If there is a Division in the Chamber while we are sitting, the Committee will adjourn as soon as the Division Bells are rung, and resume after 10 minutes.

Amendment 97

In moving Amendment 97, which proposes a new clause after Clause 9, I shall speak also to Amendments 136 to 138. They would re-formulate some of the offences in the Political Parties, Elections and Referendums Act 2000 so that they allow adequate account to be taken of the reason for the breach of the Act at the time that an assessment is made about whether an offence has been committed. Debates in another place indicated the widespread concern that, although it is right and proper that the requirements of the 2000 Act are observed and enforced, it may not be right and proper for every breach of those requirements to be pursued, particularly where there might be a very good reason for that breach.

It is helpful in this context to note that the Electoral Commission’s proposed approach to the use of its new investigatory powers and civil sanctions, published in January 2009, suggests that the commission considers the public interest as a material factor in determining whether to proceed with a particular case. Notwithstanding this helpful confirmation of approach, some of the reporting requirements in the 2000 Act are formulated without any prior consideration being given to why non-compliance occurred; that is, the late submission of a donation report is in itself an offence. Consideration of why non-compliance happened is left to a separate defence which can subsequently be demonstrated by that showing,

“all reasonable steps and … all due diligence”,

have been exercised.

That is a high test, requiring a person to show that “all” reasonable steps and due diligence have taken place. Further, this particular defence might be unnecessarily narrow. It suggests that at least some steps have been taken or considered which do not deal with a case where a person for a good reason mistakenly concludes that no report needed to be delivered. For these reasons, we were persuaded by the debates in another place that the existing position included an unhelpful formulation that could result in some inadvertent breaches being pursued without there being a proper examination of why the breaches occurred. These amendments provide that offences of late and incomplete reporting of donations and loans—by parties, regular donees or treasurers—are only committed if the breach is “without reasonable excuse”. In parallel, they remove the defence of taking,

“all reasonable steps and … all due diligence”,

as it is no longer necessary.

Because each case is different, it is impossible to be prescriptive about what will and will not be viewed as a “reasonable excuse”. A reasoned judgment will of course have to be made on the facts of each case and the relevant circumstances. However, I can say that “reasonable” imports an element of objectivity here: not just any old excuse will do. This approach ensures that there is flexibility to take account of any reason given for non-compliance without meaning that all a person has to do to avoid liability is to make up an excuse that sounds vaguely plausible.

I stress, for the avoidance of doubt, that the effect and intention of these amendments is not to absolve regulated persons of guilt for all unintended errors. It might well be that a really bad breach of the requirements of the Act, even if not deliberate, does not have a reasonable excuse and as such still constitutes an offence.

While we are sympathetic to concerns about the commission pursuing those who did not intend to breach the Act, we are equally clear that the public interest demands a stringent and well enforced regulatory regime. Any more blanket excuse that would allow unintended errors to go unpunished would risk incentivising ignorance of the law, which would over time prove highly corrosive to public confidence in our political system. We do not wish to create a situation in which a person who serially forgets to comply is absolved of any possible punishment simply because there was no intent to deceive, but we do think that a person who fails to comply should have a chance to show that there was an objectively good reason for doing so.

I am pleased that the commission has welcomed this approach. In its latest briefing on this Bill, the commission states:

“The Commission believes the proposed new defences are more proportionate, providing greater protection to those we regulate and more certainty to the Commission”.

Our amendments strike the right balance between the twin aims of helping to ensure that inadvertent errors with good reason are not punished and ensuring that the regulatory system is not undermined by absolving of the consequences of their actions all those who did not intend to commit a breach. I beg to move.

We welcome this amendment. The arguments that I shall deploy are very much those we have deployed in this Grand Committee, and in Committee and on Report in another place, for a defence of innocent mistake. This amendment goes very much towards that.

When the Minister responds, it would be good if he drew a line under what is potentially covered by a “reasonable excuse”, in terms of objectivity, that would not be covered by an amendment on an “innocent mistake”. Is there a major difference on a philosophical or legal point that we are missing? If so, it would be good to understand what that is in terms of the reach. As regards adjudicating objectively on when a reasonable mistake has been made, the Electoral Commission would be helped enormously if it included members with recent experience of political activity.

I appreciate that the Minister may be unable to respond today, but we have been talking about achieving a system of regulating and declaring donations in which the public can have confidence. The objective is not necessarily to be seen to be dishing out hard sentences or penalties for mistakes, but is very much to give the public confidence in their system. To what extent, therefore, does he feel it appropriate for the commission to have a role in providing training and education to people who have made an innocent or reasonable mistake in the completion or late submission of forms? Is that something that the commission could respond to in a way that says, “Yes, we will not levy a civil penalty”—perhaps not a criminal penalty—provided that the person undergoes training to ensure that a level of competence can be established. That would of course mean that a serial offender would have one less argument in their defence. I offer that not as a new idea, but one which has been used by the police, for example, who can offer someone a safe driving course instead of a penalty when they have slightly exceeded the speed limit. Something like that would give integrity to the system and I shall be interested to hear the Government’s response. Otherwise we welcome the changes, which are in line with the arguments we made in another place.

Is the choice of language, “without reasonable excuse”, based upon a settled body of case law in other statutes where the words have been used, or are we out in open seas? By using it in different contexts, you are going to get different interpretations. For example, on the issue of failure to deliver a proper statement of accounts, it could be a fairly good answer to say, “They were scrutinised by a firm of chartered accountants of high standing and it made a mistake. We only submitted them”. The excuse for not making a full report by a particular date may be of a different order from where you are relying on the expert evidence of someone like an accountant. How solid is this as statutory language?

I am grateful to both noble Lords who have spoken on this matter. First, on the points raised by the noble Lord, Lord Neill, time will tell how solid it is. It represents a difference from the standard that has applied up until now, which is, as I said in opening, a harder standard. We are trying to avoid unnecessarily convicting too many putative defendants of offences. “Reasonable excuse” means there is a need for the reason for failure to be considered; inadvertent breach would not necessarily be, and often might not be, a reasonable excuse. Innocent mistake provides a much more blanket defence, absolving all inadvertent breaches. If a treasurer is ill and therefore cannot get his returns in on time, that might constitute a reasonable excuse, but a blanket defence of innocent mistake would not incentivise understanding and compliance with the law. All breaches, if unintentional, would not be punishable.

The noble Lord asked about settled case law in this field. We have all met the phrase, of course, in a number of Acts of Parliament. There is no settled case law in the context of the 2000 Act, but there are many other offences within that Act which contain the language. We are using consistent terminology that will make it easy for the commission to decide more fairly, on the facts of each case, whether or not an offence has been committed. We will have to wait and see whether it will work more satisfactorily than the present higher test. I am comforted, to some extent, by the fact that the commission prefers this choice of language to that which exists at present.

I thank the noble Lord, Lord Bates, for his welcome of the amendment in principle. He asked for an example. At the most basic level—I have already used one about someone being ill—an example could be a treasurer whose spouse is taken suddenly ill. If there is a requirement on him or her to get the return off rapidly but he or she fails to do so because other matters are obviously more important at the time, he or she would commit the offence unless there was a defence of reasonable excuse. That circumstance might be considered by the commission to be a reasonable excuse for the returns arriving 24 hours later than they should otherwise arrive. We can all think of examples.

The noble Lord, Lord Bates, asked an interesting question about whether the commission can provide education training. The first question to ask is whether there is an offence. If there is no offence, that is more difficult, except on a voluntary basis, although I am sure that the Electoral Commission will give guidance to anyone who asks for it. However, if an offence has been proved beyond reasonable doubt, an enforcement undertaking, which is one of the sanctions that can be imposed under the Bill, agreed with the commission, might be to undertake some sort of training, or a discretionary requirement, which is another sanction, might be imposed to undertake training. That explains quite well why the sanctions that we are trying to introduce for offences are flexible—they need to address the various needs away from the breaches. Therefore, the answer to the noble Lord’s question is that education training is possible and may happen, but we will have to see how it works out.

My request for an illustration or example related to the difference between what might be termed a reasonable excuse and an innocent mistake.

I use again my basic example of the treasurer whose spouse suddenly becomes ill. It may not have been an inadvertent mistake on his part; it may be at the back of his mind that he should be sending off the return but he does not get round to it because there are other, more important things with which to deal. On the other hand, there is the treasurer who does not have it in his mind at any stage when he should do. That is the difference.

Government Amendments 98, 105, 139 and 140 introduce new requirements for members associations. Government Amendments 139 and 140 are consequential.

Members’ associations are a formal category of regulated recipient, or donee, under the 2000 Act. This means that they are required to report donations and loans to the commission in a similar way to political parties. These associations are diverse and can have fairly loose structures—the legislation does not require specific posts or organisational arrangements. Indeed, the definition of what is and is not a members’ association is pretty broad. It is defined as an organisation “composed wholly or mainly of members of a political party” that is not a party or party accounting unit.

This loose arrangement is desirable as it allows a multiplicity of bodies to organise and flourish. A quick glance at the Electoral Commission’s registers indicates that organisations as diverse as the Conservative Christian Fellowship, Progress and the Liberal Democrat parliamentary party have all reported donations in their capacity as members associations. This diversity is a feature of our democratic system. Members’ associations should be encouraged, and nothing we propose is intended to hamper their existence or radically alter what is required of them.

However, it has come to our attention that, in the event of a members’ association failing to comply with the reporting requirements which attach to it, it might not always be possible to ascertain who is responsible for that failure. After all, the legislation in its current form does not require the members’ association positively to identify to the commission who is responsible for dealing with its donations. Moreover, it is not possible to sanction the association itself in the event of a failure not resulting from the actions of an individual. This situation cannot be acceptable, given the importance of a robust and enforceable regulatory system. As such, these amendments propose measures to clarify the liability of members’ associations in the event of failures to comply with the reporting requirements applying to them.

The amendments provide that, when a members’ association does not already have a treasurer and is in receipt of a donation, or enters in to a loan which is required to be reported to the commission—that is, one above £7,500, or an impermissible donation above £500—the association is required to appoint a responsible person within the reporting period of 30 days. A notice appointing the responsible person must be submitted to the Electoral Commission within the 30-day time period and include relevant details such as name and address of the association and the individual’s name and address. The notice must be signed by the responsible person and on behalf of the members’ association; it lasts for one year and can be renewed, modified or terminated during the course of that year, as set out in the clause.

In the event of a failure adequately to comply with the reporting requirements, that responsible person will be liable. When a members association fails to appoint a responsible person, in these circumstances that will be an offence. In contrast with the current liability provisions in the 2000 Act, these amendments provide that the members’ association itself can be sanctioned for both a failure adequately to comply with the reporting requirements, and as a new offence, the members’ association would be liable for a failure to appoint a members association where one is required.

This is a sensible and proportionate measure which clarifies liability without compromising the status of members associations more widely. I am pleased that the Electoral Commission has recognised that these amendments are desirable and fully supports them. Its recent briefing note on the Bill said:

“The new requirements are … targeted at circumstances where a breach of the law is most likely to affect confidence in the transparency and integrity of political finance. They will enable the Commission both to give members associations a clear account of what they need to do to comply with the law, and to deal appropriately with cases of non-compliance”.

I beg to move.

This measure is fairly straightforward; we recognise that it is a necessary tightening of the PPERA and therefore welcome it. I take this opportunity to seek further clarification. There may be circumstances in which some people may be categorised as members’ associations under the terms of this Bill but may not be aware that they are categorised as such. How will they be contacted and told that they come within the remit? Whose responsibility is that? Is it that of the party to which they are affiliated or linked in some way, whose members make up the bulk of their membership? If so, that is an added requirement on party organisations and it would be helpful to know that. Furthermore, how will it be enforced? Have the commission or Ministry of Justice made any estimates as to how many of these associations are out there and who they are—and, therefore, how this additional element will be supervised and policed? Those are the only two points that we wish to raise at this stage.

I briefly welcome the amendments, as they obviously address significant loopholes in the 2000 legislation that we did not spot at the time. We particularly welcome the fact that they address the issue of loans as they were not addressed in 2000, which was put right eventually in 2006.

The noble Lord referred to the definition of a members’ association. Many of them we will understand, and he underlined several examples. Would that cover a leadership or deputy leadership campaign team? We know rather notably that there were controversies over the last deputy leadership campaign for the Labour Party. Would such a campaign team be a members’ association and are we now therefore closing the loophole that meant that there were problems in that election? The commission spotted that there were clear problems, but nobody could be held responsible.

I thank the noble Lords, Lord Rennard and Lord Bates, for their support—we love support for government amendments. I was asked what a members’ association was. It is a very good question which I, too, have asked at some length. The definition, which I gather is in the 2000 Act, is that it is an association, composed wholly or mainly of members of a political party that is not a party or a party accounting group. We know what they are: they are typically the campaign groups one refers to. Their central feature is that they are made up of members of a political party. Those registered with the commission are those sorts of organisations that I tried to illustrate with the list that I read out.

The noble Lord, Lord Bates, asked how anybody would know that they were part of a members’ association. In a sense, it would not matter until they either got a donation of more than £7,500 or were offered an impermissible donation of more than £500. It is the responsibility of citizens to know the law. The definition of “members association” in the 2000 Act is unchanged by the amendments. Nor do the amendments change how members’ associations have come to be known through custom and practice. The amendments solely fill a loophole—I do not like that word because I do not believe that a loophole has ever been exploited. Rather, they address a lack of clarity that has emerged as a result of one or two events in recent years by making it absolutely clear that if you are going to be a members’ association and receive donations, you must have a responsible person who can be identified.

This group of amendments is concerned with Clause 10, which allows for the appointment of a compliance officer by a holder of elected office. Perhaps I may take the opportunity to discuss the intentions behind the clause, particularly as it was not given much time in another place.

During the passage of the Bill, concerns have been raised regarding what some have seen as a burdensome and time-consuming administrative side of compliance with the requirements of PPERA. The Government believe that we must always prioritise the upholding of the law, which helps reinforce public confidence in the overwhelming probity of our political system and our politicians above any administrative burdens that politicians, as individuals, may encounter. However, we have said throughout this process that we are happy to listen to concerns and seek reasonable solutions.

We were therefore persuaded to amend the Bill by incorporating Clause 10, by which holders of elective office may—I emphasise, may—appoint a person to help them with the practical duties of compliance. The clause does not compel the appointment of such an officer, but it is helpful in that it ensures that such appointments can be made on a statutory basis.

I thank my noble friend for the amendments. I was confused when I first read this clause because it raised a whole lot of questions in my mind. The amendments have sorted out, or at least rectified, some of my queries, but I still have a couple of questions. The first concerns the elective office. I am not sure who that covers as no list is available. Secondly, how will we make people aware that this is a possibility, and what incentive will they have for appointing a compliance officer? I am not opposing the principle because I understand that anything that will take away the burdens from local officers will make a big difference. I am happy with the concept but there are one or two queries still in my mind.

We, too, very much agree with the amendment—or perhaps I should say not “very much”, in the sense that an additional capability is being offered here. However, if as the Minister stated on Report in the Commons on 9 February, and as the Minister has repeated in this Committee this afternoon, it does not absolve officeholders from responsibility for compliance with their obligations under Schedule 7 to PPERA, I question the need for an additional compliance officer to be appointed. By all means someone can be appointed to handle the paperwork, but does it need to be another person who is registered if the person who stands for elective office is ultimately responsible for what happens?

I am grateful for the support from the two noble Lords who have spoken. My noble friend Lady Gould asked what an “elected officer” means. Schedule 7 to the 2000 Act defines a holder of relevant elective office as either:

“(a) member of the House of Commons;

(b) member of the European Parliament elected in the United Kingdom;

(c) member of the Scottish Parliament;

(d) member of the National Assembly for Wales;

(e) member of the Northern Ireland Assembly;

(f) member of—

(i) any local authority in any part of the United Kingdom, including the Common Council of the City of London but excluding a parish or community council, or

(ii) the Greater London Assembly; or

(g) Mayor of London or elected mayor”.

Therefore, it is a wide definition of all those elected under our systems.

How to make people aware of the existence of the elective office is a more difficult question, but I think that elected politicians—certainly at the other end of this Palace—will know about it. The idea is that there should be some Electoral Commission guidance on this but it is up to individual officeholders to decide whether they want to appoint one. We do not propose to encourage the appointment; it is absolutely up to elected members. This proposal is intended to help those members rather than be something that we impose on them in any sense.

The noble Lord asked me about legal requirements. As I have already said, they remain the same, so there is no policy intention that every officer holder should have one—indeed, we do not expect everyone to have one.

The noble Lord, Lord Bates, in his turn, questioned the need for an additional compliance officer. The need is as expressed in debate in another place, where a number of Back-Benchers are at some stage faced with quite complicated double reporting. They are universally very busy looking after their constituents’ interests. During the debate, the Government listened to representations about how it might be helpful to be able to appoint such an officer to an individual member to help them with this difficult but important task. That is the reason for it. It seemed to find general support then and I am glad that it does here today.

Would the Minister take a question arising from his reference to Clause 10? I want to know who these officeholders are. It strikes me as curious that they are not required to have a home address in the United Kingdom. That is set out in relation to compliance officers in new paragraph 18 proposed under Clause 10. At line 33 on page 9 of the Bill, new paragraph 18(2)(b) states that,

“the officer-holder’s home address in the United Kingdom, or (if there is no such home address) the office-holder’s home address elsewhere”.

Exactly the same thing happens with the responsible person. It seems rather odd that people who have great responsibilities and are discharging important duties do not have to live here.

I did not think it would be very long before the noble Lord caught me out. I do not know the answer to his question. I hope he will allow me to write to him with a proper reply, which I will send to all Members of the Committee.

I shall speak briefly also to Amendment 109, although my noble friend Lord Rennard may have something more to say about it, and I shall be exceedingly brief in dealing with Amendment 143, which is simply the implementation timetable for Amendment 108 in Clause 29.

Amendment 108 seeks to insert a new clause after Clause 12. This brings us back to Hayden Phillips and to rather more meaty issues than we have so far dealt with in Committee today because it concerns a cap on donations. Before I go into detail, I remind the Committee of the comment of Andrew Tyrie, who is regarded on all sides of the House of the Commons, and perhaps in your Lordships’ House as well, as an expert, having studied these issues for many years. He asked my honourable friend David Howarth:

“Does he agree that we cannot arrive at the point at which one party can have a veto over change if it were clearly what the overwhelming majority of voters concluded would enable greater public trust to be restored in such matters?”.—[Official Report, Commons, Political Parties and Elections Bill Committee, 20/11/08; col. 414.]

That should be our text. If we are going to seek always a consensus at the lowest common denominator, we shall not be able to in any way meet the expectations of the public. I give full credit to the Minister, his team, his department and the Government for introducing the Bill, but if it remains as weak as it is at the moment on this vital issue, the public will regard us all as having wasted an important opportunity, one that may not come again for some years. As we all know, the legislative timetable is such that we are not always able to address issues speedily when they are first brought to our attention.

Amendment 108 seeks to insert a new clause which absolutely follows the near agreement in the Hayden Phillips discussions. It would introduce a £50,000 cap on donations from a single individual or organisation in any given year. This is entirely in line with the Phillips recommendations, which I shall turn to again in a moment, and is key to proposals on our side of your Lordships’ House to take the big money out of politics. Wealthy individuals, organisations and companies should not be able to buy influence, whether through policies or peerages. The inequality of influence generated by massive donations runs entirely counter to democratic principles and certainly erodes public trust.

I was waiting to see whether the noble Lord, Lord Rennard, would come in first and talk about the trade unions. As the noble Lord, Lord Tyler, said, the two issues are linked and, therefore, one cannot talk about one without talking about the other—at least to a degree.

I agree with the noble Lord, Lord Tyler. I think that everyone is saying that we must arrive at consensus. The problem is that nobody can arrive at what that consensus should be, which is why the Sir Hayden Phillips talks collapsed. Although everybody wanted a consensus, that consensus was not arrived at. It is the detail that is the important factor, not the fact that everyone wants to do something about this. It is very clear from all the discussions that a great deal of complexity has to be dealt with when looking at this issue. I sincerely hope that some agreement can be reached at some point. At the moment, I do not think that to put such an amendment into the Bill is the answer. I think that we have to reach consensus.

One thing that the noble Lord, Lord Tyler, did not refer to except in passing when he talked about us all spending too much at general elections—he talked about the main two political parties spending enormous amounts of money, with which I might well agree—was that, if the amendment were to become part of the Bill, there would be a shortfall of something like £5 million to £6 million in what the political parties could spend. That is quite a lot of money. Both the Committee on Standards in Public Life in 1998, which I am sure we will hear more about, and the Sir Hayden Phillips review of 2007 said that if there was to be a cap on donations we would have to look at an increase in state funding. No mention was made of that by the noble Lord, Lord Tyler. I do not think that the moment is right to suggest to the public that we should look to state funding for political parties. Again, that is why I do not think that the amendment is appropriate at this time. However, we need to have the debate and continue to have it until, maybe, some great minds will come round and we will be able to come to some conclusion.

I wanted to ask the Minister a question before coming to the trade union side of this matter. If this amendment was carried, would public funds such as the Short money be affected by this amendment and also be capped? That would have quite a serious affect on opposition parties. On the trade unions, I am sorry that the noble Lord, Lord Rennard, has not made his case, and I think that I shall not make my comments at this point but wait until he has made his so I can respond to them properly. I shall make one comment only about the trade unions—that they are, perhaps, the most regulated of all bodies. We shall see how the noble Lord, Lord Rennard, responds to that and I shall come back to it.

As the noble Baroness, Lady Gould of Potternewton, is so anxious that I speak, I feel obliged to rise to my feet immediately. I thank her for anticipating what I might say. Before I make a few remarks about trade unions, I shall make a few general points about the package within these amendments, which begins with the proposal in Amendment 108 for a £50,000 cap.

I will not say a great deal, because I stand by my remarks, on the Political Parties, Elections and Referendums Bill in 2000, when I proposed such a cap a number of times and made most of my arguments. Since that day, I very much welcome the conversion of large elements of the Conservative Party to that suggestion, and the recognition by all the major parties when they sat around with Sir Hayden Phillips to discuss this that perhaps £50,000 was the appropriate level. Since then, I confess that there may have been a need in terms of the reputation of politics to go even further than I suggested in 2000. Things would be healthier if there were a substantially lower limit. All of us who observed and were delighted by President Obama’s victory in the States will be aware that individual contributions to his campaign were capped at a mere $2,800. With the introduction of a spending cap it is possible to have healthy and vigorous democratic debate. The principle behind that is that power should lie with the voters, not the donors. We need to hold the arms race on funding.

On the two areas which the noble Baroness, Lady Gould, raised, first is the obvious implication, which I accept entirely, that if there were to be a cap on very large donations, as was recognised during the Hayden Phillips talks, there would need to be alternative funding for political parties to state their case. The principle must be that democracy does not come free, but I also accept and emphasise in relation to this overall package that there could not possibly be a case for any increase in taxation to pay for democratic political activity, nor should there be cuts in services to things like schools and hospitals. We have an element of state funding, and perhaps those who speak from the Conservative Benches might tell me whether or not they accept that Short money and the policy development fund are measures of state funding. I believe that they are and that measures such as those need to be extended, but this must be on the basis that savings need to be made elsewhere in how the Government spend our taxpayers’ money.

Previously in debates on this subject I have said that there needs to be increased support to pay for democracy and I have made suggestions regarding, for example, the Government’s national advertising budget. When I first suggested that it was excessive and had risen significantly since 1997, it was some £200 million nationally. I also suggested that that budget is often targeted for more partisan purposes than is sometimes proper for government advertising. The scale of that budget has increased to something like £300 million and it would not be difficult to suggest that if the government advertising budget were reduced by only some 10 per cent, the parties could state their case, rather than allowing the Government to put forward their propaganda in a partisan way as they occasionally do with their advertising spending. That is why my case is sustainable.

I am sorry to interrupt, but can the noble Lord give some examples?

Perhaps I can please the noble Baroness by giving first some of the most notorious examples under the previous Conservative Government, when they attempted to suggest that they cared passionately about finding jobs for people. There were huge adverts in national newspapers about how the Government were working very hard in this area. Yet all the adverts appeared in affluent areas where people were not genuinely unemployed and the adverts did not seem to appear in other areas. If you were genuinely trying to suggest that this was an opportunity for people to find work, you would perhaps have advertised in those areas, rather than in the more marginal areas where jobs appeared to be plentiful and unemployment was low.

At the moment, one might accept that entirely legitimate government advertising was on things like the potential flu pandemic. I have no doubt that there is widespread advertising in other areas, such as on the introduction of the so-called Australian points system on immigration to advise employers about what they have to do to conform with government regulations. I do not believe that this was the most cost-effective way of telling employers what they have to do in terms of policing the Australian points system. But it was very good way perhaps of reassuring voters through public advertising, paid for by the taxpayer, that the Government were doing something about a problem which they said needed to be addressed. My suggestion is that somebody independent should vet government advertising, reduce the bill significantly, give some of the money back to the taxpayer and use other parts of the budget to allow the parties to state their case democratically. At the moment, we have state funding for things like Short money and delivery of council election addresses. The implication of a cap of £50,000 is then to say that you have to do something else instead.

I have no option but to stand up and respond to that. I found the noble Lord’s argument on government advertising highly spurious. Are we suggesting that things which the Government have implemented by parliamentary decision, such as the non-smoking or seat-belt laws, should not be allowed to be advertised on television? That would be absolute nonsense. Those are issues that the public have to know about.

I am not for a minute suggesting that some of the necessary public health information, for example, on the smoking ban, should not be advertised. What I am suggesting is that the total budget for it is excessive, having grown enormously during an era of spin in the past 12 years, and could be reduced significantly. There is clear evidence that some of that advertising is not about public health information, for example, but promoting the policies of the Government in a partisan way. I cited one example from the previous Conservative Government and the introduction of the Australian points system as an example of the Labour Government advertising improperly for party-political purposes.

I thank the noble Lord for his intervention, but it does not influence my thinking. The noble Lord’s first example was of the Conservative Government on unemployment. It is not for me to argue the case for the Conservatives when they were in government, but I would have thought that anything that helped to reduce unemployment was well worth doing. As for the political parties being able to take that space, we obviously have three party- political broadcasts that other political parties can use. That is not only at election times, but at other times too, so there are other avenues for free broadcasting by the political parties.

On the trade unions, I start, with great respect, with a quote from the Neill Committee on Standards in Public Life in 1998, which said:

“No change should be made in the law relating to trade unions and their political funds”.

That was sound. However, I accept that there still might need to be some tightening up of procedure. The trade unions have accepted that. They are prepared to look at their own situation, such as full affiliation of the levy-paying membership and how that affects things, and see if they cannot look at doing that.

I must make the trade unions’ position clear because an awful lot of false information is given. The noble Lord, Lord Rennard, referred to possible breaches of the position. However, between 2000 and 2006 the certification officer received only three complaints regarding political funds; two were withdrawn and one was not upheld. Certainly, no complaints have been justified. The 10-yearly ballots of trade union members show continuing support for trade unions having political funds; I declare an interest, as I was the officer responsible at the time and worked to implement those 10-yearly ballots,.

We must be clear that there is absolute transparency in trade union funding. Through the Electoral Commission, any member of the public can look and see how much an affiliated trade union gives to the Labour Party. They can see those political funds’ income and expenditure from the certification officer’s annual report, and the numbers of those who pay in and opt out. As I probably said many years ago, that can be compared with some companies and unincorporated associations, where the public cannot even know the names of the individuals behind the donations.

As I said at the beginning, the trade unions’ political activities are more tightly regulated than those of any other organisation. To argue that something is not quite right in the receipt and expenditure of trade union funding is completely wrong. These two things go together. Putting a cap on donations at this point would be wrong if we are to look at the question of public funding, which has not been responded to and no doubt will be: how much public funding might be necessary to ensure that the democratic process works well? Now is certainly not the moment for us to talk about public funding. We have had that debate for the past 30 years. There has been a gradual increase in public funding, and we have reached the point at which we should not put any more into the electoral procedure.

As has been proved by all the debates and the lack of consensus, this is a much bigger debate than the amendments suggest. Putting them in the Bill will not satisfy that debate at all.

One cannot help but agree with the sentiment of the amendments of the noble Lord, Lord Tyler. Having been practically at the coalface as parliamentary treasurer at the previous general election, I can see their real implications. In the report of Hayden Phillips, I was the one who volunteered the £50,000 cap.

Clearly we must have transparency. We cannot have individuals—or unions for that matter—or organisations buying political parties or their policies. I am a bit cautious about the comments on public trust; a lot of it is a media storm which creates the lack of public trust. Having been involved in Sir Hayden Phillips’s negotiations, the stumbling blocks were twofold. We could not get an agreement on a cap on union funding, on transparency or on an opt-out by union members from donating via the union to a political party. There is still strong evidence that pressures are brought to bear on union members not to opt out. Secondly, we could not get an agreement on the unfair advantage of sitting MPs and their spending limits. The report by Hayden Phillips, which was done with great endeavour, unfortunately disappeared.

It is hard to look at the two amendments coupled together. One has to do with trade unions, how they raise their money, give it to a party and how limitations are imposed. The other is about a £50,000 cap on donations. Why does not each party impose a £50,000 cap? It may help noble Lords to know that when I was responsible for the recent mayoral election we self-imposed a £50,000 cap on donations. We also did it in the Euro elections and the local elections. By and large it was possible to run the general working expenditure of our party with a £50,000 cap on donations. In fact, it was breached twice—once when someone bid £70,000 for something in an auction, for which we were very grateful, and the second time was when we were leaderless for six months. We were desperate for money; very few people were coming forward and various candidates were dipping into the trough of our donors. It was difficult to keep the centre going.

There are another two occasions when a political party cannot live within the cap. The first is capital expenditure. We moved office as a party and needed a new computer system, which would cost several million pounds. We could not say to our suppliers, “Would you mind if we drip this out for four or five years while our £50,000 donations come in to pay for the new system, the new office or for any other major capital expenditure we need?”.

The noble Lord referred to candidates “dipping into the trough of our donors”. What does that mean?

As the noble Lord probably knows, funds must be raised by the potential leader of a party to fight that election, so candidates would go to our donors and say, “Would you mind supporting my election campaign?”. That happens in the Labour Party, the Liberal Democrat Party, and it certainly happens in the Conservative Party. Ours is an extensive laid-down campaign, which is very transparent and has a limitation on how much a candidate is allowed to raise. That still means uncertainty about the donor base, but candidates go to the common—for want of a better word—donors. I hope that that clarifies the noble Lord’s very good point.

Returning to my point, the two occasions when a party cannot function on a £50,000 cap are, first, the general election—our party had to raise £30 million in a period of 12 months—when no Short money, for want of a better expression, is available to support the campaign, and, secondly, when we have capital expenditure. Sentiment would drive me towards supporting this amendment but, because there is no practical solution to satisfying these two substantial financial requirements, it is not possible for me to do so, although I strongly support Amendment 109.

Unlike almost everyone else speaking here today, I have not had the benefit of labouring in the political kitchen. However, coming from a political stable, I hope that my remarks will not be taken as being too simplistic. At least, coming from this particular area, I shall be impartial.

The fact that there is no consensus on this matter is almost certainly down to fear between the parties that one party will gain some advantage over the other. That is something that you would expect a Cross-Bencher to say; nevertheless, it remains true. If I understood the noble Lord, Lord Tyler, correctly, he said that £93 million was spent at the last election. It is time for me to reveal my own credentials. I spent my entire business life in marketing, advertising and public relations. If you are skilful enough, it is comparatively easy to get even the most hard-headed businessman—and, by definition, the most hard-headed party leader—to spend more than they need to. It is almost certainly true that parties spend too much money on elections because they are amateurs and they are being conned by these sorts of people.

I believe passionately that there should be some contribution from the public. That is the cost of democracy. However, frankly, the time when that could have been introduced was during the fat years, which have now gone. It should have been brought in during the past 10 years but now we are stuck with whatever we have. Therefore, I think that, whatever may come of this amendment or the deliberations on the Bill, as a matter of urgency we have to get together and agree some sort of limit.

I try to speak briefly on amendments which are not my own and I want to say only a very few words. I cannot see how a £50,000 cap on donations will work, the simple reason being that it is very easy to circumvent through foreign donations. You simply spread the donations through a number of routes and thereby circumvent the donations regime domestically. There is only one way to sort out this problem. The Liberal Democrats know it because they are moving amendments which basically deal with the problem—that is, capping expenditure. We have to control annual expenditure by the political parties. No one wants to talk that language, but capping expenditure would provide for the far more efficient use of resource by political parties. To be frank, it really is not of any great interest where the money comes from so long as it does not exercise undue influence over the political parties concerned. My contributions in this debate will essentially be about capping expenditure. I agree with many of the amendments being moved by the Liberal Democrats but, unfortunately, I feel that this one is of no consequence.

I wish to raise one point which my noble friend made and which I intended to raise earlier—that is, the question of evasion. If we were to have this cap, it would have to be accompanied by very tight restrictions to ensure that it happened. However, that is not in the amendment and therefore I do not think that that would happen. The noble Lord, Lord Rennard, mentioned the United States, where there is a cap on donations, but there is no evidence that it has worked. Instead, as someone said to me, it has fuelled a culture of evasion. I know people who have donated more than the capped amount to elections in the United States. Therefore, unless there are very tight restrictions which have to be enforced, just including a cap will not work.

I have a few points on the amendments. It is difficult not to be sympathetic with many perspectives represented this afternoon. This is a very difficult issue to raise but none the less essential, and it is for this reason that we felt that this was a missed opportunity not to have a cap on donations—and a cap on expenditure. We proposed a reduction in expenditure from £20 million to £15 million; we were very supportive of that proposal, and we remain supportive of it. However, there has to be equality in a political system; everybody has to abide by the same rules.

I have sympathy for the position in which the Labour Party finds itself. I have sympathy, for example, with the position that Tony Blair doubtless took in initiating this whole process to try to free himself from the binds and obligations to the trade unions. In 2006, when this process began, Labour’s donation income from the trade unions amounted to £9 million. On top of that, the unions provided £8 million a year of affiliation fees to the Labour Party. Further funding is provided by the trade unions under the radar to local associations through constituency development plans. In fact, trade union literature stated that the unions made huge donations nationally in excess of 2001, and to regional Labour parties. Union offices were given over as phone banks to local constituencies; union members acted as leafleters, canvassers, endorsers and drivers in local campaigns, sending 6 million direct mails—1.8 million in key seats—16,000 postal votes, 188 key co-ordinators and so on.

One understands the links, which are to be respected, with the history of the Labour Party, and the feeling that those links with the trade unions can be distanced with regard to raising funds and accepted when it comes to spending funds. In that regard, some fears are perhaps unjustified. Sir Hayden Phillips himself mentioned that a limit on donations may not challenge the Labour Party’s constitutional relationship with the trade unions. That would be something we would support.

It is to that extent that we see deficiencies in the amendments that have been proposed today, despite the case argued for them by the noble Lords, Lord Tyler and Lord Rennard. They do not go far enough, and the detail of the difficulties that we have with them is contained in Amendment 109—particularly in the conditions listed in subsections (2)(d) and (3)(a) of the amendment. Subsection (2)(d) says that,

“consent has been obtained either of all the members … or … the relevant proportion”.

However, subsection (3) defines consent as being when a,

“member was afforded during the 12 months … a reasonable opportunity to be exempted”.

In many ways, the amendment contains an opt-out clause. We would be very much in favour of one that allowed for opting in. People should be able to opt in; we very much support that. Mention was made by the noble Lord, Lord Tyler, of my friend Andrew Tyrie, who in another place said:

“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”.

And then he made a moot point, which was:

“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”.—[Official Report, Commons, 2/3/09; col. 634.]

That relates to a point to which I note the noble Baroness, Lady Gould, referred: that there was some legitimacy in the fact that people—

There is a Division in the House. The Committee will adjourn for 10 minutes.

I am a new Member of the House, so perhaps your Lordships will forgive me for being a little slow on the procedure after a Division in the House; even a negated Division. Apparently, one just has to get up and try to remember where one was when the Division was called. I was referring to the noble Baroness, Lady Gould, who had made a fair point about trade union members being aware of a political fund and occasionally being asked whether they were supportive of it. It would seem to us to be simple to go one step further and ask, “Who do you think the funds ought to be allocated to?”. That might be stretching it a little far but, in the overall remit, that is our objective. People who hold a set of political beliefs may not have the opportunity to opt out of having their funds taken and given to party-political purposes that they would not support. Our difficulty with Amendment 109 relates to the qualifications that it contains.

My noble friend Lord Marland, together with David Cameron and Francis Maude, played a key role in moving the Conservative Party into a modern era where big-money politics is not accepted. My noble friend has led the Conservative Party on a kind of road-to-Damascus experience, and we hope that the noble Baroness, Lady Gould, or even the noble Lord, Lord Campbell-Savours, might lead the Labour Party on the same road. It will then reach the conclusion that such disproportionate funding from one particular source is inappropriate in building public confidence and trust in our political system.

We have had a fascinating debate and I am grateful to all noble Lords who have spoken. The contribution of the noble Viscount, Lord Tenby, was very welcome, speaking from the Cross Benches and coming from a family, as he confessed, that was political to the nth degree. Indeed, he showed that in his contribution and understanding. There is probably a broad consensus around expenditure—that it should not be allowed to run riot. We will have to see later today how that works out in practice. Today, we are talking about the link and the different subject of donations to political parties. I am grateful for the view he expressed, which is probably held by a number of voters.

I take the point about the Conservative Party attempting to modernise itself as regards expenditure. I particularly pay tribute to the noble Lord, Lord Marland, as the noble Lord, Lord Bates, has done. However, I still want to know from him about one of the exceptions to the £50,000 rule, apparently the winner of an auction for something worth £70,000. I am intrigued to know what someone found it necessary to pay £70,000 for; no one else has asked, so I am afraid that I do.

It was, appropriately, a portrait of the noble Baroness, Lady Thatcher.

I rather wish that I had not asked.

This group of amendments relates to the establishment of a cap on political donations and the treatment of contributions from trade union political funds under such a system. Amendment 108 would place a £50,000 limit on the amount a single donor, whether an individual or an organisation, could donate to a registered political party in any calendar year. A party would be required to refuse donations exceeding this value and return the excess to the original donor or a person acting on their behalf.

The idea of capping donations has been considered and debated many times in recent years. To give a potted history, the noble Lord, Lord Neill of Bladen, who I am delighted to see in his place, considered the merits or otherwise of a cap in the Committee on Standards in Public Life’s landmark 1998 report on the funding of political parties. His recommendation was that a cap should not be introduced. Rather, he proposed measures to introduce full transparency as to the source of all donations above certain specified levels.

Donation caps were again considered by the Constitutional Affairs Select Committee on party funding in 2006 and, of course, by Sir Hayden Phillips in his 2007 review. Both of those reports recommended that a cap on donations should be introduced. However—and this point must be emphasised—both were equally clear that such a cap would result in a loss of income for the largest parties. Both reports therefore concluded that the quid pro quo for a cap on donations was an increase in state funding. The Constitutional Affairs Select Committee said that,

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

Sir Hayden Phillips said:

“While parties will still, of course, continue to receive donation income, it will necessarily be significantly reduced, and we should all recognise that this may put them in an unsustainable financial position unless public funding is increased”.

We must be absolutely clear from the start that these two points—a cap on donations and state funding—are inextricably linked. Calculations made in our June 2008 White Paper, Party Finance and Expenditure in the United Kingdom, indicated that a donation cap of £50,000 would produce a shortfall of £5 million to £6 million each year for the two largest parties compared with the level of donations that these parties may be expected to receive if there were no restrictions. Increased public funding would be needed to make up for this shortfall.

Following the publication of Sir Hayden’s report, the parties came together to discuss his recommendations, including those on donation caps and state funding. Regrettably, those talks broke down without cross-party agreement being reached. The Bill before us today does not, therefore, seek to introduce the fundamental package of reforms that Sir Hayden proposed. Rather, it seeks to make changes in those areas where a consensus for change does exist. Making changes to the legislation on party funding without consensus would be hugely destabilising. We cannot allow ourselves to reach a point where the party in power, whoever that may be, feels free to legislate on funding issues to its own advantage with disregard for the views, structure and histories of other parties. I hope that that proposition would receive general support in the Committee.

If my noble friend remembers, we had this conversation outside the Committee upstairs in the meeting between the parties. The proposition does not have widespread support because the Official Opposition have not agreed that it is the way forward. Indeed, it is distinctly possible that they may at some stage in the future take a partisan position on some matter relating to political funding which might be damaging to another party. So why are we preoccupied with consensus? I agree entirely with what the noble Lord, Lord Tyler, said about consensus: we are being led astray by it.

I know my noble friend’s view on this. We do not feel it right to legislate unless there is broad consensus. I very much hope that the Opposition feel the same way—we cannot guarantee how they feel; we do not know what they may or may not do if they ever come back into government. I would hope that they might take into account the example of how we are legislating when they decide what to do. The effects of not doing so would be disastrous, because if you legislate just for your own good and your own benefit, it can be extremely counterproductive. But we shall have to see; I take my noble friend’s point.

It remains our view that it is above all transparency which is required in the financing of our political parties. That point came up in debate: both my noble friends Lord Campbell-Savours and Lady Gould made it in passing. A cap on donations could, paradoxically, have the effect of decreasing transparency, because those who wished to make larger donations could seek to evade the restrictions imposed by a donations cap—my noble friend said via foreign donations; I say perhaps by seeking to divert donations through friends and family members. There would need to be detailed and complex provision to address the potential for such abuse. The incentive to such abuse is reduced where no cap exists. We have to take that into account.

In any case—here, I agree with my noble friend Lady Gould—we do not consider that a consensus exists, either between the parties or on the part of the public, on the introduction of donation caps and associated increases in state funding. Identical proposals to those before us today were put forward by the colleague of the noble Lord, Lord Tyler, in the other place and were debated at length. The amendment was not supported by either the Government or the Official Opposition and was comprehensively defeated. This shows to some extent that the parties cannot agree on the need for a cap on donations.

The noble Lord, Lord Tyler, generously paid tribute to the honourable Mr Andrew Tyrie, who is a leading Conservative Member of Parliament and an expert on these occasions. I hope that it would not in any way be offensive of me to remind the Committee that Mr Tyrie did not vote for the amendment; indeed, his own Front Bench voted against it, which may be the reason that he did not vote for it.

So we do not think that there is consensus. But what of the public? We have talked about political consensus, but not public consensus. Perhaps I may look to what my right honourable friend the Justice Secretary said in the debate in the other place—I do not do it too often. His comments were echoed in different language by the noble Lord, Lord Neill of Bladen, at Second Reading. In these times of economic difficulty, it cannot be right to suggest that even more taxpayers’ money should go to politicians and political parties. My right honourable friend said:

“It would have been difficult to introduce [state funding] 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”.—[Official Report, Commons, 2/3/09; col. 628.]

That seems to be quite a hard but pretty accurate representation of where we are in the argument at present. It is for those reasons that we are not minded to support the introduction of a cap on donations today, as proposed by Amendment 108, although we are grateful to the noble Lord, Lord Tyler, for introducing the debate.

Amendment 109 is consequential on Amendment 108, so without one being agreed, the other is impossible as there is a link between them. As the noble Lords, Lord Tyler and Lord Rennard, said, they broadly reflect the proposals put forward by Sir Hayden in his draft agreement, published in October 2007, which would create a clear link between the amount paid in individual contributions to a union’s political fund by way of affiliation fees and the amount of subsequent donation made by the union. Any donation made by a union would be subject to the donation cap that Amendment 108 would impose unless certain conditions were met. There are some subtle differences between Amendment 109 and Sir Hayden’s proposals, but I need not go into them this afternoon.

As has been said on a number of occasions, which I shall repeat, the political activities of trade unions are already very tightly regulated. My right honourable friend the Minister of State reported in Second Reading in the other place that,

“affiliated trade unions … will voluntarily provide more information to members … and that affiliates will introduce a common text for incorporation into membership materials, including application forms. In addition, the affiliates have agreed that full affiliation of the levy-paying membership is the most transparent form of political membership, and moves will be made to that end”.—[Official Report, Commons, 20/10/08; col. 120]

It will come as no surprise that we are not minded to accept the amendment.

Amendment 143 states that the cap on donations would be commenced on Royal Assent. I need not debate that further, as the nub of the debate is Amendment 108. In passing, I have to say that trade unions are well regulated. Companies making political donations are obliged to do something rather different from what trade unions have to do. No individual shareholder has the right to opt in or opt out of a donation that a company may give. Companies can give donations of very large amounts of money if they so choose. It is slightly unfair that trade union members are obliged to do what they do while company shareholders are not.

Is this not another example of the consensus not working? Why did we not introduce provisions in this Bill to cover that issue? We subscribe to the nonsense of consensus which will always favour those who want to block advance and progress.

The Bill is intended to be limited to deal with those matters on which we can find general agreement. We have had an enjoyable knock-about on trade unions and I shall leave it there. I hope that the noble Lord, Lord Tyler, in replying to the debate will withdraw his amendment.

I am grateful to all noble Lords who have contributed to the debate. It has been useful to try to tease out some of the concerns and anxieties. We share the overall objective that we need to have a transparent system with which the public have confidence. We are grateful to the noble Lord, Lord Marland, for the fascinating bit of information about the £70,000 portrait, but we were not told for what purpose it was bought. It may be the most expensive dartboard in history.

I need to qualify that. I would not like it to be taken on record that it is a £70,000 portrait; my recollection of it is not factual. But enjoy yourselves.

Perhaps I may ask a question through the noble Lord, Lord Tyler. Who was the artist of this picture? He or she must be an extremely good artist to have attracted £70,000 for whatever subject he or she painted.

The Minister is asking me to stretch my memory. Clearly it was not the artist but the quality of the subject that was the most important thing.

We had better move on. I think it was the noble Lord, Lord Hodgson—who, I am sorry to see, is not in his place in the Committee today—who referred to the arms race that has developed. I take the point made by the noble Viscount, Lord Tenby, about spending. I have never been directly involved in the advertising industry but I used to be involved in what you could broadly call the communications industry. I remember speaking to a very astute operator in advertising who, when looking at a poster for the SDP—and this dates me—said, “Good heavens, they are spending an awful lot of money” because there was a row of vintage claret on the poster. I cannot remember what the slogan was but, in tiny type at the bottom, it said, “Vote Conservative”. However, she interpreted the poster as advertising what you would get if you voted SDP.

The waste—I say this with my noble friend Lord Rennard beside me—on advertising in elections is notorious in the industry. I entirely agree with the professional view of the noble Viscount, Lord Tenby, that the arms race is benefiting only those who manage to receive money for that purpose rather than the public at large or, indeed, the political parties.

A number of noble Lords have said that the advice from various sources on limiting donations was in the context of more favourable economic times when the public might accept greater public funding. I understand that point of view. However, that is not the only option because, as we will see when we come to Amendment 120A in the names of my noble friend Lord Goodhart and the noble Lord, Lord MacGregor, there are other possibilities, such as tax concessions comparable to those provided for contributions to charity. So it is not the only way to take up the shortfall, although, frankly, there is not a huge shortfall. A large proportion of the sums that have been referred to in the Committee today are wasted in the arms race. Getting better value for money rather than more money may well be a good objective for all three major political parties.

I remind the Committee that there is considerable public funding already, as my noble friend Lord Rennard said. We have the Short money for the opposition parties in the House of Commons; the Cranborne money for the opposition parties and the Cross-Benchers in this House; the Policy Development Fund, which could now well be uprated in the light of the needs of the parties and the public to understand what is going on; and there is also considerable public money pouring into the coffers of the Conservative Party in both Houses of Parliament by way of salaries and expenses. So none of us can be against public funding, but we have to make sure that it is properly targeted.

I hope the noble Lord was not making the point that that sum from salaries and allowances was purely for Conservative Members.

It is. That particular fund, which I think is now in the region of several million per Parliament, goes to certain named individuals: the Leader of the Opposition and one or two other Conservative Members in the House of Commons, and the Leader of the Conservative Opposition in the House of Lords. None goes to the other opposition parties in that category. When I last looked, the Conservative Party was receiving something in the region of £20 million per Parliament from state funding, and a lot of it does not go to any other political party. So none of us can be against public funding in principle. We may wish to reallocate it, but that is a different matter.

In another place, the Opposition brought forward amendments to require that the thresholds of the 2000 Act should be uprated annually in line with a measure of inflation. My right honourable friend the Minister of State indicated that we agreed with the principle behind these amendments, and committed to bringing forward government amendments to give effect to it. Our Amendment 112 meets this commitment. In effect, it compels the Secretary of State, at least once in the life of a Parliament lasting more than two years, to review and, if he considers it appropriate, vary the recordable and reportable thresholds in the 2000 Act to take account of changes in the value of money.

Such a review will not take place in the life of the current Parliament, but must be conducted for all future Parliaments which sit for at least two years. In carrying out the review, the Secretary of State will be expected to take account of changes in the value of money as well as the administrative burden on parties. Should he conclude that no change should be made to the thresholds, he will make a Statement to Parliament explaining his reasoning. In the event that the thresholds are amended, we expect that the GDP deflator will be used to calculate any revisions.

The imposition of this obligation to consider changing the thresholds once per Parliament does not limit the existing discretion under Section 155(2)(a) to make such changes as are thought necessary from time to time. So, if the Secretary of State decides that more than one change to the various limits is justified during the life of a Parliament, nothing in these amendments will prevent that. I beg to move.

I have tabled Amendment 113 in this group, which would achieve much the same as the Government’s amendment, about which I will say a word or two in a moment.

I am very grateful that the Government have tabled Amendment 112. I appreciate that they did so as a result of my colleagues in another place bringing forward an amendment seeking an annual increase. We appreciate that that was not really a practical, simple solution. The Minister might also offer some congratulation to me, as I suggested at Second Reading that this might be considered once in a Parliament and the Minister said that he would take that on board. I am grateful to him for doing just that.

Our amendment achieves exactly the same as the noble Lord’s government amendment with one exception: it suggests consulting the Electoral Commission. Will the Minister say whether he thinks that that might be a good, or not so good, thing to—

The noble Lord said that his amendment is similar apart from one small area. It is obviously the product of this great consensus. Does the noble Lord believe that, if there were a change of Government, another Government should support the principle of consensus in legislating in this area? Or does he believe that there would not necessarily have to be a consensus for legislative change to be introduced?

Throughout the Bill, in both Houses, I, my noble friend Lord Bates and colleagues in another place have expressed the desire for consensus. I do not see that that is likely to change following an election, which we hope will happen sooner rather than later.

I understand that the noble Lord does not see that it is likely to change. I am trying to establish whether there are conditions under which it could change. We have been committed to consensus throughout this legislation. That is not the position of some of us, but it has been the official position of the Government, and they have proceeded on that basis. Will that be the position of another Government if it were to take power?

I do not think that I can make my position clearer. I think the noble Lord will agree that he is trying to entrap me into making a commitment that we will always maintain a consensus. I was saying that we have been committed to consensus throughout this process. I do not think that that is likely to change, given the commitments that I and my noble friend Lord Bates, together with others in another place, have made, and I shall not go any further than that. As I said, we still seek consensus. The only difference between my amendment and that of the Government is the small idea that we should consult the Electoral Commission. I should be very interested to hear what the Minister has to say about that when he comes to respond, if he thinks that it is necessary to say anything. Looking forward to his response, it is then likely that I will not move Amendment 113 but will accept the Government’s Amendment 112.

I shall intervene briefly. The principle of the Dodo in Alice’s Adventures in Wonderland is being exercised, in that everyone is claiming credit for everything that is happening. I compliment the noble Baroness, Lady Gould of Potternewton, who is sitting opposite me. In 1989, when it was clear that things needed to be done and that they should be carried through by consensus before the Summer Recess, Douglas Hurd, now my noble friend Lord Hurd, who was Home Secretary, delegated to me in my capacity as chairman of the Conservative Party the task of negotiating with the noble Baroness, Lady Gould of Potternewton, who had been appointed by Roy Hattersley—now the noble Lord, Lord Hattersley—the shadow Home Secretary, to deal with the matter. We dealt with it with extreme dispatch. We changed the limits for expenses in by- elections, as agents of all parties were being threatened with prison by virtue of excessive expenditure, and we had no difficulty at all in reaching agreement. I notice that my noble friend Lord Hodgson of Astley Abbotts has tabled another amendment, in relation to which we will return to that discussion, but that is not for today.

It seems that there are congratulations all round, not only going back 20 years but also to the noble Lord, Lord Henley, on having the perspicacity, if that is the right word, to suggest what should be in this amendment. We do not think that a requirement to consult the Electoral Commission is necessary, as the Secretary of State’s discretion is limited to changes to reflect changes in the value of money. We think that it would be excessive to introduce a formal consultation requirement, and we are gratified that the commission itself seems to be of the same mind in that it does not consider it necessary to put such a requirement into the legislation. I imagine that in practice part of the Secretary of State’s review will involve taking into account the views of the commission regarding the likely impact of any potential change to thresholds.

This group of amendments attempts to set out an alternative to the proposals in the Bill, which we consider to be rather unworkable and particularly bad legislation as we are sure that they will apply only to this Parliament. Had they been introduced previously, they would have applied to something like only two of the past 12 Parliaments. The Bill proposes to control expenditure in a way that I think all parties accept needs to be done but to do so purely in the 55-month period after a Parliament has begun. It would seem to be a much more sensible system, and one that should attract consensus, if there needed to be limits in every year and not just in the last few months of the occasional Parliament which will go the full five years.

The noble Lord, Lord Rennard, will not be surprised when I say that we cannot offer him much comfort or support for these amendments. However, Amendment 144, dealing with the communications allowance, might deserve some sympathy. What he is proposing in this group of amendments would impose massive bureaucracy and would do much to discourage a great deal of voluntary activism, which would be a bad thing for politics generally. It could also discourage a great many MPs and councillors from doing quite a lot of the vital work they need to do in communicating with their constituents. It also provides a piecemeal solution to the problem rather than a proper package of reforms. We therefore will not be offering our support to the noble Lord for this amendment or the amendments grouped with it.

I make one point: I wish we had fixed-term Parliaments because I believe it would solve many of these problems. I have been saying this since the 1980s, when I was trying unsuccessfully to persuade the Government of that day that we should consider fixed-term Parliaments.

I still have great problems with the Government’s position as it is in the Bill. I am still not happy that it is the answer to the question. The noble Lord, Lord Rennard, put the question of when does an election start; I have said for years and years, of course, that it starts the day after a general election. A question more often put was, “When does the candidate start to promote himself or herself as a candidate and how does that fit into election expenses?” That, for me, has always been the big question. I am not certain that what we have—I will read it again after what the noble Lord, Lord Rennard, said—is the answer to that question. After looking at the amendment, I agree with the noble Lord, Lord Henley, that it would create an enormous amount of bureaucracy and that is not a satisfactory solution.

This is another of those dilemmas. The Electoral Commission came up some time ago with the idea of having election expenses starting four months before an election, but dropped it because it did not know what four months meant in terms of an election. That proposal was dropped and the solutions that we came up with in the 2000 Act are a part of the problem that we are facing now. Possibly because of my experience, I am one of the people who felt that the triggering mechanism that we had before 2000 worked quite well. It was a shame that the 2000 Act stopped that. Clearly, once one starts to promote a candidate, one has started to promote expenditure. I could see nothing simpler and easier than that, so I do not understand why the Commons was so resistant to the proposals to reintroduce the triggering mechanism.

It is with regret that I have to say to my noble friend that I still have a problem with the Bill. It needs a lot more thought and discussion, and I should like a lot more explanation. I said on Second Reading that I hoped that somebody would write it all out for me in words of one syllable so that I could look at each stage to see what it meant. I am not at all sure that we have the answer at the moment. We are stuck with what we have in front of us for perhaps the next general election, but what will happen after that? We do not have the answers to that. I am still not sure, and before we reach Report I will have to do a lot more thinking and work on the Bill, which I most certainly will do.

I have only a sentence to add. I completely agree with the thrust of the amendments. The problem is that some constituencies are spending huge amounts of money and there has to be some control. I do not know whether that limit should be £50,000, although it is good enough for the moment. While the Government may reject the amendment today, I hope that they might consider matters further before Report. I completely support the principle.

I do not in any way want to imply a degree of conspiracy between the noble Baroness, Lady Gould of Potternewton, and myself, but I indicated earlier in Grand Committee that I am married to the administrator of the fellowship of retired Conservative agents, so I have access to a fair amount of practical, professional advice. I should say that the advice that I am about to read into our proceedings does not come from my wife, but from another, who is a retired agent. He said:

“The proposal to pre-candidacy election expenses for certain elections gives me more concern. The whole idea of permitted expenditure for a person before they are declared, let alone nominated as a candidate is anathema to me. The new Section 76ZA in my view makes a total nonsense of election expense restrictions. In my day the art of an election agent was to get your candidate elected within the then permitted maximum expenditure allowed. Now it is extremely difficult to distinguish when a person becomes a candidate and almost impossible to ensure a level playing field for candidates at an election. In my view the whole section will be a nightmare to deal with especially (3) and particularly when you read at the end of first section of 76ZA the omission of part of 90ZA of the Representation of the People Act 1983”.

I do not know precisely the misgivings of the noble Baroness, Lady Gould, but clearly they are shared with Conservative agents on the other side of the political divide.

I am sympathetic to the thrust of the amendments, which have been thoughtfully put together. I am at slight loggerheads with my party, whereas I totally agree that the amendments would be very difficult to impose and would give us greater policing difficulty. One has to respect the fact that a lot of thought has gone into this—a lot of practical thought, given the experience that the noble Lord, Lord Rennard, has on these matters.

The particular point that I may be at loggerheads with my party on is the back-counting of 365 days for adding up the total election expenditure. At the last election, great strain was put on parties, considering that in that back-counting you had to include the cost of the European elections and the local elections. The decision as to when the election is called and the back-counting totally favour the incumbent, and this cannot be fair in the current electoral system. Another system of establishing the period during which the total spending limit for an election is allowed has to be rethought. Some of the amendments have a stab at that, and I hope that the Minister might consider looking at this issue again during this Bill.

I must confess that I did not entirely follow all of that debate, because much of it seemed to be about Clause 14, rather than this group of amendments, but I can see why the ideas might have been brought together. I shall speak to the amendment and the other amendments in this group. In response to my noble friend Lady Gould, we—or, I should say, the Government in the form of my noble friend Lord Bach—shall respond to her points when he speaks in the debate on Clause 14 stand part.

This group of amendments seeks to effect a profound shift in the regulation of political spending. They would replace the current system which regulates what parties can spend for election purposes in the 365 days prior to the date of election and, separately, what candidates can spend for election purposes in the period between the dissolution of Parliament and the date of election, although noble Lords will be aware that the Bill makes changes to the regulation of candidates’ expenditure.

The amendments appear to be based on the recommendations put to the parties by Sir Hayden Phillips in 2007, although they differ in several key respects from his proposals. We have previously stated our broad support for the comprehensive package of measures proposed by Sir Hayden, including his recommendations on the control of political expenditure. However, I must inform noble Lords that we are not minded to accept the proposed amendments.

Many concerns and questions remain about how a system of all-encompassing spending limits such as those Sir Hayden proposed could work in practice. The amendments bring a number of these concerns into sharp focus. Upon close consideration, the proposed new clauses would, if enacted, have a number of unintended and undesirable consequences.

Amendment 115 would introduce an all-encompassing annual limit of £20 million on the amount that a political party can spend during each 12-month period after a general election. This differs markedly from Sir Hayden’s proposals. He recommended a whole-of-parliament spending limit of £150 million, with an additional general-election premium of £20 million. No such top-up is provided for in Amendment 115. The amendments appear to be intended to apply to the majority of spending by a party for electoral and non-electoral purposes. As a result, we are concerned that parties would face great difficulty in meeting running and campaigning costs in the year of a general election.

Amendment 116 proposes that the level of the annual limit should be reduced for smaller parties, which it defines as those who contested fewer than 100 seats at the previous general election. Again, this differs markedly from Sir Hayden’s proposals that the whole-of-parliament spending limit for smaller parties should be pro-rated only according to the number of seats being contested at the forthcoming election. Under this amendment, the spending limit for smaller parties would be calculated through use of a formula taking into account the number of seats previously contested, the number of seats to be contested at the next general election and the number of months between elections. It is not clear how a smaller party can be expected to know, potentially years in advance, how many seats it intends to contest at the next election and how many months away that election is. We are therefore concerned that smaller parties would face great difficulty in calculating their annual spending limits.

We believe that the proposals in this amendment could disadvantage newer parties by taking into account seats contested at the previous election. There is also a risk that a party could field candidates in a high number of seats at one election to earn the full £20 million spending limit in the following years. It could then choose to contest only a small number of target seats, yet would be permitted to spend very large sums of money in doing so.

Amendment 114 seeks to impose a local pre-candidacy limit of £50,000 in any year, although it would regulate spending by a party, not an individual who goes on to become a candidate. The amendment goes on to state that, after the dissolution of Parliament, the existing candidate spending limit set out in the Representation of the People Act would then apply.

There is perhaps some confusion on this point and it may be helpful if I set out clearly how the current legislation works. The distinction between spending by or on behalf of a party and spending by or on behalf of a candidate is crucial. Current legislation regulates these types of spending separately, and we are concerned at any measures that would blur or confuse that distinction.

The candidate spending limit is often referred to somewhat misleadingly as the “local spending limit”. That implies that it is intended to regulate all spending which takes place within a given constituency. This is not the case, however. It regulates only spending which is by or on behalf of a candidate for the purposes of the candidate’s election. This has been the clear understanding since the famous Tronoh Mines judgment of 1952. Spending on campaigning by a political party, even where that spending is focused on or targeted at a particular constituency or area, should be counted against the separate limit which regulates all party expenditure in the year before a general election. That limit has been in place only since the passage of the 2000 Act. Before that Act, such spending was entirely unregulated, and the period before the regulated 365 days remains unregulated.

It may be the intention of noble Lords to seek to prevent political parties targeting their campaign expenditure at constituencies. If that is the aim, I suggest that the clause should not be labelled as a “pre-candidacy limit”. As it refers only to spending by parties, it does nothing to prevent spending ahead of dissolution by individuals who go on to become candidates, unlike Clause 14.

The focus on more marginal seats is an inevitable consequence of our electoral system. Indeed, in any electoral system it is inevitable that parties will seek to concentrate resources and effort where they feel they have the greatest prospect of electoral success. We do not, in principle, see any reason to seek to prevent that, as it is a legitimate feature of our democratic system.

Will my noble friend give way? He is saying that after 10 years of our Government it would be permissible to have in place a regime in which a political party could spend, say, £1 million per year in a constituency. Is it really acceptable that after all this time we should have a regime that endorses that?

I do not think we are saying that we particularly want to endorse it; we are saying that it is a reasonable, practical fact that money will be spent by political parties differentially between constituencies in order to achieve political advantage. That is part of the democracy in which we live and we should not seek to change it in the Bill.

Will my noble friend give way again? I am sorry to press him but I should like to have this on the record. A very rich man with a vast amount of money could pick out 30 or 40 marginal constituencies, concentrate vast amounts of money—millions and millions of pounds—on those constituencies and thereby influence a general election. That is not a democracy as I understand the term; there is something inherently wrong with a system that allows that. I only ask my noble friend why the Government do not take away this whole area and reconsider it before Report. Later, there will be further amendments that deal specifically with this issue. This is wrong and everyone knows that it is wrong. Labour MPs object to it, so why cannot we stop it now in this Bill?

In a sense, I have to accept that the interpretation offered is in reductio ad absurdum correct. However, political parties are limited to £20 million spending in the year before an election and, as such, to spend a million pounds in one constituency would be less than wise. Regulation of election expenditure is already complex; any further proposals would introduce further complexity and be difficult and unwieldy to operate in practice. Defining when a central party’s expenditure is regarded as local or national would be particularly difficult. A further problem arises when expenditure could be said to be targeted at voters from a particular constituency but is not used in that constituency. The amendment goes on to state that where boundaries change between elections the commission would have the power to apportion expenditure.

A Division has been called. The Committee stands adjourned for 10 minutes.

Amendment 114 goes on to state that, where boundaries change between elections, the Electoral Commission would have the power to,

“apportion expenditure between constituencies in any matter it thinks fit”,

subject to issuing guidance. I must advise noble Lords that the commission is the independent regulator of party finance and that this proposal is inappropriate, both in terms of good legislative practice and proper parliamentary scrutiny. The commission can, and does, make recommendations which the Government consider along with representations from other interested bodies, but any changes to electoral legislation are ultimately a matter for the Government of the day and for Parliament to consider. Therefore, a more appropriate mechanism for achieving this would be for the Secretary of State to lay an order, subject to the affirmative resolution procedure, making any such change, having received a recommendation from the commission.

Amendment 117 provides for a power to vary, by order, any of the sums specified in the 1983 Act. This power is presumably conferred on the Secretary of State, although it is not clear from the proposed amendment. A power to vary, by order, the level of the candidate spending limit already exists in the 1983 Act, but such a power can be exercised only in consequence of changes in the value of money or following a recommendation by the Electoral Commission. We are concerned that the amendment grants a wider power than currently exists.

Amendment 120 would add expenditure paid for out of the House of Commons communications allowance to the list of regulated matters. The rules regarding use of that allowance are a matter for the other place, but I can perhaps make one observation here. As with all parliamentary allowances, the communications allowance must be spent only on matters in connection with carrying out parliamentary duties. It cannot be used for partisan or political purposes. Given these clear conditions, I find it difficult to see how money spent appropriately under the terms of the allowance could be regarded as being for electoral purposes. Notwithstanding this, my honourable friend the Minister of State gave a clear commitment in the other place that a proposal would be brought forward on the appropriate use of allowances during the pre-candidacy regulated period proposed in Clause 14. The other place may consider that some form of restriction is required when the new limit is in operation, but that is not a matter for this Committee to opine on. Furthermore, it is not appropriate for legislation to alter or restrict an allowance established and administered under House rules. Any change to the way in which a parliamentary allowance works should be achieved using the procedures that were used to establish it. We would not want to make provision for legislation to regulate how either House conducts its business.

Amendment 118 and associated Amendments 141 and 144 are concerned with the transitional arrangements that would apply should the proposals contained elsewhere in this group of amendments be agreed to. They provide that only 75 per cent of the proposed annual spending limit would be available for the period beginning 31 July 2009 until the next election. We are concerned that it would be very difficult for the parties to adjust at such short notice to the major changes proposed by the amendments.

Amendments 145 and 146 propose commencing the new clauses contained in Amendments 114 and 115 just 14 days after Royal Assent. Again, we are concerned about the very short notice that this would give parties to prepare for such significant changes. I also note that the commencement of other critical amendments in this group, including on the spending limit for smaller parties and the list of qualifying expenditure, has been left unspecified.

We firmly believe that any changes to the regulation of party funding should be made only where broad agreement can be established between the parties to move forward. This is particularly the case where the changes represent a major shift from the existing arrangements. Following the publication of Sir Hayden’s final report in 2007, the three largest parties came together to negotiate on a way forward. Regrettably, those talks broke down without a consensus being achieved. We do not see any prospect of a consensus on Sir Hayden’s recommendations emerging in the near term.

The amendments before us make proposals based on Sir Hayden’s recommendations but, as I have set out, they differ in a number of important ways and would create a number of difficulties and problems. I am grateful to the Members of the Committee who tabled these amendments for the opportunity to discuss these matters in some detail. However, it would not be appropriate to make the wide-ranging and unwieldy changes proposed by the amendments without the requisite consensus and at such a late stage of what has always been intended to be a far more modest Bill. I hope that the noble Lord will withdraw his amendment.

I asked a question about when the campaign begins. It seems clear that, if the Bill is not amended along these lines, the debate on how to deal with this issue will simply begin again the day after polling day following the next general election campaign and we will not have achieved very much with this Bill.

I thank, in particular, the noble Lord, Lord Campbell-Savours, for his support for these amendments and, if I may say so, for hitting the nail on the head when it comes to the Bill’s failure to deal with fundamental problems. Between 1883 and 2000, effective legislation was in place to deal with some of the problems of using money to buy undue influence in a particular constituency. Inadvertently, the trigger was removed in 2000, and, like the noble Baroness, Lady Gould, I wondered long and hard whether the best way of trying to introduce some level of fair play at the constituency level might be to bring back the trigger. However, after talking to all my colleagues, it would seem that nine years after its abolition, it would be very difficult to bring it back. Therefore, there is a need for alternative mechanisms, which are set out in the Bill.

I thank the noble Baroness, Lady Gould, for at least agreeing that the code in the proposals is clearly wrong and that we need to do something to try to get things right. I also thank the noble Lord, Lord Marland, for his sympathy for the amendments. I thank the Minister and the expert team behind him for suggesting some drafting amendments and improvements to this series of amendments that could produce a much better package than is currently in the Bill.

The debate around these amendments has focused on two other principles—a balance between bureaucracy and effectiveness. On bureaucracy, raised by the noble Lord, Lord Henley, and the noble Baroness, Lady Gould, I should say that I am the only person in the Room who is currently responsible for administering the bureaucracy on the code of rules for a national party organisation. I have to do that every year in which there might be a general election. In which year would I decide not to have the bureaucratic controls in place on the grounds that there was no chance of a general election? It would never be responsible for me not to have the bureaucracy in place because there might always be the possibility of a general election in any year. Therefore, at a national level the bureaucracy is in place on a permanent basis, and that must be the case in all the major party headquarters. It would be wrong if we did not have that. If we have to have it in place every year in case there is a general election, and we have to track back all our expenditure, which is limited over the 12 months before polling day, we might as well go the whole hog and say that we should have expenditure controls over the life of a Parliament.

The other issue is effectiveness. To deal with this problem, which is clear, readily identifiable and recognised by most people, we need to do something to control party-political expenditure and buying undue influence in the ballot box. It is simply not an effective principle to say that we should have controls between the 51st month after a general election and the 55th month in which it must happen. This is a nonsense in trying to control the overall problem.

I end with a plea to the Minister and those close to him. They are saying, “This is what we are trying to do with this Bill”. I hope that they will look carefully at what the noble Lord, Lord Campbell-Savours, said and perhaps go to Mr Peter Bradley, the former Member for the Wrekin, and say, “This is what we are planning to do. What happened to you in your constituency in the last general election? How can such a clear abuse of the original principles of the 1983 legislation be addressed by this Bill?” I suggest to the Minister and the Government that it will not address those problems in any significant way. We need to look further at this.

However, having suggested that we need to try to refine this package and make it better, I will return to the debate at a later date. For the moment, I beg leave to withdraw the amendment.

We turn now to an issue with which a great many Members of your Lordships’ House, and certainly a great many Members of the other place, are concerned. I was horrified to recollect that the first time I stood in a parliamentary election was in 1966—I was terribly young, of course. In those good old days, as other Members of the Committee may recall, we were dragooned into recognising that the man or woman who was responsible for our expenditure could go to prison if we did not abide by the rules. The amendment about qualifying expenditure seeks to bring up to date those simple principles of candidature, which, as my noble friend said, go back to the 19th century. They were well expressed in Section 75 of the Representation of the People Act 1983, 100 years after the first legislation on this issue, and we refer to that section in our amendment. Section 75(1) reads as follows:

“No expenses shall, with a view to promoting or procuring the election of a candidate at an election, be incurred by any person other than the candidate, his election agent and the persons authorised in writing by the election agent on account—

(a) of holding public meetings or organising any public display; or

(b) of issuing advertisements, circulars or publications; or

(c) of otherwise presenting to the electors the candidate or his views or the extent or nature of his backing or disparaging another candidate”.

It all seems very simple, and no doubt it seemed very simple to candidates in the 1980s and even before that, but, as the Minister said in responding to the previous group of amendments, spending by or on behalf of a party has to be distinguished from spending by or on behalf of a candidate, and it is not. That is why we need this group of amendments.

The amendment specifies the type of expenditure that parties can legitimately undertake to fight elections. It is very different from the situation in 1983, let alone in 1966. I particularly draw the Committee’s attention to the proposed subsection (1)(c) in our amendment. It states that,

“unsolicited material sent to electors, whether or not addressed to them by name (including newsletters or similar publications issued by or on behalf of the party with a view to giving electors in a particular electoral area information about the opinions or activities of, or other personal information relating to, their elected representatives or existing or prospective candidates)”,

and then there is the detail of what other costs can be included.

Since the 1983 legislation, and indeed even since the 2000 Act, there has been a huge increase in the amount of unsolicited mail sent to individual electors by name which, if it did not specifically ask the elector to support Mr A or Miss B, has been ruled as not being part of the necessary expenditure limits in that constituency. That is extraordinary. Now it would be seen to be very much part of the political weaponry of all the parties, yet it is clearly intended deliberately to get round the rules that have been in place for 100 years and more. Those of us who have stood in elections—not necessarily as far back as 1966 but more recently—will be only too conscious of how this trend has hugely increased and developed in recent years.

Therefore, our amendment seeks to define all qualifying expenditure, including all party-political spending, whether it be from central headquarters funds, designed to influence a particular constituency, or whether it is intended for wider dissemination. This would apply regardless of whether such spending was promoted by a particular candidate or whether it was based on a decision taken at a national level for other reasons. Again, I make it clear, as we have done frequently in the Committee, that this amendment, together with other of our amendments, is intended to close the loophole by which parties nationally can go outside the limits imposed locally and not take any notice of what is happening in local campaigning, or take notice of the responsibility that the candidate or his or her agent has in terms of the controls that have been in place all that time.

Frankly, the strict limits on candidates are no longer relevant—they do not work—while this expenditure is considered to be not subject to any sort of limitation. As I have already said, subsection (1)(c) of our proposed new clause is intended to catch all the publications sent to specific constituencies which are paid for from national expenditure. It should clearly be read in conjunction with the new clauses to which we have already referred concerning the local pre-candidacy spending limit and the national spending limit. It is intended to ensure that the entirely proper controls that have been in place for so long are effective.

I also draw attention to subsection (3) of the proposed new clause, under which expenditure on, for example, parliamentary staff should not be included in such calculations for qualifying expenditure, but the expenditure on a campaign manager should clearly be included. This is intended to ensure that expenditure that allows an elected MP to do his or her job as a parliamentarian is quite distinct from expenditure on his or her campaign to be re-elected. We believe that this is a much more workable and relevant assessment of what should and should not be categorised as expenditure in this context. It effectively brings up to date the very limited list from the Representation of the People Act 1983 and, in so doing, we believe that it is much more in the spirit of the controls that have been in place for a century and more to stop people buying parliamentary seats. I beg to move.

One problem for me in this whole business has been the fact that I have spent the past eight years in this House steering very clear of political argument. That may seem strange because when I was in the Commons I was probably a bit of a beast on the Back Benches. But here I have been very careful to avoid getting into party-political point-scoring in debates on the Floor of the House or even in Committee. One of my difficulties with this Bill is that we are just led into that kind of political argument. In the context of what has happened, it is very hard to avoid getting into a party-political debate, and I apologise to the Committee. As I said, I have spent eight years avoiding it in every contribution that I have made.

I want to produce a letter that was sent out by the Cities of London and Westminster Conservative Association because in many ways it represents the debate that we are having now. I wonder whether it fits into the legislation and whether this kind of material should be subject to some kind of control. In constituencies throughout the country, we see letters from David Cameron that have been sent out nationally and which somehow seem to get round all kinds of constraints, whether it is before or during campaigns. This letter was sent to my mother who lives in Whitehall Court, which noble Lords will know is just opposite Downing Street. The letter is headed, “Conservative Fighting Fund Appeal”. It states:

“Dear Mrs Campbell-Savours,

No one can tell when the call to battle for the Conservative Party will come, to respond to the dreadful state into which Gordon Brown has led our country—and without a word of apology for his own part in causing the disaster through his chosen economic and financial policies.

The Conservative Party will need money to meet whatever further contingencies and challenges arise, and this letter is to appeal to you to put your hand in your pocket now”—

we all know what is coming as many of us have probably sent them out—and the letter is signed by the noble Lord, Lord Brooke of Sutton Mandeville, who is here today. He might not know that it has gone out. My argument is not with him but about whether this kind of material should be sent out. It includes a request to send your money to:

“The Rt. Hon. the Lord Brooke … London SW1”—

and is followed by the words:

“I/We have pleasure in enclosing … my/our contribution to the Conservative Fighting Fund”.

A postal vote application is also enclosed with the letter.

The document was sent last week in the middle of a campaign for the European elections. Nothing indicates that it would fall under any of the constraints that we have discussed today. I am pretty sure that it has not. If there is confusion in the Conservative Party about whether it is within campaign territory, it applies equally in the Labour Party. A colleague sought information somewhere in the United Kingdom of a regional office and got a number of different interpretations as to what the law is. It does not apply only to the Conservatives; it probably applies to a number of political parties. If the noble Lord, Lord Rennard, is in control of the Liberal Democrats, he is probably keeping tight control over how these things do in the light of the Michael Brown affair.

It is difficult to understand how that material can go out at this stage. I did not read the whole letter but it is basically an election leaflet. It is asking people for money and encloses a postal vote application form. Within a matter of weeks we will be going to the polls in London. Somewhere along the line it should be included in election expenditure, but it does not because it does not refer to a candidate. That is how it gets out of it. If we were to slip the name of the candidate into the letter, I do not think that it would make much difference. The reality is that it is an election document.

I ask my noble friend to forgive me. I have tried diligently not to be political over all my years in this House. This is wrong and it should be sorted out. If the amendments of the noble Lord, Lord Tyler, deal with this kind of problem, let us look at them before Report and not write them off as we have done with many of the amendments in our deliberations on this Bill.

It may be helpful if I make a brief intervention. The noble Lord, Lord Campbell-Savours, and I have had a most agreeable series of jousts over the past eight years on any matter relating to Westminster. As soon as that word appeared in the document that he was about to read I could see that it was another such example. I do not take offence in the slightest. The only thing that I did not know until he reached the end of his remarks was whether he would say who the signatory was. I was perfectly clear that if he did not do so, I would get up and say that it was in fact me. This is not in the context of a confessional but, in the context of the doubt in the noble Lord’s mind about who might have composed it, I will say that I also wrote it. Without seeing it, I have no grounds for supposing that I knew anything about the postal vote application. But the noble Lord may tell me that there is a reference to the postal vote on my part. I do not believe that there was.

Can I just clarify that the letter says, after the signature,

“P.S. A postal vote application form is enclosed for your convenience; more are freely available from Westminster City Council”.

I am grateful for that elucidation. The only way in which I can verify whether that was an action of mine or an action of someone else is by making direct inquiries. So far as I was concerned, it was not an electoral communication and I cannot believe that I would have included the postal vote in it. However, as I am sure is true of the noble Lord, Lord Campbell-Savours, as well as myself, nothing ever went out of my constituency office other than by my dictation and by my signature. I am not talking about the party-political part; I am talking about the office in which I represented the constituents for 24 years. Of course I therefore take responsibility for the action.

The point is that we all get involved in these sort of things because of how the law is framed. On reflection, does the noble Lord think that the law perhaps should be reviewed in this particular area if there is confusion in all the political parties on these sorts of issues?

I do not want to get the noble Lord, Lord Campbell-Savours, to his feet again, but was he actually asking me a question?

Yes.

I am certainly of the view—and this is one reason why I am taking part in this Grand Committee—that it is important that everybody knows where they are.

I shall be careful not to get into the Campbell-Savours-Brooke debate. I have some notes here. The only thing that I can say with confidence is that election expenditure before European elections is regulated for four months before the election is held. I shall return to the essence of the debate on those details at the end.

Amendment 119 lists the types of expenditure which would be regulated by the spending limits proposed in the earlier Amendments 114, 115 and 116. Sir Hayden Phillips’s proposals sought to regulate the vast majority of a party’s spending with only a few key exceptions, such as interest on debt, legal expenses and intra-party transfers. Amendment 119 instead mirrors the list-based approach taken in current legislation. It largely replicates the list of regulated matters for the existing campaign spending limit, which is set out in Schedule 8 to the 2000 Act. However, the amendment makes several key changes and additions to that list and I shall speak to only a couple of these. Expenditure would appear to qualify whether or not it is,

“for the purposes of the candidate’s election”.

This is a very significant change.

Specifically, expenditure on the remuneration or allowances of staff would be included, provided that those staff work in any way on matters listed elsewhere as qualifying expenditure, although I note the amendment makes no attempt to define who would count as staff. Staff costs are currently specifically excluded from the list of regulated matters in Schedule 8 to the 2000 Act. This is because when that Act was being discussed all parties recognised the difficulties that staff would have in accurately assessing which part of their work can be said to be on campaign issues and which can be said to be on non-campaign duties. That is particularly so where a member of staff works in part on campaign matters and in part on non-campaign matters. Even if staff were able to do so, verification by the Electoral Commission would likely prove very difficult without it proving unduly burdensome for parties—for example, by the keeping of timesheets or something similar. Without that sort of record keeping there would be significant scope for parties to avoid the rules. For example, rules might be circumvented by changing job titles. All of these problems would come to the fore should the noble Lord’s proposed system come into force.

Secondly, any expenditure of more than £100 per year by any person on qualifying expenditure which is intended to benefit a registered party would count against that party’s limit. It would not, apparently, be necessary for the party to have authorised that expenditure. This is not appropriate. Where a party authorises expenditure, it should count against the limit. Where a party does not authorise expenditure, it should be regulated separately by the controls that already exist on third-party expenditure.

We have suggested previously that we are open to considering whether the list of regulated matters in Schedule 8 to the 2000 Act needs amendment. We are, as on many other areas of the Bill and associated policy, open to views on this. However, the amendment goes much further than is desirable. It proposes unworkable and undesirable amendments to the schedule. I hope that the noble Lord will withdraw the amendment.

I can respond quite speedily. The noble Lord, Lord Campbell-Savours, is of course quoting just one of a huge number of examples. All parties are as confused as he and I, particularly by this issue of unsolicited mail. It has grown exponentially in recent years. Unless we are prepared to take it in, as the Minister now appears to be saying that he might be able to do with the schedule to the 2000 Act, this will continue to be a vast loophole. In all three major parties, even those responsible for local campaigns in marginal seats quite resent this sort of interference and intervention by party headquarters. It is often peddling a line or spinning a tale which is not much in accord with the local candidate’s campaign. It undermines that relationship between the candidate and his or her electorate in his or her constituency in a way that is undesirable anyway, quite apart from the issue of controlling expenditure. Unsolicited mail—indeed, unsolicited e-mail, now—is undoing literally a century and a half of careful pinning of accountability and identification of responsibility for who is going to pay for an election.

The Minister referred to two ways in which our amendments would change the current situation. Neither case is as substantial as he suggests. He says that he is open to views. I hope that he has been listening, not least to the noble Lord, Lord Campbell-Savours. If they were honest, all Members of the Committee would admit that campaigning techniques have moved on in a way which is not thoroughly desirable and is certainly not covered by legislation.

It is therefore extremely important that we identify these things with greater clarity by some means or other. That may be achieved not in the Bill but in secondary legislation. For example, the Minister mentioned that the four months leading up to the European parliamentary elections are a controlled period for the purpose of expenditure. I am not sure that all parties are aware of that given some of the publications to which the noble Lord, Lord Campbell-Savours, has referred. From what the noble Lord, Lord Brooke, said, it sounds as though putting together the package for postal votes clearly relates to an election—I exonerate the noble Lord from doing anything improper—because you do not do that in March simply for the fun of it; you do it because you know that there is an election coming up.

I am hopeful that the Minister, in saying that the Government are open to views, is genuinely listening on this. The points that have been made are formidable and we will not get another opportunity to deal with this problem for some years to come if we miss it now. I therefore hope that, if I now withdraw the amendment, the Government will think carefully about how they might address this formidable problem before Report. In the mean time, however, I beg leave to withdraw the amendment.

Amendments 120A and 132B would enable donors to obtain tax relief on small or moderate donations to the established political parties. This practice has been successfully adopted in several countries, notably perhaps in Canada.

Tax relief on modest donations was recommended by the Committee on Standards in Public Life in its 1998 report on the funding of political parties, of which I shall read the conclusion in paragraph 8.20:

“We therefore conclude that the balance of argument is in favour of allowing tax relief on donations to political parties by deduction at source. We think that tax relief should be limited to donations of up to £500 in any one year (or the first £500 of larger donations). This sum is within reach of a moderately well-off party activist, and not just the rich. We believe that it also represents a balance between setting the level so high that it loses its purpose of encouraging parties to seek large numbers of smaller donations or setting it so low that the benefit of tax relief is not worth pursuing”.

Most of the recommendations in the committee’s report were accepted and incorporated in the 2000 Act, but not this one. I was a member of the Committee on Standards of Public Life at the time, as was the noble Lord, Lord MacGregor of Pulham Market, who I am extremely pleased to see has put his name to this amendment.

All political parties need funding. It is highly undesirable that all funds should come from the Government as used to, and may still be the case in Sweden, since it greatly reduces the need to go out and recruit members and give more contact with the voters. Equally, however, it would be at least as undesirable—or even more so—that party funding should come mainly from a small number of rich donors making very large donations. That would be a travesty of democracy; it would give too much influence to the big donors, both in the setting of the donee party’s policy and in enabling the donee party to run a more effective campaign. It is important to encourage parties to seek small or moderate donations from people who are not in a position to exercise influence over the party but who give money to it because they believe in and support it.

One way of doing this is to give tax relief for small or moderate donations, including membership subscriptions, which enables donors to give a larger sum of money for the same net cost to them as now prevails. This does not involve the payment of any taxpayers’ money to political parties out of government funds; rather, it reduces the amount of tax that the donor has to pay to the Government, which I believe is considerably more acceptable to the public than payment out of government funds.

Political parties are an essential part of any democratic system. We recognise that giving to charities should be encouraged by tax relief to the donors. By extending tax relief to donations to political parties, we would recognise that those donations are also very much in the public interest and deserve tax relief. It may not be known by many Members of the Committee, but tax relief has already been extended by the Inheritance Tax Act 1984, previously called Capital Transfer Tax Act 1984 to bequests by will to a political party which won at least two seats at the preceding general election or one seat and a total of no fewer than 150,000 votes.

Tax relief on modest donations is not linked to the question whether there should be a cap on very large donations. If there is such a cap, then increasing the value of smaller donations would be an acceptable way of restoring some of the income lost to the parties. If there was no cap, tax relief would increase the value to the parties of smaller donations and reduce the extent of their dependence on large donations. Both of these seem to be desirable conclusions.

On the question whether tax relief might work, we have the advantage in this country of an established system of tax relief for donors to charities through the gift-aid system. I have no doubt that using a modified form of gift aid is the best way of achieving tax relief on gifts to political parties. It would, as I said, be a modified form. There are two main modifications. First, gift aid applies to gifts of any amount. That is, indeed, the right thing for gifts to charity—the bigger the gifts the better—but it does not apply to donations to political parties because it is an essential purpose of the tax relief on political donations to increase the value of smaller donations as against bigger ones.

As I have mentioned, the Committee on Standards in Public Life recommended that relief should be given on donations of £500 in any one year, or on the first £500 of donations exceeding that total in the year. As that committee recommended the limit in 1998, I have increased the limit in paragraph 5 of Amendment 132B to £1,000, which may or may not be an appropriate figure. I shall certainly be happy to consider any variations.

The second modification is that tax relief for gift aid extends to higher rate tax so that higher rate taxpayers get refunds of their higher rate tax on the amount of their gift to charity. Again, that is fair enough for gifts to charity, but to apply that rule to donations to political parties would give greater tax relief to donations from higher rate taxpayers than to donations of the same initial amount from a donor who is not paying higher rate tax. Paragraph 6 of the proposed new schedule in Amendment 132B restricts tax relief for any donor to the basic rate of tax.

Another question concerns the parties that should be eligible to receive donations that give rise to tax relief. Gift aid is of course available for donations to any registered charity, but I doubt whether tax relief for any registered political party would be appropriate, at least initially; it may be possible to widen the number later. That could lead to the problem which arose in Germany, where state funding is available to minor parties. One such party was the Grey Party, which campaigned for pensioners. Having received a generous fund from the state, the party used it for building residential homes for their members rather than using it for fighting elections. It is undesirable to give it to a party—even a registered party—which might act in that way.

I put in the test of two seats at the previous general election on the basis of the exemption from inheritance tax. By an oversight, I am afraid, I failed to add the possibility of one member being elected and at least 150,000 votes being cast as an alternative test. There could indeed be further possible tests or different tests to decide which parties are entitled to the benefit of the tax relief.

Tax relief on the lines suggested by these amendments is plainly desirable. It reduces the influence of very rich donors; it encourages parties to seek more members; and it recognises that modest donations are an important part of the democratic process. The part that modest donations can play has been highlighted dramatically by President Obama’s huge success in funding his campaign by myriads of small donations. That should be the target for which we look. I beg to move.

I support the noble Lord, Lord Goodhart, on the proposed new clause. As he indicated, I was a member of the Committee on Standards in Public Life which produced this report on the funding of political parties in the United Kingdom, and he and I were strong advocates of this measure. We persuaded all our colleagues that it was very worthy and it was therefore a recommendation of the full committee. I have not changed my mind since.

The noble Lord has given the main reasons for it and I can be brief in adding to them and, to some extent, repeating them. First, it would reduce the dependence on large donations and, I hope, considerably extend the number of small donors. In the report, we said:

“We have found very widespread support for the view that it is more democratic, and therefore in the public interest, that political parties should be funded by a large number of small donations rather than by a small number of large donations. A system of tax relief which increases the value to political parties of smaller donations is likely to encourage the parties to make greater efforts to obtain them”.

Much more important, in my view, is the second reason. To my mind, supporting and participating in the political process is just as important a part of public life as supporting charities, and just as worthy. In this day and age when, sadly, so many people take the view that being involved in the political process is not an honourable activity, recognising it in the tax system would be an important indication that it was worthy. I suspect that most people in this Room share my view that the way in which politicians and the political process are now perceived is most disappointing, and I would hope that the amendment would be a small step towards putting that right. Aligning tax relief would recognise the importance of participating in the process. I cannot do better than quote the noble Lord, Lord Parkinson, who gave evidence to the committee in 1998. When asked for his reaction to a tax incentive scheme, he said:

“I think that is a very attractive idea. I think anything that encourages people to participate in a political process, to get involved in political parties, to broaden the base of their membership is to be welcomed because I think politics is a very honourable profession and supporting a political party is a very worthwhile way of spending one’s time and money”.

I am sorry to trouble the noble Lord, because I support the amendment, but does he have any idea what it would cost? The noble Lord, Lord Goodhart, said that it would not represent a cost to the taxpayer, but does he have any idea? Has anyone tried to cost it at any stage?

I was intending to come to that. It would obviously depend on the level of take-up. However, the fact that donations that are eligible for tax relief are limited by size and limited to the basic rate means that the cost would not be very great. However, I will come back to that point in a moment.

I wanted to quote the noble Lord, Lord Razzall, who, in giving evidence to our committee, was also asked what he thought about this. His was not such a rousing response as the one from the noble Lord, Lord Parkinson, which I thought was much better, but he did at least say:

“I think that as a weapon for the political parties to build up their membership base in particular … as part of that armoury as long as it was structured in a way that was designed to benefit the small donations, I wouldn’t be against it”.

In fact, the proposal in the amendment is to limit tax relief in the way that the noble Lord, Lord Goodhart, described.

It is interesting to note—I certainly did not until I came to look at this matter—that in inheritance tax, relief is given not just in relation to limited donations but for donations of whatever scale. That indicates that the tax system recognises the points that I have been making and it shows that there is a precedent.

My third point, which brings me to the question that I have just been asked, is that there would be a small—I think, fairly small—reduction in tax revenue. The argument in favour of giving a state benefit, as one might describe it, to political parties in this way rather than through direct funding is that it would involve decisions and choices by a lot of citizens around the country. In other words, the allocation and amount of the relief given would depend on choices by citizens who—this is an important point—would have to make a contribution themselves.

I now come to the really difficult point. As a former Chief Secretary, and looking at the current appalling state of the public finances in the debate on the economy on Thursday, I will be arguing that every proposal for tax relief or for further state funding should be looked at extraordinarily carefully and be very well justified. Given the state of the public finances today, I would not put forward such a case.

The Government will no doubt be resistant to this proposal, as they were when our report was published. As the noble Lord, Lord Goodhart, said, this was the only amendment that the Government refused to accept. Interestingly, they gave no reasons; they just rejected it. I suspect that some of the reasons were that they have the trade union contributions and felt that this proposal would benefit other parties more than themselves.

I hope that the Minister will give reasons other than cost—I accept that argument—and the reasons for the principle being rejected. The principle is what matters, and why I support the amendment. I hope that, in more propitious times, we can address this again in preference to further state funding. It is the right way to proceed.

I follow the noble Lord, Lord MacGregor, on the question of principle—I hope that my noble friend will support it. There may be some details, such as the maximum amount of £1,000 in the schedule and at what level we should determine whether tax relief is available. However, the principle is, without doubt, absolutely sound. I support the idea, and the concept that we should be thinking much more about small donations to political parties rather than the big donations that all have relied on. It is an important part, not only of increasing party membership, but of building a better democratic base on which our political parties actually work.

We all say that democracy relies on the political parties; it is a nice slogan. Well, the political parties rely on getting people’s support and this is one way of doing it. There may be some details still to be looked at, but the principle is just right.

I endorse the amendment, to which I have put my name. I am slightly disappointed that the noble Lord, Lord MacGregor, thinks that this is the right thing to do but not now. We want to get more people involved in our political process now. There is a crisis of confidence, which is partly related to the economic crisis: people do not see the political parties and Parliament as representing them. The case has increased since 10 years ago, when the Committee on Standards in Public Life so strongly put the argument to which the noble Lord, Lord MacGregor spoke. Given that we seem unable to reach another way to help the individual citizen to be more directly involved, and seeing that they are involved—at a modest level in terms of contribution—in the political process, it would be a pity to put this into cold storage for “better times”. Better times may not come for some time.

I confess that I was attracted by the idea of the Power commission, chaired by the noble Baroness, Lady Kennedy of The Shaws, that electors could in some way or other indicate which party they thought should receive a limited part of the available state funding when they went to the polling station. Frankly, that is a long way off; we will not be able to get it. This, however, is an intensely practical, simple solution. A huge number of people already adopt a similar provision for charity contributions. I see no reason why taking an active interest in how your country is run should somehow be demeaned as less important than contributing to a charity.

The noble Lord, Lord MacGregor, referred to the impact of this, and whether it might treat political parties unfairly in the sense that people on higher incomes, paying higher taxes, might be inclined to vote in a particular way and the benefit would therefore arise for a particular political party. I am not altogether sure about that. In the period up to 1997, if such a scheme had been in operation I am sure that there would not have been very much difference between the application of this principle, whether it applied to Conservative, Labour or Liberal voters. I suspect that Labour was sufficiently popular at that time to have been able to attract as much donation as other political parties. Maybe at the moment, because we have a little difficulty which we all know about, contributions under this system might drop off. That is just the to and fro of politics.

I rise briefly to support the proposal, with an eye on the clock. I do so because the amendment has twin objectives and could kill two birds with one stone. Unlike the noble Lord, Lord Campbell-Savours, I am not in favour of direct state aid, because it does not answer the question of introversion or force parties to look out—it can tend to make them look inwards. However, we need to recognise the need for political parties and that they need funding. We need to reduce the dependency on large donations. For me, it is a way in which to get modest amounts of state aid to parties without having to have the direct connection, which would otherwise be the case.

The second bird that it kills is that of encouraging political parties to reach out. We examine why the turnout in elections is low and falling, but people fail to see their relevance to them. That may be their fault or that of the political parties, but we surely need to make greater efforts to try to build a mass membership. As the noble Lord, Lord MacGregor, said, that would be a further encouragement to reach out to present policies in a way that is attractive and is seen to be relevant by our fellow citizens, and would do so in a way that would reward political parties with a modest sum. I agree that the sum should be modest. I am attracted by the idea suggested by the noble Lord, Lord Campbell-Savours, that we might put a tiny marker down, because the state of our public finances is such that anything more than a tiny marker would be very difficult. But let us get something on the record that would enable us to start this new approach, avoiding direct state funding and encouraging parties to reach out to rebuild a mass membership, which sees the political process as relevant and important to themselves and to the country.

I endorse my noble friend’s remarks. I add my support, too, to what the noble Lord, Lord Campbell-Savours, said, which is something that I have said in the past about allowing for tax relief but doing it on very small amounts. I am attracted by his suggestion that one can have a regulatory mechanism and increase the amount over time.

Although it might seem like quite a technical amendment to some, it is worth stressing what has already been touched on. It is fundamental to the health of our political system. Political parties are at the heart of a healthy democracy. They aggregate opinion and provide the essential mechanism for accountability in the political process. Without them electors are lost; there is no accountability. We need to stress the fundamental role of parties but recognise that they are under threat at the moment, not least from a shift in the interests of electors to organise interest groups. Such groups help to absorb the energies; they are much more directed, so people are more willing to give to groups than to political parties.

Interest groups enjoy no democratic legitimacy, but it is worth mentioning that some of them enjoy the tax advantages, as mentioned by the noble Lord, Lord Goodhart, that political parties do not. A case has been made that it is essential to try to help to sustain political parties within our political system, but as the noble Lord, Lord Campbell-Savours, has conceded, there is a certain public wariness about direct support from public funds, which is understandable. We already provide indirect support for a whole range of mechanisms, such as free mailing, election broadcasts, Short money and Cranborne money, so there is something coming indirectly. I concur with the argument against going down the route of direct public funding on which I am completely at one with my noble friend Lord Hodgson.

I prefer the option embodied in the amendment for the reasons given by the noble Lord, Lord Goodhart, and my noble friend Lord MacGregor. It is essentially a democratic option in that electors choose how to allocate money. Capping the amount has been mentioned, which would encourage the parties to solicit funding from a wide range of supporters. Perhaps even Mrs Campbell-Savours senior will be solicited.

She would not give it to Labour.

I found the arguments of the noble Lord, Lord Goodhart, and my noble friend Lord MacGregor compelling, and I reiterate my support for the overwhelming arguments for moving in this direction.

The amendments essentially propose a system of gift aid for political donations, enabling political parties to benefit by reclaiming the tax paid by individual donors. They would benefit only established parties—those with two or more MPs. In addition, higher rate taxpayer donations would not attract tax relief.

We understand the motivation for these amendments and confirm that we support and encourage smaller donations from individuals and encourage political parties to reach out to a wide proportion of the population. We, too, have seen the lessons from the Democratic Party’s fundraising ahead of the recent elections in the United States. That is a striking example of how it can be used to good effect.

However, we cannot seriously support a proposal that suggests, in effect, an increase in public funding for political parties in the current economic climate. The noble Lord, Lord MacGregor, was right to point out that this is real money. It might not divert public money towards political parties, but it would reduce the amount of money available in the public purse for public expenditure. Even without the current downturn, we are not sure that we shall be presenting political parties as analogous to charities. Gift aid is an important development that encourages donations to charities and helps them to do good work with the additional income they receive as a result, but politics is not charitable work.

I apologise to the Minister but does he not see that there is an essential irony in that many charities campaign on policy issues? The argument that he is advancing suggests that he would now wish to take away that opportunity for those NGOs that campaign on policy issues simply because of the economic crisis. I do not think that that is what the Minister is saying but will he at least accept the irony that charities can be political and have donations set against tax while political parties whose main function is politics cannot?

Irony is in the eye of the beholder and the beholder in this case is the great British public. While the analogy drawn by the noble Lord between political parties and campaigning charities may have some point, I do not believe that is how the public feel about political parties at this moment and we should not press on that basis.

Can the Minister explain why it is right to allow tax relief for inheritance purposes but not for income tax? Surely the principle that it is right to give some form of tax relief for political donations is already accepted.

I am sure the noble Lord would not argue that in a splendid taxation system there are not anomalies from time to time. Clearly this is one and we are against the principle of extending it. The Committee probably think more highly of politics and political parties than some other parts of the population, but we cannot support the proposal in the amendment that political parties should benefit from additional sums of taxpayers’ money. It is with some temerity that I must shatter this consensus. On that basis, I hope the noble Lord will withdraw the amendment.

By my watch, I reckon I have about four minutes to go and I will finish well within that time.

I am immensely grateful for the support from all sides of the Committee, if that is the right expression, that I have received for the amendment; that is, from three members of the Labour Party, three members of the Conservatives and my noble friend Lord Tyler.

The amount involved is very small. The noble Lord, Lord Campbell-Savours, raised the important question of how much it is likely to cost. Having made a quick calculation, almost all gifts will come from members of the political parties, of which there are now about 500,000 between them. Probably only a small proportion of those give more money than their membership subscription. But let us assume that the total membership contributions amount to an average of £40 per member, which is perhaps on the generous side. That includes all donations but cuts out everything above the tax relief limit. If that is so, it would add up to a total of £20 million of donations and the tax relief on that would be about £5million. Even in the days of the credit crunch, £5 million is not an enormous sum to be paid. In any event, it should at least be possible to pass this as legislation but leave it to the Government, who always have the power, to decide when that particular provision should be brought into force.

Having said that, this has been an interesting debate. As I said, I greatly welcome the support my amendment has received and I beg leave to withdraw it.

This may be a convenient moment for the Committee to adjourn until tomorrow at 3.45 pm.