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Clause 9

Political Parties and Elections Bill – in a Public Bill Committee at 2:15 pm on 20th November 2008.

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Defence to charge of failing to return donation from impermissible donor

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to discuss the following amendments: No. 183, in clause 9, page 8, line 21, after first ‘the’, insert ‘party or its’.

No. 184, in clause 9, page 8, line 21, after ‘treasurer’, insert ‘reasonably’.

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

The clause proposes to insert a defence into section 56 of PPERA to excuse the party treasurer from liability for a criminal offence under section 56(3). Section 56(3) requires the treasurer of a party to return such a donation or to pay an equivalent amount back to the donee. The offence arises from a failure to return donations from donors considered impermissible under section 54(2) and attaches to both the party and the party treasurer.

We have tabled a series of probing amendments. Amendment No. 182 would remove the need for “all reasonable steps” in proposed new section 56(3A). By removing the word “all” in subsection (a), the requirement becomes more practical. Requiring reasonable steps is one thing, but requiring “all reasonable steps” is quite another. The exhaustive nature of the “all” requirement imposes an unduly high burden on parties and treasurers. In essence, they must second guess all the possible routes of verification that the commission could come up with.

Local treasurers are not professionals. They are often volunteers who help out of a sense of civic duty. To require them to take “all reasonable steps” seems unreasonable to us. The requirement of reasonableness, as set out in the clause and in many other pieces of legislation on any number of different subjects, applies the so-called reasonable man test to any given set of circumstances. Called on to adjudicate on disputed behaviour, the courts should ask what a reasonable man would have done. That should be adequate.

Amendments Nos. 183 and 184 would amend proposed new section 56(3A) of PPERA as set out in the clause. The section covers the party’s belief as well as that of the treasurer and states that such belief must be reasonable. Amendment No. 184 seeks to rerun the arguments in favour of the inclusion of a test of reasonableness, where the opinions of individuals form the crux of the section in question. The need for objectivity as the yardstick against which to measure that belief where it has given rise to dispute, is important to ensure fairness and safeguard individuals from arbitrary penalties.

Amendment No. 183 would insert the word “party” alongside “the treasurer” in subsection (b). That is included in proposed new section (3A), and is perhaps a drafting oversight on the part of the Government. As it stands, only the treasurer must believe the donor to be a permissible donor. That is odd because the reasonable steps verification requirement in subsection (a) is imposed on both party and treasurer.

As I understand it, the party would currently be able to take reasonable steps to verify whether a donor is permissible, and leave it at that. Furthermore, it could suggest that in such situations, the treasurer must believe the donor to be permissible, despite not necessarily having undertaken the verification. That seems confusing and the amendment has been tabled in an attempt to clarify what is required by the people involved, and to ask the Minister to explain the drafting of the provision.

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

I appreciate the intention behind the amendments. They seek to clarify important points of detail and I am happy to respond. Amendment No. 182 would downgrade the requirement on regulated persons to prove that they have taken “all reasonable steps” and to claim that as a defence. Instead, it would require  them to take only “reasonable steps”. In our view, that would undermine the important requirement to take “all reasonable steps” found in section 56 of PPERA. It would mean that having taken some—but not all—reasonable steps could be used as a defence. That would create a mismatch between the obligation in the 2000 Act and the protection that should properly result should it be fulfilled.

Section 56 (1) of the 2000 Act imposes the requirement to take “all reasonable steps” to verify that a donation can be accepted. If that obligation is fulfilled, and if the party still feels that it is entitled to accept the donation, there would be no offence if it turns out later to have been wrong. To allow some protection if the obligation is only partially fulfilled does not make sense. Indeed, it may result in less rigorous efforts to comply with the requirements to ascertain the identity and permissibility of donors.

The requirement in section 56 means that parties are under an obligation to ensure that they take all reasonable steps to verify the identity and permissibility of donors. Amendment No. 182 would devalue that by establishing an easier defence. “Reasonable” is the key word. “All reasonable steps” does not mean that all steps that could possibly be taken, should be. We are concerned about the amendment, not least because it would send the wrong signal about the importance of compliance.

Amendment No. 183 would mean that a decision on the permissibility or otherwise of a donation could be made by the party as a distinct entity, as well as by the party’s treasurer. It is unclear how it could be proved that the party as a collection of members believed something, but that is what the amendment would allow. We believe that the provision is workable only if it refers to an individual’s belief and the treasurer is the obvious individual in that respect.

The amendment would not expose the treasurer to any wider liability. It simply makes it clear that it is his or her belief that is important in a case where all reasonable steps have been taken, and that there is a subsequent question about whether it was believed that the donation should lawfully be accepted. For those reasons, I do not believe that the amendment would work.

I do not fully grasp the purpose behind amendment No. 184. A reasonable belief may be harder to prove than a simple, subjective one and that makes the defence more difficult to satisfy. In that situation, requiring a reasonable belief to be shown would be unduly burdensome, and it is therefore unnecessary. It is hard to imagine an unreasonable belief being reached if all reasonable steps have been taken to ascertain the permissibility or identity of a donor. Therefore, we are not sure that the amendment adds much. In the absence of clarity as to the rationale for the amendment—which potentially makes the defence easier while the other amendments in the group have the opposite effect—we would resist it.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I would be grateful if the Minister guessed at what his own test of reasonableness would translate into, in time or cost per case. That would give us a sense of what we are talking about. If someone could show that he had put in that amount of time, reasonably and intelligently, would that constitute a defence?

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

So far, in these lengthy proceedings, I have resisted all temptation to give specific examples, and I will do so even at this late stage. The hon. Gentleman knows that every situation is different, and it would be wrong to give any indication otherwise. He is well aware of the consequences of my doing so, and so he will forgive me if I resist. I am happy to give way again, but he will not tempt me.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

Is the Minister aware of the impact assessment’s own assessment that £5 per case might cover it?

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

Of course I am aware of that. We have already discussed it in the Committee. I will not be tempted down that route. We have made a general statement, and have made a perfectly reasonable guess about what the amount might be. The hon. Gentleman asks for specific examples in specific cases and, as I have said, I will not be tempted down that route. However, I hope that I have given enough clarification to encourage the hon. Member for Huntingdon to withdraw the amendments.

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

That was an interesting debate on reasonableness. I listened to the Minister talk about “all” reasonable processes; I would have thought that if something is reasonable, it is reasonable. I am still not sure why “all” is needed. I shall go away and think about that further.

On the individual and the party, I agree that belief can attach only to an individual. I do not dispute that. My issue is a drafting one. One part of the clause refers to the individual, and another to the individual and the party. That might be a consistency issue, and the Minister may wish to look at it in due course. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

I beg to move amendment No. 152, in clause 9, page 8, line 22, at end add—

‘(3B) The defence established by subsection (3A) shall not apply where the donor was not a permissible donor by virtue of section [Non-electors to be impermissible donors].’.

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to discuss new clause 22—Non-electors to be impermissible donors—

‘(1) For the purposes of the 2000 Act a person who is not qualified to vote at parliamentary elections shall not count as a permissible donor.

(2) A company controlled by a person who is not a permissible donor by virtue of subsection (1) shall also not count as a permissible donor for the purposes of the 2000 Act.

(3) A company shall count as controlled by a person in the same circumstances as those set out in section [Donations by companies controlled by impermissible donors] (2)(a)-(c).’.

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

The amendment is to the new defence to which the hon. Member for Huntingdon referred, and would exclude from the scope of that defence the effect of new clause 22. The heart of the debate is therefore the new clause, and it will become obvious why the new defence should not apply to it.

The new clause simply aims to exclude Members of the House of Lords from giving donations to political parties. In the future, the House of Lords may become an elected body, and its Members would become parliamentary electors again. They are not parliamentary electors now, but they could be in the future, at which point, my proposal would have to be reconsidered. Nevertheless, in the interim period, the purpose of the new clause is to exclude donations from Members of the other place.

The new clause could be interpreted more radically, although that was not the intention of myself or my hon. Friend the Member for Argyll and Bute when we tabled it. However, it is a legitimate interpretation that will interest the hon. Member for Chichester, and would make it the single most unpopular new clause ever proposed to a Bill dealing with party funding. Under this more radical interpretation, the new clause would exclude donations from all companies, trade unions, unincorporated associations and trusts, which would destroy the financial base of all three main parties. That is not the intention, but it might be useful to discuss that point.

During the stand part debate on schedule 3, the hon. Gentleman said that one of his criteria for cleaning up politics—another was a donation cap—was that donations from all intermediate bodies should be got rid of, which is the case in other jurisdictions in the world, such as Canada, I believe, and certain parts of the United States. It is worthwhile thinking why we should not adopt the same policy, at least as a goal.

Photo of Andrew Turner Andrew Turner Conservative, Isle of Wight 2:30 pm, 20th November 2008

Will the hon. Gentleman explain how people are disabled, or whatever it was that he said. He said that in Canada and some of the United States—

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

I am sorry, but the hon. Gentleman misheard me. Corporate donations of all types are not allowed in those jurisdictions, and under one interpretation, new clause 22 would have the same effect. The argument against such a system is that it would require great dollops of state funding for political parties—the Minister made the same argument against a donation cap—which would not be acceptable to the public in present, or any, circumstances. But is that really the case? Should we not set out a long-term goal, perhaps with a date or a power for the Secretary of State to introduce an order with that radical effect, and say to parties, “You have a certain amount of time to sort yourselves out, because we are moving to a system of funding radically different from the one that we have now”? In that interim period, some state funding might be necessary. My party has always been more in favour of state funding than I have, but that could be a requirement, although it would not be necessary to have vast state funding of political parties forever.

The campaigns in the United States that have just been completed used a very different model of party funding that we could not introduce in this country now—I agree with that—but if all parties knew that eventually we would have to move to such a system, we would all do it. That is similar to what happened in Canada where the four main parties were dramatically affected by the reforms. The Liberal party—the equivalent  of my party—was dependent on large donations, and the New Democrats were dependent on trade union funding. The Conservatives and their predecessors were rather less dependent on big donations than the Liberals, but there was a similar problem.

All three parties in Canada have now adapted to a radically different, far more restrictive and individual system. It seems to me that we should be thinking about doing that here and weaning ourselves off the way we do things now, because it produces, rather than public confidence, intermittent scandals and, more than that, long-term, low-level distrust of the political class, so we have to think about radical reform.

Photo of Martin Linton Martin Linton Labour, Battersea

The hon. Gentleman forgets the fourth party in Canada, the Bloc QuÃ(c)bÃ(c)cois, which was the origin of that policy simply because it did not get funding from trade unions or business but invented what they called le financement populaire to do away with all business funding.

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

I am tempted to answer the hon. Gentleman, “C’est exact.” That is an interpretation of new clause 22 that I did not intend, but it is a possible interpretation and I hope that the hon. Gentleman and other members will make clear their views on what the long-term goal should be and their support for the idea of moving away from institutional funding entirely.

Our original intention in tabling new clause 22 was to raise the question of whether it is proper for Members of the House of Lords to be donors to political parties. All parties represented here—obviously the Scottish National party would be in a different position—regularly receive donations from Members of the House of Lords, which can be substantial, and in certain cases very substantial. I do not want to cast any aspersions on Members of their lordships’ House at all.

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

Is the hon. Gentleman saying that people can give money before they are made Members of the House of Lords but not after?

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

The hon. Gentleman raises a point that I will get to later, because that is at the heart of the intention behind the new clause. That is what will change the nature of donations to political parties by people who later become lords.

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

I am trying to understand where the hon. Gentleman is coming from. Presumably he is trying to stop money being related to peerages, but is he suggesting under his solution that people would have to give their money up front rather than afterwards?

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

I will get to that point later, but I think that the hon. Gentleman is thinking about that the wrong way round. He needs to think about the question from the point of view of the political parties and whether they would want major donors to be nominated to the House of Lords, were the new clause to be adopted. I will get to that clause in a moment.

I do not want to cast aspersions on those of their lordships who make donations, but the question is whether an individual, who already has great access and influence over politics by virtue of their appointment to the legislature under this extraordinary system that we  have, should have the additional opportunity to influence the political process via donations, and that is a question that we ought to raise. It is a question of perception.

I fully accept that many of their lordships who give donations do so because of their desire to further the causes that they believe in, and that is true of their lordships in all three parties. As the hon. Member for Huntingdon hinted, if we are talking about the problem raised by the hon. Member for Chichester about captains of industry who gave large donations to the Conservative party and then miraculously appeared in the House of Lords, this new clause on the face of it does not have much to do with that. They had given their donations and then appeared later, so no further advantage of that sort could be looked for. There is, however, the subsidiary question of ministerial office. Again, this is entirely a question of perception but Members of the House of Lords are eligible for ministerial office in a way in which ordinary members of the public are not. That might be another reason for restricting donations from them.

Let me turn to the point raised by the hon. Member for Huntingdon. How does this new clause affect the serious problem of perception—in some cases perhaps beyond that—that large donations lead to ennoblement, to becoming a Member of the House of Lords? The answer is simple. Imagine a political party—not one of those present—that found itself with a very generous donor who was giving that party large amounts of money. The rule—new clause 22 having passed—would be that if that person were to be appointed to the House of Lords they would no longer be able to make these large donations to that party, so what interest would there be for that party to suggest that that person should become a Member of Lords? It would remove any incentive that a party had for making its large donors peers. It would introduce into the system an interference in the way in which this has been done and talked about for a long time, going back, I confess, to the days of David Lloyd George.

David Lloyd George’s approach was based on his view that he did not like aristocrats and if he could do anything to discredit them by selling peerages that was all right by him. But the problem has carried on beyond that for a long time. We are still in a position where members of the public are quite cynical about what happens in politics. People frequently mention to me the fact that of the people who have recently given £1 million to the Labour party only two are not Members of the House of Lords. One of those is J. K. Rowling and I am sure she does not want to be. Nevertheless, only one of the others is not. We need to look for ways of getting out of that problem. We have looked at strengthening legislation, directly saying there should be no sale of honours. That legislation has serious weaknesses, as anyone who has tried to raise a possible problem with the police has found.

I am suggesting a different approach aimed at the incentives the parties have in the first place to raise their donors to the peerage. That is the central intention of new clause 22. It raises a second point. There might or might not be an opportunity later to discuss this point directly under new clause 10, but new clause 22 does refer to new clause 10, and I am sure it is legitimate to discuss the issues raised there in this debate. The issue is whether someone who is not a permissible donor should be allowed to use the corporate form to evade the  regulation that makes them a non-permissible donor. New clause 22 says that, with regard to this particular form of impermissible donor, that will not be allowed. It refers to new clause 10, which does the same thing for a different class of impermissible donor, namely foreign donors.

This goes back to the debate on unincorporated associations, although here we are talking about corporated bodies. The question is, should it be allowed to use the corporate form to make a donation in a way that would not be allowed were the individuals to do it themselves? We have seen cases of this being reported in the media recently—that concerning Lord Ashcroft, and the potential one concerning Mr. Deripaska and LDV, which raise the issue directly. If people who are not allowed to make donations are allowed to get through that by using the corporate form, we must ask whether we should raise the veil of the corporation to see who the real donor is.

The hon. Member for Huntingdon and I spent many days, possibly in this room, or perhaps it was next door, on the Companies Bill. During the course of that debate we talked about the issue of the corporate veil and the extent to which people should be allowed to set up their businesses in whatever way they want, using the corporate veil to separate their various businesses and the debts and obligations that those businesses might create. Never, in the course of those debates, did anyone make the point that people should be allowed to use the corporate form to evade the law on donations to political parties. It seems that we should make an exception to the rule in Salomon v. Salomon that companies should be treated legally as separate people.

New clause 22 says that a company that is controlled by an impermissible donor shall, itself, count as an impermissible donor. That is the way to do it. The question then is who counts as controlling the company? Going back to the debates that the hon. Gentleman and I had on the Companies Bill, now Act, there is an answer to that question in company law and we should use it. There are three ways in which people control companies and we should catch all of them in trying to stop the evasion of the law. The first, which is the most obvious, is where a shareholder owns 75 per cent. or more, of the shares in a company, that shareholder can give the company an instruction by resolution; it can tell the company what to do. If the shareholder has less than 75 per cent. they cannot do that. They might be able to elect the board, but they cannot tell the company what to do; the board runs the company. The first condition, therefore, is that anyone who owns 75 per cent. or more of the company should, for donation purposes, be counted as controlling the company.

The second concerns boards of directors. If there is a board of directors, it—rather than the shareholders—will run the company. If the board of directors is dominated by impermissible donors, the company itself should count as an impermissible donor. That seems to be quite straightforward. The third, and perhaps most important, concerns shadow directors. A company that is controlled indirectly by someone should count as well for these purposes. Section 251 of the Companies Act 2006 says that a shadow director is

“a person in accordance with whose directions or instructions the directors of the company are accustomed to act.”

The normal circumstance is where there is a dominant shareholder with enough votes to make anyone a director or not a director at that person’s will. But there are other circumstances where this applies. Were we to adopt this rule, we could remove the possibility of people setting up shell companies in various ways to make donations that would not otherwise be lawful.

That is the overall intention of the new clause: to remove the possibility of making donations to Members of the House of Lords and to make sure that that intention cannot be evaded or got round by the creation of companies. I know that many members of the Committee are uncomfortable discussing this kind of issue. I can see it in their faces as I look round. [Interruption.] I certainly was not looking at the Government Whip. He was not one of the people I had in mind. But this is the central issue in the Bill. It should be about donations, expenditure and the nature of our political system where it is now, which is not good and not well respected, and where it should be going. If we do not discuss it now, when?

Photo of Jonathan Djanogly Jonathan Djanogly Shadow Minister (Business, Innovation and Skills), Shadow Solicitor General, Shadow Minister (Justice), Shadow Solicitor General 2:45 pm, 20th November 2008

We are in favour of transparency, but we do not want to prevent people from donating. When I read the amendment I was not entirely sure what the hon. Gentleman was aiming at. Having heard him I am slightly the wiser. He is basically looking at the laws. First, I thought of foreigners, but they are already banned. Then I thought of people under 18: 17-year-olds. Then I thought of mental health cases. Then I thought of prisoners and thought it had something to do with Liberals wanting prisoners to get the vote.

Basically, the new clause needs a bit more work, even to achieve the objective that the hon. Gentleman wishes for it. The other point that jumped out was how to define someone who is not qualified to vote. Does a person who ought to be on a register, but who is not, count as someone who is not qualified to vote? Could a non-registered person who is an anarchist give money to an anarchist party? It was all quite confusing, but I see where the hon. Gentleman is coming from. However, we do not agree with it.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

There are three types of amendment or new clause. There is one that seeks to change the law, there is one that seeks to probe what the law might mean and there is a third, into which category this new clause falls, which is to make a point, which may or may not appear initially relevant to the clause, come what may, whatever the procedure of the institution one happens to be sitting in. The hon. Gentleman is a clever lawyer. He has found a wheeze to debate new clause 10 and get all his points in, just in case we do not reach it. I take my hat off to him for that.

As it happens, having heard the hon. Gentleman’s description of new clause 22, although I certainly think that it would need a great deal of work, I agree with what he described as its intention, which is, in summary, to exclude all institutional donations, including trade unions and corporate donations from party funding and to force parties to rely on local activism. That is where we have to go. I strongly agreed with his description that it should be a long-term goal and that we should not try to implement something like this overnight, which would have huge implications for all political parties, but particularly the Labour party. It would be  unfair and damaging to any party that tried to introduce it in that way. We should mark out that territory, recognising that many other jurisdictions have also tried to go down that road—he made that point about Canada, and the Canadian point is well taken.

I also agreed with the hon. Gentleman that, if there is to be state funding, it should be considered transitional—in order to help bring in such a scheme, while parties adjust and find a way of establishing and broadening their local base. There is a stench in the nostrils of the electorate about how parties are funded at the moment. People have heard me say that on numerous occasions. I feel strongly that we need to deal with that. I regret that the Government have been unable to take forward the key measures required to enable something substantive to be done about it, which was a consequence of the breakdown of the Hayden Phillips talks.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I will in a moment. I hope that I have worded that in a way that does not open up a debate that I not only suspect would be out of order—

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

—but would also be an unnecessary party political exchange of a type that I would like to avoid. None the less, even though we have had such a stricture in an unusual but powerful ruling from a sedentary position, I shall give way to the Minister.

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

I was only seeking illumination from the hon. Gentleman. Could he remind the Committee of what happened to the Hayden Phillips talks and which party withdrew from them?

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

The answer to that would be completely out of order. I am sorry, I do not often disagree with Ministers in Committee, but I do on this occasion. The hon. Member for Chichester should not deal with the question.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

And I shall not—not even by the back door.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I shall not try to, even by the back door.

I want to make one last point. There is the question of the effect on the scope of the criteria for ennoblement, which the hon. Member for Cambridge touched upon near the end of his contributions. It is true that a significant number of donors has as an incentive the idea that such preferment might come upon them one day. There are some pretty good statistics to back up that view. The hon. Gentleman mentioned one about donations in excess of £1 million to the Labour party over the past 11 years. He might have tried looking below £1 million, because the going rate is certainly well below £1 million at the moment—or it was, until the Lord Levy scandal broke.

I want to make only one more point about achieving that part of the objective. I am not sure that new clause 22, or even a hyper-improved version of it, is the way forward. The appointment to a peerage and the sense in which it is an honour need to be completely separate. A peerage should be granted entirely on the likelihood of that person making a contribution to the legislature, whether that is an appointment or, ultimately, an election—I shall not go into that. The position is part of the legislature and it should be treated as an appointment to the legislature, in which we want contributions from that individual, rather than thinking of the peerage as an honour. It should certainly not form part of patronage of any type, even of a Prime Minister.

When I wrote my proposals for reform of party funding, the Leader of the Opposition wrote the foreword and launched them at a press conference, giving warm support. For those interested, although the proposals obtained little coverage due to other issues, on page 6 the hon. Gentleman will find the solution to the problem of new clause 22 set out in detail. My right hon. Friend believes that the link between patronage and the Prime Minister should be completely broken and that those appointments should be made by an independent appointments commission.

My very last point is that the issue will not go away, even if we deal with it before the election, which is extremely unlikely. It will probably come up after the election, whoever wins. I will do whatever I can to ensure that it comes up after the election if the Conservative party wins. This area needs fundamental reform; not along the lines of new clause 22, which would have all sorts of unforeseen and unforeseeable consequences, as the hon. Gentleman admits. We have to have reform, if we are to remove what I described earlier as the stench in the nostrils of the electorate.

Photo of Tony Lloyd Tony Lloyd Chair, Parliamentary Labour Party 3:00 pm, 20th November 2008

I commend new clause 22, although not every aspect is unproblematic. For example, removing Members of the House of Lords, which would be an unintended consequence of new clause 22, should not be part of our duties, but the spirit of the clause is right. The hon. Member for Chichester was a little harsh about the motivation behind it. The new clause serves a genuine purpose and there is a need to debate those devices. We can disagree about the mechanisms that ought to be allowed in our political system and the funding thereof, but we ought not to disagree about devices designed to get round clear principles that have already been established elsewhere.

One clear principle, which exists for direct donors, is that overseas residents—those prohibited from taking part in our domestic political processes—should be disbarred from funding. That is the essential import of the new clause, and, in that sense, we ought to seek something that does that. We ought to ensure that the law for corporate structures is in line with the law affecting individuals. It may not be the right mechanism, but I hope that my right hon. Friend the Minister will at least see the logic of moving in the direction that the hon. Member for Cambridge is urging.

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

Like most members of the Committee, we agree with the high-minded principles that we discern behind the amendment and new clause 22. However, as  has already been revealed in the discussions, the new clause is, perhaps, too imperfectly drafted to secure the ends that it seeks.

Section 54(8) of the 2000 Act makes it clear that an individual on any of the following registers is entitled to donate to a UK political party: the register of parliamentary electors; the register of local government electors; the register of relevant citizens of the EU; and the register of peers made under regulations under section 3 of the Representation of the People Act 1985. The amendment would change that so that only those on the parliamentary register would be able to donate, which would prevent UK citizens living abroad and EU citizens living in the UK from donating. We do not think that a limitation of that sort is desirable, given that those categories of person have a right to vote and otherwise participate in our political system.

As we have heard, the new clause would also prevent peers from donating. Of course, it is right, in our and in most people’s view, that peers may not vote for representatives in the House of Commons, but it is not right that they should be barred from participating in the democratic process in other respects. In any event, as I have mentioned, the future reform of the House of Lords, to which everyone is committed, would make such a change inevitably anachronistic if we introduced democratically elected peers, either in whole or substantial part.

The amendment would further prevent companies owned by such individuals—that is, peers and individuals with foreign connections—from being able to donate. That would be a significant departure from the 2000 Act, under which all companies that are registered and carry on business in the UK are eligible to donate. We all understand the concerns that lie behind the amendments. It is equally clear, however, that they need to be addressed in some other context and not through the wholesale amendment of the 2000 Act to prevent any company with significant foreign connections or any company owned or controlled by a peer from being able to donate. As currently drafted, the amendments would prevent a significant number of individuals and companies with genuine connections to the United Kingdom from being able to donate, and that is not an effect that we want to achieve.

However, as the hon. Member for Cambridge made clear, and as my hon. Friend the Member for Manchester, Central and the hon. Member for Chichester said, these are important issues. The purpose of the amendment is perhaps to open up discussions on how we can come to some kind of final resolution of these complex but fundamentally important issues on party funding and spending. I think we can all agree that the discussion is not finished, but as I have said over and again in Committee, and as my right hon. Friend, the Secretary of State said on Second Reading, we believe that we can move towards such a final resolution only on the basis of consensus. Such important issues cannot be dealt with in any other way and certainly should not be turned into a party political football. That is why I share the regret of the hon. Member for Chichester that the Conservative party walked away from the discussions.

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

I hope that one day we will see consensus emerge on what we all agree are important issues. I think that all members of the Committee will wish to return to the subject in due course, but I do not believe that the amendment and the proposed new clause provide the place to do that. Having heard the debate from both sides, I hope that the hon. Member for Cambridge will withdraw the amendment.

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

The Minister came back to the point about consensus, but he seems to have a highly restricted view of where we should be going and how. There are times when politicians have to go with the consensus of the public, rather than the consensus of the parties. His final remarks illustrated that there is not even consensus among the parties on why the previous talks broke down, never mind on what to do about it. The public expect us to act, and to do so in a way that they see as fair, not partisan. The Government are in a position to make proposals that will be perceived as fair by the public as a whole. It is interesting that amendments have been tabled by Labour Back Benchers that would have had an adverse effect on the Labour party, but which they tabled anyway. That is the spirit in which the debate should continue.

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

Of course we must move forward in the way that the public want—that is what we all are here to do. I hope that the hon. Gentleman recognises, however, that if we cannot secure consensus among the parties it will become a partisan issue, axiomatically so. It will become very difficult to secure an enduring settlement. The public certainly do not want it to become a party political football or for it to be batted around between elections. We saw that at the beginning of the 20th century; it is not helpful to the processes of democracy. That is not an excuse for kicking the matter into the long grass and I hope that the hon. Gentleman will accept that. It is a duty of all hon. Members to try to achieve consensus, so that we can do precisely what the people of this country want us to do.

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

I am happy that the Minister has just said that it is a not a matter of kicking the issue into the long grass, but he is not right about the conditions under which we can get a permanent settlement. It is not necessary to have agreement among the parties to reach a position that will be stable. We need to reach a position that the public think is fair and when an attempt to move away from it would be seen as partisan and would lose support for the party that proposed it. That is what I am asking for on not only the issues raised under new clause 22, but donations, expenditure caps and relations between the unions and the Labour party. The possible solution that has been suggested would enable us to reach the point at which we could propose a settlement that the public, not the parties, would want.

Photo of Andrew Tyrie Andrew Tyrie Conservative, Chichester

I agree entirely with the hon. Gentleman. Does he agree that we cannot arrive at the point at which one party can have a veto over change if it were clearly what the overwhelming majority of voters concluded would enable greater public trust to be restored in such matters?

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

I agree with that. What matters is whether the public would perceive as fair a system with which one party did not agree. If the other parties ganged up on a particular party just to do it down, the public would not consider that to be fair. It would not be a stable position. I am not suggesting that. We should all think about what would be a fair settlement and go for it, regardless of whether one or two of us might object on partisan grounds to the eventual fair solution.

Having heard the debate on new clause 22, I readily confess that it could do with some more work. As the Minister said, a number of groups are excluded from parliamentary elections, some of which I certainly would want to exclude from the right to donate, including peers. I would be a bit more doubtful about others, such as European Union electors who are not peers in this country. An interesting question was asked about whether we should allow United Kingdom citizens abroad, some of whom are not peers strangely enough, to be donors.

I want to mention prisoners, the issue raised by the hon. Member for Huntingdon. At the moment, they are not allowed to vote. A European Court of Human Rights judgment is against the Government on that point. The problem can be resolved in several ways, but not by granting the right to vote to all prisoners. Taking away the right to vote should be considered to be a specific part of a sentence, because the right to citizenship and the rights of citizenship should be considered separately from other aspects of what happens to someone. That is the correct approach, because being a citizen with the right to vote should be considered an important matter.

Even though I recognise the problems in how new clause 22 has been drafted, I am encouraged by the remarks made by the hon. Member for Manchester, Central about the acceptance of the spirit behind it, especially behind proposed subsections (2) and (3) on anti-avoidance. It is the constant task of legislators to look out for ways in which what they intend is being got round in the world outside. That is why legislation cannot be for ever. When rules that are laid down are being avoided by devices that undermine their spirit and intention, we should do something about it. With that in mind, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 ordered to stand part of the Bill.