With permission, I shall make a statement about the report of the review of party funding by Sir Hayden Phillips entitled “Strengthening Democracy: Fair and Sustainable Funding of Political Parties”, published earlier this morning. Copies are available in the Vote Office and the Library of the House.

In a written ministerial statement this morning, my right hon. Friend the Prime Minister thanked Sir Hayden, on behalf of the Government, for his hard work over the past 12 months. In the course of his review, Sir Hayden received submissions and held discussions with representatives of all the major political parties, as well as consulting the public, the Electoral Commission and various academic experts.

Sir Hayden's report identifies important principles that could form the basis of a lasting settlement of the party funding system. However, as Sir Hayden himself concedes, a number of practicalities remain to be worked out and will require further discussion between the parties. We will play a full and constructive part in those talks.

The issue of party political finance and spending is central to the debate about the health of our democracy. There is a keen public interest in securing lasting reform in a way that curbs wasteful spending, does not gratuitously advantage one party at the expense of others, and does not interfere in the internal structures of any political party.

If the various political parties can agree on a reform package that meets those objectives, we will have a funding regime that will increase public confidence in the probity of the democratic process and help stimulate grass-roots renewal of our parties.

The most compelling need identified by Sir Hayden is the need to end the political spending “arms race”, which has seen expenditure spiral upwards even as party memberships have declined. In the 1997 to 2001 Parliament, the Government, with all-party support, sought to tackle the problem of excessive spending with what became the Political Parties, Elections and Referendums Act 2000. The Act reflected key recommendations from the Committee on Standards in Public Life, chaired by Patrick Neill QC. It introduced a national limit on campaign expenditure, created the Electoral Commission, and made the funding system more transparent by requiring that all donations above £5,000 nationally and £1,000 locally be made public.

We all believed that through the introduction of those limits and that transparency, public confidence in the system could be assured; but the recent revelations about unpublicised loans to parties by individuals, resulting from a loophole in the 2000 Act, have clouded that transparency. In addition, the line between local and national spending has become blurred by developments such as political campaigning facilitated by the internet, and other advances in telecommunications. As a consequence, a modest relaxation of spending controls at local level in the 2000 Act has been exploited to an extent far beyond what was intended in the legislation.

Sir Hayden draws attention to the fact that spending by the two main parties in the 12 months before the last general election—in 2005—rose to £90 million, up nearly 40 per cent. on the £65 million spent during a similar period in 2000-01. He must be right to say that the 2000 Act

“sought to control the level of spending, but it has proved inadequate to the challenge”.

The immediate problem of transparency in relation to party loans has been resolved by the Electoral Administration Act 2006, which requires that loans be publicly declared in the same way as donations. However, in his report Sir Hayden advances proposals for further reform. Crucially, he shows support for the principle of continuous spending limits at local and national level. He also proposes tighter controls on third-party expenditure, and a reformed Electoral Commission with the power, capacity and practical experience to perform its role as an effective regulator.

The importance of effective spending limits cannot be overstated. As the Select Committee on Constitutional Affairs observed in its report “Party Funding”, published in December last year, the United States offers an instructive example of what can happen when political spending is left unchecked. The Committee said that in 1976, the total cost of all United States elections was $40 million. By 2004, the cost of federal elections alone had risen to $3.9 billion, 97 times higher.

Sir Hayden also recommends the introduction of caps on donations. All three main parties agree in principle that there should be some form of donation cap. The Constitutional Affairs Committee recommended a voluntary arrangement. We believe that that would work, providing enough flexibility for the different structures and traditions of the various parties to be respected.

Sir Hayden offers welcome backing for the judgment of the Constitutional Affairs Committee that

“any move to change the nature of party funding must not stray into prescriptive devices to require political parties to organise internally in ways that violate their democratic relationships with other institutions”.

Finally, Sir Hayden recommends the introduction of a higher level of state funding for political parties. The Constitutional Affairs Committee reached a similar conclusion, but recognised the need for further debate about the values and principles that should govern such funding. As a 1976 report on party funding—by a committee chaired by the then Douglas Houghton—showed, there has long been a degree of state funding in United Kingdom politics. All political parties have the opportunity to claim free television and radio broadcast slots, along with free postage. Since the 1970s, the provision of Short money and Cranborne money has given millions of pounds of state aid to the main Opposition parties. That funding has increased more than threefold since 1997. In 2006, the total amount of Short money was £6.3 million, with more than £4 million being paid to the main Opposition party.

The Neill committee noted in its 1998 report that the arguments for and against state funding were “finely balanced”. Although Neill did not recommend a major extension, his committee concluded:

“We can envisage circumstances in which substantially increased state funding of the political parties—including the funding of their general activities—might become imperative.”

Sir Hayden concludes that those circumstances now exist, and he has put forward proposals for increased state funding based on electoral support and the recruitment of members.

Our democracy could not function without the organisation of political parties of all political shades and opinions, and the platforms for debate and the exploration of ideas which the political parties provide. Their work, and in particular the work of party foot soldiers who devote time and energy to their cause, is fundamental to the health of the democratic process.

In order for them to command high levels of public support, the funding arrangements for political parties must be fair and transparent. Through earlier legislation, Parliament has taken significant steps to put such a system in place. Sir Hayden Phillips’ report has identified areas for further reform and some key principles. The task now for the political parties is to work on the practical arrangements of achieving a fairer, more sustainable and more transparent funding regime. The public would expect nothing less.

I thank the Leader of the House for giving me advance sight of his statement.

We welcome the publication of Sir Hayden Phillips’ report. We accept his main recommendations. We want to have cleaner and cheaper politics, and we want to work with the other parties to achieve that goal. However, if cleaner and cheaper politics is the goal, we start a long way from that point. The cash for peerages scandal has pushed the public’s estimation of politicians to a new low. This issue is not just about our vanity, nor is it just a joke that can be easily written off. Public cynicism about our political process is deeply damaging to our democracy, so will the Leader of the House agree to hold cross-party talks on Sir Hayden’s recommendations as soon as possible?

There is much to welcome in Sir Hayden’s report. We support the moves towards a long-term cap on donations to political parties and a reduction in the general election campaigning cap, and we are happy to discuss spending caps on all year round non-election campaigning and proposals for tighter controls on third-party expenditure, greater transparency on donations, such as those by unincorporated associations, and new powers for the Electoral Commission. Does the Leader of the House share our support for those proposals?

Sir Hayden suggests that it might be desirable to control local campaign spending outside election times, but he rightly notes the difficulties in putting that into practice, such as the variance of constituency boundaries according to the type of election, the practice of targeting marginal constituencies which is inevitable in our electoral system, and the fact that local party officers tend to be volunteers. Despite our scepticism about the need for local limits, in order to secure agreement we are prepared to consider them, but subject to one condition: that any caps imposed at local level do not entrench incumbency. Does the right hon. Gentleman agree to that?

It has long been the position of the Conservative party that in order to restore public trust we must remove the dependency of the political parties on all large donors, regardless of whether they are individuals, businesses or trade unions. I am glad that Sir Hayden has reached the same conclusion. Does the Leader of the House agree with Sir Hayden’s proposal that caps on donations should apply across the board—to individuals, businesses and trade unions?

Sir Hayden’s report suggests that, despite the cap on donations, trade union affiliation fees could count as individual donations on the condition that

“it is possible to trace payments back to identifiable individuals”.

Does the Leader of the House agree that any such system must be free from abuse? Does he agree that if affiliation fees are to count as individual donations it is imperative that individual trade union members are able each year to opt in to political funds, rather than being left to opt out, as is currently the case? Given that more than half of all union members who pay affiliation fees do not vote Labour, should not members who opt in to political funds be able to choose annually to which party their fees should go?

These are very important questions because it is, of course, Labour’s financial links to the trade unions that have prevented reform until now. [Interruption.] The party’s national executive committee recently pledged to “vigorously oppose plans” for an across-the-board cap on donations, saying that

“the Labour Party cannot accept a statutory uniform donation cap…It would also undermine the Labour Party federal structure and seek to amend a system of Trade Union contributions”.

However, as Sir Hayden says,

“a limit on donations need not...challenge the Party’s constitutional relationship with the trade unions”.

Does the Leader of the House agree with Sir Hayden? Three quarters of Labour’s donations—some £8.5 million per year—come from the unions, and there is another £8 million per year in affiliation fees. Is it not the Labour party’s constitutional relationship with the unions that is threatened by funding reform, and what it is particularly worried about is its financial relationship with the unions?

Sir Hayden is clear that there should be no new state funding of political parties until an agreement is reached on all aspects of reform. We agree. There should not be a single extra penny of state funding until there is a cap on all donations from individuals, companies and trade unions. Does the Leader of the House agree that there should be no more state funding until that is the case? Does he also agree that any new state funding must promote democratic engagement? As the Committee on Standards in Public Life and the Constitutional Affairs Committee have each concluded, that could be done through tax relief on small donations and matched funding for non-taxpayers.

We need to reform party funding if we are to get cleaner and cheaper politics, and we need cross-party consensus if we are to reform party funding. Sir Hayden’s report, published today, is a very good starting point for cross-party talks. The principal block to reform remains the Labour Party’s relationship with the trade unions. This Government came to power promising to reform party funding to end sleaze. I am sure that in new Labour’s old days the Prime Minister and Chancellor would have wanted to be bold by ending the unions’ financial grip on their party. That is the key to achieving consensus on party funding, so will the Leader of the House now accept that challenge?

Of course we would like the all-party talks to take place soon, but I must say to the right hon. Lady that they will have to take place on the basis of what is actually in Sir Hayden Phillips’ report, rather than on what she wishes was in his report.

The right hon. Lady talks about state funding. Sir Hayden proposes that that must be linked to other changes, and of course we accept that. There is a big issue, which the Constitutional Affairs Committee raised, to do with ensuring public consent for the idea of extended state funding—it is not that there is no state funding at the moment; it is about extending state funding.

I wondered how quickly the right hon. Lady would try to turn the issues covered in the report to suggesting that the big problem was trade union funding, and it certainly did not take her long. It is simply untrue that Sir Hayden anywhere says that the “principal block”, to use the right hon. Lady’s phrase, to solving the problems is the issue of the trade unions. More to the point, she knows that, in all this public concern about some aspects of trade union funding, there is absolutely no evidence—not a scintilla—of any problem in respect of funding by the trade unions. She also knows that her party went through a series of so-called reforms of the method of the trade union political levy through the 1980s and up to 1992, and that in 1998 the Neill committee reported that there was no evidence that there was a case for any further reform. The Conservative party said in its evidence to the Neill committee:

“The question of trade union funding of parties is not a matter of direct concern to the Conservative party. We recognise the historic ties that bind the trade union movement with the Labour Party.”

It was content to accept the evidence that there was no case for further reform, given the fact that the Conservative Government of Margaret Thatcher had introduced a series of reforms that sought to change and undermine our system of party funding, but—consistent with their usual practice—never touched their own system.

We will have talks, but I cannot think of any one occasion in the past 50 years when the Conservative party has taken the initiative to try to clean up party funding. As recently as 5 March—[Interruption.] It has not done so when it has been in government. Of course, Conservatives will say things in opposition, but they did nothing between 1951 and 1964 or between 1970 and 1974, and the only thing that they did—although it was a big thing—between 1979 and 1997 was to seek to undermine another party’s finances while their own were maintained.

The proof of that comes from Lord McAlpine, who for a long time was the Conservative party’s treasurer. He said in his memoirs “Once a Jolly Bagman”:

“Personally, I do not think that we ever should have shown how we spent our money. The Conservative Central Office is not a charity dedicated to helping the sick and the suffering”.

He also said:

“There was a black hole in the Party’s finances…The solution was easy: we gave up publishing accounts.”

That is the approach that the Conservative party has always adopted. It has to be dragged kicking and screaming towards any sort of transparency.

Even at the last election, and notwithstanding the Conservatives’ subscription to the principles of the 2000 Act, they were up to it again—using front organisations such as the Midlands Industrial Council and other bodies to evade and avoid the principles to which they had signed up. I am glad that there has been a rapid Pauline conversion today. Only two weeks ago, the right hon. Member for Horsham (Mr. Maude), the chairman of the Conservative party, said in a published interview:

“Let’s be quite clear: the reason party funding needs reform is nothing to do with how much is spent.”

That is the real position of the Conservative party. We will go into these discussions hoping to seek agreement. I just hope that the Conservative party does the same.

I have to say that the opening exchanges do not immediately instil confidence in consensus being reached.

I thank the Leader of the House for his statement and welcome Sir Hayden’s report. We support the principles that he so clearly sets out, as we also welcomed the report by the Constitutional Affairs Committee, which preceded it. Sir Hayden correctly identifies the lack of public confidence in the party political process, and that is partly fuelled by factors such as the cash for peerages allegations, the loans scandal and the perceived influence of big donors, as well as increasing resentment of the spiralling costs of campaigns. Parties say that they have little cash to spend, but spend more and more on national campaigns.

When Sir Hayden says that nothing should be agreed until everything is agreed, that must be right in the case of the contentious issues, but does the Leader of the House agree that there are several non-contentious matters in the report—such as strengthening the policing role of the Electoral Commission—that can proceed forthwith and do not need consensus to emerge on everything else in the report?

Now is the right time for all parties in the House to engage seriously in a constructive way on the outstanding issues that Sir Hayden identifies. I suggest to the Leader of the House that three issues are outstanding on which it will be difficult, if not impossible, for us to reach agreement. One has already been clearly identified in the opening exchanges: the limits on individual donations. We have always strongly supported the view that there should be a limit on individual donations, but does the Leader of the House agree with Sir Hayden when he says that the principal defence against avoidance will be public opprobrium? Does not experience suggest that public opprobrium is insufficient and that we need statutory support and clear regulation if limits are to be introduced?

The issue of the trade unions is important in terms of public perception and the discussions that we must have. I understand some of the reservations that the Labour party has on the issue, but I do not believe that it is impossible to reach a solution that takes account of those concerns and, at the same time, produces a binding limit on individual donations.

The second issue is the limit on campaign spending. Is it not outrageous that in individual constituencies, particularly marginal ones, we have a gross, continuing and routine abuse of the spirit of electoral law by the application of massive expenditure from central sources in campaigning in order to affect the result without it appearing on the accounts of individual candidates? Does not that need to be addressed, and as a matter of urgency?

The third issue is perhaps less difficult, but it is the linking of future funding to membership. I strongly support the view that we should encourage local engagement, but I can see serious difficulties in defining membership and avoiding abuse of that process if simple membership of a party leads to the unlocking of state resources. We need to reach consensus on that.

I hope that we can now proceed from the basis of a firm starting point. I wonder whether Sir Hayden will be involved, given the work that he has done so assiduously over the past year, in the cross-party discussions which now need to take place. We need good will and determination on the part of all parties if we are to produce a system that is transparent, fair and restores public trust. No party should have a veto on the grounds of partisan advantage, but nor should any party’s legitimate concerns be ignored. This work is essential and urgent.

I thank the hon. Gentleman for his constructive response to this issue. I think that he has answered his own question about whether anything can be agreed until everything is agreed. In the end, this House and the other place have to make decisions, and he described the process appropriately: no party should have a veto on sensible reforms that are likely to carry public support, but at the same time the discussions and any agreement that can be reached have to take account of the legitimate interests of all the parties. That is an important point for the Conservative party to bear in mind.

I say to the Conservatives seriously that they need to reflect on the point that I made earlier, which is that they have never introduced any changes in the financing regime that have adversely affected them. They have sought to change the regime that affects us, and the right hon. Member for Maidenhead (Mrs. May) was at it again today. She was trying to return to the opt-in arrangements in the Trade Disputes and Trade Unions Act 1927. Not even Margaret Thatcher tried that on. Of course there has to be a level playing field, but that requires effective spending and donation limits. I concede that the Liberal Democrats have been consistent about the issue.

It is worth pointing out that when the Liberal Democrats advanced the proposal for donation limits in 2000, I said from this Front Bench that I did not think that they were necessary. So did the Conservative party. Indeed, that remained the official position of the Conservative party until very recently, because in November 2005 the hon. Member for Wealden (Charles Hendry), who was a Conservative Front-Bench spokesman at the time, said in a debate on the issue that the argument about caps on donations was

“a sideshow in the debate.”—[Official Report, Westminster Hall, 8 November 2005; Vol. 439, c. 17WH.]

It is worth reflecting on how much the Opposition have had to move, because until recently they thought that donation caps were a sideshow and spending limits were not the issue. We look forward to movement on their part. Discussions must take place on what Sir Hayden says, not on the basis of a partisan interpretation of what he does not say.

My last point on the issue of trade unions is that there may have been a public perception about trade union funding, but it was completely dispersed by changes introduced both in legislation and by us. All opinion poll evidence shows almost zero concern about trade union spending, because it is the most transparent arrangement. Interestingly, the Better Regulation Task Force said that there is too much regulation of trade unions in that respect, not too little, and the assiduous certification officer said that there have been three complaints—only three—about the operation of the levy since 2000. Two of them were withdrawn and one rejected.

I congratulate my right hon. Friend on his statement. Does he agree that the central issue the electorate expect us to deal with is the question of both national and local spending limits? That is the driver of dodgy practices such as the Midlands Industrial Council, which we have come to know only too well, and the dining clubs in the House of Commons. Does my right hon. Friend also agree that the basic reality is that the role of trade unions in relation to donations has been transparent and open? It is there for people to see. We can always put our record in comparison with that of the Conservative party: ours is one of honour.

I accept that. We changed the law on local spending in 2000. I was the Minister responsible—I put my hand up to that. We thought it would make the system as controlled but more transparent. However, it failed to do that. I accept what the right hon. Member for Maidenhead says about the need for regulation that does not deny the reality that elections are principally fought in marginal seats—of course that is true—and which takes some account of the so-called incumbency factor, although it affects different parties at different times and I do not recall its being mentioned often between 1979 and 1997, but there you go—here you go. The reason why those proposals, which emanated from the 1998 report of the Neill committee, have not worked is that there used to be a clear distinction in practice between national and local spending, but because of things such as call centres and personalised mailing the division between national and local spending has become almost non-existent. That is why we need both national and local controls on spending, for which Sir Hayden provides strong support in his report, and they should be pretty continuous.

May I welcome Sir Hayden’s report and the fact that it follows closely the lines of the Select Committee’s report? Does the Leader of the House recognise that the Committee believes unanimously that there should be voluntarily agreed binding limits on all large donations, whether individual, corporate or trade union, and a cap on all party spending, including spending outside the election period, as a precondition for more state funding? Does he realise that all the parties will have to move on from past positions? We found it was possible to do so when we saw how successfully Canadian parties had adapted to quite fundamental change that still enabled them to preserve their trade union links or their ability to engage with the electorate. Surely, the taxpayer cannot be asked to pay the parties more money unless they carry out reforms to remove large paymasters.

I accept that we all have to move on, and we are ready to do so in the spirit set out in Sir Hayden’s report. I commend the report and, for the avoidance of doubt, point out that—I think with the acknowledgement of the Constitutional Affairs Committee—I delayed publishing the Government’s formal response to the Select Committee report because we wanted to wait for Sir Hayden’s response. Of course, the right hon. Gentleman accurately quotes the recommendations. The only thing I would say is that they were relatively general; the issue now is to try to pin down those general propositions, which we welcome, into propositions that can be the subject of legislation.

Does my right hon. Friend accept that Conservative parties all round the world constantly conspire to try to keep trade unions out of politics because they fear working people engaging in the political process to advance their interests? In his talks with the other parties, will he make it clear that the democratic involvement of trade unions in the Labour party is not on the table for discussion?

Yes I will.

I thought the statement of the Leader of the House was not in the real world when he suggested that there was no longer any public concern about trade unions. The trade unions are about to have a large say in the appointment of the next Prime Minister, and they will almost certainly be the main, if not the only, funder of the Labour party at the next general election. Will the Leader of the House answer a specific question that he did not answer when my right hon. Friend the Member for Maidenhead (Mrs. May) asked if he agreed with Sir Hayden’s conclusion that

“a limit on trade union donations”

and affiliation fees

“need not…challenge the party’s constitutional relationship with the trade unions”?

It need not, but that requires a certain spirit of consensus from the main Opposition—the spirit that informed the hon. Gentleman when as a member of the Constitutional Affairs Committee he signed up to its report. It is not the trade unions as corporate bodies and their national executives that play a part in the election of the leader and deputy leader of the Labour party; it is 3.5 million levy payers—ordinary people across the country—who in a secret postal ballot, supervised by an external independent body, will have that right. Is the hon. Gentleman seriously suggesting that those 3.5 million people, who voluntarily pay the political levy, should be denied that right?

Will my right hon. Friend confirm that Hayden Phillips was given that job in the aftermath of cash for peerages, starting with the Tories way back in at least 2001—as far as we know—and then encroached on by us, the Labour party? Will he also confirm that when deciding on Hayden Phillips to do that job there was not reference at any time to examining the trade union movement? Is it not ironic that despite all the big business money, and the Swiss roll-over for the Liberal Democrats, we find ourselves here in the House discussing a report from Hayden Phillips about clean money from the trade union movement that is balloted for every few years, while the Tories and the rest want to imagine that big business has played no role whatever? There should be no cap on the trade unions; the cap should be on the spending. In terms of equality, we should decide on a national spending cap of about £10 million—equivalent to the amount a party would spend in every constituency it contests—

Order. I think that is plenty.

My hon. Friend’s recollection of the history of the establishment of the Hayden Phillips inquiry is entirely right; at the time, there was not a single mention of problems with the trade unions, because there is no problem with the way that trade unions have been making contributions towards the Labour party. The hon. Member for Chichester (Mr. Tyrie) asked me about the matter when I gave evidence to the Select Committee and I invited him to provide even a sheet of evidence that suggested any concern that the current, highly transparent, highly regulated system in respect of trade unions was operating inappropriately. None was forthcoming. The Conservative party has been unable to produce such evidence; nobody has been able to produce it. The Department for Constitutional Affairs cannot and neither—as I confirmed to the Select Committee—has the Electoral Commission. My hon. Friend the Member for Bolsover (Mr. Skinner) is entirely right to say that what the Conservative party are trying to do is on the one hand say, “Yes, we’ll take part in talks,” while on the other trying to shift the issue in a rather blatant and obvious way from the real problem, which is the over-reliance by all three parties on single, large donors—with the inappropriate and completely opaque influence that can bring—to trying to suggest that the trade unions are the bogey. I am afraid that is the old Conservative approach, and they will have to wrest themselves away from it if they want consensus in the talks.

The Leader of the House, in rightly commending the review, said that the conclusions would be underpinned by the creation of a level playing field to which we would all agree, so may I ask him to turn to local funding? By allowing all of us to have up to £10,000 extra a year as a communication allowance and allowing some of our incidental expenses to go towards campaigning effectively in the constituency, do not we put those who are not incumbent at a disadvantage? When he reaches the conclusion of his all-party discussions, it must be right that other parties in a constituency should be able to spend the same amount as the incumbent Member.

I say to the right hon. Gentleman that there will be a debate on the recommendation of the House of Commons Commission in respect of the communications allowance. As he will see when the report is put forward, that is about communicating in respect of our parliamentary duties and it actually proposes tightening up considerably the way in which the existing incidental expenses provision is currently used and restricting the amount that can be spent on franked envelopes from no limit at the moment to one that Mr. Speaker will set at £7,000. Yes, some additional funding will be provided for communication by Members of Parliament and all the evidence suggests— it is not a party issue at all—that that is necessary if we are to inform our electorates better. However, that will take place in more strictly controlled circumstances.

I do not want this issue to be thrown across the Chamber, but if we are talking about the amount of money that is spent locally, it has to be said that even the communications allowance will pale into insignificance compared with the amount that Lord Ashcroft is already spending and spent at the last election. He made a significant speech the other day in the other place in which he set his face against any idea of spending limits, and said that parties want to spend whatever they can. He reinforced that view in an aptly entitled book on the 2005 elections called “Dirty politics, Dirty times”.

There is a great deal to welcome in Hayden Phillips’ report. I agree with my right hon. Friend that what most damages the public perception of British politics is the suggestion that the main political parties to a greater or lesser extent are in hock to a handful of extremely wealthy individuals. As regards the political levy, does he agree that 3 million to 4 million people paying £3 or £4 voluntarily a year is the nearest thing that we have to mass politics in this country and that we ought not to throw it away lightly?

I agree with both my hon. Friend’s propositions. On the political levy, I want to say that the proportion of members of trade unions that are affiliated to the Labour party and who pay their political levy varies. It was 80 per cent. a few years ago; it is currently 90 per cent. The number of individual trade unionists who pay varies and there is a change year on year. What that shows is that trade union members are well aware of the fact that if they pay the political levy and their trade union is affiliated to the Labour party, part of the money—part only—will go to the Labour party. It is transparent and highly regulated in a way that much else in the current political funding regime is not.

Has not Hayden Phillips done an heroic job in narrowing the gap that existed between the parties a year ago and in setting out some general principles on which we should all agree? However, there is still a gap that we need to address. Of course, Opposition Members should listen to the legitimate concerns expressed by Labour Members, and some of them have been aired in this exchange. However, can the Leader of the House for the third time try to answer a question that has been put to him—whether he agrees that a limit on donations from trade unions

“need not challenge…the Party’s constitutional relationship with the trade unions”?

Is his party interested in pursuing what, on page 10 of the report, Sir Hayden regards as a “reasonable outcome”?

I thought that I had answered the question, and I apologise if I have not. Of course, the limit need not challenge the relationship—some suggestions are set out on page 10—but that depends not just on us but on the Conservative party. This is not a symmetrical issue. The Conservative party has issues with us and we have issues, as it were, in the other direction. [Interruption.] I am trying to be helpful, if the right hon. Member for Maidenhead will stop muttering.

I understand any Opposition party’s concern about incumbency and I obviously appreciate the fact that under our system—indeed, under virtually any system that we can think of—elections are fought out in marginal seats. Sir Hayden understands that and he has come forward with suggestions that try to take account of the fact that, as we all know, in safe seats the level of expenditure both at an election and well before it is very different from that in marginal seats. If there are to be limits, however flexible they are, they have to apply everywhere.

Sir Hayden Phillips was given the impossible task of seeking consensus where no consensus exists and he has performed that task heroically. He now says that we have to move on to further inter-party talks to resolve the real issues at stake. However, he says that that will be accomplished satisfactorily only if there is independent oversight of such talks. What is my right hon. Friend’s view of that?

My right hon. Friend the Prime Minister, in the written statement that he issued this morning to accompany the publication of the report, has already welcomed Sir Hayden’s offer that he might chair those further discussions. We will discuss the modalities of the discussions; none of us wants to waste Sir Hayden’s time. My feeling is that we will probably wish to see some staff work and work by the three parties directly, as well having Sir Hayden chair some of the talks. However, I also endorse the point made by the hon. Member for Somerton and Frome (Mr. Heath) that if this is going to work, no party should have a veto and all parties should take account of the legitimate interests of the other parties round the table. That is the only way forward. However, in the end, the House will have to make its own judgments.

Sir Hayden Phillips says that the practicalities have yet to be worked out and he refers to the three main parties. I would argue that that is perhaps an oversight. If yesterday’s edition of The Times, with its headline “Nationalists set for stunning victory in May”, is to be believed, the Scottish National party would become Scotland’s biggest party. Given the cash for peerages scandal that the SNP played a modest part in exposing and the exploitation of the loopholes in the 2000 Act, we are where we are. However, with the special situation in Scotland, should the SNP not be involved? Sir Hayden has said that he wants this process to be fair and transparent, and I would put the emphasis on fairness.

I am happy to talk both to Sir Hayden and to representatives of the hon. Gentleman’s party and Plaid Cymru about how they can be involved in the talks.

A good deal of the spending nationally at election time on posters, for example, is, as we all know, a complete waste of time and has no effect on the result. However, does my right hon. Friend not agree that having a firm legal limit on local spending but no limit during elections makes a mockery of the legal limit, especially since so much of the money is donated between elections by secretive, anonymous business organisations accountable to no one?

I agree with my hon. Friend. One of Sir Hayden’s important recommendations is that the loophole that allowed secretive third-party organisations, such as the Midlands Industrial Council and many others, to fund the Conservative party should be plugged, so they are subject to the same rules on transparency as political parties.

The amount of money spent by my political party on the last two general elections should serve as a powerful corrective to any notion that it is of any value whatsoever. If there are to be local limits, does the Leader of the House agree that there should also be rather more rigorous scrutiny of the existing rules about how allowances are spent locally?

The hon. Gentleman speaks for himself, but I note that he is the Parliamentary Private Secretary to the Leader of the Opposition, so his view makes a refreshing change. I agree with him. Many wise souls in the Conservative party as well as in our party believe that an awful lot of the money that is spent—£90 million at the last election—is wasted.

To pick up a point that has just been raised with me, I think that there is a case for examining whether voluntarily or by regulation we ban the use of posters. As far as I can tell, the only people who benefit from the posters are those who have the poster sites. The number of so-called salients and members of public who take any notice of them has dropped. Just as we are banned from advertising on television and radio, it would be a huge relief to us, and moreover to the voters, if they did not have to suffer the visual pollution of posters from all three parties, particularly in marginal seats.

rose—

Order. If the Leader of the House promises me that he will be very brief in his answers, I will try to call all Members who are seeking to question him.

Given that every trade union member can trace back their donations made under the trade union levy through headquarters accounts and given that those accounts are properly audited by external bodies and have the oversight of the trade union commissioner, is it not a reasonable proposition for those donations to be counted as individual donations?

That is one of the suggestions made by Sir Hayden, and one that we must take account of in the discussions.

Following the theme of the contributions from many Labour Members about caps on spending, does my right hon. Friend agree that having much lower levels of spending, rigorously enforced, with severe criminal penalties, would solve all the problems? Lord Ashcroft could keep his money and stop trying to buy elections for the Conservatives.

I agree. If one compares the examples of Canada and the United States, there is no question but that it is the arms race on spending that is the mother and father of the current problems.

Does my right hon. Friend agree that the discussion on trade unions needs to be put in context? Since 1906, only one segment of our society has been restricted in the political donations that it can make: the trade union movement. As he has quite rightly pointed out, in 1992 that was strengthened even further. During a temporary absence from this place, I was responsible for the second round of political fund balloting for about 5 million levy payers. Does he agree that further restrictions and a further regulatory burden placed on unions would be unfair and, further, that the focus is being shifted away from where it should be: the excessive spending, particularly at a local level?

I agree with my hon. Friend. It seems to be a temptation in the bloodstream of the Conservative party to attack the funding of the Labour party.

Does my right hon. Friend agree with me and the Hayden Phillips report that it is now in the public interest to have rigorously enforced expenditure caps in order to deal with the huge escalation in expenditure on elections, which is against the public interest and threatens to take us in the same direction as the United States? Following his comments on the potential banning of the use of poster sites, does he agree that allowing—as they do in the midlands and in Northern Ireland—political parties to put up much cheaper posters on lamp posts achieves the idea of telling people that there is an election on? That should be allowed.

I agree with my hon. Friend’s first point. [Interruption.] Personally, although this is subject to immediate disagreement on the Front Bench, I also agree with her second point. I am envious of the way in which the west midlands handles the matter. It is a good idea and, of course, it is cheap.

What does my right hon. Friend think that the time dimension on all this is? There are those of us who have always believed that the great boast of British politics is that we do not spend much money. Clean politics is cheap politics. What worries me is that in some constituencies at the moment, as we all know, the Ashcroft money is swashing about. It is pouring in. We know that that is not really what most sensible people on the Opposition Benches want either. Often, it swashes around with particular kinds of Tories, not the average Tory.

We want to move as quickly as possible. We know that there is deep anxiety in the more sensible parts of the Conservative party about the fact that Lord Ashcroft is trying to buy up part of that party.

Sir Hayden has now completed his task and, whether he was within his remit or not, that work is done. However, Sir Hayden does not have the monopoly on good ideas for party reform. There are other academics in the country who have come up with alternative, but similar proposals. May I ask my right hon. Friend to look at the work of Professor Keith Ewing, and perhaps if we are taking this further, to try to include other academics in our further deliberations?

Sir Hayden would not suggest that he has a monopoly on good ideas and of course we are ready to take account of any sensible suggestions.

In welcoming my right hon. Friend’s statement, may I urge him to bring forward a Bill as soon as possible to deal with the Ashcroft loophole, if necessary ahead of the party talks? It is imperative to deal with this matter well in advance of the next election. Will he also reject the view of the Phillips report and of the official Opposition that the same donations limit should apply to individuals and to organisations? Many other countries have different donation limits for individuals and organisations and it would surely be an interference in the Labour party’s constitution if the measure was imposed on us. May I also—

Order. I heard one “also”; the second “also” gives a warning sign.

My hon. Friend has taken a long interest in this matter, and moved provisions relating to donation limits in the proceedings on what became the 2000 Act. Sir Hayden makes a suggestion about the way in which the current levy paid by 3.5 million trade unionists should be treated for the purposes of any changes. On having legislation in bits, I think that, in the real world, we need to see whether we can reach agreement on a comprehensive package.

Does my right hon. Friend agree that it is possible to resolve the issues concerning the input of money into local political activity that Sir Hayden Phillips sets out in his report? Does he consider that the Electoral Commission could play a substantial role in auditing and maintaining those arrangements, as Sir Hayden Phillips mentions? Does he consider that, among other things, the addition of commissioners with a political background and understanding to the Electoral Commission would be helpful in that respect, as Sir Hayden Phillips also mentions in his report?

Yes. Sir Hayden makes some important recommendations, which I think are already agreed between the parties, for major reforms to the Electoral Commission, to make it, as he says, smarter, to separate its educative role, and to make it better at regulation. Crucially, not only the Constitutional Affairs Committee and Sir Hayden Phillips, but the Committee on Standards in Public Life, have all recommended that there have to be people among the commissioners who understand how political parties operate and who have experience within parties.

Does my right hon. Friend agree that the spending of tens and tens of thousands of pounds in individual constituencies for the sole purpose of electing a single candidate is a real threat to a democracy and little more than an attempt to buy votes and seats? Will he therefore give his support to Sir Hayden Phillips’ recommendation for continuous spending limits at a local as well as a national level and work with the Opposition parties to try to find a way of making sure that the limits are both practical and enforceable?

I do agree with my hon. Friend and Sir Hayden Phillips’s report provides a way through, taking account, as I have said, of the fact that, inevitably, more money is going to be spent in marginal seats—but it need not be ridiculous sums more.

Next Tuesday there is yet another dinner of the United and Cecil club expressly to raise money for Tory marginal seats. Does my right hon. Friend agree that the names of the donors at those dinners, which are not on the public record, should be made transparent and put on the public record?

Yes, I do. Some £105,000 has been raised in the last two years. That is in addition to the £1.4 million that has been raised by the Midlands Industrial Council.

Does my right hon. Friend agree with me, and with my hon. Friend the Member for Bassetlaw (John Mann), that there should be full transparency of donations? That includes fundraising front organisations, such as Conservative patrons clubs and the United and Cecil clubs. There should be a legal obligation on those organisations to publish accounts of who gives them money and who attends the fund-raising dinners they hold in this place.

Yes, I do. [Interruption.] The right hon. Member for Maidenhead is chuntering about this. She is ever anxious to impose further regulation on the trade union movement—it has been the subject of a century of further regulation by the Conservative party—but not to examine the problems in her party and the lack of transparency that has always been a feature of Conservative party funding.