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Political Parties: Funding

My Lords, with the leave of the House, I will now repeat a Statement made in another place by my right honourable friend the Lord Chancellor and Secretary of State for Justice on the funding of political parties. The Statement is as follows: ““Mr Speaker, the Government are today publishing a White Paper on party finance and expenditure in the United Kingdom. Copies are available in the Vote Office and on my department’s website. ““How our politics is funded is vital for the health of any democratic system, ours included. Over the last decade important steps have been taken towards achieving this. In 1998, the Committee on Standards in Public Life, under its then chairman, the noble Lord, Lord Neill of Bladen, published a landmark report, which went on to form the basis of the Political Parties, Elections and Referendums Act 2000. ““It must also be fundamental to the health of our democracy that the regime for regulating political parties should never be used as a partisan tool by one party against others and, instead, that change should be by way of broad cross-party agreement and achieved in a manner which carries wider public support. It was that spirit which led to the passage of the 2000 Act by consensus, and which continues to be a guiding principle for this and, I hope, any Government’s approach. ““The 2000 Act represented the first major overhaul of the regulation of party funding and expenditure for over 100 years. It has greatly helped to improve transparency and standards. But it has not proved sufficient. In the intervening period there has been continuing public disquiet about many aspects of how parties and politicians are funded. ““In March 2006, Sir Hayden Phillips was therefore invited by the then Prime Minister Tony Blair to conduct a further review, including as to whether state funding should be enhanced in return for a cap on donations. Sir Hayden’s final report was published in this House on 15 March 2007. It made major recommendations for reform of the Electoral Commission, for tightening of controls on expenditure, for greater transparency and for a gradual move to enhanced state funding linked to a cap on donations. ““All parties explicitly welcomed Sir Hayden’s report and accepted its main recommendations, including those for cross-party talks chaired by him to take forward the report’s recommendations. ““These talks proceeded satisfactorily until the Summer Recess. Sir Hayden then issued detailed proposals based on what he judged might form the basis for a consensus between the parties. It is a matter of great regret that in late October one of the parties decided to walk out of the talks, making agreement impossible. ““Against this background Her Majesty’s Government undertook in the Queen’s Speech to bring forward proposals on party finance and expenditure. This White Paper is the result. It proposes measures to improve the regulatory system. It sets out the Government’s aspiration for long-term comprehensive reform, building on the model proposed by Sir Hayden Phillips. In those areas where the Government believe broad consensus exists, it outlines plans to bring forward immediate legislation, including reform of the Electoral Commission and more effective controls on candidate spending. ““It is the excessive spending by parties and candidates which gives rise to the wider problems with party finance which we see today. Repeated independent reviews—including those from Sir Hayden Phillips, the Committee on Standards in Public Life and the Constitutional Affairs Committee—have called the problem one of a ‘spending arms race’, although some individuals still question its existence. A spending arms race is evident within each electoral cycle. As Sir Hayden’s report said, spending by the two largest parties was £90 million between them in the 12 months preceding the 2005 election, up from £65 million in the 12 months before the 2001 election. That was despite the fact that the campaign limit was set at £20 million for each party. Although parties did not act unlawfully, their ability to spend well above the campaign spending limit in the Act reveals a problem with the rules. In the interests of democracy, we need finally to achieve what all parties had sought to do through the 2000 Act, and stop this damaging arms race. ““The White Paper proposes some important steps for immediate action. Strengthening the Electoral Commission will send a clear signal that politics and politicians are effectively scrutinised—never above the law. The Electoral Commission will have robust civil sanctions to deploy, with criminal proceedings as an alternative. The commission will have more effective investigatory powers, enabling it to access information from anybody where it suspects a breach of the rules. Its governance arrangements will be overhauled better to ensure that there is greater practical experience available to it. The Committee on Standards in Public Life, the Constitutional Affairs Select Committee and Sir Hayden Phillips all recommended that the commission would benefit from the knowledge and judgment of individuals with political backgrounds. So we propose, as the Committee on Standards in Public Life recommended, the appointment of four commissioners with recent political experience and fewer restrictions on staff appointments. Far from politicising the commission, this will, in fact, enable the commission better to understand the people it is regulating and so help it to do a more effective job. ““There has been widespread concern that a loophole in the 2000 Act has allowed certain unincorporated associations to obscure the original source of donations to parties. As the Phillips review proposed, these will be better regulated, as will third-party campaigning organisations. ““Let me turn to spending by parties. In 2000, when I took through the Political Parties, Elections and Referendums Act, all believed that we were, in the words of the report of the noble Lord, Lord Neill, ““buttressing”” the existing restrictions on spending including those contained in the Representation of the People Act 1983 and its predecessors. What we did not foresee at that time was the likelihood of significant increased and unregulated candidate spending as a result of the detailed drafting of the Bill; though from the Conservative Front Bench, the late Lord Mackay of Ardbrecknish, sought to alert us to this problem by moving a clarifying amendment on behalf of his party. The White Paper therefore proposes a return to the system of ““triggering””, which will regulate all candidates’ spending directed towards electoral success and which was a key feature of the previous Administration’s 1983 Act. ““A stronger, more focused Electoral Commission will help to ensure that the previous uncertainty about these rules will be avoided. In parallel with this, we propose to re-examine the list of activities which are defined as campaign spending. ““Let me turn to the question of introducing donation caps in return for enhanced state funding. To do this, we would have to have not only all the main parties with us, but the public—the taxpayer—as well. This is not the case at present. We are very ready to have that debate and, indeed, to discuss donation caps at a lower level than Sir Hayden recommended, but that will require us to come together to have the debate between the parties and the public. ““My intention is to introduce a Bill before this Summer Recess, but with its Second Reading in the early autumn and the other stages of the Bill carried over into the next Session. This will allow ample opportunity for scrutiny. ““By any international comparison the standards of our political system have long been high, and nothing infuriates most Members of Parliament, local councillors and especially the thousands of unpaid voluntary activists in all parties more than the fact that their work and good faith can be tainted by the failures of a very few. But perceptions matter hugely. So I hope the whole House recognises the imperative in this situation of strengthening the probity of British politics and of people’s faith in our democratic process as a whole. That is the principal aim of this White Paper and we hope that all parties will support us in this endeavour. I commend this Statement and the White Paper to the House””. My Lords, that concludes the Statement.