I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss the following:

Amendments (a) to (c).

Government amendment 94.

Amendment 126, in clause 8, page 6, line 2, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 95.

Amendment 125, page 6, line 3, leave out ‘£1,000’ and insert

‘£3,000 plus an annual upwards-only indexation allowance’.

Government amendment 96.

Amendment 123, page 6, line 7, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Amendment 122, page 6, line 12,  leave out ‘best of individuals’ and insert ‘individual’s reasonable’.

Government amendment 97.

Amendment 127, page 6, line 18, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 98.

Amendment 124, page 6, line 35, leave out ‘£1,000’ and insert

‘£3,000 plus an annual upwards-only indexation allowance’.

Government amendment 99.

Amendment 121, page 6, line 38, at end insert—

‘(6A) A person does not commit an offence if, in the reasonable opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration under this section’.

Amendment 8, in schedule 3, page 38, line 19, at end insert—

‘Schedule 6 of the 2000 Act (details to be given in donation reports)

A1 (1) In paragraph 2 of Schedule 6 to the 2000 Act (details to be given in donation reports), after paragraph (b) of sub-paragraph (10), there is inserted—

“(c) the names and addresses of all the members of and donors donating £5,000 or more annually to the association.”.

(2) In paragraph 2 of Schedule 6A to the 2000 Act (details to be given in transaction reports), after paragraph (b) of sub-paragraph (10), there is inserted—

“(c) the names and addresses of all members of and donors donating £5,000 or more annually to the association.”.

(3) In paragraph 2A of Schedule 6A to the 2000 Act (details to be given in transaction reports), after paragraph (b) of sub-paragraph (11), there is inserted—

“(ba) the names and addresses of all the members of and donors donating £5,000 or more annually to the association;”’.

Government amendment 100.

Amendment 128, in schedule 3, page 38, line 24, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 101.

Amendment 129, page 38, line 26, leave out ‘£1,000’ and insert

‘£3,000 plus an annual upwards-only indexation allowance’.

Government amendment 102.

Amendment 130, page 38, line 30, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 103.

Amendment 131, page 38, line 32, leave out ‘£1,000’ and insert

‘£3,000 plus an annual upwards-only indexation allowance’.

Government amendment 104.

Amendment 132, page 39, line 3, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 105.

Amendment 133, page 39, line 5, leave out ‘£1,000’ and insert

‘£3,000 plus an annual upwards-only indexation allowance’.

Government amendment 106.

Amendment 134, page 40, line 18, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 107.

Amendment 135, page 40, line 23, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 108.

Amendment 136, page 40, line 36, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 109.

Amendment 137, page 42, line 2, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 110.

Amendment 138, page 42, line 7, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

Government amendment 111.

Amendment 139, page 42, line 20, after ‘£5,000’, insert ‘plus an annual upwards-only indexation allowance’.

In line with the indication I gave in Committee, we have considered raising the recordable and reportable thresholds in view of the concerns expressed by parties about the burden of compliance with the Political Parties, Elections and Referendums Act 2000. As the House knows, the 2000 Act was a landmark piece of legislation that brought, for the first time, transparency to the sources of political funding. It has been a huge step forward for democracy and I am sure that all in the House agree that we are all the better for it, and that our democracy works better as a result.

However, we must also address legitimate concerns about the burden of reporting relatively small donations in the context of the public’s interest in bigger political donations. We had a lot of discussion on this matter in Committee, and there is a balance to be struck. We have to act in a way that is transparent and accountable to the public whom we serve, but we must never forget that political activity in this country is largely carried out by volunteers—selfless people who give their time and effort to political parties across the House. Without them, none of us could function effectively in representing our constituents.

None of us would be here.

As my right hon. Friend says, without those volunteers, none of us would be here. We have to be careful about placing burdens on them, or about putting barriers in the way of their activity, which might discourage those selfless volunteers from giving their time and effort in the future. There is a balance to be struck.

When we considered this matter, we became convinced that it is the significant donations, either individually or in aggregate over time, that the public want to know more about, and it is right that they should. All parties agree that it is right that they should know more about such donations. If one looks at media reports on this subject, which are frequent and extensive, one certainly gets that impression. We have come to the conclusion that the levels for recording and reporting such relatively small donations impose a high burden of compliance that is not matched by the transparency gained from recording and reporting them.

I should note in passing that the thresholds have not been changed since the 2000 Act. I am not suggesting that the changes that we are introducing are merely designed to take account of inflation—they are not—but some increase for that reason would be merited in any event.

The right hon. Gentleman must be cognisant of the level of public distrust that there is in this place, and particularly in political parties campaigning locally. An amount of £200 is not seen as an insignificant sum, and £500 is a considerable sum. Why is he pushing the matter so far? Why is a 250 per cent. increase proposed, which can only reduce transparency for local people? People in Castle Point want to know who is funding the Castle Point Tories and Castle Point Labour party. Those people may be developers or businesses; they may have a vested interest in what goes on in local government and in this place.

The hon. Gentleman has a great deal of experience in party politics, and he is part of the select group in this House who has had the distinction of belonging to two political parties here. Obviously, I listen with great attention to what he has to say on this question. He is right to draw attention to the importance of the issue and, implicitly in his remarks, I think that he accepts that a balance has to be struck. How do we strike that balance between accountability through transparency, which is essential, and taking account of the fact that parties—even the party to which he now belongs—are also dependent on the efforts of volunteers. How do we put measures in place that square that circle? How do we have accountability through transparency on the one hand and, on the other hand, not put unreasonable burdens on the volunteer armies that sustain our democracy?

I am delighted that the Minister has allowed me to intervene again in order to explain that I belong to no party. I am an independent, so I have no workers. I take no money whatever from any businesses, political parties or developers, or from anyone else, and I will deliver no favours to anyone after the election. If he thinks that those people give their hard-earned cash to political parties in order to return a particular candidate without expecting their pound of flesh at the end of the day, he probably believes in the tooth fairy as well.

I am grateful to the hon. Gentleman for his intervention and I am happy that he has put the record straight in the way that he has. However, I was saying that I thought that he had made an important point. Implicit in what he was saying was the need to strike a balance between transparency, which those in all parts of the House subscribe to as a fundamental principle in party funding, and not putting unreasonable burdens on the volunteer armies that sustain the activities of us all and on which our democracy depends. We have to strike that balance.

As I was saying, there has already been an increase since 2000 that would have been merited by inflation, but such an increase would not, on its own, account for the increases that we are suggesting. However, I want to stress one thing, before I deal with the substance of the amendments and the Government’s response to the Opposition amendments. This Government are fundamentally committed to transparency. It is worth noting that the Bill before us makes important provisions to increase transparency. In particular, clause 8 and the Government amendments relating to unincorporated associations, which we will come to shortly, do a great deal to enhance transparency.

The increases in the thresholds in the 2000 Act should be considered in that context. We have proposed to increase the recordable threshold for recording donations, loans and other transactions from the current limit, of to donations of more than £200, to a new limit, of to donations of more than £500. As the House will know, the recordable threshold requires recipients to verify the permissibility of the donor and to keep their details.

The Minister is proposing to increase what is permissible by 150 per cent. Has he taken into account the Electoral Commission’s concerns about that, given that people may be able to make quite substantial donations regularly, thereby compromising transparency?

I have great respect for the hon. Gentleman. He makes a valuable point about transparency and we agree with him about its fundamental importance. However, we have to be proportionate in all measures. We have to do what is necessary to increase public confidence and public trust, but we all have to make judgments on this, and we are making the judgment where we thought best.

What I hope is not in doubt is our commitment to transparency. We have made significant progress already. The Bill makes further progress in increasing the transparency of party funding in this country. That is a good thing and everyone in the House will welcome it, as will the public as a whole, whom we all serve. However, we have to ensure that those measures are proportionate. That is the point. We cannot ignore the fact—I am sure that the hon. Gentleman will know this from his party activists, just as every other hon. Member will know it from theirs—that we have to be clear that we are not putting unreasonable burdens on those volunteers.

The overwhelming majority of people who participate in political activity are decent, honourable citizens who do so from the best of motives. We may disagree on particular policy areas and our political values may be different, but the people who sustain us in this place are decent, honourable people who are fighting for the political values that they believe in.

Is my right hon. Friend not concerned that foreign residents, such as Sean Connery, who are currently unable to make donations to political parties would now be able to make donations of amounts of less than £500, which could amount to quite a lot over the course of a year?

As always, I pay tribute to my hon. Friend, and on this occasion, I also pay tribute to his ingenuity. I have no doubt that we shall return to that issue as the proceedings progress.

Of course I accept the points made by Opposition Members about the importance of transparency. We agree with them, but we must ensure that the measures are proportionate and that we do not put such burdens on volunteers that we choke off their contributions.

I have a lot of sympathy with what the Minister is trying to do; there is a burden involved, and there are many decent people who want to give relatively modest sums and who have no wish to influence an individual candidate or policy. Will he help the House by explaining how he arrived at the figure of £500? Was the decision based on some sort of rule of thumb?

It was a judgment. From memory, if we had increased the thresholds in line with inflation, the figure would have been about £250, give or take; I hope that I will not be held to a precise figure. The increase is not quite as great in percentage terms, but we had to take account of anecdotal experience and make a judgment. This was a judgment, and it is entirely a matter for the House if it wants to reject the threshold that we are proposing. We are doing our best, and we are making a judgment about where to strike the balance. It is in the nature of the task of striking a balance, as I am sure the right hon. Gentleman knows, that it is, to some extent, a matter of judgment. There is no rule for this and no science; it is a matter of judgment. This is our judgment about where we think the balance should be struck. Others might wish to strike it differently; that is a matter for them, and I am sure that there will be further contributions to the debate.

Was any research done into the sums that ordinary people—the volunteers, the grass-roots workers—give to a party? I recollect that it is usually between £20 and £100, and that the sums that businesses and developers give to political parties are in the £200 to £500 bracket. I suggest to the Minister that many grass-roots people will give small sums of up to £200, while the number of people giving £300, £400 or £500 is extremely limited. Why should not the public know who those people are, so that the public can hold their elected officials to account for the money that they receive?

We are talking about recordable thresholds at the moment, not reportable thresholds, so the hon. Gentleman’s last point does not quite stand up. However, I do not disagree with him about the fundamental principle: of course the public have a right to know who is giving money to whom. That is the fundamental principle of transparency, and of course we agree with it. However, sometimes in life—political life and all other areas of life—fundamentally important principles can conflict with each other. It is important to have a vibrant democracy. That is a fundamental principle, and it is sustained by the efforts of volunteers, who are also fundamental to the health and vibrancy of our democracy. We have to ensure that, as far as possible, the two principles are kept reconciled.

Of course the hon. Gentleman is right to say that we have to set these thresholds at a level at which the public can be confident that no one is buying influence. Most Members would be utterly appalled to think that anyone believed that their voice in the House could be influenced or bought by a donation, however large or small. We would be utterly appalled by that prospect, but that is not the only issue. I paraphrase the hon. Gentleman here—I am sure that he will intervene on me if I am doing so incorrectly—but I think that he is saying not only that that must not happen, but that the public must be confident that that is not happening. In that, I am entirely at one with him.

The question is: at what level do we strike the balance? No one would think that it was worth placing a huge burden of compliance on those volunteers for the sake of the odd fiver here or there. However, I am sure that everyone would agree that £1,000 was worth recording, let alone £10,000, £50,000 or £100,000. There is no argument about that. The question arises about the relatively small sums of money, and, as I have said, that is a matter of judgment. The hon. Gentleman’s judgment on the matter might be different from ours, and that is a matter for him. It is implicit in what he is saying that there is a balance to be struck. The question is not one of whether there is a balance to be struck, but one of how and where to strike it. That is what we are discussing.

There is no science here, and there is no way of knowing for certain what will reassure the public; we have to make our best guess and proceed with it. If we on the Government side have got this particular threshold wrong, we will happily revisit it. There is nothing at stake here other than the desire to strike the right balance. If we have inadvertently struck it in the wrong place, I gladly pledge that we will come back to the House and change it—in whatever direction: whether we are imposing excessive burdens on volunteers that are not justified by the increased transparency, or conversely, if we set the threshold too high. I hope that Opposition Members will agree with that approach. If they feel that this is the right level, experience shows that they will support it in future and not seek to change it.

I agree with everything the Minister says about the need for a balance between compliance and transparency. Will he be prepared to share with the House the advice that he no doubt will have received from the Labour party’s accounting officer on the dangers of imposing excessive burdens that will come with a low threshold? I am to some extent aware of what such advice is likely to have been and I think it would be helpful to have it as a matter of public record.

I think that the hon. Gentleman, who was a member of the Public Bill Committee, was present at the sittings where officers of both the Labour and Conservative parties—and, indeed, the Liberal Democrats—gave evidence about the dangers stemming from the excessive burdens of compliance on volunteers, on whom every party depends. I think that this is a matter of public record and of common sense; every Member knows about it from their own experience. We must be very careful. Throughout the lengthy Public Bill Committee stages, this issue came up over and over again, and it was raised by all parties. Broadly, there is, I think, a consensus. What we are debating is the fine detail of exactly where and how to strike this balance between transparency and excessive compliance. It is inevitably a judgment.

It might help the hon. Member for Castle Point (Bob Spink) if I explained more about the difference between the recordable and the reportable threshold, so let me say a few words about that. The recordable threshold requires recipients to verify the permissibility of the donor and to keep details about it, but the information is not reported to the Electoral Commission unless, in aggregate, donations from the same donor exceed the reportable threshold in a calendar year. We believe that the burden for parties and others of keeping records of really quite small donations—those of £500 or less—exceeds the benefits of verifying their source.

We also propose to increase the thresholds for reporting donations, loans or other regulated transactions to the Electoral Commission from the existing level of more than £1,000 to more than £1,500 and from the existing limit of more than £5,000 to those with a value of more than £7,500. We believe again that increases of that order are proportionate and that they strike the right balance between the transparency that everyone agrees is so necessary and the burden of compliance. A certain increase would have been merited by inflation, but we decided that to increase the thresholds by more than inflation alone was merited for precisely the reasons that I have set out in respect of recording donations, loans and other transactions.

Overall, the Bill’s provisions will increase information in the public domain about significant political donations. In our view—it is our view—this is the key area of public interest, and the moderate increases in reportable thresholds should be considered in that context. I know that hon. Members have referred to percentage increases, but I think that this is one of the occasions where percentages can be misleading—more misleading than the numerical figures themselves. I hope the House will focus on the number of pounds involved rather than on the percentage increases. As I say, they may be misleading about the overall impact of these changes.

I believe that indexation as proposed in the Opposition amendments would complicate the Bill and lead to a lack of clarity. It would also add very small, insignificant sums that would not substantially change the position on party funding or the complex process that donors must undergo. In fact, it would change things very little and would only introduce massive complexity. Tiny percentages would be added, creating a rather strange figure for the Electoral Commission to monitor, at a time when we are increasing these sums by massive percentages—150 per cent., or 50 per cent.—which would wipe out the impact of any indexation over a very long period. Does the Minister not think that the Opposition parties are trying to have cream on their sticky buns?

Let me take a moment in which to contemplate that enticing image. [Laughter.] No—I have calmed down now.

As always, the hon. Gentleman makes an interesting point that has some merit. We did consider it, but I am afraid that in the end we rejected it. Let me explain why. Obviously, I cannot speak to the Opposition amendments—no doubt the Opposition will do that very well themselves—but I will explain why I was persuaded on this point, in an effort to reassure the hon. Gentleman.

Of course the hon. Gentleman is right about complexity. We should always try to avoid it, for precisely the reasons that he mentioned. We want to make the compliance burden as light as possible, although there has to be a compliance burden: let there be no doubt about that. Compliance is essential, transparency is essential and accountability is essential, for all the reasons that I have already given. Complexity can militate against those elements—I will concede that point to the hon. Gentleman—but, as always, it is a matter of striking a balance. I think it important for us to accept and entrench the principle of a threshold—that is implicit in all previous legislation, and it is implicit here—along with the principle that, although where we strike the balance is a matter of judgment, wherever we strike it there is a threshold below which donations should not be recorded.

What persuaded me of the merit of the Opposition amendment—and the reason for our intention, subject to a condition that I shall explain in shortly, to table our own amendments in the House of Lords to achieve the same effect—was the fact that one part of it does entrench the principle of there being a threshold. That means that we will not have to return to the threshold, because we will not see it being eroded over time by inflation. Of course, under this Government we have had record low levels of inflation thanks to the prudent management of my right hon. Friends the Prime Minister and the current Chancellor of the Exchequer, and as a result of that historic achievement we face a global recession much better equipped than we would have been otherwise. Nevertheless, we cannot legislate for future Governments, and we do not know how successfully they will handle whatever inflationary challenges may emerge in future. We all remember what happened under the previous Conservative Government—I know the hon. Gentleman does—

Remind us.

Inflation went up to unsustainable levels—

How much?

It was 22 per cent., which was a huge burden on my constituents and those of every Member. It is a time we all regret; even Conservative Members now regret that they let the economy get so badly out of hand. Sadly, we cannot be confident that they have learned the lessons and the situation may just happen again. At that point, we have to be clear about the advantages of indexation, so I am glad that Opposition Members have recognised the danger that inflation may let rip again should the Labour Government—for whatever reason—not be in power indefinitely.

I fear the Minister may be losing his way. Although I disagree with his history lesson, which was somewhat more enjoyable than sitting on the Bill’s Committee, despite that being enjoyable too, I welcome his concession on indexation. Will he outline the methodology for his approach in the Lords to overcome some of the problems of indexation that have been mentioned—such as the small increases—so that we do not have to come back to those issues, as we have had to do since the Political Parties, Elections and Referendums Act 2000, with the 25 per cent. increase, and can allow for the sensible increase the Minister proposes?

Those are important points, but if I may I shall conclude the point I was making about the value of the Opposition amendment. I look forward to hearing what Opposition Members have to say and I have no doubt they will correct me if they think I have misunderstood the purpose of their proposal. I am merely setting out why I am persuaded that we should accept the principle behind it. The hon. Gentleman raises an important point about how we can do that and I shall deal with it in a moment.

To return to my earlier point, it is important to entrench the principle of indexation; we do not want to find that the thresholds fall a long way behind inflation and that we have to come back to the House. Every time we come back to the House for these sorts of discussions, we hear contributions such as those from the hon. Members for Castle Point and for Perth and North Perthshire (Pete Wishart). They are quite properly scrutinising what the Government propose and our approach to Opposition amendments. That is what they should be doing. They scrutinise us vigorously and I am grateful for it, because it will enable the Bill to be more muscular and to achieve its effect. I have no doubt whatever about that. However, in doing so they call into question public trust not just in the Government, the Opposition or any of the minority parties, but in the whole political process. That is not necessarily helpful. We need to be scrutinised and we must be accountable, but constantly having to revisit subjects such as these feeds a pervasive cynicism in the political process, which is not always justified. We have to be careful about that.

Indexation seems a practical and sensible way forward, subject to the important point made by the hon. Member for Rochford and Southend, East (James Duddridge), to which I shall return shortly. In the meantime, I hope the hon. Member for Castle Point is reassured by my understanding of the point behind the proposal—that we entrench the principle of a threshold. Once the House has collectively agreed what it should be, it will be entrenched and can be uprated in line with an appropriate measure of inflation.

The hon. Member for Rochford and Southend, East made an important point. The measure of indexation should command public confidence, which is what I think the hon. Member for Castle Point wants to achieve. We all agree that we want a measure that commands public confidence. The hon. Member for Rochford and Southend, East was alluding to the fact that we could use a variety of indexes—with or without housing costs or earnings. In the past, those matters have been of great contention in the House in relation to other areas of public policy, so we have to be careful about which measure we choose. We also have to be careful about how exactly it will translate into practice. We do not want to put an excessive burden on volunteers; nor do we want to put an excessive compliance burden on the Electoral Commission, which has other valuable missions to perform.

As I said, I propose to resist the Opposition amendments for the reasons I have given, but I shall consult statisticians and Members to see if we can come to an agreement about the measure of inflation that would command the broadest possible consensus and then introduce amendments in the Lords.

Many times today I have heard my right hon. Friend talk about consensus, reaching the right balance and the rest of it, but given the impression that some Labour Members have, and bearing in mind the decision that was reached when we last debated the Bill, may I suggest that we should not surrender too much? Otherwise, it is not consensus; surrender would be a more appropriate word. I hope that my right hon. Friend bears that in mind when he says that he will consider other aspects of the matter.

My hon. Friend makes an important point, and I was about to address it. Whatever the uprated figure is, we will almost certainly need to lay a statutory instrument before Parliament to make the figure clear. The House will have an opportunity to express a view on it. Each change will mean a change to the figure in primary legislation; a statutory instrument is probably the best way of achieving that.

The Minister is making an important point, not just about the methodology and what rate or index is used, but about the method by which it would be implemented. Does he agree that there is some merit in setting out in the Bill the approach that is to be taken? We are considering transparency, and are seeking not to give the impression that things are being hidden away or swept under the carpet. However, sometimes simply putting the information in a statutory instrument may inadvertently give an impression that that is happening. Perhaps the best way to emphasise transparency is to express the information as clearly as we can in the Bill.

That is a good point, and it is certainly one of the issues that we will bear in mind when formulating the amendments that we propose to bring before the Lords.

On indexation, my right hon. Friend has already talked about simplicity, and we are all well aware that most political parties are run almost purely by volunteers. May I put it to him that when he considers what indexation regime to introduce, he should consider indexing only once in the lifetime of each Parliament? Volunteers in particular get a figure in their head and then do not move with the times. I understand that; it is not their job to do so—they are volunteers. We could make the change once each Parliament—perhaps, say, within two months of a general election. That would have the virtue of simplicity, which would assist volunteers.

As always, my hon. Friend makes an extremely important point. That is one of the issues that we will have to consider. As I have said, we cannot guarantee that this Government will be in power indefinitely. We have to cater for the risk of inflation taking off, as it has in the past. We have to be careful and sensitive to what may happen in future. However, he makes an important point about volunteers. As I say, we will consult hon. Members from all parts of the House informally on that. I hope that, in the Lords, our amendments will command a broad consensus. As long as this House expresses its view on the principle, we will go forward. For the reasons that I have given, I hope that Opposition Members will withdraw their amendments, but I look forward to hearing what they have to say.

Amendments 121 and 122 are Opposition amendments on limits on donations. During the passage of the Bill, we have heard a good deal of debate about what is a reasonable excuse for non-compliance with the regime in the Political Parties, Elections and Referendums Act 2000. I think that we can all find some sympathy for an individual who makes a small, inadvertent error and who subsequently fears criminal prosecution by the police, or action by the Electoral Commission. However, we have also been clear that if we want to deal with such concerns, we must ensure that we do not create a loophole to be exploited by the less scrupulous individual, who might seek to conceal a larger wrong behind the claim of a small-scale error. We have considered those concerns and believe that there is merit in addressing them. I am happy to confirm that we intend to introduce amendments in the other place to reframe some of the offences in the 2000 Act that might currently be so widely framed as not to take full account of inadvertent errors for which there is a genuine, reasonable excuse.

I hope that that approach will be welcomed by Members who are concerned that the current framing of certain offences is too stark, binary and polarising. I hope that they will be reassured that the Electoral Commission will be better able to apply its reasonable judgment at the outset of considering a potential case. We have listened carefully to all the concerns that have been expressed about that and taken account of them.

I am not consoled or persuaded at all. In fact, I am deeply concerned that, yet again, the Opposition parties are seeking to relax the high standards to which political parties and donors are to be held. Those standards are intended to ensure that what they do is transparent and available to the public. The public will look at the House with deep suspicion and wonder where the Opposition parties are coming from. Why do they not want to be held to account? Why do they want to create little loopholes and escape routes for their friends, to enable them improperly to give more money to political parties?

I am afraid that I do not accept that for one second. We are not creating a loophole or relaxing the criteria at all. The British people, on whose behalf the hon. Gentleman professes to speak, are driven by the principles of fairness and justice. We are trying to ensure that those principles are applied. People can make small, inadvertent, genuine errors. Who among us can hold his hands up and say, “I have never made a single mistake, no matter how small, at any cost to anyone else”? I am not sure that even the hon. Gentleman will say that. If he wants to stand up and tell me that he has never made a mistake with the best of motives, I am happy to let him do so. Is he going to? I think not.

rose—

Oh, he is. I give way to the hon. Gentleman.

Amendment 121 would insert an escape clause, stating:

“A person does not commit an offence if, in the reasonable opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration under this section.”

Surely we are placing too much responsibility on the commissioners to judge the political climate of the time. Why would anyone want to stick an escape clause in legislation such as this? Do they anticipate that their supporters and donors will make small, inadvertent errors?

I believe that the hon. Gentleman was reading from the Conservative amendment.

Yes.

We intend to resist that amendment. The hon. Gentleman is not reading from the amendments that we propose to introduce in the other place, because they have not been written yet. Before he criticises what we are planning to do, he might want to see what it is.

There are dangers of the sort that the hon. Member for Castle Point (Bob Spink) mentions, and I hope that the Minister will take them into account when producing his own amendments. In particular, it is right to point out the danger of defining the existence of a crime according to the later opinion of the commission. That is never a correct way of framing a criminal offence.

As always, the hon. Gentleman makes an extremely important point. He is right that we have to strike a balance, and we are sensitive to such concerns. We made it clear in Committee that the perception of the public is paramount, and we will abide by that principle. However, there is a problem that we cannot ignore, and we must address it in the best way we can. We are addressing it by reframing the offences in question so that they are applied only when necessary.

I was making a point about the Minister’s attitude towards the Conservative amendments. I would be more sanguine about the amendments if I did not know the Conservative party’s track record in driving a coach and horses through election law and the public test of what is acceptable—for instance, by taking money from people who do not pay tax in this country to fund marginal constituencies by £20,000, £30,000 or £40,000 a year before the election is even declared. I do not want to give the Conservative party any loophole through which it can jump; nor do the public and nor do those in the media, who are watching us carefully in the House.

The hon. Gentleman’s relationship with the Conservative party is infinitely fascinating—it is the stuff of drama—and I should be delighted to explore it with him at some other time, but I should like now to make a little progress with the new clause and amendments. As I say, we want to table amendments in the other place, and I hope that most Members will welcome that.

Without wishing to disagree with the hon. Member for Castle Point (Bob Spink) in any way, may I say that I welcome my right hon. Friend’s announcement that he will introduce an amendment in the other place on the issue, and I hope that it will not simply reflect the Opposition amendment, which puts the onus on the Electoral Commission to determine what it regards as a reasonable mistake, but give some latitude to candidates to seek relief through the courts where they feel that they have made a late declaration that was unintended.

I am grateful to my hon. Friend; I was about to make exactly that point. Specifying the phrase

“in the reasonable opinion of the Commission”

is not a factor that adds anything useful on a practical level. The commission is already compelled to act reasonably when it considers civil sanctions. If it fails to do so, that is grounds for appeal against any decision to impose a sanction. So what I suspect is the desired effect of amendment 121 is already achieved in the Bill by other means. In fact, although I accept that that amendment is well intentioned, it would be distinctly unhelpful in that—I think that this is the point that has been made—it would make the commission’s opinion central to the offence. Accordingly, in a case where the police and the Crown Prosecute Service decided that an offence was so serious that it warranted criminal prosecution, rather than civil proceedings instituted by the commission, a court would still be required to consider what the commission thought to decide whether an offence had been committed. Surely, that cannot be the intention, and I certainly do not think that it would be right.

I urge my right hon. Friend to resist amendment 121, which would put the onus on the commission and make life very complicated. However, I also urge him to look very carefully at amendment 122, which would change a subjective test into an objective test of whether something was an individual’s reasonable belief and would therefore make it much easier for any tribunal, court or whoever to decide whether any shenanigans had taken place. Therefore, although my right hon. Friend and the Government might not like the exact wording of amendment 122, it would tighten things and it contradicts amendment 121. We would be better with amendment 122, not amendment 121.

Again, I have heard what my hon. Friend says, and he has got a point. I will come to our view on amendment 122 very shortly, and I then want to conclude because there is a lot of business to get through and I need to let other Members speak.

On amendment 121, I am also concerned by the use of the phrase “innocent mistake”. I think that we all agree that the commission must act proportionately. It has repeatedly said that the new range of civil sanctions that we propose will help it to achieve that, but the phrase “innocent mistake” carries no legal weight. Indeed, it is quite vague and confusing. I do not believe that it is helpful. In any event, given the nature of the conduct required for the offence, which I have already described, that or similar wording would not add much to ensuring that inadvertent errors were not unfairly penalised.

Amendment 122 would insert a requirement for an individual to make a declaration about their reasonable belief, rather than requiring them to act to the best of their knowledge and belief, as the Bill is currently drafted. To adopt that wording would substantially weaken the requirement and make it inconsistent with other declaration requirements contained throughout the Political Parties, Elections and Referendums Act. I think it is right that we ask the best of people, rather than something less, given that they will be penalised for a failure only if they act intentionally or recklessly in making the relevant declaration. As I have said, the requirement for an act to be carried out knowingly or recklessly will not, in my view, catch a person who makes a statement in good faith. That strikes the right balance between rigour and fairness in this context, and I do not think we should disturb that balance.

Given that, and given the assurances I have given about amendments we intend to introduce in the other place, I hope Opposition Members will see that these amendments are unnecessary, and that they will withdraw them.

As the Bill stands, clause 8 creates a new requirement for a donor to make a declaration in respect of donations for a sum exceeding the specified threshold. The intention behind the clause, and the related schedule 3, is to clarify the source of donations. Essentially, transparency is the goal. Schedule 3 makes changes analogous to those made by clause 8 in relation to donations made to individuals and members’ associations so as to recognise third parties and permitted participants. Although we support the goal of transparency, earlier in the Bill’s passage we had many concerns about the provision. In particular, we were concerned to ensure that small donations were not subject to a potentially burdensome and demanding declaration system. After much negotiation and effort, we have, thankfully, made great progress since then, particularly in increasing the thresholds for declaration from the low original sum of £200. In this day and age, using that sum was particularly out of touch.

The Government have also removed the unworkable requirement that parties verify the donation. In combination with the £200 threshold, that requirement would have made the administration of donations almost impossible. It was agreed by all, including the Electoral Commission, that amendments increasing the thresholds and removing the verification requirement were the way forward. Again, the verification requirement would have placed a great burden on local and national party officers alike. Of greatest concern was the potential impact on local party officers. As the Minister said, they are frequently volunteers, and we felt that the Bill in the form considered in Committee risked permanently discouraging those at the grass roots of politics from engaging with the political system. Even for lawyers or experts in money laundering, the requirement would have been almost unworkable, let alone for busy unpaid local volunteers.

When the Bill went into Committee, any donation of more than £200 would have come within its ambit. That would have resulted in approximately 100,000 declarations being required in relation to Conservative party donations alone, leading to an administratively unworkable work load. As a result, we felt that the political system would be damaged, rather than enhanced. After much effort in Committee, the thresholds were increased to £5,000 at national level and £1,000 at local level. We still had concerns, however. It is a simple fact that political parties need funds to fulfil their democratic roles, and the thresholds are still set at a lower level than we had expected. Fortunately, the Government have come back again and admitted that the clause is still deficient, and have tabled these amendments that we are discussing today.

Government amendments 94 to 111 and new clause 19 are a response to widespread objections to the surprisingly low thresholds for declaration originally proposed in the Bill. The Government amendments increase the sums to £7,500 for donations made nationally and £1,500 for donations made locally. I shall return to the thresholds in discussing our amendments. I can confirm that we are reasonably satisfied with the national threshold, but that we have tabled amendments to increase the local threshold from the £1,500 proposed by the Government to the more appropriate figure of £3,000. We had considered increasing this figure to match the national threshold, as that would have been simpler for all concerned, but £3,000 is where we are at on this issue.

New clause 19, which addresses the so-called “permissibility threshold”, serves two important purposes. First, it introduces further consistency to the 2000 Act by amending relevant sections so that the figures are in line with the proposed increased thresholds in amendments 94 to 111. Secondly, it increases the recordable threshold to £500 from £200—another improvement. As it stands, part IV of the 2000 Act imposes restrictions on the sources of donations; it prevents certain foreign and anonymous donations to political parties and makes registered parties subject to reporting requirements when in receipt of donations of more than a certain value. The new clause serves to amend the relevant sections of PPERA, specifically in part IV, and the related schedules 7, 7A, 11 and 15. The Act specifies which payments or services to a party are not to be regarded as a donation and are therefore not subject to any requirements—any donation of £200 or less is to be disregarded. The new clause amends the sum, increasing it to £500. Accordingly, any donation of £500 or less would not be subject to the regime.

The increased figure serves a number of goals, and the threshold, generally, is a significant one. Principally, the increased sum aims to reduce administrative burden—a reduced strain will be placed on parties in relation to less financially significant sums. The sum should also prevent donors of smaller sums—those up to the more realistic figure—from being discouraged from contributing money. I am thinking of, for instance, ticket prices for attending local fundraising events. It is important that less significant sums donated in that manner are not caught up in the complexities of this Bill. Again, I stress that we should be encouraging engagement at the grass-roots level of politics; by having a higher level, we carve out individuals who are involved at the base level of politics and who are in no way targets of the legislation. It is sensible to remove entirely from any such conversation those lower sums. I am sure that all hon. Members will be aware that the voluntary levels of party structures and local fundraising are normally entirely divorced from the more complex upper echelons of party funding. Furthermore, as the Minister has pointed out, it should not be forgotten that the PPERA provisions that set the £200 level were debated almost a decade ago. Given the time lag, there is a need for a more valid and fair level at which to disregard the potentially oppressive PPERA restrictions.

Although we approve of increasing the threshold, we remain concerned that £500 is not enough. That sum is still very low in the grand scheme of party financing, and for the reasons I have highlighted, extra caution should be exercised to ensure that minor donations do not end up falling within the ambit of this substantial and intimidating—for individuals—legislation. Although we appreciate that the Government have attempted to address these widespread concerns, new clause 19’s changes to part IV of the 2000 Act may not go far enough; a greater sum of £1,000, for example, might be more appropriate.

As the Minister said, this is a matter of judgment and balance. The potential for excessive burden does not extend solely to the donor; in particular, I draw hon. Members’ attention to the potential for requirements to be placed on local volunteers in relation to small donations that nevertheless remain above the proposed level of £500. The accounting rules are extremely technical and complex, as is even the guidance produced on the rules. In addition, we need to consider the fact that, because of the voluntary nature of local associations, many of those responsible for accounting are volunteers. Again, I suggest that it is sensible to remove entirely the possibility of an unnecessary burden being placed on donors and volunteers; extending the threshold to a sum such as £1,000 would ensure that there was far less room for doubt.

Does the hon. Gentleman agree that raising the level to £1,000 would make it relatively easy for a donor making a weekly donation of that sum to give £50,000 without it even showing up on the radar of the political parties legislation? Would that not open the door to large-scale donations that would go unrecorded and unreported?

I do not think that that can happen, because it is a catch-all provision. However, we are not opposed conceptually to anti-avoidance provisions. I am talking about the good guys who want to give money for the right reasons, not the loopholes, which we would be happy to see addressed.

But this provision would create a loophole, because it would set the recording level. The recipient of donations of as much as £999 would not even be obliged to write down the name of the donor on a piece of paper. The donor could be someone from overseas, and they would be able to make large donations.

My understanding is that there are anti-avoidance provisions. Taking the hon. Gentleman’s point at face value, the same problem could be held to exist for a limit of £500, £200 or any other amount. If the anti-avoidance provisions need to be tightened up, we would not be averse to considering that.

If the threshold were extended to £1,000, there would be less room for doubt. It has already become increasingly difficult to recruit and retain volunteers, but we need to encourage enthusiasm for politics at a local level. In that context, I do not understand the Electoral Commission’s concerns that the Government’s proposed increase has the potential to reduce confidence in the transparency and integrity of party and election finance. From previous conversations, we know that the Government have an open mind on this issue, and it may be that their low-bid amendment reflects the concern held by the Electoral Commission. When it comes to setting a level, however, I would argue that it is a matter for Parliament to decide the limit. While we accept new clause 19, we are concerned that the permissibility threshold is reviewed further in the later stages of the Bill.

Our amendments 124, 125, 129, 131 and 133 would increase the threshold for local donations to £3,000 from the current level of £1,500. They would also provide for indexation, about which we are concerned because of the likely high levels of inflation as we come out of Labour’s recession. Such sums can look out of kilter after only a few years. I should note that we have tabled other amendments, such as amendments (a), (b) and (c) to new clause 19, which would provide for indexation for all the threshold figures in the Bill.

The declaration requirement is considerable and should be required only in the case of considerable donations. Smaller donations, which will comprise the majority in number, should be less rigorously regulated. Increasing the reporting threshold figure to £3,000 would remove the lower-level donations from the ambit of the Bill and further reduce the administrative burden locally.

I do not understand, especially given the state of the world economy and the prospect of deflation haunting us, why the hon. Gentleman is talking about upwards-only indexation. That seems strange to me.

We have provided that indexation should be upward only on the basis that to date none of the thresholds has been reduced. If the hon. Gentleman is concerned about complexity, I put it to him that having an upward and downward measure would certainly increase the amount of complexity involved.

It would not do so if the Government adopted the excellent proposal that someone made earlier—that the adjustment should be made only once in each Parliament. In that case, the complexity for the individual volunteer would be the same whether the figure was £450 or £550 or stayed at £500. It is no more complex to adjust to a figure going from £500 to £450 than it is to adjust to one that has gone from £500 to £550.

The hon. Gentleman has made his point, which is worth looking at. We would not be averse to debating his proposal along with others that will hopefully be considered in the context of the Government’s response.

More specifically, an increase in the threshold would further emphasise the importance of catching the larger and more significant sums. Narrowing the ambit of the Bill would focus the commission on the more serious tasks that it faces, avoiding donors, local associations, volunteers and electoral commissioners being bogged down in misunderstandings and disputes over lesser sums.

The amendments would serve three connected purposes. First, they would reduce the administrative burden for donors and parties. Again, I remind hon. Members that the measure will place a significant obligation on a great number of donors. Secondly and simultaneously, an increased limit would emphasise the importance of declarations of larger donations. That would ensure that an appropriate level of scrutiny was applied to the more significant sums. Indeed, it is in relation to the larger sums that suspicious and offending activity is most likely to take place. Finally, an increased limit would remove the discouraging requirements in relation to smaller donations. Accordingly, fewer people donating at the very important grass-roots level would feel exposed to the declarations regime and such people would therefore not be discouraged from giving.

We must avoid pushing interested persons further away from political engagement by importing complex legal requirements into the local party funding scheme. The wrong that the measure is intended to tackle is very far departed from the vast majority of scenarios involving sums under £3,000. If we succumb to the temptation to over-regulate, we will succeed only in taking the political system further away from the general public. In this way, we will defeat some of the Bill’s key goals in the process.

By tabling their own increases, the Government have shown that they support the principle behind increased thresholds. We therefore believe that the further increase introduced by our amendments would reinforce the theme of the Bill, rather than detract from it. The Minister’s acknowledgement of the fairness of our £3,000 proposal is welcome. In the light of his kind offer, we shall not press the amendment to a Division. We look forward to seeing the Government amendments in the other place. I take the Minister’s point on certain technical issues that he mentioned, which his draftsmen will no doubt address in their drafting of his amendments.

As I stated, clause 8 creates a new responsibility for donors to political parties to declare any outside source of a donation. Although I repeat our support for the concept of transparency, there must be sensible limits in place to protect the vast majority of honest and genuine participants in the democratic process. The general impact of clause 8 could be costly in both time and money for parties locally. It is at this most fundamental and important level that such burdens are most heavily felt. Bearing in mind this negative potential, our amendment 121 seeks to provide a positive defence for those who have made an innocent mistake.

As we have emphasised throughout our deliberations, this is a complex Bill and it may prove easy innocently to fall foul of the law in PPERA. Even a brief review of the provisions on a declaration reveals the lack of certainty for a lay person—for example, the concept of “value of the benefit” and the provision of a benefit “in connection with” a donation. Although we do not dispute the need for such provisions, it is important to ensure that a positive defence is in place if the complex measures are unwittingly not complied with.

By including the commission in the process, amendment 121 aims to place adequate and specialised scrutiny on any person who asserted the defence. By positively confirming that the defence exists, we can ensure that the Bill is in kilter with other legislation that creates criminal offences. It is important to remember that guilt of a criminal offence, with the obvious stigma attached, is at stake. As it stands, the drafting of proposed section 54A(6) to the 2000 Act does not adequately address our concerns. It merely states:

“A person who knowingly or recklessly makes a false declaration under this section commits an offence.”

There is no confirmation that a person would not commit an offence in the case of an innocent mistake. From our perspective, the drafting of section 54A(5), as proposed in clause 8(2), is not sufficiently prescriptive in that respect. The Bill is silent, and might unfairly cast a doubt over the honesty of an innocent person. There may be a lack of clarity about how the law works in practice, especially when the legislation is first enacted. As such, it seems fair positively to provide a clear defence.

The hon. Gentleman will correct me if I am wrong, but according to my recollection, he is a lawyer; in fact, I believe that he still moonlights as one. I suggest to him that amendment 122 would change a subjective test into an objective one, and that amendment 121 would introduce a subjective test. He is proposing contradictory amendments that would create great complexity. Were both amendments agreed to, we would end up with the replacement of a subjective test by an objective test and then the reintroduction of a subjective test.

That is not the case, because the defences are different. They are not put together. Let me continue my line of thought; the hon. Gentleman can then come back, if he likes.

I should like to draw a comparison with section 167 of the Representation of the People Act 1983, which shows the point that we are making. It stated that when a person had to be charged with an offence under its provisions, they could apply to the High Court, an election court or other court as appropriate for relief from liability, on the grounds that

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

The 1983 Act is an effective example of our amendment in practice. We tabled a near-identical amendment in Committee, but the Minister dismissed it. He said:

“Hon. Members spoke about the 1983 Act, but that framework was replaced by the 2000 Act…We do not believe that the amendment is necessary, but of course we hear the concerns about the dangers of an overzealous approach to enforcement—of the minor, technical breaches.”––[Official Report, Political Parties and Elections Public Bill Committee, 20 November 2008; c. 379.]

The 1983 Act may have been replaced, but that does not mean that it is not a good example of what we want to get to. The Minister concedes that there is a concern about an over-zealous approach by the commission and that we should address that concern by clarifying the defence.

We should act now to avoid the dangers that we have identified and that the Minister has confirmed. There should be no harm in adding this extra layer of protection. Perhaps the technical point that the hon. Member for Cambridge (David Howarth) made earlier is valid, but I say here and now that the Conservative party has been the only one to have supported the concept of an innocent mistake—and we are sticking by it. I am pleased that the Minister seems to be coming around to our way of thinking.

I rise on behalf of my hon. Friend the Member for Battersea (Martin Linton). On a point of record, I should say that, as the hon. Gentleman may recall, my hon. Friend also had a lot to say about the issue in Committee.

He did, and I congratulate him on having done so, but he was not speaking from the Front Bench, unless I am mistaken; the Minister may wish to put me right on that.

The Electoral Commission seems to have concerns about the amendment. It says that it could considerably weaken the eligibility of declarations made under clause 8. However, I put it to the commission that we need a mechanism to deal with the issue. To that extent, the policy of straight rebuttal that the Minister advanced in Committee was not productive. However, he seems to have made a significant about-turn on the issue, at least in general terms; I was heartened by what he said. Nevertheless, so far there have been no specifics, so we will press amendment 121 to a Division at the appropriate stage this afternoon.

I am anxious that the hon. Gentleman should not be under any misapprehension. I said to him that I did not believe that the offence in new section 54A(6), with which these Opposition amendments are primarily concerned, is one of the offences that we consider too wide at the moment. We are bringing the amendments forward in the other place, and as I have said, we will reframe some of this. We have, as always, listened carefully to what hon. Members have said, particularly the cogent arguments made by my hon. Friend the Member for Battersea (Martin Linton) in Committee. We want to achieve the stated aim, but not in this context. Some specifics have already been given today, and I would not want the hon. Gentleman to be under any misapprehension.

I am thankful for the Minister’s putting the record straight. That makes it more important that we request a Division on amendment 121.

Amendment 122 would change the requirement for a declaration under new section 54A(1) to be made

“to the best of the individual’s knowledge and belief”

by inserting a less oppressive requirement of “reasonable” knowledge. As it stands, the Bill imposes a considerable obligation on the donor by requiring them to apply the highest level of their knowledge and belief in stating whether subsection (2) applies. Subsection (2) applies if another person has provided the donor with money or another benefit in excess of the threshold in subsection (2)(b). It therefore has two layers: the fact of the provision and the value of the provision. In the case of the latter, subsection (2)(b) applies if the “value of the benefit” exceeds the threshold. Satisfying that requirement could be especially difficult. Likewise, it may be equally tough to apply one’s best knowledge in deciding whether another person has provided a benefit

“in connection with the making of the donation”.

That is emphasised by the lack of an obligation in the Bill for the commission to provide guidance on valuing benefits, so the potential to catch out honest donors is considerable. The provision implies that the person must use all efforts to ascertain whether a vague link or high value of an obscure benefit requires a declaration. When we consider the sanction for failure in this respect, we see that that is a tough standard to satisfy.

In short, the provision can serve only to discourage donations and engagement with the political system. I remind the Minister that he accepted the principle at stake in Committee, where he said:

“Of course reasonableness is important. For instance, when someone is required to give an opinion it should be a reasonable one.”––[Official Report, Political Parties and Elections Public Bill Committee, 20 November 2008; c. 371.]

That being the case, why not incorporate it clearly in the Bill? This requirement is oppressive and potentially counter-productive to the wider goals of the legislation. Our amendment seeks to temper the Bill and bring it into line with the mutual expectation that reasonableness, rather than best knowledge, is the correct requirement in these circumstances.

My hon. Friend, and indeed the Minister, talked about the concept of acting in good faith. To that extent, there is some commonality of approach in trying to deal with good faith actions and bad faith actions, if I may use those terms. That is difficult to frame in a legislative way. Does my hon. Friend agree that there is an issue as regards the “best endeavours” obligation—the extent to which people need to make investigations to ensure that they are satisfied—and that there is, equally, a correlation with the recklessness test that appears later on as to whether an offence is triggered? Does he agree that a combination of those steps could lead to uncertainty, which I assume relates to the good faith that he is trying to achieve?

My hon. Friend makes an interesting and valid point that I hope will be taken on board and considered by the Minister as he reviews the provision as a whole.

As I understand amendment 121, the hon. Gentleman seeks to apply a subjective test to actions that may have taken place under new section 54A(2)(a) and (b). However, the amendment does not narrow things that much. I can see the mischief in subsection (2) that he is trying to address, but his amendment does not refer to that subsection, so it seems too widely drawn.

The hon. Gentleman may have a point. We presented two defences that need to be reviewed, and perhaps they are not as connected as they should be—something that we can review. He agreed conceptually with one of the defences that I advanced, and found interest in the other one as well, so we are talking along the same lines to a great extent. I agree that we would want to look at amendment 122 further as we moved on to the later stages, and that will be done in the other place.

This is one of those odd occasions where I was in favour of the new clause the Minister was proposing until I heard his reasons for it. I could have understood an argument that said, “These figures take no account of the rate of inflation since 2000, and there is a need to stick to round figures because people do not understand small fractions, so one may as well increase the number upwards to the next round figure and leave it at that for a long time.” The figures are nine years short of where indexation would normally get us, so one could then have said, “We don’t intend to change the figures for a while.” That would be especially important given the fact that inflation is now very low—in fact, we are looking at deflation.

Unfortunately, however, that was not the Minister’s argument. He suddenly came out in favour of some form of indexation and said that the figures should be increased now and then indexed. That is going too far in the direction of reducing transparency. The Minister quite rightly said that we do not have any scientific evidence about public opinion on this matter, but I caution him against making too many assumptions about whether public opinion would find what he proposes acceptable. I would be happy for him to do some research to show me that I am wrong, but to increase the figures by 50 per cent. and also to index, is to lay ourselves open to a charge that we are going too far in one go.

I do not want to interrupt the hon. Gentleman unduly, but I did make the point that we are all making judgments about the matter. I am not making any assumptions and we are making the best judgment that we can. I have certainly said, quite explicitly, that if our judgment about the matter is proved wrong, we shall be happy to revisit it. There is no science about the matter and I can assure him that I am not making too many assumptions.

I am glad to hear the Minister being suitably modest about his proposal, but I would have preferred him to have given a more positive reply to the suggestion made by the hon. Member for Battersea (Martin Linton) to have a review only once a Parliament, given the uplift suggested in the figures. Indeed, a revision once every two Parliaments might be appropriate, given the size of the initial uplift.

There is also an interaction between new clause 19 and new clause 1. In a way, it makes no sense to decide on new clause 19 until we have decided on new clause 1, because we have to decide whether transparency will be the only mechanism for controlling donations, as it currently is. Where transparency is the only mechanism, there is a very strong case indeed for making that transparency provision as strong as possible and for keeping the limits as low as possible.

However, if we were to adopt a cap, that would be the primary way of maintaining the public’s confidence that—to use the Minister’s words—people are not buying influence in politics. The transparency provisions would then provide a secondary way of maintaining that confidence. In those circumstances, one might come to different conclusions about where the transparency line should be drawn. I do not intend to divide the House on new clause 19, but given what the Minister said, I am rather more worried about it now than I was when we started our consideration of it.

The hon. Member for Huntingdon (Mr. Djanogly) said that he would like a Division on amendment 121. However, I will not be able to support him, and not just because of the technical reason—in fact, it is far more than a technical reason; it is an important reason—that I gave in an intervention. His amendment 121 would make the commission of a criminal offence dependent on what an administrative agency later decided about the circumstances that prevailed when the defendant acted. That can never be the right way to write a criminal offence.

However, that is not my only reason. Rather, I am entirely puzzled about how the defence would work in the precise circumstances that the hon. Gentleman described. As was made clear in an intervention on him, the Bill suggests that

“A person who knowingly or recklessly makes a false declaration under this section commits an offence.”

However, after that he wants the Bill to say that it is not an offence if,

“in the reasonable opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration”.

I just cannot see how one can knowingly make a false declaration innocently. If someone makes a false declaration and they intend it to be false, it can never be made innocently.

The only circumstances that have been raised are those where someone has been reckless, but what does recklessness mean in such circumstances? It means knowingly—consciously, subjectively—not caring whether what one says is true or false. I cannot see how that can ever be done innocently either. I am afraid, therefore, that I cannot support amendment 121.

The crucial question in all the amendments that we are considering is public confidence.

Is the hon. Gentleman therefore saying that he will not support the insertion into the Bill of any provisions to deal with innocent mistakes?

As the Minister said, it depends what the offence is. There is scope for an innocent mistake defence where the offence is strict, or somewhat strict, in the way that it is drawn up. However, where the offence is one of knowingly or recklessly making a false statement, it is difficult to imagine any circumstances where that could be done innocently.

As I said, the key criterion in all these debates is public confidence, and my doubts about new clause 19—although not enough to encourage me to divide the House—are based on precisely that issue. Will the changes maintain public confidence? My reason for opposing amendment 121 is exactly the same, because I do not think that making contradictory laws ever maintains public confidence.

I welcome the Minister’s attitude towards new clause 19. As a result, my comments will be quite brief. I welcome the increased donation limits, because they will mean that political parties will be less reliant on public money, trade union money and businesses’ money, which is bound to be a good thing.

I would welcome hearing from the Minister by how much he predicts overall private donations will increase as a result of the increased thresholds. Some people who now donate at a level just below the threshold will donate at a level just below the new, higher threshold. That is not for any criminal reason, or for any other reason that might make us uncomfortable. I can give the House three examples of people to whom I have spoken about this. The first is a bailiff, who wanted to contribute to a political party, but who did not want his name in the public domain, and who has a policy of keeping his name and address private. The second was a constituent who had won quite a bit of money on the national lottery, and who was conscious of the need to keep their name out of the public eye for fear of receiving unsolicited requests for donations. The third was a relatively junior civil servant who wanted to make quite a large contribution to a political party, but who felt that that might go against them in their workplace.

Conversely, some people might increase the amount of money they donate because they want it to appear on the register. For example, I was considering making a £50 donation, having met Rebecca Harris, the Conservative candidate in Castle Point. That would have been below the £200 threshold. I am actually incredibly proud of wanting to make that donation, and I think that I shall increase it to £201, so that it can go on the record, as part of the attempt to bring greater democracy and accountability to Parliament, rather than having to wait until the threshold goes up to £500 to make the same point. That would also be an awful lot more expensive for my pocket. So Castle Point Conservatives can expect a £201 donation from me as a result of this debate.

We all want to make a donation.

This seems to be quite popular. Perhaps I will arrange a whip-round after the debate.

I am grateful to the Minister for taking on board the points that have been raised about indexation. I am slightly concerned, however, given the very useful evidence sessions and the large number of very useful Committee sittings, that the Government did not table these amendments earlier. It would have assisted them if there had been a greater gap between the evidence sessions and the Committee sittings, so that they could have tabled amendments to be considered by this House rather than another place. Sometimes, the devil is in the detail and, all things remaining equal, I can imagine the House of Lords being less aware of electoral practices, and our getting into a position in which the system becomes more complex than it needs to be.

In addition to indexation, I want to talk about how the threshold is raised. I am minded to think that the idea of raising it at a general election is a good one. In that way, there would not be a problem with raising it from £500 to £512. I think that we should raise it to a round number—perhaps £550 or £600. In relation to wanting to raise the maximum amount of revenue from private individuals, will the Minister give consideration to years in which there are two general elections, as happened in 1974? Heaven forbid that we should find ourselves in that position in 15 months’ time, or before, if the country remains undecided about who they want to solve the problems that the Government have got us into. However, if we do end up in that position, we, as politicians, would surely want private individuals to be able to contribute twice the annual limit, rather than being constrained by that limit.

On new clause 19, which I shall deal with before briefly concluding on amendment 121, will the Minister look at connected parties? Although I fully endorse the movement from £200 to £500, if a family of five adults all contributed a smidgeon under £500, that would amount to £2,500 and over an electoral cycle of four years—the norm, if the Government are not running scared and so go the full term—it would mean a donation of £10,000. In addition, if those five individuals living under the same roof set up an unincorporated association, they could yet again make an even larger contribution. I would appreciate it if the Minister, as well as making concessions on new clause 19, looked again at connected parties.

We have had an interesting discussion. We have heard what people said and we have taken most of the concerns into account. I am not sure that I agree that we are striking the wrong balance, as the hon. Member for Cambridge (David Howarth) suggested we were; we have done our best to strike it in a way that will sustain and endure. As I said, if we have got the judgment wrong, we will be happy to return to it. We think that this is a sensible way forward and we hope that the Opposition will reconsider their decision to vote on amendment 121, which I think they might regret in times to come, but it is a matter for them. I commend the Government new clause.

Question put and agreed to.

New clause 19 accordingly read a Second time, and added to the Bill.

New Clause 1

£50,000 cap on donations

‘(1) In section 54 of the 2000 Act, after subsection (1) there is inserted—

“(1A) A donation received by a registered party from a permissible donor must not be accepted by the party in so far as the amount of that donation and of any other donations accepted by the party from that donor during the same calendar year exceeds £50,000.

(1B) Subsection (1A) does not apply to donations to which subsections (1) and (2) of section 55 apply.”.

(2) In section 56 of the 2000 Act, after subsection (2) there is inserted—

“(2A) If a registered party receives a donation which it is prohibited from accepting by virtue of section 54(1A), subsection (2) applies to that donation only in so far as the amount of that donation and of any other donations accepted by the party from that donor during the same calendar year exceeds £50,000.”.

(3) In subsection 58(1)(a) of the 2000 Act, after “(b)”, there is inserted “or (1A)”’.—(David Howarth.)

Brought up, and read the First time.

I beg to move, That the clause be read a Second time.

New clause 1 simply introduces a £50,000 cap on donations to political parties by any particular person in any calendar year. In the long discussions about the Bill, which is supposed to be about political parties and their funding, this is the first time that we have been able to debate the central issue of whether transparency in donations—as we have discussed over the last hour and a half—is enough, or whether, as I and my party believe, there should be far stricter control than just knowing who donated money, as we need to limit the amount donated itself.

Our proposals in this new clause were part of the compromise package put forward as a result of talks under the chairmanship of Sir Hayden Phillips—talks that seemed fruitful for a while, but in the end failed to produce proposals that all parties supported. However, while those talks were going on, this particular proposal for a donation cap at around £50,000 gained support on all sides, so I would be astonished if it were opposed today by parties and politicians who previously supported it.

I hope to expand on this point if I catch your eye, Madam Deputy Speaker, but does the hon. Gentleman accept that Hayden Phillips made his proposal for a donation limit of £50,000 as part of a comprehensive package, which included state funding, and that he said words to the effect, “You cannot have one without the other”? I think he used the phrase, “There can be no cherry-picking; this is a comprehensive package.”

Sir Hayden Phillips did say that it was a comprehensive package, but I understand that the talks never got to the discussion of state funding. Later in my speech, I shall get to precisely that point, because it is important to understand exactly what effect a £50,000 cap would have on the existing parties, the extent to which it would produce a funding gap for the parties and the extent to which state funding would be required to fill that gap, if at all. If the Secretary of State will forgive me, I shall return to that.

The point of a donation cap is to undermine the perception and the reality that big money buys access to political power. There is no point going through all the examples that have been thrown by one party against other parties over the past 10 or 15 years—cash or donations for peerages, changes in policy, support for this initiative or that. The bandying about of names, on all sides, gets us nowhere.

I am listening with great interest to what the hon. Gentleman has to say. Given his concern in relation about the perception that big money, as he puts it, is buying influence, why set the cap at £50,000? Surely it should be considerably lower, although the great British public at large would think even such a sum one that could influence decision making or give access to politicians.

I was going to come to that point later, too, because my view—as well as that of my party and my party leader, my right hon. Friend the Member for Sheffield, Hallam (Mr. Clegg)—is that to restore public confidence we will have to set the cap much lower than £50,000. We tabled an amendment in Committee, which was never discussed, that the limit should be £10,000. We have suggested £50,000 because it is what the Conservative party and its leader proposed. If the hon. Member for Cities of London and Westminster (Mr. Field) wants to oppose his party leader’s view, so be it, but we are trying to operate within a rough consensus that previously existed.

The issue, in part, is that we, as Members of Parliament, have a limit set of 1 per cent. of our salary. We have to be transparent about any donations we have or any moneys that come in relation to any entertainment—in other words, about £620. I fail to understand why—other than purely for party political advantage to the Liberal Democrats—the hon. Gentleman wants to set a limit of £50,000, or as he now desires, £10,000. Surely the issue here is transparency, as we discussed earlier in the debate. Provided everything is transparent, surely that is the right way forward that will reassure the public that there is openness on those matters.

No, the issue is not only transparency, but whether public confidence can be maintained solely by transparency. The conclusion that all the parties reached as part of the Hayden Phillips process was that transparency by itself was not enough. The perception that access could be bought and that donations were being given with strings could be challenged only by having a cap on the size of the donation.

Throughout the debates in Committee, the Minister said—this is right—that some people give money to political parties without strings and for the good of the cause, and that that is a good thing. The trouble with that is that everyone knows that sometimes the money is given, or offered, not for that purpose but in return for the prospect of access or in return for influence. The question of perception is vital to the issue before us.

The hon. Gentleman will be aware that I have an interest as chair of the trade union group of Labour MPs, but does he not recognise that there is a fundamental difference between the donations of an individual and the donations of a corporate body such as a trade union that operates collectively, which consist of small contributions from many people? The passing of the new clause would thus do real damage to the historic relationship—of which, admittedly, the hon. Gentleman may not approve—between my party and the trade unions.

I was going to deal with that point later, but let me make something absolutely clear now. Hayden Phillips also said that there must be a fair way of dealing with the relationship between the Labour party and the unions. I do not seek to undermine the existence of the Labour party through any measure that I propose today. A later group contains a new clause which I hope will deal with the question in a fair way by distinguishing between donations from trade unions and affiliation fees that are in reality—this meets the hon. Gentleman’s point at least to some extent—the agglomeration of many small donations. I am perfectly happy to allow that situation to continue, as long as the trade union itself makes clear to its members that they can choose whether or not to donate to a political party.

rose—

rose—

If I can be allowed to finish this point, I will let hon. Members intervene afterwards.

I propose that the trade unions follow a code of practice issued by the Electoral Commission relating to information that they give their members about their ability to opt out of the political fund, including information about what members must do to opt out, and what was done with the money paid into the fund in recent years. As long as the code of practice was followed, I should be happy to allow affiliation fees to continue to be paid as they are now.

This goes to the heart of the debate. Although the hon. Gentleman—supported by the Scottish nationalists, incidentally—says that he does not wish to attack the link between the unions and the Labour party, his new clause would have precisely that effect.

The hon. Gentleman may honestly argue that he sees a distinction, but he should bear in mind that many trade union members, even those affiliated to the Labour party, do not contribute to the political fund and thus do not contribute to the Labour party, because union membership is not synonymous with support for the Labour party, either political or financial. The distinction that the hon. Gentleman thinks he draws does not exist, and, what is more, his new clause in its present form would damage the Labour party. He may say that that is not his intention, but he should understand that the new clause would do precisely what he claims that he does not want to do.

If the hon. Gentleman looks at new clause 8, he will see the overall intention of the Liberal Democrats. To some extent, it is unfortunate that the grouping of the new clauses means that new clause 1 is being considered alone, so I concede the technical point that new clause 1 without new clause 8 would indeed have the effect of stopping donations of any sort, including affiliation fees, by a trade union to the Labour party. However, the hon. Gentleman needs to look at new clause 8 as well as new clause 1 to see our overall intention, which is not to undermine in any radical way the relationship between the trade unions and the Labour party, but to control that relationship in a way that is fair and equitable across the other political parties and their financial relationships.

The debate is becoming more complicated, but does the hon. Gentleman accept the basic premise that new clause 1 is unacceptable without at the same time putting in place provisions for dealing with trade unions?

One of the fundamental points from the Hayden Phillips talks was that we need to come together on three issues: donation caps, how they specifically affect trade unions and the relationship between the unions and the Labour party, and spending caps—it is a shame that the grouping does not allow us to talk about them all in one go. The national situation with regard to spending needs to be controlled as part of the whole package.

Does the hon. Gentleman agree that the Labour party’s attempt to evade unions being part of the whole settlement solution stretches credibility to the absolute limit? More than anything else, the measure is about transparency and choice—individual trade union members having choice about where their political fund money goes and transparency in the process so that they can see throughout exactly what contribution that money makes.

That is precisely right and it is what we are trying to achieve. The hon. Member for Manchester, Central (Tony Lloyd) is correct in that trade union members who do not contribute to the political fund should not in any way be contributing to a political party, because donations other than those from a political fund are not allowed in law. Nevertheless, the political fund is not limited to affiliations; it can spend on donations as well as affiliations, so it does not follow, as the hon. Gentleman seems to think, that if a union makes a payment from the political fund it is automatically an affiliation. That is not the case.

Does the hon. Gentleman not accept that any money that finds its way into the political fund of a union affiliated to the Labour party or any other party has done so only after the union has collectively voted to set up or continue a political fund and only after individual members have used, or not used, the procedure for individually opting out? I support the general concept of a cap on donations, but surely the hon. Gentleman is doing precisely the opposite of what he proposed—he is bringing forward one element of the package without resolving the key issue of the status of donations from trade unions, which I maintain should not be captured by the limit.

The hon. Gentleman must forgive me. I am not bringing forward the single element of the package; the House authorities have managed to do that by not grouping new clauses 1 and 8 together as I would have done if I had had my way.

The hon. Gentleman makes a crucial point about individual affiliation and payments to a political fund. The key point is that individuals know what is happening and are clearly able to opt out if that is what they want. All Members who have had anything to do with unions in the course of their lives—I have had a lot to do with them from my early childhood—know that some unions are more open and their political fund is easier to opt out of than others. As I mentioned at Second Reading, when my wife tried to join the union Unite she found it very difficult to opt out of the political levy, even though in the circumstances she did not feel like donating money to a party that was trying to oust me from my seat—[Hon. Members: “She might have.”] She might, but I can assure the House that she did not. The point is that the Electoral Commission should lay down clear guidelines about what counts as sufficient clarity in union rules and documentation to satisfy the commission that the union is giving its members a clear, open and transparent choice.

The hon. Gentleman is right to say that public perception is the acid test. I tend to support the direction of new clause 1, provided that it is linked to new clause 8, as he explained it was. It achieves the balance for which Labour Front Benchers called in an earlier debate. On the Hayden Phillips spending-caps pillar, can the hon. Gentleman advise the House? If there were a £50,000 limit, except for trade unions in certain circumstances, what would that give the main political parties? Has he done any research on that? I congratulate him on the way in which he has brought the debate forward; it is excellent.

A set of figures available from the Electoral Commission and on the parties’ websites gives us a clue as to what might happen if there were a £50,000 cap. We have to make certain assumptions. One of them is that a donation of more than £50,000 would become a donation of £50,000—that is, that the whole donation would not be lost, and that only anything above £50,000 would be lost. We also have to make assumptions about how a scheme like that in new clause 8 would apply, because there is a distinction between affiliation, which would continue to be allowed, and donations to which the cap would apply.

With all those caveats, I suggest that the situation would be as follows. The three main English parties, if I may put it that way in the presence of the hon. Member for Perth and North Perthshire (Pete Wishart)—the British parties, or, as the First Minister of Scotland says, the London parties—spend about £62 million in a typical non-election year, if we take 2008 as a typical year. However, it is worth saying that in a non-election year, they often have, between them, a surplus of about £10 million, so they actually raise about £72 million. If a £50,000 cap or something similar were in place—I think that this goes some way towards answering the question that the Secretary of State posed—it would have the effect of reducing the total income of the parties by some £10 million. Of course, that £10 million would not be distributed evenly among the three parties, but then the Labour party spends about £25 million a year, and the Conservatives about £32 million. The Liberal Democrats spend about £3 million or £4 million a year. The losses for the Liberal Democrats would be proportionately small, but at about the same sort of level as the losses of the other parties.

To come back to the point that the Secretary of State raised, the question is whether that would be such a devastating loss for the political parties that they would have to go cap in hand to the Government and ask for state funding. For a number of reasons, I do not think that they would necessarily be in that bad a position. The first reason is the surplus. The loss is about the same as the annual surplus, although the counter-argument is that the surplus is accumulated in non-election years and spent in election years. Even if we put the surplus to one side, a reduction of 15 or 16 per cent., although difficult to make in one go, is not, in my view, entirely out of the question for the political parties, especially the two bigger parties.

Is not the hon. Gentleman making the case that new clause 1 is unfortunately detached not only from new clause 8, but from new clause 10, which his party put forward? As Hayden Phillips—and, indeed, Select Committees—suggested, such arrangements need to lean on each other and cannot be separated from each other, if the logic is to work. Proposing an amendment that is entirely separated from a number of others as though it stood on its own appears to defeat the logic, which is to show how things might work overall.

My view is that those three elements stand together. I would never have separated new clause 1 from new clause 10 either. The spending cap goes along with the donation cap, because it would remove part of the problem of parties trying to outspend one another for the sake of it.

It is right that the effect on the parties of a £50,000 cap should be seen in the context of having a spending cap as well. What could the parties do in the medium term to deal with the gap that would be created by such a cap? It seems to me that they could do a lot of things. First, the Conservative party employs several very highly paid people, whose salaries are said to be in the region of a quarter or a third of a million pounds a year. Certain economies are therefore quite easy. Secondly, we all know that parties waste a lot of money on campaign techniques whose efficacy is far from established. The best example is billboards, which are massively expensive and do not seem to shift any votes at all.

Thirdly—I suppose I would say this, as a Liberal Democrat—the Government are fond of benchmarking public services. They say, “Let’s look at an area of the country that provides a service the most cheaply and ask the other parts of the country, which supply the same thing more expensively, why they are so expensive.” As a Liberal Democrat, all that I can say is that we manage to run a national political party with £3 million, and the other parties should be asked why they need 10 times that amount to run their parties.

The other parties have rather more seats, and they aspire to Government, which makes a difference. If the hon. Gentleman wants benchmarking, I would be delighted for the Advertising Standards Authority to be given the role of benchmarking “Focus” leaflets.

May I press the hon. Gentleman on state funding? Hayden Phillips was clear that state funding should be part of any donation limit package, but so too was the hon. Gentleman when he signed up to the Select Committee on Constitutional Affairs report, which stated, at paragraph 109:

“However, such a limit”—

on donations—

“should only be considered within the broader context of a discussion about alternative sources of funding, including state funding, for political parties.”

There is nothing there about reducing overall funding. I have checked the minutes, and he did not demur from that recommendation, so why has he changed his mind now?

As the Secretary of State says, the conclusion was that a donations limit should be considered in the context of state funding and other forms of funding. One obvious form of funding is to raise money in small amounts, as Barack Obama’s campaign in the US did. One of the great attractions to party fundraisers of the possibility of very large donations is that only a few big donations are needed for the required money to be raised. In the United States, where the donation cap is very low, techniques have been developed to raise money in smaller amounts but in large numbers.

The question to consider is whether it would be necessary for parties to receive large amounts of state funding on a permanent basis, which the Government keep implying would be the inevitable result of a donation cap. I do not believe that it would be necessary. The amount of state funding required would be quite modest, and whether there would be any need for it to be provided on a permanent basis is an open question. We must therefore ask whether it is true that we could not introduce a donation cap without already having worked out some elaborate and permanent state funding scheme. I do not believe that that would be necessary, because in the context of the spending cap and the relationship between the Labour party and the unions, the donation cap stands by itself. It does not need those further measures.

Surely, the hon. Gentleman knows that we already have a system in this country that long pre-dates what is now current in the United States or Canada and that involves marshalling a large number of small donations—it is known as the political levy—and he still has not answered my point. Quite apart from affiliation fees, does he not recognise that the money that ends up in the political funds of trade unions has been put there after a collective decision in the political fund ballot and after a series of individual decisions not to contract out of the political fund levy? The money is there as a result of many small decisions by individuals.

Yes, the money goes in by individual decision, but it comes out by collective decision and, for that precise reason, it should be treated as a donation, unless one can show that it is, indeed, an affiliation fee being passed on individually. That is the whole point of the distinction between affiliation fees and donations that Hayden Phillips was trying to make. I do not want to delay the House much further.

Will the hon. Gentleman give way?

Yes, I will give way, because the right hon. Lady probably wants to deal with the point that I am making.

No, my intervention is not on that point, although I should like to debate it with the hon. Gentleman at some stage. He started off by saying that the main thrust of the new clause came from the wish to change the public’s perception of political giving and raising money for political parties. Has he any evidence that his proposed cap would have any effect on public perception?

Any cap would make such a big gesture in the direction of self-control by those of us in politics that it would have an enormous effect, simply by saying that we are willing at long last to control ourselves in a way that we have never been willing to do until now.

I am grateful to the hon. Gentleman; he is being very generous with interventions. Many people—I am one of them—believe that the public really want restraint on spending and transparency about donations. Clearly, that is almost the opposite of what he is proposing and of what the Liberal Democrats believe in.

I cannot understand how the hon. Gentleman thinks that our proposal is the opposite, because we want both an effective national spending limit all year, every year, not just sometimes, and an effective local spending limit all the time as well, in combination with a cap. The restoration of public confidence depends on having both those things, not just one of them. We often hear arguments that one side wants transparency on donations but is willing to have a cap on spending and that the other side wants things the other way around, depending on what is to its short-term advantage. That is not good enough; we need both spending and donation caps simultaneously all the time.

I agree wholeheartedly with what the hon. Gentleman is trying to achieve. Is not one of the good things about his proposal that we would end the obscene situation whereby individuals gave the Labour party £1 million and found themselves sitting in the House of Lords?

We would also end the situation whereby individuals gave the Labour party £1 million to change a policy and it all came out in public, so the Labour party gave back the money, but the policy still stayed changed. That seems to me to be the best-value donation of all time. However, it does not do a lot of good for any of us to bandy around the names of individuals in one party or another who have been found to have done something of no credit to politics. The question is whether what we are allowing is a credit to politics and to our democracy.

Before the hon. Gentleman draws his comments to a conclusion, I just want to make sure I fully understand what he is saying about the funding gap and the interrelationship between his proposal and the need for state funding or other sorts of funding. I think he was implying that he felt that that was not necessary. However, when he and I sat on the Constitutional Affairs Committee and produced the report on party funding, it was accepted that there would be a funding gap, and that, in essence, the sorts of individualised funding that could come through would do so only after a time, and that something would be required for that transition period.

Yes, I concede that there would be a gap, but it is a gap in time rather than a permanent gap in terms of money. I agree that there might well be an interim period when something will be needed, but that would not have to be on a straightforward Treasury grant model, as the Government seem to assume.

I hope I am not making a party point here—heaven forbid!—but although the hon. Gentleman, whom I respect, was speaking about not bandying names around, may I ask him whether he feels it would be appropriate for his party to return money given by Michael Brown, who, as the hon. Gentleman knows, was convicted of criminal offences? Should not that money be returned, and would that not help the Liberal Democrats, in the sense that it would demonstrate—

Order. We are discussing a specific amendment, and the hon. Gentleman must be careful in what he says.

I do not want to stray from the subject of the debate, Madam Deputy Speaker, but in that particular case if the authorities were to say that the money ought to be given to the Electoral Commission—rather than back to the individual concerned as that would be inappropriate in the circumstances—I am sure my party would comply immediately. I might add that the parallels between that situation and what has happened in the cricket world are very striking.

Let me cover the final argument that the Government have used for not going ahead with the Hayden Phillips compromise: that there is no consensus in favour of it. That is simply a cop-out. What we should be doing is looking at where the public are at, not at where the individual parties are at, and we should be going to where the public want us to go. On the specific question of consensus, I would be surprised if there were consensus today about the unincorporated bodies issue—there is agreement between my party and the Labour party, but I would be surprised if the Conservative party were massively enthusiastic about the proposed regulation of unincorporated bodies—yet the Government have decided to move on that. My party’s view is that they should move on the reform of this whole area, not just on individual items of it.

I am glad that we have an opportunity to discuss the crucial issue of the role, if any, of donation caps in a properly transparent system of party funding that commands the greatest degree of public acceptability. This issue was first considered at great length by the Committee on Standards in Public Life, which examined it in 1997, after the general election of that year; and in its landmark report of 1998, under its then chairman, Lord Neill, it set out its view of the case for and against donation caps, because—surprise, surprise!—the Liberal Democrats were at that time urging on the Neill committee donation caps of £50,000. At least on this occasion, therefore, the Liberal Democrats have the benefit of consistency on their side. That is an accusation that can rarely be made against them, but I do so today, although it also suggests that they might have been somewhat immune to experience in the meantime.

The Neill report placed the burden of its recommendations on the crucial issue of transparency. On that issue, the hon. Member for Cambridge (David Howarth) made a very bad point for himself, but a good point for the rest of us, when he referred—in rather delphic terms, but we might as well refer to it publicly—to the Ecclestone donation to the Labour party, which emerged, with a certain amount of excitement, in the autumn of 1997. That donation was made under the old regime—the untransparent regime—whereby donors were entitled to request confidentiality for their donation, and I recollect, although I am open to correction, that that is what happened. The profound change made by the Political Parties, Elections and Referendums Act 2000 was that that donation, which was well above the £5,000 limit, would have had to be on the record and be declared by the Labour party. People could then have made up their own minds about whether undue influence was being brought to bear. If the purpose of giving the money was, as it were, to purchase a policy, the donor might well have decided that, as there would be total transparency, it might not be such a good idea. I am pretty certain that none of the problems that arose would have arisen had the provisions of the 2000 Act been in force in 1997. Therefore, this is a point for those of us who believe above all in transparency, and in doing nothing that might undermine a transparent regime.

Neill considered the whole issue of transparency and donation caps. He was very clear about the need for transparency and the caps, which have broadly stood the test of time, notwithstanding the fact that we and the Opposition accept that the limits must be increased. The committee came down against a donation cap, however, and I ask the House to weigh its words with great care:

“The individual or company wanting to give might consider that the cap infringed a basic right and there would be a strong temptation to seek to evade the limit, perhaps by spreading resources amongst friends and relations or by setting up subsidiary companies in order to legitimise any donation by sub-dividing it. There would be no easy way to detect such a stratagem, nor to enforce the cap. In our view, the panoply of rules and bureaucracy which we believe would be required to enforce such a system would not be justified by the purpose of the cap”.

I intervened on the hon. Member for Cambridge (David Howarth) precisely because his new clause would create such diffusion and lack of clarity about who had given a donation that, far from public confidence being improved, public cynicism would be increased.

I agree with that, and there is a nice paradox, which I am sure political scientists will exercise themselves in exploring in years to come: the more, quite properly, the public know about our activities, the less they appear to like them, even if they are entirely legitimate and above board. I think that Members will be aware of the very nice passage in Roy Jenkins’s biography of Churchill, in which he records all the money Winston Churchill hoovered up from various nefarious sources, and suggests, with good evidence, that Churchill’s career would never have got to the starting line had the degree of undue influence to which he was subject, and the extent of the donations that would now be regarded as wholly unacceptable, come out publicly. My right hon. Friend is absolutely right in what she says. There was a logical flaw in what the hon. Member for Cambridge was arguing: there is a balance to be achieved between transparency and complexity and artificiality, and the more there is the

“panoply of rules and bureaucracy”

to which the Neill committee referred, the less likely there is to be true transparency, and the more likely there is simply to be avoidance.

I am very disappointed by the position that the Lord Chancellor is now adopting, because the position that he and the then general secretary of the Labour party took in Sir Hayden Phillips’ committee, on which I also served, seemed to accept the broad consensus on the need for caps on donations and on expenditure, on a recognition of the difference between affiliation fees and donations outside those fees on the part of trade unions, and on some of the abuses among what I accept is a small number of unions. They were affiliating more members than they had and were paying over a greater amount than they were collecting in affiliation fees, and that needed to be addressed. I am sad that the Lord Chancellor seems to be resiling from that broad consensus that we reached, albeit that the Conservatives, for reasons of their own, walked out at a later stage.

The hon. Gentleman was a very participative member of the Hayden Phillips working party over many months. I did, indeed, on behalf of my party—I do not apologise for this—accept a number of compromises for the greater good. However, I have always made it clear that my starting point—I do not think that there is any dubiety about this—was that, in principle, I am not in favour of donation caps.

I shall deal with the hon. Member for Cambridge’s dismissal of the idea of seeking a consensus between the parties—such a consensus is more essential in the area of party funding than in almost any other area. If there is no consensus, those who happen to be in the majority end up using their majority for partisan advantage, and that is completely antithetical to the idea of democracy. As both the hon. Member for Hornchurch (James Brokenshire) and I have mentioned, this idea of a donation cap was reconsidered when the Select Committee on Constitutional Affairs considered party funding in the 2006-07 Session. I was struck by the hon. Member for Cambridge’s amnesia about what had happened in that Committee. I was not a member of it then and I am not now, but I do remember what it said—it made it clear that it was proposing a donation cap and state funding as part of a “package”. Indeed, that was exactly how Hayden Phillips read those proposals, because he was considering the matter in parallel to the Constitutional Affairs Committee and, in a sense, took as his starting point for his proposals what was in its report, to which the hon. Member for Cambridge signed up.

Before the Secretary of State leaves that report, I just wish to understand why the Government’s response to the Constitutional Affairs Committee report stated:

“At present, all three main parties in the UK are agreed in principle to some form of donation limit.”

He seemed to suggest that he was not in favour of that in principle and was, therefore, in some way, demurring. It would be helpful to understand why that statement was made in those terms.

As I say, my starting point has always been the position that was taken by Neill and by my party, and by the Conservative party, its Front-Bench spokesman, the shadow Home Secretary and a panoply of Conservative Uncle Tom Cobleighs, who all said that they are not so keen on donation limits, for perfectly sound reasons. What we were involved with at the same time as Hayden Phillips—the hon. Member for Hornchurch will recall that the interim report was published in October 2006—was seeking a compromise with the other parties. We were not so keen on donation limits, but we were keen on spending limits—I have always been keen on those—and other parties were keen on other elements of this, and we came together to agree what I thought was a comprehensive package. Inevitably, in a negotiation, for a greater good, both for oneself and the purpose being served by the negotiation, one gets some things one wants and one has to accept some things one does not want—there has never been any dubiety about that.

When Hayden Phillips reported on 15 March 2007, he said:

“In this chapter”—

chapter 5—

“I recommend that the time is now right to introduce a higher level of public funding for political parties.”

He set out a number of reasons, all of which the hon. Member for Cambridge appeared to dismiss. Sir Hayden stated:

“First, other measures proposed in this report would impose significant restrictions on the parties’ freedom to raise their own funds, and new obligations in terms of compliance and reporting. These measures are in the public interest, and it is fair and reasonable to use public funds to help offset their financial impact.

Second, our political parties all face long-term financial instability because of the rising costs of their business, and it is this which has prompted them to follow the trend among large non-profit making groups to pursue large donations from wealthy individuals and organisations. Financial instability is the enemy of healthy politics, and an injection of public funds is merited if we are to maintain public confidence in our democracy.

Third, there is a widely discussed and lamented decline in democratic engagement in this country, manifested in falling election turnouts and falling party membership rolls. Properly targeted, public funding can make some contribution to reinvigorating the parties’ drive to involve and engage more members of the public in political debate.”

As I said to the hon. Member for Hornchurch, everybody accepted that in the spirit of compromise.

Hayden Phillips reflected those principles in his proposals at the end of July. It is simply inaccurate for the hon. Member for Cambridge to assert, as he did in his speech, that Hayden Phillips did not make specific proposals on party funding, because he did so in his report in March and again in the draft all-party agreement. The Liberal Democrats and the Labour party had initialled it but, for reasons that we need not go into at length, the Conservative party was unable to support it.

The agreement contained a great chunk on public funding with two linked schemes, stating:

“Two new schemes for public funding of political parties will be introduced”.

It did not say “could” be introduced; it is explicit on the point, which is repeated in the annex to the White Paper on party funding that I published last June as a precursor to this Bill. The truth is that unless one is willing to accept gratuitously a major shortfall in party funding, one cannot—[Interruption.] The extent to which this would fall on one party as opposed to another depends on where one sets the limit, but it would never have an equal effect on all three parties, or even on the two main parties; at some levels it would hurt the Conservative party more than the Labour party and at other levels the opposite would be the case. I admire the way in which the hon. Member for Cambridge, in a spirit of alleged liberal non-partisanship, says that the Liberal Democrats will not be affected and that the fact that the Conservatives and Labour party will between them lose about £5 million or £6 million is neither here or there, because they would just cut their spending, thank you very much. That is not the way to achieve a consensus.

Perhaps the Secretary of State has hit the nail on the head. Does he agree that the problem we face in this debate is that the outside world probably thinks that each party’s position depends on its own self-interest and that the bigger picture is lost? I believe that anybody, including trade unions, should be able to give whatever money they have freely. If trade unions wish to give their money, they should be free to do so—it is their decision. Does he agree that this subject often gets bogged down in the fact that most people think that each party is simply arguing a point on the basis of its own self-interest?

I agree with that. May I say something else on the issue of donation limits? I shall do so briefly, as I know other hon. Members wish to contribute. There is no doubt that the proposals from the Constitutional Affairs Committee, which were agreed by all sides, were predicated on the basis of state funding, as were the Hayden Phillips proposals and those that were discussed in the Hayden Phillips all-party talks. A donation limit would make any sense—and could gain my support and the Government’s, for similar reasons to those that I believe have been expressed on many occasions by the hon. Member for Huntingdon (Mr. Djanogly)—only if it were part of a comprehensive package.

That then prompts the question about whether the time is now ripe for state funding. It would have been difficult to introduce in 2007, but in the midst of the worst recession we have seen since the war and when there is great demand on public finances and will be for some years to come, we would need to take leave of our senses to propose that hard-earned taxpayers’ money should be used to support our political parties. If we wanted to make one decision that would ensure that the esteem in which we are held—which is not that high anyway—rocketed through the floor, it would be to introduce extensive state funding.

In Committee and earlier, I have been trying to follow the impact of the Bill on Northern Ireland political parties. In their terms, £50,000 would be a very large amount. For example, is Sinn Fein required under existing legislation to have a separate cocoa tin for their moneys for Northern Ireland? If not, and it is a national party in terms of the whole of Ireland and can raise money in the Republic of Ireland—not to mention the US—how can we measure the cut-off point? If the national organisation in Dublin donates money to the north, is that seen as money from a donor? It is important that we know how all that will work, because Northern Ireland is a critical area for elections.

My hon. Friend raises a further issue of complexity, and we would have to think very hard before we went down that route. If he will forgive me, I will try to provide him with a more detailed answer should I catch your eye, Mr. Deputy Speaker, later to sum up the debate.

One last point that I wish to make about state funding and donation caps is something of a gypsy’s warning. The Constitutional Affairs Committee waxed eloquent about the Canadian example, and how Prime Minister Chrétien had introduced a system of state funding with low spending and donation caps. This was the future, it said, and so it was—for a period. However, if political parties were to be significantly funded by the state, we should all remember the temptation for a Government who might be under pressure in terms of public finance to seek to use the money going to their opponents to political advantage.

Last year in Canada, notwithstanding the clear all-party agreement about state funding for political parties, Stephen Harper, the Prime Minister, decided—as part of an austerity package and without consulting the other parties—to propose that the state funding should be significantly cut. He was entitled to do that, but it led to paralysis in the Canadian Parliament. Had he not then prorogued Parliament peremptorily, it would have led to a motion of no confidence in him. It led to Parliament being suspended for many weeks, and he has now had to withdraw the proposal. That vulnerability to partisan advantage shows that not much good may flow from extensive state funding.

That was an interesting lesson from Canada, but the Secretary of State suggests that we should make no change in this critical and crucial part of this Bill, and continue with business as usual. The public will find that staggering, because it means that people will still be able to buy political influence by donating to political parties. It will be back to cash for honours and people giving £1 million to the Labour party so that they end up in the other place.

First, the hon. Gentleman knows very well that there is not a shred of evidence in those allegations. Secondly, to the extent that the public know about donations, they do so because of legislation that we introduced. Unless there were good reasons for introducing donation caps, they would lead to less transparency, not more. That is not just my argument, or the Conservative party’s. It was made, independently, by the Neill committee. Thirdly, if the hon. Gentleman wants donation caps, he will have to explain to Scottish electors why their taxes should be increased to pay for political parties. Finally, it is an insult to donors small and large to all political parties to suggest, imply or insinuate that the overwhelming majority do it to curry favour or to buy advantage. They do not. They do it because—and this may be a surprise to the SNP, which has only one, negative policy—they believe in the values of the party.

New clause 1, tabled by the hon. Member for Cambridge (David Howarth), proposes a cap on donations set at £50,000, which would be an annual limit. It would insert a new subsection 1A into section 54 of PPERA requiring that parties do not accept donations from a permissible donor if that donor had already donated £50,000 in the same calendar year.

Taken by itself, the new clause looks fairly straightforward, so I agree with the hon. Member for Cambridge that taking this new clause on its own is somewhat misleading, because it is of course a very complicated issue, as the Secretary of State set out. It is the unfortunate backdrop to the debate on new clause 1 and other new clauses tabled by the Liberal Democrats that secrecy and suspicion have long tainted the donation regime. However, as the Secretary of State pointed out, most people who make donations are honest and want to contribute to the societies in which they live through their donations to political parties.

As the Secretary of State said, the process started with Lord Neill’s Committee on Standards in Public Life, and the subsequent inquiry, “The Funding of Political Parties in the United Kingdom”. The Neill report was published in October 1998 and suggested, among other things, greater transparency in donations. While the Committee’s report is relevant to the new clause, it did also pave the way for further work in the area of electoral reform, and the gauntlet was recently taken up by Sir Hayden Phillips. His report, published in March 2007, made several suggestions intended to breathe life into the democratic system and revive political engagement. Indeed, by his calculations, party membership had sunk from one in every 11 citizens 50 years ago to about one in 88 in 2007. That is a grave statistic that we should all think long and hard about.

Whatever Hayden Phillips thought about individual caps—and I heard a difference of opinion between the Secretary of State and the hon. Gentleman—we can accept for the purposes of this debate that his suggestions are, as a package, behind the new clause and others that the Liberal Democrats have tabled. However, we are concerned about the timing and whether this Bill is the correct forum in which to discuss such wide-scale reforms that have, for better or worse, been discounted so far.

The hon. Gentleman asked about the timing of the proposal. If not now, when? The Bill is about party political funding and comes after the Hayden Phillips talks. I cannot think of a better time to discuss caps.

The Hayden Phillips talks took place and, for one reason or another, were not completed. As far as we are concerned, they are ongoing business, but for the purposes of the Bill, they are not on the table. We can debate for ever and a day why the Hayden Phillips process failed. I hope my hon. Friend the Member for Chichester (Mr. Tyrie), who was present, will give us the benefit of his experience. The harsh reality, which the Liberal Democrats seem to fail to recognise, is that what is on the table today is a Bill that, I agree, is somewhat lacklustre. The debate surrounding individual and collective caps is therefore a debate for another day.

In the report Hayden Phillips was keen to emphasise that a common approach cannot be delivered in the short term, and that consensus must be reached in finding a long-term solution. The Bill is designed to ensure that that Electoral Commission has adequate powers to deal with the provisions of PPERA. It introduces some transparency through reporting requirements and adjustments to thresholds. Yes, the Bill is a tinkering exercise rather than an overhaul, but the Conservative party will remain willing to seek that overhaul, even if that means moving back to the Hayden Phillips process or, as seems probable, beyond it.

Let us be clear that when we have that further debate we shall require a thorough review of the relationship between the trade unions and the Labour party. If we were to review the need for caps, we maintain that any legislation must address the whole spectrum of donations. We need to ensure that thorough coverage of all equivalent sources of funding is guaranteed. That, of course, includes donations from trade unions.

We understand and agree that limits on funding and spending should be up for debate, but implementing them in the Bill and allowing the union funding of Labour to remain unreformed—including, as the hon. Member for Cambridge said, the use of opt-out rather than opt-in to political funds and the inability to choose the party destination of political funds—would be very damaging.

There is a self-perpetuating cycle, and if we are to address comprehensively the issue of party funding, we need to deal with it in the same way as the Companies Act 2006 rightly provided for companies to have member votes to enable the company to give stated amounts to stated recipients. If any Labour Member thinks that we conceded that only to allow unions to vote on having a political fund every 10 years, they should think again. The hon. Member for Cambridge will not have our support for his amendment, although we recognise his position as a matter to be included in the wider debate on party funding that will take place in due course.

This has been a very interesting debate. The proceedings of the Neill committee have been set out in some detail, so I shall not repeat them.

The intentions of new clause 1 go to the heart of what we are trying to achieve in any reform of party funding, which is to restore trust in the source of donations. I would like to support new clause 1 in principle, as my Front-Bench team probably would, but not without qualification, as the hon. Member for Cambridge (David Howarth) agreed when he referred to a number of other clauses that he had tabled and other points that were not in those clauses. That is why he wanted to speak about trade union affiliation fees, state funding and other issues.

This is an area that we must clean up. The means by which parties fund themselves have contributed substantially to the loss of trust in them on the part of the electorate. The plain fact is that people believe that parties can be bought, and they may be right. Access, influence and even changes to legislation all appear to have been tradable over the past decade, not to mention the honours system. Those seem to have been traded for party cash by many parties for a long time, Lloyd George being the most salient example.

Allegations about my own party’s activities and the relationship between the award of honours and senior corporate directorships at times in the 1980s did not always look 16 annas to the rupee to me. Then we have had Labour’s recent crop of life peers, with a fair sprinkling of big donors among them. The big donor culture has created a perception of corruption and we must do something about it. No debate on the subject should fail to mention Michael Brown’s millions donated to the Liberal party—he is now in jail—and the trade unions’ donations, with which they appear to have bought considerable influence, in the Warwick agreement and in other ways.

The clause would end the big donor culture at a stroke. Some may argue for a cap of less than £50,000. I notice that the Liberal Democrats started to do that today. That, as the Lord Chancellor pointed out, is a flat contradiction of the Liberal party policy that has been around for several years.

The hon. Gentleman’s memory deserts him. He must remember that during the talks I made it clear that I would have preferred a lower limit, but that I thought the £50,000 to which his party had agreed was a workable compromise. He must remember that.

I am on the record as saying many times that I would have preferred a lower limit, but my party’s position is £50,000, and the hon. Gentleman’s party’s position was £50,000 at the time of the talks, in published documents. It seems now that that has gone, and the Liberal party has another public position.

It is a sad irony that while the issue has led to the public perception of corruption in politics to a higher level than I can remember, that has taken place at a time when politics has probably been less corrupt than in any previous era. One has only to cast one’s mind back to Gladstone and the trading of consols in 1870s, his trading of Suez canal stock, and Lloyd George and the honours sales, which I have mentioned before. I am sorry that I keep going on about the Liberals. No doubt other parties were at it as well.

If we agree to new clause 1, we are still left with a crucial question: can parties fund themselves on so much less? The hon. Member for Cambridge started to discuss that. Could Labour do without trade unions, the Liberal party without its Browns or the Conservatives without their big donors? I think so, provided that several conditions are fulfilled. One is that there should be an overall spending cap nationally at a lower level than we have at present for general elections. The general election cap is £20 million and should be reduced to £15 million. That is Conservative party policy. I do not know whether it is Labour party policy; I could not tell after what I heard today. That is a cut of a third in real terms, which is a reasonable step.

Secondly, if we go ahead with the proposals, we must have some state funding, but I agree with those who said today that at a time of financial stringency, the public opposition to more state funding would be enormous, and my sympathies would be with the public on that. We would do well to recall that existing levels of state funding for political parties are already very high. Roughly half of our party politics is funded by the state directly or indirectly—a much higher figure than is commonly supposed.

If there were more state funding along the lines set out in new clause 1, however, it would have to be based on a principle that the electorate could accept. It would have to be designed to encourage very local campaigning and a regeneration of grass-roots politics, and that would mean tax relief or match funding. It would also mean that cash-per-vote schemes, such as the Liberals have supported and the Conservatives considered in the 2005 proposals, and which were published at that time, would not be serious runners again for some time. I was never enthusiastic about those schemes, and I do not support them now. However, I do support match funding.

For me, the most important thing is transparency rather than a cap. My hon. Friend said that some people give donations to political parties seeking influence or something else in return. That may be so, but he seems to be suggesting that political parties are incapable of taking people’s money without offering something in return. Surely the onus is on the political parties to take people’s money but make it clear that absolutely nothing will be given in return.

There are two problems with that. First, we do not need to look in a crystal ball. We can read the book: we can see that political parties—this Government and previous ones—do appear to have given things in return for money, and on a sizeable scale. Secondly, even if the problem is only one of perception, it will not go away, and we need to deal with it.

I want to allude to the Hayden Phillips negotiations, which centred on the treatment of affiliation fees. Throughout that period, the Conservative position was absolutely clear, as it still is. Special treatment of affiliation fees can be considered as part of the introduction of a £50,000 cap. I mean “special” treatment, because logically a £50,000 cap should be accompanied by a complete restriction, meaning that only direct payments by individuals should be permitted as a legitimate source of funding for political parties. Corporate donations and donations from institutions and intermediaries, including trade unions, in which the individual is subsumed, should in the long run be restricted—and brought to an end after an interval. That point was set out in the Conservative party’s proposals published in 2005.

Incidentally, this is also the view of many in the Labour party, although only a few are bold enough to speak up and say so. Matt Taylor, former adviser to Tony Blair, has set out in detail in print and in a number of speeches exactly the position that I have described. A good number of Blairites on the Government Benches have told me privately that they agree, although very few are prepared to put their heads above the parapet.

We are left with a crucial question. How could affiliation fees be allowed to cheat the logic of the £50,000 cap while upholding the principle that those donations are matters of individual choice? There are three requirements. First, there should be a genuine choice for an affiliated member. In the course of the Hayden Phillips investigations, we discovered that many affiliated members scarcely knew that they had made a donation to the Labour party. That, no doubt, accounts for the absurdity that, when polled, a majority of affiliated trade union members turn out to vote for political parties other than Labour. It beggars belief that they should want to donate to Labour while voting for the Scottish National party, the Liberal party or the Conservative party.

The second requirement must be that the choice should be extended to donations from other parties. Therefore the means by which the choice is presented to the affiliated member as he joins the trade union must enable him not only to choose not to give to one party, but to choose to give to another. The third requirement must be that the individual must periodically be given an opportunity to review his decision—in practice, that does not happen in many trade unions. That opportunity should be provided annually.

Before a decision is taken on whether to vote for the new clause, there is one large question to address. What would happen if the clause were introduced on to the statute book, but without any of the qualifying points that we, including the hon. Member for Cambridge, have made this afternoon? That question determines whether I would recommend to my party that it should support the clause. There would be several effects. The first would be that all parties were short of money. Does that matter? I have already discussed that question. Spending on party politics in this country is already high and it could probably be brought down. Billboards have been mentioned, and numerous other savings could be made with no material damage to the fabric of our party political system.

Incidentally, I did a comparison, taking into account per capita income, between the amount spent in the recent US presidential election and in this country’s last general election. To my surprise, I found that the numbers were broadly comparable—and without taking into account a costing of the party political broadcasts, which parties get free in this country but pay a fortune for in the United States. We already spend a lot of money on party politics in this country and I think that we could do the job with less. Of course, that is why we Conservatives support the reduction of the cap on general election spending from £20 million to £15 million.

New clause 1 would have a second big effect, which I would not find acceptable. The playing field would no longer be level; it would be fundamentally altered to the detriment of the Labour party. It would be grossly unfair to disadvantage a party without giving it any time to adjust, however reasonable the principles on which that adjustment was taking place. What kind of adjustment would it be? Well, Labour Members could start to devote some time to thinking about how to make use of their party’s huge databases of affiliated members and find ways of turning some of them into genuine individual Labour party members like members of other parties, instead of just sitting there moaning about how this is an assault on the fabric of their constitution, which is, in legal terms, complete nonsense. However, I recognise that that process would take time—perhaps a long time—and that a long transitional period would therefore be required.

Perhaps amendments might be tabled in another place to allow the change to take place in the more moderate way that the hon. Gentleman is talking about, but would not passing this new clause be the best way to concentrate minds in this House? Is not the problem that the minds of those on the Labour and Conservative Front Benches do not wish to be concentrated?

I am happy to support motions to concentrate minds, but I get wary about supporting fundamental new clauses when they are intended to act as itching powder. However, I understand the sentiment behind the hon. Gentleman’s intervention, and I hope that we will make some progress on this issue before long.

For the avoidance of doubt, let me conclude my point about Labour and affiliation fees. It should not be in anyone’s interests—indeed, it would not be in the Conservative party’s interests—to bankrupt the Labour party, and I am sure that that is not what the hon. Member for Cambridge would want to achieve. In the long run, however, cash raised locally from local party activism must be allowed to influence outcomes. The idea that there should always be a level playing field with the same amount spent in every area must be wrong. If we are to encourage and revive genuine local party grass-roots activism in British politics, it must be right that different parts of the country, and different constituencies, should have widely different levels of spending. That is why, quite apart from the administrative impossibility, local caps on spending are a non-starter. A global cap of some sort is the way forward. I might initially have been prepared to recommend something that would be unfair on Labour if I thought that Labour Members were going to start responding in a positive way, but I see absolutely no sign of that.

We have to be cautious, but in doing so we must keep thinking about what measures are required that will command public confidence. Most of us agree—I sometimes wondered during the Lord Chancellor’s speech, however—that we do not have that confidence now. The Conservatives set out three principles that should govern how to establish such confidence—[Interruption.] I will not go through them in detail, in response to the comment by my hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd), but if he reads page 3 of the proposals, he will see that a cap is an essential element.

When the Conservatives get back into office, we will do absolutely everything to seek consensus on this issue, with the objective of restoring trust. Equally, however, we cannot leave this matter at the mercy of an indefinite veto on any meaningful change by any one party. That is why, while not supporting new clause 1, I am confident that my party in government will look to a donations cap as the way forward. As this debate progresses in the country, and as the degeneration of respect for parties proceeds—as I predict that it will unless we take action—the pressure will reach a point whereby even the Labour party will be prepared to come seriously to the negotiating table to discuss a change in the relationship between it and the trade unions with regard to affiliation fees.

I am only surprised that the proposed cap in the new clause is so large. If I look back over what has happened to politics in my time in this House, certainly over the past 15 years, I see, election by election, a decline in voters’ attention to a fundamental necessity in their lives—the political process. If donations can be allowed to be so large, that makes things unequal because, naturally and understandably, it is an obvious observation that political parties become very interested in the large donor and let go of the little donor. As a consequence of that detachment from political processes over the years, revenues at local level have fallen and political parties are contracting. In many constituencies, parties are shadow organisations with very few members exercising, for instance, choice over who should be the candidate. Big donations have enabled the centralisation of political choices through party headquarters. The parties in London seek to garner all this money, so they run campaigns aggrandising the centre, but the vitality of the political history of this country comes from the grass-roots. All the great movements that have swept this country, including the extension of suffrage, were intensely public, popular movements supported by the many, not the few.

I am grateful for the support of the hon. Member for Aldridge-Brownhills (Mr. Shepherd). The sentiment behind his speech is precisely that behind the new clause, which is that we have to do something to reduce the gap between us as representatives and the people whom we represent. At the moment, one of the things coming between us and those people is big money. The process that the hon. Gentleman described, where parties turn their attention to those who give big donations, and therefore away from the ordinary people of the electorate, is profoundly important and profoundly dangerous.

I am also grateful for the rather more qualified support of the hon. Member for Chichester (Mr. Tyrie), but one of the things that he said about the new clause is vital— it would, at a stroke as he put it, get rid of the big donor culture. That is precisely its intention. Conservative Members argued against the new clause on the ground that the amount of £50,000 is too large, and I agree. It is too large, and I would like to see the amount reduced, but we have to start somewhere and so we have started with a proposal to which the Conservatives, as a party, agreed in principle, as part of the Hayden Phillips process. I urge Conservative Back Benchers to think about what they will be doing if they fail to support the new clause.

It was profoundly disappointing to hear the Conservative Front-Bench spokesmen simply say that the time is not ripe—according to them, the time never seems to be ripe. This Bill is about political parties and the funding of those parties, and if now—before the next general election—is not the right time to discuss the issue, and to pass such safeguards, when is?

As for the Government, I was even more disappointed with what the Secretary of State had to say. The position that he took rows back immensely from where we all imagined the Labour party to be. The idea that transparency is all that we need in the regulation of donations is extraordinary, and it does not meet the obvious objection that if we know the system is corrupt, it is still corrupt. If people can see that the system is corrupt, that makes it worse. We cannot move on from where we are simply through measures of transparency; we must set a cap on the influence that individuals have on politics through money.

The final thing I say to the Government is simply this: if they refuse to move on the issue of donation caps now, and if they ignore the view in society at large and in other parts of the political system that this is something that must be done, they will put their own party at risk because when reform does come—as it must—it will come at a time far less favourable to it. The relationship between the Labour party and the trade unions, which we discussed, it is at the heart of that very point. I and my party have offered a very moderate solution to that problem—one with which the Labour party could easily live, and one which the public would recognise as fair. But if the Labour party will not move on the principle, it might find itself, after the next election, in political circumstances where this House’s solution is profoundly less favourable to it—a solution that will, in the end, put the very existence of the Labour party on the line.

I warn the leaders of the Labour party to bear in mind the consequences of how they are telling their Members to vote tonight. With that, I intend to press the motion to a Division.

Question put, That the clause be read a Second time.

I beg to move, That the clause be read a Second time.

With this it will be convenient to discuss Government new clause 22—Schemes under section [Schemes for provision of data to registration officers]: proposals, consultation and evaluation.

These new clauses form an important part of our plans to transform electoral administration. It is significant and complex, so I hope the House will bear with me as I set out first the context of the new clauses, which I hope will assist the House in forming a judgment, before turning to deal with the details. In Committee, we discussed—and, it is fair to say, we all agreed—that democracy is undermined when significant numbers of people are not able to participate in elections because they are not registered to do so. Registration is the source from which democratic participation flows. Those who are not registered are denied that participation, so we must all be concerned that it has been estimated that more than 3 million eligible people are not able to vote in this country because they are not registered.

That is not acceptable—I hope we can all agree on that—and I hope we can agree that particular effort needs to be directed at registering voters in those groups who appear to be most at risk of not being registered. I hope that we can also all agree that the steps taken to tackle that problem must be on the basis of a level playing field for all democratic political parties. Anything that undermines that principle is partisan and risks illegitimacy. We must constantly strive to ensure that the register is as comprehensive as is reasonably possible, on the basis of a level playing field. That is one fundamental principle of electoral registration. The other such fundamental principle is that the register must be as accurate as possible.

I am going to assume that if I say anything about these fundamental principles with which Opposition Members disagree, they will intervene to tell me. Otherwise, I shall assume that they agree with the fundamental principles that I am setting out. Indeed, I would be surprised if they did not.

The only fundamental principles that I would raise at this point are those of data protection. Will the Minister explain why new clause 21 seems to allow an order to be made that completely ignores those principles?

Of course data protection is a fundamental principle as well. It does not apply specifically to electoral registration in general in the terms that I am discussing right now, but I have registered the hon. Gentleman’s concerns and I will come to them in due course, when I deal with the detail of the new clauses. They are important concerns—I understand that—and I am happy to address them.

Does the Minister agree that another fundamental principle is that the registration should be accurate, bearing it in mind that this is a gateway to, for example, absent voting? These things must be done in such a way as to provide good identifiers that stand in the way of fraud.

I absolutely agree with the right hon. and learned Gentleman, and that is precisely what I said. It is one of the two fundamental principles of electoral registration that the register should be as accurate as is reasonably possible. Electoral registration should be comprehensive and accurate—those are the principles.

On that basis, therefore, the Government are introducing measures that will transform the system of electoral registration. We agree with those who have argued that a system of individual registration in Great Britain would represent a significant step forward in improving the integrity of the electoral register. We also believe that there are other principled, important arguments in favour of individual registration, but our concern has been that, in pursuing the realisation of one fundamental principle of electoral registration, we should not jeopardise the achievement of the other. The simple fact that many individuals, currently registered under the system of household registration, would under a system of individual registration be required to provide personal information for the first time in order to register is very likely to deter some—perhaps many—from registering unless we take important remedial action.

The Northern Ireland experience is often cited in debates of this nature, and it is right that we should learn the lessons, both positive and negative, from that experience. At least some of the drop in the numbers registered in Northern Ireland in 2002 was due to the removal of the so-called carry forward, but as the Electoral Commission noted in its report on the implementation of individual registration in Northern Ireland:

“Individual Registration tended to have an adverse impact on disadvantaged, marginalised and hard to reach groups. Young people and students, people with learning difficulties and other forms of disability and those living in areas of high social deprivation were less likely to be registered and encountered specific problems with the new registration process.”

Does the report that my right hon. Friend is quoting from make any reference to illiteracy? What is the effect of low functional literacy on registration rates?

I am grateful to my hon. Friend for making that point. The passage from which I am quoting does not make any specific reference to illiteracy, but it is another problem, a barrier and something that we must address if we are to fulfil and deliver on both the fundamental principles that I have suggested.

The Electoral Commission report continues:

“While these findings relate directly to Northern Ireland, they are not unique and reflect the wider picture across the UK. They present a major challenge to all those concerned with widening participation in electoral and democratic processes.”

We believe that the way forward is to combine the implementation of individual registration—on a careful but fixed timetable—with significant new measures to increase registration, so that we do not jeopardise the reach of the register in seeking properly to improve its integrity.

Today, I am announcing the historic steps that we are taking to entrench those two fundamental principles of electoral registration, which underpin our democracy. The Government have already been taking significant steps to increase registration. The Electoral Administration Act 2006 placed a statutory duty on electoral registration officers to take all necessary steps to maintain the electoral register, including sending the annual canvass form more than once, making house-to-house visits and inspecting records that electoral registration officers are permitted to inspect. Much of that is common sense, and many electoral registration officers are doing excellent work in maintaining and expanding their registers.

I echo my right hon. Friend’s comment that many electoral registration officers are doing an excellent job, but the reality nationwide is that only 91 per cent. of those eligible to be registered are registered. Must not we prioritise getting a comprehensive register before we do anything else?

My hon. Friend is quite right. Those two things have to go in lockstep together, but 91 per cent. is not acceptable. As I will point out in a few moments, any of us can be satisfied only when we can be absolutely confident that the register is at 100 per cent. of those who are eligible to vote.

As I say, many electoral registration officers are doing an excellent job. Some, however, need to raise their game. The new duty has required them all to raise their game. Since its introduction for the 2006 annual canvass, registration rates have increased year on year. In the past three years, the registration figures for parliamentary elections have increased by 371,000 in 2006; 307,669 in 2007; and 111,595 in 2008. There are now 45,194,449 parliamentary electors registered in the UK.

Similarly, the registration figures for local government elections also increased by 513,054 in 2006; 463,000 in 2007; and 227,374 in 2008. There are now 46,147,877 local government electors registered in the UK. Those increases are a great achievement and they show what can be done, but that is a beginning, not the end. That end will come only when 100 per cent. of those eligible to vote are so registered to vote.

Estimates from 2005 suggest, as my hon. Friend the Member for Edmonton (Mr. Love) has just said, that only about 91 per cent. are so registered, so we have a considerable way to go.

I am sure that the House will have registered the fact that the figures that I have been referring to are national figures, and there are significant differences in different parts of the country—again, as my hon. Friend has just said. Some parts of the country having fewer of their eligible voters registered to vote than others corrodes democracy in this country. We must do everything possible to tackle that problem.

Going forward, section 67 of the 2006 Act also empowered the Electoral Commission to set and monitor performance standards for electoral services. Electoral registration officers in Great Britain have recently self-assessed their performance against 12 individual performance standards, and the Electoral Commission will publish the results of that this month. After that, local authorities will be required to report annually on their performance. The commission will also shortly publish data on the financial resources devoted to registration by local authorities.

The performance standards framework will be vital in driving up the numbers registered to vote. The standards will give the public much greater understanding of the effort being put into registering voters—good and bad, excellent and indifferent. Practice in individual areas throughout the country will quickly become apparent.

Does my right hon. Friend accept that a great difficulty here is whether the council giving the funds for electoral registration prioritises that as an activity? In such circumstances, would it not be better for us to ring-fence funding for electoral registration to ensure that it is done properly?

I am grateful to my hon. Friend for that intervention and I am aware of that strongly held point of view. There are measures that I want to announce today; there are further measures that I will announce shortly, just before the summer recess. I can absolutely assure him that everything possible that we can do, we will do in this respect.

When I have tabled parliamentary questions asking about the amount per elector in each local authority area, I have been told that the information is not collated in England, but it has been collated in Wales. The point made earlier by my hon. Friend the Member for Edmonton (Mr. Love) about the importance of ring-fenced funding is crucial. In Wales it was found—lo and behold—that the authorities that spent more money on electoral registration had bigger, better registers, while those that spent less had worse registers. Funding is key. If the Ministry of Justice sends the money to local authorities for that purpose, it must be spent for that purpose.

As I have said, what I am announcing today is only the start of a process to increase the numbers on the register. As always, we will be driven by evidence, and I assure my hon. Friend that we will take every bit of it into account.

We believe that the performance standards will help to increase registration and participation rates across the country. It is important for that to happen, because it is crucial for every part of the country to be able to expect the highest possible levels of performance from the electoral registration officers. Disadvantage should not exist in electoral registration any more than it should in any other area of public life.

I fully support the sentiments that the Minister is expressing, but there is a problem with uniform national standards in the context of electoral registration. It has nothing to do with deprivation; it simply has to do with the demographic circumstances of different authorities. Cambridge has a massive turnover of population—not just the student population—and to hold such areas to the same standards as even neighbouring authorities such as South Cambridgeshire, which has a very stable population, would not be fair on the authorities in the city of Cambridge.

That is an important point. There are significant variations throughout the country, and some areas find it much more difficult than others to achieve satisfactory levels of registration. Places such as Cambridge may be relatively advantaged socially and economically, but may have other problems because of the massive churn of the population. Other areas may have difficulties caused by large numbers of people living in houses of multiple occupation. Every area has specific problems. What we cannot accept is that any of those problems constitute excuses for anything other than the utmost effort to ensure that the register is as full as possible.

We have taken important steps and they are beginning to pay dividends, but we can do more. We propose to take three further steps. Electoral registration officers in areas where there is one tier of local government can already gain access to data held by education departments and social services which help them to maintain and enhance their registers, but that is not the case in two-tier areas. We therefore intend to introduce secondary legislation under powers in the 2006 Act to enable EROs in areas with two tiers of local government to access data held by the higher tier, to help them to target individuals who are not registered and check the accuracy of their registers. That will help them to identify, for example, young people attaining the age at which they can vote and persons in care homes, all of whom have a right to vote but many of whom may not be registered.

We also want to ensure that electoral registration officers are fully aware of all the steps that they can take to improve the register. We intend to make clear in legislation that the section 9 duty imposed by the 2006 Act applies throughout the year, not just during the annual canvass period. We know that some officers conduct mini-canvasses outside the main annual canvass period to increase registration rates in areas where they are low. We want all EROs to undertake similar activities where necessary, and to do so throughout the year. That will challenge them, but it will assist them as well. It will challenge them to do more, but we believe that it will also assist them by clarifying what is expected of them.

As my right hon. Friend says, EROs currently have permission to consult databases in different local authority departments. That entitlement is taken up with gusto by some, and is not taken up at all by others. Given that any new powers that my right hon. Friend gives may not be taken up, what measures can he and his Department take to ensure that what powers are given are used?

When we give powers we naturally expect them to be used, and we will monitor the position. That is the point of the performance standards. All of us—not just Government—will be able to see which EROs are doing well and which are not, in proportion to the funding that they receive. We will expect all of them to measure up to the standards of the best, and to strive to meet the 100 per cent. target. We may not achieve that, but it must always be a pressing obligation for us all. I shall say more about that in a moment. If my hon. Friend will bear with me, he will hear something that I hope will afford him some comfort.

We need to do more, which is why we tabled the data-matching clauses. In some areas, particularly those where the population is stable—not areas such as Cambridge—registration rates may have hit their peak, but in many other areas ensuring that people registered has always been, and is still proving to be, a significant challenge for electoral registration officers. We want to do more to assist officers in such circumstances, while not necessarily forcing them to act. The piloting of data-matching schemes that will allow them to receive relevant and restricted data from public authorities will allow us to test, in a controlled way, new tools to help them to maintain their registers.

The provision will allow the Secretary of State to make an order allowing a public authority, or a person appointed to discharge its functions, to supply an ERO with specified data at specified times for the sole purpose of electoral registration. The officer would use the data for the purpose of identifying persons who were entitled to be on the electoral register but were not currently registered, or inaccuracies in the register meaning that the officer would need to conduct a review of a registration. We have already discussed our proposals in outline with a number of public authorities, such as Her Majesty’s Revenue and Customs and the Department for Work and Pensions, and they are content in principle with the possibility of sharing data to assist improvement of the electoral register. We are discussing with them in greater detail the practicalities of any such schemes.

Since 25 November, many people renewing visas have been given identity cards containing their names and addresses. Some of those people are eligible to vote in this country. May I take it that they will be automatically included in the relevant electoral register?

No, not at present. We are proceeding carefully, in ways that I shall continue to outline. The question of the identifier is interesting, however, and I shall touch on it briefly in a few moments.

I support the aim of new clause 21. However, subsection (7) deals with the disclosure of information to third parties by a registration officer, who, according to paragraph (b), can pass on information

“for the purposes of any criminal or civil proceedings”.

In what circumstances would the officer provide such information pursuant to civil proceedings, what civil proceedings has the Minister in mind, and what protections would be provided?

If the hon. Gentleman will forgive me, I will outline the scheme and then describe the protections involved. Obviously they are important.

The Minister referred to the public bodies, or Government Departments, that had been consulted, and the hon. Member for Castle Point (Bob Spink) asked about the specificity, or the particular consequence, of the order. Has the Minister consulted the Information Commissioner about the new clause, and if so, what did the commissioner say?

As I have just said, I will be dealing with the subject of the protections, but the direct answer to the hon. Gentleman’s question is yes. Although I cannot speak for the Information Commissioner, he will forgive me for answering that question. His response was that he was content with the provisions, and I think that when I explain them, the hon. Gentleman will see why.

We have been very careful to hedge the provisions around with a lot of protections. As a lawyer, the hon. Gentleman will have noticed that I said specifically that bodies will be able to supply an electoral registration officer with specified data at specified times for the sole purpose of electoral registration. He will thus immediately have realised that makes the provisions consistent with data protection principles. He is looking at the new clause, but I can assure him that it was drafted on that basis.

rose—

If the intervention is about data protection principles, perhaps the hon. Gentleman will be a little patient as I shall come to those when I have finished outlining the scheme. Everyone will then be a little wiser—although perhaps only a little.

As I have said, the data-matching schemes will operate on a pilot basis. The local authorities participating will be selected through an open and transparent process involving the Electoral Commission as well as the Ministry of Justice, and there will be a set of criteria for the electoral registration officers who participate. We intend to publish details of the process before the summer recess. I am keen to ensure that Members on both sides of the House have the opportunity to contribute to the design of the process, and I will consult the parties before that point. In doing so, as I hope it is recognised we have tried to do throughout the passage of the Bill, we shall seek consensus.

The clauses require the Electoral Commission to conduct a review of each pilot and publish a report on its findings. We believe that the pilots will help us all to understand what information would be useful to electoral registration officers in maintaining the accuracy and comprehensiveness of their registers. They will also identify which data-matching schemes would help to secure registration rates when we move to a system of individual registration in Great Britain.

We are absolutely clear that any data matching must be carefully controlled and scrutinised. What we are proposing is not new. Both the overall approach and the provisions are closely modelled on provisions that Parliament approved in 2006 for application in Northern Ireland. I shall spell out the safeguards that will apply.

The clauses themselves set out explicitly the purposes for which the data supplied must be used by an electoral registration officer. Only data relevant to electoral registration may be provided by the public authority.

The public authority providing an electoral registration officer with data would be consulted on the release of information, and proper safeguards would be put in place in each order to ensure compliance with the Data Protection Act 1998. Each order putting in place a data-matching scheme would be subject to the affirmative resolution procedure, giving the House the opportunity to determine whether it was acceptable to proceed.

I understand what the Minister is saying, but it seems to me that the provisions breach one of the data protection principles. The principle of fair processing—as I understand it—is that data should be processed only for the purpose for which they were supplied to the data processor. In supplying data for voter registration, another public authority such as the NHS or the Department for Work and Pensions would actually be using that data for a purpose for which they were not supplied. That represents a breach of the original data protection principles.

With all respect to the hon. Gentleman, the House will have an opportunity to look at each scheme on its merits in each case—[Interruption.] The rights are not unfettered; how such things are treated will be a matter of judgment.

rose—