Commons Amendments
Motion A
Moved by
That the House do not insist on its Amendments 11 and 12 to which the Commons have disagreed but do disagree with the Commons in their Amendments 12A to 12F in lieu and do propose Amendments 12G to 12N in lieu of those Commons Amendments.
12G: Insert the following new Clause-
"Non-resident donors etc(1) In section 54 of the 2000 Act (permissible donors), in subsection (1) (circumstances in which party may not accept donation), for paragraph (aa) (inserted by section 8 above) there is substituted-
"(aa) any declaration required to be made in respect of the donation by section 54A or 54B has not been received by the party; or".(2) In subsection (2)(a) of that section (individuals who are permissible donors), for "registered in an electoral register" there is substituted "who is registered in an electoral register and (subject to subsection (2ZB)) satisfies the condition set out in subsection (2ZA)".
(3) After subsection (2) of that section there is inserted-
"(2ZA) The condition referred to in subsection (2)(a) is that the individual's liability to income tax for the current tax year (including eligibility to make any claim) falls to be determined (or would fall to be determined) on the basis that the individual is resident, ordinarily resident and domiciled in the United Kingdom in that year.
In this subsection "tax year" has the meaning given by section 4 of the Income Tax Act 2007.
(2ZB) The condition set out in subsection (2ZA) applies in relation to a donation only if-
(a) it is a donation of more than £7,500, or (b) when the donation is added to any other relevant benefit or benefits accruing in the same calendar year as the donation, the aggregate amount of the benefits is more than £7,500.(2ZC) For the purposes of subsection (2ZB)(b) "relevant benefit" and "accruing" have the meaning given by section 62(3A)."
(4) After section 54A (inserted by section 8 above) there is inserted-
"54BDeclaration as to whether residence etc condition satisfied(1) An individual making to a registered party a donation in relation to which the condition set out in section 54(2ZA) applies must give to the party a written declaration stating whether or not the individual satisfies that condition.
(2) A declaration under this section must also state the individual's full name and address.
(3) A person who knowingly or recklessly makes a false declaration under this section commits an offence.
(4) The Secretary of State may by regulations make provision requiring a declaration under this section to be retained for a specified period.
(5) The requirement in subsection (1) does not apply where, by reason of section 71B(1)(a), the individual by whom the donation would be made is a permissible donor in relation to the donation at the time of its receipt by the party."
(5) In section 56 of the 2000 Act (acceptance or return of donations: general), after subsection (1) there is inserted-
"(1A) In so far as subsection (1) requires steps to be taken to verify or ascertain whether an individual satisfies the condition set out in section 54(2ZA), the requirement is treated as having being complied with if-
(a) the individual has given to the party a declaration under section 54B stating that the individual satisfies that condition, and(b) the party had no reasonable grounds for thinking that the statement was incorrect."(6) In Schedule 6 to the 2000 Act (details to be given in donation reports), in paragraph 1A (inserted by section 8 above)-
(a) in the heading, at the end there is inserted "or as to whether residence etc condition satisfied";(b) at the end of that paragraph (which becomes sub-paragraph (1)) there is inserted-"(2) In relation to each recordable donation in the case of which a declaration under section 54B has been given, a quarterly report must either-
(a) state that no reason was found for thinking that the declaration was incorrect, or(b) give details of any respects in which the declaration was found or suspected to be incorrect."(7) In Schedule 20 to the 2000 Act (penalties) the following entry is inserted at the appropriate place-
“Section 54B(3) (making a false declaration as to whether residence etc condition satisfied) On summary conviction in England and Wales or Scotland: statutory maximum or 12 months On summary conviction in Northern Ireland: statutory maximum or 6 months On indictment: fine or 1 year”.
That Schedule makes amendments to-
(a) Schedules 7, 11 and 15 to the 2000 Act (control of donations to individuals and members associations; to recognised third parties; and to permitted participants), and(b) Schedule 20 to the 2000 Act (penalties), corresponding to those made by subsections (1) to (7)."
12H: Insert the following new Clause-
"Non-resident lenders etc(1) After section 71H of the 2000 Act there is inserted-
"71HZA Declaration that residence etc condition is satisfied(1) A registered party must not be a party to a regulated transaction to which this section applies unless the registered party has received a written declaration from each of the other parties to the transaction who is an individual stating that the individual satisfies the condition set out in section 54(2ZA).
(2) This section applies to a regulated transaction-
(a) if the value of the transaction is more than £7,500, or(b) if the aggregate amount of it and any other relevant benefit or benefits accruing in the same calendar year as the transaction is more than £7,500.(3) For the purposes of subsection (2)(b) "relevant benefit" and "accruing" have the meaning given by section 71M(3).
(4) A declaration under this section must also state the individual's full name and address.
(5) A person who knowingly or recklessly makes a false declaration under this section commits an offence.
(6) The Secretary of State may by regulations make provision requiring a declaration under this section to be retained for a specified period.
(7) The reference in subsection (1) to each of the other parties to the transaction does not include any individual who, at the time the transaction is entered into, is an authorised participant in relation to it by reason of section 71Z1(1)(a)."
(2) In section 71L of the 2000 Act (offences relating to regulated transactions), after subsection (9) there is inserted-
"(9A) An offence cannot be committed under subsection (1), (2), (5) or (6) on the basis that a person (P) ought reasonably to have known that a particular individual does not satisfy the condition set out in section 54(2ZA) (and is therefore not an authorised participant) if-
(a) the individual has given a declaration under section 71HZA stating that the individual satisfies that condition, and(b) P had no reasonable grounds for thinking that the statement was incorrect."(3) In Schedule 6A to the 2000 Act (details to be given in transaction reports), after paragraph 1 there is inserted-
"Declaration as to whether residence etc condition satisfied1A In relation to each recordable transaction in the case of which a declaration under section 71HZA has been given, a quarterly report must either-
(a) state that no reason was found to think that the declaration was incorrect, or(b) give details of any respects in which the declaration was found or suspected to be incorrect."(4) In Schedule 7A to the 2000 Act (control of loans etc to individuals and members associations), after paragraph 4 there is inserted-
"Declaration that residence etc condition satisfied4A(1) A regulated participant must not be a party to a controlled transaction to which this paragraph applies unless the regulated participant has received a written declaration from each of the other parties to the transaction who is an individual stating that the individual satisfies the condition set out in section 54(2ZA).
(2) This paragraph applies to a controlled transaction-
(a) if the value of the transaction is more than £7,500, or(b) if the aggregate amount of it and any other relevant benefit or benefits accruing in the same calendar year as the transaction is more than £7,500.(3) For the purposes of sub-paragraph (2) "relevant benefit" and "accruing" have the meaning given by section 71M(3).
(4) A declaration under this paragraph must also state the full name and address of the person by whom it is made.
(5) A person who knowingly or recklessly makes a false declaration under this paragraph commits an offence.
(6) The Secretary of State may by regulations make provision requiring a declaration under this paragraph to be retained for a specified period.
(7) The reference in sub-paragraph (1) to each of the other parties to the transaction does not include any individual who, at the time the transaction is entered into, is an authorised participant in relation to it by reason of section 71Z1(1)(a)."
(5) In paragraph 8 of that Schedule (offences), after sub-paragraph (9) there is inserted-
"(9A) A person (P) cannot commit an offence under sub-paragraph (1), (2), (5) or (6) on the basis that P ought reasonably to have known that a particular individual does not satisfy the condition set out in section 54(2ZA) (and is therefore not an authorised participant) if-
(a) the individual has given a declaration under paragraph 4A stating that the individual satisfies that condition, and(b) P had no reasonable grounds for thinking that the statement was incorrect."(6) In paragraph 9 of that Schedule (transaction reports: transactions with authorised participants)-
(a) in sub-paragraph (9)(a) and (10), for "paragraphs 2" there is inserted "paragraphs 1A, 2";(b) in sub-paragraph (10), after paragraph (b) there is inserted-"(ba) any reference to section 71HZA must be construed as a reference to paragraph 4A above;".(7) In Schedule 20 to the 2000 Act (penalties) the following entries are inserted at the appropriate places-
"Section 71HZA(5) (making a false declaration as to whether residence etc condition satisfied) On summary conviction in England and Wales or Scotland: statutory maximum or 12 months On summary conviction in Northern Ireland: statutory maximum or 6 months On indictment: fine or 1 year" “Paragraph 4A(5) of Schedule 7A (making a false declaration as to whether residence etc condition satisfied) On summary conviction in England and Wales or Scotland: statutory maximum or 12 months On summary conviction in Northern Ireland: statutory maximum or 6 months On indictment: fine or 1 year”.”
12I: Page 23, line 23, at end insert-
"(2A) An order under subsection (1) bringing into force any provision of section (Non-resident donors etc) or (Non-resident lenders etc), or Schedule (Declaration as to whether residence etc condition satisfied), may make such supplementary, incidental or consequential provision as the Secretary of State considers appropriate-
(a) for the general purposes, or any particular purposes, of those sections or that Schedule, or(b) in consequence of, or for giving full effect to, any provision of those sections or that Schedule.(2B) An order made by virtue of subsection (2A) may make provision amending this Act or the 2000 Act.
An order that makes any such provision must not be made unless a draft of the statutory instrument containing it has been laid before, and approved by a resolution of, each House of Parliament."
12J: Insert the following new Schedule-
"DECLARATION AS TO WHETHER RESIDENCE ETC CONDITION SATISFIED Schedule 7 to the 2000 Act (control of donations to individuals and members associations)1(1) In paragraph 6 of Schedule 7 to the 2000 Act (prohibition on accepting donations from impermissible donors), for paragraph (aa) of sub-paragraph (1) (inserted by Schedule 3 above) there is substituted-
"(aa) any declaration required to be made in respect of the donation by paragraph 6A or 6B has not been received by the donee, or".(2) After paragraph 6A of that Schedule (inserted by Schedule 3 above) there is inserted-
"Declaration as to whether residence etc condition satisfied6B(1) An individual making to a regulated donee a donation in relation to which the condition set out in section 54(2ZA) applies must give to the donee a written declaration stating whether or not the individual satisfies that condition.
(2) A declaration under this paragraph must also state the individual's full name and address.
(3) A person who knowingly or recklessly makes a false declaration under this paragraph commits an offence.
(4) The Secretary of State may by regulations make provision requiring a declaration under this paragraph to be retained for a specified period.
(5) The requirement in sub-paragraph (1) does not apply where, by reason of section 71B(1)(a), the individual by whom the donation would be made is a permissible donor in relation to the donation at the time of its receipt by the donee."
2 In paragraph 8 of that Schedule (acceptance or return of donations), after sub-paragraph (1) there is inserted-
"(1A) In its application in accordance with sub-paragraph (1), section 56(1A)(a) shall have effect as if the reference to a declaration under section 54B were construed as a reference to a declaration under paragraph 6B above."
3(1) Paragraph 10 of that Schedule (donation reports: donations from permissible donors) (as amended by Schedule 3 above) is amended as follows.
(2) In sub-paragraph (1)(b), after "paragraph 6A" there is inserted "or 6B".
(3) In sub-paragraph (5), at the end of paragraph (aa) there is inserted ", and any reference to section 54B shall be read as a reference to paragraph 6B above".
Schedule 11 to the 2000 Act (control of donations to recognised third parties)4(1) In paragraph 6 of Schedule 11 to the 2000 Act (prohibition on accepting donations from impermissible donors), for paragraph (aa) of sub-paragraph (1) (inserted by Schedule 3 above) there is substituted-
"(aa) any declaration required to be made in respect of the donation by paragraph 6A or 6B has not been received by the recognised third party; or".(2) After paragraph 6A of that Schedule (inserted by Schedule 3 above) there is inserted-
"Declaration as to whether residence etc condition satisfied6B(1) An individual making to a recognised third party a donation in relation to which the condition set out in section 54(2ZA) applies must give to the recognised third party a written declaration stating whether or not the individual satisfies that condition.
(2) A declaration under this paragraph must also state the full name and address of the person by whom it is made.
(3) A person who knowingly or recklessly makes a false declaration under this paragraph commits an offence.
(4) The Secretary of State may by regulations make provision requiring a declaration under this paragraph to be retained for a specified period."
5 In paragraph 7 of that Schedule (acceptance or return of donations), after paragraph (a) of sub-paragraph (2) there is inserted-
"(aa) section 56(1A)(a) shall have effect as if the reference to a declaration under section 54B were construed as a reference to a declaration under paragraph 6B above; and".6 In paragraph 9A of that Schedule (inserted by Schedule 3 above)-
(a) in the heading, after "paragraph 6A" there is inserted "or 6B";(b) at the end of that paragraph (which becomes sub-paragraph (1)) there is inserted-"(2) In relation to each relevant donation falling with paragraph 10(2) in the case of which a declaration under paragraph 6B has been given, the statement must either-
(a) state that no reason was found for thinking that the declaration was incorrect, or(b) give details of any respects in which the declaration was found or suspected to be incorrect."Schedule 15 to the 2000 Act (control of donations to permitted participants)7(1) In paragraph 6 of Schedule 15 to the 2000 Act (prohibition on accepting donations from impermissible donors), for paragraph (aa) of sub-paragraph (1) (inserted by Schedule 3 above) there is substituted-
"(aa) any declaration required to be made in respect of the donation by paragraph 6A or 6B has not been received by the permitted participant, or".(2) After paragraph 6A of that Schedule (inserted by Schedule 3 above) there is inserted-
"Declaration as to whether residence etc condition satisfied6B(1) An individual making to a permitted participant a donation in relation to which the condition set out in section 54(2ZA) applies must give to the permitted participant a declaration stating whether or not the individual satisfies that condition.
(2) A declaration under this paragraph must also state the individual's full name and address.
(3) A person who knowingly or recklessly makes a false declaration under this paragraph commits an offence.
(4) The Secretary of State may by regulations make provision requiring a declaration under this paragraph to be retained for a specified period."
8 In paragraph 7 of that Schedule (acceptance or return of donations), after paragraph (a) of sub-paragraph (2) there is inserted-
"(aa) section 56(1A)(a) shall have effect as if the reference to a declaration under section 54B were construed as a reference to a declaration under paragraph 6B above; and".9 In paragraph 9A of that Schedule (inserted by Schedule 3 above)-
(a) in the heading, after "paragraph 6A" there is inserted "or 6B";(b) at the end of that paragraph (which becomes sub-paragraph (1)) there is inserted-"(2) In relation to each relevant donation falling with paragraph 10(2) in the case of which a declaration under paragraph 6B has been given, the statement must either-
(a) state that no reason was found for thinking that the declaration was incorrect, or(b) give details of any respects in which the declaration was found or suspected to be incorrect." Schedule 20 to the 2000 Act (penalties)10 In Schedule 20 (penalties) the following entries are inserted at the appropriate places-
"Paragraph 6B(3) of Schedule 7 (making a false declaration as to whether residence etc condition satisfied) On summary conviction in England and Wales or Scotland: statutory maximum or 12 months On summary conviction in Northern Ireland: statutory maximum or 6 months On indictment: fine or 1 year" "Paragraph 6B(3) of Schedule 11 (making a false declaration as to whether residence etc condition satisfied) On summary conviction in England and Wales or Scotland: statutory maximum or 12 months On summary conviction in Northern Ireland: statutory maximum or 6 months On indictment: fine or 1 year" "Paragraph 6B(3) of Schedule 15 (making a false declaration as to whether residence etc condition satisfied) On summary conviction in England and Wales or Scotland: statutory maximum or 12 months On summary conviction in Northern Ireland: statutory maximum or 6 months On indictment: fine or 1 year"."
12K: Page 59, line 30, at end insert-
"( ) In that section as amended by sub-paragraph (1)-
(a) after "section 54A" there is inserted "or 54B";(b) after "paragraph 6A" there is inserted "or 6B"."
12L: Page 60, line 6, at end insert-
" In section 71H (authorised participants), after subsection (3) there is inserted-
"(3A) For the purposes of subsection (3), any reference to a donation in section 54(2ZB) is to be read as a reference to a regulated transaction.""
12M: Page 61, line 20, at end insert-
"( ) In sub-paragraph (3) of that paragraph (inserted by sub-paragraph (2) above), after "paragraph 6A" there is inserted "or 6B"."
12N: Page 61, line 33, at end insert-
"( ) In sub-paragraph (3) of that paragraph (inserted by sub-paragraph (2)(b) above), after "paragraph 6A" there is inserted "or 6B"."
My Lords, I beg to move Motion A, that this House do not insist on its Amendments 11 and 12, to which the Commons have disagreed, but do disagree with the Commons in their Amendments 12A to 12F in lieu and do propose Amendments 12G to 12N in lieu of those amendments.
These amendments propose to add to the permissibility and declaration requirements relating to donations and loans from individuals. They respond to the amendments tabled by my noble friend Lord Campbell-Savours in this place, which were well supported across a wide spectrum of the House. They were debated extensively in another place a week ago, and I believe that, in their revised form, they strike an appropriate balance between addressing the concern that is clearly so well supported and ensuring the new restriction is fair and proportionate.
These amendments propose to add to the existing criteria in the 2000 Act that govern the permissibility of individuals making political donations or loans. They provide that individuals giving or loaning more than £7,500 to a political party or other regulated recipient must be resident, ordinarily resident and domiciled in the UK for the tax year in which the relevant donation or loan is made. This requirement applies irrespective of whether the donation or loan exceeds the threshold singly or in aggregate over the course of a calendar year. Individuals must make a statement that they are resident, ordinarily resident and domiciled in the UK and provide this along with their donation or loan. Making a false statement is a criminal offence, and a party cannot accept such a donation without the requisite declaration.
This requirement is additional to the existing requirement for individuals making political donations or loans to be on a UK electoral register. Importantly, however, the additional restriction applies only to more significant donations or loans: those above £7,500. The existing permissibility requirement of inclusion in an electoral register remains in force at the lower threshold, currently £200, but it is proposed to increase it by this Bill to £500, as I have already mentioned.
We propose the new restriction to apply to the higher threshold of £7,500 for reasons of fairness and proportionality. That is key and largely addresses a significant concern the Government had with the amendments tabled by my noble friend. As I outlined in debates in Grand Committee and on Report on this Bill, we were concerned at the low level of the restriction in my noble friend’s amendments, which in our view amounted to an unfair restriction on individuals’ ability to participate in our democratic system. Setting the threshold at £7,500 is much fairer, allowing, as it does, an individual who is not resident, ordinarily resident and domiciled in the United Kingdom to retain the ability, albeit in a newly restricted way, to make donations as a way of participating in our democratic system. The higher threshold also has the important advantage of reducing the burden of compliance for political parties and donors. Enabling an individual who does not meet the new permissibility requirement still to make significant donations that do not exceed £7,500 in a calendar year deals, in our view, with any concern of the sort that was expressed by Members of the Opposition in the other place about the compatibility of these proposals with EU law and the ECHR.
I should briefly outline how the amendments work in respect of aggregation of smaller donations towards the £7,500 threshold.
The amendments propose to require donations above the recordable threshold—£500, as proposed by the Bill—to the same donee to be accounted for where in aggregate they exceed the £7,500 threshold. This means that if a donor gave a series of donations of £2,000 to a political party, the fourth such donation would need to be accompanied by a declaration and the donor would need to be resident, ordinarily resident and domiciled in the UK at the time of making that donation.
We have considered whether it is feasible to have a more stringent requirement for the aggregation of all political donations and loans regardless of the recipient, but we have concluded that this would be unworkable in practice, and would impose an excessive burden on donors and more importantly on parties and other recipients. In addition, such a proposal would depart significantly from the way in which the 2000 Act currently requires aggregation to work in the reporting of donations and loans. This is particularly true given that political parties would have no means of ascertaining what other political donations an individual had made, and as such whether or not a declaration was required.
I stress that the amendments do not provide for parties, the Electoral Commission or Her Majesty’s Revenue and Customs to access tax data to verify the accuracy of the residence and domicile status declarations, and as such there is no provision here for the enforcement of the requirements by the Electoral Commission or HMRC. Frankly, it has not been possible to devise such provisions in the time available, given the new onerous and costly data-holding and data-sharing requirements they would be likely to create. More importantly, we believe that it would be challenging to do so in a way that was consistent with the important principle that, without a criminal offence, an individual’s tax data are a confidential matter between him or her and HMRC. As such, were an individual to lie in a declaration, it would be for law enforcement agencies to investigate.
Given the difficulty that parties would have in probing the accuracy of declarations, and in recognition of the largely volunteer nature of our political parties, the amendments propose that where the party,
“had no reasonable grounds for thinking that the statement was incorrect”,
receipt of a declaration would be treated as meeting the requirement in Section 56(1) of the 2000 Act for a party to take reasonable steps to verify the permissibility of donations.
If a party had concerns about the accuracy of a declaration, it could seek further information from the donor on a voluntary basis. This might include, for example, a letter from an accountant. If the party had concerns that the donor was not resident, ordinarily resident and domiciled for tax purposes, the party should not accept the donation. In line with the Electoral Commission’s overarching guidance-giving role, this new requirement might be an issue on which the commission might usefully give guidance.
My right honourable friend the Secretary of State for Justice outlined the specific considerations that apply to Northern Ireland, and these provisions address that by ensuring that the requirements do not apply to Irish donors making donations to Northern Ireland parties under Section 71B(1)(a) of the 2000 Act.
I hope that these amendments will be accepted by the House. We believe that they are a proportionate and effective way of giving effect to the will of Parliament, as clearly expressed in the Division in this House in response to the amendments moved by my noble friend Lord Campbell-Savours. I beg to move.
My Lords, I am afraid I still feel that the Bill is a sad example of a terribly wasted opportunity. Ministers’ obsession with the illusory consensus has meant that they have never been able to step up to the mark and use the Bill to clean up big-money politics. Because they were so determined to do nothing to cause anxiety to the Conservative Party, they have ended up doing next to nothing about serious reform. I think all parties said they were determined to achieve such reform, so we regret this.
However, we are delighted that the consensus across your Lordships' House in support of the amendment tabled by the noble Lord, Lord Campbell-Savours, and US has at least led to the blocking of a very important and dangerous loophole in the law. The amendments put before us by the Minister are certainly a considerably improved package, which we welcome very much. We in this House, across all parties, were determined to prevent multi-millionaire tax exiles from continuing to buy parties and constituencies on a scale of intervention which has hardly been matched since the corruption of pre-1832 rotten boroughs.
These amendments seem reasonably effective, but in correspondence with the right honourable Mr Michael Wills, the Minister responsible for the Bill in the other place, I raised two continuing concerns, part of which have been addressed in his opening remarks by the Minister, but I want to press him on some details. First, throughout all stages of the Bill, we have been anxious to ensure that the thresholds for reporting and recording donations could be bypassed by making a series of payments, each individually below the threshold, but in aggregate greatly exceeding them. That is obviously an issue to which the Minister paid attention just now. For example, there would seem to have been a danger that a tax exile who is not a permissible donor could simply donate £7,499 on a number of occasions each year and avoid the provisions of this legislation.
In his response, Mr Wills wrote in his letter that,
“multiple donations to the same political party, or same MP, which over the course of a year exceeded £7,500, must be accompanied by a declaration of the tax status of the donor, and the donor must be ROD in the UK”.
ROD apparently stands for “resident, ordinarily resident and domiciled in the UK”. Mr Wills continued:
“This aggregation requirement applies to donations to different accounting units where those units report to the Electoral Commission via the central party. However, the aggregation requirement does not apply to multiple donations to different recipients (e.g. a party and an MP). This is because we do not believe it is fair to require donors to keep track of their interaction with different entities”.
It is that latter qualification to which the Minister has just referred which really adds to our concern. I hope that the Minister will be prepared to give an explicit assurance that everything possible will be done to monitor the situation and, if necessary, to take steps to avoid any exploitation if a new loophole is discovered. We really need the Government’s intention on the record if we are fully to fulfil the intention of your Lordships' House in passing the original amendment.
Incidentally, I have some difficulty with the suggestion from Mr Wills that donors may be given special treatment if they give money to several MPs. Surely their parliamentary duties are now well funded by official sources, which is something that we have all learnt over recent weeks, and there should be no special treatment for those who donate for their party-political campaigning. What would be the position if a tax exile multi-millionaire decided to give a donation below the threshold to every MP of a particular party? The implication in Mr Wills’s letter is that MPs should be treated differently from parliamentary candidates of a different party who stand against them. Surely that cannot be right.
Our second area of concern has been expressed in both Houses during the passage of the Bill; that is, very proper restrictions should now be put in place to avoid any circumvention by companies controlled by those who are not permissible donors. Mr Wills tells me in his letter:
“Section 56 of the Political Parties, Elections and Referendums Act 2000 requires donations which are made on behalf of another person to be declared as such”,
and referred to an “agency”. It is far from clear whether the constraints of the present Bill are sufficient to make it a firm requirement that any declarations from a company in this category are as rigorously controlled as from a tax exile individual. Again, I hope that the Minister will be able to give us a firm assurance on the record that it is intended that such companies should not be used as a bypass for donations that would otherwise be illegal.
There are one or two other key changes in the government amendments now before us when compared with those that were considered by the other place. For example, the Government have changed their mind about the reference to the tax year, which is going to be relevant. Previously we were told that the current tax year was unworkable as a reference point, but now we are told that it is possible. Again, perhaps the Minister can enlighten us.
Having briefly identified two areas of anxiety, I must again reassure the Minister that we think the Bill is somewhat improved by these amendments. As my honourable friend David Howarth said at Third Reading in the other place, we are delighted that the artificial consensus has at last broken down on this specific issue, but we simply regret that it did not break down earlier and more generally. I think that the noble Lord, Lord Campbell-Savours, would agree that it is an important change to which we should all give a warm welcome.
If all legislation were dependent on Conservative acquiescence and no reform could proceed without all-party support, where would we be? Indeed, at an earlier stage I asked the Minister whether his addiction to consensus would prevent action if his party and the Conservatives were in cahoots on a particular issue and we, the Liberal Democrats, disagreed, but answer came there none. If this Bill fully reflected the intentions of the Hayden Phillips discussions, it would have had more teeth and there would have been more chance of a general reform of the funding of political parties and elections. Nevertheless, we welcome this U-turn and believe that it strengthens the Bill.
My Lords, I welcome this chance to speak to the Motion before us. If the House will bear with me, it is worth taking a few minutes to recap as to how we come to be in the position we are now in. An attempt was made by Mr Prentice to table an amendment on Report in the other place. The government business managers decided that they did not want the matter to be debated and therefore it came to this place. The noble Lord, Lord Campbell-Savours, took up the amendment and with his characteristic skill and ability in Committee, again on Report and at Third Reading, brought it back here. At that point there was quite strong opposition to it. I shall come to my views shortly, but first I shall quote the Minister:
“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”,
other forms. The other forms to which that remark relates are mentioned earlier in the Minister’s speech where he says:
“As we have said before, the Government recognise and understand the sentiment behind the amendments … 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 in an election to standing as a candidate”.—[Official Report, 15/6/09; col. 914.]
In this sense, by introducing two specific additional tests in respect of donations, the Government said that we would be in danger of creating an “anomaly”. I am sure that the Minister will be able to confirm that those were very much his sentiments which he set out in Committee and repeated here.
A very high quality debate then took place in which many excellent contributions were made. A Division was called and the amendment tabled by the noble Lord, Lord Campbell-Savours, was carried. It went down to the other place, and after what I should say what was a slight delay on the part of the business managers in bringing the Bill back to the Floor of the other place, every indication was given to the press—it was reported in the Guardian, no less—that Mr Straw, the Secretary of State, had stated that the Government Benches would be whipped to vote against the noble Lord’s amendments. That was a clearly stated position. Something happened then, we know not what, but there was a Damascus road conversion in the other place and we found that some six pages of amendments, where previously the noble Lord, Lord Campbell-Savours, had sent down a paragraph, were put forward in the other place for consideration. It is interesting that those six pages of amendments have now been superseded by another six pages of different amendments, which brings us to where we are now. It is worth putting on record the circuitous route taken by the legislation and that the previous publicly stated positions of the Minister and the Secretary of State have been turned on their head for no apparent reason.
Let me set out some of the problems. We remember that when the Bill was introduced the idea was to avoid the possibility of innocent mistakes and to make the process simple and transparent. While there is nothing transparent about the way in which the Government have changed their view and introduced these amendments, certainly the objective was that the Bill should be transparent in the way that it operated. Therefore the transparency of simply registering people on an electoral register which is supplied to each party seemed a simple way forward. Now some additional tests have been introduced. It is worth going through what the tests are and what their implications are and I shall be interested to hear the Minister’s response.
First, on residence, the Explanatory Notes to Part 14 of the Income Tax Act 2007 state in paragraph 2455:
“The question whether or not a person is UK resident is primarily to be determined in accordance with case law. A limited number of statutory rules either supplement or disapply the case law rules in specific circumstances”.
In other words, there is no statutory definition of residence. Therefore, if this is to appear in the Bill as a test which donors are required to pass, and there is no statutory definition of residence, it could cause a problem. I hope the Minister will touch on these points in his response. I am happy to give way at any stage if he has a specific answer because that would aid the understanding of the House, and not least myself.
The Explanatory Notes continue:
“There is no register of UK resident individuals; it would therefore be necessary to provide individuals with information to try to enable them to determine whether or not they are resident in the UK and then require individuals to make a declaration that they are resident at the time they make their donation … By way of example, a person will always be treated as a UK resident where they spend 183 days or more in the UK”.
That is very clear. They go on:
“However, where a person spends less than 183 days in a tax year in the UK, but comes to the UK with the intention of spending on average at least 91 days or more in the tax year and they in fact spent on average 91 days or more per tax year over a four year period, then they will be treated as resident from the tax year in which they first come to the UK”.
In case your Lordships do not think that is complicated enough, the Explanatory Notes continue:
“If however the person’s intention failed and they left the UK earlier than expected, then they may not be treated as UK resident from the date upon which they first come to the UK. Clearly one would be unable to determine with certainty until the end of the 4 year period whether or not a person were to be treated as UK resident under this test. This may therefore affect the validity of any donation made to a political party during the 4 year period”
This is a moot point. In speaking to it, the noble Lord, Lord Tyler, commented on the change which had been made in the other place, along with many others, from the previous tax year to the current tax year. Will the Minister deal with that specific point? The absence of a statutory definition and the four-year aggregate of 91 days’ residence are an example of the complexity that we are dealing with here. What would happen in those circumstances?
The second test that has been introduced relates to domicile. Political parties will have to determine, in relation to every political donation, whether the donor is not a non-domiciled UK resident. HMRC has recently issued the new technical guidance on domicile, consisting of 42 pages. The introduction to this technical guidance stresses the difficulties inherent in the determination of domicile. If we thought that residence was a difficult concept to uphold in the Bill, domicile is even more complex. Add to that complexity another concern about the penalties that would be liable to the party if it accepted an impermissible donation. Again, that is relevant.
We are dealing here with the difficult concepts of residence and domicile; I think that everyone is agreed on that. Often one’s tax status and domicile may be determined retrospectively, yet the Bill is set out to relate to the current year.
The prohibition on the acceptance of impermissible donations and the duty to return any such donations within 30 days of receipt, in Clause 54(1) and 56(2) respectively, are subject to criminal and civil enforcement regimes. The party and the treasurer are guilty of an offence if the donation is not from a permissible donor and is not sent back to the donor within 30 days of receipt. In addition to the points that have been raised, the Minister referred to the fact that HMRC will not be able to keep these data and there will be no register. The system of policing will therefore not be in place. If HMRC, the Government and the Electoral Commission cannot prove the offence, how can these sanctions be applied to a party treasurer who has just 30 days to understand and test these levels of residency and tax domicile?
My next point is a very interesting one that has been raised with me. The Minister said that he felt this measure was consistent with the European Convention on Human Rights. I want to test him further on that. In the case of Bowman v United Kingdom, the European Court of Human Rights proved that it would step in to protect the right to freedom of expression even in the case of UK primary legislation designed to regulate the conduct of elections. In Bowman it was found that a spending limit on third parties of £5 imposed in Section 75 of the Representation of the People Act 1983 was an infringement of the right to freedom of expression under Article 10 of the European Convention on Human Rights. There is a statutory responsibility to have an impact assessment; the Minister states in the Bill:
“In my view, the provisions of the Political Parties and Elections Bill are compatible with the Convention rights”.
Is that still the case? Can the noble Lord still make that statement, given some of the precedents that relate to this?
Indeed, we extend that through EU law to issues relating to human rights. The Maastricht treaty introduced the concept of Union citizenship. According to Article 18, Union citizens have the right to move and reside freely within the territory of any of the member states, subject to the limitations and conditions contained in the EU treaty and secondary legislation. The European Court of Justice has defined Union citizenship as the “fundamental status” of Union citizens. Union citizens have a right of conditional residence and limited right to equal treatment. On that basis, they therefore have the right as European citizens to participate in and stand for elections in this country. Does the Minister believe that the new test of tax residence is consistent with EU law and the European Convention on Human Rights?
Section 1 of the Representation of the People Act 1985 permits overseas British citizens to vote at a parliamentary election if they are registered on the electoral roll, were resident at a UK address within the previous 15 years and registered at that address or, if they were too young to be registered, a parent or guardian was registered at that address. The requirement in PPERA that an individual be on the electoral roll therefore already incorporates a test of connection, or involvement, with the United Kingdom. This is important because it is clear that questions will be raised, time wasted and important matters debated if that matter is tested in a prosecution. Does the Minister stand by the statements about the complexity of tax and residence, and their potential for creating anomaly, that he made in Committee and on Report? A simple yes-or-no answer to that would be very helpful.
Is this the thin end of the wedge? By linking the ability to vote and donate to tax status, the Bill risks establishing a principle that political rights should be in some way based on making a contribution to the state through taxation. Has the Minister considered that aspect and, if so, what is his conclusion?
I shall touch briefly on some of the observations that have been made by the Electoral Commission, which will be landed with the responsibility for upholding the legislation. In a briefing which I am sure has been circulated to all Members who have an interest in this debate, it expresses concern. It recognises that new Amendments 12G to 12N represent an improvement over Amendments 11 and 12 which were tabled in the other place—I think that we would accept that, too. Page 2 of the document states that,
“amendments 12G to 12N go some way to addressing our previous concerns. In particular, they appear for the most part to remove the need for those receiving donations that attract the new tax status criterion for permissibility to seek to validate declarations from donors about tax status … We note that amendment 121 contains a delegated power for the Government to make supplementary provision to give full effect to the new requirements, and we urge the Government to consult with us and with those we regulate, in order to consider what further provision may be necessary”.
The Electoral Commission is therefore saying, “Well, we understand very much what you want to do”. The Minister has said, “Well, listen, you might want to do it and it might actually please some Members of this House and the other House that you are attempting to do this, but it is going to be impossible to police”—I think he used the word “impossible”. He said that all that can be required is for somebody to make a self-declaration. I think he said that it would be up to the criminal authorities to decide whether an offence had been committed. In other words, there is no access to any information for the Electoral Commission to take the lead on this—a matter that the Bill was meant to tackle.
I apologise for speaking at length but it is important to place on record legitimate questions about why the Government changed their view—if, indeed, they have done so—from that consistently argued in Committee and on Report to that proposed in these revised amendments. I am sure they recognise that they are now creating an anomaly within the tax system whereby somebody can vote in an election in this country, can stand at an election in this country but cannot give a donation to a party in this country which exceeds the threshold of £7,500. The Minister has accepted that this will be impossible to police. Very serious questions remain about these amendments. The pace at which they have been introduced is likely to lead to great confusion. We desperately wanted clarity from the Bill but we have confusion. That is regrettable and in no way helps the aim to which we all aspire of ensuring that the public have confidence in the system of electoral representation and the working of political parties in this country.
My Lords, I intend to be very brief as I spoke at great length in Committee and on Report. I thank parliamentary counsel and those who drafted these amendments, which tidy up the amendments which we originally moved, for the considerable effort they have made during a very short period. I also thank my noble friend Lord Bach, Mr Wills and Mr Jack Straw for all the work and effort they have put into ensuring that these ideas and principles are transformed into legislation.
However, I also wish to clarify the following point. At no stage during the handling of this amendment in this House, in Committee or on Report have I ever indicated that it was intended to target any individual. I have always recognised that people in all political parties might be affected by this. My view has always been, and remains, that this is an issue of principle. It is on that basis that I have moved these amendments. I am grateful to all those, particularly the Liberal Democrats and the Cross-Benchers, for their support on the night of the rebellion when we overturned the Government’s measure.
My Lords, I thank all noble Lords who have taken part in today’s debate. I shall discipline myself and not respond at length to this matter. The House has important matters to debate today and tomorrow.
I am grateful to noble Lords who have thanked the Government for taking the stance that they have. It is not an easy issue and I do not pretend for a moment that it is. However, we have found our way through the thicket. We were always sympathetic to the principle that my noble friend raised but were concerned about its practicalities. I do not say that all those concerns have gone away, as that would not be true, but we think that we have found a way through by retaining the principle there and the ability to implement this provision in due course.
The noble Lord, Lord Tyler, asked me a number of questions, which I shall deal with shortly. Aggregation is not a loophole. The approach in these amendments reflects the approach in the PPERA legislation of 2000. We do not believe that it is workable or fair to expect different recipients of donations to act in the knowledge of donations received by others, which they have no way of knowing about. The approach taken by these amendments is consistent with the 2000 Act. It would be very difficult—even onerous—to expect an MP or other individual party member to check what donations had been received in the same year by other MPs or party members of the same party. It is not at all clear how we could realistically expect someone to go about that task. We must remember that an MP represents a constituency in his or her individual capacity, not as a member of a party, and might well receive donations on that basis. We do not want to undermine that principle.
A donor could seek to get round the new restriction by giving donations below £7,500 to a large number of MPs of the same party. However, MPs are required to report donations that they receive at the lower threshold of £1,000, to be raised to £1,500 by the Bill, so such behaviour would soon become apparent. Recent events suggest that the public is not well disposed towards those who seek to operate only within the letter of the law without also respecting its spirit.
As far as companies are concerned, which was the second point raised by the noble Lord, the amendments restrict the permissibility of individuals to give political donations; they do not restrict the permissibility of donations from companies. Amendments on company donations would be out of scope. However, Clause 8 of the Bill requires a declaration to accompany donations above £7,500 about the source of the donation. That is intended to ensure that any agency arrangement is properly declared. Therefore, if an individual gives money to a company, another person or entity with the intention that that money is given as a political donation, that arrangement ought to be declared and the individual treated as the donor.
We have and continue to have sympathy with the point made by the noble Lord, Lord Tyler, on this, but there remains a serious concern about how such a restriction could be introduced in practice. In particular, there would be no easy way for parties to establish the make-up of a company’s shareholder register. Those amendments were therefore not accepted and were returned to at a subsequent stage of the Bill. The noble Lord’s last point that I want to answer was that Members of Parliament could receive up to £7,500 each from non-residents for tax purposes but candidates could not. He made that distinction. Where candidates are members of a political party, they are regulated under PPERA as a regulated donee and, as such, are covered by these amendments. Independent candidates are only regarded in the period preceding an election under the Representation of the People Act 1983, as amended. As such, they are not subject to the requirements in PPERA nor to these amendments. To suggest that donations to candidates are unregulated is not strictly fair or true. Indeed, most candidates are party members, so are captured by these requirements.
I do not seek to try to answer all the points made by the noble Lord, Lord Bates. I am sure that he enjoyed himself immensely in his speech by pointing out what had been said in earlier debates on the Bill. If that gave him and the House satisfaction, so be it.
My Lords, the Minister cannot get away with that. It is not a question of satisfaction. It is a question of what the Government said in this place—what he put on record, speaking on behalf of Her Majesty's Government—and what Her Majesty's Government then said in the other place just a couple of weeks later.
My Lords, the strength of feeling that the noble Lord showed today on this issue was not shown in the Division Lobby on Report when he led 40 of his own side into the Division Lobby in the vote that, I acknowledge, Her Majesty's Government lost. There was a lot of feeling on this side, as well as in other parts of the House, against the Government's position.
Now, what do we do? We look and see what the strength of feeling is. We know that there were 218 names on an Early Day Motion in another place, well before the matter came to this House. We had the result of the vote in this place on Report. There clearly was a great deal of feeling in both Houses of Parliament that, on this issue, the line that the Government had taken was not the right one. So are Governments to be entirely stubborn, or should Governments do what they can to try to make what we have always argued is a good principle—I do not think that the noble Lord argues against the principle—practical? That is what we have attempted to do.
I shall try to deal with some of the noble Lord’s points. He makes a legitimate point when he says that transparency about residence status and the lack of statutory definition makes it difficult to determine status. He is right; it does. However, there will be material to assist. First, the Electoral Commission will produce guidance, which is significant. Secondly, there is existing HMRC guidance, too. Thirdly, someone giving a donation of more than £7,500 who is unsure of their status can seek professional advice, because giving a false declaration is an offence only if it is given recklessly or intentionally. Someone who takes steps to satisfy themselves of their status will not have committed an offence.
The noble Lord quite understandably also refers to the ECHR. Of course we have considered whether the ECHR is possibly infringed. We think that the statement in relation to these provisions being ECHR-compliant stands. This amendment could be said to restrict rights to freedom of expression—which I think is the point that the noble Lord was getting at—or association, but we believe that the difference is that it does so proportionally. Donations of up to £7,500—not £500—can still be paid by non-domiciles. That is a clear protection, as I said in my opening remarks, and is very relevant to the ECHR argument. In short, we are satisfied that these amendments are compatible with the EU and ECHR.
The noble Lord also made a point about party treasurers. Those of us who have been party treasurers at a very low level in our parties can only have some sympathy for the position in which they sometimes find themselves under the present law. The amendments make it clear that parties will in most cases be able to rely on declarations from the donor in order to satisfy the requirement to take reasonable steps to verify that a donation is permissible. In practice, we expect that this would need to go beyond that only when they have reasonable grounds to think that a declaration is incorrect. Even in that scenario we do not expect party treasurers to have to understand and apply concepts of residence and domicile. We expect, for example, that they could ask the donor for a letter from his or her accountant asserting that the donor is a UK resident and domiciled. We have drafted amendments to ensure that the burden on political volunteers is minimised. I hope the noble Lord thinks that, in principle, that is the right thing to do—to make it easier for volunteers rather than more difficult.
The noble Lord made a point about previous and current tax years. We have changed the requirements so that the amendments propose requiring a donor to be resident or ordinarily resident and domiciled—ROD, in short—in the year of giving the donation or the loan. The version of the amendments debated in the other place referred to the previous tax year. Why did we make that change? We made it in the light of discussions with Her Majesty’s Revenue and Customs and Her Majesty’s Treasury. Fundamentally, we believe that it would be bizarre and an unintended effect if an individual who was not ROD but had been last year was a permissible donor whereas someone who was ordinarily resident and domiciled in the current year but had not been so in the year before was not a permissible donor. So we recognise that for some people it will not be clear in-year what their tax status is. If a donor or recipient is in doubt about the permissibility of their donation, they should not give it without independent advice to satisfy themselves of their position.
He also makes a fair point about the complexity of the tax system. It is certainly an argument that we have employed, and it still exists: the tax system is still complicated in this field. Of course we are not claiming that it is straightforward but—and I go back to something I said a few minutes ago—what we have proposed is a workable and effective means of addressing a clear decision from Parliament, not least from this House on Report. When these matters went back to the other place and were debated through the Government’s then amendments, there was of course no Division called at the end of that debate this time last week.
Finally, on why the anomaly is not a problem now, we took and stand by the view that it is better to tackle these issues in the round. The House decided that this issue ought to be addressed now, not at some time in the future, and we have sought to give effect to that decision. This does not prevent further consideration of the wider issue in due course; indeed, I would be very surprised if there were none.
Motion agreed.