line 17, after first ‘the’, insert ‘reasonable’.

Amendment No. 180, in clause 8, page 6, line 21, after ‘person’s’, insert ‘reasonable’.

Government amendments Nos. 157 to 159.

Amendment No. 181, in clause 8, page 7, line 17, after ‘or’, insert ‘was reasonably’.

Government amendment No. 160.

Amendment No. 148, in schedule 3, page 34, line 7, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 161.

Amendment No. 147, in schedule 3, page 34, line 12, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 185, in schedule 3, page 34, line 18, leave out from first ‘the’ to ‘knowledge’ and insert ‘individual’s reasonable’.

Government amendment No. 162.

Amendment No. 146, in schedule 3, page 34, line 25, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 186, in schedule 3, page 34, line 29, after first ‘the’, insert ‘reasonable’.

Amendment No. 200, in schedule 3, page 34, line 34, after ‘person’s’, insert ‘reasonable’.

Government amendment No. 163.

Amendment No. 188, in schedule 3, page 35, line 6, at end insert—

‘(8) The Commission shall prepare and publish guidance notes, which must be attached to any declaration under paragraph 6A, and which set out in clear English information necessary to properly complete such a declaration, which will as a minimum include—

(a) examples to assist in understanding how benefits are valued;

(b) examples to assist in the completion of the declarations required by paragraph 6A(3);

(c) the penalties for non-compliance with time periods, and for knowingly or recklessly making a false declaration;

(d) the appropriate details of when time limits for the submission of declarations commence and end.’.

Amendment No. 189, in schedule 3, page 35, line 37, leave out ‘appearing’ and insert ‘who reasonably appears’.

Government amendment No. 164.

Amendment No. 145, in schedule 3, page 36, line 2, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 165.

Amendment No. 144, in schedule 3, page 36, line 7, leave out ‘£200’ and insert ‘£1,000’.

AmendmentNo. 190, in schedule 3, page 36, line 13, leave out from first ‘the’ to ‘knowledge’ and insert ‘individual’s reasonable’.

Government amendment No. 166.

Amendment No. 143, in schedule 3, page 36, line 20, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 191, in schedule 3, page 36, line 24, after first ‘the’, insert ‘reasonable’.

Amendment No. 192, in schedule 3, page 36, line 29, after ‘person’s’, insert ‘reasonable’.

Government amendment No. 167.

Amendment No. 194, in schedule 3, page 36, line 45, at end insert—

‘(8) The Commission shall prepare and publish guidance notes, which must be attached to any declaration under paragraph 6A, and which set out in clear English information necessary to properly complete such a declaration, which will as a minimum include—

(e) examples to assist in understanding how benefits are valued;

(f) examples to assist in the completion of the declarations required by paragraph 6A(3);

(g) the penalties for non-compliance with time periods, and for knowingly or recklessly making a false declaration;

(h) the appropriate details of when time limits for the submission of declarations commence and end.’.

Government amendment No. 168.

Amendment No. 142, in schedule 3, page 37, line 30, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 169.

Amendment No. 141, in schedule 3, page 37, line 35, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 195, in schedule 3, page 37, line 41, leave out from first ‘the’ to ‘knowledge’ and insert ‘individual’s reasonable’.

Government amendment No. 170.

Amendment No. 140, in schedule 3, page 38, line 6, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 196, in schedule 3, page 38, line 10, after first ‘the’, insert ‘reasonable’.

Amendment No. 197, in schedule 3, page 38, line 15, after ‘person’s’, insert ‘reasonable’.

Government amendment No. 171.

Amendment No. 198, in schedule 3, page 38, line 31, at end insert—

‘(8) The Commission shall prepare and publish guidance notes, which must be attached to any declaration under paragraph 6A, and which set out in clear English information necessary to properly complete such a declaration, which will as a minimum include—

(i) examples to assist in understanding how benefits are valued;

(j) examples to assist in the completion of the declarations required by paragraph 6A(3);

(k) the penalties for non-compliance with time periods, and for knowingly or recklessly making a false declaration;

(l) the appropriate details of when time limits for the submission of declarations commence and end.’.

Clause 8 stand part.

I point out to hon. Members the fact that this group now includes a number of amendments that were starred at the previous sitting of the Committee. I call Jonathan Djanogly, if he has recovered his breath.

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

Thank you, Sir Nicholas, and the answer to that is “barely”. I apologise for my lateness.

Clause 8 is entirely unacceptable in almost every respect. It is an example of needless, ill thought through provisions at their worst. Given the varied issues covered by the clause, we were surprised at the lump grouping of amendments. Furthermore, given that significant issues go not only to the context of the clause, but to the sense of the clause itself, we did not expect the stand part debate to be included in the grouping. That has not made it easy to discuss the clause in a coherent fashion.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Order. The hon. Gentleman should not question the decisions of the Chair.

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

I would never think of questioning the decisions of the Chair, Sir Nicholas. I was just saying that, from our point of view, the grouping of amendments has made it difficult to debate the clause.

Rather than debate the amendments in the group by issue, it would be more sensible to take them in order of tabling, which is Labour Back-Bench amendments, Government amendments, our amendments and then  the stand part debate. I come first to those amendments tabled by the hon. Member for Leeds, North-East (Mr. Hamilton) and supported by Labour Back-Bench Members. They have made a valiant effort to put some order into what we see as the dog’s breakfast that the clause represents. The fact that they were tabled early effectively said to the Minister, “Please can you get your act in order on the clause?” However, they are not good enough and would not go far enough, and we remain to be convinced of why the clause needs to be retained.

I shall now rebut the Labour Back-Bench amendments. Clause 8 creates a new responsibility for donors to political parties to clarify the source of donations. Donors giving more than £200 will be required to make a declaration whether another person is providing them with money or benefits worth more than £200. Amendment No. 3 and others would increase the donation that triggered the reporting requirements under the clause to various amounts between £1,000 and £5,000. If we agreed with the clause—I have just said that we do not—we would agree in principle with the need to increase the trigger thresholds to avoid unnecessary administrative burdens being laid at the feet of donors and local party volunteers alike.

By my estimation, setting the threshold at £200 would result in about 100,000 declarations being handled each year by the Conservative party alone. That would be a huge increase in the work load of many local party officers—and a fairly pointless one at that. I doubt whether the systems or, indeed, the manpower are in place to cope with such an increase.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight

Will my hon. Friend make it clear that many of those people are not paid, but are volunteers?

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

My hon. Friend makes an important point to which I shall certainly return.

On Second Reading, the Secretary of State noted that the Government had received representations from all the main parties and many of the small ones advocating an increase in the limits, and they said that they would be willing to consider them in detail. We now have the Government’s proposals to increase the limit to the relevant reporting threshold for the declaration, saying that it will be £5,000 or £1,000. The most recent missive from the Electoral Commission, issued yesterday in response, states:

“These changes should reduce the administrative burdens of the new declaration requirement, while introducing a new procedural reminder of the rules on agency in respect of reportable donations. The Commission welcomes the decision to set the declaration threshold at the same level as the existing donation reporting limits rather than introducing a general £1,000 threshold, which would have created a new regulatory threshold for those parties without accounting units.”

To move on to Government amendments Nos. 153 to 170, the Government have clearly admitted that they see a good deal of deficiency in the clause. As the Minister said, the amendments will have twofold effect. First, they will do away with the previous threshold for declaration of £200 and replace it with two different thresholds—£5,000 for donations made nationally and £1,000 for donations made locally. Secondly, they will remove the requirement on parties to take all reasonable steps to verify the veracity of the declaration. While the amendments are welcome, we think they are too little, too late.

Government amendments Nos. 158, 163 and 167 will remove the need for anti-money laundering-style verification processes. The amendments, which have the support of the Electoral Commission, will go some way towards relieving the huge administrative strain that would have burdened local party offices. We were in real danger of exposing the volunteers in those offices to a crushing administrative load. Mr. McIsaac, the Conservative treasurer, noted in evidence to the Committee the scale of the potential problem:

“You can see the pattern. There is the whole verification area, the judgmentalism and the lack of staff. A large investment bank that I dealt with in professional practice had more than 1,000 people in compliance and legal—not risk. I think of the Conservatives, and we have a handful.”——[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 80, Q20.]

The anti-money laundering-style language was dangerous and the consequential regulatory burden that would be imposed could have devastated parties at local level. Basically, verification would have involved something that textbooks have been written on in the context of other areas such as money laundering. Although we welcome the Government’s reassessment of the provisions, we are still cautious about their impact. Placing disclosure requirements on donors must be carefully thought through so that we do not push people away from donating to political parties for fear of breaching these complex and, at times, opaque rules.

The provisions, while doing away with the need for parties to verify donations, still impose significant burdens on donors in the declaration process, and there is real need for clarity. The increased threshold limits mirror those in the Political Parties, Elections and Referendums Act 2000 on the reporting of accounts to the commission. These limits will be applied by Government amendments Nos. 153, and those following, to the thresholds for donors making declarations. Given the possible deterrent effect that the declaration requirements may have, we would like to see these thresholds much increased. The Government have taken a step in the right direction, but we feel that they must go much further. From our point of view, this is unfinished business.

We are pleased to be holding a debate today on our amendments, because when we last met they were starred due to the little time we had for tabling them. Amendments Nos. 179 to 181 would insert a test of reasonableness into clause 8. Amendments Nos. 179 and 180 would insert into proposed new section 54A(3) of PPERA a reasonableness test for the opinion of the person making the donation, as required by proposed new section 54A(2). Given the possible sanctions that attach to the declarations that must be made—a possible unlimited fine or one year of imprisonment—we do not think it fair to place too low a threshold on the opinion that must be held.

Throughout, the rationale behind our amendments has been the need for proportionality and striking an appropriate balance between the competing interests at stake. Here, too, we feel that a mere opinion may not be satisfactory. There should be reasonable grounds for holding such an opinion. The complexity of the provisions of proposed new section 54A and the fact that a lay person potentially unsure of what they are being asked to do might land themselves in hot water as a result of giving a declaration on something with which they are  unfamiliar or unsure represent a potentially dangerous situation. By imposing a test of reasonableness, we would allow for the basis of the opinion to be tested objectively by an external party or a court of law. That in turn would add to the process a potential judicial safeguard that would otherwise not exist if an opinion could be held subjectively.

Amendment No. 181 would apply the same test of objectivity to proposed new paragraph 1A(1) of schedule 6 to PPERA. In similar vein to the reasoning just described, we should apply the same test of reasonableness to the requirement to produce a quarterly or weekly report and the requirement to say in it whether the details given in a donor declaration are

“suspected to be untruthful or inaccurate”.

Otherwise, we would have no solid foundation on which to impose any liability for a breach of the provisions. The reporting person or persons would, in effect, be expected to second-guess what the commission viewed as suspicious or not.

Amendments Nos. 185, 186, 200, 190 to 192 and 195 to 197 are consequential on amendments Nos. 179 and 180, in that they would apply to each of the donor types set out in schedule 3 of the Bill the same reasonableness test proposed in relation to proposed new section 54A(3) of PPERA.

Amendments Nos. 185, 186 and 200 would apply a test of reasonableness to the opinions expressed by individuals and members’ associations in declarations made pursuant to proposed new paragraphs 6A(1) and (3) of amended schedule 7 to PPERA, in respect of declarations by the donor and an individual acting on behalf of a donor respectively. Likewise, amendments Nos. 190 to 192 would apply the same test to the declarations to be given by a third party, pursuant to proposed new paragraphs 6A(1) and (3) of amended schedule 11 to PPERA, in respect of declarations by the donor and an individual acting on behalf of a donor respectively.

Amendments Nos. 195 to 197 would apply the same test to declarations to be given by permitted participants, pursuant to proposed new paragraphs 6A(1) and (3) of amended schedule 15 to PPERA, as applies to declarations by the donor and an individual acting on behalf of a donor respectively.

For the sake of brevity, I will not rerun in respect of each amendment my arguments on the need for a test of reasonableness and an objective yardstick, save to say that without the amendments we would make the job of donors, party officials, the Electoral Commission and, as a last resort, the courts, that much harder.

Amendment No. 189 relates to paragraph 3(6) of schedule 3 to the Bill, which amends paragraph 11 of schedule 7 to PPERA. It would again insert a reasonableness requirement on the appearance of the ultimate donor. As with the other amendments, it would clarify the process.

Amendments Nos. 188, 194 and 198 would insert new provisions into each new paragraph 6A to be inserted into schedules 7, 11 and 15 to PPERA, which apply the requirements for declarations on the source of donations to individuals and members’ associations, third parties and permitted participants respectively.

Those new provisions require the commission to publish guidance notes on the requirements of clause 8 and schedule 3, which must be attached to any declaration to be completed by a donor. As a minimum, such guidance will give examples to assist in understanding how benefits are valued and in completing declarations, and will give details of the penalties for non-compliance with time periods and for knowingly or recklessly making a false declaration, as well as the appropriate details on when time limits for the submission of declarations commence and end.

Given the complexity of the new provisions, it is hoped that such guidance notes will provide valuable assistance to those making declarations, and allow them to do so in a compliant fashion, thereby reducing the need for the commission to investigate and possibly penalise individuals or groups for non-compliance. As with many of our amendments, our aim here is clarity and ease of understanding.

We must aim, as legislators, to provide clear signposts and assistance when compliance issues may involve significant penalties. That is particularly important in this Bill, given that it is to be interpreted by individuals who, as my hon. Friend the Member for Isle of Wight said, volunteer their time out of a sense of civic duty, and who more often than not will have no legal background or teams of assistants to aid them in understanding these complex provisions. Therefore, we, as legislators, and the commission, should do our utmost to guide them through the tangled web of the Bill.

I would hope that, in the interests of having a workable system for the regulation of party funding, the commission will do its best to produce such guidance in a timely fashion.

Moving on to the stand part debate, the clause is poorly drafted, poorly researched and almost entirely negative. To our mind, it stands out in the legislation like a sore pimple. I am afraid that if the Minister thinks that he can table a few amendments and then get away with the clause, he will have to think again. That is why I now wish to discuss the more substantive stand part issues.

The impact of the clause will still be widespread and costly—even if not as much as beforehand, following the introduction of the Government amendments—in time and money for parties at the local level, where such burdens are most heavily felt. Political parties need sufficient funds to fulfil their democratic functions. There is, however, a paradox at the heart of party politics in the UK: while on the one hand there is recognition that political parties are key in mobilising local political activity and are a central vehicle in promoting civic engagement, on the other, membership of political parties, election turnout, and trust and confidence in politicians are at an all-time low. That has major implications for the financial management of political parties.

Modern centralised campaigns have resulted in escalating campaign costs, while at the same time the financial impact of the decline in party membership has resulted in increasing reliance on large donations and loans to fund political parties—a situation that appears to have eroded public confidence still further.

The 2006 Constitutional Affairs Committee report on party funding states:

“The New Policy Network warned that without an accepted system of adequate funding for political parties ‘we risk the health of our democratic system’”.

The traditional practice of secrecy surrounding the source and amount of donations received has been one of the causes of increasing disquiet about party funding. On the back of that, the Labour party 1987 election manifesto included a commitment to require parties to declare the sources of their donations and to ban foreign donations. That commitment manifested itself in the Committee on Standards in Public Life inquiry entitled “The Funding of Political Parties in the United Kingdom”, under the chairmanship of Lord Neill. The Neill report was published in October 1998 and it suggested a greater transparency of donations, among several other things.

In the Home Office submission to the committee dated 6 March 1998, the Government had sought the committee’s advice on specific topics, including:

“What should be the mechanics for disclosure of donations? Should there be a separate threshold for the acceptance or rejection of anonymous donations? What should be the timing of disclosure?”

There were already statutory requirements on trade unions and companies with regard to the disclosure of information on political donations, although some had argued that those rules did not go far enough. Despite all the evidence of submissions made to it, the Neill committee did not uncover any wrongdoing. It did, however, acknowledge the potential for speculation and rumour about improper motives and tacit obligations where details of donors are unknown.

The advantages of greater transparency are summarised by the Neill committee and apply as much to this debate as they did eight years ago. The main drive of these arguments is that greater transparency provides the opportunity for public and media scrutiny, which makes the system less opaque and means that not only do rumour and suspicion wither, but public confidence in the system is increased. Further, there was no evidence that donations have been used to influence Ministers or policy, where such sums would be recorded on a publicly accessible register.

On the reverse, the principal arguments against disclosure and transparency centre around an individual’s right to privacy. The Neill committee report cited various issues in this context. Its conclusions, while recognising the strength of the arguments in favour of privacy, advocated a disclosure regime on the grounds that there was a public interest in knowing when a donation is made to a political party,

“which is significant enough to prompt questions or to raise suspicion about its purpose”.

On the back of this, the committee made two recommendations, which formed much of the basis for the disclosure requirements in PPERA. First, it said that opinion will differ on what constitutes a significant donation, but it recommended disclosure of donations to national party organisations of £5,000 or more per annum from one source, as supported by the two main parties and others. Secondly, it recommended that donations to constituency associations or regional organisations from one source, which total £1,000 or more per annum, should also be publicly disclosed.

Of course this is important in the context of this debate because these figures were issued in 1998 and yet even the Government, in their revised position in their amendments, use the figures from 10 years ago. However, despite this emphasis on disclosure when it came to the  subject of where responsibility for making the disclosure should lie, the Neill committee felt that it was “wholly unreasonable” to place the obligation on the donor. A decade later, here we are doing exactly that. The Minister has yet to make the case for this change of approach. I hope that he will do so in his later remarks.

The Neill committee concluded that the obligation should rest with the political party’s central office not only to report on donations received by the national party, but to ensure that the party’s organisational structure was adequately set up to deal with all disclosable donations received by sub-units of the party. It would be up to each party to ensure that each sub-unit supplied the required information to a designated officer at the central office. Only donations to candidates or election agents would be an individual’s responsibility.

The Government agreed with the general approach of the Neill committee and enshrined the main elements of the proposed reporting regime in part IV, chapter III of PPERA. Under this, the treasurer of a registered political party is required to make a quarterly donations report to the Electoral Commission, recording any donations of £5,000 or more to the national party, or £1,000 or more to local associations or regional organisations, which are called accounting units of a national party. To ensure that multiple donations from the same source are properly accounted for, the party must also record any further donations of £1,000 or more from a source already recorded during the same reporting year.

In PPERA, all donations must be from named permissible donors who are defined as an individual on the electoral register, or a company that is registered under the Companies Act 1985 or incorporated in the UK. All such companies must carry on business in the UK. Other legitimate donors, with various caveats, are trade unions, building societies, limited liability partnerships, friendly societies and various other unincorporated associations. PPERA requires registered political parties to submit an annual statement of accounts to the Electoral Commission, by a particular date and in a specified format.

Furthermore, under PPERA, donations to parties in excess of £5,000 nationally or £1,000 locally must be publicly declared with the details of the donor and the amount. That includes donations in kind as well as cash donations. Contributions may only be from permissible donors; foreign donations are banned and anonymous gifts in excess of £200 are also prohibited.

Part IV of PPERA is concerned with the control of donations to registered parties. It imposes restrictions on the sources of donations, so as to prohibit foreign and anonymous donations to political parties and make registered parties subject to reporting requirements in respect of donations above a certain value. Section 50 of PPERA defines a “donation” as

“any gift...any sponsorship provided in relation to the party...any subscription or other fee paid for affiliation to, or membership of, the party”— or—

“any money spent...in paying expenses incurred directly or indirectly by the party”.

Section 52 goes on to specify certain payments that are not to be regarded as donations, while section 53 sets out how the value of donations in kind, such as property, is to be calculated. Further, section 54 specifies who or what is to be considered a permissible donor  and the list is comprehensive, sections 55 and 56 deal with the acceptance or return of donations that fall foul of those sections, and section 61 specifies offences regarding evasion of restrictions on donations.

The provisions relating to the reporting requirements placed on political parties are no less extensive. Section 62 and schedule 6 require the treasurer of a registered party to make quarterly donation reports to the Electoral Commission and the details to be included in such reports. Sections 65 and 66 give further details on the process to be followed when submitting a report to the commission and the details to be set out in each submission, including the need for a declaration by the treasurer that he has recorded all known donations.

That scene setting gives some idea of the provenance of the clause. In its short history, it has not been without its problems. The Constitutional Affairs Committee, in its 2006-07 report, expressed significant concerns about the disclosure system under PPERA. It said:

“We believe that there are problems, both actual and perceived, with the current arrangements for party funding in the UK...While the PPERA 2000 introduced closer regulation and some improved transparency, it has not finally resolved problems with the system; if anything increased transparency, by revealing the extent of and dependency on donations from a few rich individuals, corporations and trade unions, has increased the negative impact on public confidence.”

We must be careful that we do not paint ourselves into a corner with this new provision and rather than increasing public confidence, engineer the reverse effect. That point was picked up on by the Constitutional Affairs Committee, which said:

“While we endorse a transparent system, transparency does not solve problems, but draws attention to them. It also invites ‘sniping’ between opponents. It must be based on readily identifiable risks so that audit functions have a clear overall purpose.”

At an evidence session, the Secretary of State said:

“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.”——[Official Report, Political Parties and Elections Public Bill Committee, 4 November 2008; c. 14, Q27.]

That is true, but, that statement implies that the clause is about transparency, which, given its non-public procedures, is simply not the case. More specifically, I cannot see how it will deal with identifiable risks that would give it the clear purpose demanded by the Constitutional Affairs Committee. Perhaps too, we should be mindful of the comments in the evidence session last week of the Conservative party’s Mr. McIsaac, who said:

“I have noticed that innocent mistakes have a habit of being magnified in the press, on the blogs and the rest of it, as if they were some sort of scandal. People make mistakes, even in the best regulated organisations. To open up the possibility of mistakes, and thereby the whiff of scandal, could be very counter-productive.”——[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 91, Q47.]

What then do we have in clause 8? How does it attempt to remedy the problems faced by political parties in raising finances in an open and transparent manner, against a background of growing public scepticism at donations to parties? The clause amends section 54 of PPERA—the clause dealing with who is considered as a permissible donor. It inserts a new subsection that requires a party to have a declaration from a donor where the party wishes to accept any donation. We have  been debating what the level of that donation should be. It creates a new responsibility for donors—not political parties—to clarify the source of donations.

Overall, the Government have started to make some sense of the clause with the amendments that they have tabled, which do away with the provisions requiring parties to take all reasonable steps to verify those declarations. Bodies such as companies and associations that make donations under the threshold will be expected to identify the responsible person who will make a declaration. The Bill will insert a subsection, as set out in proposed section 54A(5), making it a criminal offence for a person knowingly or recklessly to make a false statement about a donation, with a maximum penalty of one year’s imprisonment or a fine on indictment. I appreciate that certain hon. Members will move an amendment on that aspect, so I shall not talk about that here.

On Second Reading, the Secretary of State summarised the effect of clause 8. In his remarks, he noted:

“Those provisions supplement the existing requirements of the 2000 Act by making it clear that the identities of the true donor, on whose behalf the donation is made, must be given to the recipient of the donation. If a donor declares that those sections of the 2000 Act do not apply, they must explain why.”—[Official Report, 20 October 2008; Vol. 481, c. 51.]

We fear, though, that in practice, it would be far from that simple for the receiving party official or the donor. Under the clause, political parties and regulated donees will be required to confirm that they have received these declarations and retain them for the future review by the commission. We remain concerned about the potential impact of this if the clause were to come into force. We would like to see the thresholds increased much further to ensure that these new reporting burdens do not weigh too heavily on those concerned. We hope that the Government will be reviewing these thresholds again.

The assertion of Mark Sweeney of the Ministry of Justice, in the first evidence session before this Committee, has done little to soothe our concerns. He said:

“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.”——[Official Report, Political Parties and Elections Public Bill Committee, 4 November 2008; c. 14, Q27.]

That simply turns the situation on its head by saying, “Because there is no substantive change to the law, there is no problem.” There, to us, speaks the bureaucrat who has not given thought to the difficulty of the process in real life. We have concerns about the practical applications in real life and we think that the Electoral Commission is on our side. In its October briefing, it said:

“We believe that the benefits of these changes will be quite limited, since all they do is place additional procedural requirements on donors and recipients. They will not extend the current restrictions on concealing donations, nor will they add materially to the transparency of party funding as the new declarations will not be sent to the Commission or made public. However, they will impose potentially substantial new regulatory burdens on parties and donors. It is not presently clear whether the benefits of these provisions will be sufficient to justify those new burdens.”

The Conservative party is concerned that this is a disproportionate and excessive regulatory burden. Rather than helping parties broaden their fundraising, clause 8 could put off donors and discourage volunteerism.  Sections 54 and 61 of PPERA already prohibit donors from concealing the source of donations by channelling money through others. The use of proxy donations is also illegal. Moreover, if an unincorporated association is used as an agency to channel a donation from a particular donor, that original donor must be declared. I shall not speak further on that aspect as I appreciate that we shall be debating it on later amendments.

The commission, through its chief executive, Peter Wardle, has also backed these concerns. As mentioned in the evidence session to the Committee, his memorandum states:

“On the other hand, the changes will impose potentially substantial new administrative burdens on parties and donors. Political parties have expressed reservations to us about the impact of these compliance requirements, particularly on their volunteer officers.”

Furthermore, when pushed by the Minister some time later on the benefits of the Bill, Peter Wardle responded:

“In terms of what is in the Bill, we are concerned that the potential disbenefits in practical terms may outweigh the benefits; we are not saying that the whole idea is completely unworkable, but that it is not desirable as it currently stands.”——[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 57-58, Q147, Q151.]

Given such a damning assessment by the commission, have the Government reviewed this clause in light of what he said? If not, why not? Further, will the Minister give the Committee some idea of the consultation process that was gone through to end up with what we see as a pretty dreadful clause?

To reiterate the concerns raised by my right hon. Friend the Member for Horsham on Second Reading, and which remain despite the Government’s amendments, the compliance burden on a central party and the registered treasurer will be considerable given the number of transactions and accounting units involved, the lack of professional staff in most accounting units, the small number of compliance staff employed by the central party and the threat of the new regulatory sanctions available to the Electoral Commission. On 29 October, my hon. Friend the Member for Chichester tabled a question for the Secretary of State. In reference to the Bill, he asked

“what the evidential basis was for the estimate of five minutes processing time per donation for the processing of a donation declaration; and what estimate his Department has made of the average time taken to verify the source of a donation.”

On 6 November, the Minister replied:

“The estimates in the impact assessment—both for processing declarations and carrying out further verification checks in exceptional cases—were based on an assumption that the additional requirements on the parties to process declarations would be embedded to a degree within checks that they already carry out to ensure that the donations they accept are permissible under the Political Parties Elections and Referendums Act 2000.

The Government accept that a number of political parties are concerned that the impact assessment underestimates the compliance burden that the requirements of clause 8 might impose on political parties, and that the impact assessment understates the potential burden. As my right hon. Friend the Secretary of State and Lord Chancellor (Jack Straw) indicated before the Public Bill Committee on 4 November, while we are clear that greater transparency is essential, it should not be achieved at the cost of overburdening political parties, and I am ready to consider raising the thresholds at which declarations are required.”—[Official Report, 6 November 2008; Vol. 482, c. 753W.]

Perhaps the Minister can clarify that answer, or tell hon. Members what the rationale was behind the Government’s sudden change of heart. It hardly points to proper preparation and research on the Bill by his Department. The impact assessment’s estimated costs of the rules to all political parties are between £7,000 to £10,500 per year. In our view, that grossly underestimates the volume of small donations from £200 to £5,000 and wrongly assumes that it will take only five minutes for parties to verify each donation.

Given the recent amendments, can the Minister revise the impact assessment and the costs that parties will be forced to accept? How will that change once the Government have reviewed the thresholds? We are concerned about the thresholds and believe that a higher figure would do away with any potential confusion and would be more proportionate and risk-based when the provisions commence.

The Government must review the thresholds again and increase the limit so as not to place burdensome obligations on donors and volunteers. Given the difficulties, it is essential that the Electoral Commission issues guidance—hopefully light-touch guidance—on the operation of the new rules.

The money laundering-style language and the high tests proposed, in which all reasonable steps had to be taken forthwith by or on behalf of the party for verification, have thankfully now been removed. However, the Government were in danger of imposing anti-money laundering-style regulations on parties and donors. The consequential regulatory burden that would have been imposed could have been devastating, and for what purpose?

The requirement for declarations and the need to retain them on file could place a significant burden on the party-financing system. For instance, what format must they be stored in? How long must they be stored and what notice will be given of the commission’s desire to review them? How frequently does the commission expect to review them—as a matter of course or in exceptional circumstances? Those are a few of the questions that remain with the provisions.

Mr. McIsaac, the Conservative party treasurer, gave some idea of the scale of the potential problem in his responses to the Committee during the evidence taking session:

“Think about a party such as ours. We have 600 and something constituency associations, of which about 350 put in financial statements, which means that they have income in excess of £25,000 a year. Only a very small number of them have professional staff, and the rest are run by volunteers.”

He went on to note the acute problem of requiring party officials to make judgment calls as required by clause 8 and said:

“Once you start getting into areas of judgment it gets more difficult...All these things are highly judgmental and very difficult. You can imagine yourself, or your parents, being asked to become chairman of the local constituency association... and then being told, ‘By the way, there is a bit of a snag. There is the compliance manual. And, by the way, you ought to be aware that if you make a mistake, albeit an innocent one, it could be looked at through the eyes of someone who is very suspicious. Also, be aware that the Electoral Commission has all sorts of powers to gain access to your home and to look at your records. By the way, you do want to be the chairman of the association, don’t you?’”

That typifies the sort of problem that will face every local party office across the country in the wake of the Bill. As the system stands, the registered party  treasurer takes responsibility for the compliance of all associations. With the insertion of a test of objectivity and reasonableness, as proposed in amendment No. 179 and those following, we could do away with the need to rely so heavily on such subjective opinions.

I also note that Hilary Stephenson, who holds the equivalent position in the Liberal Democrat party, in reply to Mr. McIsaac’s contribution said:

“I wholeheartedly endorse a great deal of that.”———[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 79-80, Q20, Q21.]

The removal of the verification process is a step in the right direction, but the Government must consider what they are trying to achieve with clause 8. The cost of the clause as it stands might be a high price to pay as volunteers and donors turn their backs on political parties for fear of incurring liability for breaching complex rules. That was the point made by Roy Kennedy, director of finance and compliance for the Labour party, in his reference to the “volunteer armies”. Anything that imposes complicated and misunderstood rules on those people by way of regulatory sanction could stifle their desire to become involved. At a local level, such volunteers are the lifeblood of our parties. Often more senior in age, they give their time from a sense of civic or national pride. At a time when more and more people are turning their backs on the political process and large sections of the electorate feel disfranchised, we must be careful not to discourage involvement by imposing heavy-handed regulations that are difficult to understand and comply with, and which could lead to financial or criminal penalties if breached.

We would very much like the position of volunteers to be protected in the Bill. We must ensure that we do not push away those already involved or likely to become involved in the political system with the fear of regulatory penalty. The Minister may come back with something more acceptable in due course. In the meantime, I shall certainly recommend to my hon. Friends that we vote against the clause.

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs 9:30, 20 November 2008

The starting point for this debate ought to be whether proxy donations are a good thing or a bad thing. I am quite clear that they are a bad thing, and that people making donations on behalf of others is, as the Government are right to think, inherently fishy. The question is what to do about them. I congratulate the Government on introducing such a strict clause in the first place, because it is the Labour party, until very recently, that has had the most trouble with proxy donations, such as in the David Abrahams affair. However, it should be mentioned that all parties could be in trouble over such matters. Only this weekend, a question was raised about what might have been an attempted proxy donation to the Conservative party, and it made headlines in The Sunday Times.

The starting point must be that proxy donations are inherently not a good idea, especially in the context of the 2000 Act, which tried to create transparency. However, there are the questions of proportionality, which was mentioned by the hon. Member for Huntingdon, and of putting excessive burdens on volunteers, which he was also right to mention. The Government have introduced an amendment raising the limit to £5,000, which is to be welcomed. However, in order to understand how much that new approach should be supported, it is important  to put it into its potential context to see where the reform lies. He is right that clause 8 will not change the substantive rules about donations, so the question of proportionality is difficult to judge. The limit will be £5,000 where there is no donation limit. Is that proportional?

There is also a question, again raised by the hon. Gentleman, about how the clause will work in a mechanical way. The transparency parts of it will not put the real donors’ names on the public record, as perhaps they ought to. Why will it work that way? I have an optimistic scenario for why that has been done and why it might work in other circumstances.

The optimistic scenario is simply this: the clause will work, in an interesting way, if a donation cap exists. If there were a donation cap—£50,000 was proposed by Hayden Phillips, and the Committee will debate a £10,000 option later—political parties would need to be clear about who gave them the money. Otherwise, it would be a simple matter for donors to evade the donation cap by making a proxy donation. That would be an easy avoidance technique. At that point, declarations to parties would be a way in which parties could effectively protect themselves against the accusation that they had taken a donation above the limit because they would have a declaration from the donor and would know who the real donors were, so that mechanism can be a coherent part of a capped donation system. I want to know whether that is how the Government conceive it. If that is how they conceive it, I am rather more optimistic about the future for that area of regulation.

Were we to move to a cap on donations, even one as high as £50,000, as proposed by Hayden Phillips, we would be on the way to taking big money out of politics. The points about volunteers and participation, although valid, do not justify massive donations by individuals, the only plausible interpretation of which, from the outside, is that they have massively more influence over politics than ordinary people who make small donations.

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

The hon. Gentleman seems to be basing his understanding of the clause on what the Government might be thinking, which is only a maybe, maybe, but even on that basis is he saying that the level should be set at £50,000 or £100,000, because presumably he is only talking about the largest donors?

Photo of David Howarth David Howarth Shadow Solicitor General, Ministry of Justice, Shadow Minister (Shadow Solicitor General), Home Affairs 9:45, 20 November 2008

The hon. Gentleman is getting to the point. If we did have a £50,000 donation cap, what should the proxy donation limit be? The lower the overall donation cap, the lower the limit should be on declarations of proxy giving, because the danger would increase that people would use proxy donations to get around the caps. If it was a £10,000 donation cap, there is a case for going back to the Bill’s original proposal of just £200. The proportionality issue becomes quite different, because proportionality would then include the question of making sure that individuals did not avoid the overall cap, which would be an important matter at that point.

I return to my central question for the Government: do they conceive of the clause as part of a road map that would get us to a donation cap? I think that a donation cap is absolutely essential. It is part of the Hayden Phillips compromise, and although it is at a  level that I think is far too high, it is nevertheless agreed to by all parties. If we are to clear up politics and deal with the perception that it is dominated by very wealthy people who have much greater access to the political process than ordinary people, that is the route that we must take. I hope that the Government can give us a clear answer now, and the Opposition too, on whether they support caps on donations.

I will speak briefly to amendment No. 179, because I do not understand the hon. Gentleman’s intention in tabling it. He says he wants to reduce the regulatory burden, yet inserting the word “reasonable” in clause 8 would move away from the situation in which the opinion of the person making the declarations is relevant, and of course their opinion is their opinion, to one in which that opinion would count only if it was reasonable. That would increase the regulatory burden and the possibility of a legal challenge against someone who he says is a volunteer. I do not understand the insertion of the word “reasonable” in clauses where it is not the state we are regulating, but individuals. Inserting the word “reasonable” into clauses about individuals increases the burden on them; it does not reduce it. That applies to most of the hon. Gentleman’s amendments, which are entirely misconceived.

The central point in the debate on clause 8 is the cap on donations. Without a cap on donations the clause makes less sense. My optimistic view is that the clause is part of an original much bigger plan to introduce donation caps, and is all that survives of it. If that is the case, and that bit of political archaeology is true, we may be on to a better path than the one we seem to be on in the Bill.

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

I want briefly to congratulate the Government on accepting my amendments and those tabled by my hon. Friend the Member for Battersea. In speaking to my amendments I shall not take the 40 minutes that the hon. Member for Huntingdon took. I merely say that the level set in the Bill was clearly too low. We had a lot of evidence to that effect, which the hon. Gentleman listed at length.

I welcome what the Government have done, which is sensible and makes it far easier now for individual parties locally and nationally to administer the provision. The Government have tabled a very sensible amendment.

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

Welcome back to the Chair on the last day of the Committee’s proceedings, Sir Nicholas.

I thank my hon. Friend the Member for Carmarthen, West and South Pembrokeshire. His and his hon. Friends’ judgment and experience have been influential in shaping the Government’s approach, and we are extremely grateful for all their work. I hope that he will feel that we have addressed the concerns adequately and that he will not press his amendments.

Before I comment on clause stand part, I will deal with the issues raised by the hon. Members for Huntingdon and for Cambridge. We are grateful for the Opposition amendments, which we hope are essentially probing amendments on which we will be able to provide sufficient reassurance that they need not be pressed to a vote.

Of course reasonableness is important. For instance, when someone is required to give an opinion it should be a reasonable one. However, the effect of the Bill will be to ensure that sensible and reasonable opinions are given. Therefore the amendments are not needed. It is an offence knowingly or recklessly to make a false declaration about one’s opinion under the clause. Accordingly, there is effectively a requirement in the clause to give an opinion that has been considered with due care and attention. On that basis, we think it is enough that someone genuinely believes the opinion they record in a declaration. We do not think that adding an extra objectivity test that requires a person to show that their opinion is reasonable would add anything useful, and might in the end be unnecessarily onerous.

I am concerned that as well as being unnecessary to achieve what is intended the amendments would not consistently change the requirements in relation to all the different types of recipients of donations to which clause 8 and schedule 3 apply.The Bill replicates the requirements in relation to donations to political parties, set out in clause 8, for donations to individuals, members associations, third parties and permitted participants in referendums. Any changes to clause 8should therefore be reflected throughout schedule 3, and vice versa. I hope that the hon. Member for Huntingdon will accept my assurance that the amendments are not necessary, and not press them.

As to amendments Nos. 188, 194 and 198, I again invite the hon. Gentleman not to press them. I remind the Committee that they would require the commission to produce guidance notes, which would have to be attached to declaration forms. As a minimum, the guidance notes would include examples of how to value benefits, examples to assist owners in making declarations, an explanation of the penalties for non-compliance or for knowingly or recklessly making false donations, and an explanation of the time limits for the submission of declarations. This requirement would apply only to donations to individuals, members’ associations, third parties and permitted participants, but not to donations to political parties. I am not sure whether that is the effect that the hon. Gentleman intended, so I shall speak about the content of the amendment, rather than about the types of donations to which it would apply.

Clause 1 provides that the commission may prepare guidance on any of the requirements of the 2000 Act. The clause also gives the commission the function of taking such steps as it considers appropriate to secure compliance with the requirements of the Act. The commission is, therefore, already empowered by the Bill to issue guidance on the new requirements for a declaration. In fact, the Electoral Commission has already published guidance for political parties on valuing benefits, such as items sold at auction, secondment of staff by employers to work for political parties and the provision of free or discounted office space.

We would expect the commission to include in its guidance the details set out in the amendment, but a blanket requirement for the guidance to be attached to the declaration form may be unduly rigid. Those giving donations will not be required to complete specific forms, although the commission might produce a standard form, which recipients may choose to use to comply  with the requirement. The individuals and organisations regulated by the 2000 Act and the Bill may choose to comply in the way that they find easiest. That is preferable to prescribing, in primary legislation, that a specific form must be completed and a specific piece of guidance attached. I hope the hon. Gentleman will withdraw the amendment.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

Order. May I help the Minister? The Opposition do not have to withdraw their amendments, which are merely grouped with the Government amendment. If the Opposition ask the Chair for a specific Division, I would give serious consideration to that, but at present they have not.

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

Thank you, Sir Nicholas. I am, as always, grateful for your guidance.

I now come to the stand part debate on the general purposes of the clause and its associated schedule 3. However, before I do so, I remind the Committee of the wise words of the hon. Member for Cambridge, to which I have had recourse many times during the Committee proceedings, although the hon. Gentleman has not, sadly, been able to contribute as much as other Opposition members to our proceedings. I am endeavouring to put on record that he has made a significant contribution to the work of the Committee by reminding us all that, as we proceed, we should always have in mind two separate and sometimes conflicting imperatives. We must make sure that our democracy functions, and that depends, for all of us, on volunteers who are prepared to give their time and, on occasion, money to political parties. To put undue burdens on them would, in the end, be damaging to our democracy. However, equally, we must recognise the legitimate public concerns about the integrity and transparency of our political processes.

With those imperatives in mind, the objective of the clause and the associated schedule 3 is to bring greater transparency to donations to political parties. The clause also seeks to address the concerns of a number of Members on both sides that there was a lack of transparency as to the ultimate source of donations to political parties. As drafted, the clause adds a new requirement to section 54 of the 2000 Act, that all donations to parties of more than £200 are accompanied by a declaration relating to the source of the donation. Where money or a benefit of more than £200 has been given by an individual or organisation other than the person who physically makes the donation,

“with a view to, or otherwise in connection with, making of the donation”, a declaration will need to be made about whether section 54(4) or 54(6) of the 2000 Act applies.

Those subsections of section 54 require the disclosure of the identity of the true donor, where someone makes a donation on behalf of another person or organisation. If a person making a declaration concludes that those sections do not apply, they must say why. It is a criminal offence to knowingly or recklessly make a false donation, and a party cannot accept a donation if it is not accompanied by such a declaration. If it does and fails to return the donation within 30 days of receipt, the party or treasurer may be guilty of an offence. A donor  must submit a report to the commission where a donation has been received without such a declaration, in the same way as it is obliged to do where a donation is sent in by an impermissible donor.

Clause 8, therefore, does not add a new restriction on who can give a donation, but seeks to ensure that the important disclosure requirements in the 2000 Act are firmly in the minds of both donors and recipients when a donation is made, and that there is a dialogue between the two sides about the relevant legal requirements.

Clause 8 requires a declaration to accompany all donations above a threshold. I believe that that is of benefit. Having to sign a declaration stating whether the money is one’s own when making a political donation draws a donor’s attention to the existing requirements to declare when one is acting as an agent or otherwise giving money on behalf of another. I understand that that might seem unusual, but we believe that it is justifiable in the specific circumstances—

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

In a moment. I want to make this point, as it is fundamental to the purpose of the clause. We believe that the requirement is justifiable, given the gravity of the perception that someone has secretly given money on behalf of another person. It is justifiable precisely because the consequences of such an action extend more widely than to those directly affected, the donor and donee. They extend to the very integrity of our democratic system, which depends on public confidence in our politicians. We believe that making it more difficult for those giving and receiving financial support to be ignorant of the laws that apply to them can only be a good thing.

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

Taking the Minister’s line of thought forward, we could double the amount of legislation in this country by saying that for every law, we should have a law saying that people need to comply with that law. It is a circular argument.

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

With all respect to the hon. Gentleman, I had hoped that my not giving way when he first intervened would allow him to get the point of what I was saying, but he was obviously too anxious to make his intervention to listen. I recognise that the circumstances are specific and that it is not to be extended as a general principle. I made that point specifically. The reason for the measures in this specific set of circumstances is precisely that the consequences stretch so much more widely—to the very heart of our democratic system—than their immediate effects on those directly involved, the donor and the donee. That is why the measures are so important.

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

The Minister has not given any evidence, based on what has occurred under PPERA, to explain why the measures are required. If he could do so, we might reconsider them.

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

We have. The hon. Member for Cambridge referred to a recent controversy about a donation given by family members of a foreign businessman to the party to which the hon. Member for Huntingdon belongs. That can only highlight the fact that clarity is not  always present when donations are made. Surely, in such circumstances, clause 8 will impose a useful reminder that donations must be one’s own or, if given on behalf of another, that that fact must be declared and the original source of the money must be permissible. If clause 8 had been in effect when the donation in question was made, the embarrassment of the publicity given to the donation in recent days might have been avoided. I am sure the hon. Gentleman would have welcomed that, if nothing else about the clause.

Photo of Martin Linton Martin Linton Labour, Battersea

Does the Minister agree that the hon. Member for Huntingdon might need his memory jogged about a number of other cases, such as that of Midlands Industrial Council, in which there has been a lack of transparency and clarity about the source of donations? That has now been addressed, but it took some time before the spirit of the PPERA was instilled in the unincorporated associations and members associations that regularly donate money to the Conservative party, and indeed to ours. It took some time for them to understand that the true donor in every case must be declared.

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

I am grateful to my hon. Friend. No doubt he has effectively jogged the memory of the hon. Member for Huntingdon, and I need not add to my hon. Friend’s eloquent exposition of the point.

It must be a good thing to encourage transparency. This is a necessarily complicated area. Anything that encourages transparency must be a good thing.

Reference was made to Mark Sweeney. The matter does not relate to him alone. The hon. Member for Huntingdon referred to him as a bureaucrat who was not sensitive to the circumstances of political parties. May I put it on the record that Mark Sweeney—who, as a civil servant, cannot answer for himself, as the Committee will appreciate—is an outstanding public servant who has done extraordinarily good work on the Bill, way beyond the call of duty? The Government are extremely grateful for what he has done. From my own experience, I know that he is extremely sensitive to the situation of volunteers. He is very sensitive to the way in which political parties operate, notwithstanding the fact that he is an impartial civil servant of the highest integrity. I associate myself proudly with him and with the work that he and other officials have done on the Bill. The British public will have reason to be grateful to him for that.

Schedule 3 makes consequential changes to the existing legislation and extends the requirements of clause 8 to donations to individuals, members associations, third parties and permitted participants. In moving forward, it is important that we get the balance right between the need for transparency and the degree of burden placed on those who have the job of ensuring compliance with the law. The hon. Member for Huntingdon made his points clearly and we have a great deal of sympathy with his remarks about the role of volunteers in public life. We listened carefully to representations from political parties and the Electoral Commission, and that is why we tabled amendments that raise the threshold at which declarations are required to £5,000 in respect to registered parties and £1,000 in respect of donations to their accounting units.

In recognition of the practical difficulties that have been raised since the introduction of the clause, we have also tabled amendments that remove the requirement for parties to take reasonable steps to verify the accuracy of the declarations. This will not remove the need for parties to take reasonable steps to ensure that a donor is permissible and that the identity of the donor is clear, as is already required by section 56(1). Even with these concessions, clause 8 and schedule 3 will promote greater transparency. The additional declaration requirement will mean that donors to political parties will be obliged consciously to consider whether they are acting as agents for someone else when giving a donation.

As I have made clear, these amendments are intended to take into account concerns that have been expressed, and for the sake of consistency, the thresholds have been raised to those that are used in relation to a number of requirements in the 2000 Act. There is a separate question about whether those thresholds should be amended because they have not been adjusted for eight years’ worth of inflation. Long term, we perhaps also need to consider whether it might be desirable to ensure that changes in the value of money are reflected more routinely. I am happy to hear views on that issue. We have already shown our flexibility. If there is consensus, I am happy to consider whether we might be able to put something to that effect in the Bill.

Specific concerns were raised about the impact assessment and consultation. We accept that we had to make a reasoned guess when making the impact assessment. We readily concede that. We still do not have a full data set of all the donations between £200, £1,000 and £5,000 for the political parties. I concede that we had to make an estimate. We do not know how far out that estimate is, but we had a number of problems in reaching it. That is why we have been so flexible in our response, trying to address the legitimate concerns that have been raised. We will continue to operate in that spirit. If we find that we need to make further adjustments, we are happy to take account of views and, if we can reach consensus, to make provisions for them.

The hon. Gentleman asked various detailed questions about the storage of declarations—where they should be stored, how long they should be stored and so on. Those are legitimate points of detail. As he rightly said, they go to the heart of how parties operate on a local level, and such concerns might become onerous in some circumstances. He is right to raise them. However, the clause, sensibly, is not prescriptive about that. We will discuss the issues with the commission—because, as he said, they are important—with a view to its issuing guidance. We think that that provides the right balance between certainty and allowing appropriate flexibility. He is right to raise those issues. They need to be addressed, and I assure him that they will be.

On the points made by the hon. Member for Cambridge, I am glad that he found an opportunity to raise matters that I know have been of concern to him. I know that he is also concerned that the Committee might run out of time to address them later, so he seized the moment. In response, I point out just two things, because I do not want to stray too far from the clause. First, I remind him that where donations are made on behalf of another, the name of the original source is already required to be  disclosed to the Electoral Commission and made public under the 2000 Act, and that clause 8 merely draws attention to that requirement. Provision already exists for making the names public.

Secondly, the hon. Gentleman asked me a specific question about caps on donations. He will be aware that that is not on the agenda now. They would not work without state funding. There does not seem to be any consensus on that point among the political parties at present. The issue is fundamental to systems of party funding, and we believe profoundly that we cannot move forward without consensus. I am sure that it will be a subject for continuing discussion among the parties as well as in the public arena.

I hope I have persuaded the Committee that the clause should stand part of the Bill. Transparent, clean political party finance is vital to the health of our democracy. All parties have been affected by concerns about tainted donations or the inaccurate or incomplete reporting of donations. Adding a simple process to the existing permissibility requirement will encourage donors to political parties to be more open about their donations. I hope that it will also act as a deterrent to those who want to make impermissible donations. The public are rightly intolerant of any perception of sleazy politics. I believe that the additional requirements in the clause will help to achieve greater public confidence by promoting transparency, and I hope that it will stand part of the Bill.

Amendment agreed to.

Amendments made: No. 154, in clause 8, page 5, line 44, leave out ‘section 54A’ and insert ‘that section’.

No. 155, in clause 8, page 6, line 3, leave out ‘£200’ and insert ‘£5,000’.

No. 156, in clause 8, page 6, line 14, leave out ‘£200’ and insert ‘£5,000’.

No. 157, in clause 8, page 6, line 28, at end insert—

‘(4A) In the case of a registered party with accounting units, where it is an accounting unit of the party that is offered the donation this section has effect as if “£1,000” were substituted for “£5,000” in subsections (1) and (2)(b).’.—[Mr. Wills.]

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General 10:15, 20 November 2008

I beg to move amendment No. 151, in clause 8, page 6, line 30, at end insert—

‘(5A) A person does not commit an offence if, in the opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration under this section.’.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to discuss amendment No. 6, in clause 8, page 7, line 28, leave out the words in column 2 of the table and insert ‘A fine of £1000’.

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

Clause 8 creates a new responsibility for donors to political parties to clarify the source of their donations. Amendment No. 151 would insert a new sub-paragraph after proposed new section 54A(5) of PPERA, as set out in clause 8(2). The main purpose of the sub-paragraph is to provide a defence for those who have made an innocent mistake and have fallen foul of the regulation in PPERA only as a consequence of an administrative oversight or an honest mistake. We  want to make it clear with this amendment that the commission is empowered to excuse those who have made an innocent mistake.

The drafting of section 54A(5), as proposed in clause 8(2), is not sufficiently prescriptive. The sub-section as drafted—

“knowingly or recklessly makes a false declaration”

—does not specify that innocence will be a defence. By articulating a protection for innocent mistakes, we would force the commission to have regard to the mental decision element of the crime, rather than simply allowing it to hand out criminal sanctions based solely on the action of giving a false declaration.

Section 167 of the Representation of the People Act 1983 contains that idea. It states that where a person has been charged with an offence under its provisions, they may apply to the High Court, an election court or other court as appropriate, for relief from liability on the grounds that

“the act or omission arose from inadvertence or from accidental miscalculation or from some other reasonable cause of a like nature, and in any case did not arise from any want of good faith”

The Minister might suggest that sub-section (5) is sufficient to protect those who make an innocent declaration because they would not fall into the definition of having

“knowingly or recklessly made a false declaration”, but I would point him to the volumes of criminal case law that deal with the difficulty of those two concepts. If the protection was included in the Representation of the People Act 1983, I cannot see the basis on which it should not be included in the Bill. While we have the chance, we should aim for clarity, not only for donors and the commission, but to prevent the need for interpretation of our intentions by the judiciary at some later date when a sanction is challenged in a court of law.

Amendment No. 6, which was tabled by the hon. Member for Battersea, would remove the summary conviction and indictment penalty tariffs in relation to an offence under section 54(5)—making a false declaration about the source of a donation. In its place would be inserted a standard £1,000 fine. I do not support the imposition of one-size-fits-all penalties and I am concerned that the amendment, while well intentioned in that it would reduce the maximum penalty, would be an arbitrary and in some cases, a disproportionate penalty.

Much was made in the lead-up to the Bill of the role of better regulatory regimes and the use of flexible tariffs. My concern with the amendment is that we would take a step back from that flexibility. A range of sanctions will always require a top-end option. It may not be used often, or at all, but its existence acts as a deterrent. I am afraid that the amendment could remove that option and undermine the seriousness of the offence. I have more sympathy with the view that it should be an indictable crime. We will consider that element further.

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

The question is how serious a crime it is to make a false declaration about the source of a donation. As drafted, the Bill allows for a prison sentence, and the amendment would change that. To come back to my previous point, does the question not depend on what the purpose of clause 8 is, and whether it is to pave the way for a donation cap at a later date? The Minister has now put that off even further, but the issue depends on whether there is to be a donation cap. What is the hon. Gentleman’s attitude to a donation cap?

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

I will not go on to donation caps, Sir Nicholas, but the hon. Gentleman made an interesting point with regard to the amount that would fit. Of course, if there is an offence with respect to the lack of declaration, there will probably be another offence caused in relation to a breach of PPERA, or whatever. There will probably be an underlying charge, which could relate to the seriousness of the underlying offence—simply for not putting in the right bit of paper. I have some sympathy for the views of Government Members on the seriousness of not filling in the bit of paper, which is why we should look again at whether the offence is summary or indictable.

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

That is my point. If the underlying offence were to be to exceed the donation cap, it would be a very serious offence. That changes the entire context, so I come back to my question. What is the hon. Gentleman’s attitude towards the donation cap?

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

No. The underlying offence could be in relation to a number of issues under PPERA, not necessarily the donation cap.

Photo of Martin Linton Martin Linton Labour, Battersea

I am confident that the Minister will, in the end, accede to my plea under an earlier amendment, that the relief system under the Representation of the People Act should be imported into PPERA. If my hon. Friend is unable to do that, I hope he will accept the amendment. No one in Committee would want the threat of a jail sentence to hang over someone for a simple mistake that was not made in bad faith and was not an attempt to deceive or withhold information. The amendment does not ask for special privileges for politicians, but it is unfair to have the potential of a jail sentence for an unintended error. The issue, central as it is to the Bill, would be better dealt with by the Minister tabling an amendment to introduce section 86 of the Representation of the People Act into the PPERA, so that hon. Members who find themselves in this difficult position can seek relief from the court to have the offence struck out, and we do not have all the unnecessary paraphernalia of investigation by the Electoral Commission or the police over an unintended error.

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

Throughout our consideration of the Bill, we have tried to tread the line between having an effective set of regulations and avoiding unduly onerous burdens on volunteers and, indeed, politicians, whose work is vital to our democratic processes. We have been striving to get the balance right, which is why clause 8 states that a person commits an offence only if he or she

“knowingly or recklessly makes a false declaration”.

I know that the hon. Member for Huntingdon is sceptical about the requirement, but it will catch those who intentionally make a false declaration, or who do not properly turn their minds to whether the declaration is accurate. It does not seek to punish innocent mistakes, where steps have been taken to ensure that a declaration is accurate or where there is no good reason to think  that it might not be. We believe that our wording strikes the right balance. Importantly, it goes no further than the wording of other false declaration offences in the 2000 Act.

Hon. Members spoke about the 1983 Act, but that framework was replaced by the 2000 Act, and there is no reason why the particular offences are special cases requiring different treatment. We do not believe that the amendment is necessary, but of course we hear the  concerns about the dangers of an overzealous approach to enforcement—of the minor, technical breaches. We are not talking about substantive breaches, but about the inadvertent, minor breaches, which my hon. Friend the Member for Battersea has mentioned on several occasions.

It being twenty-five minutes past Ten o’clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at One o’clock.