Political Parties and Elections Bill

Public Bill Committee, 20 November 2008.

Further written evidence to be reported to the House

Nicholas Winterton (Conservative, Macclesfield)

I welcome to our penultimate sitting those members of the Committee who are present and I make a plea to the Committee that we make as much progress as possible in the time we have left, so that the expectations of the Programming Sub-Committee can be met—namely, that all the important parts of the Bill be considered before we conclude at 4 o’clock.

Clause 8

Nicholas Winterton (Conservative, Macclesfield)

I remind the Committee that with this we are discussing the following: Amendment No. 3, in clause 8, page 5, line 43, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 135, in clause 8, page 5, line 43, leave out ‘£200’ and insert

‘£5,000 donated to a registered party or £1,000 donated to an accounting unit of a registered party’.

Government amendments Nos. 154 and 155.

Amendment No. 4, in clause 8, page 6, line 3, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 156.

Amendment No. 5, in clause 8, page 6, line 14, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 134, in clause 8, page 6, line 14, leave out ‘£200’ and insert

‘£5,000 donated to a registered party or £1,000 donated to an accounting unit of a registered party’.

Amendment No. 179, in clause 8, page 6, line 17, after first ‘the’, insert ‘reasonable’.

Amendment No. 180, in clause 8, page 6, line 21, after ‘person’s’, insert ‘reasonable’.

Government amendments Nos. 157 to 159.

Amendment No. 181, in clause 8, page 7, line 17, after ‘or’, insert ‘was reasonably’.

Government amendment No. 160.

Amendment No. 148, in schedule 3, page 34, line 7, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 161.

Amendment No. 147, in schedule 3, page 34, line 12, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 185, in schedule 3, page 34, line 18, leave out from first ‘the’ to ‘knowledge’ and insert ‘individual’s reasonable’.

Government amendment No. 162.

Amendment No. 146, in schedule 3, page 34, line 25, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 186, in schedule 3, page 34, line 29, after first ‘the’, insert ‘reasonable’.

Amendment No. 200, in schedule 3, page 34, line 34, after ‘person’s’, insert ‘reasonable’.

Government amendment No. 163.

Amendment No. 188, in schedule 3, page 35, line 6, at end insert—

‘(8) The Commission shall prepare and publish guidance notes, which must be attached to any declaration under paragraph 6A, and which set out in clear English information necessary to properly complete such a declaration, which will as a minimum include—

(a) examples to assist in understanding how benefits are valued;

(b) examples to assist in the completion of the declarations required by paragraph 6A(3);

(c) the penalties for non-compliance with time periods, and for knowingly or recklessly making a false declaration;

(d) the appropriate details of when time limits for the submission of declarations commence and end.’.

Amendment No. 189, in schedule 3, page 35, line 37, leave out ‘appearing’ and insert ‘who reasonably appears’.

Government amendment No. 164.

Amendment No. 145, in schedule 3, page 36, line 2, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 165.

Amendment No. 144, in schedule 3, page 36, line 7, leave out ‘£200’ and insert ‘£1,000’.

AmendmentNo. 190, in schedule 3, page 36, line 13, leave out from first ‘the’ to ‘knowledge’ and insert ‘individual’s reasonable’.

Government amendment No. 166.

Amendment No. 143, in schedule 3, page 36, line 20, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 191, in schedule 3, page 36, line 24, after first ‘the’, insert ‘reasonable’.

Amendment No. 192, in schedule 3, page 36, line 29, after ‘person’s’, insert ‘reasonable’.

Government amendment No. 167.

Amendment No. 194, in schedule 3, page 36, line 45, at end insert—

‘(8) The Commission shall prepare and publish guidance notes, which must be attached to any declaration under paragraph 6A, and which set out in clear English information necessary to properly complete such a declaration, which will as a minimum include—

(e) examples to assist in understanding how benefits are valued;

(f) examples to assist in the completion of the declarations required by paragraph 6A(3);

(g) the penalties for non-compliance with time periods, and for knowingly or recklessly making a false declaration;

(h) the appropriate details of when time limits for the submission of declarations commence and end.’.

Government amendment No. 168.

Amendment No. 142, in schedule 3, page 37, line 30, leave out ‘£200’ and insert ‘£1,000’.

Government amendment No. 169.

Amendment No. 141, in schedule 3, page 37, line 35, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 195, in schedule 3, page 37, line 41, leave out from first ‘the’ to ‘knowledge’ and insert ‘individual’s reasonable’.

Government amendment No. 170.

Amendment No. 140, in schedule 3, page 38, line 6, leave out ‘£200’ and insert ‘£1,000’.

Amendment No. 196, in schedule 3, page 38, line 10, after first ‘the’, insert ‘reasonable’.

Amendment No. 197, in schedule 3, page 38, line 15, after ‘person’s’, insert ‘reasonable’.

Government amendment No. 171.

Amendment No. 198, in schedule 3, page 38, line 31, at end insert—

‘(8) The Commission shall prepare and publish guidance notes, which must be attached to any declaration under paragraph 6A, and which set out in clear English information necessary to properly complete such a declaration, which will as a minimum include—

(i) examples to assist in understanding how benefits are valued;

(j) examples to assist in the completion of the declarations required by paragraph 6A(3);

(k) the penalties for non-compliance with time periods, and for knowingly or recklessly making a false declaration;

(l) the appropriate details of when time limits for the submission of declarations commence and end.’.

Clause 8 stand part.

I point out to hon. Members the fact that this group now includes a number of amendments that were starred at the previous sitting of the Committee. I call Jonathan Djanogly, if he has recovered his breath.

Jonathan Djanogly (Conservative, Huntingdon)

Thank you, Sir Nicholas, and the answer to that is “barely”. I apologise for my lateness.

Clause 8 is entirely unacceptable in almost every respect. It is an example of needless, ill thought through provisions at their worst. Given the varied issues covered by the clause, we were surprised at the lump grouping of amendments. Furthermore, given that significant issues go not only to the context of the clause, but to the sense of the clause itself, we did not expect the stand part debate to be included in the grouping. That has not made it easy to discuss the clause in a coherent fashion.

Nicholas Winterton (Conservative, Macclesfield)

Order. The hon. Gentleman should not question the decisions of the Chair.

Jonathan Djanogly (Conservative, Huntingdon)

I would never think of questioning the decisions of the Chair, Sir Nicholas. I was just saying that, from our point of view, the grouping of amendments has made it difficult to debate the clause.

Rather than debate the amendments in the group by issue, it would be more sensible to take them in order of tabling, which is Labour Back-Bench amendments, Government amendments, our amendments and then the stand part debate. I come first to those amendments tabled by the hon. Member for Leeds, North-East (Mr. Hamilton) and supported by Labour Back-Bench Members. They have made a valiant effort to put some order into what we see as the dog’s breakfast that the clause represents. The fact that they were tabled early effectively said to the Minister, “Please can you get your act in order on the clause?” However, they are not good enough and would not go far enough, and we remain to be convinced of why the clause needs to be retained.

I shall now rebut the Labour Back-Bench amendments. Clause 8 creates a new responsibility for donors to political parties to clarify the source of donations. Donors giving more than £200 will be required to make a declaration whether another person is providing them with money or benefits worth more than £200. Amendment No. 3 and others would increase the donation that triggered the reporting requirements under the clause to various amounts between £1,000 and £5,000. If we agreed with the clause—I have just said that we do not—we would agree in principle with the need to increase the trigger thresholds to avoid unnecessary administrative burdens being laid at the feet of donors and local party volunteers alike.

By my estimation, setting the threshold at £200 would result in about 100,000 declarations being handled each year by the Conservative party alone. That would be a huge increase in the work load of many local party officers—and a fairly pointless one at that. I doubt whether the systems or, indeed, the manpower are in place to cope with such an increase.

Andrew Turner (Conservative, Isle of Wight)

Will my hon. Friend make it clear that many of those people are not paid, but are volunteers?

Jonathan Djanogly (Conservative, Huntingdon)

My hon. Friend makes an important point to which I shall certainly return.

On Second Reading, the Secretary of State noted that the Government had received representations from all the main parties and many of the small ones advocating an increase in the limits, and they said that they would be willing to consider them in detail. We now have the Government’s proposals to increase the limit to the relevant reporting threshold for the declaration, saying that it will be £5,000 or £1,000. The most recent missive from the Electoral Commission, issued yesterday in response, states:

“These changes should reduce the administrative burdens of the new declaration requirement, while introducing a new procedural reminder of the rules on agency in respect of reportable donations. The Commission welcomes the decision to set the declaration threshold at the same level as the existing donation reporting limits rather than introducing a general £1,000 threshold, which would have created a new regulatory threshold for those parties without accounting units.”

To move on to Government amendments Nos. 153 to 170, the Government have clearly admitted that they see a good deal of deficiency in the clause. As the Minister said, the amendments will have twofold effect. First, they will do away with the previous threshold for declaration of £200 and replace it with two different thresholds—£5,000 for donations made nationally and £1,000 for donations made locally. Secondly, they will remove the requirement on parties to take all reasonable steps to verify the veracity of the declaration. While the amendments are welcome, we think they are too little, too late.

Government amendments Nos. 158, 163 and 167 will remove the need for anti-money laundering-style verification processes. The amendments, which have the support of the Electoral Commission, will go some way towards relieving the huge administrative strain that would have burdened local party offices. We were in real danger of exposing the volunteers in those offices to a crushing administrative load. Mr. McIsaac, the Conservative treasurer, noted in evidence to the Committee the scale of the potential problem:

“You can see the pattern. There is the whole verification area, the judgmentalism and the lack of staff. A large investment bank that I dealt with in professional practice had more than 1,000 people in compliance and legal—not risk. I think of the Conservatives, and we have a handful.”——[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 80, Q20.]

The anti-money laundering-style language was dangerous and the consequential regulatory burden that would be imposed could have devastated parties at local level. Basically, verification would have involved something that textbooks have been written on in the context of other areas such as money laundering. Although we welcome the Government’s reassessment of the provisions, we are still cautious about their impact. Placing disclosure requirements on donors must be carefully thought through so that we do not push people away from donating to political parties for fear of breaching these complex and, at times, opaque rules.

The provisions, while doing away with the need for parties to verify donations, still impose significant burdens on donors in the declaration process, and there is real need for clarity. The increased threshold limits mirror those in the Political Parties, Elections and Referendums Act 2000 on the reporting of accounts to the commission. These limits will be applied by Government amendments Nos. 153, and those following, to the thresholds for donors making declarations. Given the possible deterrent effect that the declaration requirements may have, we would like to see these thresholds much increased. The Government have taken a step in the right direction, but we feel that they must go much further. From our point of view, this is unfinished business.

We are pleased to be holding a debate today on our amendments, because when we last met they were starred due to the little time we had for tabling them. Amendments Nos. 179 to 181 would insert a test of reasonableness into clause 8. Amendments Nos. 179 and 180 would insert into proposed new section 54A(3) of PPERA a reasonableness test for the opinion of the person making the donation, as required by proposed new section 54A(2). Given the possible sanctions that attach to the declarations that must be made—a possible unlimited fine or one year of imprisonment—we do not think it fair to place too low a threshold on the opinion that must be held.

Throughout, the rationale behind our amendments has been the need for proportionality and striking an appropriate balance between the competing interests at stake. Here, too, we feel that a mere opinion may not be satisfactory. There should be reasonable grounds for holding such an opinion. The complexity of the provisions of proposed new section 54A and the fact that a lay person potentially unsure of what they are being asked to do might land themselves in hot water as a result of giving a declaration on something with which they are unfamiliar or unsure represent a potentially dangerous situation. By imposing a test of reasonableness, we would allow for the basis of the opinion to be tested objectively by an external party or a court of law. That in turn would add to the process a potential judicial safeguard that would otherwise not exist if an opinion could be held subjectively.

Amendment No. 181 would apply the same test of objectivity to proposed new paragraph 1A(1) of schedule 6 to PPERA. In similar vein to the reasoning just described, we should apply the same test of reasonableness to the requirement to produce a quarterly or weekly report and the requirement to say in it whether the details given in a donor declaration are

“suspected to be untruthful or inaccurate”.

Otherwise, we would have no solid foundation on which to impose any liability for a breach of the provisions. The reporting person or persons would, in effect, be expected to second-guess what the commission viewed as suspicious or not.

Amendments Nos. 185, 186, 200, 190 to 192 and 195 to 197 are consequential on amendments Nos. 179 and 180, in that they would apply to each of the donor types set out in schedule 3 of the Bill the same reasonableness test proposed in relation to proposed new section 54A(3) of PPERA.

Amendments Nos. 185, 186 and 200 would apply a test of reasonableness to the opinions expressed by individuals and members’ associations in declarations made pursuant to proposed new paragraphs 6A(1) and (3) of amended schedule 7 to PPERA, in respect of declarations by the donor and an individual acting on behalf of a donor respectively. Likewise, amendments Nos. 190 to 192 would apply the same test to the declarations to be given by a third party, pursuant to proposed new paragraphs 6A(1) and (3) of amended schedule 11 to PPERA, in respect of declarations by the donor and an individual acting on behalf of a donor respectively.

Amendments Nos. 195 to 197 would apply the same test to declarations to be given by permitted participants, pursuant to proposed new paragraphs 6A(1) and (3) of amended schedule 15 to PPERA, as applies to declarations by the donor and an individual acting on behalf of a donor respectively.

For the sake of brevity, I will not rerun in respect of each amendment my arguments on the need for a test of reasonableness and an objective yardstick, save to say that without the amendments we would make the job of donors, party officials, the Electoral Commission and, as a last resort, the courts, that much harder.

Amendment No. 189 relates to paragraph 3(6) of schedule 3 to the Bill, which amends paragraph 11 of schedule 7 to PPERA. It would again insert a reasonableness requirement on the appearance of the ultimate donor. As with the other amendments, it would clarify the process.

Amendments Nos. 188, 194 and 198 would insert new provisions into each new paragraph 6A to be inserted into schedules 7, 11 and 15 to PPERA, which apply the requirements for declarations on the source of donations to individuals and members’ associations, third parties and permitted participants respectively.

Those new provisions require the commission to publish guidance notes on the requirements of clause 8 and schedule 3, which must be attached to any declaration to be completed by a donor. As a minimum, such guidance will give examples to assist in understanding how benefits are valued and in completing declarations, and will give details of the penalties for non-compliance with time periods and for knowingly or recklessly making a false declaration, as well as the appropriate details on when time limits for the submission of declarations commence and end.

Given the complexity of the new provisions, it is hoped that such guidance notes will provide valuable assistance to those making declarations, and allow them to do so in a compliant fashion, thereby reducing the need for the commission to investigate and possibly penalise individuals or groups for non-compliance. As with many of our amendments, our aim here is clarity and ease of understanding.

We must aim, as legislators, to provide clear signposts and assistance when compliance issues may involve significant penalties. That is particularly important in this Bill, given that it is to be interpreted by individuals who, as my hon. Friend the Member for Isle of Wight said, volunteer their time out of a sense of civic duty, and who more often than not will have no legal background or teams of assistants to aid them in understanding these complex provisions. Therefore, we, as legislators, and the commission, should do our utmost to guide them through the tangled web of the Bill.

I would hope that, in the interests of having a workable system for the regulation of party funding, the commission will do its best to produce such guidance in a timely fashion.

Moving on to the stand part debate, the clause is poorly drafted, poorly researched and almost entirely negative. To our mind, it stands out in the legislation like a sore pimple. I am afraid that if the Minister thinks that he can table a few amendments and then get away with the clause, he will have to think again. That is why I now wish to discuss the more substantive stand part issues.

The impact of the clause will still be widespread and costly—even if not as much as beforehand, following the introduction of the Government amendments—in time and money for parties at the local level, where such burdens are most heavily felt. Political parties need sufficient funds to fulfil their democratic functions. There is, however, a paradox at the heart of party politics in the UK: while on the one hand there is recognition that political parties are key in mobilising local political activity and are a central vehicle in promoting civic engagement, on the other, membership of political parties, election turnout, and trust and confidence in politicians are at an all-time low. That has major implications for the financial management of political parties.

Modern centralised campaigns have resulted in escalating campaign costs, while at the same time the financial impact of the decline in party membership has resulted in increasing reliance on large donations and loans to fund political parties—a situation that appears to have eroded public confidence still further.

The 2006 Constitutional Affairs Committee report on party funding states:

“The New Policy Network warned that without an accepted system of adequate funding for political parties ‘we risk the health of our democratic system’”.

The traditional practice of secrecy surrounding the source and amount of donations received has been one of the causes of increasing disquiet about party funding. On the back of that, the Labour party 1987 election manifesto included a commitment to require parties to declare the sources of their donations and to ban foreign donations. That commitment manifested itself in the Committee on Standards in Public Life inquiry entitled “The Funding of Political Parties in the United Kingdom”, under the chairmanship of Lord Neill. The Neill report was published in October 1998 and it suggested a greater transparency of donations, among several other things.

In the Home Office submission to the committee dated 6 March 1998, the Government had sought the committee’s advice on specific topics, including:

“What should be the mechanics for disclosure of donations? Should there be a separate threshold for the acceptance or rejection of anonymous donations? What should be the timing of disclosure?”

There were already statutory requirements on trade unions and companies with regard to the disclosure of information on political donations, although some had argued that those rules did not go far enough. Despite all the evidence of submissions made to it, the Neill committee did not uncover any wrongdoing. It did, however, acknowledge the potential for speculation and rumour about improper motives and tacit obligations where details of donors are unknown.

The advantages of greater transparency are summarised by the Neill committee and apply as much to this debate as they did eight years ago. The main drive of these arguments is that greater transparency provides the opportunity for public and media scrutiny, which makes the system less opaque and means that not only do rumour and suspicion wither, but public confidence in the system is increased. Further, there was no evidence that donations have been used to influence Ministers or policy, where such sums would be recorded on a publicly accessible register.

On the reverse, the principal arguments against disclosure and transparency centre around an individual’s right to privacy. The Neill committee report cited various issues in this context. Its conclusions, while recognising the strength of the arguments in favour of privacy, advocated a disclosure regime on the grounds that there was a public interest in knowing when a donation is made to a political party,

“which is significant enough to prompt questions or to raise suspicion about its purpose”.

On the back of this, the committee made two recommendations, which formed much of the basis for the disclosure requirements in PPERA. First, it said that opinion will differ on what constitutes a significant donation, but it recommended disclosure of donations to national party organisations of £5,000 or more per annum from one source, as supported by the two main parties and others. Secondly, it recommended that donations to constituency associations or regional organisations from one source, which total £1,000 or more per annum, should also be publicly disclosed.

Of course this is important in the context of this debate because these figures were issued in 1998 and yet even the Government, in their revised position in their amendments, use the figures from 10 years ago. However, despite this emphasis on disclosure when it came to the subject of where responsibility for making the disclosure should lie, the Neill committee felt that it was “wholly unreasonable” to place the obligation on the donor. A decade later, here we are doing exactly that. The Minister has yet to make the case for this change of approach. I hope that he will do so in his later remarks.

The Neill committee concluded that the obligation should rest with the political party’s central office not only to report on donations received by the national party, but to ensure that the party’s organisational structure was adequately set up to deal with all disclosable donations received by sub-units of the party. It would be up to each party to ensure that each sub-unit supplied the required information to a designated officer at the central office. Only donations to candidates or election agents would be an individual’s responsibility.

The Government agreed with the general approach of the Neill committee and enshrined the main elements of the proposed reporting regime in part IV, chapter III of PPERA. Under this, the treasurer of a registered political party is required to make a quarterly donations report to the Electoral Commission, recording any donations of £5,000 or more to the national party, or £1,000 or more to local associations or regional organisations, which are called accounting units of a national party. To ensure that multiple donations from the same source are properly accounted for, the party must also record any further donations of £1,000 or more from a source already recorded during the same reporting year.

In PPERA, all donations must be from named permissible donors who are defined as an individual on the electoral register, or a company that is registered under the Companies Act 1985 or incorporated in the UK. All such companies must carry on business in the UK. Other legitimate donors, with various caveats, are trade unions, building societies, limited liability partnerships, friendly societies and various other unincorporated associations. PPERA requires registered political parties to submit an annual statement of accounts to the Electoral Commission, by a particular date and in a specified format.

Furthermore, under PPERA, donations to parties in excess of £5,000 nationally or £1,000 locally must be publicly declared with the details of the donor and the amount. That includes donations in kind as well as cash donations. Contributions may only be from permissible donors; foreign donations are banned and anonymous gifts in excess of £200 are also prohibited.

Part IV of PPERA is concerned with the control of donations to registered parties. It imposes restrictions on the sources of donations, so as to prohibit foreign and anonymous donations to political parties and make registered parties subject to reporting requirements in respect of donations above a certain value. Section 50 of PPERA defines a “donation” as

“any gift...any sponsorship provided in relation to the party...any subscription or other fee paid for affiliation to, or membership of, the party”—

or—

“any money spent...in paying expenses incurred directly or indirectly by the party”.

Section 52 goes on to specify certain payments that are not to be regarded as donations, while section 53 sets out how the value of donations in kind, such as property, is to be calculated. Further, section 54 specifies who or what is to be considered a permissible donor and the list is comprehensive, sections 55 and 56 deal with the acceptance or return of donations that fall foul of those sections, and section 61 specifies offences regarding evasion of restrictions on donations.

The provisions relating to the reporting requirements placed on political parties are no less extensive. Section 62 and schedule 6 require the treasurer of a registered party to make quarterly donation reports to the Electoral Commission and the details to be included in such reports. Sections 65 and 66 give further details on the process to be followed when submitting a report to the commission and the details to be set out in each submission, including the need for a declaration by the treasurer that he has recorded all known donations.

That scene setting gives some idea of the provenance of the clause. In its short history, it has not been without its problems. The Constitutional Affairs Committee, in its 2006-07 report, expressed significant concerns about the disclosure system under PPERA. It said:

“We believe that there are problems, both actual and perceived, with the current arrangements for party funding in the UK...While the PPERA 2000 introduced closer regulation and some improved transparency, it has not finally resolved problems with the system; if anything increased transparency, by revealing the extent of and dependency on donations from a few rich individuals, corporations and trade unions, has increased the negative impact on public confidence.”

We must be careful that we do not paint ourselves into a corner with this new provision and rather than increasing public confidence, engineer the reverse effect. That point was picked up on by the Constitutional Affairs Committee, which said:

“While we endorse a transparent system, transparency does not solve problems, but draws attention to them. It also invites ‘sniping’ between opponents. It must be based on readily identifiable risks so that audit functions have a clear overall purpose.”

At an evidence session, the Secretary of State said:

“By way of background, there is a consensus that there has to be greater transparency; that was the whole purpose of the 2000 Act. As far as I can see, no one is arguing on the issue of transparency.”——[Official Report, Political Parties and Elections Public Bill Committee, 4 November 2008; c. 14, Q27.]

That is true, but, that statement implies that the clause is about transparency, which, given its non-public procedures, is simply not the case. More specifically, I cannot see how it will deal with identifiable risks that would give it the clear purpose demanded by the Constitutional Affairs Committee. Perhaps too, we should be mindful of the comments in the evidence session last week of the Conservative party’s Mr. McIsaac, who said:

“I have noticed that innocent mistakes have a habit of being magnified in the press, on the blogs and the rest of it, as if they were some sort of scandal. People make mistakes, even in the best regulated organisations. To open up the possibility of mistakes, and thereby the whiff of scandal, could be very counter-productive.”——[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 91, Q47.]

What then do we have in clause 8? How does it attempt to remedy the problems faced by political parties in raising finances in an open and transparent manner, against a background of growing public scepticism at donations to parties? The clause amends section 54 of PPERA—the clause dealing with who is considered as a permissible donor. It inserts a new subsection that requires a party to have a declaration from a donor where the party wishes to accept any donation. We have been debating what the level of that donation should be. It creates a new responsibility for donors—not political parties—to clarify the source of donations.

Overall, the Government have started to make some sense of the clause with the amendments that they have tabled, which do away with the provisions requiring parties to take all reasonable steps to verify those declarations. Bodies such as companies and associations that make donations under the threshold will be expected to identify the responsible person who will make a declaration. The Bill will insert a subsection, as set out in proposed section 54A(5), making it a criminal offence for a person knowingly or recklessly to make a false statement about a donation, with a maximum penalty of one year’s imprisonment or a fine on indictment. I appreciate that certain hon. Members will move an amendment on that aspect, so I shall not talk about that here.

On Second Reading, the Secretary of State summarised the effect of clause 8. In his remarks, he noted:

“Those provisions supplement the existing requirements of the 2000 Act by making it clear that the identities of the true donor, on whose behalf the donation is made, must be given to the recipient of the donation. If a donor declares that those sections of the 2000 Act do not apply, they must explain why.”—[Official Report, 20 October 2008; Vol. 481, c. 51.]

We fear, though, that in practice, it would be far from that simple for the receiving party official or the donor. Under the clause, political parties and regulated donees will be required to confirm that they have received these declarations and retain them for the future review by the commission. We remain concerned about the potential impact of this if the clause were to come into force. We would like to see the thresholds increased much further to ensure that these new reporting burdens do not weigh too heavily on those concerned. We hope that the Government will be reviewing these thresholds again.

The assertion of Mark Sweeney of the Ministry of Justice, in the first evidence session before this Committee, has done little to soothe our concerns. He said:

“Clause 8 is not intended to add any additional requirements, in terms of who may or may not donate, or the way in which they may do so.”——[Official Report, Political Parties and Elections Public Bill Committee, 4 November 2008; c. 14, Q27.]

That simply turns the situation on its head by saying, “Because there is no substantive change to the law, there is no problem.” There, to us, speaks the bureaucrat who has not given thought to the difficulty of the process in real life. We have concerns about the practical applications in real life and we think that the Electoral Commission is on our side. In its October briefing, it said:

“We believe that the benefits of these changes will be quite limited, since all they do is place additional procedural requirements on donors and recipients. They will not extend the current restrictions on concealing donations, nor will they add materially to the transparency of party funding as the new declarations will not be sent to the Commission or made public. However, they will impose potentially substantial new regulatory burdens on parties and donors. It is not presently clear whether the benefits of these provisions will be sufficient to justify those new burdens.”

The Conservative party is concerned that this is a disproportionate and excessive regulatory burden. Rather than helping parties broaden their fundraising, clause 8 could put off donors and discourage volunteerism. Sections 54 and 61 of PPERA already prohibit donors from concealing the source of donations by channelling money through others. The use of proxy donations is also illegal. Moreover, if an unincorporated association is used as an agency to channel a donation from a particular donor, that original donor must be declared. I shall not speak further on that aspect as I appreciate that we shall be debating it on later amendments.

The commission, through its chief executive, Peter Wardle, has also backed these concerns. As mentioned in the evidence session to the Committee, his memorandum states:

“On the other hand, the changes will impose potentially substantial new administrative burdens on parties and donors. Political parties have expressed reservations to us about the impact of these compliance requirements, particularly on their volunteer officers.”

Furthermore, when pushed by the Minister some time later on the benefits of the Bill, Peter Wardle responded:

“In terms of what is in the Bill, we are concerned that the potential disbenefits in practical terms may outweigh the benefits; we are not saying that the whole idea is completely unworkable, but that it is not desirable as it currently stands.”——[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 57-58, Q147, Q151.]

Given such a damning assessment by the commission, have the Government reviewed this clause in light of what he said? If not, why not? Further, will the Minister give the Committee some idea of the consultation process that was gone through to end up with what we see as a pretty dreadful clause?

To reiterate the concerns raised by my right hon. Friend the Member for Horsham on Second Reading, and which remain despite the Government’s amendments, the compliance burden on a central party and the registered treasurer will be considerable given the number of transactions and accounting units involved, the lack of professional staff in most accounting units, the small number of compliance staff employed by the central party and the threat of the new regulatory sanctions available to the Electoral Commission. On 29 October, my hon. Friend the Member for Chichester tabled a question for the Secretary of State. In reference to the Bill, he asked

“what the evidential basis was for the estimate of five minutes processing time per donation for the processing of a donation declaration; and what estimate his Department has made of the average time taken to verify the source of a donation.”

On 6 November, the Minister replied:

“The estimates in the impact assessment—both for processing declarations and carrying out further verification checks in exceptional cases—were based on an assumption that the additional requirements on the parties to process declarations would be embedded to a degree within checks that they already carry out to ensure that the donations they accept are permissible under the Political Parties Elections and Referendums Act 2000.

The Government accept that a number of political parties are concerned that the impact assessment underestimates the compliance burden that the requirements of clause 8 might impose on political parties, and that the impact assessment understates the potential burden. As my right hon. Friend the Secretary of State and Lord Chancellor (Jack Straw) indicated before the Public Bill Committee on 4 November, while we are clear that greater transparency is essential, it should not be achieved at the cost of overburdening political parties, and I am ready to consider raising the thresholds at which declarations are required.”—[Official Report, 6 November 2008; Vol. 482, c. 753W.]

Perhaps the Minister can clarify that answer, or tell hon. Members what the rationale was behind the Government’s sudden change of heart. It hardly points to proper preparation and research on the Bill by his Department. The impact assessment’s estimated costs of the rules to all political parties are between £7,000 to £10,500 per year. In our view, that grossly underestimates the volume of small donations from £200 to £5,000 and wrongly assumes that it will take only five minutes for parties to verify each donation.

Given the recent amendments, can the Minister revise the impact assessment and the costs that parties will be forced to accept? How will that change once the Government have reviewed the thresholds? We are concerned about the thresholds and believe that a higher figure would do away with any potential confusion and would be more proportionate and risk-based when the provisions commence.

The Government must review the thresholds again and increase the limit so as not to place burdensome obligations on donors and volunteers. Given the difficulties, it is essential that the Electoral Commission issues guidance—hopefully light-touch guidance—on the operation of the new rules.

The money laundering-style language and the high tests proposed, in which all reasonable steps had to be taken forthwith by or on behalf of the party for verification, have thankfully now been removed. However, the Government were in danger of imposing anti-money laundering-style regulations on parties and donors. The consequential regulatory burden that would have been imposed could have been devastating, and for what purpose?

The requirement for declarations and the need to retain them on file could place a significant burden on the party-financing system. For instance, what format must they be stored in? How long must they be stored and what notice will be given of the commission’s desire to review them? How frequently does the commission expect to review them—as a matter of course or in exceptional circumstances? Those are a few of the questions that remain with the provisions.

Mr. McIsaac, the Conservative party treasurer, gave some idea of the scale of the potential problem in his responses to the Committee during the evidence taking session:

“Think about a party such as ours. We have 600 and something constituency associations, of which about 350 put in financial statements, which means that they have income in excess of £25,000 a year. Only a very small number of them have professional staff, and the rest are run by volunteers.”

He went on to note the acute problem of requiring party officials to make judgment calls as required by clause 8 and said:

“Once you start getting into areas of judgment it gets more difficult...All these things are highly judgmental and very difficult. You can imagine yourself, or your parents, being asked to become chairman of the local constituency association... and then being told, ‘By the way, there is a bit of a snag. There is the compliance manual. And, by the way, you ought to be aware that if you make a mistake, albeit an innocent one, it could be looked at through the eyes of someone who is very suspicious. Also, be aware that the Electoral Commission has all sorts of powers to gain access to your home and to look at your records. By the way, you do want to be the chairman of the association, don’t you?’”

That typifies the sort of problem that will face every local party office across the country in the wake of the Bill. As the system stands, the registered party treasurer takes responsibility for the compliance of all associations. With the insertion of a test of objectivity and reasonableness, as proposed in amendment No. 179 and those following, we could do away with the need to rely so heavily on such subjective opinions.

I also note that Hilary Stephenson, who holds the equivalent position in the Liberal Democrat party, in reply to Mr. McIsaac’s contribution said:

“I wholeheartedly endorse a great deal of that.”———[Official Report, Political Parties and Elections Public Bill Committee, 6 November 2008; c. 79-80, Q20, Q21.]

The removal of the verification process is a step in the right direction, but the Government must consider what they are trying to achieve with clause 8. The cost of the clause as it stands might be a high price to pay as volunteers and donors turn their backs on political parties for fear of incurring liability for breaching complex rules. That was the point made by Roy Kennedy, director of finance and compliance for the Labour party, in his reference to the “volunteer armies”. Anything that imposes complicated and misunderstood rules on those people by way of regulatory sanction could stifle their desire to become involved. At a local level, such volunteers are the lifeblood of our parties. Often more senior in age, they give their time from a sense of civic or national pride. At a time when more and more people are turning their backs on the political process and large sections of the electorate feel disfranchised, we must be careful not to discourage involvement by imposing heavy-handed regulations that are difficult to understand and comply with, and which could lead to financial or criminal penalties if breached.

We would very much like the position of volunteers to be protected in the Bill. We must ensure that we do not push away those already involved or likely to become involved in the political system with the fear of regulatory penalty. The Minister may come back with something more acceptable in due course. In the meantime, I shall certainly recommend to my hon. Friends that we vote against the clause.

David Howarth (Liberal Democrat, Cambridge)

The starting point for this debate ought to be whether proxy donations are a good thing or a bad thing. I am quite clear that they are a bad thing, and that people making donations on behalf of others is, as the Government are right to think, inherently fishy. The question is what to do about them. I congratulate the Government on introducing such a strict clause in the first place, because it is the Labour party, until very recently, that has had the most trouble with proxy donations, such as in the David Abrahams affair. However, it should be mentioned that all parties could be in trouble over such matters. Only this weekend, a question was raised about what might have been an attempted proxy donation to the Conservative party, and it made headlines in The Sunday Times.

The starting point must be that proxy donations are inherently not a good idea, especially in the context of the 2000 Act, which tried to create transparency. However, there are the questions of proportionality, which was mentioned by the hon. Member for Huntingdon, and of putting excessive burdens on volunteers, which he was also right to mention. The Government have introduced an amendment raising the limit to £5,000, which is to be welcomed. However, in order to understand how much that new approach should be supported, it is important to put it into its potential context to see where the reform lies. He is right that clause 8 will not change the substantive rules about donations, so the question of proportionality is difficult to judge. The limit will be £5,000 where there is no donation limit. Is that proportional?

There is also a question, again raised by the hon. Gentleman, about how the clause will work in a mechanical way. The transparency parts of it will not put the real donors’ names on the public record, as perhaps they ought to. Why will it work that way? I have an optimistic scenario for why that has been done and why it might work in other circumstances.

The optimistic scenario is simply this: the clause will work, in an interesting way, if a donation cap exists. If there were a donation cap—£50,000 was proposed by Hayden Phillips, and the Committee will debate a £10,000 option later—political parties would need to be clear about who gave them the money. Otherwise, it would be a simple matter for donors to evade the donation cap by making a proxy donation. That would be an easy avoidance technique. At that point, declarations to parties would be a way in which parties could effectively protect themselves against the accusation that they had taken a donation above the limit because they would have a declaration from the donor and would know who the real donors were, so that mechanism can be a coherent part of a capped donation system. I want to know whether that is how the Government conceive it. If that is how they conceive it, I am rather more optimistic about the future for that area of regulation.

Were we to move to a cap on donations, even one as high as £50,000, as proposed by Hayden Phillips, we would be on the way to taking big money out of politics. The points about volunteers and participation, although valid, do not justify massive donations by individuals, the only plausible interpretation of which, from the outside, is that they have massively more influence over politics than ordinary people who make small donations.

Jonathan Djanogly (Conservative, Huntingdon)

The hon. Gentleman seems to be basing his understanding of the clause on what the Government might be thinking, which is only a maybe, maybe, but even on that basis is he saying that the level should be set at £50,000 or £100,000, because presumably he is only talking about the largest donors?

David Howarth (Liberal Democrat, Cambridge)

The hon. Gentleman is getting to the point. If we did have a £50,000 donation cap, what should the proxy donation limit be? The lower the overall donation cap, the lower the limit should be on declarations of proxy giving, because the danger would increase that people would use proxy donations to get around the caps. If it was a £10,000 donation cap, there is a case for going back to the Bill’s original proposal of just £200. The proportionality issue becomes quite different, because proportionality would then include the question of making sure that individuals did not avoid the overall cap, which would be an important matter at that point.

I return to my central question for the Government: do they conceive of the clause as part of a road map that would get us to a donation cap? I think that a donation cap is absolutely essential. It is part of the Hayden Phillips compromise, and although it is at a level that I think is far too high, it is nevertheless agreed to by all parties. If we are to clear up politics and deal with the perception that it is dominated by very wealthy people who have much greater access to the political process than ordinary people, that is the route that we must take. I hope that the Government can give us a clear answer now, and the Opposition too, on whether they support caps on donations.

I will speak briefly to amendment No. 179, because I do not understand the hon. Gentleman’s intention in tabling it. He says he wants to reduce the regulatory burden, yet inserting the word “reasonable” in clause 8 would move away from the situation in which the opinion of the person making the declarations is relevant, and of course their opinion is their opinion, to one in which that opinion would count only if it was reasonable. That would increase the regulatory burden and the possibility of a legal challenge against someone who he says is a volunteer. I do not understand the insertion of the word “reasonable” in clauses where it is not the state we are regulating, but individuals. Inserting the word “reasonable” into clauses about individuals increases the burden on them; it does not reduce it. That applies to most of the hon. Gentleman’s amendments, which are entirely misconceived.

The central point in the debate on clause 8 is the cap on donations. Without a cap on donations the clause makes less sense. My optimistic view is that the clause is part of an original much bigger plan to introduce donation caps, and is all that survives of it. If that is the case, and that bit of political archaeology is true, we may be on to a better path than the one we seem to be on in the Bill.

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

I want briefly to congratulate the Government on accepting my amendments and those tabled by my hon. Friend the Member for Battersea. In speaking to my amendments I shall not take the 40 minutes that the hon. Member for Huntingdon took. I merely say that the level set in the Bill was clearly too low. We had a lot of evidence to that effect, which the hon. Gentleman listed at length.

I welcome what the Government have done, which is sensible and makes it far easier now for individual parties locally and nationally to administer the provision. The Government have tabled a very sensible amendment.

Michael Wills (Labour, North Swindon)

Welcome back to the Chair on the last day of the Committee’s proceedings, Sir Nicholas.

I thank my hon. Friend the Member for Carmarthen, West and South Pembrokeshire. His and his hon. Friends’ judgment and experience have been influential in shaping the Government’s approach, and we are extremely grateful for all their work. I hope that he will feel that we have addressed the concerns adequately and that he will not press his amendments.

Before I comment on clause stand part, I will deal with the issues raised by the hon. Members for Huntingdon and for Cambridge. We are grateful for the Opposition amendments, which we hope are essentially probing amendments on which we will be able to provide sufficient reassurance that they need not be pressed to a vote.

Of course reasonableness is important. For instance, when someone is required to give an opinion it should be a reasonable one. However, the effect of the Bill will be to ensure that sensible and reasonable opinions are given. Therefore the amendments are not needed. It is an offence knowingly or recklessly to make a false declaration about one’s opinion under the clause. Accordingly, there is effectively a requirement in the clause to give an opinion that has been considered with due care and attention. On that basis, we think it is enough that someone genuinely believes the opinion they record in a declaration. We do not think that adding an extra objectivity test that requires a person to show that their opinion is reasonable would add anything useful, and might in the end be unnecessarily onerous.

I am concerned that as well as being unnecessary to achieve what is intended the amendments would not consistently change the requirements in relation to all the different types of recipients of donations to which clause 8 and schedule 3 apply.The Bill replicates the requirements in relation to donations to political parties, set out in clause 8, for donations to individuals, members associations, third parties and permitted participants in referendums. Any changes to clause 8should therefore be reflected throughout schedule 3, and vice versa. I hope that the hon. Member for Huntingdon will accept my assurance that the amendments are not necessary, and not press them.

As to amendments Nos. 188, 194 and 198, I again invite the hon. Gentleman not to press them. I remind the Committee that they would require the commission to produce guidance notes, which would have to be attached to declaration forms. As a minimum, the guidance notes would include examples of how to value benefits, examples to assist owners in making declarations, an explanation of the penalties for non-compliance or for knowingly or recklessly making false donations, and an explanation of the time limits for the submission of declarations. This requirement would apply only to donations to individuals, members’ associations, third parties and permitted participants, but not to donations to political parties. I am not sure whether that is the effect that the hon. Gentleman intended, so I shall speak about the content of the amendment, rather than about the types of donations to which it would apply.

Clause 1 provides that the commission may prepare guidance on any of the requirements of the 2000 Act. The clause also gives the commission the function of taking such steps as it considers appropriate to secure compliance with the requirements of the Act. The commission is, therefore, already empowered by the Bill to issue guidance on the new requirements for a declaration. In fact, the Electoral Commission has already published guidance for political parties on valuing benefits, such as items sold at auction, secondment of staff by employers to work for political parties and the provision of free or discounted office space.

We would expect the commission to include in its guidance the details set out in the amendment, but a blanket requirement for the guidance to be attached to the declaration form may be unduly rigid. Those giving donations will not be required to complete specific forms, although the commission might produce a standard form, which recipients may choose to use to comply with the requirement. The individuals and organisations regulated by the 2000 Act and the Bill may choose to comply in the way that they find easiest. That is preferable to prescribing, in primary legislation, that a specific form must be completed and a specific piece of guidance attached. I hope the hon. Gentleman will withdraw the amendment.

Nicholas Winterton (Conservative, Macclesfield)

Order. May I help the Minister? The Opposition do not have to withdraw their amendments, which are merely grouped with the Government amendment. If the Opposition ask the Chair for a specific Division, I would give serious consideration to that, but at present they have not.

Michael Wills (Labour, North Swindon)

Thank you, Sir Nicholas. I am, as always, grateful for your guidance.

I now come to the stand part debate on the general purposes of the clause and its associated schedule 3. However, before I do so, I remind the Committee of the wise words of the hon. Member for Cambridge, to which I have had recourse many times during the Committee proceedings, although the hon. Gentleman has not, sadly, been able to contribute as much as other Opposition members to our proceedings. I am endeavouring to put on record that he has made a significant contribution to the work of the Committee by reminding us all that, as we proceed, we should always have in mind two separate and sometimes conflicting imperatives. We must make sure that our democracy functions, and that depends, for all of us, on volunteers who are prepared to give their time and, on occasion, money to political parties. To put undue burdens on them would, in the end, be damaging to our democracy. However, equally, we must recognise the legitimate public concerns about the integrity and transparency of our political processes.

With those imperatives in mind, the objective of the clause and the associated schedule 3 is to bring greater transparency to donations to political parties. The clause also seeks to address the concerns of a number of Members on both sides that there was a lack of transparency as to the ultimate source of donations to political parties. As drafted, the clause adds a new requirement to section 54 of the 2000 Act, that all donations to parties of more than £200 are accompanied by a declaration relating to the source of the donation. Where money or a benefit of more than £200 has been given by an individual or organisation other than the person who physically makes the donation,

“with a view to, or otherwise in connection with, making of the donation”,

a declaration will need to be made about whether section 54(4) or 54(6) of the 2000 Act applies.

Those subsections of section 54 require the disclosure of the identity of the true donor, where someone makes a donation on behalf of another person or organisation. If a person making a declaration concludes that those sections do not apply, they must say why. It is a criminal offence to knowingly or recklessly make a false donation, and a party cannot accept a donation if it is not accompanied by such a declaration. If it does and fails to return the donation within 30 days of receipt, the party or treasurer may be guilty of an offence. A donor must submit a report to the commission where a donation has been received without such a declaration, in the same way as it is obliged to do where a donation is sent in by an impermissible donor.

Clause 8, therefore, does not add a new restriction on who can give a donation, but seeks to ensure that the important disclosure requirements in the 2000 Act are firmly in the minds of both donors and recipients when a donation is made, and that there is a dialogue between the two sides about the relevant legal requirements.

Clause 8 requires a declaration to accompany all donations above a threshold. I believe that that is of benefit. Having to sign a declaration stating whether the money is one’s own when making a political donation draws a donor’s attention to the existing requirements to declare when one is acting as an agent or otherwise giving money on behalf of another. I understand that that might seem unusual, but we believe that it is justifiable in the specific circumstances—

Jonathan Djanogly (Conservative, Huntingdon)

Will the Minister give way?

Michael Wills (Labour, North Swindon)

In a moment. I want to make this point, as it is fundamental to the purpose of the clause. We believe that the requirement is justifiable, given the gravity of the perception that someone has secretly given money on behalf of another person. It is justifiable precisely because the consequences of such an action extend more widely than to those directly affected, the donor and donee. They extend to the very integrity of our democratic system, which depends on public confidence in our politicians. We believe that making it more difficult for those giving and receiving financial support to be ignorant of the laws that apply to them can only be a good thing.

Jonathan Djanogly (Conservative, Huntingdon)

Taking the Minister’s line of thought forward, we could double the amount of legislation in this country by saying that for every law, we should have a law saying that people need to comply with that law. It is a circular argument.

Michael Wills (Labour, North Swindon)

With all respect to the hon. Gentleman, I had hoped that my not giving way when he first intervened would allow him to get the point of what I was saying, but he was obviously too anxious to make his intervention to listen. I recognise that the circumstances are specific and that it is not to be extended as a general principle. I made that point specifically. The reason for the measures in this specific set of circumstances is precisely that the consequences stretch so much more widely—to the very heart of our democratic system—than their immediate effects on those directly involved, the donor and the donee. That is why the measures are so important.

Jonathan Djanogly (Conservative, Huntingdon)

The Minister has not given any evidence, based on what has occurred under PPERA, to explain why the measures are required. If he could do so, we might reconsider them.

Michael Wills (Labour, North Swindon)

We have. The hon. Member for Cambridge referred to a recent controversy about a donation given by family members of a foreign businessman to the party to which the hon. Member for Huntingdon belongs. That can only highlight the fact that clarity is not always present when donations are made. Surely, in such circumstances, clause 8 will impose a useful reminder that donations must be one’s own or, if given on behalf of another, that that fact must be declared and the original source of the money must be permissible. If clause 8 had been in effect when the donation in question was made, the embarrassment of the publicity given to the donation in recent days might have been avoided. I am sure the hon. Gentleman would have welcomed that, if nothing else about the clause.

Martin Linton (Labour, Battersea)

Does the Minister agree that the hon. Member for Huntingdon might need his memory jogged about a number of other cases, such as that of Midlands Industrial Council, in which there has been a lack of transparency and clarity about the source of donations? That has now been addressed, but it took some time before the spirit of the PPERA was instilled in the unincorporated associations and members associations that regularly donate money to the Conservative party, and indeed to ours. It took some time for them to understand that the true donor in every case must be declared.

Michael Wills (Labour, North Swindon)

I am grateful to my hon. Friend. No doubt he has effectively jogged the memory of the hon. Member for Huntingdon, and I need not add to my hon. Friend’s eloquent exposition of the point.

It must be a good thing to encourage transparency. This is a necessarily complicated area. Anything that encourages transparency must be a good thing.

Reference was made to Mark Sweeney. The matter does not relate to him alone. The hon. Member for Huntingdon referred to him as a bureaucrat who was not sensitive to the circumstances of political parties. May I put it on the record that Mark Sweeney—who, as a civil servant, cannot answer for himself, as the Committee will appreciate—is an outstanding public servant who has done extraordinarily good work on the Bill, way beyond the call of duty? The Government are extremely grateful for what he has done. From my own experience, I know that he is extremely sensitive to the situation of volunteers. He is very sensitive to the way in which political parties operate, notwithstanding the fact that he is an impartial civil servant of the highest integrity. I associate myself proudly with him and with the work that he and other officials have done on the Bill. The British public will have reason to be grateful to him for that.

Schedule 3 makes consequential changes to the existing legislation and extends the requirements of clause 8 to donations to individuals, members associations, third parties and permitted participants. In moving forward, it is important that we get the balance right between the need for transparency and the degree of burden placed on those who have the job of ensuring compliance with the law. The hon. Member for Huntingdon made his points clearly and we have a great deal of sympathy with his remarks about the role of volunteers in public life. We listened carefully to representations from political parties and the Electoral Commission, and that is why we tabled amendments that raise the threshold at which declarations are required to £5,000 in respect to registered parties and £1,000 in respect of donations to their accounting units.

In recognition of the practical difficulties that have been raised since the introduction of the clause, we have also tabled amendments that remove the requirement for parties to take reasonable steps to verify the accuracy of the declarations. This will not remove the need for parties to take reasonable steps to ensure that a donor is permissible and that the identity of the donor is clear, as is already required by section 56(1). Even with these concessions, clause 8 and schedule 3 will promote greater transparency. The additional declaration requirement will mean that donors to political parties will be obliged consciously to consider whether they are acting as agents for someone else when giving a donation.

As I have made clear, these amendments are intended to take into account concerns that have been expressed, and for the sake of consistency, the thresholds have been raised to those that are used in relation to a number of requirements in the 2000 Act. There is a separate question about whether those thresholds should be amended because they have not been adjusted for eight years’ worth of inflation. Long term, we perhaps also need to consider whether it might be desirable to ensure that changes in the value of money are reflected more routinely. I am happy to hear views on that issue. We have already shown our flexibility. If there is consensus, I am happy to consider whether we might be able to put something to that effect in the Bill.

Specific concerns were raised about the impact assessment and consultation. We accept that we had to make a reasoned guess when making the impact assessment. We readily concede that. We still do not have a full data set of all the donations between £200, £1,000 and £5,000 for the political parties. I concede that we had to make an estimate. We do not know how far out that estimate is, but we had a number of problems in reaching it. That is why we have been so flexible in our response, trying to address the legitimate concerns that have been raised. We will continue to operate in that spirit. If we find that we need to make further adjustments, we are happy to take account of views and, if we can reach consensus, to make provisions for them.

The hon. Gentleman asked various detailed questions about the storage of declarations—where they should be stored, how long they should be stored and so on. Those are legitimate points of detail. As he rightly said, they go to the heart of how parties operate on a local level, and such concerns might become onerous in some circumstances. He is right to raise them. However, the clause, sensibly, is not prescriptive about that. We will discuss the issues with the commission—because, as he said, they are important—with a view to its issuing guidance. We think that that provides the right balance between certainty and allowing appropriate flexibility. He is right to raise those issues. They need to be addressed, and I assure him that they will be.

On the points made by the hon. Member for Cambridge, I am glad that he found an opportunity to raise matters that I know have been of concern to him. I know that he is also concerned that the Committee might run out of time to address them later, so he seized the moment. In response, I point out just two things, because I do not want to stray too far from the clause. First, I remind him that where donations are made on behalf of another, the name of the original source is already required to be disclosed to the Electoral Commission and made public under the 2000 Act, and that clause 8 merely draws attention to that requirement. Provision already exists for making the names public.

Secondly, the hon. Gentleman asked me a specific question about caps on donations. He will be aware that that is not on the agenda now. They would not work without state funding. There does not seem to be any consensus on that point among the political parties at present. The issue is fundamental to systems of party funding, and we believe profoundly that we cannot move forward without consensus. I am sure that it will be a subject for continuing discussion among the parties as well as in the public arena.

I hope I have persuaded the Committee that the clause should stand part of the Bill. Transparent, clean political party finance is vital to the health of our democracy. All parties have been affected by concerns about tainted donations or the inaccurate or incomplete reporting of donations. Adding a simple process to the existing permissibility requirement will encourage donors to political parties to be more open about their donations. I hope that it will also act as a deterrent to those who want to make impermissible donations. The public are rightly intolerant of any perception of sleazy politics. I believe that the additional requirements in the clause will help to achieve greater public confidence by promoting transparency, and I hope that it will stand part of the Bill.

Jonathan Djanogly (Conservative, Huntingdon)

I beg to move amendment No. 151, in clause 8, page 6, line 30, at end insert—

‘(5A) A person does not commit an offence if, in the opinion of the Commission, the person had no intention of making, or by innocent mistake made, a false declaration under this section.’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss amendment No. 6, in clause 8, page 7, line 28, leave out the words in column 2 of the table and insert ‘A fine of £1000’.

Jonathan Djanogly (Conservative, Huntingdon)

Clause 8 creates a new responsibility for donors to political parties to clarify the source of their donations. Amendment No. 151 would insert a new sub-paragraph after proposed new section 54A(5) of PPERA, as set out in clause 8(2). The main purpose of the sub-paragraph is to provide a defence for those who have made an innocent mistake and have fallen foul of the regulation in PPERA only as a consequence of an administrative oversight or an honest mistake. We want to make it clear with this amendment that the commission is empowered to excuse those who have made an innocent mistake.

The drafting of section 54A(5), as proposed in clause 8(2), is not sufficiently prescriptive. The sub-section as drafted—

“knowingly or recklessly makes a false declaration”

—does not specify that innocence will be a defence. By articulating a protection for innocent mistakes, we would force the commission to have regard to the mental decision element of the crime, rather than simply allowing it to hand out criminal sanctions based solely on the action of giving a false declaration.

Section 167 of the Representation of the People Act 1983 contains that idea. It states that where a person has been charged with an offence under its provisions, they may apply to the High Court, an election court or other court as appropriate, for relief from liability on the grounds that

“the act or omission arose from inadvertence or from accidental miscalculation or from some other reasonable cause of a like nature, and in any case did not arise from any want of good faith”

The Minister might suggest that sub-section (5) is sufficient to protect those who make an innocent declaration because they would not fall into the definition of having

“knowingly or recklessly made a false declaration”,

but I would point him to the volumes of criminal case law that deal with the difficulty of those two concepts. If the protection was included in the Representation of the People Act 1983, I cannot see the basis on which it should not be included in the Bill. While we have the chance, we should aim for clarity, not only for donors and the commission, but to prevent the need for interpretation of our intentions by the judiciary at some later date when a sanction is challenged in a court of law.

Amendment No. 6, which was tabled by the hon. Member for Battersea, would remove the summary conviction and indictment penalty tariffs in relation to an offence under section 54(5)—making a false declaration about the source of a donation. In its place would be inserted a standard £1,000 fine. I do not support the imposition of one-size-fits-all penalties and I am concerned that the amendment, while well intentioned in that it would reduce the maximum penalty, would be an arbitrary and in some cases, a disproportionate penalty.

Much was made in the lead-up to the Bill of the role of better regulatory regimes and the use of flexible tariffs. My concern with the amendment is that we would take a step back from that flexibility. A range of sanctions will always require a top-end option. It may not be used often, or at all, but its existence acts as a deterrent. I am afraid that the amendment could remove that option and undermine the seriousness of the offence. I have more sympathy with the view that it should be an indictable crime. We will consider that element further.

David Howarth (Liberal Democrat, Cambridge)

The question is how serious a crime it is to make a false declaration about the source of a donation. As drafted, the Bill allows for a prison sentence, and the amendment would change that. To come back to my previous point, does the question not depend on what the purpose of clause 8 is, and whether it is to pave the way for a donation cap at a later date? The Minister has now put that off even further, but the issue depends on whether there is to be a donation cap. What is the hon. Gentleman’s attitude to a donation cap?

Jonathan Djanogly (Conservative, Huntingdon)

The hon. Gentleman makes an interesting point.

Nicholas Winterton (Conservative, Macclesfield)

Not at length.

Jonathan Djanogly (Conservative, Huntingdon)

I will not go on to donation caps, Sir Nicholas, but the hon. Gentleman made an interesting point with regard to the amount that would fit. Of course, if there is an offence with respect to the lack of declaration, there will probably be another offence caused in relation to a breach of PPERA, or whatever. There will probably be an underlying charge, which could relate to the seriousness of the underlying offence—simply for not putting in the right bit of paper. I have some sympathy for the views of Government Members on the seriousness of not filling in the bit of paper, which is why we should look again at whether the offence is summary or indictable.

David Howarth (Liberal Democrat, Cambridge)

That is my point. If the underlying offence were to be to exceed the donation cap, it would be a very serious offence. That changes the entire context, so I come back to my question. What is the hon. Gentleman’s attitude towards the donation cap?

Jonathan Djanogly (Conservative, Huntingdon)

No. The underlying offence could be in relation to a number of issues under PPERA, not necessarily the donation cap.

Martin Linton (Labour, Battersea)

I am confident that the Minister will, in the end, accede to my plea under an earlier amendment, that the relief system under the Representation of the People Act should be imported into PPERA. If my hon. Friend is unable to do that, I hope he will accept the amendment. No one in Committee would want the threat of a jail sentence to hang over someone for a simple mistake that was not made in bad faith and was not an attempt to deceive or withhold information. The amendment does not ask for special privileges for politicians, but it is unfair to have the potential of a jail sentence for an unintended error. The issue, central as it is to the Bill, would be better dealt with by the Minister tabling an amendment to introduce section 86 of the Representation of the People Act into the PPERA, so that hon. Members who find themselves in this difficult position can seek relief from the court to have the offence struck out, and we do not have all the unnecessary paraphernalia of investigation by the Electoral Commission or the police over an unintended error.

Michael Wills (Labour, North Swindon)

Throughout our consideration of the Bill, we have tried to tread the line between having an effective set of regulations and avoiding unduly onerous burdens on volunteers and, indeed, politicians, whose work is vital to our democratic processes. We have been striving to get the balance right, which is why clause 8 states that a person commits an offence only if he or she

“knowingly or recklessly makes a false declaration”.

I know that the hon. Member for Huntingdon is sceptical about the requirement, but it will catch those who intentionally make a false declaration, or who do not properly turn their minds to whether the declaration is accurate. It does not seek to punish innocent mistakes, where steps have been taken to ensure that a declaration is accurate or where there is no good reason to think that it might not be. We believe that our wording strikes the right balance. Importantly, it goes no further than the wording of other false declaration offences in the 2000 Act.

Hon. Members spoke about the 1983 Act, but that framework was replaced by the 2000 Act, and there is no reason why the particular offences are special cases requiring different treatment. We do not believe that the amendment is necessary, but of course we hear the concerns about the dangers of an overzealous approach to enforcement—of the minor, technical breaches. We are not talking about substantive breaches, but about the inadvertent, minor breaches, which my hon. Friend the Member for Battersea has mentioned on several occasions.

Nicholas Winterton (Conservative, Macclesfield)

I remind the Committee that with this we are discussing amendment No. 6, in clause 8, page 7, line 28, leave out the words in column 2 of the table and insert ‘A fine of £1000’.

Michael Wills (Labour, North Swindon)

I welcome you, Sir Nicholas, and the rest of the Committee to our final sitting. I think that before the Committee adjourned I had completed my remarks about clause 8 stating clearly that a person commits an offence only if they knowingly or recklessly make a false declaration, but I want to say at the commencement of this afternoon’s proceedings that I recognise the concerns that have been expressed that an over-zealous approach to enforcement for minor technical breaches is in no one’s interest. It may result in major breaches going unpunished if the Electoral Commission focuses on minor technical breaches, so I asked the commission to write to the Committee, setting out its risk-based approach to regulation. I hope that members of the Committee have received that letter.

As part of the letter, the commission has described in a very helpful way its criteria for investigating breaches. I hope that that goes a significant way towards reassuring hon. Members. The commission has said that the criteria that it will apply in order for it to investigate a breach are, first, that there is evidence or information substantiating a potential breach of political party or election finance legislation, not merely an assertion of or a speculation about a breach, and secondly, that the commission considers that it is in the public interest for it to investigate, taking into account the potential impact of the breach on the integrity or transparency of party or election finance, the cost of investigating such a potential breach relative to the impact of the breach, and any other considerations that may be relevant. I hope that those criteria are helpful in reassuring the Committee that the commission is not interested in pursuing cases that are essentially groundless. Members of the Committee are understandably concerned about that.

Notwithstanding the considerable reassurance from the Electoral Commission, I am still willing to consider how that reassurance may be given more force in appropriate cases. However, in stressing my openness on the issue, I emphasise that offences that are formulated as false declarations through the Political Parties, Elections and Referendums Act 2000, such as those subject to the amendment, quite properly have a degree of intent or negligent wrongdoing inherent in them. I do not think that there is a good case for revisiting that. Clause 8 already provides that a person is guilty of an offence only if they knowingly or recklessly make a false declaration. They commit an offence only if they are either conscious of the fact that it is substantially certain that they are making a false—

Jonathan Djanogly (Conservative, Huntingdon)

Is the Minister saying that he will consider whether this should be an indictable or just a summary offence?

Michael Wills (Labour, North Swindon)

No, I was saying that I was prepared to consider the circumstances in which the commission might be able to give further reassurance to the Committee on the basis on which it will investigate potential breaches or breaches. It has already, in its letter, gone a long way towards reassuring the Committee, but if concerns remain, we are open to considering that.

Under the clause, someone is committing an offence only if they are conscious of the fact that it is substantially certain that they are making a false declaration or if they are being careless to the point of being heedless of the consequences. If neither of those conditions is satisfied, an offence is not committed.

I must oppose amendment No. 6 for similar reasons. We believe that the controls on permissible donations that were introduced in the 2000 Act are vital to uphold public confidence in the transparency and fairness of our democracy. A breach of those rules is a serious matter, and must result in a serious penalty. The amendment appears to downgrade the seriousness of failing to comply with the requirements in clause 8. I understand the motivation behind it, which is essentially the same as that discussed in the previous amendment. We are concerned that if the amendment were accepted, we would be sending a mixed message about the importance of the controls on donations. We believe that a fine of £1,000 would not be a sufficient deterrent.

On the basis of the reassurances that I give the Committee and on our willingness to continue considering the matter, I hope that hon. Members will agree to withdraw their amendments.

Jonathan Djanogly (Conservative, Huntingdon)

I thank the Minister for going over the matter in some detail, and for helpfully setting out the commission’s criteria, which I will go away and consider. I appreciated him saying that he was open to a further review, but the area that he is prepared to consider is quite narrow. We will look carefully at the matter again. We consider it important that an innocent mistake should not be caught. As to whether the package and the criteria that has been mentioned by the Minister are adequate, we will review that in due course. For the moment, however, I beg to ask leave to withdraw the amendment.

David Kidney (Labour, Stafford)

I beg to move amendment No. 106, in clause 8, page 8, line 12, at end insert—

‘(12) The registration by a Member of Parliament of receipt of a donation or other benefit within the terms of the 2000 Act in the Register of Members’ Interests shall be sufficient compliance with the requirement for registration of the same with the Commission and registration of such receipt with the Commission shall be sufficient to meet requirement for registration in the Register of Members’ Interests.

(13) The Registrar of Members’ Interests and the Commission shall put in place arrangements for the sharing of such information as enables them to give effect to subsection (12).’.

May I say, Sir Nicholas, what a pleasure it has been to witness the smack of firm leadership that you have given us whenever you have been in the Chair?

All hon. Members have an interest in the amendment, which is about the registration of donations and benefits received by Members of Parliament. Before the commission started work in 2001, we all knew that we had to register such benefits in the Register of Members’ Interests. Since the commission started work, we have had to register the same benefit twice, under two regimes with two formats and two different procedures. Since 2001 hon. Members have become increasingly frustrated about that and demanded action.

Eventually, Parliament amended the law in the Electoral Administration Act 2006 by inserting section 59, which says that in future, Members can go back to registering only in the Register of Members’ Interests. The provision was not brought into effect straight away because the commission and the House authorities said that they need time to align their procedures so that the commission could be satisfied that it could get from the registrar all the information that it currently collects. The registrar wanted to be clear that the law permitted the handing over of such information.

It is two years since then, and the provision still has not been brought into effect. That delay is reprehensible. When Mr. Wardle of the commission was giving evidence, I asked him whether the law was sufficient for us to get to the result for which we all thought we were waiting. He said that it was not. He thinks that there should be an amendment to the Bill, so I have tabled the amendment. My offering to the Committee is to say that, finally, we will get to the position that we thought we would get to in 2006.

Nicholas Winterton (Conservative, Macclesfield)

Good gracious me, how succinct.

Eleanor Laing (Conservative, Epping Forest)

I thank you for calling me, Sir Nicholas, and I sincerely apologise to you, the Committee and the hon. Member for Stafford for not being present when the amendment was moved. I support, in principle, the direction of the amendment.

As my right hon. Friend the Member for North-West Hampshire (Sir George Young) said on Second Reading, it is an important principle that dual reporting is unnecessarily bureaucratic and leads to misunderstanding and confusion. Such reporting is therefore wrong. We have all known for some time that confusion can occur. Conservative Members have so often said during the passage of the Bill that law that is not clear is not good. This legislation lacks clarity. There is not just a lack of clarity now, or a possible lack if the Bill were to become law. There is already confusion between the 2000 Act, the 2006 Act and the matters that we are discussing.

The 2000 Act introduced two parallel reporting regimes for hon. Members’ interests. First, we have to report—as is quite proper—our interests as Members of Parliament to the House of Commons. In addition, those matters have to be reported to the commission. It almost goes without saying that that creates confusion, and that that confusion is significant. That situation was recognised by the Government, and by all parties in the House, as being wrong, and therefore the Government rightly proposed section 59 of the 2006 Act, which was supported by both sides of the House. Its aim was to produce one route for registration, as my right hon. Friend put it on Second Reading when he referred to

“streamlining and simplifying the process without compromising on transparency.”—[Official Report, 20 October 2008; Vol. 481, c. 96.]

That is what we all want to see. However, section 59 requires commencement by an order laid by the Secretary of State, and that has not been forthcoming. Why is that taking so long? We understand, of course, that the Electoral Commission had reservations about the exact rules laid down by the House and that discussions have been ongoing between all parties involved, including the Government and senior Members of the House of Commons who represent us on such matters, but they have had three years to work it out. The confusion has continued and has caused embarrassment to some Members on both sides of the House, who have innocently and inadvertently made mistakes because of the far too complicated bureaucracy. That should not happen. Why have the Government not brought into force section 59 of the 2006 Act? They would have our support in that. In the meantime, we on the Conservative Benches support amendment No. 106, so eloquently introduced by the hon. Member for Stafford.

Michael Wills (Labour, North Swindon)

I understand the frustration of Committee members, but I point out to the hon. Lady that we cannot commence section 59 of the 2006 Act until the Electoral Commission has notified the Secretary of State that it is satisfied that it has received, from the Register of Members’ Interests, all the information that it is required, under the 2000 Act, to collect in relation to holders of the relevant elected office. We agree that the need for MPs to provide different reports to different bodies is undesirable—it is inefficient, cumbersome and leads to the sorts of consequences that she mentioned.

Discussions continue between the parties concerned. I have held meetings with the House authorities and the Electoral Commission. All sides are coming closer together. They are not absolutely agreed on the best way forward, but I think they will be very soon. The solution might not have to be a legislative one; it might be—I say no more than that—an administrative one. However, we are diligently engaged in the task, and I hope very much that I can return with the outcome of those discussions, so that, if necessary, the House will have an opportunity to consider any necessary solutions. I stress, however, that we might not need a legislative solution.

On the basis of those reassurances, I hope my hon. Friend the Member for Stafford will withdraw his amendment.

David Kidney (Labour, Stafford)

For once, I think I speak on behalf of all Members in saying that the present situation is not good enough, and one way or another it must be resolved on Report. The current situation is making fools of us all. On 3 July 2006, in a debate on the Electoral Commission, the hon. Member for Buckingham (John Bercow) asked the hon. Member for Gosport (Sir Peter Viggers), who speaks in the House on behalf of the Electoral Commission, whether dual registration posed the danger of duplication. The hon. Gentleman replied:

“It is not often that an hon. Member can give total reassurance to a colleague, but I assure my hon. Friend that the current legislation has now amalgamated the requirement to make a declaration to the House authorities and to the Electoral Commission”.—[Official Report, 3 July 2006; Vol. 448, c. 587.]

So, two years ago, it appeared that we had solved the problem, but still we have not. The situation is urgent. If the Minister does not provide a solution on Report, I shall table a similar amendment. For now, however, I beg to ask leave to withdraw the amendment.

Schedule 3

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

I beg to move amendment No. 149, in schedule 3, page 34, line 2, at end insert—

Jonathan Djanogly (Conservative, Huntingdon)

We are keen to avoid imposing further administrative burdens on donors or party officials without a pressing need to do so. I note that a similar amendment, which did not propose the same threshold, was tabled but not selected. Although the commission might support additional transparency, which everyone probably supports, it is against the amendment, and it is worth putting that on the record. It states that

“the Commission does not support amendments 7 and 149 which seek to introduce new reporting requirements for donations from unincorporated associations. The Commission sees merit in increased transparency in this area, but any change to the regulatory regime should balance that against the additional administrative burdens on regulated entities and on donors. We do not think these amendments strike the right balance, since they impose sweeping new reporting requirements, going beyond those applying to e.g. registered companies or trade unions where the identities of those controlling the organisation are already in the public domain so do not need to be listed in the donation report.

The amendments also require details about donors to an association for any purpose . . . not just those whose donations are political in nature. Much of this information may be irrelevant and potentially misleading, since it is unlikely that all the members of and donors to the organisation will have participated to the decision to make any given donation. It may be helpful to introduce greater transparency about of those who provide substantial donations to unincorporated associations which fund political parties, but the workability of any new requirements in this area, and the administrative burden associated with them, would need careful thought.”

We agree with those points.

Tony Lloyd (Labour, Manchester Central)

It is interesting that the hon. Gentleman praises anything that the Electoral Commission says on that. Does he believe that it has done a good job so far on the issue of transparency with regard to unincorporated associations? It is a simple question, so I wonder whether he will put it on the record.

Jonathan Djanogly (Conservative, Huntingdon)

I am not sure whether it is for me to judge, and as it is not part of the Bill, it is not a topic on which I have done a huge amount of preparation. However, we believe that proxy donations and intentionally using an unincorporated association as an agent are already covered by PPERA. That threatens to create large volumes of red tape for the voluntary sector, which could be discouraging for donations to voluntary organisations and, in turn, to political parties. We also have general concerns about the focus on transparency issues for only one small donor sector. There are other donor sectors, not least the trade unions, that should be looked at in the context of the whole. We do not think that the focus should be on individual sectors, but we would be prepared to examine the issue in the round.

David Howarth (Liberal Democrat, Cambridge)

Earlier, the Minister talked about consensus being a necessary condition of reforming the area. I think he is wrong because it tends to give a veto to parties with a particular interest, and I think that that is another area where we might be suffering from that problem. I would like to put on record, however, that I support the amendment. Its intention seems to be extremely important and useful. Everyone knows that the unincorporated bodies to which we are referring are organisations such as the Midlands Industrial Council, which are devices to disguise the identities of donors. That is what they are invented to do and that is what they have been doing.

Martin Linton (Labour, Battersea)

Is the hon. Gentleman aware that telephone calls to Coleshill manor, the seat of the Midlands Industrial Council, are not currently being answered and that there is a suggestion that the Constituency Campaigning Services Board, exactly the kind of organisation to which he is referring, might have closed down? Perhaps that is a recognition that those organisations really are merely a conduit.

David Howarth (Liberal Democrat, Cambridge)

I am not aware of that, but the conclusion that the hon. Gentleman draws from the information provided seems a plausible explanation.

Jonathan Djanogly (Conservative, Huntingdon)

The hon. Gentleman says that the Midlands Industrial Council is there only to hide donations. That is a very serious allegation, which has been put to the Electoral Commission, and, my understanding is that it has been reviewed and shown not to be the case. I do not know how the hon. Gentleman gets to make that allegation, but he might like to back it up a bit more.

David Howarth (Liberal Democrat, Cambridge)

This is an example of the Electoral Commission being guilty of naivety. Its response to the hon. Member for Carmarthen, West and South Pembrokeshire’s amendment is an illustration of why it is important to have political commissioners. The idea that we are talking about “voluntary sector associations”, in the words of the hon. Member for Huntingdon, as if they are ordinary charities, set up for another purpose, which happen to give money to political parties, is ridiculous. That is not what is going on at all. These organisations are, for the most part, set up to donate money to political parties. They must be scrutinised with great care, and transparency is of immense importance. This is all about whether they existed before and had a life prior to their existence as bodies that donate to political parties. Are they real organisations? For the most part, I fear that they are not.

Martin Linton (Labour, Battersea)

May I help the hon. Gentleman by pointing out that the leader of the Conservative party has said that that shadowy organisation, which is not answering its telephone, the Constituency Campaigning Services board, based at Coleshill manor, is “practically a part” of the Conservative party?

David Howarth (Liberal Democrat, Cambridge)

That is an interesting description, which illustrates my point.

Andrew Tyrie (Conservative, Chichester)

I am a bit astonished by what the hon. Gentleman is suggesting. He seems to be saying that the Electoral Commission is a waste of time, that it has fallen down on the job and that it has not arrived at a reasonable level of transparency. It has looked into this issue in immense detail and has produced a thorough and comprehensive rebuttal; unfortunately, I do not have it with me. The hon. Gentleman’s defence for continuing to make the allegations seems to be that it has no idea how to do its job.

David Howarth (Liberal Democrat, Cambridge)

I would not go that far, but the views that the Electoral Commission has expressed about the amendment show a deep naivety about the nature of the problem that we face. We are not merely dealing with charitable bodies or voluntary associations that have a separate life and suddenly happen to give money to political parties, which should not, therefore, face an administrative burden because it would get in the way of their other functions. These bodies do not have any other functions—this is their point. Therefore, it is not disproportionately burdensome to ask them to keep a record of how much money they are getting from particular individuals so that they know what has happened when they pass that money on to political parties. That is perfectly reasonable given how, for the most part, these organisations come into existence.

Alan Whitehead (Labour, Southampton, Test)

If those organisations, which appear to have no other function, were to keep a record, would that not automatically be a reason for them to cease to exist? Therefore, his suggestion is, perhaps, otiose. Would the hon. Gentleman reflect on that?

David Howarth (Liberal Democrat, Cambridge)

The hon. Gentleman has produced an interesting reason for passing the amendment. Proxy and non-transparent donations are to be discouraged. If the amendment discouraged that form of donation, I would not be too sorry.

A point was raised about how the amendment applied to trade unions. As far as I am aware, trade unions are unincorporated associations, so I am grateful to the hon. Member for Carmarthen, West and South Pembrokeshire for tabling an amendment that applies to the unions. The trade unions are in the unusual position of existing anyway; they are, in fact, voluntary organisations that would have a life without giving money to a political party. The question whether that would be a great burden to them is one that Labour Members are in a better position to answer than me, but I am sure their answer would be that trade unions would be willing to bear the burden of the amendment. Since that would be the only objection, I do not understand why it cannot be accepted.

Tony Lloyd (Labour, Manchester Central)

What the hon. Member for Huntingdon said was interesting. When asked whether he considered that the commission had done a good job in respect of unincorporated associations, he said that he did not have time to consider it. However, he was forthright in his response to the hon. Member for Cambridge when he said that its examination of the Midlands Industrial Council had been full and proper.

Jonathan Djanogly (Conservative, Huntingdon)

The answer to the hon. Gentleman’s point is simple. I was briefed at a later date by one of my hon. Friends.

Tony Lloyd (Labour, Manchester Central)

You would be the first to agree, Sir Nicholas, that it is a delight to know that, even though the process is slow, the Conservative Front Bench learns bit by bit—although, in this case, perhaps not enough.

The hon. Member for Cambridge was right to point out that trade unions are unincorporated associations. He might want to reflect on his original words that unincorporated associations are set up only for the purpose of funding. It is clear that trade unions are not set up primarily for that purpose. Nevertheless, he is right that the trade unions would be caught by the amendment tabled by my hon. Friend the Member for Carmarthen, West and South Pembrokeshire, which I support as, among other things, chair of the trade union group of Labour MPs. The trade unions have nothing to hide in that context, nor would they want to hide relatively high-value donations. That is a reasonable position, and it puts the spotlight firmly on organisations such as the Midlands Industrial Council, which most certainly is set up only for the purpose of funding one particular political party.

I asked about the role of the Electoral Commission because it is obvious to many people that one of the criticisms of it has been its failure properly to investigate, even with its powers, organisations such as the Midlands Industrial Council. That is important if we want to achieve adequate transparency that reassures members of the general public that they can know who the funders are, particularly the high-value funders. Even if the amendment were not optimal, I hope that my right hon. Friend the Minister will take seriously the need for us to move rapidly in its direction, which would guarantee that all high-value donors can be known. I say clearly to the Conservative party, my party and to the Liberal Democrats that there is nothing wrong with people acting in a public-spirited way and giving money to political parties, but it is wrong when that is done covertly and is designed to prevent the public from being reassured that the money trail is legitimate and is there simply to enhance the benefits of our party political system.

Andrew Tyrie (Conservative, Chichester)

Perhaps one or two Labour Members will confirm that I am not completely out of sorts with what the hon. Gentleman is saying. I just wonder whether he has thought through the full implications of his argument. Surely, at the heart of matters, is whether we think that individuals or institutions have a role in donations. If we are to move to long-term reform, we must reach the point at which parties are donated to by those who can vote for them, and that they are individuals, not organisations, trade unions, companies or intermediaries such as the one that we are discussing.

Even though I recognise that it would be hugely difficult in a short period for the Labour party to adjust, does the hon. Gentleman agree that there might be merit in it thinking over the long term of moving in the direction of removing all intermediary institutions, including trade unions and businesses, as well as bodies such as the Midlands Industrial Council, from the role of funding political parties in the 21st century?

Tony Lloyd (Labour, Manchester Central)

The hon. Gentleman has consistently put forward particular views on these matters. I understand but do not share all of them. For the record, I do not necessarily believe that intermediary organisations are wrong, whether they be private companies or unincorporated associations, as long as it is clear what the flows of moneys are and who has access to what the public will perceive as financial influence if those transfers of money are not properly transparent and properly there to be seen.

We can differ about the role of the trade unions in funding my party. I do not agree with the hon. Gentleman that collective giving is of itself a bad thing, but it would be a bad thing if the members of a trade union could not dissent from the political fund, which of course they can do under the law as it stands. What would be equally wrong with something like an unincorporated association, even if my party gains from the existence of such structures, is if a clear audit trail cannot be seen—if there is not transparency about where the money comes from and who is seeking to give it—to allow us to elicit at least some sense of the purpose behind the giving.

Andrew Tyrie (Conservative, Chichester)

I am fascinated by that reply, because it seems to acknowledge the idea that as long as there is transparency, it is all right for intermediate bodies such as trade unions and such institutions or, for that matter, companies to donate money with the purpose of obtaining influence. The hon. Gentleman used the word “influence” in his reply to my intervention. Does that not go to the heart of the perception of the problems with such institutions and the need for reform to remove concern in the public mind?

Tony Lloyd (Labour, Manchester Central)

I honestly do not agree with the hon. Gentleman. What I sought to say—I will need to read the record to ensure that what I sought to say is what the words actually say—is that transparency is necessary so that the public are able to see whether people are seeking to gain unreasonable influence. We need transparency so that people are not allowed to draw that conclusion about the political process.

I have no objection to the existence of an organisation such as the Midlands Industrial Council. In a society and democracy such as ours, it is, at present, part of a legitimate process. What is difficult is the perception that it is a shadowy organisation whose very existence is designed to obscure the identity of those who give.

I do not mind people giving to the Conservative party. I encourage them to give to my own party through the means available. I do not think that an intermediary body of itself is the problem because, as the hon. Gentleman will know, my party went through a long and, I accept, sometimes tortuous process whereby the concept of the collectivisation of the giving process was necessary historically to set some kind of balance against the unfair power of money in party politics. That goes back to the origins of the Labour party. I do not think that my party needs to run away from that background as if it were somehow illegitimate or immoral, because it is neither.

What the Labour party and the trade unions have to do, as should all political parties and unincorporated associations, is guarantee that the public at large and the individuals involved are quite clear on the question of transparency. That is the spirit that my hon. Friend the Member for Carmarthen, West and South Pembrokeshire seeks to capture with the amendment.

Andrew Tyrie (Conservative, Chichester)

I am grateful to the hon. Gentleman for giving way so generously. This helpful exchange goes to the heart of some of the problems. Nobody on the Conservative Benches seeks to alter the constitutional relationship between the Labour party and the trade unions. It is only the issue of influence that may be bought by money that is of legitimate concern in my view and, I believe, in the view of most Opposition Members. Indeed, it is the public’s concern as well. The hon. Gentleman has just confirmed again that he did not mean to say what he said, but the record will show what he did say—we will have to wait and see. He said that we need transparency to know whether organisations seek to gain an unreasonable influence over the political process, which suggests that there are donations for which influence at a reasonable level is gained. I fundamentally disagree with him. That is the division on the issue. We do not think it is right for people to be able to buy influence over the political process, full stop.

Tony Lloyd (Labour, Manchester Central)

The hon. Gentleman and I are at one on that. For example, the question must arise about who funds an unincorporated association, the Churchill luncheon club, which I believe is a donor to his constituency, and what their role and ambitions are. After I have sat down, he might seek to catch your eye, Sir Nicholas, to explain the role of the Churchill luncheon club.

Andrew Tyrie (Conservative, Chichester)

I would like to catch the hon. Gentleman’s eye, as he has referred to my constituency.

Tony Lloyd (Labour, Manchester Central)

Indeed. I shall give way if the hon. Gentleman can tell us who the donors to the Churchill luncheon club are.

Andrew Tyrie (Conservative, Chichester)

The Churchill luncheon club makes about—

Nicholas Winterton (Conservative, Macclesfield)

Order. I am not much liking this. There is too much nitty-gritty about the constituencies of individual Members of Parliament. May we perhaps concentrate on the matter in the same way in which it was introduced—succinctly and to the point?

Tony Lloyd (Labour, Manchester Central)

Alas, Sir Nicholas, I was tempted by others. As often happens in this big old world, temptation leads us in the wrong direction. I will try to correct the error of my ways henceforth and bring my remarks to a conclusion. I apologise, in a sense, to the hon. Member for Chichester, because your ruling means that I cannot give him the opportunity to respond. As a matter of courtesy, I would have liked to give him that opportunity.

Let me simply say this: in our political system, it is right that unreasonable influence is something we all deplore. Inevitably, the public have suspicions. They have had suspicions about my party in the recent past when flows of money arose that we have not been able properly to account for. As a long-standing member of my party, I regret and deplore that, and I hope that hon. Members from all political backgrounds would do the same.

The way to get round the matter is not to get rid of the unincorporated association—whether at constituency or national level—but to ensure that we have the transparency necessary to reassure the public that the exchange is legitimate and not one that seeks to acquire unfair and unreasonable influence. That is what the Bill ought to be about.

The hon. Gentleman and I disagree about the exact conclusions, but it might well be that we agree with the sentiments behind what my hon. Friend the Member for Carmarthen, West and South Pembrokeshire is seeking to do.

Alan Whitehead (Labour, Southampton, Test)

For the purposes of clarity, can my hon. Friend explain the point on the £1,000 of donations referred to in the amendment? A distinction appears to be made between the results of, for example, a lunch where a number of people have contributed some money in relation to that lunch, which is collected and donated in a convenient way, as opposed to an arrangement whereby a number of people, for the purposes of hiding the origin of their donation, donate large sums of money, which are gathered together?

Indeed, if the origins of those donations were recorded, there would be no point in having intermediary activity at all and the organisation concerned might well cease to exist. As, I think, my hon. Friend the Member for Battersea suggested, one organisation that might be in that category may have recently ceased to exist—perhaps in anticipation of something that might happen in the Committee.

Tony Lloyd (Labour, Manchester Central)

I shall bring my remarks to a conclusion by exploring the line of argument put forward by my hon. Friend. Of course, he is right.

At the heart of the amendment is the issue of collective giving at relatively modest levels—for example, the kind of thing that might take place at a luncheon club. Such a club may well be legitimate and beyond suspicion, and I am happy to state that. That also applies to a trade union. I know of no trade union where an individual gives at the level of £1,000, but certainly, if the union is giving collectively, the question about transparency ought to catch it.

The matter before us is the perception that all political parties have gained from shadowy organisations whose purpose is to prevent the transparency that the amendment seeks. That is why I strongly support the spirit behind the amendment.

Andrew Tyrie (Conservative, Chichester)

On a point of order, Sir Nicholas. I seek your guidance on how I might be able to respond to the allegation made about my constituency. I completely agree—even if I quietly disagree—with the point that you made from the Chair, but I would be grateful if you told me how I might put the record straight. I do not want to create undue fuss, but I do not think the matter can be left entirely.

Nicholas Winterton (Conservative, Macclesfield)

I think that there will be a debate on the schedule as a whole. Perhaps the hon. Gentleman—briefly and succinctly—may correct the record then.

Michael Wills (Labour, North Swindon)

The extent and quality our debate on the clause demonstrate the debt that the Committee owes to my hon. Friend the Member for Carmarthen, West and South Pembrokeshire for tabling the amendment. I understand and share the concern expressed on Second Reading and in today’s debate that we need to do more to promote greater transparency of donations from unincorporated associations. We must ensure that such structures are not used to conceal the ultimate source of donations to parties.

Unincorporated associations have given money to all the parties represented here today: the Labour Finance and Industry Group has given money to my party; the Midlands Industrial Council, as we have heard, is a long-standing donor to the Conservative party; and there are historic Liberal clubs, often registered as unincorporated associations, that give money to the Liberal party. The hon. Member for Perth and North Perthshire is not present, but if he were I would remind him that that the Scottish women’s independence fund trust has donated money to the Scottish National party.

There is nothing inherently wrong about such associations contributing. Of course, it is a matter of consensus that such contributions should not be used to purchase influence—that is abhorrent. The only people who should have influence over political parties are the voters, through exercise of the vote. That is the source of authority and power in our democracy, nothing else. Everyone is agreed on that.

The point that my hon. Friend the Member for Manchester, Central made is important and I am surprised that the hon. Member for Chichester should take issue with it. Transparency is the best guarantor for everybody that such influence is not purchased in our society, and above all that everybody in our democracy can see that it is not being purchased. It is not the existence of unincorporated associations that matters; what matters is that they should be transparent. We have to recognise that there is enough evidence to show that they are not as transparent as we would wish.

The provisions in clause 8 and schedule 3, which apply to unincorporated associations as they do to other donors, already address some of the concerns about transparency, which I share with other hon. Members here. There is a lot of cross-party agreement on the importance of transparency.

I appreciate that there are continuing concerns and I am willing to consider actively—indeed, we are considering actively—what more we can do. Again, I would prefer to move forward on a consensual basis, as on many areas of the Bill. One way we could promote greater openness about donations from unincorporated associations would be to require them to declare the names and addresses of their members and donors. We must be certain that we are not putting undue burdens on them and bear in mind the need for flexibility and proportionality, but we are considering options to that effect.

Andrew Turner (Conservative, Isle of Wight)

The Minister has suggested two groups: those listed as members and those who might be listed as donors. Is there a reason for suggesting the first group?

Michael Wills (Labour, North Swindon)

Yes, there is, because we need to be quite clear about the source of the donations. There are issues about how exactly we would frame any amendment that might be considered necessary. I will resist the hon. Gentleman’s invitation to go further at this stage, because that is one area in which we are actively considering tabling an amendment of our own.

I ask my hon. Friend the Member for Carmarthen, West and South Pembrokeshire to withdraw the amendment. I know that the Liberal Democrats are anxious to reach their amendments, which are further down the amendment paper, and I do not want to detain the Committee. I can assure the Committee that we are continuing actively to examine these issues. We recognise the concerns and feel that there probably needs to be further movement on them, but we want to consider all the options before coming back to hon. Members.

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

Bearing in mind the debate and the Minister’s positive response, I beg to ask leave to withdraw the amendment.

Martin Linton (Labour, Battersea)

I beg to move amendment No. 8, in schedule 3, page 34, line 4, at beginning insert—

‘(A1) In paragraph 1 of Schedule 7 to the 2000 Act (prohibition on accepting donations from impermissible donors), at the end of sub-paragraph (7)(c) there is inserted “, or a compliance officer appointed by the holder of a relevant elective office to act on his behalf.”’.

I do not wish to detain the Committee for long, because there are weightier items in other clauses to discuss. This is a little amendment about the appointment of compliance officers. Political parties already have compliance officers. Sir Nicholas has one—to judge from today’s Question Time. I gather from the hon. Member for Congleton (Ann Winterton) that there are regular breakfast meetings with your compliance officer. Candidates have compliance officers called agents, which has been written into law for more than 100 years, but nominees for party office do not, and the amendment suggests that they, too, should be able to have compliance officers.

The Electoral Commission commentary supports the amendment in principle. It would add to the list of relevant donees, which we all are, the words

“a compliance officer appointed by the holder of a relevant elective office”,

as well as five more words—

“to act on his behalf”—

but the Electoral Commission does not agree with those, as it believes they would pass the legal responsibility to the compliance officer.

I can assure the Committee that it is the intention of the amendment not that the compliance officer should take over all the legal obligations of a nominee or candidate, but that those should be shared with the office holder. I do not know whether those words carry that implication, but if they do they should be left out. The amendment would allow nominees to elected party office to delegate to a compliance officer some of the responsibility to make declarations—which, the Committee has heard constantly, has become quite onerous—without passing on the legal responsibility for ensuring that that had happened.

PPERA also relates to internal party elections. Similar legislation in Canada provides an elaborate structure of limits and subsidies for nominees as much as for candidates. Although many elections to party office are internal, some are wider. We all know circumstances in which an election to party office could be to choose the Prime Minister, as happened only last year. That was an uncontested election, so many of the issues did not arise, but it is not difficult to imagine circumstances in which they would. The electorate in a party election can be 5 million or 6 million, making it the largest election in the country, although that probably does not quite beat the Mayor of London, who has an electorate of 7 million, but it very nearly does.

So, elections for party office can be major events, and the candidate will have a huge burden of responsibility—he or she has to take personal responsibility for ensuring that every donation is declared. To take final responsibility is one thing, but not to be able to delegate in any way, to anyone else, creates enormous difficulties.

I shall not go over the factors involved any more, because they are well understood by everyone in the room—equally, the Electoral Commission is not raising any opposition in principle—and I commend them to the Minister. I hope that he can add the words “or a compliance officer” to the list of regulated donees.

Jonathan Djanogly (Conservative, Huntingdon)

I shall be brief as I am interested to hear what the Minister has to say. I wonder whether the amendment would make it more complicated to work out who had the burden of responsibility. Otherwise, we are open-minded.

Michael Wills (Labour, North Swindon)

I have sympathy for the intention behind the amendment. I understand why there is interest in such a measure, but I ask the Committee to consider a number of points before we move forward. First, we should consider whether, for those who are not minded to appoint such an officer, it might be burdensome to require them to do so. We need to be clear whether the provision could be permissive.

There is nothing in the Act as it stands to prevent a regulated donee from appointing a compliance officer, but that person would have no statutory basis. In that sense, if we were to provide in the Bill that a person may appoint a compliance officer—a permissive provision—that would serve primarily as a useful clarification of the existing legal position.

Secondly, if we accepted the provision, we would need to consider whether such an amendment would extend to Members of this Parliament alone or to other holders of relevant elective office within schedule 7. A holder of a relevant elective office would include a member of the European Parliament elected in the United Kingdom, a member of the devolved institutions, a member of any local authority apart from a parish or community council, the Mayor of London or any other mayor elected under the Local Government Act 2000. Consideration and consultation on this point would be necessary before the provision became part of the Bill, although we would not necessarily foresee any problems coming out of that consultation.

Thirdly, the amendment as drafted would not achieve its desired effect. Rather, it would be add “compliance officer” to the list of regulated donees set out in paragraph 1(7)(c) of schedule 7 and would thereby result in regulating donations to compliance officers. I do not think that that is the intention of the amendment, but that would be its effect. For that reason alone, I must resist it. However, following the consultation that I mentioned, I am happy to consider tabling at a later stage of the Bill a similar provision that would achieve the principle underlying the amendment, if there is sufficient agreement from the Committee to do so.

Finally, for the purposes of clarity, I should point out to the Committee that the appointment of a compliance officer would not, as I think the amendment intends, absolve the donee of responsibility for any breach of the regulations. Ultimate responsibility would depend on the circumstances of each case and it could rest with both or either the donee or compliance officer. That reflects the approach taken under the Representation of the People Act 1983 in relation to candidates and their agents. Were we to bring forward a Government amendment to make it clear that these appointments could be made for regulated donees, we would not depart from that principle.

So, bringing all those different points together, if it is clear that there is agreement to move forward and introduce a measure that achieves the intention behind the amendment, we will endeavour to do so. We will consult and consider further the impact of the proposed amendment on all officers whom it might affect. We would have to consider the technical and legal matters as well. I am prepared to take the matter forward and to consider it seriously. Bearing that in mind, I hope that the amendment will be withdrawn.

Martin Linton (Labour, Battersea)

On that basis, I beg to ask leave to withdraw the amendment.

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

I beg to move amendment No. 9, in schedule 3, page 34, line 4, at beginning insert—

‘(A1) In paragraph 1 of Schedule 7 to the 2000 Act (prohibition on accepting donations from impermissible donors), at the end of sub-paragraph (8)(a) there is inserted—

“(aa) member of the House of Lords;”’.

This is a probing amendment and I shall be brief. Members of the House of Lords who are members of political parties are already regulated donees, but Cross-Bench Members, who are of no party, are not. I would like an explanation. We have three types of peers, including some hereditary ones and life ones—

Andrew Tyrie (Conservative, Chichester)

Bishops and Law Lords—many types.

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

Many types—I accept that—who are not regulated donees. Will the Minister give the Committee an explanation?

Michael Wills (Labour, North Swindon)

I am grateful to my hon. Friend for moving the amendment, which allowed the hon. Member for Chichester, from a sedentary position, to make the case admirably and succinctly for reform of the House of Lords, for which I am grateful. I hope all members of the Committee agree on that.

As my hon. Friend pointed out, the amendment would amend schedule 7 to PPERA, such that the holder of an elective office would include a Member of the House of Lords as well as a Member of the House of Commons. Members of the House of Lords would therefore become subject to controls on donations contained in the 2000 Act. As my hon. Friend pointed out, many peers are already subject to the schedule 7 controls by virtue of the fact that they are party members. Therefore, as he observed, the effect of the amendment would be felt only by those with no party affiliation, such as Cross-Benchers and bishops.

I understand the intention behind the amendment. As my hon. Friend knows, we are planning to bring forward shortly radical reform of the House of Lords and the way it is constituted. That has been about 100 years in the making. We are on the verge, I believe, of cross-party consensus on that. I look for nods around the Committee and see assent from all parts. This is pertinent, Sir Nicholas. I am sticking to the clause. We will shortly be introduce further proposals for reform.

Andrew Tyrie (Conservative, Chichester)

Will the Minister at least consider and, I hope, agree that whatever measure is proposed for reform of the House of Lords, it should require that whoever currently sits in the House of Lords becomes a new type of peer, one type of peer, which would satisfy the concern underlying the clause?

Nicholas Winterton (Conservative, Macclesfield)

Order. That question is outside the scope of the schedule. If it were something to do with donations, it would have been in order. The classification of peers is quite another matter.

Andrew Tyrie (Conservative, Chichester)

May I complete my intervention by rephrasing it slightly? Since we have established that different categories of peers have different donation requirements, and since we have agreed in principle that it might be possible to put peers on a similar basis, might that not be the simplest way of addressing the concerns of the hon. Member for Carmarthen, West and South Pembrokeshire who tabled the amendment?

Nicholas Winterton (Conservative, Macclesfield)

Very briefly, Minister.

Michael Wills (Labour, North Swindon)

I am grateful for your indulgence, Sir Nicholas. I shall wrap up my answer to the intervention by addressing the purpose of the probing nature of the amendment. I am not sure where the problem exists. Presumably, those peers were excluded from the scope of the 2000 Act precisely because they are not elected and, as such, they would be unlikely to receive political donations. That is not a problem of which we have been made aware. But, most importantly, there is no point legislating for a problem of whose existence we are not aware and which, as I said, will shortly be resolved. When the House comes to consider how a reformed House of Lords will be constituted, that will be the proper time to examine donations, Members and the reporting requirements, because then that will be pertinent. I hope my hon. Friend the Member for Carmarthen, West and South Pembrokeshire will therefore ask leave to withdraw the amendment.

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

In light of what my right hon. Friend the Minister said, it seems that the matter will be addressed, although that may take some time. I beg to ask leave to withdraw the amendment.

Andrew Tyrie (Conservative, Chichester)

I shall be brief. I am grateful for the opportunity to answer the allegation about the Churchill luncheon club, which is a group of people who come together to have lunch, for which they pay £20 to £30, and £5 profit, if we are lucky, is made per person per lunch. The money slowly accumulates over two or three years, and once every few years a relatively small donation is made to the Bognor association or to the Chichester association. The last donation to my association was, I think, a few thousand pounds—£2,000 or so, although I cannot remember exactly how much—which was made some time in the early 2000s, perhaps 2001 or 2002. I wonder whether the hon. Member for Manchester, Central feels that there is anything untoward or concerning about that.

Eleanor Laing (Conservative, Epping Forest)

Does my hon. Friend consider that it might have occurred to the hon. Member for Manchester, Central that, had the luncheon club to which my hon. Friend refers wished to give the impression that it had nothing to do with the Conservative party, it would not have chosen to call itself after Sir Winston Churchill?

Andrew Tyrie (Conservative, Chichester)

I entirely agree with my hon. Friend. Hon. Members on the Government Benches say that she is missing the point, so let us find out what point we are missing.

Tony Lloyd (Labour, Manchester Central)

For clarity, I was not one of those who said that the hon. Lady is missing the point. I know that she often does, but it is not for me to comment on that now.

If the hon. Gentleman examines what I said a little earlier, he will see that I said that the low value unincorporated association of the kind that he describes is without stain on its character. I do not wish to cast doubt on its purpose or on the probity of those involved. It is exactly that sort of thing that benefits from the transparency that I am arguing for. I was arguing, as I think the hon. Gentleman now concedes, that such collective mechanisms for giving are legitimate, as long as we know what they are for, who takes part and what the mechanisms of the financial transfer are. That is legitimate. I am happy to say to the hon. Gentleman’s friends and colleagues, through him, that I cast no doubts whatever on anything other than their public spiritedness in seeking to enhance the political process.

Andrew Tyrie (Conservative, Chichester)

I am grateful for that assurance. I am just left wondering why it was raised in the beginning, and why it has been raised on the Floor of the House on more than one occasion.

I want to make one other point of substance in the debate on the schedule. The Minister and several hon. Gentlemen, particularly the hon. Member for Manchester, Central, suggested that transparency was a sufficient condition for sorting out the problems of public perception in this area. Transparency is a necessary, but not a sufficient condition. Was it enough to dispel the impression that honours had been bought in the 1980s when captains of industry appeared to get them because they came from companies that quite transparently had made large donations? I do not think that it was enough. Was it enough to dispel the impression that Bernie Ecclestone’s donation, declared at £1 million, had some influence on whether a ban on tobacco advertising was enforced on the industry of which he was such a prominent member? Transparency is not enough. A necessary condition for cleaning up the area must come in two parts: a cap on donations and the removal of intermediary institutions, whatever their type.

Michael Wills (Labour, North Swindon)

We have largely dealt with the issues in the debate on clause 8 and the consequential changes, so I will not detain the Committee for long.

I hope that I was not suggesting that transparency was a sufficient condition. I agree with the hon. Gentleman that it is a necessary condition, but it is not the only condition that is needed. I do not necessarily agree with his entire prescription, but that is for another day. As I have said, we have largely debated the matter under clause 8, so I hope that the Committee will agree that schedule 3 should stand part of the Bill.

Clause 9

Jonathan Djanogly (Conservative, Huntingdon)

I beg to move amendment No. 182, in clause 9, page 8, line 18, leave out ‘all’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss the following amendments: No. 183, in clause 9, page 8, line 21, after first ‘the’, insert ‘party or its’.

No. 184, in clause 9, page 8, line 21, after ‘treasurer’, insert ‘reasonably’.

Jonathan Djanogly (Conservative, Huntingdon)

The clause proposes to insert a defence into section 56 of PPERA to excuse the party treasurer from liability for a criminal offence under section 56(3). Section 56(3) requires the treasurer of a party to return such a donation or to pay an equivalent amount back to the donee. The offence arises from a failure to return donations from donors considered impermissible under section 54(2) and attaches to both the party and the party treasurer.

We have tabled a series of probing amendments. Amendment No. 182 would remove the need for “all reasonable steps” in proposed new section 56(3A). By removing the word “all” in subsection (a), the requirement becomes more practical. Requiring reasonable steps is one thing, but requiring “all reasonable steps” is quite another. The exhaustive nature of the “all” requirement imposes an unduly high burden on parties and treasurers. In essence, they must second guess all the possible routes of verification that the commission could come up with.

Local treasurers are not professionals. They are often volunteers who help out of a sense of civic duty. To require them to take “all reasonable steps” seems unreasonable to us. The requirement of reasonableness, as set out in the clause and in many other pieces of legislation on any number of different subjects, applies the so-called reasonable man test to any given set of circumstances. Called on to adjudicate on disputed behaviour, the courts should ask what a reasonable man would have done. That should be adequate.

Amendments Nos. 183 and 184 would amend proposed new section 56(3A) of PPERA as set out in the clause. The section covers the party’s belief as well as that of the treasurer and states that such belief must be reasonable. Amendment No. 184 seeks to rerun the arguments in favour of the inclusion of a test of reasonableness, where the opinions of individuals form the crux of the section in question. The need for objectivity as the yardstick against which to measure that belief where it has given rise to dispute, is important to ensure fairness and safeguard individuals from arbitrary penalties.

Amendment No. 183 would insert the word “party” alongside “the treasurer” in subsection (b). That is included in proposed new section (3A), and is perhaps a drafting oversight on the part of the Government. As it stands, only the treasurer must believe the donor to be a permissible donor. That is odd because the reasonable steps verification requirement in subsection (a) is imposed on both party and treasurer.

As I understand it, the party would currently be able to take reasonable steps to verify whether a donor is permissible, and leave it at that. Furthermore, it could suggest that in such situations, the treasurer must believe the donor to be permissible, despite not necessarily having undertaken the verification. That seems confusing and the amendment has been tabled in an attempt to clarify what is required by the people involved, and to ask the Minister to explain the drafting of the provision.

Michael Wills (Labour, North Swindon)

I appreciate the intention behind the amendments. They seek to clarify important points of detail and I am happy to respond. Amendment No. 182 would downgrade the requirement on regulated persons to prove that they have taken “all reasonable steps” and to claim that as a defence. Instead, it would require them to take only “reasonable steps”. In our view, that would undermine the important requirement to take “all reasonable steps” found in section 56 of PPERA. It would mean that having taken some—but not all—reasonable steps could be used as a defence. That would create a mismatch between the obligation in the 2000 Act and the protection that should properly result should it be fulfilled.

Section 56 (1) of the 2000 Act imposes the requirement to take “all reasonable steps” to verify that a donation can be accepted. If that obligation is fulfilled, and if the party still feels that it is entitled to accept the donation, there would be no offence if it turns out later to have been wrong. To allow some protection if the obligation is only partially fulfilled does not make sense. Indeed, it may result in less rigorous efforts to comply with the requirements to ascertain the identity and permissibility of donors.

The requirement in section 56 means that parties are under an obligation to ensure that they take all reasonable steps to verify the identity and permissibility of donors. Amendment No. 182 would devalue that by establishing an easier defence. “Reasonable” is the key word. “All reasonable steps” does not mean that all steps that could possibly be taken, should be. We are concerned about the amendment, not least because it would send the wrong signal about the importance of compliance.

Amendment No. 183 would mean that a decision on the permissibility or otherwise of a donation could be made by the party as a distinct entity, as well as by the party’s treasurer. It is unclear how it could be proved that the party as a collection of members believed something, but that is what the amendment would allow. We believe that the provision is workable only if it refers to an individual’s belief and the treasurer is the obvious individual in that respect.

The amendment would not expose the treasurer to any wider liability. It simply makes it clear that it is his or her belief that is important in a case where all reasonable steps have been taken, and that there is a subsequent question about whether it was believed that the donation should lawfully be accepted. For those reasons, I do not believe that the amendment would work.

I do not fully grasp the purpose behind amendment No. 184. A reasonable belief may be harder to prove than a simple, subjective one and that makes the defence more difficult to satisfy. In that situation, requiring a reasonable belief to be shown would be unduly burdensome, and it is therefore unnecessary. It is hard to imagine an unreasonable belief being reached if all reasonable steps have been taken to ascertain the permissibility or identity of a donor. Therefore, we are not sure that the amendment adds much. In the absence of clarity as to the rationale for the amendment—which potentially makes the defence easier while the other amendments in the group have the opposite effect—we would resist it.

Andrew Tyrie (Conservative, Chichester)

I would be grateful if the Minister guessed at what his own test of reasonableness would translate into, in time or cost per case. That would give us a sense of what we are talking about. If someone could show that he had put in that amount of time, reasonably and intelligently, would that constitute a defence?

Michael Wills (Labour, North Swindon)

So far, in these lengthy proceedings, I have resisted all temptation to give specific examples, and I will do so even at this late stage. The hon. Gentleman knows that every situation is different, and it would be wrong to give any indication otherwise. He is well aware of the consequences of my doing so, and so he will forgive me if I resist. I am happy to give way again, but he will not tempt me.

Andrew Tyrie (Conservative, Chichester)

Is the Minister aware of the impact assessment’s own assessment that £5 per case might cover it?

Michael Wills (Labour, North Swindon)

Of course I am aware of that. We have already discussed it in the Committee. I will not be tempted down that route. We have made a general statement, and have made a perfectly reasonable guess about what the amount might be. The hon. Gentleman asks for specific examples in specific cases and, as I have said, I will not be tempted down that route. However, I hope that I have given enough clarification to encourage the hon. Member for Huntingdon to withdraw the amendments.

Jonathan Djanogly (Conservative, Huntingdon)

That was an interesting debate on reasonableness. I listened to the Minister talk about “all” reasonable processes; I would have thought that if something is reasonable, it is reasonable. I am still not sure why “all” is needed. I shall go away and think about that further.

On the individual and the party, I agree that belief can attach only to an individual. I do not dispute that. My issue is a drafting one. One part of the clause refers to the individual, and another to the individual and the party. That might be a consistency issue, and the Minister may wish to look at it in due course. On that basis, I beg to ask leave to withdraw the amendment.

David Howarth (Liberal Democrat, Cambridge)

I beg to move amendment No. 152, in clause 9, page 8, line 22, at end add—

‘(3B) The defence established by subsection (3A) shall not apply where the donor was not a permissible donor by virtue of section [Non-electors to be impermissible donors].’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss new clause 22—Non-electors to be impermissible donors—

‘(1) For the purposes of the 2000 Act a person who is not qualified to vote at parliamentary elections shall not count as a permissible donor.

(2) A company controlled by a person who is not a permissible donor by virtue of subsection (1) shall also not count as a permissible donor for the purposes of the 2000 Act.

(3) A company shall count as controlled by a person in the same circumstances as those set out in section [Donations by companies controlled by impermissible donors] (2)(a)-(c).’.

David Howarth (Liberal Democrat, Cambridge)

The amendment is to the new defence to which the hon. Member for Huntingdon referred, and would exclude from the scope of that defence the effect of new clause 22. The heart of the debate is therefore the new clause, and it will become obvious why the new defence should not apply to it.

The new clause simply aims to exclude Members of the House of Lords from giving donations to political parties. In the future, the House of Lords may become an elected body, and its Members would become parliamentary electors again. They are not parliamentary electors now, but they could be in the future, at which point, my proposal would have to be reconsidered. Nevertheless, in the interim period, the purpose of the new clause is to exclude donations from Members of the other place.

The new clause could be interpreted more radically, although that was not the intention of myself or my hon. Friend the Member for Argyll and Bute when we tabled it. However, it is a legitimate interpretation that will interest the hon. Member for Chichester, and would make it the single most unpopular new clause ever proposed to a Bill dealing with party funding. Under this more radical interpretation, the new clause would exclude donations from all companies, trade unions, unincorporated associations and trusts, which would destroy the financial base of all three main parties. That is not the intention, but it might be useful to discuss that point.

During the stand part debate on schedule 3, the hon. Gentleman said that one of his criteria for cleaning up politics—another was a donation cap—was that donations from all intermediate bodies should be got rid of, which is the case in other jurisdictions in the world, such as Canada, I believe, and certain parts of the United States. It is worthwhile thinking why we should not adopt the same policy, at least as a goal.

Andrew Turner (Conservative, Isle of Wight)

Will the hon. Gentleman explain how people are disabled, or whatever it was that he said. He said that in Canada and some of the United States—

David Howarth (Liberal Democrat, Cambridge)

I am sorry, but the hon. Gentleman misheard me. Corporate donations of all types are not allowed in those jurisdictions, and under one interpretation, new clause 22 would have the same effect. The argument against such a system is that it would require great dollops of state funding for political parties—the Minister made the same argument against a donation cap—which would not be acceptable to the public in present, or any, circumstances. But is that really the case? Should we not set out a long-term goal, perhaps with a date or a power for the Secretary of State to introduce an order with that radical effect, and say to parties, “You have a certain amount of time to sort yourselves out, because we are moving to a system of funding radically different from the one that we have now”? In that interim period, some state funding might be necessary. My party has always been more in favour of state funding than I have, but that could be a requirement, although it would not be necessary to have vast state funding of political parties forever.

The campaigns in the United States that have just been completed used a very different model of party funding that we could not introduce in this country now—I agree with that—but if all parties knew that eventually we would have to move to such a system, we would all do it. That is similar to what happened in Canada where the four main parties were dramatically affected by the reforms. The Liberal party—the equivalent of my party—was dependent on large donations, and the New Democrats were dependent on trade union funding. The Conservatives and their predecessors were rather less dependent on big donations than the Liberals, but there was a similar problem.

All three parties in Canada have now adapted to a radically different, far more restrictive and individual system. It seems to me that we should be thinking about doing that here and weaning ourselves off the way we do things now, because it produces, rather than public confidence, intermittent scandals and, more than that, long-term, low-level distrust of the political class, so we have to think about radical reform.

Martin Linton (Labour, Battersea)

The hon. Gentleman forgets the fourth party in Canada, the Bloc QuÃ(c)bÃ(c)cois, which was the origin of that policy simply because it did not get funding from trade unions or business but invented what they called le financement populaire to do away with all business funding.

David Howarth (Liberal Democrat, Cambridge)

I am tempted to answer the hon. Gentleman, “C’est exact.” That is an interpretation of new clause 22 that I did not intend, but it is a possible interpretation and I hope that the hon. Gentleman and other members will make clear their views on what the long-term goal should be and their support for the idea of moving away from institutional funding entirely.

Our original intention in tabling new clause 22 was to raise the question of whether it is proper for Members of the House of Lords to be donors to political parties. All parties represented here—obviously the Scottish National party would be in a different position—regularly receive donations from Members of the House of Lords, which can be substantial, and in certain cases very substantial. I do not want to cast any aspersions on Members of their lordships’ House at all.

Jonathan Djanogly (Conservative, Huntingdon)

Is the hon. Gentleman saying that people can give money before they are made Members of the House of Lords but not after?

David Howarth (Liberal Democrat, Cambridge)

The hon. Gentleman raises a point that I will get to later, because that is at the heart of the intention behind the new clause. That is what will change the nature of donations to political parties by people who later become lords.

Jonathan Djanogly (Conservative, Huntingdon)

I am trying to understand where the hon. Gentleman is coming from. Presumably he is trying to stop money being related to peerages, but is he suggesting under his solution that people would have to give their money up front rather than afterwards?

David Howarth (Liberal Democrat, Cambridge)

I will get to that point later, but I think that the hon. Gentleman is thinking about that the wrong way round. He needs to think about the question from the point of view of the political parties and whether they would want major donors to be nominated to the House of Lords, were the new clause to be adopted. I will get to that clause in a moment.

I do not want to cast aspersions on those of their lordships who make donations, but the question is whether an individual, who already has great access and influence over politics by virtue of their appointment to the legislature under this extraordinary system that we have, should have the additional opportunity to influence the political process via donations, and that is a question that we ought to raise. It is a question of perception.

I fully accept that many of their lordships who give donations do so because of their desire to further the causes that they believe in, and that is true of their lordships in all three parties. As the hon. Member for Huntingdon hinted, if we are talking about the problem raised by the hon. Member for Chichester about captains of industry who gave large donations to the Conservative party and then miraculously appeared in the House of Lords, this new clause on the face of it does not have much to do with that. They had given their donations and then appeared later, so no further advantage of that sort could be looked for. There is, however, the subsidiary question of ministerial office. Again, this is entirely a question of perception but Members of the House of Lords are eligible for ministerial office in a way in which ordinary members of the public are not. That might be another reason for restricting donations from them.

Let me turn to the point raised by the hon. Member for Huntingdon. How does this new clause affect the serious problem of perception—in some cases perhaps beyond that—that large donations lead to ennoblement, to becoming a Member of the House of Lords? The answer is simple. Imagine a political party—not one of those present—that found itself with a very generous donor who was giving that party large amounts of money. The rule—new clause 22 having passed—would be that if that person were to be appointed to the House of Lords they would no longer be able to make these large donations to that party, so what interest would there be for that party to suggest that that person should become a Member of Lords? It would remove any incentive that a party had for making its large donors peers. It would introduce into the system an interference in the way in which this has been done and talked about for a long time, going back, I confess, to the days of David Lloyd George.

David Lloyd George’s approach was based on his view that he did not like aristocrats and if he could do anything to discredit them by selling peerages that was all right by him. But the problem has carried on beyond that for a long time. We are still in a position where members of the public are quite cynical about what happens in politics. People frequently mention to me the fact that of the people who have recently given £1 million to the Labour party only two are not Members of the House of Lords. One of those is J. K. Rowling and I am sure she does not want to be. Nevertheless, only one of the others is not. We need to look for ways of getting out of that problem. We have looked at strengthening legislation, directly saying there should be no sale of honours. That legislation has serious weaknesses, as anyone who has tried to raise a possible problem with the police has found.

I am suggesting a different approach aimed at the incentives the parties have in the first place to raise their donors to the peerage. That is the central intention of new clause 22. It raises a second point. There might or might not be an opportunity later to discuss this point directly under new clause 10, but new clause 22 does refer to new clause 10, and I am sure it is legitimate to discuss the issues raised there in this debate. The issue is whether someone who is not a permissible donor should be allowed to use the corporate form to evade the regulation that makes them a non-permissible donor. New clause 22 says that, with regard to this particular form of impermissible donor, that will not be allowed. It refers to new clause 10, which does the same thing for a different class of impermissible donor, namely foreign donors.

This goes back to the debate on unincorporated associations, although here we are talking about corporated bodies. The question is, should it be allowed to use the corporate form to make a donation in a way that would not be allowed were the individuals to do it themselves? We have seen cases of this being reported in the media recently—that concerning Lord Ashcroft, and the potential one concerning Mr. Deripaska and LDV, which raise the issue directly. If people who are not allowed to make donations are allowed to get through that by using the corporate form, we must ask whether we should raise the veil of the corporation to see who the real donor is.

The hon. Member for Huntingdon and I spent many days, possibly in this room, or perhaps it was next door, on the Companies Bill. During the course of that debate we talked about the issue of the corporate veil and the extent to which people should be allowed to set up their businesses in whatever way they want, using the corporate veil to separate their various businesses and the debts and obligations that those businesses might create. Never, in the course of those debates, did anyone make the point that people should be allowed to use the corporate form to evade the law on donations to political parties. It seems that we should make an exception to the rule in Salomon v. Salomon that companies should be treated legally as separate people.

New clause 22 says that a company that is controlled by an impermissible donor shall, itself, count as an impermissible donor. That is the way to do it. The question then is who counts as controlling the company? Going back to the debates that the hon. Gentleman and I had on the Companies Bill, now Act, there is an answer to that question in company law and we should use it. There are three ways in which people control companies and we should catch all of them in trying to stop the evasion of the law. The first, which is the most obvious, is where a shareholder owns 75 per cent. or more, of the shares in a company, that shareholder can give the company an instruction by resolution; it can tell the company what to do. If the shareholder has less than 75 per cent. they cannot do that. They might be able to elect the board, but they cannot tell the company what to do; the board runs the company. The first condition, therefore, is that anyone who owns 75 per cent. or more of the company should, for donation purposes, be counted as controlling the company.

The second concerns boards of directors. If there is a board of directors, it—rather than the shareholders—will run the company. If the board of directors is dominated by impermissible donors, the company itself should count as an impermissible donor. That seems to be quite straightforward. The third, and perhaps most important, concerns shadow directors. A company that is controlled indirectly by someone should count as well for these purposes. Section 251 of the Companies Act 2006 says that a shadow director is

“a person in accordance with whose directions or instructions the directors of the company are accustomed to act.”

The normal circumstance is where there is a dominant shareholder with enough votes to make anyone a director or not a director at that person’s will. But there are other circumstances where this applies. Were we to adopt this rule, we could remove the possibility of people setting up shell companies in various ways to make donations that would not otherwise be lawful.

That is the overall intention of the new clause: to remove the possibility of making donations to Members of the House of Lords and to make sure that that intention cannot be evaded or got round by the creation of companies. I know that many members of the Committee are uncomfortable discussing this kind of issue. I can see it in their faces as I look round. [Interruption.] I certainly was not looking at the Government Whip. He was not one of the people I had in mind. But this is the central issue in the Bill. It should be about donations, expenditure and the nature of our political system where it is now, which is not good and not well respected, and where it should be going. If we do not discuss it now, when?

Jonathan Djanogly (Conservative, Huntingdon)

We are in favour of transparency, but we do not want to prevent people from donating. When I read the amendment I was not entirely sure what the hon. Gentleman was aiming at. Having heard him I am slightly the wiser. He is basically looking at the laws. First, I thought of foreigners, but they are already banned. Then I thought of people under 18: 17-year-olds. Then I thought of mental health cases. Then I thought of prisoners and thought it had something to do with Liberals wanting prisoners to get the vote.

Basically, the new clause needs a bit more work, even to achieve the objective that the hon. Gentleman wishes for it. The other point that jumped out was how to define someone who is not qualified to vote. Does a person who ought to be on a register, but who is not, count as someone who is not qualified to vote? Could a non-registered person who is an anarchist give money to an anarchist party? It was all quite confusing, but I see where the hon. Gentleman is coming from. However, we do not agree with it.

Andrew Tyrie (Conservative, Chichester)

There are three types of amendment or new clause. There is one that seeks to change the law, there is one that seeks to probe what the law might mean and there is a third, into which category this new clause falls, which is to make a point, which may or may not appear initially relevant to the clause, come what may, whatever the procedure of the institution one happens to be sitting in. The hon. Gentleman is a clever lawyer. He has found a wheeze to debate new clause 10 and get all his points in, just in case we do not reach it. I take my hat off to him for that.

As it happens, having heard the hon. Gentleman’s description of new clause 22, although I certainly think that it would need a great deal of work, I agree with what he described as its intention, which is, in summary, to exclude all institutional donations, including trade unions and corporate donations from party funding and to force parties to rely on local activism. That is where we have to go. I strongly agreed with his description that it should be a long-term goal and that we should not try to implement something like this overnight, which would have huge implications for all political parties, but particularly the Labour party. It would be unfair and damaging to any party that tried to introduce it in that way. We should mark out that territory, recognising that many other jurisdictions have also tried to go down that road—he made that point about Canada, and the Canadian point is well taken.

I also agreed with the hon. Gentleman that, if there is to be state funding, it should be considered transitional—in order to help bring in such a scheme, while parties adjust and find a way of establishing and broadening their local base. There is a stench in the nostrils of the electorate about how parties are funded at the moment. People have heard me say that on numerous occasions. I feel strongly that we need to deal with that. I regret that the Government have been unable to take forward the key measures required to enable something substantive to be done about it, which was a consequence of the breakdown of the Hayden Phillips talks.

Michael Wills (Labour, North Swindon)

Will the hon. Gentleman give way?

Andrew Tyrie (Conservative, Chichester)

I will in a moment. I hope that I have worded that in a way that does not open up a debate that I not only suspect would be out of order—

Nicholas Winterton (Conservative, Macclesfield)

It is.

Andrew Tyrie (Conservative, Chichester)

—but would also be an unnecessary party political exchange of a type that I would like to avoid. None the less, even though we have had such a stricture in an unusual but powerful ruling from a sedentary position, I shall give way to the Minister.

Michael Wills (Labour, North Swindon)

I was only seeking illumination from the hon. Gentleman. Could he remind the Committee of what happened to the Hayden Phillips talks and which party withdrew from them?

Nicholas Winterton (Conservative, Macclesfield)

The answer to that would be completely out of order. I am sorry, I do not often disagree with Ministers in Committee, but I do on this occasion. The hon. Member for Chichester should not deal with the question.

Andrew Tyrie (Conservative, Chichester)

And I shall not—not even by the back door.

Nicholas Winterton (Conservative, Macclesfield)

You will probably try.

Andrew Tyrie (Conservative, Chichester)

I shall not try to, even by the back door.

I want to make one last point. There is the question of the effect on the scope of the criteria for ennoblement, which the hon. Member for Cambridge touched upon near the end of his contributions. It is true that a significant number of donors has as an incentive the idea that such preferment might come upon them one day. There are some pretty good statistics to back up that view. The hon. Gentleman mentioned one about donations in excess of £1 million to the Labour party over the past 11 years. He might have tried looking below £1 million, because the going rate is certainly well below £1 million at the moment—or it was, until the Lord Levy scandal broke.

I want to make only one more point about achieving that part of the objective. I am not sure that new clause 22, or even a hyper-improved version of it, is the way forward. The appointment to a peerage and the sense in which it is an honour need to be completely separate. A peerage should be granted entirely on the likelihood of that person making a contribution to the legislature, whether that is an appointment or, ultimately, an election—I shall not go into that. The position is part of the legislature and it should be treated as an appointment to the legislature, in which we want contributions from that individual, rather than thinking of the peerage as an honour. It should certainly not form part of patronage of any type, even of a Prime Minister.

When I wrote my proposals for reform of party funding, the Leader of the Opposition wrote the foreword and launched them at a press conference, giving warm support. For those interested, although the proposals obtained little coverage due to other issues, on page 6 the hon. Gentleman will find the solution to the problem of new clause 22 set out in detail. My right hon. Friend believes that the link between patronage and the Prime Minister should be completely broken and that those appointments should be made by an independent appointments commission.

My very last point is that the issue will not go away, even if we deal with it before the election, which is extremely unlikely. It will probably come up after the election, whoever wins. I will do whatever I can to ensure that it comes up after the election if the Conservative party wins. This area needs fundamental reform; not along the lines of new clause 22, which would have all sorts of unforeseen and unforeseeable consequences, as the hon. Gentleman admits. We have to have reform, if we are to remove what I described earlier as the stench in the nostrils of the electorate.

Tony Lloyd (Labour, Manchester Central)

I commend new clause 22, although not every aspect is unproblematic. For example, removing Members of the House of Lords, which would be an unintended consequence of new clause 22, should not be part of our duties, but the spirit of the clause is right. The hon. Member for Chichester was a little harsh about the motivation behind it. The new clause serves a genuine purpose and there is a need to debate those devices. We can disagree about the mechanisms that ought to be allowed in our political system and the funding thereof, but we ought not to disagree about devices designed to get round clear principles that have already been established elsewhere.

One clear principle, which exists for direct donors, is that overseas residents—those prohibited from taking part in our domestic political processes—should be disbarred from funding. That is the essential import of the new clause, and, in that sense, we ought to seek something that does that. We ought to ensure that the law for corporate structures is in line with the law affecting individuals. It may not be the right mechanism, but I hope that my right hon. Friend the Minister will at least see the logic of moving in the direction that the hon. Member for Cambridge is urging.

Michael Wills (Labour, North Swindon)

Like most members of the Committee, we agree with the high-minded principles that we discern behind the amendment and new clause 22. However, as has already been revealed in the discussions, the new clause is, perhaps, too imperfectly drafted to secure the ends that it seeks.

Section 54(8) of the 2000 Act makes it clear that an individual on any of the following registers is entitled to donate to a UK political party: the register of parliamentary electors; the register of local government electors; the register of relevant citizens of the EU; and the register of peers made under regulations under section 3 of the Representation of the People Act 1985. The amendment would change that so that only those on the parliamentary register would be able to donate, which would prevent UK citizens living abroad and EU citizens living in the UK from donating. We do not think that a limitation of that sort is desirable, given that those categories of person have a right to vote and otherwise participate in our political system.

As we have heard, the new clause would also prevent peers from donating. Of course, it is right, in our and in most people’s view, that peers may not vote for representatives in the House of Commons, but it is not right that they should be barred from participating in the democratic process in other respects. In any event, as I have mentioned, the future reform of the House of Lords, to which everyone is committed, would make such a change inevitably anachronistic if we introduced democratically elected peers, either in whole or substantial part.

The amendment would further prevent companies owned by such individuals—that is, peers and individuals with foreign connections—from being able to donate. That would be a significant departure from the 2000 Act, under which all companies that are registered and carry on business in the UK are eligible to donate. We all understand the concerns that lie behind the amendments. It is equally clear, however, that they need to be addressed in some other context and not through the wholesale amendment of the 2000 Act to prevent any company with significant foreign connections or any company owned or controlled by a peer from being able to donate. As currently drafted, the amendments would prevent a significant number of individuals and companies with genuine connections to the United Kingdom from being able to donate, and that is not an effect that we want to achieve.

However, as the hon. Member for Cambridge made clear, and as my hon. Friend the Member for Manchester, Central and the hon. Member for Chichester said, these are important issues. The purpose of the amendment is perhaps to open up discussions on how we can come to some kind of final resolution of these complex but fundamentally important issues on party funding and spending. I think we can all agree that the discussion is not finished, but as I have said over and again in Committee, and as my right hon. Friend, the Secretary of State said on Second Reading, we believe that we can move towards such a final resolution only on the basis of consensus. Such important issues cannot be dealt with in any other way and certainly should not be turned into a party political football. That is why I share the regret of the hon. Member for Chichester that the Conservative party walked away from the discussions.

Andrew Tyrie (Conservative, Chichester)

Will the Minister give way?

Michael Wills (Labour, North Swindon)

I am just concluding my remarks.

Andrew Tyrie (Conservative, Chichester)

Will the Minister give way?

Nicholas Winterton (Conservative, Macclesfield)

Order. The Minister is not giving way.

Michael Wills (Labour, North Swindon)

I hope that one day we will see consensus emerge on what we all agree are important issues. I think that all members of the Committee will wish to return to the subject in due course, but I do not believe that the amendment and the proposed new clause provide the place to do that. Having heard the debate from both sides, I hope that the hon. Member for Cambridge will withdraw the amendment.

David Howarth (Liberal Democrat, Cambridge)

The Minister came back to the point about consensus, but he seems to have a highly restricted view of where we should be going and how. There are times when politicians have to go with the consensus of the public, rather than the consensus of the parties. His final remarks illustrated that there is not even consensus among the parties on why the previous talks broke down, never mind on what to do about it. The public expect us to act, and to do so in a way that they see as fair, not partisan. The Government are in a position to make proposals that will be perceived as fair by the public as a whole. It is interesting that amendments have been tabled by Labour Back Benchers that would have had an adverse effect on the Labour party, but which they tabled anyway. That is the spirit in which the debate should continue.

Michael Wills (Labour, North Swindon)

Of course we must move forward in the way that the public want—that is what we all are here to do. I hope that the hon. Gentleman recognises, however, that if we cannot secure consensus among the parties it will become a partisan issue, axiomatically so. It will become very difficult to secure an enduring settlement. The public certainly do not want it to become a party political football or for it to be batted around between elections. We saw that at the beginning of the 20th century; it is not helpful to the processes of democracy. That is not an excuse for kicking the matter into the long grass and I hope that the hon. Gentleman will accept that. It is a duty of all hon. Members to try to achieve consensus, so that we can do precisely what the people of this country want us to do.

David Howarth (Liberal Democrat, Cambridge)

I am happy that the Minister has just said that it is a not a matter of kicking the issue into the long grass, but he is not right about the conditions under which we can get a permanent settlement. It is not necessary to have agreement among the parties to reach a position that will be stable. We need to reach a position that the public think is fair and when an attempt to move away from it would be seen as partisan and would lose support for the party that proposed it. That is what I am asking for on not only the issues raised under new clause 22, but donations, expenditure caps and relations between the unions and the Labour party. The possible solution that has been suggested would enable us to reach the point at which we could propose a settlement that the public, not the parties, would want.

Andrew Tyrie (Conservative, Chichester)

I agree entirely with the hon. Gentleman. Does he agree that we cannot arrive at the point at which one party can have a veto over change if it were clearly what the overwhelming majority of voters concluded would enable greater public trust to be restored in such matters?

David Howarth (Liberal Democrat, Cambridge)

I agree with that. What matters is whether the public would perceive as fair a system with which one party did not agree. If the other parties ganged up on a particular party just to do it down, the public would not consider that to be fair. It would not be a stable position. I am not suggesting that. We should all think about what would be a fair settlement and go for it, regardless of whether one or two of us might object on partisan grounds to the eventual fair solution.

Having heard the debate on new clause 22, I readily confess that it could do with some more work. As the Minister said, a number of groups are excluded from parliamentary elections, some of which I certainly would want to exclude from the right to donate, including peers. I would be a bit more doubtful about others, such as European Union electors who are not peers in this country. An interesting question was asked about whether we should allow United Kingdom citizens abroad, some of whom are not peers strangely enough, to be donors.

I want to mention prisoners, the issue raised by the hon. Member for Huntingdon. At the moment, they are not allowed to vote. A European Court of Human Rights judgment is against the Government on that point. The problem can be resolved in several ways, but not by granting the right to vote to all prisoners. Taking away the right to vote should be considered to be a specific part of a sentence, because the right to citizenship and the rights of citizenship should be considered separately from other aspects of what happens to someone. That is the correct approach, because being a citizen with the right to vote should be considered an important matter.

Even though I recognise the problems in how new clause 22 has been drafted, I am encouraged by the remarks made by the hon. Member for Manchester, Central about the acceptance of the spirit behind it, especially behind proposed subsections (2) and (3) on anti-avoidance. It is the constant task of legislators to look out for ways in which what they intend is being got round in the world outside. That is why legislation cannot be for ever. When rules that are laid down are being avoided by devices that undermine their spirit and intention, we should do something about it. With that in mind, I beg to ask leave to withdraw the amendment.

Clause 10

Martin Linton (Labour, Battersea)

I beg to move amendment No. 201, in clause 10, page 8, line 29, leave out subsection (2)(b) and insert—

‘(b) for “after the date when he becomes a candidate at the election” there is substituted “after the 50th month following the month of the previous general election”’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss amendment No. 202, in clause 10, page 9, line 2, at end add—

‘(6) In the 1983 Act section 76 (Limitation of election expenses) is amended as follows.

(7) In subsection 2(a)—

(a) in paragraph (i), after “electors” there is inserted “in the period between the end of the 50th month following the month of the previous general election and the dissolution of Parliament, plus the same amount between the date of the dissolution of Parliament and the date of the general election”;

(b) in paragraph (ii), after “electors” there is inserted “in the period between the end of the 50th month following the month of the previous general election and the dissolution of Parliament, plus the same amount between the date of the dissolution of Parliament and the date of the general election.”’.

Martin Linton (Labour, Battersea)

We come now to triggering, which for many of us is the most important issue in the Bill. I am conscious that we have very little time left so I shall not take an unfair share of it. It is important to set out the issues. I have been dedicated for a long time to the notion that if the Bill achieves nothing else, it should close the loophole unintentionally created in the 2000 Act—on which Committee I also served—which leaves completely unrestricted spending by candidates up until the date of dissolution.

Triggering—in other words, control of candidates’ spending—was in force for 17 years before that, since the 1983 Act and, as far as I know, since the Corrupt and Illegal Practices Prevention Act 1883. For most of our history we have had control of candidates’ spending. It was dropped only by mistake in the 2000 Act. I have looked up the historic debate in the House of Lords where that occurred. Amendment No. 253G was the first time in the discussion of that Bill that it was proposed to introduce the words

“a) on the date of—

(i) the dissolution of Parliament,”—[Official Report, House of Lords, 24 October 2000; Vol. 618, c. 227.]

That was just a few weeks before the Bill received Royal Assent, long after it had left the House of Commons and long after the Committee stage. The phrase had never been mentioned and there had been no intention or discussion to remove the trigger during the course of that Bill. Then on 24 October that amendment appeared in the House of Lords. It was opposed by the Conservative Front Bencher Lord Mackay of Ardbrecknish, who sought to delete the words

“on the date of dissolution”.

Sadly, the deletion was opposed by the Government Front Bencher at that time, Lord Bach, who said:

“If he withdraws his amendments, I promise to look at the point that he has raised.”—[Official Report, House of Lords, 24 October 2000; Vol. 618, c. 229.]

That is a phrase we often hear in Committee and on Report. I have implicit trust in the Minister that when he has said to me that he promises to look at the points that I raised on a number of amendments, he will be as good as his word.

Andrew Tyrie (Conservative, Chichester)

I do not mean any disrespect, but I have Hansard, column 61, of 20 October 2008, in front of me, and so far the hon. Gentleman has read out his speech as it appears there. He made those points on Second Reading. If he carries on like this, we will end up having to make all the obvious replies—that he tabled a probing amendment, that he made that clear, and that the decision was taken without even a Division, which hardly suggests that there was opposition on our part. There is no merit in his persisting.

Nicholas Winterton (Conservative, Macclesfield)

Order. I know that was an intervention from the hon. Gentleman and I am sure that what he said has been noted, but the hon. Member for Battersea is entirely in order in what he is saying.

Martin Linton (Labour, Battersea)

Thank you, Sir Nicholas. I understand the point that the hon. Member for Chichester is making, but without the context we would not get to a meaningful discussion. I shall not dwell on what has happened since that loophole was opened up. I do not blame Lord Ashcroft for making use of it in the 2005 election and I cannot blame him for seeking to make use of it now in his new position in the Conservative party. After all, I would not deny that my party tries to match spending by the other party, so both parties are using the loophole.

Parenthetically, I do not accept the argument that parliamentary newsletters invalidate the issue. Hon. Members are welcome to look at my parliamentary newsletters. I do not think that they bear on the point of candidate spending at all. It is perfectly right that Members should be allowed to communicate with their electors and tell them what they have done in Parliament. If they have done things that are good for the constituency, it is right that they should get whatever credit the electors feel that they deserve, but that does not invalidate the need for a return to candidate spending limits.

Alan Reid (Liberal Democrat, Argyll and Bute)

I agree absolutely that there is a problem that must be tackled, but I am concerned that the clause is not the right way to tackle it. The hon. Gentleman referred to newsletters, but what if an Opposition candidate put out a newsletter saying what a wonderful job he was doing, how he had got the roads fixed and so on? It is totally unclear whether that would be counted as election expenses. That is our concern about the clause.

Martin Linton (Labour, Battersea)

The hon. Gentleman is right that there are difficulties with triggering. That is the reason for the amendment. I do not deny that the difficulty with triggering is that there is a certain element of uncertainty about it. It is like a sword of Damocles hanging over a candidate. They never know when they might accidentally overstep a mark and trigger election expenses.

I am trying to act in a spirit of cross-party consensus. I am not insisting that there should be a consensus, but I believe we can find a degree of it. The Bill reinstates the legislation of 1983, which was Conservative legislation, so the Bill cannot be accused of being partisan. I would prefer us to stick with what the Bill says because that is the system that worked for 117 years, and that is the system that we know has some effect. If a better system can be found, we should all try to move towards it.

In the amendment, my hon. Friend the Member for Southampton, Test and I suggest a different version of triggering that is meant to achieve the objective in a better way. The idea first came up in evidence from my hon. Friend to the Constitutional Affairs Committee. Instead of candidate limits that apply from the point when somebody becomes or declares themselves a candidate or appeals for votes, they should apply from a specific point in the parliamentary cycle. The first suggestion was 42 months. Three and a half years into a Parliament, candidate limits should automatically come into effect.

The wording of the amendment takes into account the fact that we are already well past the 42nd month of this Parliament. As 42 months is not relevant to the present situation, the amendment refers to the 50th month, which means that the candidate limits would come into force in July next year—that is, 11 months before the last possible date on which an election can be held. There would essentially be one period from the beginning of July until dissolution during which candidates could spend up to their candidate limit—those limits vary from constituency to constituency, but they fall roughly within the range of £10,000 to £12,000—and another regulated period during the campaign itself.

So there would be two regulated periods, which would double the amount that candidates could spend to £20,000 to £25,000. That is a reasonable proposition. I do not make it out of self-interest—my self-interest would best be served by what is in the Bill—but because I recognise that there are many legal difficulties associated with triggering and that, in the past eight years, parties have got used to having no restrictions on candidates. It might be a bit difficult for us to turn the clock back to a situation where triggering operates all the time.

Andrew Turner (Conservative, Isle of Wight)

Will the hon. Gentleman clarify one point, for my benefit? If the period is instituted as he described, are the candidates allowed to spend before that?

Martin Linton (Labour, Battersea)

Before the first regulated period starts, candidates, as now, can spend as much as they like. Once a regulated period has started they can spend only up to the constituency limit in that regulated period. The reason for two regulated periods is because if we merely increase the candidate limit over a longer period, some candidates who were adopted only towards the election would have twice as much to spend during the election campaign as a candidate who had been adopted earlier. That would introduce an element of unfairness. The concept is that there should be two regulated periods. It could be three regulated periods, so that candidates are not completely precluded from spending any money before the election, but they are not allowed to save all that money up and have a spending spree during the election itself.

Andrew Turner (Conservative, Isle of Wight)

I am grateful for that answer. Could the hon. Gentleman help me with a second point? What are the conditions as far as Members of Parliament are concerned?

Martin Linton (Labour, Battersea)

Members of Parliament who have been adopted as candidates would be caught by the same provisions. To the extent that they wanted to promote themselves as candidates, they would have to work within the limits, as they do during the election period. It would not stop them putting out parliamentary newsletters, provided that those conformed not only with Parliament’s definition of a parliamentary newsletter, but with the electoral returning officer’s definition. Those should, in principle, be the same, but there is no guarantee of that.

The simple principle that I am putting before the Committee as a possible way forward, if one is needed, is that we can proceed on the basis of a fixed triggering point, where every candidate is triggered and that that should be at a fixed point in the parliamentary cycle. In the normal course of events I would propose 42 months—three and a half years—which means that in a four-year Parliament, the last half year would be covered by limits. In the occasional five-year Parliament—they are still a minority—it would be the last 18 months. That would remove the doubt as to when triggering started. It would remove the need for all the long titles like parliamentary spokesperson and prospective parliamentary candidate, which the public find rather laughable. It would mean that the starting gun was fired at the same point for everybody and that the rules were the same for everybody.

I agree with the hon. Member for Cambridge that the test is not whether there is consensus between the parties, because the history going back to the 1970s is that one party can see that it has an advantage in consensus and uses the consensus as a veto. That is why we had the 20 or 30 years of scraping the bottom of the barrel for party funds in this country, whereas other countries all found consensus around party spending limits, party donation limits and state spending. We were the only country that left it until 2000 before we even began to consider comprehensive party funding legislation. Where there is consensus, that is desirable, but it is important that we do something that is seen by the public to be fair. A fixed triggering time for everybody would be the right principle.

Andrew Tyrie (Conservative, Chichester)

Will the hon. Gentleman indicate, on a scale of one to 10, to what extent the Electoral Commission’s proposal would be second best? The commission has come forward with a four-month proposal.

Martin Linton (Labour, Battersea)

The Electoral Commission agrees in its note that this proposal could provide greater certainty for parties and candidates—Members can read it themselves. The commission basically supports the proposal. It sees one or two possible disadvantages, but it prefers it to triggering. I have no personal interest here; as a Member with a majority of 163, anything that reduces the spending of my potential opponents is welcome. Triggering might be more effective, but this is probably a fairer system—it is certainly a clearer one. It is more likely to be the basis of cross-party agreement, and above all, it is more likely to appear fair to the public.

Eleanor Laing (Conservative, Epping Forest)

The proposals made by the hon. Gentleman in amendments Nos. 201 and 202 are interesting. I am glad that he has now explained just what they mean and why he has proposed them, and I sympathise with his attempt to produce a clearer and more certain Bill. I hope that we will have time to debate the whole of clause 10, because it is one of the most important in the Bill. To ensure that we have as much time as possible for that debate, I will be brief in my remarks on the amendment.

The hon. Gentleman and others have used the phrase “going back to”—going back to triggering, going back to what happened before 2000. We should not look to go back to the confusion that we had then; we should look to go forward. [Interruption.] Of course I will give way. I am sorry; I thought that the hon. Gentleman wanted to intervene.

Alan Whitehead (Labour, Southampton, Test)

I was simply gesturing that that is what the amendment attempts to do: to go forward to a more satisfactory version of what might misleadingly be called triggering but which ought to have a new name—a pre-election period that is clear to everybody and does not relate to whether somebody has called themselves a candidate.

Eleanor Laing (Conservative, Epping Forest)

I thank the hon. Gentleman for that apparent clarification. It is difficult to have a pre-election period when it is not known when the election will take place, but I entirely concede that the wording of the two amendments is much clearer on that, because it refers to the previous election. The amendments, therefore, make sense from that point of view. While I am referring to the initial remarks of the hon. Member for Battersea, I also pay tribute to the late Lord Mackay of Ardbrecknish, who noticed this problem, brought it up and was sadly ignored. He was a great parliamentarian and a very clever politician, who is much missed in both Houses and in the political firmament generally.

The lack of clarity worries me considerably. In considering triggering, before 2000, I have had reason to look at the literature of each of the three main political parties that advises candidates when it is that they become candidates and when election expenses begin. I sympathise with the hon. Gentleman’s assertion that it is necessary to be precise about when election expenses begin. That is why triggering, as set out in clause 10, is so worrying. Due to lack of time, I will not quote what I might have quoted, but I will reserve, I hope, the duty of Her Majesty’s Opposition to bring the matter forward again on Report.

We are in danger this afternoon of not being able to consider important matters. However, I draw the Committee’s attention to the guidance produced by the Labour party in a document called, “The Way to Win—Labour’s Campaign Handbook for the 1990s”, which is when triggering was in effect. There is a paragraph in the document called, “The dangers of election law”. I always thought that we made laws to protect people, not to endanger them, but the way in which the then Opposition saw electoral law at that time was as dangerous. In the advice to candidates, the document says:

“Keeping on the right side of election law is vital. But it’s not an excuse to keep out of sight. Use your imagination to avoid the constraints imposed by election law on the candidate’s activity.”

That is what the Labour party told its candidates in the run-up to the 1997 general election.

My argument is that it is essential to have a law that does not leave itself open to the imagination of Labour candidates or of any other player on the political field during a general election and that it must be certain. Sadly, I do not consider that the hon. Gentleman’s amendments would improve clause 10, and we therefore cannot support them.

David Howarth (Liberal Democrat, Cambridge)

The Committee has only 24 minutes left, and I feel not only that will we not have a chance to discuss the matters later in the list, but that we do not have enough time to discuss this matter in the depth that it requires. I am sure that the Committee will agree that this is a matter to which we ought to return, in detail, on Report.

The hon. Member for Battersea has moved an amendment that assumes that triggering is not the right thing to do. I will not to spend the Committee’s time explaining why I think that he is right to make that assumption. That leaves only two other solutions to the problem of when local spending limits should kick in. One is the fixed-month solution that he suggested; the other is to say that permanent local spending limits should be there all the time.

I think that the permanent local spending limit should be the solution. The problem with the fixed-month solution that the hon. Gentleman has proposed is that we do not have fixed-term Parliaments. His proposal is certainly better than the suggestion made by the Electoral Commission, which said that the limit should apply a certain number of months before the election. One would have to be a mind reader to work out when that would apply.

Nevertheless, there is a different problem with the hon. Gentleman’s solution, which would apply a certain number of months after the previous one. It is obviously clearer, but it still gives an advantage to the incumbent party, because the leaders of the incumbent party—not necessarily the people who are standing for Parliament for that party—will have a much better idea about when the election will happen than the Opposition parties, and they can give signals to their candidates to spend. [Interruption.] We know what happened last year. Those were unusual circumstances, where the signals got confused on all sides.

The advantages of incumbency are great, and they include, on the whole, being in a better position to predict or understand the timing of elections than the Opposition. Therefore, Government candidates will be in a position to spend more earlier; they will not have to delay their spending to get it into the first regulated period. That would not be the case if the regulated period started so soon after the previous election that no one would plausibly call an election at that point. The trouble is that even the hon. Gentleman’s permanent suggestion—not the one that would apply to the five-year part—will not really achieve that end. As we have seen, it is still quite possible for Prime Ministers to think that they should call an election after two and a half years.

The only way to solve the problem properly is to ignore a fixed starting point and go to a third solution. Admittedly, it is one that the Electoral Commission says is difficult to administer and everyone says would raise problems with enforcement, but it is nevertheless clearer. It is to have a permanent local cap on spending. There are various ways to do that—some are proposed on today’s amendment paper—but the principle is clear.

Tony Lloyd (Labour, Manchester Central)

The hon. Gentleman might be coming to this. I have considerable sympathy with his proposal for a permanent cap over the life of a Parliament, but that is not on offer at the moment. Is he going to insist on the best at the price of the good?

David Howarth (Liberal Democrat, Cambridge)

The hon. Gentleman says that that proposal is not on offer, but technically it is, if we get enough time to discuss new clause 9. However, what we are going to do at this point? Not a lot, given the state of play on the arguments about consensus and not doing anything unless we all agree, which means that one party can veto any proposal.

My other point involves the difference between candidate spending and party spending. Campaigns now are not just about candidates. Candidate regulation involves proper 19th-century regulation of the extraordinary amounts that were spent by candidates in elections in the second half of that century. However, politics is not like that anymore. Candidate spending still occurs, and it ought to be regulated. If hon. Members want to see some candidate spending, they should go down to Richmond Park and see Mr. Goldsmith’s spending. Nevertheless, candidate spending is not the leading problem nationally. The leading problem nationally is party spending, directed at a particular constituency. That is how parties attempt to buy elections, and it needs to be regulated as well. It seems that the only way to do that is by separate, clear regulation of local party spending across the entire life of a Parliament.

Andrew Turner (Conservative, Isle of Wight)

Does the hon. Gentleman not understand that this is far more about national decisions on where money is spent than about the individual? What did we spend money on before the new system was introduced? The only difference is that my name is on the literature. Before, it had pictures of Conservatives, doing nice Conservative things, as well as lots of other people. Subsequently, my name is on it. What is the difference?

David Howarth (Liberal Democrat, Cambridge)

The hon. Gentleman makes an important point. Triggering or fixed-month solutions that deal with candidate spending will result only in his name being taken back off the leaflets. Party spending will continue. I am not saying as a consequence that there should be no control on candidate spending—we must have that as well—but the solution to the problem is a local party spending cap.

I want to make one final point. One thing that we have not and perhaps ought to have discussed is how the spending of third-party people—not Liberal Democrats, but people who are not technically involved with a party—comes into play. The present problem is that spending by such people, who support parties’ campaigns but do not partake of official party spending, is regulated only in the national cap and as part of election expenses.

We must be careful not to leave a gap there as well. Perhaps that is also the way that we need to go in order to regulate the spending of individuals who intend to become candidates later. We need to count them as regulated third parties and expand the definitions in the relevant part of PPERA, which would catch instances such as Mr. Goldsmith’s campaigns in west London.

Alan Whitehead (Labour, Southampton, Test)

At the moment, we have a platonic form of a possible all-encompassing solution to party funding, both national party funding and local party funding, including how national and local party funding might interact over the course of an entire electoral cycle. Indeed, in that platonic form I would agree with the hon. Member for Cambridge that a whole-term regulation of local spending is probably the right way forward.

Also, whole-term regulation of local spending incorporates the idea that national spending may be applied for local purposes and therefore ought to be regulated as if it were local spending. Indeed, if one had overall regulation with a choice between a cap on local spending and a cap on national spending, that idea would automatically be implemented.

Eleanor Laing (Conservative, Epping Forest)

Does the hon. Gentleman not perceive an unfairness if local spending by a candidate over the whole period that he is talking about is restricted while spending by the sitting Member of Parliament is not only unrestricted but backed by the taxpayer to the amount of £10,000 a year?

Alan Whitehead (Labour, Southampton, Test)

The spending by Members of Parliament is not unrestricted and it would not be unrestricted in the system that I have suggested might be encompassed by a whole-term spending restriction. Indeed, the idea of a whole-term spending restriction was set out in the Constitutional Affairs Committee report on party funding a little while ago.

As I am sure the hon. Lady is aware, spending on items such as newsletters is carefully regulated by this House, particularly by the efforts of the Standards and Privileges Committee to define carefully what is regarded as promotion of a person and what is regarded as a report of parliamentary activities. Under those circumstances and under the circumstances that I am about to describe, if a Member of Parliament used the resources of the House to go beyond telling the electorate what they have been doing as an MP, which is quite reasonable, that expenditure could well come under the heading of local election expenditure to promote that person’s candidature. A penalty would then be levied on that person automatically for going beyond what is reasonable in terms of parliamentary expenditure.

At the moment, there are a number of debates about whether that expenditure is within the right terms. A number of hon. Members have either been required to repay what they have spent on putting out their newsletters or, in certain instances, have had to apologise to the House for what they have put in them.

An additional sanction could well be that, in circumstances where there is a clear date-based trigger point, expenditure after that date will not relate to whether or not a person is a candidate, or an avowed candidate. As the hon. Member for Isle of Wight has said, there were practices in previous years where people were hiding behind metaphorical bushes, as it were, prior to the point that they declared themselves a candidate. In a sense, with a clear date-based trigger point, which is what we potentially have on offer in the real world and not in the platonic world of a whole-term cap, the real issue would not be whether a person had declared themselves as a candidate but what they had done to promote that candidature, in terms of expenditure, within that period. It would be the same for everybody and it would be the same within each constituency on a rubric that we already have, in terms of how much money can be spent.

Eleanor Laing (Conservative, Epping Forest)

I want the hon. Gentleman to clarify a point on which I am genuinely not certain. Does he believe that a candidate should not be able to spend any money before the trigger point in his amendment? The Member of Parliament would spend both taxpayers’ money and private money. To use taxpayers’ money, they would have to explain what they have done as a Member of Parliament without any party political advantage. None the less, it still gets the name of that person known in the locality as a Member of Parliament while, at the same time, the candidate would not be able to declare himself or herself as a candidate and would not be able to spend any money.

Alan Whitehead (Labour, Southampton, Test)

I fear that the hon. Lady has misunderstood the mechanism of the trigger point. There is a difference between a trigger mechanism and what is proposed in the amendments. The amendments work back, as it were, from a solid point in the river—or a post in the river—and that is the point at which one has to have a general election. After Dissolution, there is a period of restricted local expenditure, as is the case at present under PPERA. Before that, there is a pre-election period. Once that point has been reached, everybody—whether or not they have been a candidate previous to that—knows what the rules are on local expenditure. If they have been a candidate before that point, they can spend what they like. That is not regulated until that point has been reached. A sitting Member of Parliament is bound by exactly the same regulations except that they can put out a newsletter or similar, which is regulated by the House authorities, talking about what they have been doing in Parliament. If, after the period of pre-election regulation, that person goes beyond that, their expenditure could conceivably be counted as their candidate expenditure.

I suggest that that method overcomes the problem that was inherent—as the hon. Member for Cambridge said—in the Electoral Commission’s suggestion of the four-month period when one had to guess when the general election might be. In that case, one might get into problems of retrospection. In the present circumstances, if this were to become law before the next election, there would also be no issue of retrospection because a date would not have been reached by the time this went into law. Therefore, there is no question of anybody’s expenditure to date being caught within such an arrangement.

I was encouraged by what the hon. Lady said in her initial comments on the amendment, but she then did an Indiana Jones-like bound and said, “Therefore, we cannot accept it.” I thought that, in substance, her comments were rather supportive of the ideas in the amendment, and those potentially on offer in the real world of what we do now to regulate issues—we all know that there are problems, in our current electoral arrangements. That is the spirit in which the amendment is offered. Whether the issues work in the round depends, I hope, on the ability of parties to reach a consensus on how to operate such matters. The amendments provide a framework that reflects the consensus of a fair and level playing field for all concerned, clear points before and after which expenditure is regulated and a method for ensuring that the maximum that can be spent relates to a route that already exists and by which we can judge what happens constituency by constituency at local level.

Andrew Tyrie (Conservative, Chichester)

I agree with everybody who has said that we have not had enough time to consider this area of triggering, which is the most important issue in the Bill. It is extremely important that we do everything we can to give it salience on Report, and the attention that it deserves. I fear, with the shutter coming down at 4 o’clock, that the Minister will not get long to respond to my remarks on the amendments.

My guess is that the clause—not the amendment—is so controversial and mistaken that the whole Bill will be delayed. I would be surprised if the great hurry, which has afflicted every aspect of the Bill’s consideration, continues—three cheers, or at least two cheers, for that. I may be wrong, and we may see the Bill on the Floor of the House before Christmas, but I have my doubts. It is not unreasonable to describe the main proposal in the clause as blatantly partisan. That is why I would certainly favour going down the road of the amendment, which, as a Back Bencher, I can say has considerable merit—although I am sure that, as I always or sometimes do, I shall vote slavishly should we find ourselves in a Division.

This issue seems to be the meat of the Bill and why we have it. We have had newspaper reports saying that there must be a move against Ashcroftism, as it is described, and that this is the essential measure to tackle it. We have had all sorts of reports of that type, which I shall not go through one by one. This was not a good way to proceed. We should have had a chance to consult on the sort of idea embodied by the amendment, but we had no consultation at all on the triggering issue. When I asked the Secretary of State in the evidence session whether there had been any consultation, he said that there was and there was not. It would have been more helpful and, frankly, more accurate to say that there was not.

As I mentioned, I was involved in the talks. All that happened—not in, but outside, the talks—was that Sir Hayden asked the parties individually whether they had any views and wanted to open up the issue. He spoke to the three parties, and they all said that they did not particularly like the current arrangements—they had suggestions for improving them, but they did not want the issue to form part of the talks. Sir Hayden made that point clear publicly. I do not see how anyone can reasonably call that consultation.

The amendment proposed is much better than going back to the old rules, which would risk retrospection for the forthcoming election. We have had overwhelming evidence—available for many years, not just in what we have heard—not just from academics but from others that the old rules would be a disaster. Lord Bingham made such remarks in a case, and the Committee on Standards in Public Life has given unequivocal advice that we should not go down the road of the old rules. I shall not read it out, because I do not have time, but it is absolutely clear.

We have just had an interesting debate about whether the solution, from where we are, is to go to a fixed period, as proposed in the amendment, or to whole-Parliament limits, which is what the hon. Member for Southampton, Test was advocating as the alternative. He used a different phrase, but that is what he is suggesting at local level. The problem with whole-Parliament limits is that it is difficult to disaggregate them administratively at local level. Sir Hayden looked at that issue in the context of expenditure limits. He came to that conclusion—it may even have been something he published, but it is certainly in some of the unpublished papers, which we would very much like to see in the public domain, but which the Government are obstructing and blocking the public from seeing.

In the remaining seconds, I would like to make a point about incumbency—

Schedule 4

Schedule 5

Clause 18

Clause 19

New Clause 23

Michael Wills (Labour, North Swindon)

On a point of order, Sir Nicholas. We are coming to the end of our proceedings and now might be my last opportunity to thank you and your co-Chairmen, Mr. Cook, Mr. Benton and Mr. Atkinson, for what, all members of the Committee will agree, has been a most skilful chairmanship. We are all extremely grateful for the wit, skill and good humour with which you have helped steer the debate and guide the members of the Committee, and bring our proceedings to what has been a successful conclusion.

On behalf of the whole Committee, I thank the Badge Messengers, our Clerk, the Hansard reporters and our colleagues from the police. All have provided a particularly efficient service to the Committee, especially in view of the large number of amendments tabled by the Government and the Opposition. I realise the pressure that that puts on the Committee. We are extremely grateful to them. I particularly thank Opposition Front-Bench Members—the hon. Members for Huntingdon, for Epping Forest, for Cambridge and for Argyll and Bute—for their valuable and comprehensive contributions to the debate and the diligence with which they have scrutinised the Government’s proposals under the Bill.

I am particularly grateful to my hon. Friend the Member for Wrexham and his Opposition counterpart, the hon. Member for Rochford and Southend, East, for their hard work through the usual channels. I am also extremely grateful to the other members of the Committee who have tabled amendments and contributed to our discussions on this important Bill, including my hon. Friends. The various amendments have made an extremely useful contribution to our proceedings, particularly those tabled by my hon. Friends. The Bill has been immeasurably improved, and we are grateful for them.

All Opposition Members whose contributions have tested us in debate have made the Bill stronger and more robust. We have examined in detail most of the clauses. I can just manage to say that. I hope that members of the Committee agree that there has been a productive discussion from both sides. I recognise that we have committed ourselves to coming back to issues on Report, and I assure my hon. Friend the Member for Battersea that I mean what I say: we will be coming back to them. I hope that hon. Members also agree that, while we recognise there is clearly some way to go on some issues, we have made good progress. The Bill is in a much better shape now as a result of the amendments and the hard work that has been put in.

Finally, I thank the Ministry of Justice officials. I hope that the Committee agrees that they have done a remarkable job. The Bill has been difficult and complex in many ways. It has tested them to the limits. They have worked extremely hard, late into the night and night after night to make sure that the Bill is in good shape. We all owe them a great debt of gratitude.

Jonathan Djanogly (Conservative, Huntingdon)

Further to that point of order, Sir Nicholas. I thank you, Mr. Cook and Mr. Atkinson for chairing our proceedings over the past weeks. I also thank the Clerks, the Hansard reporters, the Doorkeepers and the police for providing the mechanics that have facilitated our deliberations. The Committee has been conducted in generally good humour and a positive spirit. I thank all hon. Members for their contributions. Yes, more time would have allowed for the eight unconsidered clauses to be covered, but we have covered a lot, in what have been pretty good debates. The Minister generally has been open-minded and recognised the need for consensus through our deliberations. That will involve him returning at the next stage with quite a lot of amendments, but we look forward to that.

David Howarth (Liberal Democrat, Cambridge)

Further to that point of order, Sir Nicholas. I would like to add my thanks, especially to you, Sir Nicholas, and to the other hon. Members who chaired the Committee. You have chaired the Committee in your usual exemplary fashion and I always enjoy serving under your chairmanship. I also thank the Minister for the open spirit with which he has approached the debate, and the Opposition for providing many hours of amusement, of one sort or another.

We have not made good progress, I am afraid to say. We have not reached a large number of clauses. More than that, we have not reached what are the central issues for many hon. Members and many members of the public. We have not debated properly the issue of party expenditure at the national and local level, although we almost got to it at the end of the previous debate. We have not debated caps on donations. We had a few moments on that earlier today, but we did not reach the new clause on it. We did not debate properly how to deal with foreign ownership of corporations—again, we had a few words on that—and we did not debate in any detail how to implement the other aspect of the Hayden Phillips compromise: dealing in a fair way with the relationship between the unions and the Labour party. I hope that those issues will be given priority on Report. We must show the public that we understand that those are the issues that matter for what the Bill must be about, which is getting big money out of politics and cleaning up politics.

To finish on a happier note, the spirit of the Committee has been very positive, and I hope that we will take the Bill onwards in that spirit.

Nicholas Winterton (Conservative, Macclesfield)

The last word lies with the Chairman. I thank the members of the Committee for their generous comments, which I will ensure are brought to the attention of my co-Chairmen. I thank all those responsible for the orderly conduct of the Committee. That is, the Clerks—who do a wonderful job; I do not think that the House fully appreciates their excellent work—the Hansard reporters, the police and the Doorkeepers, all of whom are essential to the orderly conduct of a Public Bill Committee.

May I congratulate those on the Front Benches, particularly the Minister? I always admire a Minister who deals with a Bill on his own. It certainly is not easy; he cannot get away. Like the Chairman, he has to sit there all the time, but perhaps unlike the Chairman, the Minister must be on top form and the master of his brief. All those on the Front Benches—the Official Opposition, the Liberal Democrats and the Government—have made this, for me, a very enjoyable Committee.

To end on a positive note, I really enjoy my job on the Chairmen’s Panel. One gets to know colleagues in all parts of the House very much better and one can establish an understanding and a relationship with them, which I believe is what makes Parliament a great place to be a Member of. I thank the Committee for the way in which it has dealt with the Bill. We did not debate it all, but I am sure that the Government will try to ensure that those parts to which the hon. Member for Cambridge drew attention get priority during the remaining stages of the Bill.