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Companies Bill [Lords]

I shall speak mainly to new clause 76 on corporate expenditure on lobbying. We do not know the exact extent of corporate lobbying in the UK, but we can get some idea of it from the fact that expenditures on public affairs have risen rapidly over the past 20 or 30 years. In the 1980s and 1990s, leading agencies were growing at between 20 and 40 per cent. a year, and according to a study done in 2000 by Miller and Dinan, in the last two decades of the 20th century, expenditure on public relations rose thirty-onefold. We do not know exactly how much of that expenditure was directed at lobbying Government on Government relations, as it is called, but as Miller and Dinan point out in their study, it is hardly a coincidence that that massive growth in expenditure coincided with the era of massive privatisations and deregulation of the financial services industry. Lobbying is now a very big business. The services offered by Government relations companies are extensive. A particular company—I have checked its website—gives these examples of its work: changing Government policy on payouts to Railtrack shareholders, changing telecommunications policy, defending the interests of companies involved in the private finance initiative, winning political approval for a takeover bid and getting changes in the Financial Services and Markets Bill. Whatever one thinks about those issues, one way or the other, one thing about them that cannot be doubted is that they are political. Corporate lobbying is an intervention in the political process, just as much as, and in some ways more than, giving money to a political party or a political campaign, yet the law controlling corporate political activity, which is in the Bill, covers only activity connected with elections or referendums. Lobbying is not just about issues that concern individual companies; it reaches the most important issues. During the past few weeks, there has been some controversy about the activities of certain oil companies—ExxonMobil in particular, and its alleged funding of climate change denial. That is an attempt to shift public policy in a way that favours the short-term interest of a company at the expense of everyone in the world. The growth of lobbying over the last generation brings into question the type of democracy we are. Sometimes, even when discussing the Bill, the Government, and even the Opposition, have given the impression that the purpose of Government is not to put forward and defend a certain view of the public interest, but is instead merely to navigate a path between clashing special interests. Earlier today, the Minister said something to the Conservative Opposition that I think implied that she feels that this is a problem in relation to how parts of the Bill have been handled—we have spent too much time working through what various lobby groups are saying and not enough on what we ourselves think. Lobbying is creating a form of corporatism in which rich and powerful bodies reinforce their power and wealth by seizing control of the access to Government and excluding others. As the membership of political parties falls, and as in many parties the influence of members on the policies of those parties has declined, the space left behind in the political system has been occupied by corporate lobbyists. The result is that politics is becoming a closed circle. In addition, lobbying is economically harmful. Most of the massive expenditures made on Government relations are aimed simply at redistributing wealth, usually from the poor to the rich. The aim is not to increase the productive capacity of the company or the country, but simply to shift wealth from one group to another. It is, in the jargon of economists, an example of non-productive rent-seeking. The resources devoted to lobbying would, in economic terms, be much better spent on developing new products, and on selling and marketing. Resources devoted to lobbying are, in economic terms, mainly waste. We must do something to bring lobbying under control. New clause 76 is only the start of our thinking about that process. Frankly, I do not expect it to be added to the Bill tonight, but I hope that it will be the start of an important debate. The new clause would oblige companies to report on their expenditure on lobbying, once it exceeded a certain limit set by the Secretary of State, and to obtain shareholder approval for lobbying expenditure above that limit, in a way that is equivalent to the regime that applies to political donations. In Standing Committee, there were various objections to our proposal. One was that companies would have to report trivial expenses, such as the cost of a cup of coffee with a Minister or a taxi to Parliament. We dealt with that in the new clause by allowing the Secretary of State to set a minimum limit. The objection was made that the measure would inhibit the flow of information from companies to the Government, or Parliament. To deal with that, we have given the Secretary of State power to exempt expenditure on meeting governmental or parliamentary requests for information. Outside the Committee, it was suggested that there was a gap in our proposal, because it did not deal with overseas companies operating in this country, and we plugged that gap by making it clear that it does apply to them. Such companies already have to register and report their activities. The object of new clause 76 is to bring more transparency to the world of lobbying, but it is of help to shareholders, too. As the Minister said, one of the reasons that political donations need shareholder approval is that directors’ political enthusiasms can adversely affect a company’s reputation. The same is potentially true of lobbying. One might expect shareholders to be more in favour of lobbying in their company’s interests than in favour of political donations, but they, too, might wonder whether managerial effort would be better spent on promoting and developing the company’s products than on lobbying Government. They, too, might wonder about the effects on a company’s reputation if it was found to have lobbied in a way that was enormously unpopular—for example, on the subject of climate change. The topic is important and, if the opportunity arises, I should like to press my new clause to a Division. I realise that its chances of success are slim, if Standing Committee was anything to go by, but I hope that it will be the start of a serious debate. I shall not press our other amendment in the group, amendment No. 687, to a Division. It is a drafting amendment, but an important one, and I hope that the Government understand the point behind it. It would amend clause 372, which is about the circumstances in which a company may make a political donation. Under the clause, a company must obtain a resolution of members. Subsection (3) is about what happens in a wholly owned subsidiary company but, obviously, in such companies, it is pointless to require a resolution of the shareholders separately from a resolution of the parent company, because they are one and the same thing. Clause 372(3) aims to prevent the requirement for two resolutions if one of them is pointless. Unfortunately, the wording of the provision it is not entirely clear:"““No resolution is required on the part of a company that is a wholly-owned subsidiary””" before it can make a donation. There therefore appears to be an enormous loophole, and one need do to avoid making a resolution in the form required by the law is set up a wholly owned subsidiary. I hope that that is not the intention and amendment No. 687 aims to put into legislation what we all believe should be the case. I conclude by thanking the Minister for closing the loophole on trade union political funds that we brought to her attention in Committee. I accept that it is unlikely that that loophole has been used, but it could be used in future, so I welcome the fact that the Government have taken the opportunity to close it.