Report (1st Day) (Continued)
2: After Clause 3, insert the following new Clause—
“Review: the procedures for local referenda on recall for misconduct
The Secretary of State shall, within 6 months of this Act being passed, in exercise of his powers under section 6(2) of the Political Parties, Elections and Referendums Act 2000 (c. 41) (reviews of electoral and political matters), request the Electoral Commission to review and report on the procedures for local referenda on the recall by constituents of a Member of Parliament found guilty of misconduct.”
My Lords, I want to make it clear that the new clause we are proposing fulfils the promises made by all three party leaders in recent days that the eventual decision about whether a Member of Parliament found to have behaved dishonestly should rest with constituents. The amendment is effectively a facilitating amendment; it would set in place a responsibility on the Secretary of State to call from the Electoral Commission, within six months of the passage of this Bill as an Act, a request to review and report on procedures for local referenda on the recall by constituents of a Member of Parliament found guilty of misconduct.
As with so many things on the reform agenda, we are providing an opportunity this afternoon for all those who say that they favour change to put their votes where their rhetoric is. The amendment introduces the prospect of constituents being able to recall their Member of Parliament—ultimately, then, to give him or her the sack—if, and only if, they have been judged by an independent body to have made a serious transgression of the rules. People have been asking why MPs who have announced their quiet exit from Parliament should be allowed to wait and why, if they have been found out for charging the taxpayer for duck houses or dry rot, or have learnt how to flip their second home arrangements like pancakes to make extra cash, they should not be subject to recall now. Why should constituents wait until the Prime Minister calls a general election for an opportunity to choose a new Member of Parliament?
My Lords, I should like the noble Lord to clear up a fundamental point. The procedure he is outlining is possible at the moment, because each Member of Parliament represents a particular constituency and is elected by first past the post. The noble Lord and his party favour some sort of proportional system. Would it not be a thousand times more difficult, if not impossible, to have this kind of recall system in the electoral system that he favours?
My Lords, your Lordships' House is famous for the ability, often taken, to divert from the subject on the Bill in hand and go off on a tangent, but I refuse to be tempted by the noble Lord. I promise him a personal seminar in the different systems of proportional representation—of which he, of course, has been a beneficiary in Scotland—after we have dealt with the Bill.
I want to make it clear that our amendment is not a charter for party Whips—I confess to having previously been the Chief Whip for my party—star chambers, scrutiny panels or kangaroo courts. I utterly reject, indeed, the selective approach of some party hierarchies to make sure that awkward colleagues are for the high jump at the election, while trusted lieutenants are quietly reinstated. This amendment is about providing due process in Parliament and then clear, transparent processes for the public to censure and dispense with their representatives when it has been proved by the relevant authorities that they have broken the rules.
Members of your Lordships' House will recognise that we are somewhat inhibited at the moment by the lack of certainty over the proposed parliamentary standards authority. The PSA is still a gleam in the Prime Minister’s eye and, perhaps, in the Minister’s eye. However, my right honourable friend Nick Clegg has already backed the idea of independent monitoring and an investigative agency of this sort, and I understand that the Conservative leader seems equally well disposed to this. Of course, we cannot specify its precise role in this amendment because it does not yet exist, so we aim to show how responsibilities could be set if and when it comes into being. Incidentally, we do not yet know whether the PSA will have a specific role in these matters as far as this House is concerned. No doubt we will see that in due course when other legislation is brought forward.
We can assume that the parliamentary commissioner for standards will be responsible to that authority and not to either or both Houses of Parliament. That, at least, is clear. It is surely a welcome development, which rightly separates the defendant from the judge and jury. Our whole political system, as well as the individual, is on trial at the moment. Only in those cases where the independent judgment has been made, by the proper authorities, that someone has done something so serious that they should be suspended from the House, would we envisage using this new right for the final—and perhaps the highest—court of public of opinion to have its say. I make it absolutely clear that if a Member is thought by his or her constituents to have done something politically wrong—such as voting the wrong way on Iraq—as opposed to breaking the rules, this system cannot be triggered. It is only triggered when the parliamentary standards authority has taken full account of the incident and the views of the Member concerned.
My Lords, does the noble Lord not think that it would be difficult to define the difference between political and other offences? For example, if a party leader accepted £2.4 million from someone who was later convicted for giving that money illegally—the money belonged to someone else and the party leader failed to return it to the rightful owner—would that be the kind of offence that could trigger a recall?
My Lords, I do not think that the noble Lord has been following my argument. We will have, as we are told by the noble Lord’s leader the Prime Minister, a parliamentary standards authority. It will be responsible for the investigative system that will be undertaken by the commissioner. Presumably that will be the present commissioner with a new remit. If that due process is completed properly, and is not in any way affected by party considerations, with a decision that a particular Member has so infringed the rules of the House that he or she should be suspended, it will be possible—on demand of, say, 5 or 10 per cent of voters signing a special petition—to call a by-election. That is what the Prime Minister and the Conservative leader have been talking about in the last few days. That is what I am talking about. With this amendment we seek to give effect to the intentions of all three party leaders. Today we should agree, in principle, that those steps should be taken to give effect to the promises that have been made on behalf of all three major parties.
Much has been made in recent days about the special link between MPs and their constituents. As a former Member, I know that there can be a very strong sense of connection for constituents in that they talk about their local MP as “their” MP. Many MPs are, in that sense, servants of their constituents, who send them to this building. If they break the rules, surely the constituents, and not their parties, party leaders, kangaroo courts or the Chief Whip, should have the right to say, “You are not our MP any more. You have broken our trust and you must go”. That is a sound principle for us to agree to. Today is Parliament’s earliest opportunity to make that statement. If we dodge this issue now, I fear that the public will think that we have deliberately forgotten it already, despite the promises of recent days from all three party leaders. Delay will be interpreted as a further broken promise. Let us show this place, at least, in a good light this afternoon by deciding to change rather than just to debate change.
Our amendment will not be the final word as it expressly confers that responsibility on the authorities—the Electoral Commission in the first place and in due course on the newly created PSA—to report the details and to set out options for Parliament to agree. For once, instead of just talking about the merits of an idea, let us vote this afternoon to make it happen. I beg to move.
My Lords, I do not know whether I misheard the noble Lord, Lord Tyler, but I think he said something to the effect that procedures for local referendums are not in place. His amendment is quite misconceived. It is putting the cart before the horse. He wants to put into the Bill before us today something to do with the powers of the Electoral Commission, which exists and has several new powers given to it by this Bill, but only on the basis that there are procedures for local referendums on the recall by constituents of an MP found guilty of misconduct. The detail of how that would be done, how the referendums would take place, or what is meant by misconduct, to which my noble friend Lord Foulkes, referred, is all left unexplained. That is hardly surprising because, as the noble Lord admits, there are no such referendums for recall at the moment. The amendment should be ruled out—not out of order, although it is practically out of order because it depends on things that do not currently exist.
My Lords, I have a reservation that the noble Lord might wish to consider. I sat on the Members’ Interests Committee in the House of Commons from 1982 until 1994 and on the Privileges Committee in the House of Commons from 1996 until 2001, so I sat through a number of inquiries. The problem with inquiries is that they have to make a judgment and such judgments can be fine and on the margin. In the event that a finding was on the margin, members of the standards authority might have in mind the possibility that an elector might choose that judgment as a way of triggering a referendum, and that might distort the judgment of those Members who sit on the standards authority. While I recognise that electors often strongly want to remove people who breach the rules, the cases on the margin would worry me and to what extent the fact that they might trigger that referendum at a local level could influence the judgment of the standards authority. I suspect that on the margin judgments could be diluted because of the authority’s concerns.
My Lords, I support the remarks of my noble friend Lord Campbell-Savours. I can see exactly that sort of situation arising. We have seen in the media recently vendettas built up against certain politicians, which is easy when one sees a large number of newspapers and the BBC taking a particular line, which may not be based on fact. I was recently involved in a case in relation to the Speaker of the House of Commons. Most of the stuff printed in the newspapers was downright lies, yet a certain perception grew up about the person in this case. A perception can be created and acted on. This House could even be pushed into taking action against Members because of fear of the media, but that applies even more so in the House of Commons. A political campaign could be manufactured against a Member of Parliament and in the constituency there could be a movement to get rid of that Member on an entirely political basis.
The noble Lord, Lord Tyler, ought to think carefully. I hope that he might speak a little more. For example, I am particularly disappointed that the seconder of his amendment, my good friend the noble Lord, Lord Rennard, is not here; he probably knows more about all aspects of this subject than anyone present. Could the noble Lord, Lord Tyler, tell us why the noble Lord, Lord Rennard, is not able to be with us to lend his vocal support to this amendment?
My last point is the one that I made in my first intervention, which the noble Lord, Lord Tyler, batted away in an insouciant manner as if it was irrelevant, but it is very relevant. The reason why we have seen the petitions and campaigns growing up in constituencies about individual Members of Parliament is that MPs have been elected by the first-past-the-post system and are accountable. Real democracy lies in that accountability of individual Members, which is there in first past the post but not in the arithmetical correlation between the number of votes cast and the number of Members of Parliament in some fancy scheme devised by the Liberal Democrats or others.
The noble Lord, Lord Tyler, referred to my own election to the Scottish Parliament. That was through a system that is entirely wrong—I am its beneficiary, but I do not like the system. In a list system, how would this work? I hope that the noble Lord, Lord Tyler, might explain this. Let us suppose that a list system was introduced at the behest of the Liberal Democrats, particularly one like that for the elections that we have just had for the European Parliament. How could that system work then? The noble Lord’s proposal is very naive. Since a former leader of the Liberal Democrats is present with us, he might also consider a situation where a Mr Michael Brown gave a huge amount of money to a particular party which turned out not to be his but to be given illegally. If that party did not return the money, would that come under this particular category? The noble Lord is opening a can of worms with this amendment and perhaps he would think carefully before pressing it.
My Lords, I follow the noble Lord, Lord Borrie, in thinking that much of this amendment seems previous in its make-up. The amendment talks of being “guilty of misconduct”, but we do not quite know by whom, about whom or how that procedure will work. It is important to have that issue clear in any Bill before we move further down that road.
My concern follows those expressed by other noble Lords. We obviously want Members of Parliament who will exercise their independent judgment. Indeed, we are talking about greatly strengthening the power of individual Members of Parliament in the face of the Executive, which will mean that they are highly controversial. Under the “guilty of misconduct” rule, one is concerned that the awkward squad might suddenly find themselves somehow being asked about aspects of their behaviour that they might not be asked about if they were more prepared to toe the line of whichever party they belonged to. Even worse, a Member of Parliament with a particular behaviour—it might be particular sexual preferences that are entirely within the law—might run into groups in their constituency who greatly disapprove of it, as is their entitlement, and in turn might seek to disaffect and build up opinion against that Member.
The power of Members of Parliament needs buttressing in many ways. They have lived a life where they have been squeezed and squeezed and, while misconduct clearly has to be punished, we have not yet reached the right or appropriate place to strike the balance, either in the Bill or this amendment.
My Lords, I must admit that I feel some professional sympathy for the noble Lord, Lord Tyler. His amendment seems to be struggling for any support at all, having been demolished pretty effectively by the comments of the noble Lords, Lord Borrie, Lord Foulkes and Lord Campbell-Savours. If there were any stumps still left in the ground, my noble friend Lord Hodgson has ensured that they have been taken out.
However, the noble Lord, Lord Tyler, has done the House a service by raising this matter. I do not think that anybody who has been out on the campaign trail knocking on doors over the past six weeks can be in any doubt about the anger felt by members of the public at the breach of trust that has been revealed through the articles, mostly in the Daily Telegraph, on expenses. There is intense anger. We need to ensure that there are degrees of protection for Members of Parliament.
Those who are in favour of representative democracy and the notion of Members of Parliament ought to be encouraged that people feel so strongly and expect such standards from the people who represent them in the House of Commons and, for that matter, in the House of Lords. The fact that people feel so strongly is welcome. One way of recognising it is to be able to recall a Member of Parliament in extreme circumstances. The noble Lord, Lord Tyler, was right to say that in a wide-ranging speech my right honourable friend David Cameron referred to this as one of the possibilities, along with a range of other things, including fixed-term Parliaments, that are needed to restore trust in the parliamentary process and the trust of constituents in their Members of Parliament. That process has a long way to go. We are at the beginning—I am looking at the Minister. Is he about to come in? No. He is just listening intently; how generous.
In moving his amendment, the noble Lord said that it is not entirely in order or watertight in its present form because it does not specify the role of the public standards agency. I could not see the reference to the public standards agency—
My Lords, we already have a problem, and I am sure that the noble Lord, as a student of matters procedural, will recognise that that makes it difficult to proceed.
Perhaps this is an opportunity to have a discussion about the other issue, which relates to the circumstances under which censure would take place. Although the amendment does not mention it, it has been stated in the press and by the noble Lord, Lord Tyler, in his introductory remarks that this would be an option where a motion of censure had been passed on a Member of the House of Commons. That would trigger a mechanism by which a petition, a referendum or a by-election would take place. We are unsure about which at the moment. There already is a mechanism: a Member of the House of Commons whose case has been highlighted and who has not yet been censured has chosen to apply for the Chiltern Hundreds, thereby causing a by-election in Norwich North and giving people a say on this.
The noble Lord is on to something and does us a service by tapping into a huge level of anger and concern at the revelations that have been made. He may have a point about the mechanism of recall, although we would like to see a recall of Parliament en bloc and a general election called as a way of testing the public mood on these matters. But the recall of individual Members of Parliament could be considered. There would need to be safeguards against the malicious prosecution mentioned by my noble friend Lord Hodgson. The experience in the United States has not exactly been wonderful. In California, 5 per cent of the electorate—a pretty large number—voted to recall Gray Davis to allow Governor Schwarzenegger eventually to be elected.
There remains a series of questions about the mechanism and how this would take place. If this is simply a probing amendment, I think that it does the House a service. If it is a serious amendment, I cannot see how we could possibly support it, unless there were further evidence as to how it would work.
My Lords, I thank the noble Lord for raising this topic. The amendment would compel the Secretary of State to request the Electoral Commission to undertake a review and report on arrangements that would enable constituents to recall a sitting Member of Parliament. As has been said, a number of recall systems are in operation internationally, most notably, as the noble Lord, Lord Bates, just reminded us, in 18 states in the United States of America. Detailed characteristics vary but they commonly involve a certain number of electors petitioning for the holding of a ballot at which an elected official may be voted out of office mid-term and/or for a by-election for their replacement.
I agree with noble Lords that there is no doubt that the issues that have arisen in recent weeks have badly dented—if not worse—the public’s confidence in politicians of all parties and in the institutions of our democracy. As my right honourable friend the Prime Minister made clear last week, there is no more pressing task for all of us involved in public life than to respond to the public’s demand for reform. In his Statement on constitutional reform on 10 June, the Prime Minister set out the Government’s intention to bring forward new legislative proposals following cross-party discussions as the first stage of this reform. These proposals include, as the noble Lord, Lord Tyler reminded us when he moved this amendment, the immediate creation of a new parliamentary standards authority and the agreement of a statutory code of conduct for all Members of Parliament. The Prime Minister said:
“There will be consultation with all sides of the House to come forward with new proposals for dealing effectively with inappropriate behaviour, including the potential options of effective exclusion and recall for gross financial misconduct, identified by the new independent regulator and by the House itself”.—[Official Report, Commons, 10/6/09; col. 796.]
Provision for the recall of elected officials exists in 18 of the 50 US states, although not at federal level. The American experience has been varied. It is certainly true to say that the recall of elected officials has not been common. Until 2003, when the Californian governor was successfully recalled following a recall election, despite other attempts, the only governor to be successfully recalled was in 1921 in North Dakota. There are examples at a more local level of government in the United States of successful recall.
The variation in the systems in operation across the 18 states is instructive when considering whether similar arrangements might be appropriate for the United Kingdom. For example, as the noble Lord, Lord Bates, pointed out, the question arises of what constitute the grounds for recall. Specific grounds are required in only eight states and most commonly relate to gross misconduct, violation of oath or criminal convictions. All 18 US states have some form of petition process, but the thresholds vary. Usually the formula is based on a percentage of the vote in the last election for the office in question, but there are other variants. There are also variations in the way in which the ballots are conducted, including the point at which the individual who is subject to the recall is permitted to put forward their own case.
No doubt all these questions merit careful consideration; indeed, the amendment envisages putting these considerations into the hands of the Electoral Commission. However, to task the Electoral Commission with policy work of this nature is inconsistent with the recommendation of the 11th report of the Committee on Standards in Public Life, which recommended that,
“the Electoral Commission should no longer have a role in undertaking policy development in relation to electoral legislation. This function should be the responsibility of the appropriate Secretary of State”.
I think that the commission agrees. Its briefing document for the Report stage of the Bill notes, in relation to the amendment:
“The Commission would of course review and report on the administration of any procedure to recall Members of Parliament, were we directed to do so. In doing so, we would focus on the extent to which any such procedure was run consistently, professionally and with a primary focus on voters, in the same way as we approach our reports on other elections”.
The commission clearly envisages that its role will be limited to the consideration of how any ballot that was conducted as part of a procedure ran, as in other elections.
I am sure that there is agreement on all sides that this suggestion merits careful consideration and, indeed, the Prime Minister has made clear his commitment to taking this debate forward. I therefore hope that noble Lords will agree that legislating to force a debate on this issue will not be necessary and that, in any event, the Electoral Commission is not best placed to undertake this work. Again on behalf of the House, I thank the noble Lord, Lord Tyler, for raising this very current issue and I hope that he will consider withdrawing his amendment today.
My Lords, I am grateful to all Members of your Lordships’ House who have contributed to this thoughtful, if brief, debate. I hope that it will be listened to with care at the other end of the building.
In response to some of the points that have been raised, I should say that there are quite well established rules in statute for the handling of referendums. That meets the point made by the noble Lord, Lord Borrie. I accept the point made by the noble Lord, Lord Campbell-Savours, that it could affect the judgment of the new parliamentary standards authority if it knew that, at the end of this careful process, the result could be a by-election, but we will have to be confident that this new machinery will stand above the party battles and will be truly independent and approach these issues with due integrity, or there is no point in having it; we might as well keep the present rules. That is the critical issue that other Members may not have appreciated. This is part of a new regime that we know will come. The Prime Minister has said that it will come; indeed, he has raised the issue of recall in this context, and the other parties have agreed.
For that reason, the noble Lord, Lord Foulkes, is not right that there could be a vendetta—I think that that was the word that he used—because the process will be outwith party discussions and away from all policy issues. It will have nothing to do with partisanship. Incidentally, the noble Lord kindly expressed interest in where my noble friend Lord Rennard was. I am afraid that he is ill today. He will be here on Wednesday for another day of Report, but I promise to tell him of the considerable concern that was expressed by the noble Lord.
The noble Lord, Lord Hodgson, is absolutely right that clearly we will have to develop a very good process—a due process—that will have to be a long way away from the present processes, which rely on Chief Whips and special groups in parties. Even small groups of people at constituency level decide the fate of a Member of Parliament. That is utterly wrong. We should have a due process and proper triggers, so the noble Lord is right.
If this amendment is passed, the process that I am suggesting will be looked at carefully by Electoral Commission. I do not think that it would endanger the independence of Members of Parliament who may take a view that their constituents think of as controversial. In this process, the controversial views will not be in question; the question will be whether, on the clear evidence put before an independent investigation, the Member has broken the rules of their House. Therefore, the recall mechanism, with which the noble Lord, Lord Bates, expressed some tentative agreement, must be something that both Houses of Parliament should look at carefully.
In the past few weeks, politicians have constantly said to the public, “Yes, we understand your anger. Yes, we understand you want to have a bigger role in deciding what should happen”. If, now, at this first opportunity, the parties say, “Oh well, of course, we don’t want you to have any role at all; we want to leave it to the parties and those people within Parliament or in the local party structure to make all these decisions”, there will be real disappointment. The Prime Minister—the Minister just now repeated it—said:
“There is no more pressing task”.—[Official Report, Commons, 10/6/09; col. 795.]
Your Lordships’ House has an opportunity to take up that challenge from the Prime Minister and we should take it.
It is true that we do not have the whole system in place, but very soon we will have a new system in place. Your Lordships’ House would be right to put a marker down that we think that, ultimately, the public anger to which the noble Lord, Lord Bates, referred is very important. The Prime Minister, the leader of the Conservative Party and the leader of my party picked that up and see that it is essential to find a mechanism to which that public anger can be constructively deployed.
Look at the contrast between the sort of procedure that I am discussing and the present knee-jerk reactions. Within a few days, a few people in a constituency can give a thumbs-down to an individual constituency Member. That is surely wrong. This measure would be much better. I believe that we should recognise that the public feel that their influence—their power—over their representatives, especially in those 500-plus safe seats in the House of Commons, has diminished and is diminishing and that this should be reversed. I wish therefore to test the opinion of the House.
Schedule 2 : Civil sanctions: Schedule to be inserted into the 2000 Act
3: Schedule 2, page 46, line 10, leave out “a prescribed” and insert “an”
My Lords, the amendment is in the name also of my noble friend Lord Henley. The amendments in this group follow on from a discussion that we had in Grand Committee, at cols. GC 93-96 of the Official Report, on 29 April. We sought there to elicit from the Minister some examples of offences which might give rise to criminal sanctions. The Minister said in response, at col. GC 96, that he would “write to me”—to use that famous term—with some examples. I waited with bated breath, thinking of nothing of else during the entire month of May and waiting only for this letter from the Minister to arrive. And duly it did, at 11 o’clock last night. It ran to some seven pages, and I am afraid that I have not been as assiduous as I should have been and have not managed to digest all of it. However, I have a few questions.
I invite the Minister to, in his usual thorough way, walk us through the letter that he sent and highlight what he intended by this measure. Our concerns arose from the Committee on Standards in Public Life report of January 2007, which stated on page 35 that, currently,
“the only sanctions that the Electoral Commission has if parties do not comply with legislation is to name and shame or, if the offence is sufficiently serious, to refer it to the Crown Prosecution Service for criminal prosecution”.
In its fifth report, the committee made it clear that the Electoral Commission should not have any substantial judicial power. The Government accepted this recommendation and the committee continues to believe that this is the right approach. We, too, believe that. What we sought in tabling these probing amendments in Grand Committee was to have on the record some further examples of the types of offences that might be engaged. I shall carefully listen to, and read, the Minister’s response. I beg to move.
My Lords, I start with an apology. I said that I would write to the Committee, giving examples of where we felt that it might be preferable to leave offences to be dealt with by criminal law rather than by the new civil sanctions. Regrettably, this letter did not go out until last week. It was e-mailed to the noble Lord’s office, the Whips’ Office, on Friday. It did not go out before then because of the significant pressures involved in readying government amendments. I am sorry that a copy did not arrive in the noble Lord’s hands until last night. I am glad to have the opportunity—I am grateful to him—to outline our approach in the House. I am sorry that the noble Lord has not been able to read my long letter to him. If he had managed to get to the second page, there are a couple of examples of where we think that a criminal sanction is appropriate. Now that I am on my feet, let me say a little more.
I will move straight to the examples mentioned by the noble Lord. The new range of civil sanctions should be applicable to the vast majority of offences contained in the 2000 Act. They represent a proportionate and flexible approach to enforcement and should remedy the current situation whereby the enforcement choices range from criminal investigation at one end of the spectrum to, effectively, nothing at the other. This point was made with force in Committee by the noble Lord, Lord Rennard, who is unfortunately absent—we wish him well. We know that there is a strong consensus that the current situation is not satisfactory.
Some offences are more serious than a mere administrative error, and it would be more appropriate to reserve these breaches for the criminal sphere only. For instance, where there is a deliberate attempt to undermine the 2000 Act on a significant scale, it could be that allowing only for the possibility of a criminal sanction is the appropriate approach, in keeping with the gravity of the offence. This would also send a clear deterrent signal about the most serious offences in the earlier PPERA Act. Nothing in the Bill should detract from our overriding objective that compliance with the law is vital in the context of public confidence in our democratic systems.
I shall give a couple of examples of where reserving certain offences for the criminal sphere might be more appropriate. Section 61(2)(a) of PPERA makes it an offence knowingly to give the treasurer of a party false information about donations. This is an example of where the basis of the offence is a deliberate and wilful attempt to mislead over the facts of a donation, as opposed to an administrative oversight or error. Also under Section 61(2)(a), it is an offence to withhold from a treasurer information about donations with intent to deceive. Additionally, we believe that where an individual or organisation deliberately attempts to conceal evidence or intentionally hinder an investigation by the commission, this behaviour may require the strong deterrent of criminal prosecution. For example, Section 148(1) of PPERA relates to the altering, suppressing, concealing or destroying of documents relating to the financial affairs of supervised organisations or individuals, and Section 148(2)(b) makes it an offence knowingly to supply false information when purporting to comply with a request to provide information.
In such cases where an administrative error in itself is not the offence but rather the wilful or malicious attempt to destroy or otherwise conceal evidence, it may be more appropriate that the deterrent and the enforcement are criminal. I stress that these are examples: this is not a full list of the offences that may remain only in the criminal sphere. We will bring that forward when we make the statutory instrument under this clause.
Noble Lords may wish to note that it was originally the recommendation of the Committee on Standards in Public Life that, apart from providing for new sanctions for use by the commission, the most severe offences should remain purely in the criminal sphere. If these amendments, which I am grateful to the noble Lord for describing as “probing”, were passed, they would prevent us from providing for this option, or at least debating the pros and cons of this or other approaches as part of the debate on the statutory instrument. I hope that I have explained in rather more detail than I was able to give in Committee what kind of offences we think should remain only in the criminal sphere.
My Lords, I am grateful to the Minister for his response to the amendments and for the additional information that he has now placed on the record. It was felt that there should be in the Bill an indication of the types of offences that could be involved but I accept the reasons that he puts forward for why that should not be the case and also the provision of a statutory instrument that will contain more detail on the specific offences.
Our concern was that for the most serious offences there should remain the criminal option. In a previous debate, we discussed the potential moral hazard that could occur if the Committee on Standards in Public Life assessed a Member and knew that the consequence of its judgment could mean that proceedings for recall were commenced. In certain circumstances, following the argument of the noble Lord, Lord Campbell-Savours, that might give rise to some hesitation on the part of the committee before it arrived at that conclusion, even if it was the right one. There is a similar concern here that, with the civil sanctions that are available, the Electoral Commission may feel under some restraint as to how they will be deployed and at what point it would choose to pass over the case to the Crown Prosecution Service for pursuit of criminal sanctions. Now that those matters have been aired, and the information secured, I do not want to press the amendment and beg leave to withdraw it.
Amendment 3 withdrawn.
Amendments 4 to 15 not moved.
16: Schedule 2, page 51, line 12, leave out “early payment discounts or”
My Lords, I speak also to Amendment 21. These two amendments deal with Schedule 2 and, in particular, the part relating to the fixed penalty notices under the civil rather than the criminal sanctions. If the Minister remembers, in Committee I moved probing amendments, seeking to remove both the early payment discounts to the fixed penalty notice and the late payment penalties. I received a response in due course from the Minister. On this occasion, I have come back with two amendments to remove the early payment discounts but leave in the late payment penalties. It seemed to us that one could put a case for late payment penalties but that, although early payment discounts might encourage early payment, they could also diminish the authority of the commission and trivialise a very important message sent out by its power to give those fixed penalty notices. For that reason, I thought that it would be worth coming back with these two amendments removing the early payment discounts to see whether the Minister had anything further to say on the subject. I beg to move.
My Lords, in Grand Committee my noble friend Lord Rennard expressed some anxiety about this proposition. We are very anxious about the greater bureaucracy likely to be entailed, on which I think Members on all sides of the House will concur, which will be imposed on local treasurers and others who have a reporting or other responsibilities. In that connection, we think that it is better simply to stick with penalties for late submission of information rather than indulge in what we think will be quite complex arrangements, which may have to be constantly reviewed, for some assistance for early payment discounts. We still stand by that—and probably with the Minister, I suspect. Simplicity would suggest that a late penalty is better than an early discount.
My Lords, the amendments both relate to early payment discounts for financial penalties imposed by the Electoral Commission. Amendment 16 would delete the reference to early payment discounts from paragraph 7(3)(b)(iii) of new Schedule 19C to the 2000 Act, which relates to the availability of early payment discounts or late payment penalties in a notice of a discretionary requirement imposed by the commission. Amendment 21 would remove paragraph 18(1)(a) of new Schedule 19C, which allows the Secretary of State to make a supplementary order to allow the commission to offer provision for early payment discounts for any of the monetary penalties contained in the Bill.
Noble Lords present during Grand Committee may recall that we touched upon the provision of early payment discounts and of late payment penalties during our debate. An amendment on late payment penalties that was tabled and debated at Committee has not returned here. Following the endorsement that late payment penalties have received, I think we can safely suggest that a general consensus exists that this provision will be a useful tool for enforcement. That is certainly the expressed view of the Electoral Commission. However, the provision of early payment discounts has received less unanimous support.
For those noble Lords not present at Committee, I reiterate that the provision of an early payment discount is replicated from the Regulatory Enforcement and Sanctions Act 2008, on which the civil sanctions regime is based. As I have said on a number of occasions, we are not minded to depart from that regime and treat the commission differently from other regulators unless there is the strongest possible reason for doing so. That is a view following that of the honourable Mr Howarth in another place. We need to provide an incentive for swift compliance in cases when liability is not going to be disputed, offering the opportunity for a person to deal with it in a timely fashion. The provision would therefore also reduce the workload that late payment would create for the commission and generally encourage compliance, helping to keep costs of enforcement down and bolstering the regulatory regime.
The key point that needs to be made here is that, while the Bill provides for the possibility of these early payment discounts, it in no way requires them to be used. It simply allows that the statutory instrument, which will need to be passed in order to provide more detail about the sanctions procedure, may make provision about discounts. There is no obligation for it to do so. If a decision is made to allow for discounts in the statutory instrument, that instrument will be laid before Parliament and may be debated. If the statutory instrument allows for discounts, it will be a matter for the commission to decide when, if indeed at all, it will be appropriate for it to use this provision. Following its consultation on the draft enforcement guidance, it will be able to make a decision about whether to use them.
Officials from the commission have indicated to us that, at present, they would be unlikely to use the early payment discount as part of the enforcement regime during its initial phase. However, we do not think that is a reason for leaving this provision out of the Bill altogether. If we were to remove that now and the commission later decided, in light of its practical experience of operating the sanctions, or of feedback from those subject to it, that early payment discounts added to the fairness or effectiveness of the regime, it would not be able to use them without further primary legislation. That makes the position inflexible. It makes sense to keep the option open and allow the commission the scope for using the same powers that are available to other regulators under the RES Act. I believe, therefore, that it would be more sensible to leave this provision in place. After all, the commission’s approach may need to adapt to the reality of operating the new civil sanctions, and we may not be able to say with confidence at this juncture that this provision will never be of any use.
I will say that if we are persuaded by strong arguments on this, we could take another look at making a change and removing the provision for early payment discounts. But our present attitude is not to do so.
My Lords, I was amused by the Minister’s final remarks. It was almost as if his speaking note, written out in Civil Service-ese, had “If pressed” written there. However, I shall not be pressing the Minister on this occasion. I was very grateful to hear the Minister say that he thought that some consensus had come into being, particularly on the question of the late payment penalties, where ourselves, the Liberals and the Government seemed to be in agreement. That is the first occasion this afternoon on which we have had the use of the word “consensus”. I know that the noble Lord, Lord Campbell-Savours, is not quite as keen on consensus as are ourselves and the Government. We will continue to pursue consensus as and when possible.
I think that the noble Lord, Lord Tyler, misunderstood me. I was making it clear that I was moving only the amendment relating to early payment discounts, which is why I dropped the late payment penalty amendment that I moved in Committee. I think that we have had the assurance from the Government that all the Bill does is give power to the commission to bring in either late payment penalties or early payment discounts or both, that they will not be introduced without some form of secondary legislation and that secondary legislation will be affirmative. I certainly had a nod from the Minister on that first one. I take it that I can have his assurance that on the second point the regulations will be affirmative, but I shall keep talking while winged Mercury does his bit to get the information back to the Minister. With that assurance, I am more than happy to withdraw the amendment.
Amendment 16 withdrawn.
Amendments 17 to 22 not moved.
Clause 6 : Number of Electoral Commissioners
23: Clause 6, page 5, line 4, leave out “or ten”
My Lords, Amendment 23 requires a brief word of explanation. I raised the issue of the statutory numbers of commissioners during the Clause 6 stand part debate in Grand Committee. The Minister said that the matter could and would be covered in a letter. As is indicated by an asterisk on today’s Marshalled List, I did not table my amendment until late last week when no letter had arrived. I think that I may have been subject to the same conditions as my noble friend Lord Bates.
In putting down the amendment, I had no discourteous or aggressive intent; I just wanted to ensure that there was a peg on which to raise the issue on Report. Indeed, my respect for the courtesy of Ministers had suggested to me a possible circumstantial reason for the Government’s silence, in that Hansard put the Government’s assurance into the mouth of the noble Lord, Lord Tunnicliffe, whereas my mind’s eye and ear told me that the noble Lord, Lord Bach, had uttered it. Therefore, it is possible that the matter fell inadvertently between two stools.
I am grateful for the letter from the noble Lord, Lord Bach, which greeted my return today. It explains the rationale of the Bill’s text in a way that the Explanatory Notes, despite their title, do not in this instance. I shall of course understand if the noble Lord, Lord Bach, wishes to put on the record what is in his letter, but I can give him an assurance now that his letter has wholly satisfied me. I beg to move.
My Lords, my Amendment 24 in the group is concerned with political restrictions on staff in Clause 7. Restrictions are imposed on people who have held certain posts as to the time that must elapse before they are able to become members of the staff of the commission. In this case, I wish to increase the basic period of quarantine in proposed new paragraph 11A(2)(c) from one year to three years.
I raised the matter in Committee and we had an interesting debate on it. The reply from the Government, in the shape of the noble Lord, Lord Tunnicliffe, was:
“I have nothing to add at this point”.—[Official Report, 30/4/09; col. GC 132.]
I hope that the Minister will forgive me if I found that a slightly less than obliging response. Therefore, I am returning to the matter and I hope that he will give me a slightly better and more fulsome response this afternoon, failing which I may feel inclined to test the opinion of the House.
Since we discussed the matter on 30 April, events have reinforced my view that the 12-month period presently contained in the Bill is too short. It is a truism that confidence in our democratic institutions has taken a battering in recent years and, in the past few weeks, Parliament has moved to the eye of the storm. This afternoon we do not need to go into why, how and where, but it is a fact. Many of us believe that the Electoral Commission in its new guise will play a critical role in rebuilding public confidence. If it were to fail, which we all hope that it will not, the damage will be extremely serious and severe—doubly so, because expectations will have been aroused in the general public only to be dashed. Therefore, I think that we need a belt-and-braces approach to ensure that not only is it above reproach but is seen to be so.
In Grand Committee, I took a certain amount of incoming fire. The noble Baroness, Lady Gould—I am sad not to see her in her place; she was here a minute ago —said that what was then government Amendment 77, which I think is now new paragraph 11B, answered my concerns. It gives the chief executive of the commission the flexibility to require, following a discussion with the Speaker’s Committee, other potential members of staff of the Electoral Commission to undergo a greater quarantine period. I entirely agree with the noble Baroness about the need for flexibility. I think that that is an excellent idea and I have no problem at all with new paragraph 11B.
The danger is not about posts that are permanently sensitive but about those that are temporarily sensitive. Junior members of the staff of the commission will carry out investigations, putting together documents, searching through files and doing various work, which may or may not lead to a prosecution. It does not seem likely that the chief executive will wish to go to the Speaker’s Committee to obtain clearance to ensure that people who do that have not been involved in politics in the immediate past. Therefore, I think that, while the noble Baroness’s point is entirely fair, it provides only half the answer.
The second lot of incoming fire came from the noble Lord, Lord Tyler, who may feel after my slightly disobliging remarks on his Amendment 2 this afternoon that he wishes to return to the matter. The thrust of his argument was that it was one of “mindset”—the word that he used—not time bars. I agree with him that mindset is important, but the problem can be guarded against by lengthening the time bar. If you have a time bar of a week, a mindset would not be easily overridden. With 12 months, you have a little more coverage and, with 36 months, someone has to have a critical and long-lasting attempt to disconcert the Electoral Commission. That deals with the mindset argument.
Who would be affected by the amendment? It would be a very small number of people who had shown an above average level of political commitment and interest. They would be an officer or employee of a registered party or any accounting unit of such a party, a donor in the register of donations or a participant in the register of recordable transactions under Part 4A.
I urge the Government to think again about this. To have a situation where an officer or an employee of a registered party can become a member of the staff of the Electoral Commission within 12 months seems to me to be extraordinarily dangerous. It is better to be safe than sorry. We should have a longer period for people who have held these quite senior and sensitive roles before they are able to switch—if I may use the vernacular—from poacher to gamekeeper.
My Lords, I repeat the point that I made in Committee, to which the noble Lord, Lord Hodgson, has referred. It is extremely important that we should not imagine that the threshold of the number of years will be absolutely the deciding factor; the deciding factor will be the mindset. In support of the argument that the noble Lord has given, I accept that 12 months is not very long. In recent weeks, we have had interesting examples of people in very sensitive positions who were still political activists. The classic case was of a member of the private office of the Home Secretary who then gave information to an opposition spokesperson, Mr Damian Green. The person concerned was very much still an activist. I do not know how long he had been inactive—I suspect not very long. He had previously stood as a Conservative candidate. We have had the more recent example of a member of staff, somewhere in this building presumably, who has felt it necessary to leak substantial information about the circumstances in which Members of the other House—and, for all I know, Members of this House—made claims for allowances. Therefore, this area is very sensitive.
The noble Lord, Lord Hodgson, has done us a great assistance in bringing this back to the House so that at least the Minister can examine this issue. What worries me more than the particular case that he refers to—12 months versus 36 months—is the division between new paragraph 11A and new paragraph 11B. I remind the House that, under new paragraph 11B, a number of less important posts can be subject to the discretion of the chief executive of the commission. Might the Minister, in responding to this brief debate, look again at where the dividing line between the paragraph 11A categories and the paragraph 11B categories comes? That is important, as perhaps it is in that area that we need to be more clear about what considerations will be taken into account, what can be left to the discretion of the chief executive and what needs to be on the face of the Bill and eventually in statute.
My Lords, my Amendment 25, which is grouped with Amendment 24, relates purely to the new paragraph 11B case, as referred to by the noble Lord, Lord Tyler. In Grand Committee, I asked the Minister to give some examples of when he thought the chief executive might wish to make use of the power in new paragraph 11B. I said that I had some ideas of my own but that I would be grateful for the Government to give their views as to when they thought it likely that the chief executive might exercise those powers.
We had no response from the Minister that I can find or that I can remember at the time. It might be that the examples are in the famous letter that my noble friend Lord Bates received last night, which I got only when I arrived here. That is my own fault for not arriving until 1 pm, but I have not been able to go through that letter in enough detail to see whether the Government can give such examples. I hope that the Minister, when he comes to respond, will deal with that question and give some examples of when the chief executive might make use of those powers to vary times under paragraph 11B, which I have suggested through our amendment should be deleted, although that is merely by way of probing.
My Lords, I thank noble Lords for these amendments. I believe that what I am about to say will cover the individual inquiries of each of the noble Lords. Amendment 23 would amend Clause 6, which sets out the number of electoral commissioners. Currently, the Political Parties, Elections and Referendums Act 2000 provides that there should be,
“not less than five, but not more than nine Electoral Commissioners”.
Clause 6 of the Bill seeks to increase the minimum number from five to nine, and the maximum from nine to 10.
It may be helpful if I explain the rationale behind the number of electoral commissioners in Clause 6. The increase in the minimum number of commissioners is intended to ensure that commissioners with political backgrounds—nominated commissioners—will always be in a minority on the commission as a whole. That is four out of nine. The increase in the maximum number to 10 is to ensure sufficient room to appoint a full complement of four nominated commissioners in the event of there being six electoral commissioners, as is currently the case.
This amendment seeks to alter Clause 6, to require that the commission have exactly nine commissioners at all times. I must resist the amendment as it is unnecessarily restrictive and could hamper our policy intent, which is to ensure, in line with the recommendations of the Committee on Standards in Public Life, that there should be four commissioners with recent political experience drawn from across the political spectrum. Moreover, given that there are currently six electoral commissioners, this amendment would prevent the appointment of four commissioners with recent political experience.
If the current number of other electoral commissioners fell to five, enabling the appointment of four nominated commissioners, we feel that there would be an increased likelihood of these nominated commissioners achieving parity with others on the board. So, if, for example, the post of one of the other electoral commissioners became vacant, reducing the total number of electoral commissioners to eight, there would be the same number of nominated commissioners as other electoral commissioners.
We have always made it clear that we believe that it is important to seek to ensure that nominated commissioners are in a minority on the commission at all times. This is also in line with the recommendations of the Committee on Standards in Public Life. Our intention is that these nominated commissioners bring their political experience to bear in the commission’s work, and so help it to become a more effective and credible regulator. However, ensuring that they are always in a minority is intended to prevent any perception of politicisation of the commission.
Further, this amendment would remove any flexibility by always requiring the commission to have exactly nine commissioners. Potentially, it would take just the departure, for whatever reason, of one commissioner for the commission to fall short of the statutory requirement of nine commissioners. While we note that Schedule 1 to the PPER Act 2000 provides that the validity of any proceedings of the commission shall not be affected by any vacancy among members of the commission, we see no advantage in setting an inflexible number of nine commissioners. The Electoral Commission has also commented in its briefing note on the Bill that such an amendment is undesirable.
For the reasons I have given, we believe that a requirement for nine or 10 electoral commissioners achieves a reasonable balance, ensuring enough room to appoint the full complement of four nominated commissioners, who are within a minority, and allowing for the appointment of five or six other electoral commissioners. The noble Lord has already indicated that he is not going to press this amendment. However, I hope that I have given him the background that he seeks and that I have placed it on the record.
I turn now to the amendment of the noble Lord, Lord Hodgson. This seeks to amend Clause 7, which sets out the political restrictions on electoral commissioners and staff. The Political Parties, Elections and Referendums Act 2000 currently imposes a 10-year restriction on previous political activity for all Electoral Commission staff. Clause 7 of this Bill reduces the restriction period from 10 years to five years for the commission’s chief executive, and to 12 months for all other staff. The amendment would increase the 12-month restriction period on previous political activity for all of the commission, apart from the chief executive, to 36 months.
The noble Lord tabled an identical amendment in Grand Committee. I gathered from the informative debate that we had on the issue at the time—and perhaps my response was out of exhaustion more than any intent to be less than polite—that his concern is that a one-year minimum political restriction period is too short for any member of the staff at the commission, and so should be increased to three years.
I share the noble Lord’s concern to the extent that I acknowledge that there may be a small number of posts in the commission, other than the chief executive, that merit a requirement for a longer restriction from political activity than one year. However, I do not agree that we should impose a blanket minimum restriction period of three years on all staff. For the majority of commission posts, I firmly believe that a one-year restriction will be appropriate. It is important to note that the Electoral Commission, which has a better knowledge of what the duties of posts at the commission involve than anyone, shares this view. For posts deemed suitable by the chief executive, he will be able to designate them as being subject to a longer restriction period of up to five years, taking into account the seniority of the post, and—crucially—the likelihood of the person dealing with politically sensitive matters.
I note the noble Lord’s comments during Grand Committee that, although a person may not be in a politically sensitive role all the time—for example, staff at a more junior level—they could dip in and out of politically sensitive activities and so be in a position to gain access to sensitive information. Therefore, they may not be subject to a designation even if they merit it. In the light of that, he believes that a basic threshold of three years, instead of one year, for all staff is preferable to a longer restriction period for senior staff only.
While I appreciate the reasoning behind the noble Lord’s argument, I emphasise that the chief executive’s power to designate is not restricted to a particular level of posts. The chief executive will be best placed to determine whether a person’s access to sensitive material is such that the post should merit a longer restriction. Overall, the proposal to reduce the restriction on past political experience for commission staff has been welcomed during the passage of the Bill to date. This warm welcome is in recognition of the overly restrictive rules that apply at present, and the fact that the recommendations of the CSPL and others for equipping the commission better to understand the field it regulates resonate with many people.
In its briefing note ahead of today’s debate, the commission recognises that the formulation in the Bill is appropriate and workable. A blanket provision requiring a 36-month period is unduly inflexible and imposes an unnecessarily long restriction on the majority of staff of the commission. I hope that the noble Lord will now feel able not to move his amendment.
On Amendment 25, and recognising its purpose of teasing out the posts to which this might apply, the Political Parties, Elections and Referendums Act 2000 currently imposes a 10-year restriction on previous political activity for all Electoral Commission staff. Clause 7 of this Bill reduces the restriction period from 10 to five years for the commission's chief executive, and to one year for all other staff.
Noble Lords will recall that government amendments in Grand Committee sought to provide the chief executive of the commission with the power to designate certain other commission posts as being subject to longer restricted periods of between two and five years. Before he decides to designate a post, the chief executive must reasonably believe that it is necessary to do so in order to maintain public confidence in the effectiveness of the commission in carrying out its functions. In addition, when determining the length of the proposed designation, the chief executive must take into account the seniority of the post and, crucially, the likelihood that the person holding the post will have to deal with politically sensitive matters. Once these decisions have been made, the chief executive would be required to consult the Speaker's Committee on the posts that he intends to designate and take heed of its views.
These government amendments were intended to address the concerns raised by the commission and my noble friend Lady Gould that the five-year restriction should be capable of being extended to other senior posts in the commission, or those dealing with politically sensitive responsibilities. They made the valid point that a one-size-fits-all policy might not be appropriate here.
Amendment 25 seeks to remove the chief executive's power to designate posts, and thereby prevent the chief executive of the commission from increasing the one-year restriction period on previous political activity for other commission posts. We are bound to resist this amendment, as it removes the flexibility for the chief executive of the commission to determine the appropriate restricted period for its staff within the parameters that the Bill sets. Having heard representations on the subject, we appreciate that there may be a small number of posts in the commission, other than the chief executive, which merit a requirement for a longer restriction on recent political activity than one year.
I emphasise that the underlying theme of the reduced political restrictions in Clause 7 is to enable the commission to recruit staff with relevant experience of the environment that they regulate. A power for the chief executive to designate posts is not intended to detract from this underlying theme. It is right that we strike an appropriate balance between ensuring that the commission is able to employ those who have the necessary skills to enable it to be more effective and creating any perception of politicising the commission.
For these reasons, a power for the chief executive to designate certain posts as subject to a longer restricted period is justified. The commission has emphasised that the power is important, and will enable its chief executive to designate longer restrictions from previous political activity to a handful of posts dealing directly with regulatory activities, policy or boundary decisions, which may include matters of significant sensitivity. The chief executive will also take into account the extent to which recent party-political activity may be perceived by others to compromise the impartiality of the post. Examples of posts that the commission has indicated that the chief executive may designate include, among others, the deputy chief executive, director of party and election finance, the director of electoral administration and boundaries, and the heads of the commission’s Scotland, Wales and Northern Ireland offices.
Listing those posts does not detract from the chief executive’s responsibility to consider other posts where there is particular political sensitivity. The chief executive of the commission would designate these posts on the basis of deputising for the chief executive, or the political sensitivities of the posts. The chief executive of the commission will be best placed to decide which posts merit a longer restriction period, and what that period should be. That is why the Bill does not impose a blanket longer restriction on all senior posts. Some senior posts may merit a longer restriction period, while others will not. Likewise, some relatively junior posts may merit designation.
Having said that, we appreciate the valid concerns that the power should not provide the chief executive with an unfettered discretion to designate posts for a longer restriction period. It is for this reason that the power sets out specific tests that the chief executive must believe have been met, and factors which he must take into account before he designates a post; for example, the seniority of the post, and how likely it is that any holder of the post will be required to deal with politically sensitive matters.
These criteria show that we are mindful that the chief executive should use this power responsibly. The power also includes a further check on the discretion provided here through the inclusion of a requirement for the chief executive to consult the Speaker's Committee on the posts that he intends to designate. A duty to consult will mean that any view put forward by the committee in relation to a proposed designation will have to be taken into account, and taken seriously, by the chief executive.
I reiterate that the commission does not envisage that this designation would apply to more than a handful of posts within the staff body, and in each case the commission would consider the merits of the case for designation. Additionally, the commission will publish information regarding the designation of posts on an annual basis. With the steps that we have taken to ensure that the power to designate is used appropriately, I hope that we have reassured the noble Lord and that he will feel able to withdraw his amendment.
Amendment 23 withdrawn.
Clause 7 : Political restrictions on Electoral Commissioners and staff
Amendments 24 and 25 not moved.
26: After Clause 7, insert the following new Clause—
“Education about systems of government and EU institutions
In section 13 of the 2000 Act (education about electoral and democratic systems), paragraphs (b) and (c) of subsection (1) (Commission’s duty to promote public awareness of systems of government and EU institutions) are omitted.”
My Lords, I will speak also to government Amendment 123 and it will be useful for me to speak in anticipation of Amendment 27.
Section 13 of the Political Parties, Elections and Referendums Act 2000 sets out the Electoral Commission’s function to educate people about electoral and democratic systems, systems of local and national government, and institutions of the European Union. Government Amendment 26 would restrict the Electoral Commission's public awareness role by removing the commission's duty in relation to current systems of local and national government in the United Kingdom and the European Union. The commission's duty to educate people about current electoral systems in the United Kingdom under Section 13(1)(a) is not affected by the amendment.
The purpose of the amendment is to clarify that the commission's function under Section 13 is to promote public awareness of current or pending electoral systems in the United Kingdom and any matters which it considers are connected to these systems. I should emphasise that the wording of Section 13(1)(a)—
“matters connected with any such existing or pending systems”—
will still allow the commission to provide information about systems of local and national government and the European Union, but only in so far as it is needed in the context of the commission carrying out its function of educating people about current and pending electoral systems. So, for example, to help promote understanding about existing and pending electoral systems, the commission will be able to provide information about how Parliament, or the EU or local government, actually works.
In practice, the commission's function will be, as it is now, to provide information on the mechanics of the electoral process, including electoral registration procedures, how to vote and explaining any changes to the electoral system and connected matters. We believe that it is appropriate that the commission focus on this area of its expertise. The amendment is in response to the amendment of the noble Lord, Lord Norton of Louth, in Grand Committee, which sought to restrict the commission's duty in Section 13 along these lines. At the time, we were concerned that the noble Lord’s amendment would prevent the commission commenting about systems of local and national government or the institutions of the European Union, which is important in the context of educating people about electoral systems. However, we are now satisfied that the scope of Section 13(1)(a) will enable the commission effectively to discharge its duty to educate about existing and pending electoral systems.
The commission has similarly confirmed that it is not concerned by the amendment. Government Amendment 123 makes the necessary consequential repeals to Section 13 by deleting references to systems of local and national government throughout the section. These amendments are in line with our acceptance of the Committee on Standards in Public Life’s recommendation that the commission should retain a statutory duty to educate people on the mechanics of the electoral process but should no longer have a wider statutory duty to encourage participation in the democratic process.
That is not to say that the wider democratic engagement is not important. It is vital to a healthy democratic system that people who are eligible to vote are encouraged to do so and participate. The Government are in the process of taking provisions through Parliament that will place local authorities under a duty to promote democracy. The duties to promote democracy are set out in Clauses 1 to 9 of the Local Democracy, Economic Development and Construction Bill which has recently passed from this House to another place. These provisions are intended to work alongside the duty of local electoral officers to encourage participation which is set out in the Electoral Administration Act 2006. I hope that noble Lords will be assured that in limiting the commission’s powers to exclude a wider democratic engagement role, these important functions will be carried out by local authorities.
Amendment 27 seeks to require the Secretary of State to provide a written response to reports issued by the Electoral Commission under Section 6 of the Political Parties, Elections and Referendums Act 2000 within six months of publication. In Committee we agreed to consider an identical amendment tabled by the noble Lord. There was significant support for the amendment among the Committee Members and from the commission itself. We have given it careful consideration. I fully appreciate the concerns behind the amendment, which are that the Electoral Commission reports are important and should be given timely consideration. An early response ensures that the commission’s recommendations are appropriately addressed and taken account of. It is right and appropriate that the Government should aim to respond promptly to the commission’s report on issues under Section 6. There is no doubt the Electoral Commission has built up considerable expert knowledge in these areas. Therefore, I am willing to make a commitment that the Government will endeavour to respond to the Electoral Commission’s report issued under Section 6 within six months. Where we are not in a position to do so, we will provide the commission with reasons why that is the case within the six month timeframe.
I hope the noble Lord will be satisfied with such a commitment which, while having the same effect as his amendment seeks, is unlikely to have the potential adverse consequence that placing a requirement in statute might have. As the noble Lord pointed out during Grand Committee debates on the issue, there are other examples where the Government have made a commitment to respond to certain reports within a specific timescale, but without a statutory requirement to do so. For example, the Government seek to respond to Select Committee reports within two months of publication. This requirement is a convention and is not statutory. Our commitment would provide a clear expectation that the Government would respond to reports within six months, in effect achieving the noble Lord’s objective. The Electoral Commission has indicated in discussions with officials that its key interest is in ensuring a timely response to these reports and it is not especially wedded to doing so via a statutory commitment. On that basis I hope the noble Lord will agree not to press his amendment. I beg to move the government amendment.
My Lords, can the noble Lord confirm that Clause 6 of the existing Bill would prevent the recent fiasco of ballot papers in many constituencies being printed in such a way that the name of my party, the UK Independence Party, which comes at the end of the alphabet, was in some cases printed over the back of the front page of the ballot paper and in some cases was almost sealed down? Is that the sort of matter on which the Government would expect the Electoral Commission to report? If so, will it do so? I have tabled a specific amendment on this for the next stage of proceedings but it is a timely moment to ask that question.
My Lords, it may be appropriate if I respond to the Minister’s speech in moving the amendment. I very much welcome Amendment 26 tabled by the Minister and to which I have added my name. The amendment has the support of the Electoral Commission. The amendment meets the points I raised in Committee. It helps contribute to what the noble Lord, Lord Tyler, referred to in Committee as the clarity of purpose of the Electoral Commission. As it stands, the 2000 Act imposes a duty on the commission to promote awareness of systems of government and of the institutions of the EU. The amendment removes these duties, enabling the commission to focus on raising public awareness of electoral systems and, as the Minister stressed, matters connected.
As the Electoral Commission puts it in its own briefing:
“The Commission’s main focus is already on electoral systems—encouraging and explaining voter registration and providing information on how to take part in elections. The amendment would allow the Commission to continue to provide some information on systems of government and democratic institutions where this is important in explaining the relevance of the democratic process, while also providing a clearer focus”.
I am grateful to the Minister for having listened to the case advanced in Committee and for bringing forward the amendment. My amendment, Amendment 27, seeks to ensure that reports from the Electoral Commission, made under Section 6 of the 2000 Act, are responded to by the Secretary of State in writing within six months or for there to be an explanation of why it has not been possible to do so.
The amendment has the support of the Electoral Commission and enjoyed cross-party support in Grand Committee. The only resistance came from the Minister, who argued that for the Secretary of State to have to write and explain if a response was not forthcoming after six months would impose a bureaucratic burden. The reaction to that argument from other Members of the Committee persuaded the Minister of the need to reconsider. He has clearly done so. I therefore welcome the commitment of the Government to respond to commission reports within six months. It delivers what I sought to achieve in my amendment.
Perhaps the Minister would confirm that the commitment extends to reports made by the commission under Section 5 of the Act as well as Section 6. My amendment was confined to Section 6, but the commission has said in its briefing that it would welcome the commitment covering reports made on elections and referendums. If the Minister is able to confirm that, it will be extremely helpful.
I commend the Minister for the constructive responses to both the amendments I moved in Committee. What he has brought forward meets the points I advanced. I think these changes help the Electoral Commission in fulfilling its core purposes.
My Lords, is it in order for me to ask a question about Amendment 26 as well? If the European Commission is not going to be encouraged to educate the British people about the European Union, then who is? It is a very sad fact that elections to the European Parliament—
My Lords, I agree with my noble friend Lord Norton that we are grateful that the Government have responded positively to his Amendment 27. I presume that my noble friend accepts that his amendment is no longer necessary as the Government have given an assurance that they will respond within an appropriate time, ideally six months, to any report from the commission. It might not necessarily have been a good idea to have had such a provision on the statute book; it is very prescriptive, although it is improved by proposed new subsection (2). But as my noble friend put it, we are very grateful that the Government have responded positively to the amendment he moved in Committee.
My Lords, I thank noble Lords who participated in the debate. On the first question asked by the noble Lord, Lord Pearson, the Electoral Commission is independent and would determine which issues to include in its reports. Section 5 of the 2000 Act requires the Electoral Commission to report on the conduct of elections and we would expect those reports to cover all relevant issues.
I can see no reason why my assurance should not apply to Section 5 as well as Section 6. However, I have to speak with some care; perhaps the best way to leave this is to say that I can see no reason why not. I will write to the noble Lord confirming that, or not, and if he is dissatisfied he can of course bring the matter up at Third Reading.
Amendment 26 agreed.
Amendment 27 not moved.
28: Before Clause 8, insert the following new Clause—
(1) In section 54 of the 2000 Act (permissible donors) is amended as follows.
(2) In subsection (2) paragraph (a), after “register” there is inserted “(or eligible to be registered in an electoral register)”.
(3) After subsection (7) there is inserted—
“(7A) Where a registered party accepts a donation from an individual who is eligible to be registered in an electoral register, the treasurer of the party shall report the donation to the Electoral Commission, together with the reasons for accepting the donation.”.”
My Lords, noble Lords may recognise the first part of this amendment as the same which the Conservative Party tabled to the Political Parties, Elections and Referendums Bill in Committee in your Lordships' House on 12 October 2000, as reported at cols. 550 to 571 of the Official Report. This followed the recommendation of the report of the noble Lord, Lord Neill, which gave birth to that Bill, that a party should have been able to accept a donation from someone whom it knew to be eligible to be on the electoral roll, even if they were not in fact on it.
Lord Mackay of Ardbrecknish, who moved the amendment, cited people who might not want to be on the electoral register for security reasons, students who failed to register or others who were moving round quite a bit who were inadvertently missed off for those and other reasons. He repeated, and I repeat now, that the object of that Bill, and this one, was and is to prevent foreign and anonymous donations, not to penalise innocent donors without good reason.
The Government, in the shape of the noble Lord, Lord Bassam of Brighton, did not accept these arguments, saying:
“It would … be no easy matter for a registered party to establish whether a donor whose name did not appear on an electoral register was nevertheless entitled to register”.—[Official Report, 21/11/00; col. 695.]
It might be or it might not be; that is what this amendment seeks to address. Lord Mackay pressed his amendment to a Division, and lost. This is, of course, inconvenient to my case, but I point out that the Division took place at about 7.15 pm and, going by the noble Lords who supported it, it does not appear to have been Whipped by the Conservatives.
Since then, a case has occurred which I submit justifies the Neill report’s original recommendation, and therefore reconsideration of this amendment, especially with its proposed new subsection (3), to which I shall return. I alluded to the case in question at Second Reading and in Committee in the hope of eliciting a lighter and more reasonable touch from the Electoral Commission, but without success. The story is, briefly, this. The largest donor of UKIP—my party—gave some £370,000 in a year when he had let his house and been inadvertently left off the electoral register. He had been a bona fide resident taxpayer all his life, had donated as such in previous years, and has indeed done so since. So the party knew that he was a permissible donor but did not realise that he had been left off the electoral roll, without his or its knowledge, for one year only. I should have thought that that qualified as a reasonable excuse within the spirit of the Minister’s Amendment 97, which he so eloquently moved and spoke to in Committee on 5 May at cols. GC 167 to 171 of the Official Report. It was, after all, obviously an innocent mistake.
In this respect, I note also the Minister’s latest circular on the Bill dated 12 June on the commission’s enforcement policy in which he says that it is suggested that,
“the Commission may decide to take no action at all if they were of the view that ‘the contravention was so trivial or inadvertent, and the risk of the regulated entity failing to meet the relevant obligation in future so slight, that it is not appropriate to take any action’”.
The noble Lord went on to say that alternatively the commission might believe that an individual or organisation needed to improve its capacity to comply with the law and would then set up some form of training. I should have thought that either course of action was pretty obvious in this case.
In its latest briefing on the Bill, the commission says that it does not support the amendment, because the proposal,
“to widen the scope for permissibility along eligibility to register would create additional burdens and present uncertainty for regulated entities in confirming permissibility of donors”.
That is where proposed new subsection (3) of the amendment comes in. If a treasurer receives a donation from someone who is not on the electoral roll but whom he knows is eligible to be on it, then he may accept the donation but he must report it to the commission, together with the justification for his certainty. I think that I am right in saying that the donation is likely to be more than £7,500 and therefore worth taking just that little bit of trouble over.
I have to say that the Electoral Commission has behaved in a completely different way. It took the United Kingdom Independence Party to court, where it lost. The judge found, all the same, that £18,000 of the donation which had to be repaid was bona fide and should have been allowed. Not content with having lost in court, the Electoral Commission has now gone for judicial review, and the case is being referred back to the court. Further than that, the commission has made it clear that, if necessary, it will take the case to the High Court, which is something that the donor in question and UKIP cannot possibly afford. I do not call that a light touch. However, I think that this amendment should help. If a treasurer knows that a donor is permissible, it is not difficult to justify that to the Electoral Commission.
There is one other point that I should bring to your Lordships’ attention. I believe that I am right in saying that the Bill does not change the present Act’s provisions about legacies to political parties, so bequests can be accepted from anyone who was on the electoral register at any time within five years before death. Someone could live abroad in a tax haven for up to five years before he dies and still leave a large sum to a political party. This means that physical presence on the register in the year of donation does not always apply. I suggest that it should not apply, as the amendment proposes. I am not criticising the legacy provisions, but mention them in support of the amendment, which I trust your Lordships will be able to accept.
My Lords, there may or may not be anomalies in respect of legacies, but I fail to follow the noble Lord’s reasoning. He seeks to make a general case out of a particular problem that affects his party. As I understood it, he suggested that the individual in question had let his house. If that be the case, he would not in any event be resident and presumably not eligible to be on the register. The noble Lord said that the treasurer would accept money when he knew that someone was eligible. That begs many questions. How does he ascertain whether someone is eligible? There are proper tests. It is, frankly, too difficult and the noble Lord strives too hard to make a general point out of a particular matter, which not only affects his own party but is now, in any event, the subject of litigation.
My Lords, I declare an interest in that I was the chairman of the standards committee when it produced its original report on political parties. Another Member present, the noble Lord, Lord Goodhart, was with me on the committee. We indeed used such language. We may have created the term “permissible donor”, but we then had to define it, which we did as including people who were on the electoral register or were entitled to be on it. I am not addressing any particular case; the noble Lord, Lord Anderson, has argued about the amendment that the noble Lord, Lord Pearson of Rannoch, has spoken to.
In life there could obviously be reasons why somebody’s name was not on the register. The simplest example is of somebody who thinks that they have sent in the document that will procure their registration but it has been lost in transmission. A second easy example would be of some administrative error by officials, meaning that someone had not been registered, although the document was duly received. It may even be a case where somebody has been negligent and should have taken a step but did not. In all these cases, the underlying policy is being complied with. The money comes from somebody who could have been on the register but for this error or fault, call it what you will.
I ask your Lordships and the Minister to think again about this provision. What is urged against it is that it means a difficult inquiry into whether someone is entitled. It really hinges on whether they can produce proof that they were entitled to be on the register when they gave money to the local party. The party can then take the money and send the report to the commission. There is no sidestepping supervision. There will be supervision, but in the rare circumstances where this may happen it seems perfectly reasonable to allow the text as originally proposed by the committee.
My Lords, the noble Lord, Lord Pearson, takes us back in history to the 2000 Act, whose passage I do not clearly remember. If, as he assures me is the case—I have not had a chance to check—my late friend Lord Mackay of Ardbrecknish moved an amendment similar to this one, it must have been a jolly good amendment. I am glad that he pressed it to a Division. I must confess that I was Chief Whip at the time and I cannot remember what instructions were issued to my late friend—not that he would necessarily always take them—on that occasion. Again, the noble Lord, Lord Pearson, assures us that the vote was at 7.15 pm and, from his examination of the Division List, it does not look as though I tried too hard to assist my late friend in securing the successful passage of that amendment. Obviously, in the event, we were unsuccessful.
More seriously, I take the point made by the noble Lord, Lord Neill of Bladen, about how easy it is to make an error that will leave one off the electoral roll. I am, like many noble Lords, entitled to put myself on the electoral roll in two places: at home in Cumberland and where I live in London when I attend your Lordships’ business. This year, purely for administrative reasons, because I happened to be away at the crucial period, I failed to put myself on the electoral roll in London. I believe that I have now been put on it. Certainly, I have written to Westminster City Council and am assured that this is being corrected. It is just an example of how easy it is to make a small error of the sort that could leave one off the electoral roll. The noble Lord, Lord Anderson, says that in the case cited by the noble Lord, Lord Pearson, the individual had let his house. Therefore, he ought to have been living somewhere else or out of the country. He should have known. However, it is easy to move from one home to another and forget that you have not registered in the second place, having let the first home. One should not dismiss the idea out of hand in the way that the noble Lord, Lord Anderson, did. I certainly give a degree of qualified support to the first part of the noble Lord’s amendment, particularly since, as he said, he copied it from one moved by my late friend Lord Mackay of Ardbrecknish.
My Lords, this amendment relates to the permissibility requirements surrounding donations made by individuals. I make it quite clear that, in what I have to say, I am not referring in any way to any case that may be pending on this matter. Currently, the 2000 Act requires that, to qualify as a permissible donor, an individual must be registered on an electoral register. Parties may accept donations of over £200 only if they are deemed permissible under the terms of the 2000 Act, although noble Lords will be aware that this threshold is to be raised to £500 under provisions in Clause 17 of the Bill. If a party receives a donation from an impermissible source, it is required to return it within 30 days; it is an offence not to do so. Additionally, if a party accepts a donation that is impermissible, the Electoral Commission may apply to a court to seek forfeiture of an amount equal to the donation. Any amount forfeited is paid into the Consolidated Fund.
Let me respond to Amendment 28, which concerns the existing requirement in the 2000 Act. As the House knows, the Act is based largely on the recommendation made in the fifth report of the Committee on Standards in Public Life, then chaired by the noble Lord, Lord Neill of Bladen, who has already spoken in this debate. The House and the country owe a huge debt of gratitude to the noble Lord, Lord Neill, and the committee’s members. The Government agreed with the vast majority of the report’s recommendations, but on individuals to be regarded as permissible donors we differed slightly from what was recommended. The Neill report, as we have heard from the noble Lord, recommended that a donation could be properly received from a person who was on the register or eligible to be on the register. We disagreed with that recommendation and set out why in our response to the Neill report:
“Checking that a particular donor appears on the electoral register offers a test that is both conclusive and simple to administer. It would be far less straightforward for political parties to verify that a donor not appearing on the register was nevertheless entitled to do so. It is in the interests of the parties to have available a test which offers certainty as to the eligibility of a donor”.
Our view has not changed over the years. Political parties have an obligation to ensure that the donations that they receive above the threshold are permissible. We should not look to add a further measure that would increase the administrative burdens on parties. We are concerned that the measure proposed by the noble Lord, Lord Pearson, would do that.
That view is shared by the Electoral Commission, as the noble Lord, Lord Pearson, frankly admitted in moving his amendment. In commenting on this amendment, the commission said:
“The proposal to widen the scope for permissibility along eligibility to register would create additional burdens and present uncertainty for regulated entities in confirming permissibility of donors”.
I hope that the noble Lord, Lord Goodhart, will forgive me for mentioning him. The noble Lord, Lord Neill, has pointed out that he, too, was a member of the committee at that time. When this matter was considered in the debates on the 2000 Act, the noble Lord, Lord Goodhart, said:
“The Government put that forward—this was stated in their reply to the Neill committee—because administratively it is a relatively simple matter to check who is in fact on the electoral register, but it is much more difficult to find out whether someone who, let us say, sends a cheque drawn on a British bank in a letter from an address in London is in fact eligible to be on the register. It is not of course difficult for anyone who is eligible to be on the register to put themselves on the register. For that reason, the Neill committee, when this proposal was put to it, did not object to it being brought forward in the form in which it is brought forward by the Government”.—[Official Report, 12/10/00; col. 546.]
I am sorry not to have spoken to the noble Lord earlier and told him that I intended to use his words.
My Lords, I am grateful to both noble Lords. With great respect, we think that the noble Lord, Lord Goodhart, was correct on that occasion, just as he is tonight.
The noble Lord, Lord Pearson, seeks to draw an analogy between what his amendments would achieve and the reasonable excuse provisions elsewhere in the Bill. I am afraid that we do not see a clear link between these provisions and the amendment. The government amendments introducing a defence of reasonable excuse in relation to the obligation to report would not give parties carte blanche. We do not think that it would be wise to water down the important obligation to verify the permissibility of donations above the recordable threshold, nor does the Bill seek to do so. It goes without saying that I will not speak about specific cases.
It is for those reasons that we cannot accept the noble Lord’s amendment. The recurrent requirement for an individual to be registered in an electoral register offers a test that is simple to operate for all concerned and we do not want to change that.
My Lords, I am grateful to all noble Lords who have spoken, including the noble Lord, Lord Anderson, who rightly said that I was making the general out of the particular. However, that is what often happens. This is a particular case, but other examples have been mentioned by the noble Lord, Lord Neill, and others. The general does exist and this case merely proves it.
I am grateful to the noble Lord, Lord Henley, for what I took to be support for this amendment, but I certainly do not intend to press it to a Division. I can see that there is little flexibility from the Government on this point, which is a pity. The amendment would not make life more difficult or complicated for treasurers. If a treasurer knew that the person could be on the electoral register, he would merely have to give reasons for that knowledge to the Electoral Commission. There is no difficulty about it at all. However, I can see that the amendment will not be accepted, so I do not want to take up more of your Lordships’ time. I trust that what is on the record may be useful for the future and I beg leave to withdraw the amendment.
Amendment 28 withdrawn.
Clause 8 : Declaration as to source of donation
29: Clause 8, page 7, line 14, at end insert—
“(1A) In section 54 of the 2000 Act (permissible donors), in subsection (2)(a), after “register” there is inserted “who is resident in the United Kingdom for the purposes of Part 14 of the Income Tax Act 2007 and is not a non-domiciled United Kingdom resident”.”
My Lords, I shall also speak to Amendment 30. These amendments were debated at great length in Committee. They were originally tabled in the House of Commons and have been vigorously opposed by the Government at all stages. I shall argue on two counts: first, the merits of the amendment are set out in the letter from Mr Gordon Prentice MP; and, secondly, the procedural issues arising out of the handling of the amendments in the Commons, as set out in the letter from Martin Linton MP.
The case on merit, in my view, turns on whether a person who is not liable to tax in the United Kingdom should be permitted to make a substantial political donation that may well run into millions of pounds to a political party, and thereby influence the result of a general election. That is the question. I believe that they should not be allowed. Individuals collectively pay their taxes in the belief that, having done so, it is they who should have the right to influence how their taxes are used—not some person who deliberately avoids liability to United Kingdom taxation. It is the payment of and liability for tax that gives us the right to decide. It is our money and not theirs. It is for us, who are liable to tax, to decide which Government should be in place to decide how our taxes are used.
I shall repeat the scenario I put to the Committee. I shall exaggerate to make my point. If a Ukrainian billionaire philanthropist, entrepreneur, oligarch, public benefactor, or whatever acquires British residency, buys a home in London, spends most of his or her time abroad, refuses to make him or herself liable for tax in the United Kingdom, and then offers a political party a £5 million donation, should the political party be permitted to accept it? The public would be appalled; the political party would be discredited; and Parliament’s credibility would be further undermined. As the law stands, that can happen. My amendment would make it unlawful for any person who is not UK-liable for tax purposes, and is not a non-domiciled UK resident, to make a substantial donation to a political party. A cap on such donations would be defined in law.
The amendment is based on the simple principle: if you want to donate you have to be liable to tax. Of course, there are limitations. If a person is not ordinarily resident, he or she will be liable to tax on income arising only in the United Kingdom. Only someone who can spend 183 days or more in the UK is a UK resident under the six-month rule. Someone will be regarded as a resident if they come to the United Kingdom regularly and after four tax years they visit during those years for an average of 91 days or more a year. I am told that that is the current position.
We know that non-UK taxpayers can have a huge impact on the outcome of general elections. The Rowntree report published last year, Purity of Elections in the United Kingdom: Causes for Concern, states:
“There is substantial evidence to suggest that money could have a powerful impact on the outcome of general elections, particularly where targeted at marginal constituencies over sustained periods of time”.
A well-known public figure, who lives offshore and refuses to make himself liable to tax in the United Kingdom, converted a £3 million loan into a gift to a political party. He then went on to donate a further £100,000 to that party and an additional £30,000 to a mayoral election campaign. Do we really believe that that is acceptable? The Electoral Commission has stated:
“The permissibility requirements in the 2000 Act are intended to ensure that only people and organisations with a close relationship to the UK can donate to political parties. It is for Parliament to decide if this is appropriate”.
That is what the amendments do.
How would they work in practice? A person wishing to make a donation simply ticks a box on their tax return and the Electoral Commission need only certify with HMRC that that is the case. It would be a simple procedure in circumstances when a donation could on occasion influence the result of a general election. Of course, it would apply only in circumstances when a donation exceeded a threshold laid down in regulations. The House may want to consider a letter to Mr Tony Wright, chairman of the House of Commons Public Administration Committee and the House of Lords Appointments Commission. The letter announced the changes to the selection criteria for Peers. It stated:
“I am writing to notify you of a slight strengthening of the selection criteria which the Appointments Commission will in future use when assessing nominees for non-party-political peerages. The Commission has agreed these changes as part of its review of policies and procedures and in the light of experience”.
A copy of the press notice is attached, which states:
“The Commission also wants to strengthen the existing requirement that a nominee should be resident in the UK for tax purposes, and be willing to confirm his or her acceptance of the requirement to remain so. This strengthening will also be reflected in our vetting criteria for future party-political and other nominations for peerages”.
Surely, if appointment to the Lords requires UK residency for tax purposes and a liability to tax within the United Kingdom, it must follow that donations of millions of pounds to political parties, which could influence general elections to the elected House of Commons, must have at the least the same tax liability requirement. As many of my colleagues in this House have asked me over recent weeks, how can the Government justify the position that they have taken on this issue?
If the high standards which the public demand of Parliament are to be met in a way that the Prime Minister recently proposed, surely now is the time to deal with this utterly unacceptable practice in our tax system? The Government last week circulated to Members on this side of the House—and to all Members, I presume, in the spirit of fair play—their explanation and, indeed, justification for refusing to accept these amendments. They gave a number of reasons, which I shall take individually. The Government’s own circulated document says,
“The amendments would restrict only one form of democratic participation (making a donation) according to tax status whilst leaving other forms unrestricted”.
That is to say:
“standing as a candidate for and sitting in a legislature, voting or campaigning as a ‘third party’ pressure group”.
The Government say:
“There is a real Article 11 ECHR (right to freedom of association) issue. It may be lawful to restrict who may give donations if the restriction is justified and proportionate. But a tax status restriction is problematic if it restricts donations but not voting”,
“standing for Parliament”.
That is their justification.
In other words, they are saying that a tax status restriction is problematic if it restricts donations but does not restrict voting. They then pray in aid Article 11 of the Convention, somehow likening the right of a single individual to cast a vote in the Pimlico Churchill Gardens polling station at a general election to the right to donate millions of pounds to a political party and thereby influence the result of that whole election campaign. The logic behind that is ludicrous: one vote equivalent to a contribution of millions of pounds. I feel sure that a few lawyers in this House would readily make a meal of that excuse.
The Government then say:
“There is a risk that the amendments would result in donations being diverted through other routes … companies, unincorporated associations”.
My response to that is: why do the Government themselves not table amendments in this House on Third Reading or, if the amendments were to go through, on the Commons consideration of Lords amendments to deal with that problem, if it exists? I invited my noble friend to do so in Committee. If the principle of a tax restriction were to be established in this House, there is no reason why further work could not be done by the Treasury on tax law relating to “companies and unincorporated associations”.
They then say there is a,
“difficulty in establishing whether an individual is resident and, particularly, domiciled. HMRC does not routinely hold this information for the majority of taxpayers. Establishing residence and domicile would usually require HMRC to undertake an investigation at considerable time and expense. It is not clear how parties would satisfy themselves before deciding whether to accept a donation. Resident status is ‘retrospective’ in that it is dependent upon the amount of time an individual has spent in the UK in the previous 12 months, so very difficult to establish at a given point in the middle of a year if an individual is ‘resident’”.
“also risks treating individuals unfairly who may not know whether they are domiciled or not”.
These amendments place no responsibility whatever on HMRC to investigate the tax status of an individual. It is the individual making a tax return who makes the declaration; he or she is responsible. If HMRC indicates to the Electoral Commission that the donor’s tax return indicates UK tax status, signed off under the statutory declaration by the taxpayer, then the commission would have met the requirements of the law under these amendments, if carried by the House. It would be for the donor to establish whether he or she was domiciled; or, they could take professional advice on that matter if they were not aware whether they were domiciled.
They then go on:
“In order to enforce the new requirement, recipients of donations and the Electoral Commission would need to be able to verify that a donation was permissible and would require access to HMRC information. HMRC has a statutory duty to maintain taxpayer confidentiality”.
In reply to that, let me make it absolutely clear that all the Electoral Commission needs to know from HMRC is: has the donor ticked the box on a tax return? Recipients of donations would have no need whatever to approach HMRC. Then, they say that they,
“need to be mindful of a commitment in the 2008 Budget that there would be no further changes to the taxation regime for non-domiciles in the rest of this Parliament or the next”.
To that, I reply: there is nothing in my proposed amendments that would increase the liability to tax. Indeed, I could not table such an amendment in this House.
I have been asked what would happen if, despite a Revenue declaration, a party was found to have been misled by a donor and had received an impermissible donation. In my view, it would be a perfectly reasonable defence for a party to argue that it received approval for the donation on the basis of HMRC’s confirmation to the Electoral Commission that the box had been ticked. However, it would concentrate the minds of political parties when seeking to ensure the validity of donations.
Finally, I turn to what some people refer to as the most important argument of all. What happened when these amendments were originally moved in the Commons? They followed on the important work done, over a number of years, by Martin Linton. These two amendments were originally moved in the Commons by Gordon Prentice. They were supported by 218 Members of Parliament—probably among some of the highest signatory endorsements for amendments in the history of the House of Commons. They were supported by nearly all political parties, yet they were not debated. They got caught up in a procedural wrangle.
These amendments constituted the fourth group out of a total of six scheduled for debate on day two of proceedings on the Bill. I do not want to go into the detail, but they caught up in an argument over a programme motion, which effectively excluded them under House of Commons procedure. As I say, they were neither debated nor voted on—a classic example of a Commons failure to properly scrutinise amendments. This is our opportunity to show the Commons the value of scrutiny arrangements in the Lords. The Commons are desperate to have the opportunity to debate and vote on these amendments, and many a screen is going in that House this evening with people watching our debate. They want the opportunity to vote on these amendments. We can give them that opportunity. I beg to move.
My Lords, I and my colleagues very strongly support these amendments, as we did in Grand Committee. Indeed, my noble friend Lord Oakeshott may refer to the specific issue of how the criteria for entry into this House now follows the pattern to which the noble Lord, Lord Campbell-Savours, has already referred. For goodness sake, if it is practically possible to identify the tax status of those entering this House, it must surely also be possible to do the very same thing for donors to political parties. I intend to speak only briefly on this issue, as I hope that we shall also hear from the noble Lord, Lord Rooker, who has put his name to these amendments.
As the noble Lord, Lord Campbell-Savours, has already said, this set of amendments had the support of an unusually large number of Members of Parliament, from the Back Benches of all parties. They were tabled by Mr Gordon Prentice but not put to the vote; by an accident of history, they were not passed there. However, unless we allow ourselves the privilege of putting this into the Bill, it will never be discussed in the House of Commons, despite the support of a very large number of Back Benchers. The effect is that it would require a permissible donor to be resident in the United Kingdom for the purposes of Part 14 of the Income Tax Act 2007, not simply to be a non-domiciled UK resident.
When we discussed this in Committee, Ministers came up with a number of apparent practical difficulties. I suggest to them that where there is a will, there is a way. It is important that they should be forced to look carefully at the practicalities of this between now and Third Reading, and if they cannot accept that it is practical to do this at that stage, we should nevertheless demand that there is an opportunity for the other place to discuss this. There is an issue of principle here. Members of your Lordships' House who are steeped in history will recall that the rebels in the United States went under the great slogan, “No taxation without representation”. In a sense, we are turning that upside down and saying, “No representation without taxation”. That is the basic fact. It is surely right that no person who is not liable for tax in the United Kingdom should be permitted to influence the use of taxpayers’ money, money paid by those who do pay tax and are liable—you and me. That should be an intrinsic principle.
There is a subsidiary issue that I would like to draw to the attention of the Minister at this stage because it arises out of this. In his letter of 12 June, he wrote:
“I know that concerns have been expressed about the potential for making multiple donations just below the thresholds to avoid the recording and reporting requirements”.
In the otherwise very comprehensive briefing that he has given at all stages, the Minister has been very conscientious in giving us a response to a query or a concern of that sort, but no such response appeared in this letter, at Second Reading or in Committee. A foreign donor could very easily avoid the restrictions of reporting or recording by simply making a payment every week of the year, but just below the threshold— £1 below the threshold every week of the year—so we have to be extremely careful. Even if this amendment is passed, and I hope it will be, we must be very careful that that other loophole is not still available to foreign donors who, because they keep just below the threshold, are not required to be recorded or reported to the commission.
If we leave the Bill as it is, without a clear statement that these sorts of donations from foreign sources are not permissible, the Bill will not fulfil the requirements that the Government have placed upon it. Even since the Bill was in Grand Committee, there is greater awareness of the potential corruption of our political system by people with very large chequebooks who can buy their way into influencing a relatively small number of constituencies, the marginal seats. It takes us right the way back to the purchase of seats before the Reform Act 1832. As the noble Lord, Lord Campbell-Savours, said, unless we stand up for the right of citizens of this country who pay taxes to be the people who decide how our political system works, the House of Commons will not get its opportunity, and the Bill will be weaker for it.
My Lords, my noble friend Lord Campbell-Savours has made a powerful case not only on the substance of the matter, but on enabling the other place, which was prevented from discussing the matter, not only to discuss but to determine whether a restriction should be placed on non-UK residents making donations to political parties.
My noble friend may not have drafted the perfect amendment because, for example, it seems to leave it possible for non-UK residents to make donations indirectly through an unincorporated association or a company, but unless the Minister undertakes this evening to bring forward an improved amendment with similar objectives to those of my noble friend Lord Campbell-Savours, I am inclined to vote for his amendment so that MPs and parliamentary draftsman can pool their respective skills to improve upon it.
It may be said that restrictions on donations are restricting one form of democratic participation according to tax status while leaving other forms unrestricted. I do not regard the making of huge, unlimited donations in the same light as the right to vote, the right to have fair elections or the right to stand as a candidate for the other place. I doubt the suggestion that a restriction on donations might breach Article 11 of the European Convention on Human Rights. This has been raised by the Government with no supporting evidence or legal argument; they simply posed the view that this restriction on donations suggested by my noble friend would be a breach of the provision for freedom of association and assembly. There are restrictions on the right to vote in many of the convention countries, including our own. We are contemplating reducing the voting age. There are restrictions on the way in which elections are run. Surely, if it is suggested that restrictions on the finance that may be provided by a donor to a political party contravene Article 11, it would suggest that Article 11 of the convention is rigid, clear and specific. However, I am sure that it is not so, and I cannot imagine that a full, successful argument could be made that my noble friend’s proposal would result in a breach of the convention. I support my noble friend.
My Lords, I agree with the purpose of the amendment. Over 10 years, I have taken very great care not to criticise on the Floor of this House the legislative procedures in the other place. I say only that I am depressed that an amendment on this question, which was tabled for Report in the other House in the names of 216 or, possibly, 218 Members of Parliament, was never discussed because of the timetabling, procedures and the use of a programme motion. It is open to us to adopt the amendment in the name of the noble Lord, Lord Campbell-Savours, thus making it possible for the other House to discuss the proposal, so let us do that.
My Lords, I rise with a little trepidation to put a slightly different point of view. I have great sympathy with the fact that this was not discussed in the House of Commons, and it should have been. It says an awful lot about the procedures of the House of Commons that 216 MPs can support an amendment and then it is decided not to take it. I can only say thank goodness we do not have procedures like that in the House of Lords. I genuinely hope—and I have said this to my noble friend—that there might be the possibility of some solution to this before we reach Third Reading. However if that is not possible, I shall vote with the Government.
I will do so because the amendment is so badly flawed that I do not feel able to support it. It does not do what it is attempting to do. I have great sympathy with what it is attempting to achieve. I think it is diabolical that large sums can be spent prior to an election in the way that they have been in the past, but this amendment does not solve that problem. It does not solve the problem of a non-UK taxpayer putting money through companies or unincorporated associations. To prevent that would need another amendment, which we do not have in front of us. Nor does it do what I would like it to do, which is to say that large donations should not be spent before a general election from wherever they come. I can only cite from my own constituency, where one of the candidates spent £90,000 of his own money prior to the last general election. There is nothing in this amendment to stop that happening next time. I wish there was, but this amendment does not do what a lot of people believe it will do.
My Lords, I do not think the two things go together, with the greatest respect. We will come to the capping of donations later. The noble Lord does not know what my view is on that; he will have to wait and see. But this amendment does not do what a lot of people believe it does. I am not certain what the procedure would be to get an amendment which eliminated that loophole in respect of companies or unincorporated associations through the Commons if this amendment went back to the other place. I am not certain that it would be feasible.
We have had some discussion already on the concerns the Government have raised in response to this amendment. One is the anomaly about democratic participation. It may be said that there is no relevance between giving money to a political party and affecting the outcome of an election. My constituency won irrespective of the £90,000 donation from another candidate. But I accept it has an effect. Also, if we say that a person cannot give a donation but can be a Member of this House or a candidate for the Commons and can win, does that not have an enormous influence on how taxpayers’ money is spent? It is not just a question of how it is spent in elections, but also of how it is spent on all the other issues that we deal with. Those people have the right to sit in this place and the other place and spend that money. That is another flaw in the argument.
I share the concern raised by the Electoral Commission about the need to verify whether a donation is permissible. The Electoral Commission’s own data suggest that more than 1,000 individual donations would need verification annually. That would be an extraordinarily difficult job.
My other real concern is about the implication for constituency parties. At present political parties can fulfil their compliance duty to check that an individual is on an electoral role, or a company is registered at Companies House, by consulting public records. Obliging parties to check the residence status of donors for tax purposes would be an impossible task and I am sure it is nowhere near as easy as putting a cross on the tax form. Tax records are not public documents and, in any event, there is no single record of individual tax status. I am not sure whether, even if a cross would satisfy it, it would be possible to use that cross because information would then be being disclosed about that person’s tax. The consequence of that could be that a constituency party could find itself in difficulty and may end up having to repay the money. So there are many flaws in the argumentation. That is not to say that there is not a problem. Maybe there needs to be a wider discussion on the issue of tax status and participation in politics generally, but that is not a discussion for this Bill and this amendment does not achieve what it is intending to achieve.
My Lords, my noble friend recognises that there is a problem and argues that the amendment does not wholly meet it. Of course that is true, but I agree with the noble Lord, Lord Tyler, who made the point that, even though this House should probably be reluctant to intervene in elections since we are a unelected House, this amendment gives the opportunity for the elected House to make its own decision, and this is what we should allow it to do.
I can see no reason for the Government’s rejection of this. The Government, in a rather civil-servant way, give 1,001 reasons why we should reject this, but do not come forward with any real reasons why this particular anomaly should not be met. The mischief which the noble Lord, Lord Campbell-Savours, seeks to meet is very clear; it is the mischief of the buying of elections by rich individuals who are not domiciled in this country. Quite properly the noble Lord, Lord Tyler, mentioned the good inverted US principle of no representation without taxation. Why should individuals have a disproportionate effect on our electoral process?
I am thinking, for example, of a very competent colleague in the House of Commons, who lost his seat in 2005 and watched a tidal wave of money pour into his marginal seat from certain individuals in the years prior to the period when it was banned. He could do nothing about it. Clearly, only a relatively small number of marginal seats are laser-beamed in this way. This is not a partisan position. I hope the main Opposition also see the danger to our democracy of having elections bought in this way by very rich individuals. The awful thing for this individual was not that this tsunami of money poured into his constituency and overwhelmed him but that the money came from someone who was non-resident in this country. That is clearly the mischief that the noble Lord is seeking to meet.
I simply ask this question of the Government: do they recognise that this is a problem at the very root of our democracy? Over the years, step by step, we have tried to remove the influence of money on elections and corrupt practices—mostly, I concede, thanks to the Liberal Party over the centuries—from the great Reform Act through to secret ballots, seeking to remove various forms of corrupt practice and the effect of money on elections, so that one individual does not have a greater say in the determination of an election result than other, ordinary folk. Why can we not seek some means of doing it? It is not good enough simply to parade a series of individual objections to the points raised. Why will the Government not do something about it? And is the Conservative Party content to allow this possibility to pervert our democracy without accepting what is here and giving the House of Commons—the elected House—the opportunity to debate it and put it right if it is able to do so?
My Lords, there are two debates going on. The first is whether the amendment is in substance correct, whatever nitpicking one can indulge in. The other is that we have a duty to give the other place a chance to vote on this issue. If I may take the liberty of pretending to be a member of the public, if asked, as a man in the street, whether I would approve of a wealthy foreigner—not even a member of the EU—paying a huge sum of money to one political party in the run-up to a general election, and it being acceptable under the rules for influence to be wielded in that way, the only possible answer would be, “What an absolutely outrageous suggestion—of course not. Surely that’s not allowed”. One would have to say, “Well, as a matter of fact, it is at the moment. We are talking about an amendment to stop it being possible”. I am sorry to fantasise, but I believe this is how people would react: “Well, I am all with it”.
On the second issue, we now want to give the other place—we call it the House of Commons out in the street—a chance to vote on this portion of the Bill. The man in the street might say, “I thought this Bill came to you from the House of Commons. It must have thought about this”. One’s response would be, “No, I’m afraid I have to enlighten you on that point. It often does not consider very important parts—sometimes great chunks—of an Act of Parliament. The House never had the opportunity to debate this proposal. We are not suggesting chicanery. It somehow came out through the machinery; there was no chance of debate”. My ideal man in the street would say, “That is ridiculous. Give them a chance”.
My Lords, it is probably incumbent on members of the Labour group who are inclined to support the amendment to explain themselves very briefly.
At a time of constitutional renewal, and with the absurdity of the overuse of the guillotine in the House of Commons, there is a very powerful argument here. To put a shot across the bows of those who talk about constitutional change without having any way of meeting it—the noble Lord, Lord Tyler, produced a Bill on this earlier, and it seems to have been debated for a long time—I am very interested in and sympathetic to the premise with which my noble friend Lady Gould, who has enormous experience in this field, began.
I also agree that the amendment does not do certain other things that may or may not logically be part of a jigsaw puzzle. Equally, I pick up the point that something needs to be done and that, if this amendment is carried, the Government must realise that they will have to put their brain to this with more urgency, so that when it gets back to the House of Commons—I doubt that that will be by Third Reading, but it may be—unless the procedures of the House of Commons are even more incomprehensible to Members of this House, the mysterious authorities there cannot simply say for the second time: “No, we are not going to take the amendment”.
My Lords, briefly, I support this amendment and the excellent speeches made by the noble Lord, Lord Campbell-Savours, and my noble friend Lord Tyler. The speeches were in support of the amendment, with the sole exception of the noble Baroness, Lady Gould. She made two points. First, she broadly agrees with the amendment but thinks that it does not go far enough. That is no reason to oppose it. Her practical point was that it would be very difficult for parties to check whether donations met this test. I do not think, off the top of my head, that it would be difficult. All one would need would be a requirement that any person making a donation signed a form to say that they were wholly resident or domiciled in this country for tax purposes, that a donation could not be accepted if that were not so, and that it would be a criminal offence to accept a donation without that form and a criminal offence to sign it if that were not true. It would be very easy indeed for the Electoral Commission to check with the tax authorities whether any person had signed the form wrongly. I cannot see that that is a problem. I see that the noble Lord, Lord Myners, is here. I know that he is very sympathetic to the drift of all this, and I am sure he will quickly tell me if I have not got this quite right. The noble Baroness, Lady Gould, is looking for problems where they do not exist.
My Lords, I am sorry to intervene. The noble Lord has talked about individuals, which seems fine. That seems to be a very easy solution to the problem. However, the donations do not come from the individual directly; they come indirectly. How would he solve that particular problem?
My Lords, this is what I mean when I say that we should not accept any donations from companies at all. That is the solution to that one.
My Bill, which is currently in Committee, requires that no one who is not ordinarily resident or domiciled in this country shall sit in this House. The Government say that they are very sympathetic to that. I am very glad for that sympathy, and I hope that it will soon be converted into practical action. However, the amendment before us today is arguably even more important than my own Bill. It is outrageous that non-resident Peers can sit and vote on our laws in this House, but it is even more outrageous that a person who does not pay full British tax can pay millions to a political party—money that is, in effect, filched from the British taxpayer by that person because he is not resident here and does not pay tax but can influence millions of votes. If the Government believe that this is wrong and must be stopped, why will they not accept the noble Lord’s amendment? If they say—as to some extent they have been saying, although I hope that has changed—that my Bill is the wrong way of dealing with the abuse of non-resident Peers sitting in the House, what is the right way of dealing with the abuse of donations that we all accept is happening? Why will the Government not act while they still have the power to do so? We are at the eleventh hour.
My Lords, I did not intend to speak, but I must say that I wholly support the amendment in the name of my noble friend Lord Campbell-Savours. I have two brief points to make.
In June 1977 in a committee in the other place, my late colleague Audrey Wise and I tabled amendments to the Finance Bill. As well as being told that the amendments were inconvenient, we were told that they were in the wrong place in the Bill and were technically deficient—all those reasons. Our view was: “Make them okay. Put them in the right place in the Bill”. That is what the Government did, but they would not have done so if we had not tabled the amendments. I must say to your Lordships, although I would not dare to give examples, that on several occasions at the Dispatch Box in recent years I have moved government amendments or agreed to amendments to government Bills from noble Lords around the House that were not perfectly drafted. Our view was that we needed them so that the draftsmen in the other place could get to work to achieve our objective. That is done every day of the week. That is what parliamentary counsel is for.
The general view among the population now is that we have banned donations from foreigners. Morally, you cannot argue that case if you allow the status quo on the taxation argument; the noble Lord, Lord Neill, made that point. If the amendment had not been on the amendment paper in the House of Commons, it would be quite wrong for us to try to put it in from here. The fact that it was on the amendment paper but not debated means that it was still part of the Bill’s proceedings.
Generally speaking, if anyone outside this place asks us what we do, one of the key answers that we give is that we ask the House of Commons to think again. It will not think again unless the issue is on the amendment paper, and we can get it on to the amendment paper only if my noble friend’s amendment is accepted. I shall vote for it.
My Lords, briefly, I support all those who have spoken in favour of the amendment in the name of my noble friend Lord Campbell-Savours. I have one very simple point to make. Over the past few months, we have heard from all the leaders of the political parties their undying commitment to cleaning up politics. If we collude in supporting this Bill without an amendment of the kind which my noble friend has moved, we are colluding in not cleaning up politics. We should support the amendment.
My Lords, this has been a debate of outstanding quality. I am new to your Lordships’ House, and it is incredibly impressive to hear such skilled speeches and debates about the detail of this legislation. I shall touch on a few of those points without detracting from the outstanding experience that is present in this House and which I do not possess.
In moving his amendment, the noble Lord, Lord Campbell-Savours, touched on a point with which we certainly agree: the procedural way in which matters are conducted down the other end of the Palace of Westminster—the over-frequent use of the guillotine and the stifling of debate—leaves much to be desired. That is not the case here. This amendment was moved in Grand Committee, again very ably. It sparked a debate that went on for an hour. During that time, the Minister gave a detailed, almost line-by-line, rebuttal of the reasons why the amendment would not work in the way that it was proposed. I found that argument quite persuasive.
There is a need, which has been articulated by my right honourable friend David Cameron on a number of occasions, to remove big money from British politics. That desire is there and all parties of the House need to agree on how it should move forward. Hayden Phillips had almost reached that point before, sadly, the Government abandoned that pledge. Therefore, we are left with the difficulties before us. Very detailed restrictions are put on people who want to donate to political parties in this House. They have to be registered or be on the electoral register. The money has to come from a UK-registered corporation. In both those respects, it could be argued that there is some level of interest; namely, that either the person is resident and is on a register or that they are part of our economy and paying through a company which is registered here.
We also need to bear in mind that context is important as regards the notion and the language of buying elections. I can understand why people use that sense of hyperbole—
My Lords, I am grateful to the noble Lord for giving way. I accept that he is making a very balanced speech. But does he not accept that there is a core argument in your Lordships’ House, which addresses the role of an upper House, a revising and scrutinising House? The argument is that on a matter of significant interest, particularly if it affects how we carry out our politics, it is appropriate for this House to give the opportunity to the other House to make a determination on an issue of fundamental importance that it has not so far had the opportunity to decide.
My Lords, I follow the noble Lord’s argument. There is a sense in which it could be argued that the other place had an opportunity when Mr Gordon Prentice presented those Bills. The fact that that opportunity was denied by the business managers in the Commons is regrettable and we are redressing it by having a more reasoned debate in this place. I do not doubt that. Because they have behaved in a certain way once, the argument is to pass it back to see whether they will behave in the same way again. I am not entirely persuaded of that because of another point, which was touched on by the noble Baroness, Lady Gould, who pointed to some of the difficulties. On the way through this Bill and the legislation, we have talked about the difficulty of too onerous a requirement being placed on volunteers within associations who could potentially make innocent mistakes, and the boundaries of knowledge.
Certainly, it is possible to check whether a company is registered in the UK for tax purposes and to check the electoral register to see whether an individual is on that register. It is not possible for the average person to scrutinise tax records, which are private, in order to ascertain whether that is not the case. The solution is that there should be voluntary disclosure. In Committee, the Minister’s response pointed to some of the difficulties which that can land one in, because tax status is determined retrospectively. Tax returns are filled in at the end of a year. A register of electors is for the year ahead. In terms of those types of arguments, there is something to be considered.
In addition, we are roping into funding and taxation the whole issue of residence and domicile for tax purposes. I am no tax specialist, but many learned Members seem to make a very handsome living out of determining who is and is not resident and domiciled for tax purposes. It may not be as clear cut as one might suggest as far as this proposal is concerned. Those big money elements of politics also need to caution people. Before the intervention, I referred to hyperbole and the buying of seats and the buying of elections. Big money has been around in politics for a long time. If I feel slightly saintly on this, it is because I spent a glorious weekend walking around the grounds of the Earl Grey’s house, Howick Hall in Northumberland. I feel at least some moral element of authority. In that respect, we are talking about nothing of that here.
Especially in the days of the media, elections are won and lost by the veracity of the arguments and the compelling nature of the case put forward. If my party happens to be doing better in the elections at this time, it is because of the positive alternative offered by David Cameron to this country, which is put forward by the party. The electorate is capable of making those independent judgments. To minimise them or to use inappropriate language to question whether they are capable of making that judgment is perhaps unfair at these times.
In conclusion, the matter has been aired and discussed. In Committee, the Minister gave a vigorous defence of the reasons why this is difficult to bring about from a legal point of view. We on this side of the House look forward to the day when big money is genuinely taken out of politics and those cross-party agreements—
My Lords, that is genuinely the case. The Liberal Democrat Benches laugh at this, although their idea is that big money should not come from trade unions or businesses, but from the taxpayer. They want public money to fund their coffers. They want big money that is public money. That is unacceptable to the British public who are facing many pressures on public services and would not choose to fund political parties at this time. With those comments, we await the Minister’s rebuttal on these matters and we will support him in that.
My Lords, Amendments 29 and 30 would add to the permissibility requirements relating to donations from individuals. In addition to the existing requirement that an individual be registered in an electoral register, Amendment 29 would provide that an individual would have to be resident in the United Kingdom for the purposes of the Income Tax Act 2007 and would have to not be a non-domiciled United Kingdom resident. Amendment 30 would amend proposed new Section 54A of the 2000 Act by requiring any declaration by an individual donor as to the source of a donation to state that he satisfies these additional requirements. I agree with the noble Lord, Lord Bates, that this has been an outstanding debate and I thank all noble Lords who have spoken.
As the House knows, these amendments were originally debated at some length in Grand Committee. The Government have listened carefully to the points that were made then and have been put again today, but I must inform the House that the Government continue to have serious concerns about these amendments on principled, practical and legal grounds. I want to reiterate these concerns and I apologise in advance if it takes a little time. I hope to address additional points raised in Grand Committee and in today’s debate.
As we have said before, the Government recognise and understand the sentiment behind the amendments, which is that those who donate to political parties in this country should pay tax in this country. We also recognise, however, that making a donation is just one way in which an individual can participate in our democracy. There are many other ways, ranging from exercising the right to vote to standing as a candidate for the House of Commons and sitting in a legislature as we are tonight in the House of Lords. We believe that there is a spectrum of political involvement from voting at one end to sitting in the legislature at the other, with large political donations somewhere in-between.
The Government have stated their firm belief that it would be wrong in principle to create an anomaly by introducing extra restrictions on only one form of participation without considering whether equivalent restrictions should be placed on other forms of participation. We believe that the issue of what should be the correct relationship between an individual’s taxation status and their right to civic and democratic participation needs to be looked at as a whole. I can tell the House tonight that this will be one of the issues that will be covered by the democratic renewal council in its deliberations, which are taking place now, on the wider constitutional reform agenda. I can give that commitment to the House this evening that it will be part of its brief to look at this issue as a whole.
Notwithstanding this objection of principle, significant legal and practical difficulties must be given detailed consideration before any restriction on donations relating to tax status could be introduced. I am afraid that we are of the view that the amendments fail to deal adequately with these difficulties. As a result, they risk introducing a new restriction which could not be effectively enforced and which could be open to legal challenge. Moreover, the amendments—and this is a crucial point, in our view—would not achieve their intended objective, since non-UK taxpayers could continue to have a role in funding political parties and other political entities through companies and unincorporated associations. For this combination of reasons, we are duty-bound, we feel, to resist these amendments.
If carried and enacted, there is a risk—I choose my words carefully—that the amendments would interfere with Article 10, Article 11 or Article 3 of Protocol 1 of the European Convention on Human Rights.
My Lords, will all respect to the Minister, that seems to be a highly improbable interpretation of Articles 10 and 11 and Article 3 of the Protocol. Is there any authority that binds the Government not to accept legislation of the kind covered by this amendment?
My Lords, will the noble Lord just hear my argument on this, which I hope will deal with the point that he raises? Those articles are the right to freedom of expression, the right to freedom of assembly and association and the right to free elections. The articles might be engaged by limitations on the making of donations and any steps taken in this area would need careful legal consideration—I do not go further than that—in order to ensure that the proposal was compatible with the relevant convention rights. We do not say that it would breach them; we say that, if we do not consider imposing the restriction alongside the other restrictions—those on voting or being able to stand for Parliament—the risk of breach is, we believe, on advice, greater, because of the anomaly that it creates, for which there would be no obvious justification. This strengthens the argument for wider consideration of the whole matter, as we propose. I concede that the legal position is difficult and needs very careful consideration. If we are going to do something like this, we need to get it right. Without wider consideration, we genuinely risk not getting it correct.
My Lords, is it seriously the Government’s intention to suggest that the European Convention on Human Rights would restrict the prevention of an election from being bought by people who are not even resident in the European Union? The Minister has not answered in one respect my noble friend’s inquiry as to whether there is any legal justification or legal precedent for the astonishing assertions that he has made.
My Lords, noble Lords laugh, but that is a little unfair. The advice that we have received from our officials and that I mention to the House in as moderate and as cautious a way as I can is that there is a risk. If I was advised that there was no risk, I would not say that there was a risk. If we are told that there is a risk, I think that I am duty-bound to tell the House that, even if I have to do it through the laughter of noble Lords.
If we are to focus only on donations, as the amendments propose, rather than on the full range of democratic participation, we think that concern would be heightened because, for a restriction of this type to be lawful, it has to be justified and proportionate in the interests of a democratic society. Focusing only on donations, as this amendment does, begs a question when assessing the compatibility of the proposal with ECHR rights. Why place a restriction on donations in this way now, but not on other forms of participation, on the grounds of tax status? There may be no easy answer to that question, especially if we have not considered, at the same time, whether it would be justified and proportionate to impose similar restrictions on other rights as well as this one, or, indeed, instead of it. We see that a wider review of the range of possible restrictions is essential in order to ensure that the approach taken here is lawful and proper. Without it, the risk of a finding that the proposal is incompatible with the ECHR is increased. This sort of review is exactly what we propose and the position of the lawfulness of this sort of restriction will be much clearer for it. A review such as this, however, is a major piece of work and is not possible within the timescale to which this Bill is working.
Finally, we must not forget that the effects of these amendments would, in some cases, be to restrict the rights of UK citizens to participate in the democratic system. This will add extra difficulty. Any proposal that seeks to link an individual’s taxation status to their ability to donate would require clear information on the taxation status of all potential donors to be readily available. That information would need to be accessible to political parties and the Electoral Commission for the purposes of checking whether a donation was permitted. There are obvious and serious concerns about data protection.
Her Majesty’s Revenue and Customs is the body that can establish whether an individual is resident and domiciled in the UK for tax purposes. However, as this information is relevant only to the tax liabilities of certain people with non-UK income, it does not routinely hold this information for all taxpayers. Even for those individuals who self-assess their residency or domicile status, this information is not in an easily accessible, retrievable or list-based form.
Of course, HMRC can, where necessary, undertake an investigation to establish the residence and domicile status of any particular individual. Such investigations can involve considerable time and expense and are made on the basis of a risk assessment. To conduct an investigation into every individual who makes a political donation would require an investigation into an individual’s status at a given point. This would be a very significant undertaking and would need to be based on facts that would require additional information gathering. An individual’s tax residence status can change from year to year and is, effectively, retrospective, as it is often based, among other criteria, on the amount of time that an individual has spent in the UK in the previous 12 months. Uncomfortable though it may be to hear, it could be very difficult to establish at a given point in the middle of a tax year whether an individual was or was likely to be regarded as resident at the end of that year.
An individual’s domicile status is separate from his residence status. Domicile is a common-law concept relating to the country that a person thinks of as home. This is composed of a number of factors, such as the birth country of the father and the country with which a person feels that they have the most ties. It is not always straightforward for an individual to determine their domicile status. Many individuals are unlikely even to be aware of their domicile status, since it is irrelevant to their tax affairs, and they could therefore unwittingly commit an offence by making a donation that would be impermissible under these amendments.
It is quite possible for someone to live in the UK for a number of years without acquiring UK domicile. For example, an Australian might live in the UK for 20 or more years but have family in Australia and intend returning to Australia on retirement. Despite the fact that this person was paying full UK tax on all earnings, their domicile could still be in Australia, meaning that, under these amendments, it would be an offence for them to give a political donation. I would be grateful if my noble friend would deal with that example in his reply and explain to the House why the amendments in his name would not lead to that completely unfair result for that individual.
Even if Her Majesty’s Revenue and Customs were able easily to establish the taxation status of all donors, questions would remain as to how the requirement in the amendments could be enforced. Recipients of donations and the Electoral Commission would face great difficulty in verifying whether what a donor told them about their taxation status was accurate. As the House will know, the 2000 Act requires a donee to verify that a donation is permissible before accepting it. Requiring donees to be certain that a donation is from an individual who is both resident and domiciled in the UK for tax purposes would be a significant obligation that the House should be careful about imposing. The obligation could result in a reduction in the income of political parties.
Realistically, the obligation could be satisfied only if parties and the commission were granted access to the information held by HMRC, either routinely or on a more limited basis. HMRC has a statutory duty under Section 18 of the Commissioners for Revenue and Customs Act 2005 to maintain taxpayer confidentiality. I hardly need say that the data-sharing and confidentiality implications of granting an exception in the case of all donors are, whether we like it or not, significant and would need to be thought through very carefully.
I note once again that the Electoral Commission has expressed concerns about the workability of these proposals and their impact on political parties and other regulated entities in its briefing notes in advance of Committee and Report. On workability, the commission noted:
“In many cases it may be difficult for the recipient of a donation to verify whether the donor is a resident in the UK for taxation purposes and not a non-domiciled UK resident. Further, Parliament may wish to consider the administrative implications for HMRC should the amendment be agreed. Commission data suggests that more than 1,000 individual donations would need verification annually”.
Commenting on the impact on parties, the commission said:
“In order to assess whether any donation from an individual is permissible, the recipient would need access to authoritative information about that individual’s tax status. The Commission would also need access to that information to confirm compliance. We think it highly unlikely that this will be achievable in practice, or (if so) that the resulting burden on regulated entities and on HM Revenue and Customs would be proportionate”.
When we considered this point in Grand Committee and, of course, tonight, my noble friend Lord Campbell-Savours and others suggested a number of ways in which they thought that this problem might be addressed. My noble friend suggested that tax returns could include a tick-box for donors to indicate their taxation status and that the Electoral Commission could then certify with HMRC that a ticked return had been received.
I have to advise noble Lords that tax returns already allow for people to declare whether they are resident and/or domiciled. However, most people are not required to complete a tax return at all. About 9 million people complete a return each year out of a UK population of 60 million—that is about 15 per cent. I remind the House that you have to make a return only if, first, Her Majesty’s Revenue and Customs sends you one or, secondly, if you have tax to pay and it has not sent you one. A vast majority of people pay the right amount of tax under PAYE or because tax is deducted at source, as with bank interest, so there is no tax to pay and no return needed. Fifty-one million people in the UK do not make a return each year; 9 million people do. Thus, for my noble friend’s suggested solution to work and to ensure that all donors had declared their residence status via a tax return, Her Majesty’s Revenue and Customs would have to issue many more tax returns for non-tax reasons. That would involve significant additional public expenditure, including potentially, we have been advised, the need to overhaul IT systems to enable them to cope with the routine of tax returns.
My Lords, I am explaining that a very large number of people do not fill in tax returns, but there may well be people who, as in the Australian example that I gave to the noble Lord, are not domiciled in the country but pay UK tax through PAYE and have done for many years. That would mean that HMRC would have to change the way in which it did things at large public expense and with new IT if the amendments were to be carried and became law.
Requiring donors to tick a box on their return would not overcome the retrospection objection to which I have referred. People are required to complete a return 10 months after the end of a tax year. If an individual makes a donation in the middle of one tax year, it might not be reasonable to expect them to know at that point what their residence status would be by the end of the year. Even if this information were collected, it would, as things stand, be illegal for HMRC to share it with the Electoral Commission.
The noble Lord, Lord Tyler, noted tonight as well as in Grand Committee that the House of Lords Appointments Commission announced recently that it would strengthen the existing criteria requiring that nominees should be resident in the UK for taxation purposes. He argued that this process sets a precedent that could be used to confirm the permissibility of donors. However, the number of people seeking membership of your Lordships’ House is far smaller than the number who make donations to political parties. As we have heard, Electoral Commission data suggest that more than 1,000 individual donations would need verification annually. By contrast, fewer than 10 people are appointed to this House annually on the recommendations of the Appointments Commission.
Indeed, the relationship between the Appointments Commission and HMRC is not a formal gateway for sharing information. HMRC simply informs the commission whether an individual meets all the criteria. These criteria include residence, but also whether there is an indication of any tax irregularities such as an investigation being under way. It is important to note that HMRC’s response does not go into detail other than to give a yes or no response to the query as to whether there are any issues of concern in an individual’s tax records.
My Lords, I must have misunderstood what the Minister said, and I would be grateful if he would clarify it. The Appointments Commission, as we all know, is not yet subject to the Bill of the noble Lord, Lord Steel, which stipulates a statutory appointments commission, and deals in effect only with Cross-Benchers. Am I right that these Cross-Benchers are the people we are talking about?
My Lords, indeed not. It was suggested that the House of Lords Appointments Commission’s method of proceeding was a way that Her Majesty’s Revenue and Customs could proceed. However, the numbers are vastly different—that is the point at issue. There are very few people each year who apply to join the House of Lords compared to the large number of people who make donations to political parties, so it would not be an easy job for Her Majesty’s Revenue and Customs to supply answers, whereas it is comparatively easy for it to do so for those who apply to join the House.
My Lords, in principle almost anything is perfectly possible. Those of us here whose job it is to pass legislation that will work in the real world have to look beyond that to see whether what we are suggesting is realistic. My point is that, while in principle it might be possible, it would require huge amounts of public money and huge changes to the way HMRC works before it could be put into operation. I hope that that is a powerful point in suggesting that these amendments, attractive as clearly they are to a number of Members of the House, are unrealistic and cannot work.
I will come to a conclusion. I apologise for going on—
Well, it is important that the Government case is put, my Lords, particularly as this is a matter of some controversy in the House. I am sorry if noble Lords are becoming slightly impatient. As I have said, we understand completely the argument that my noble friend makes so well in raising the issue again through these amendments. I hope that he and other noble Lords have no doubt that the Government take the concerns seriously. We are continuing to reflect on how the issue might be taken forward. As I have said, the new democratic renewal council will have the issue on its agenda—but as a whole, not in part. These are complex issues—I do not think that any noble Lord would disagree—that must be considered in detail before any change in this area can be made. Failure to do so would leave us with flawed and unworkable law. It is all very well for us to talk about our scrutiny role, but that is to make sure that laws are not flawed or unworkable. Our strong view is that if we pass the amendment, we would be left in that position.
Noble Lords will be aware that the issues of constitutional change and renewal are at the top of our political agenda. Many options for reform are being considered and discussed. The amendments before us, and the debate that we have had today, which I have praised already, are an important part of that discussion. However, the Government’s point is that it would be wrong to make change in only one small area now, as the amendment seeks to do, without considering the whole picture. It would be wrong to pass legislation that would not achieve its objective. It would be particularly wrong to do so before the logistics and data-sharing issues around such a proposal have been fully worked through. That is a major project, and realistically not one that can be completed between now and the Summer Recess, which we hope is the deadline for the Bill to obtain Royal Assent.
Of course I ask my noble friend to withdraw his amendment. If he feels that he cannot, I ask my noble friends and other noble Lords to support the Government in the Lobby tonight.
My Lords, my noble friend had very little to say about the position of the House of Commons—many of us will wonder why. The hour is late, everyone is waiting to vote and there are many things that I would like to say in response to my noble friend’s contribution. What I will recall from this debate is his likening of the casting of a single vote to the contribution of millions of pounds to a political party. They cannot be the same, yet the Government’s case seems to rest on that proposition, along with all the administrative difficulties that they say will arise in the event that the amendment is carried.
I simply dispute their case. We took widely available advice on the question of what the impact would be on the department. The arguments that my noble friend has used this evening are new in that area alone. All the other arguments that he used are in response to questions, and are arguments that I used in my own contribution and answered quite comprehensively. I am indebted to the noble Lords, Lord Tyler, Lord Borrie, Lord Williamson, Lord Anderson, Lord Lea of Crondall, Lord Oakeshott, Lord Rooker and Lord Warner, and to the noble Baroness, Lady Gould of Potternewton, for their contributions. In particular, I would like us to reflect on the words of the noble Lord, Lord Neill. He questioned what the public—the man in the street—would say if asked what he expected of Parliament. In his view, my view and, I believe, the view of the great British public, this should be sorted out now. This is our only opportunity and I call upon my noble friends to join me in the Division Lobby to test the view of the House.
30: Clause 8, page 7, line 37, at end insert—
“(3A) A declaration under this section must also state that the person P is resident in the United Kingdom for the purposes of Part 14 of the Income Tax Act 2007 and is not a non-domiciled United Kingdom resident.”
Amendment 30 agreed.
Consideration on Report adjourned until not before 9.28 pm.