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Political Parties: Funding

Volume 757: debated on Wednesday 10 December 2014

Question for Short Debate

Asked by

To ask Her Majesty’s Government what plans they have to reform the funding of political parties in the United Kingdom.

My Lords, I am grateful for the opportunity to raise the question of the absence of an agreement on party funding by the political parties. This mainly, of course, affects the activities of the House of Commons rather than our own but it also reverberates throughout British politics.

I have to start on a sad and depressed note, which is unusual for me because I am normally a cheerful personality, I hope—at least that is what most members of my family still say to me. I feel sorry for MPs collectively because in recent years there has been a huge demoralisation in the House of Commons. This is a severe problem. British politics is in the doldrums, as we are all aware, and wondering how to get out of it. I am grateful, therefore, that the Minister is here today. I am sure he has many ideas on this issue but, in the time he has to discuss them today, he will concentrate mostly on the subject of the debate.

The reasons for this demoralisation are various. All party leaders actively overreacted, almost to the point of hysteria, on the MPs’ expenses scandal. There were some bad examples but the demoralisation of the House of Commons resulted from people being unfairly accused of doing things they did not do or which they did by mistake. Only a small number of MPs did anything seriously wrong—and they were, quite rightly, punished if that was appropriate—but others were driven out of politics without having done anything wrong. I can give plenty of names if anyone wants them.

Another reason over the long term was the blocking of MPs’ wage rises by various Prime Ministers. When I first came into politics, my boss, Edward Heath, was the only Prime Minister to immediately accept the independent recommendation of a substantial wage increase for MPs from, in those days, £3,000 to £4,500. Ever since then, every Prime Minister, of whatever hue, has blocked rises and the demoralisation caused by the freezing of MPs’ wages has partly produced that absence of morale.

On the question of party funding, there was much optimism when the subject was launched either side of the beginning of the coalition Government and afterwards. When Labour was replaced by a coalition for the first time in the post-war period, there was optimism that it might produce a better system in which people would be inclined to agree more. The party funding system was regarded as a serious problem which needed to be tackled. As we know, a committee was set up which produced some notable suggestions and I again commend its work. Could the politicians, the political leaders, their representatives and advisers agree on anything that emerged from the imbroglio unleashed by this quest for some kind of agreement on party funding? You had only to see the headlines in the papers, of whatever colour, in those days about how they were struggling to get there. One paper, at the end of October 2011, referred to the idea of using public money—£3 for every vote—as a state funding plan for political parties. Immediately most of the press objected violently to that idea. However, it happens in other countries—Germany is a notable example—on a large scale and helps to produce more sensible, modern, up-to-date politics dealing with complicated political economies, as Britain is.

Then, because austerity was gradually deepening, the parties got nervous about even suggesting that. They said that in a time of austerity it would be quite wrong of them to seek to use public money, although relatively small amounts had always been used for party research activities and so on—the Short money and the Cranborne money in the House of Lords. MPs urged swift action to limit donations to political parties. What a problem that now is. We have recently seen more and more donors coming to this place. I have to be careful in what I say because of course the Liberal Democrat Party has recently benefited from a £1 million bequest from Professor Watson of Cambridge University. At least it is not a donation from a living person. It is gratefully received by our party, which has a very modest budget of about only £4 million or £5 million in comparison with the larger figures for the other leading parties.

The three main political parties pledged in their election campaigns to take big money out of politics. They were embarrassed by the stories of huge donations, mainly for the Conservatives but also for the others, including ourselves. A fraudster who had offered us £2.5 million went to prison. There were mistakes, scandals and dramatic headlines. The Conservatives ended up offering their business supporters a sort of tariff of what they could get by contributing certain amounts of money. If they paid £2,000, they could have,

“a lively programme of drinks receptions, dinner and discussion groups”.

For £5,000, they could,

“meet and debate with MPs at a series of political lunches and receptions”.

For £10,000 they could have,

“dinners and political debate with eminent speakers from … business and politics”,

and for £25,000—I pause here for effect—they could,

“join senior figures from the … Party at dinners, lunches, drinks receptions, election result events and important campaign lunches”.

It is not only the Conservatives who do that; we all do it, although perhaps in a more modest way.

Again, it is a symptom of the problem that we really have to deal with, with consensus, on a cross-party basis. There is no harm in occasionally having a bit of consensus in British politics on major issues such as this. I feel that the public are turned off by the instantaneous opposition to a suggestion from another political party in order to compete with it as though an election is hovering. Of course, there is a general election approaching now and we have to acknowledge that. None the less, the differences between the parties remain at the margin and are sometimes infinitesimal. A politician from one party says, “We’re saying 18.4679% and that’s the right policy. Someone from another party says the figure is 17.237%, but that’s ridiculous”. The public get turned off by these marginal differences, as well as by politicians changing their mind. They keep shifting in their positions and the public become more and more bewildered, shut out and switched off by this very depressing phenomenon.

The talks resumed in the spring of 2012, having collapsed and the suggestions of the independent committee having been rejected by all the party leaders. I thought that the essence of setting up that independent Committee on Standards in Public Life was to reach agreement on the suggestions, including a cap on donations. The political parties ended up by shelving the funding reform talks, and by July 2013 there was a complete breakdown in any co-operation at all. Why was that? The original suggestion of a £5,000 limit was then dismissed as donations became larger and larger, and more and more members of parties became Members of the House of Lords—coincidentally, of course; there is no direct connection between the two, because that would be a criminal offence. The Lords now has just under 800 Members, many of them financial contributors. Good luck to them—they are entitled to do that under the present system.

We have to get away from this. My colleague, my noble friend Lord Oakeshott, who has now taken leave of absence, made himself thoroughly unpopular through some of his suggestions and behaviour not only in my party but also generally, and we have not heard from him since. However, he had a point when he suggested that voters could be asked whether they wanted to give £5 to a political party of their choice at the ballot box, and he also wanted to cap political donations at £5,000. That would stop wealthy donors having such power over political parties, and Mr Clegg could, for example, team up with Labour to co-operate on reforms of party funding if the Conservatives were less inclined to agree.

That led to what I believe to be Ed Miliband’s quite substantial reorganisation of unions’ individual funding systems. Members of trade unions now donate on a different basis and are not compulsorily obliged to give money to trade unions against their will. Ed Miliband’s reform in that area, which was quite a major step, did not get the credit in the British papers that it deserved. Again, that was part of this atmosphere, with the party leaders unable to co-operate and work with each other. I am sad to have to say this, but I thought we would get a better quality of politics coming from this thing.

This matter really needs to be dealt with very urgently indeed now. I hope that my noble friend will make some interesting suggestions today, and it will be very important to return to this subject. Presumably, alas, we cannot do it before the general election, for obvious reasons, but we must surely return to it after the election. The British public are really quite fed up with what has been happening and they want a sensible system. It may include some public money, on a limited basis. The total figures of £25 million, £75 million or £100 million are very modest for a five-year Parliament, even if public funding is to be involved, now the economy is recovering and people are feeling more self-confident in that sense.

The other thing is that donations must be capped and the attribution of union membership dues must be on a voluntary basis only. That should be officially registered, recognised and accepted by everybody, and then we will get to a position where we are on a more even keel and we will begin to restore the public’s confidence in our politics. I hope that there will be lots of other measures as well in the manifestos—and good policies of course—and then we will begin to make progress. But the whole of this five years has been wasted.

My Lords, I am very pleased that the noble Lord, Lord Dykes, has raised this debate today, because it is a debate that is very close to my heart, going back over some 30 years. I am also glad that he raised the issue of IPSA, because I am utterly convinced that IPSA has effectively destroyed Parliament for many parliamentarians. It has so circumscribed the rules on expenses now in the Commons that many people—worthy people—who should be attracted to Parliament will no longer stand for Parliament. I know people who will not come to Parliament any more, because they believe that the way in which the new regime has been set up, effectively based on distrusting Members of Parliament, leaves them exposed to media attack for the smallest of sins, if you might call them that. They are not prepared to risk their family and professional reputations, or indeed their careers, on the basis of something where they can be removed on a whim. If I was starting off again in my first election as a candidate, all those years ago in 1974, I would have second thoughts about coming into Parliament in the light of developments that have taken place following the introduction of IPSA.

In my view, one of IPSA’s biggest sins was to presume that it could propose a substantial increase in Members’ salaries and justify it on the basis that it was cutting back on the expenses regime. What it did not realise, and what a schoolboy with an elementary knowledge of politics could have told it, was that the moment you talk about a 10% increase for MPs prior to a general election, MPs get bombarded with letters asking whether they are going to take the increase. I know that MPs are currently writing back to their constituents and saying, “No, I am not going to take the increase”. What a ludicrous position we are in whereby MPs, because of the power of the press and concerns about the ballot box, are now turning down increases that should legitimately be accepted. I completely blame IPSA for that, along with those who proposed the idea of this monstrous organisation four or five years ago.

I now want to speak specifically to this debate. I believe that the issue of political funding is a festering sore undermining the credibility of Parliament, parliamentarians, the political process and the political parties. I do not think we should underestimate the level of cynicism in the mind of an electorate following articles alleging impropriety in the relationship between politicians and money.

People are becoming heartily sick of these stories and wonder what is going on in Westminster. In fact, very little is going on in Westminster that should worry them. The facts are that they read these stories and believe that something is fundamentally wrong. I do not believe that people necessarily follow policy when they vote in general elections. I actually think that people make an instinctive judgment, very often not on the basis of their knowledge of a particular party’s political posturing but on their feelings of trust and distrust. They make up their minds on the basis of an aggregate series of stories they hear over a period of time that undermine their trust in political institutions. This is one of the areas influencing public judgments.

When I first stood for Parliament in the early 1970s, we used to regularly get turnouts of 70-odd per cent. In my by-election in Workington in 1976, the turnout was nearly 73%. We regularly had turnouts of nearly 80% in the general elections up to and throughout the 1980s and 1990s. Now, when one looks at general election results nationally, one sees a collapse in the vote in almost every constituency in the country. We have to ask ourselves why. It is because of this disconnect and distrust that has built up between the public outside and this institution. It is often the case that bad headlines have swamped all the good that we do in this institution. Bad donor stories damage the whole political process.

We read stories about trade unions, and they somehow are condemned for the donations they make. Again there is a misunderstanding. Trade unions and their contributions reflect the collective giving by millions for their collective interest in collective provision. One cannot liken that to the donations of individuals, whether they be companies or people making single donations. Those single donations by companies and individuals are more often than not about personal advancement and advantage. That was the Oakeshott analysis. He and we knew that there are Members of the House of Lords who are here because they paid money to their political parties. It is a fact, and we know it. I know a particular case, not in my party. I know the sum that was paid, the chap is no longer with us, he almost never spoke and he was here because he paid. The police may carry out their inquiries and may find nothing, but the facts are that this system is wrong and has to change. The power of big money and big donations has to be brought to an end.

It was with all that background in mind that I put up, during the passage of the then Political Parties, Elections and Referendums Bill, a proposal to change this system. I want to take down the contribution I made on that occasion off the shelf where it still sits unnoticed and bring it once again before this Committee to consider, because I believe that it would help resolve the difficulty. What I proposed at the time was a system that would have incentivised systems of donations by individuals by allowing taxpayers to reclaim the basic rate of tax on their donations to political parties. It would have limited the relief to the standard rate and operate in the same way as gift aid to charities or covenanting to one’s local church. It was not my idea; it was done in America. Obama had hundreds of thousands of small donors who were tax-relieved. I cannot see why we could not have done something similar in this country. Then we would have mass financial contributions and membership of political parties. This issue has had much support over the years from all political parties and all the organisations that are associated with political debate. The Committee on Standards in Public Life, chaired by the noble Lord, Lord Neill of Bladen, recommended essentially the proposal I made when we were dealing with the legislation. He suggested that 15 years ago. The Electoral Commission’s report of 2004 on the funding of political parties recommended a similar change in the law, with a £200 cap per individual on their tax relief.

In 2006, the Constitutional Affairs Committee of the House of Commons made a similar recommendation in line with my proposal at the time. The Conservative Party’s Tyrie report of 2006, entitled Clean Politics, also made reference to an amendment of the nature of what I was moving. In 2004, the Liberal Democrats called for a scheme of tax relief of a similar nature, and in 2009 moved an amendment very similar to the one that I was moving during proceedings on the Political Parties, Elections and Referendums Bill. When the Labour Government established the Hayden Phillips inquiry in 2007, they recommended a tax relief match-funding scheme that bore a close resemblance to the scheme that I was proposing. Why was it blocked when we tried to introduce it into the legislation? It was blocked because we were told that negotiations were going on between the political parties. That simply was not true. Mr Clegg told us quite clearly from the Dispatch Box in the House of Commons that negotiations had finished, so that was not an obstacle. The negotiations had ended and therefore we were free, if we wished, to proceed on the basis of changing the law in favour of what I was proposing.

It was also put to me, sadly by people in my own party, that a single party—in this case it was targeting the Conservative Party—might gain by increasing the low tax relief contribution cap that I had set. It may have done, but it would never have set it so high that it was not credible in terms of what the public would accept. Anyhow, the Conservative Party never has trouble raising money; it is always raising money. It is the other parties that have great trouble raising funds from individuals. Therefore, that someone might at some stage in the future be inclined to raise the cap slightly higher than the one I propose is irrelevant to me. I was interested in ensuring that, in raising funds, the smaller parties were in a position to develop this contributory financial base. Finally I was told that the cost was too much. I proposed a cap in the third year of £96 per annum per contributing taxpayer. We could not cost it but we gave an estimate of approximately £3 million per year. It would have begun the process of tax-relieved small sums widening the base of contributions, narrowing the base of big donors and ultimately giving us the much wider contributing base that we all believe is necessary if we are to develop a more healthy politics.

If, indeed, there are negotiations of the conditions of a minority Government next year, I hope that, whatever happens, at least those who are in a minority will demand this change. They will be in a position to do so. If no party has an overall majority next year there may well not be a coalition but there will certainly be a minority Government, and those who can influence that minority Government should use their power to begin to secure that elementary change, which will not cost a lot of money, in the culture of financial contributions in British politics.

My Lords, like my noble friend Lord Campbell-Savours, I thank the noble Lord, Lord Dykes, for introducing this debate. I agree with him that he is a happy and friendly noble Lord. I always enjoy our conversations together, whether they are in the Bishops’ Bar, outside the Table Office when we are waiting to put our Questions down, or anywhere else. I see the points that he makes about politicians and the low feelings in the House of Commons. Unlike the noble Lord and my noble friend Lord Campbell-Savours, I have never served in the other place but Members there and Members of this House are honourable and only a few exceptions cause problems.

The funding of political parties is an extremely important issue, and having healthy parties is crucial to our democracy. Whether locally or nationally, most people elected to public office stand on a party ticket. Those elected to form the Government of the UK, the Opposition or devolved institutions or to form the administration of a local council are drawn from people who, in virtually all cases, are elected from party tickets.

However, before we get to the point of seeking elected office, parties must have structures and procedures in place. They must have built up organisations and developed the skills to undertake campaigns. All this costs money, and everyone in this debate wants the funding of our political parties to be transparent, open and free from suspicion of people buying influence or seeking favours.

Over a number of years there have, as my noble friend and the noble Lord, Lord Dykes, said, been a number of attempts to reform party funding. The present interests or concerns can be traced back to the 1990s and the last years of the Conservative Government led by John Major. The biggest reform followed the report undertaken by the Committee on Standards in Public Life, which led to the 2000 Act commonly known as PPERA. It introduced spending limits for national election campaigns, the regulation of donations, the publication of what money had been received in each quarter by the parties and the publication of annual accounts, among other things, including the establishment of the Electoral Commission.

Since then, there have been other problems. After the 2005 election, we saw allegations of cash for peerages, which went on for well over a year. We then had the review by Sir Hayden Phillips, to which other noble Lords have referred, but the interparty talks were suspended in 2007. Then we had the election of the coalition Government, whose agreement said:

“We will also pursue a detailed agreement on limiting donations and reforming party funding in order to remove big money from politics”.

We have had the inquiry by the Committee on Standards in Public Life into party finance, published in November 2011. It is a good report with lots of sensible recommendations on how party funding could be reformed. However, the biggest problem is that the public—the taxpayer—would not accept additional public funds going to parties when we are in such difficult economic times and when efforts to improve the public finances and the economy are set to continue well into the next Parliament, no matter which party or parties are in government after May next year. That is the real issue and one that the parties cannot ignore.

The interparty talks again failed to reach agreement, as the noble Lord, Lord Dykes, said, and the Government moved ahead with their lobbying Bill. There have been other developments. In terms of my own party, my noble friend Lord Collins led a review which fundamentally changed the relationship we have with the trade unions, with individual union members having to opt in, as the noble Lord, Lord Dykes, said. That in itself may bring about other changes regarding the funding of political parties. These are difficult issues to resolve but I am firmly of the opinion that they must be resolved by agreement between the parties and that that agreement must not produce winners or losers. It needs to be a fair funding settlement whereby, in effect, every party has to give up something or make changes but where every party also gains as well. My noble friend Lord Campbell-Savours made some powerful points about how important it is to look at what impact that might have, particularly on the smaller parties. A deal can be made only on that basis and that is the real challenge for everyone who wants to seek a resolution to this problem.

The Political and Constitutional Reform Committee came to similar conclusions in its report published on 29 January 2012. It said that a solution perceived as partisan would undermine any positive impact on public opinion which would otherwise be achieved by resolving this issue.

I want to move on and look at some of the suggestions that have been made in recent years. Some have considerable merit and others not so much. As I said before, additional state support for parties in our present economic climate is not something that, in my opinion, the public are going to accept, but the proposals put forward by Andrew Tyrie MP, John Denham MP and the noble Lord, Lord Tyler—particularly in connection with making savings on things such as the freepost costs and possibly using that money in a different way—are certainly worth exploring further. I wonder whether the noble Lord, Lord Wallace of Saltaire, has any idea of the sums of money that would be involved, which might be used in a different way. Would it be possible for this money to be used to begin to limit the size on donations received by a political party? I do not have any figures but could a start be made? It would be good to get the noble Lord’s views on this.

Often when people look at party funding reform, it is suggested that there should be some reduction in the national local spending limits to curtail expenditure and stop the development of an arms race. In a previous life I was the director of finance for the Labour Party. A political party is not shielded from the everyday cost pressures that any other organisation faces. I refer to things like mortgage payments, rents, pay claims, IT costs, insurance and other office costs. Many of these limits for campaigning in national elections have not risen for many years. I really do not want to see an arms race, but parties must be able to mount effective campaigns with reasonable expenditure limits.

I have always liked the idea of fixing limits, but then building in a process whereby an annual uprating for inflation is made as a matter of course. That would let you protect the original decision you made and allow for reasonable annual increases which would not become a row after a number of years because no one had actually dealt with the issue. Then you have to deal with rises to cover four or five years in one go.

I did this with the Labour Party membership fee. No one ever wanted to put the fees up and they were withering on the vine. After five or six years we would end up having a big row because the fees had to be put up. There was always trouble at conference about this, so I proposed, and it was agreed by the National Executive Committee, that in future our fees would be put up on 1 January every year using the October figure for RPI, rounded up to the nearest 50p. We had a standard rate membership fee and a reduced rate at half that which was for unemployed and retired people, and then we had a rate for elected people such as Members of the House of Lords. That was to be double the standard rate. It took the heat out of everything. There are no more rows about membership fees at party conferences or anywhere else. The system is simple, fair and reasonable, and everyone accepts it.

I have always been a bit reluctant to entertain schemes that involve tax reliefs, but I wonder if the noble Lord, Lord Wallace of Saltaire, could say a little about what thinking there is in government about them. My noble friend Lord Campbell-Savours made some valuable points about this area.

The noble Lord, Lord Wallace, has kindly written to me this week about the question of the governance of the Electoral Commission. I know that we are not going to look at this issue until after the election, if at all, but I do think that if any of these changes take place, we must also look at how the regulator is held to account and is subject to proper challenge. I do not believe that speeches in the House of Commons present that proper challenge in areas such as the governance of the Electoral Commission. These are major issues that need to be taken on, so we need to make sure that they are done properly. I was for many years an electoral commissioner and my experience tells me that we need to look very carefully at the whole question of the commission’s governance.

In conclusion, I thank the noble Lord, Lord Dykes, for tabling this short debate. It is important that we have healthy political parties that can function properly and that the political system is free from the suspicion of acting improperly in relation to party funding matters. While we often sit and watch the TV or see in the newspapers an opponent’s party getting caught up in all sorts of funding nonsense, as my noble friend Lord Campbell-Savours has said, in the end we all lose because people begin to think that all the parties are at it. They think that the system is corrupt and we all suffer as a result. It is really important that we get this right. There should be no winners or losers, but a fair, functioning system that actually respects everyone.

My Lords, looking around the Committee room, I think we can say with great confidence that none of those here bought their peerages. I do not think that it was open for us to afford any such thing. Indeed, part of the negative attitude towards the House of Lords is the image that somehow we all bought our peerages. That is not the case, although most of us have probably paid too great a proportion of our salaries to our political parties. We have walked too many pavements over too many years. We have fought too many elections, and that is how we eventually ended up here in this place. It is part of the problem of politics, however, that the popular image is one where money plays too great a role.

I have been in the House for almost five years. When I filled in the forms I was in the bizarre position of having to explain that I was actually being paid a salary by the Labour Party. It paid me money.

I wish my party had paid me. The first time I worked for my party, in the 1966 general election, when I took four weeks off from writing my PhD to be the party’s assistant press officer, I worked flat out—probably 14 to 16 hours a day for four weeks. At the end of it, Lord Byers, who was then the party’s chair, presented me with a £50 note, which I had never seen before and which in those days was a substantial sum of money. I and a friend spent a very enjoyable holiday in France on the basis of that £50 note. That is the only occasion on which I have benefited from money flowing the other way.

There is a consensus on the need to limit the impact of money on politics. There is also a particularly negative campaign from the right-wing media that we are all in politics only for the money. All I say on that is that I would encourage the noble Lord, Lord Campbell-Savours, who pursues many very effective campaigns in politics, also to campaign to ensure that those right-wing newspapers pay their full taxes in the country which they seek to defend because we all know that they do their utmost to avoid that.

The problem for all of us is that political campaigning costs money and the public, as consumers of politics, expect the parties to put leaflets through their doors, to phone them and to maintain websites, Twitter feeds and so on. When I was out in Hull two or three weeks ago, people told me on the doorstep, “How good to see you. Hardly anyone ever comes round and asks us about our political attitudes”. I was glad that we were doing it there, but in quite a lot of constituencies, no parties really manage to do that actively. We know that it does not come for free and that maintaining a basic constituency organisation requires a level of funding. Voters complain vigorously when parties do not maintain contact with them but show no willingness to help pay for those activities.

That pushes us towards the question of donors. The noble Lord, Lord Campbell-Savours, and other noble Lords asked whether all the political parties could manage on less money and depend more on volunteers—but we all face similar problems in how many volunteers we can attract. Perish the thought, but if UKIP had three or four really major donors, that might drive the three parties together to an eventual consensus on this issue.

We all know the context for this debate. The Political Parties, Elections and Referendums Act 2000 introduced some important changes in the field of party funding. It established the Electoral Commission, about which the noble Lord, Lord Kennedy, has rightly raised issues today and on previous occasions. It required political parties to register with the Electoral Commission, set down accounting requirements for parties, introduced controls on donations to parties and their members, and controlled campaign expenditure within certain periods, both for parties and third parties in national election campaigns. I stress “control periods” because I suspect that all three parties have spent a fair amount of money in the last four weeks. We are just about to start the control period for the election; that is part of the problem. The Act set down rules on the donations received and expenses incurred in election campaigns and required companies to obtain approval before making political donations. These provisions are useful and important. Political parties have to keep records of donations over £500, and donations over £7,500 have to be declared to the Electoral Commission, which publishes details every quarter of donations received by political parties. That information is published on its website and is accessible to all—so far, so good. Parties can only receive donations from permissible sources: individuals who are on the electoral register, UK-registered companies—I stress “registered” as that raises a number of questions of definition—trade unions, building societies and other bodies such as unincorporated associations and limited liability partnerships.

The Electoral Administration Act 2006 introduced further provisions on the disclosure of loans to political parties. Since these reforms, there have been continued public and media attacks on large donations and on trade union funding—to which I shall return—which have led to further reports. These include the 2004 review by the Electoral Commission, reports by Sir Hayden Phillips and the Constitutional Affairs Select Committee in 2006 and, most recently, in 2011, a report from the Committee on Standards in Public Life, which recommended, among other things, a £10,000 annual cap on donations, trade union members having to opt in to fees paid to political parties if donations are to be counted individually—I stress that was a proposal from the Committee on Standards in Public Life; it was not a partisan proposal by other political parties—and an increase in public funding.

The problem is in getting consensus among the political parties on this. We all have different interests and we all have different sources of donations. My party has proudly said on its website that when the Electoral Commission has published the number of donations to political parties, over the past three years we have received on several occasions more individual donations than the Labour Party. The problem is that we have not received half as many large corporate donations or donations from other collectivities known as trade unions, or indeed any other large donations—let alone those received by the Conservative Party. In that sense, it does us good as a democratic principle, but it does not provide us with the money we need to employ staff, work on our website and do all the other things that need to be done.

We had a further round of discussions in the light of the report of the Committee on Standards in Public Life which the Deputy Prime Minister convened in 2012-13. Seven meetings were held and the Deputy Prime Minister made one thing clear in setting out the remit, which was that in the current circumstances of a squeeze on public spending, there was no possibility of increasing state funding for political parties. After those discussions, the group failed to agree, and it is quite clear that between now and the next election we are not going to make any progress. Over the past 25 years we have established a whole set of additional funding for political parties—Short money, Cranborne money and the like—which has been very useful and has helped us to carry out our parliamentary functions and to raise the quality of our political research. However, public support for the expansion of political public funding is clearly absent at the present moment. So those talks broke down and we are stuck. We need to fund political parties and we benefit enormously from not having to pay for radio and television advertising, but politics and political campaigning cost money.

The noble Lord, Lord Campbell-Savours, raised the question of the extent to which the harsh regulation that we all suffer, including under IPSA once you are elected, discourages political recruitment and political retention. I think that that is an enormous problem and we will all need to address it once the election is out of the way and we have seen many good MPs from all parties retire rather than continue. I think that the noble Lord and I would probably agree that some of the best of the new Conservative intake are retiring after one period in Parliament, regrettably, because they really do not want to put up with the situation in which they live. That is a loss to us all in terms of democratic politics as much as those retiring from other parties.

I have listened very carefully to the noble Lord. Is he suggesting that there will be discussions about reform of the regime? Has he heard something that we have not heard?

My Lords, for many of us, the world in its current form ends on 8 May 2015. If anyone here knows what the shape of the new Government will be, I would love them to tell me so that I can put down a large sum with the bookmakers and donate the winnings to my political party. I have no knowledge of that. What I am saying is that awkward people like the noble Lord, Lord Campbell-Savours, should insist, as soon as they come back, that it is put back on the agenda because it is a very important question and we cannot get away from it. I therefore encourage him to continue to stir on all of this.

I am not entirely sure that I agree with the noble Lord that trade unions act as virtuous collectivities, which I think is what he was saying, with benign general secretaries representing the enlightened interests of their diverse memberships. That is not quite how I see all the general secretaries of trade unions, so there are some questions around that.

Will the noble Lord accept that our contributions come from individual members paying in so many pence per week? The contributions come from individual trade union members paying the political levy.

I will accept that. A proportion of the fees that individual members pay is deducted for a political fund which goes to one political party. How conscious or voluntary that is is, of course, part of the dispute.

I have a great deal of personal sympathy for the argument made by several noble Lords in support of gift aid tax relief. That is absolutely part of the way forward and it is one of the issues that quite a few of us, in whatever position we find ourselves after the election, should put straight back on to the agenda. We can then argue about the cap to be set, but again we are facing the problem that so far, the evidence of the number of voters who are sufficiently committed to any political party to want to pay money to it has fallen and we therefore need to increase it yet again. Some of us, and I am one of them, do our best to narrow the gap by entering the EuroMillions lottery each week and promising that we will give a substantial part of our winnings to our political party. Unfortunately only the SNP has benefited from that so far, not the Liberal Democrats or any other party.

I had expected the noble Lord, Lord Campbell-Savours, to ask me why the Government have not commenced the part of the last Act which deals with the tax status of donors. The answer I was ready to give to him, and which I cannot resist giving to him, is that the tax status of donors is actually not very easy to establish during a current tax year. For example, whether someone is domiciled in Britain or not is not entirely clear until after the end of the tax year. It is also a matter of confidentiality between the taxpayer and HMRC. If we are to have an information data gateway between HMRC and political parties that political parties can access, which might well be part of what we need to do, it will take us a year or two to establish—my notes say a minimum of two years. That, again, is an issue which we may wish to return to after the election. The question of whether or not a company is registered within Britain and carrying out serious activities in Britain is also a very difficult issue.

Would my noble friend also consider the possibility of imitating the American regulations so that owners of newspapers in Britain have to be based in the United Kingdom and pay UK personal taxes?

My Lords, the coalition Government have no policy on that, so I had better not comment. I think that that covers all the issues which have been raised. I encourage the noble Lords, Lord Campbell-Savours and Lord Dykes, to continue to press this. It is an issue to which we will all have to return after the next election.

The Minister referred to my amendment on this question of foreign donations, over which, if I remember rightly, we defeated the Labour Government. He has given the Committee an explanation, although I did not raise the issue. Could we have a written explanation as to exactly why we have had difficulty in implementing that particular area of the law?

I also mentioned the whole issue of freepost. I know he does not have figures here, but maybe we could look again at how much we spend on freepost in the UK, and use that money in a slightly different way.

Committee adjourned at 6.05 pm.