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Party Funding Reform

Volume 776: debated on Thursday 3 November 2016

Question for Short Debate

Asked by

My Lords, party funding reform is rather like Lords reform: we come back to it every other year, or at least once every Parliament; we possibly get round to setting up a working group; the parties fail to agree; we go away and significant change is rarely made. I note that the last debate on the matter in this House came after the breakdown of cross-party talks in late 2013, and I wound up on behalf of the Government after the coalition parties had failed to come to an agreement between themselves.

The reasons for returning to the subject are very clear. The first is the funding of the referendum campaign, which had a number of troubling aspects. According to the report last month from Transparency International, more than half the total funding to both sides in the referendum campaign came from 10 sources, both individuals and corporations. Indeed, 95% of the funding came from as few as 100 donors. That is not exactly popular sovereignty or popular participation among the masses.

The absence of limits to cap individual donations is clearly becoming an acute problem in our democracy, and there have been other recent developments in the funding of politics. In the 2015 election, Conservative spending was far higher than that of any other party, and some of it was on the outside edge of current rules, as we can see from the number of Electoral Commission investigations at this time. The current situation builds in a structural advantage for the Conservative Party in access to finance and pushes other parties into chasing major donors, wherever they can find them, in order to compete. There has been a substantial increase in income from large donors. When writing about the resignation of the noble Lord, Lord Feldman, from the chairmanship of the Conservative Party, the Financial Times estimated that the Conservatives had raised £250 million under his chairmanship.

Then there is the question of more professional techniques—what the Russians call political technologies —which also cost a good deal more money: for example, computerised analyses using sophisticated search engines that allow personalised messages to be sent to assorted individual voters from central party organisations, and focus groups to refine messages. These techniques also mean that, within the parties, there is a shift in the balance of influence from local parties to the centre, which I think has caused a certain amount of discontent over the past few years in the Conservative Party, as well as in others. The competition among parties in this way means that there is a harder drive for funds. There has also been a rise in corporate donations to political parties, which the Transparency International report estimates as £125 million over the past decade.

We have also had the Trade Union Bill of 2015, on which a Lords committee reported in March. We still await the Government response to that, and perhaps the noble Baroness will be able to tell us something about that as she winds up the debate. I intend to leave further comment on that to my noble friend Lord Tyler, who was a member of the committee.

The continuing globalisation of wealth and the rise of the super-rich, living largely offshore, means there is concern in Britain and other countries about foreign donors and foreign donations—that is, from wealthy foreigners within the UK and from the British abroad, not on UK electoral register, who have been living in tax havens for a very long time. There is particular concern about the super-rich living in London from autocratic states such as Russia and the Gulf monarchies.

There are also concerns related to this House: honours for donors, from all parties. This is a recurring theme. Most famously, my father once met my party leader of many years ago, Lloyd George, so I can “almost” say that Lloyd George knew my father—there were several thousand other people in the room at the time, but never mind. More recently, I recall the investigations of 2006 and 2007. The Transparency International report identified that 28 Peers created over the past 10 years were created primarily for their donations to particular political parties—I stress that that relates not just to one party.

The popular and press assumption is that donations buy influence. They certainly buy access. The Conservative offer of special access for large donors in the Conservative Leaders Group, to which one pays apparently a £50,000 entry fee, is estimated to have brought in £5 million from 100 donors since January 2013. The attractions of this access are strongest when a party is in government, and build in a structural advantage for a party in government. Mr Cameron’s resignation Honours List has increased concern still further, but I stress again that all parties take part in this competition, partly because they have to.

Recent proposals from the Government to cut support for opposition parties by imposing cuts in Short Money and Cranborne Money have also raised issues about funding for democratic activities. There was a clear perception that the Conservatives were trying to bias the political rules in their favour, including those for party funding, which feeds into popular cynicism about politics. Then this August, we had a letter from the Chairman of the Committee on Standards in Public Life, to which I hope the noble Lord, Lord Bew, will refer in his speech.

We have seen the developments in the United States, where the extraordinary influence of the very rich on politics is becoming even greater, where congressional politics is distorted by the continual search for campaign funding, and where Donald Trump has funded a great deal of his own political rise. That does not yet happen in our politics, although in Richmond Park we have someone who has very substantially funded his own political rise. We have seen the aggressive political campaigning that the use of major funds allows in the United States, and we have seen the politics of fear in similar campaigns in this country. All this drives popular mistrust of politics as such as a plaything of the rich, as inherently corrupt and as excluding the voices of ordinary people. A Transparency International survey suggests that 76% of respondents think that rich people have undue influence on politics, and 28% think that all politicians are corrupt.

That raises some major issues. The funding of the Vote Leave campaign and the role of Arron Banks and the company he founded, Better for the Country Ltd—which appears not only to have given £2 million to Grassroots Out, but to have lent £6 million at a nil rate of interest to the Vote Leave campaign in three separate transactions—raise large questions about getting around current rules about party funding.

All parties pledged further reform in their 2015 manifestos and all have particular preferences to defend. We need to reopen cross-party talks and recognise that we need a serious intent to achieve at least some limited reforms to restore public confidence in participatory politics. We all know what happens if people do not feel they have a chance to engage in parliamentary politics—politics moves on to the streets. We have seen that once or twice in the last 15 years and it could easily happen again if there is a strong sense that politics in Britain has become dominated by money, and in particular money to the advantage of a particular party.

Francis Bacon said at the beginning of one of his best essays,

“Money is like Muck, not good except it be spread”.

That is a good democratic principle. We could agree that limits on corporate donations and trade union donations should have to be considered together. We could agree a cap on donations to start at £50,000 or even £100,000, and then gradually reduce it. We should at least consider making individual donations up to a certain level open to gift aid, comparable to charitable donations contributing to public life. We need to strengthen the policing role of the Electoral Commission in local as well as central spending, and in campaigning innovations. We need to police donations from outside the UK more carefully, and possibly from ex-pats—no representation without taxation. Our overall aim must be to reduce the impact of money on politics, to widen the pool of donors, and to encourage ordinary citizens to contribute and feel that they are making their own contribution to democratic life.

My Lords, first, I apologise to the House and to our friends in Hansard for my voice. It is not at its best, having completed a half marathon for Water Aid just a short while ago. I should also make a declaration of interests, not all of which are in the register of interests because they are not required to be so, but I am a senior treasurer of the Conservative Party, and I have been a treasurer of the party for some 16 years. I am also chairman of the aforementioned Conservative Leaders Group. I hope to remain in the job and that it does not become redundant. I congratulate the noble Lord, Lord Wallace, on securing the debate. Surprisingly, I agree with quite a lot of what he has said. Somewhat ironically, he and I both served on a committee to investigate aggressive fund-raising by charities. I hope that there is no need for a committee to look at aggressive fund-raising by political parties.

I start from the initial premise that parties ought to be self-sufficient and not reliant on state funding for their resources. I was lucky enough to be invited to the ACRE dinner this week at which the Edmund Burke award was presented to John Howard, the former Prime Minister of Australia. We were reminded that the source of political parties some 220 years ago, largely thanks to Edmund Burke, was created from a loose coalition of people who had roughly the same ideas. Since then the precise nature of a political party, its ownership, rules and structure, has changed and evolved over time, and unlike the emergence of limited companies or professional partnerships, they are complicated organisations which defy the normal textbook rules of ownership and governance.

While some countries have looked to the state to finance independent political parties, we in the UK have had a very proud history of ensuring that our political parties are just that: independent and not reliant on state financing. State funding, in my view, would be a dangerous road to take and could threaten the existence of political parties. It would be extremely unattractive and unacceptable to most people in the UK to see our political parties in any way dependent upon the state, which then might have influence, directly or indirectly, with direct or indirect threats, nudges, promises, hints—however subtly done—about the ongoing nature of that state funding.

We can be proud that in the UK we have a plethora of parties at the moment, all of which exist because people with passion and vision have helped to create them and have invested both their time and their personal financial resources to make them what they are. I accept that there is some sort of soft state funding in the form of Short money, and I note that the other place has voted for greater transparency in this source of funding. Perhaps we could see the same for Cranborne money, all of which is, of course, taxpayers’ cash. Disclosure and transparency is the key. The Conservative Party is unique in that every member of the Conservative Leaders Group—[Interruption]. I will carry on.

As I say, there is some soft state funding through the Short and Cranborne money, and there has been a move in the other place for greater transparency. I think that the Conservative Party is unique in that members of the Conservative Leaders Group who attend dinners with Prime Ministers all have those names disclosed on a quarterly basis. That is not a legal requirement, it was something that David Cameron proposed voluntarily and it continues to this day. Again, I believe that disclosure and transparency is the key against any undue influence.

In my opinion, party funding is not, in the nature of the world, big money. Big money does not go to the parties and is not needed by the parties. I know that the noble Lord, Lord Wallace, will not agree, but the sums involved are small and they are decreasing. In the 2015 election, the total spending by all parties was £37.25 million as opposed to £31.5 million in 2010. All the candidates combined spent a further £11.7 million in 2015 in the short period as opposed to a much higher £14 million in the corresponding 2010 short period. Additionally, if one looks at the long period in 2015, the spend was £10.7 million as opposed to £11.2 million in 2010. Overall, the important numbers are as follows: £59.8 million was spent in the whole of the 2015 election as compared to £56.8 million in 2010. The whole of that increase is explained by the Labour Party’s spend in 2015 of £12 million, as opposed to £8 million in 2010, so congratulations must be extended to the new Labour Party treasurers on doing a great job, more on which anon.

Let us put these sums into context. To run your Lordships’ House alone costs some £100 million a year, just on day-to-day expenditure, excluding capital costs. Each and every year this House spends more on running costs than the whole amount spent in a general election in the UK by every political party combined, and that is only once every five years. Looking across the pond at the topical American elections, which the noble Lord, Lord Wallace, invited us to do, the figures are extraordinary and give us some perspective. As of last week, the disclosed figures are that the Democrat party had raised $1.3 billion and the Republicans some $800 million for the 2016 election alone. The predictions have been for a total spend in the US elections of some $5 billion, which is quite some distance from our £57 million.

It is perfectly true to point out that the Conservative Party manifesto made a commitment to,

“continue to seek agreement on a comprehensive package of party funding reform”,

but the key word in this sentence is “agreement” rather than “reform”. It is worth pointing out that on the same page of the manifesto is a pledge to,

“cut the cost of politics”,

which seems to rule out any state funding. We are therefore left looking only at existing donors to parties. I wonder whether my noble friend the Minister would agree that we need to do more to encourage individuals to be donors to political parties, and that people will be so encouraged only if they feel a sense of pride in their contribution to British public life through these donations. At the moment there is a very unhealthy and unsatisfactory tendency for people who choose to donate money to political parties to be castigated for so doing. Currently the press uses the adjective “party donor” as a pejorative term. In reality, of course, the reverse is true.

All of us who have had any involvement with campaigning on the ground, as I think nearly every Peer speaking will have done, come across those who give their time tirelessly to a political party. I disclose my interest in this as president of the Westminster North Conservative Association.

I must remind my noble friend that this is a time-limited debate. He is limited to eight minutes and he has now had eight minutes.

I am most grateful to my noble friend. I apologise. There was a disruption in the middle of my speech.

I conclude by saying there is room for further progress on party funding reform, which will be to the benefit of all parties, to be achieved through agreement between them around a table—perhaps with the people here tonight—rather than elsewhere. But what is paramount is that we encourage citizens to step up to the plate and be proud of their role in helping UK political parties, of whatever colour, and that the Government take their part in achieving this ambition.

My Lords, like the noble Lord, Lord Leigh, my voice might give out, so I will try to keep it brief. I do not have the same excuse as him, either.

Like others on the speakers list, I served on the Select Committee on the then Trade Union Bill a few months ago, under the chairmanship of the noble Lord, Lord Burns. That was in the context of a Bill to restrict activities for trade unions. It focused on the political funding for one party and from one source. The Bill intended to put restrictions on, and increase greater transparency of, that source, I think its proponents would say. Following the Select Committee, its recommendations and decisions of this House and of another place, some of those restrictions were slowed down, but nevertheless they will have a serious impact on the ability of trade unions to fund political parties, and therefore on the funding over time of the Labour Party.

I did not support the proposals in the Trade Union Bill. I do not really approve of even the revised proposals. But the important point tonight is that those changes affected one source of funding and, in effect, one political party. They had no effect on other institutions or individuals, and no effect—as it stands at the moment—on other political parties.

As I have said in the House before, in the five years up to the last election about £148 million was given in political donations by organisations as distinct from individuals. Some £65 million of that was from trade unions; therefore more than £80 million was given by other organisations. Trade unions are all required to have a separate political fund; they are all required to make a decision on that political fund and its retention every 10 years; they must all allow a member to opt out of it and, as a result of the Trade Union Act, members will eventually be allowed only to opt in. None of the other organisations, companies, trusts, friendly societies or partnerships which make the bulk of the institutional donations to parties—the great majority of which go to the Conservative Party although some of it goes to other parties, including my own—has such restrictions applied to it. There is now a requirement for listed companies to take a vote, but only once and without any separate political fund.

Although I opposed the restrictions on the trade unions, the whole experience of that Select Committee brought home to me yet again the unfairness and lack of principle underlying our rules on political funding. I think that I can speak for all members of the Select Committee, including those from the Conservative Party, in saying that we were shocked when Ministers came to tell us that absolutely nothing had been done by the Government to fulfil their election manifesto commitment to seek agreement with other parties. We noted this in paragraph 138 of our report and urged the Government to reconvene cross-party talks and seek agreement. In the months since then, nothing has happened. Like the noble Lord, Lord Wallace, I hope that the Minister will tell us tonight what is being done to address this issue.

This is not just a question of equity and balance between parties; it also relates to the health of our democracy. It is not healthy for any political party to depend on significant donations from the super-rich—and a very limited number of them. It is not healthy for a decreasing number of institutions, large corporations or private companies to provide support to political parties. I also accept that it is not healthy for a political party to depend solely or mainly on the admittedly reduced sources of funding from trade unions either.

We all know that in principle none of this is justifiable to the public or, quite often, to ourselves. We all know that we need to look at the level of political expenditure. The noble Lord, Lord Leigh, said that it is small here compared with other things, but as far as the public are concerned it is still a significant overspend, particularly in general elections. We need to look at limits on such expenditure and at enforcement of limits at both national and local level by the Electoral Commission and others.

I disagree profoundly with the noble Lord, Lord Leigh, that state funding should be excluded. We have the lowest level of state support for political parties in the whole of Europe and many other parts of the world—there is even significant state funding in the United States, even though you would think that they were awash with money in the first place. The health of and support for those other European countries’ political democracies are not diminished by a significant role for state funding in their operations. I do not want utter dependence on state funding; I hope with others for more encouragement for small donations to political parties and for a wider range of institutions to give relatively small donations. However, there is a role for state funding; it is not an entirely new principle—we have significant funding in terms of Short money and Cranborne money. We also have security subsidies for our conferences and freepost at election times; and, if one counts the BBC and the other television companies as part of the state, we have free airtime for party-political broadcasts.

So it is not a principle but, when we look at it again, the balance between state funding and the form of that political funding should be part of that review. As we said in our Select Committee report, the reality is that the public do not like the present situation. They consider it unhealthy and potentially corrupt. The prospect of state funding of political parties by the taxpayer is not particularly popular either, but in terms of balance it may well be regarded by the public as the lesser of two evils. I do not wish to see a situation where political parties are utterly dependent on the state, but I see state funding, along with limitations on the level of expenditure, as part of the package. Above all, as we said on the Trade Union Act 2016, whatever comes out of the talks that I hope that the Minister will tonight announce will be convened must be equitable between political parties, and seen to be by our electors.

My Lords, the rules that govern the funding of political parties are a barometer of the health of a democracy. Where lack of transparency and the domination of big-donor funding prevail, politics is undermined and democracy sickens. One only has to look across the Atlantic, as has been alluded to by other noble Lords, at what is going on in the current US election to understand the corrosive dangers of big money distorting democratic ideals and undermining popular faith in what, until recently, has been the remarkable genius of democracy in America.

We have been relatively fortunate in that our party funding rules, the relative transparency of our system and the general practice that has been adhered to compares favourably with many other democracies in Europe and around the world, but we should not be in any way complacent. There is a crisis of democracy around the world and we are not immune from it. Public faith in politicians is at an all-time low, brought about in part by a series of scandals and suspicions around party funding. No party is immune from error in this regard and it would be a brave person who would preach from the mountain top on this subject when, too often, party funding rules have operated in the valleys. Political parties want advantage and money buys advantage, whether through more party staff with greater skills, a bigger budget to deliver direct mail into the homes of constituents or the funds to buy social media advertising. Increasingly, it buys the capacity to crunch bigger data and tailor individual messages.

So it is no surprise that parties want the money to out-compete one another. Nor is it any surprise that the party with the advantage is unlikely to wish to give it up and almost by definition—although not quite—the party with that advantage is most likely to be the party in government, and therefore in a position to make or break party financing reform; which, with honourable exceptions they nearly always break. At each election in recent years the main parties have promised comprehensive party funding reform but almost always it does not happen, although it should be noted here that the Labour Party in power after 1997 did much to make our system more open and transparent and got precious little thanks for it.

In 2010, the Liberal Democrat manifesto promised that we would:

“Get big money out of politics by capping donations at £10,000 and limiting spending throughout the electoral cycle”.

The Conservative Party manifesto boldly proclaimed:

“We will seek an agreement on a comprehensive package of reform that will encourage individual donations and include an across-the-board cap on donations. This will mark the end of the big donor era and the problems it has sometimes entailed”.

Labour’s manifesto stated rather more modestly:

“We will seek to reopen discussions on party funding reform, with a clear understanding that any changes should only be made on the basis of cross-party agreement and widespread public support”.

In doing so, it gave the Conservative Party the perfect let-out during the coalition talks on this subject, which it eagerly took advantage of. Undaunted by the failure to reach any sort of agreement or understanding in the 2010 Parliament, the parties were back at it in their 2015 manifestos, although the Conservative Party, having spent some time in government, had rather more modest promises this time.

Despite all that, nothing has happened and nothing looks likely to happen. The Conservatives currently hold the advantage and, as the rather extraordinary complacency of the speech of the noble Lord, Lord Leigh, suggests, they have absolutely no intention of giving it up. This is worrying because while we may fare better than other countries around the world, we have done so because we have had comparatively tight rules on election funding at constituency level and because the transparency rules and other changes introduced after 1997 helped shine a light into hitherto dark corners.

If a democracy is to function in the interests of the electorate and not of a wealthy few, it is imperative that it cannot be bought by wealthy individuals. Here the funding and expenditure rules drive each other. Back in 1997, when I was first an election agent, the rules on constituency expenditure were pretty tight and were carefully monitored by all the parties. The amount you were allowed to spend was modest and it was possible for anyone who had significant public backing to raise funds for a constituency campaign. Rules on national spending in constituencies were adhered to, so that direct mail funded from party headquarters could not mention anything that would identify it as relating to a particular constituency.

Those rules were largely adhered to in 1997, 2001 and 2005, when I was last involved in running a campaign. But at some point after that, either the rules changed or the parties’ interpretation of them did, because in the 2015 general election there was a deluge of nationally funded literature into marginal constituencies from the Conservative Party. I was deluged with a large number of letters and leaflets from Mr Cameron, telling me that while I might very much like my local Liberal Democrat MP—as it happens, I did; I was his best man—in Kingston and Surbiton I simply could not take the risk of Ed Miliband and Alex Salmond running the country. In case I was in any doubt as to how ghastly a prospect that would be, these letters and leaflets were helpfully illustrated with a picture of Alex Salmond and Ed Miliband standing on the threshold of No. 10. I have never asked my Conservative friends why it was Alex Salmond instead of Nicola Sturgeon but I think I probably know the answer. More pertinently, I am not quite sure why they thought that the Deputy Prime Minister’s chief of staff was a potential swing voter, but that is a whole different matter.

The serious point here is that the volume of direct constituency-focused mail is significantly distorting the political process. We have recognised the principle of limiting constituency spending in law but that principle is no longer adhered to in practice, and the impact is to make national funding of political parties a much more significant factor in the election of our local representatives. Therefore, the need for funding reform is even more acute. It is not just the funding of political parties we should be concerned about. As my noble friend Lord Wallace of Saltaire has outlined, the funding of the recent referendum campaign is a cause of very serious concern. As he said, popular sovereignty it certainly was not.

We have the basic building blocks of a fair and equitable funding system via the 2011 Committee on Standards in Public Life report, although we believe that additional state funding is not required and the redistribution of existing funding could work. We need to act now; if we do not, our system will increasingly be distorted by big money. As the governing party, the Conservative Party needs to live up to its 2010 manifesto commitment to end “the big donor era”.

My Lords, I thank the noble Lord, Lord Wallace of Saltaire, for his initiative in raising again this very important issue of party funding in modern Britain. I speak as chair of the Committee on Standards in Public Life. Our report of 2011 has been referred to a number of times, as well as my various letters to Prime Ministers—plural, now—and the leader of the Opposition on this subject. As I have said in this House before, the replies that I received from the Conservative Party have not exactly raised my hopes of dramatic reform in the near future. It is a matter of justice to say that today I received a letter from the Labour Party, and I can assure your Lordships that it did not raise my hopes either. There was really no difference in helpfulness in that hapless correspondence with my office.

During the passage of the Trade Union Bill, the 2011 report of the Committee on Standards in Public Life was discussed. I said then that we were aware of problems with that report. I genuinely believe that its basic approach, its insistence on consensus and cross-party agreement and its attempt to provide the basis for that was completely right. Although the Conservative and Labour members of our committee both dissented, I think they were sympathetic to the broad approach. They both had disagreements on points to which I will return. But I was also well aware that, five years later, some of the statistical material in our report was now out of date.

I promised on the Floor of this House that the Committee on Standards in Public Life would commission new research, and we have so done. The work we commissioned from the distinguished academic Dr Michael Pinto-Duschinsky, who has worked in this field for a long time and advised the committee on a number of occasions in the past, is published in your Lordships’ briefing pack for this debate. I will not refer to that work, which brings the figures up to date—although it touches on the point raised, for example, by the noble Lord, Lord Leigh, on whether there really is an arms race going on in electoral expenditure. That report has been published and in that respect, I have kept my promise to the House. I add that today we are publishing a second report, based on YouGov polling which we commissioned earlier, by Dee Goddard of the University of Kent. For simplicity, I will call it the Goddard report.

That report, Public Attitudes to Party Funding in Britain, has been published this afternoon by the committee and is available on our website. Because we have limited time, I will obviously not go through every point but it is an important addition to the already important work published by Dr Pinto-Duschinsky. The Goddard report shows that the issue of party funding is considered of greater importance than it was the last time YouGov did this polling in 2011. A substantial majority of respondents, 93%, believe that large party donations are motivated by hopes for influence or special favours—the most obvious example being peerages—from a given political party, while 79% of those asked believed that this was a common motivation for donors. Equally, on the other side of the argument, I totally accept that all our previous polling shows that 80% of the British people do not want to see state funding for parties. One immediately sees the complexity and inherent difficulty of this issue.

Ninety per cent of respondents in the new report believe that MPs “very often” or sometimes decide what to do based on what their donors want, rather than on what they really believe. Even 48% of those who said that they had high trust in their MPs believe that sometimes the interests of donors played a role in political behaviour. The public are clear in their belief that this behaviour is unacceptable: indeed, they are probably more concerned than they were over the role of large donations in British politics. That said, because nothing is served by presenting an oversimplified picture of this debate, when they were asked about a cap on donations 42%—a largish block—said that they did not know whether it was a good idea or what the level should be. Again, that indicates the difficulty and complexity of public attitudes. But it is the role of my committee to at least bring attention to the most up-to-date information that we can to further debate.

In September, the Institute for Government produced a report using data based on more recent polling—our polling was done in April and May. The report was headlined:

“Trust in government is growing”.

That surprised me as over the years I have read endless reports showing that it was dropping. The report showed that more people now believe that the Government are doing their best and have proper priorities than believed it in 2014. The figure is up by 8%. Equally, the number of those who believe that MPs are self-interested persons concerned only with their re-election is down by 8%. At the moment, there is a slight upwards spike—a better direction than the normal pattern of gloomy figures about trust in politics. I have never believed that one should take these figures too seriously because trustworthiness is a different thing, but the public have these concerns and we cannot afford to ignore them, while not taking these matters absolutely literally. There is a slight spike upwards and trends are more positive, but the Institute for Government is quite right to say in its headline that further work is needed on this point.

Expectations have clearly been raised by the change in government. There is no doubt that they have been affected by the Prime Minister’s speeches about standards in public life, and trust is an issue she has directly addressed. We are in a honeymoon period. We have temporarily reversed the downward trend, which is a good thing. If we choose to do absolutely nothing in these controversial areas of public standards—not just party financing, but lobbying and a range of other difficult issues, including revolving doors and so on—we will create a mood of disappointment, and things will plummet again. On party funding, it is clear that work could be carried out to promote small donations. It is entirely right to draw attention to these better figures, but I counsel against any complacency. Things cannot be left exactly as they are, even though I concede the inherent complexity of these issues of public funding.

My Lords, it is a pleasure to follow the noble Lord, Lord Bew, whom we had before our committee earlier this year and whose contributions are always extremely thoughtful and balanced.

We all agree that political parties are essential for the effective working of our democracy and that political parties need proper funding, but parties need more than money. They need popular consent, support and membership; otherwise they become the preserve of the political elite or, worse still, a part of the state. So the debate over party funding needs to take place in that wider context.

One of the great challenges facing western democracies today is that millions of people have on the whole tended to have less confidence in mainstream political parties. There is, as we all know, a growing disconnect between people and those whom they see as the political elite. It is happening in America and in parts of Europe and it is certainly happening here, so my starting point is that any reform of party funding should aim to halt that trend and, better still, to reverse it. I am therefore opposed to any change which would discourage and reduce voluntary donations to political parties to the extent that the state would then be called upon to step in to fill the gap. I accept the need for Short money and Cranborne money, but I am totally opposed to general state funding of political parties. If we were to go down that road, it would only confirm people’s suspicions that there is a self-appointed political elite running the show.

Political parties have a responsibility to go out and seek support, and they should not subcontract that job to the state. We know it can be done. Just look at recent developments. UKIP broke the oligopoly of the major parties in England, the SNP has broken the oligopoly in Scotland and Jeremy Corbyn’s leadership and appeal has swollen the membership and the coffers of the Labour Party. If we look at our democracy from that broad, non-partisan perspective, I see these as really interesting and in many ways encouraging developments. It is worth noting that both UKIP and the SNP have been the recipients of substantial donations from rich individuals. Would our democracy be better or worse off if those donations had been precluded by law, if those parties had never risen up and if their supporters had never been given a voice or representation?

We should not look at the question of party funding as if the party structure were permanent. A reformed system of funding should not freeze the status quo, it should not erect barriers against new entrants and it should not deter the rise of new parties where there is support for them. But if we are not careful, these could be the unintended consequences.

Let me paint a scenario which could perhaps occur. Donations are capped, the state then steps in to provide more funding from the taxpayer and as a quid pro quo there is felt to be a need for parties’ expenditure to be capped—all of this to be decided by an unelected Electoral Commission on which will be sitting members appointed by the leaders of the political parties. Meanwhile, local parties have less and less incentive to go out and raise money and recruit new members. The result? The political elite are further entrenched and the general population further alienated.

As the parties edge bit by bit along the road towards consensus on gradualist reform, as I hope they will, I also hope that they will keep all this in their minds.

I am very pleased to follow the noble Lord in the comments he has just made. We are all anxious about the consequences of not doing something about this subject, and I have a tremendous sense of déjà vu this evening, because of the debates that have been held so often in the past on this subject. The solution to the problem that the noble Lord has just outlined lies with his own Government and with the Conservative Party. If they are not prepared to see reform taking place, and not even prepared to call all-party talks to try to get agreement, no progress will be made and the electorate will rightly be cynical about manifestos which promise things that are then not carried out. The Conservative Party manifesto, on this subject, is frankly not worth the paper it is written on, because none of the things that were suggested in it have been done.

We know from our experience in the coalition Government—from the Deputy Prime Minister and David Laws speaking to colleagues from the Conservative Party—that the Conservatives were not prepared to carry out what they had committed themselves to in their own manifesto. If the £50,000 cap that was promised had been introduced, a lot of these problems would not have arisen. I do not agree with the noble Lord about the cap having consequences. It would get rid of a lot of the cynicism about major donors running or influencing parties in their own interests, but it would also—I speak as a former treasurer of the Liberal Democrats—force the parties to go out and get more donors.

Look what President Obama did in the United States with crowdfunding; look what lots of venture capitalists are doing with it. If you want to do it, and make the effort, you can get the money from a substantial number of people. As party treasurer, I raised as much for the Liberal Democrats as the Labour Party raised from individuals and small businesses. In fact, most of the time I raised more, as the Labour Party has not historically needed to go out and get those individual funds in, because it has had the trade union funding. It would be an incentive if the cap was introduced, as well as getting rid of a lot of the electorate’s cynicism towards the funding of political parties.

The Labour Party has shown that it is willing to shift its view. It introduced legislation when it was in government, and the report of the noble Lord, Lord Collins, which we looked at, which will lead to reform in the funding of the Labour Party, was a substantial step in the right direction—which I, frankly, never thought it would take—moving to individual donations.

The Government’s response tonight is crucial. Are we going to make progress on this issue or not? I think the Labour Party is willing to have discussions; the Liberal Democrats certainly are; I do not know about the other parties.

Look at what happened in the coalition days. The Deputy Prime Minister called for all-party talks—my noble friend was very much involved in that. We had a response from the Labour Party; we Liberal Democrats gave a response. We waited and waited for a response from the Conservative Party, but none was forthcoming until there was a scandal which led to the Conservative Party treasurer having to resign. On the day that that story broke in the Sunday Times, all of a sudden, the Conservative Party came up with nominees for the all-party talks. Surprise, surprise.

So I am deeply cynical about the seriousness of the party opposite ever reforming the system. I suspect that it will always be other parties that will introduce the reforms that are so necessary.

State funding could come in many forms. As the noble Lord, Lord Sherborne, said, there is already substantial state funding of political parties. I think the noble Lord referred to it as soft funding. Soft, hard, or whatever, it is a lot of money. Providing the funds for political parties to mail virtually the whole of the country with election addresses during a general election is a substantial amount of state funding. So are the Short, Cranborne and other funds that come in from the state. The principle has already been established; it is not new.

I do not know whether noble Lords opposite would be prepared to consider another alternative—giving tax relief to parties, as happens with charitable donations. There is a respectable argument for doing that. I agree with the comments made earlier that funding political parties is a noble thing to do. Democracy would be nowhere without resources being found to run our parties, and we should praise individuals for being prepared to support them by making contributions. If we believe that, we should consider tax relief on contributions. I do not know whether noble Lords opposite would regard that as state funding or whether they would be prepared to consider it.

There are various ways in which this problem could be overcome, but it will not be unless we all sit down together to talk about it. There is an immense obligation on the Government to get talks under way. It is the cynicism bred by parties breaking manifesto commitments and not doing the things they say they will that leads to the growth of the protest vote through the UKIPs of this world—and, indeed, the Trumps in the United States—those disillusioned with existing parties for not carrying out the things they say they will.

I urge the Government immediately—I hope that we will hear this from the Minister this evening—to get talks between the parties under way to try to reach some sort of agreement. With his report from the Committee on Standards in Public Life, the noble Lord, Lord Bew, has given us immense help and information to point us in the right direction. There is an agenda there that could achieve progress, and I very much hope that we will hear from the Minister this evening that that is what the Government are going to do.

My Lords, I start with a quote:

“Whether or not clause 10 is enacted, in whatever form, the political parties should live up to their manifesto commitments and make a renewed and urgent effort to seek a comprehensive agreement on party funding reform. We urge the Government to take a decisive lead and convene talks itself, rather than waiting for them to emerge”.

That was the unanimous recommendation of a Select Committee of your Lordships’ House, chaired by the noble Lord, Lord Burns, and which represented all groups in the House—three of which are here this evening, I am delighted to say—and it was of course subsequently welcomed on all sides of the House. The report was published on 2 March of this year. The convention is that the Government respond to a Select Committee report of your Lordships’ House within two months. It is now six months later and we are still waiting for any sort of response, let alone any action to fulfil that recommendation.

The Government are clearly becoming increasingly apprehensive that the traditional role of your Lordships’ House as the impartial guardian of the constitution, semi-detached from the rather more tribal activities at the other end of this building, will prove more popular than their own narrow partisan approach. Perhaps we should remind the Government that they were elected with less than a quarter of the eligible electorate giving them their support, so they have a doubtful mandate.

The Government should also be reminded, as they were by the Select Committee of the noble Lord, Lord Burns, that the Conservative manifesto had an explicit promise, as we have been told this evening:

“We will continue to seek agreement on a comprehensive package of party funding reform”.

Since the 2015 election, further evidence has emerged of the extent to which all parties—as my noble friend Lord Wallace has said—are now reliant on a small number of large corporate bodies and individual millionaires, when we all want to step away from that and try to make sure that we have a greater number of small donations. It is extremely important, as my noble friend Lord Wrigglesworth has just said, that we should look again at giving encouragement to smaller donations through a replica of the gift aid scheme that is available to those donating to charities.

Millions of modest donors must be better than millions of pounds from a very small group of special interests, trying to buy access, influence or patronage. That includes—as I think the noble Lord, Lord Sherbourne, would accept—those who have been supporting UKIP, and indeed the SNP, which have been reliant on a small number of very big millionaire donors. His argument would also go in the same direction.

I think we are all grateful to the noble Lord, Lord Bew, for giving us some brief information about this latest poll that the Committee on Standards in Public Life has commissioned. That is really useful and we will all look at it with considerable interest. But I just remind him that the last time that there was an indication of the public’s attitude to this, 77% were saying that big donors have too much influence—that would seem to have risen. However, at the same time, 57% believe that state funding of politics is better than the present system when there is a direct comparison, which has gone up from 41% in 2014. So it is not such a clear picture about the state funding issue as has been suggested.

As my noble friend Lord Wrigglesworth has said, if you simply reallocate existing state funding—free postage being an obvious example—you could save a huge sum of money which could be better allocated to good effect. The noble Lord, Lord Bew, summarised the situation excellently after the general election when he said that:

“It is clear after the General Election that the issue of party funding remains a matter of significant public concern centred on the confluence of money, power and influence”.

I thought that his speech this evening underlined that brilliantly. Since 2015 and the CSPL report—and indeed since the general election—there have been some important changes in the relationship of the Labour Party and its main funders, but no movement on the Conservative side. The time is now really ripe for some movement there.

It is not just the donations issue that is resulting in the ever-decreasing public confidence in these aspects of our political system.

In the 12 elections that I have contested—I have won some and lost some, as we all have—I have always been reminded by my agent that every single pound spent to promote the candidature has to be carefully recorded, and, of course, it is restricted; otherwise, you could face an election court, with the potential for disqualification. My noble friend Lord Oates is absolutely right: the law that has been in place since 1883 to prevent anybody with large amounts of money seeking to buy a constituency, and thereby own the Member of Parliament, is now being circumvented by the current situation. The present rules are inadequate and simply do not meet the case.

The independent Electoral Commission said in its report on the 2015 UK parliamentary general election, published in February of this year:

“These experiences from the 2015 UKPGE reinforce our view that the relationship between regulation of candidate spending and political party spending that has been in place since PPERA was passed in 2000 needs closer examination. The law currently only requires political parties to report spending against separate limits for England, Scotland, Wales and Northern Ireland, which means it is difficult to assess whether and where political parties are choosing to target their spend, their campaign funds on a regional or constituency basis”.

Evidence to the Burns committee reinforced that. We had evidence in particular from the Minister in the coalition Government who was responsible for these matters, who told the committee that,

“the local constituency-wide spending limits were made a mockery of, first, because all this stuff was being mailed out centrally and, secondly—one has to acknowledge—because of some very ingenious, intelligent and smart, if ruthless, use of digital technology, which costs money … Some of the hired guns of the Conservatives are already on public record as saying they spent far more than they should have done, but the question beyond that is that those slightly old-fashioned constituency-level limits can be easily circumvented through central funding, or through the use of … database campaigning techniques”.

I say to the noble Lord, Lord Leigh, that Jim Messina, who claimed that the Conservatives spent £30 million, far in excess of the national limit of £18.5 million, seems not to agree with him that there was not a general increase.

The Electoral Commission has made firm recommendations on this issue. Clearly, we have to listen to it because it is the statutory body responsible for electoral law. Since then, we have had the referendum, to which my noble friend referred. I simply say that I think the time has come to move on. Indeed, the report by the noble Lord, Lord Hodgson, on third-party campaigning adds to the need for a level playing field of funding constraints between them on one side and the political parties on the other. Taken with the CSPL evidence and the Burns Select Committee and, indeed, the report and draft Bill produced by the cross-party group in 2013, there is simply no excuse now for further delaying tactics.

My Lords, this has been an interesting debate on an important issue. There is a lack of trust in parties, and therefore in the political system, which is deeply unhealthy. We have a duty to work to restore confidence, and tackling political funding is a vital part of that. The Kelly Committee on Standards in Public Life emphasised not only that,

“the regulatory regime must be fair to all political parties”,

but also must be,

“widely believed to be so”.

As my noble friend Lord Whitty made clear, the then Trade Union Bill failed this test, addressing just one party’s source of funding—a view shared across your Lordships’ House. As we have heard, the House then set up a Select Committee to examine the union party funding in the context of Kelly’s view that a cross-party approach was needed. As we have heard, the Government were urged to take a wider and consensual route. Well, they did not, and the trade union aspect was the only one looked at, which has now been legislated for.

There will be an opt-in to the political levy for new members, even though these are a mere 10p per week. The Certification Officer is now consulting on how to implement this, after which there will be a year to put the new arrangements in place. That means that we now have time to rectify the imbalance of regulating Labour but not Conservative funding, and to deal with the bigger issue of companies’ and individuals’ largesse. It is urgent.

The Government are determined to remove the 15-year time limit for overseas voters, handing a vote for life to an estimated 1 million expats, who have left and not paid any taxes to this country for decades. But even more seriously, as the Minister helpfully revealed in her letter to me of 24 October—her department having refused to answer my questions for the year before that—all these extra voters will also become “permissible donors”. As she writes:

“If a British citizen is able to vote in an election for a political party, we consider that they should be able to donate to that political party”.

I cannot think what political party she had in mind.

Therefore, unless we change the law, all these extra voters, long after they have left these shores, will be able to funnel unlimited—presumably untaxed, probably unearned—amounts into the coffers of a UK political party, in a country in which they do not live, giving to a party that makes laws which do not apply to them and which takes decisions which do not affect them. Clearly, therefore, although the noble Lord, Lord Leigh, says that the Conservatives are content with existing donors, they are not—they want to add these extra expats as well. As the Mirror Online says about this today:

“Tycoons who have not lived or paid tax in the UK for decades will be able to fund political parties under new rules drawn up by the Tories … That means more foreign-based financiers will be able to push policy by pumping cash into the Conservative Party—where a £50,000 donation buys dinner with Theresa May as part of the ‘Leader’s Group’”,

as we heard today from both the noble Lord, Lord Wallace, and the noble Lord, Lord Leigh.

What does this look like to the general public? According to the noble Lord, Lord Wallace, three-quarters of the public think that wealthy individuals influence government to benefit their own interests, and the noble Lord, Lord Bew, said that nine out of 10 people think that large donations are motivated by hopes of influence. We have to deal with this. We must keep it simple and clean. There must be an upper limit on the size of the donation any one person—or company, trade association or a body corporate—can give. That was once accepted by the Conservative Party. Its 2010 manifesto promised,

“an across-the-board cap on donations”,


“mark the end of the big donor era”.

Notably, this was dropped from the 2015 manifesto. Perhaps the Minister can explain this regrettable omission when she comes to reply.

A cap on individual donations is urgently needed, and at a level which avoids any perception—let alone reality—of bought influence. As Kelly emphasised, only a low cap will be seen as taking,

“big money out of politics”.

He thought £10,000 was low, as the noble Lord, Lord Leigh of Hurley, clearly does. To me, £10,000 is high. It could amount to £50,000 over a parliament from one individual. That sounds like big money to me, and to voters, if not to the noble Lord, Lord Leigh. A lower cap would signify that we are changing. In addition, we should not be afraid to discuss adjustments to public funding. The free post will, over time, become less of a necessity, and could be better directed, as the noble Lord, Lord Tyler, says.

A healthy democracy requires properly run and accountable parties, able to undertake serious policy work as well as campaigns, able to train and develop its elected representatives, able to engage with the electorate, and with MPs able to serve their constituents. This is a price worth paying for a healthy, functioning democracy. If it needs more public funding, so be it. What it does not require is unlimited donations from rich individuals. This matter is urgent. I hope that the Minister will take back what she has heard to Downing Street, with the message: “Something must be done”.

My Lords, I must thank the noble Lord, Lord Wallace of Saltaire, for tabling this Question, and all noble Lords who have contributed.

The current regime for the regulation of political parties was established in the Political Parties, Elections and Referendums Act 2000. Since that time, there have been a number of proposals for further reform, most notably a review of party funding by Sir Hayden Phillips in 2007 and a report from the Committee on Standards in Public Life in 2011. Cross-party talks followed on both occasions but no agreement was reached on a package of reforms. The most recent talks in 2012 and 2013 covered many of the issues raised by noble Lords today. Despite a decade of talks, there is still no cross-party consensus on the broad issue of party funding at this time. This is ultimately a matter for the political parties; the Government cannot impose consensus from Whitehall.

Many noble Lords called for a further round of cross-party talks to be convened, thereby echoing the Select Committee on Trade Union Political Funds and Political Party Funding. But before such talks can start, there needs to be a sense that all parties agree on the basis for discussion. Without such an agreement such talks are likely to fail. As many noble Lords will be aware, the Committee on Standards in Public Life in 2011 produced a comprehensive report but was unable to get cross-party support for all its recommendations and conclusions. Both parties opposite objected to at least some of the conclusions in the report.

It is interesting—I want noble Lords to hear this, and the noble Lord, Lord Bew, mentioned it—that research published by the Committee on Standards in Public Life in August 2016 showed that there has been no “arms race” in party funding. In fact, taking into account inflation, the research shows a steep fall in central party spending of the three main established political parties in general elections since 1997. It also showed that there was very little difference in the spending of the two main parties in the 2015 general election, and neither party came close to its spending limit.

There are major stumbling blocks to progress. The Committee on Standards in Public Life’s suggestions from 2011 included taxpayer funding of political parties under a scheme which was estimated would cost around £20 million a year at 2010 prices. The problem is that this would represent a considerable increase in taxpayer funding of political parties. As my noble friends Lord Leigh and Lord Sherbourne, and the noble Lord, Lord Bew, mentioned—and the Government agree—there is no case for more taxpayer funding of politicians and no public appetite for state funding of political parties. This is a widely held view. Indeed, in 2011, the Government said that,

“the case cannot be made for greater state funding of political parties at a time when budgets are being squeezed and economic recovery remains the highest priority”.—[Official Report, Commons, 23/11/11; col. 25WS.]

Those are not my words, but the words of Nick Clegg when Deputy Prime Minister in a Written Ministerial Statement. Instead, we believe that savings are needed to help reduce the cost of politics. We are taking this forward, by reducing the size of the House of Commons, freezing ministerial pay and stopping the unanticipated hikes in the cost of Short money.

There are steps that we can take forward. Over the past decade, cross-party talks have focused on controversial and complex structural changes. This may be one of the reasons they have failed to reach a consensus. The Government are open to constructive debate on how we can move forward on this issue. A possible way would be to concentrate on smaller reforms, which may command broad support.

I repeat the offer made by my noble friend Lady Neville-Rolfe during the debate on the report of the Select Committee on Trade Union Political Funds and Political Party Funding. The Government would be willing to take forward work to find practical ways of encouraging smaller donations from a wider audience if there were a positive reaction to such a potential step from the main political parties. For example, technology has changed the way that people make small donations to charities. It may be possible to look into how such technology can be utilised by political parties, while ensuring that large donations remain transparent.

The Government would be willing to look at regulatory obstacles to small changes, while maintaining transparency around donations. If there were a positive reaction to such a step from the political parties, the Cabinet Office would be willing to take it forward for further consideration—for example, by publishing a discussion paper in the first instance.

I thank the noble Lord, Lord Bew, for his speech and for the important work that he has done on this matter over many years. I shall now turn to answering some of the questions that were raised during the debate.

The noble Lord, Lord Wallace of Saltaire, mentioned getting round donation rules by loaning money. Controls on loans were in place during the EU referendum, and it is for the Electoral Commission to enforce those rules.

The noble Lords, Lord Wallace and Lord Wrigglesworth, mentioned gift aid. I will pass all the issues raised in this debate to my ministerial colleagues in the Cabinet Office, including the point on gift aid in relation to donations to political parties and the question of tax relief, raised by the noble Lord, Lord Wrigglesworth.

The noble Lords, Lord Wallace of Saltaire and Lord Whitty, asked about the Government’s response to the Select Committee on the Trade Union Bill. I reassure them that the Government have taken account of the committee’s report. Indeed, many of the recommendations on union and political funds now form part of the Trade Union Act, as the noble Lord, Lord Whitty, explained. A formal government response is a matter for BEIS.

My noble friend Lord Leigh mentioned provisions being brought in for Cranborne money similar to those for Short money in the other place. This is a matter for the House of Lords to take forward. I echo my noble friend’s praise for the volunteers in all political parties. Along with, I am sure, everyone here, I have huge admiration for their dedicated work.

The noble Lord, Lord Oates, asked whether the 2012 report of the Committee on Standards in Public Life should be used as the basis for discussions. As the noble Lord, Lord Bew, explained, the committee’s recommendations in 2011 did not obtain cross-party consent. Indeed, dissenting opinions were expressed in the report and, for assorted reasons, the Labour Party and the Conservative Party disagreed with its conclusions. The report does not represent a basis on which to reform party-funding legislation.

The noble Lord, Lord Tyler, talked about revising the legislation on how political parties target, for example, their national spending in constituencies. The Government are currently considering the Electoral Commission’s recommendation on party spending in support of candidates. They are also considering the proposals from the Law Commission on consolidating electoral law, as well as the review by Eric Pickles on electoral fraud.

The noble Lord, Lord Wallace, and the noble Baroness, Lady Hayter, mentioned votes for life and the letter that appeared in the Mirror Online. I reiterate that donations from foreigners remain banned. This has nothing to do with donations; this is about enfranchising British expats, as pledged in the Government’s manifesto. It will ensure that people who have given something to our country are allowed to participate in our democracy, including war heroes such as Harry Shindler.

Increasingly, expats have strong links with the United Kingdom. They may have families here and indeed they may plan to return here in the future. Modern technology and cheaper air travel have transformed the ability of expats to keep in touch with their home country. So far as the Government are aware, there is no evidence as to the voting habits of overseas electors. There is no reason to believe that expats are more inclined to vote for one party or another. In fact, a lead campaigner on votes for expats, Harry Shindler, is a Labour Party member.

The noble Baroness, Lady Hayter, also mentioned a cap on donations, as did several other noble Lords. Although it was not included in the 2015 Conservative manifesto, the principle of capping donations was considered in the cross-party talks held in 2012-13.

I reiterate that I will pass all issues raised in this debate back to my ministerial colleagues in the Cabinet Office. Perhaps now there really is the momentum for cross-party talks. I will of course write to noble Lords if I have failed to answer any questions raised.

House adjourned at 7.06 pm.