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26 Jun 2002 : Column 260WH

Political Party Funding

11 am

Matthew Taylor (Truro and St. Austell): I start by saying that I welcome the debate. Given the interest of several hon. Members who hope to participate, I know that the subject is a matter of considerable interest and concern throughout the House. That is indicated also by previous debates on ten-minute rule Bills and Adjournment debates on the subject. Those debates had one thing in common; they were serious efforts to address the real issues that surround state funding of political parties, the problems of the present system and the public's perception that the emphasis is on scrabbling around for large amounts from a few individuals which raises worries about undue influence or access being offered or asked for in return.

It was notable from those debates that although political warfare outside the debates is often concentrated on individual examples and criticism of the Government of the time—we can all think of allegations and scandals of possible sleaze and corruption—the debates themselves did not focus on that, but on solutions. I plan to do the same today.

This debate is being held at an important time, because we are clearly entering a process in which there is great focus on major changes that might take place to the basis on which political parties are funded. Research has been undertaken by organisations such as the Institute for Public Policy Research. The Electoral Commission is about to embark on a serious piece of research on both the overall spend of political parties during elections and how parties raise the money. There will be lengthy deliberations, but the process is starting to kick off and the commission will reach its conclusions toward the end of next year. This is an appropriate time for the House to consider the issue.

The reason to hold the debate is perfectly apparent. At a time of declining membership, political parties' fundraising efforts are increasingly focused on small numbers of individuals who are able to pay large amounts. In the past, fundraising was focused on businesses and trade unions, but all parties—especially the major parties—are now focused on encouraging a tiny number of personally wealthy individuals to make very large donations.

At the time of the last election—to give a sense of scale—some individuals made single donations that were more than my party could spend in total; £5 million. That raises worries that affect us all, including my party. Such donations raise the question of what individuals want and might be given in return. That adds to a general reputation that politicians are corrupt and that favours are offered in return for money. I suspect that most members of the population do not draw a great distinction between donations to political organisations and the thought that the party might be in someone's back pocket, although I do not believe that that is the case.

Previous work on the issue was essentially about greater transparency and exposing donations to the light of day. The Neill committee report recommendation to put all donations on the record has not delivered the solution that was expected. It made the process more public, which means that criticisms are

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there to be made. The major reason that the present Government have suffered so much is not that they are any different from any other Government, but simply that they are the first Government to have put the information so publicly on record. Future Governments will suffer in exactly the same way—

Mr. Jim Murphy (Eastwood): More.

Matthew Taylor : Possibly more, as the hon. Gentleman suggests. All political parties raise donations. Opposition parties raise less, because they are in opposition, and, perhaps more importantly, because they are less liable to be asked what favour is involved, as Opposition parties can, by definition, offer less. Nevertheless, the process corrupts the reputation of all political parties, and it is time to bring it to an end.

I believe that partly because I believe that those questions are real. It is hard to understand how a party treasurer or leadership that is desperate for funds does not leave at least a crack open for someone to push for something that is in their interests. At the very least, they will have a level of access that no other person is likely to have; a seat at the top table or personal meetings with Ministers, who undoubtedly—indeed, overwhelmingly—intend to do no more than perhaps say, "Thank you."

An even more important reason for tackling the issue is the creeping process of state funding for political parties. The proportion of funding of political parties undertaken by the state is rising rapidly, but by the back door, and not with public support, a Bill in the House or in a way that has been properly open to public scrutiny. I am not suggesting that the process is secret, but funding is happening in ways that do not involve an announcement that we are moving to a formal system of restricting big donations and replacing them with state support. It is happening with an increase in Short money; huge increases in the case of the Opposition parties. There has been a huge increase in taxpayer-funded political advisers for Ministers, so it is not only Opposition parties that are benefiting; the Government are too.

Research funding has been introduced, and I hear that there may be further increases relating to the introduction of information technology by political parties and the training of activists and officials. All those ways of funding avoid having to make the big announcement that we are going to change the political system, and they do not make the big and necessary change which is to stop the whiff of corruption that surrounds the desperate search for a small number of multi-millionaire donors.

The system is highly undemocratic. It rewards the establishment, of which all of us present are part, in one form or another. It rewards the status quo and penalises those who might try to challenge it. It is extraordinary that the research money explicitly relates to the work of political parties in developing European manifestos and manifestos for Scotland and Wales, but is tied to representation in this place. Organisations such as the Green party or the UK Independence party are excluded, even though the money will help us develop manifesto policies for elections to bodies to which they are elected and in relation to which they compete.

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The current system is the worst of all worlds. The whiff of corruption and the desperate search for multi-millionaire donors remain. The current development of central state funding rewards the status quo and is unattached to proper democratic developments and the wishes of the electorate and does not prevent any emerging problems.

What could and should be done? I strongly believe that—as others in the House, from all parts of the party spectrum have argued—we need to end donations of such a size as to suggest that they might influence party or Government policy. That means keeping them relatively small; to thousands of pounds, not tens of thousands, and certainly not hundreds of thousands or millions. I believe that the public are looking for a situation where donations are on a small enough scale that there can be no suggestion or belief that they could possibly influence Government, or the policy of Opposition parties, or that sums of money can buy one's way to the top table of influence; they will be insufficient to do so.

If we are to make that change, it is equally apparent that in a vibrant, functioning democracy, political parties need to be able to raise sufficient funds to do all the work of a democracy. Incidentally, that includes campaigning. The idea that we should fund political parties for everything except the campaign seems to be nonsense. Ultimately, the campaign itself is the most vital ingredient of democracy. The counter-arguments between the political parties, and their ability to communicate those arguments allow the electorate to take their decision. A manifesto of which no one has ever heard, or a policy of which no one is aware, is not part of the process that delivers democratic government.

The campaigning process is important. Therefore, we need a system that will bring in the necessary funding to allow that. If we cut donations to very small levels and do nothing else, I believe that we will not achieve such a vibrant, functioning democracy. The latest figures from the Conservative party show that of their funding of £20 million in a general election year, £1.4 million came from small donations from individual figures. Similar figures could be given for any of the political parties. I use those figures because they are the ones that have recently been analysed.

I believe that we need a system of match funding in which the state links any funding it gives to the individual small-scale donations that are raised. I do not suggest that the rate should necessarily be £1 for £1, 30p for £1 or £3 for £1. The rate will be determined by proper debate about what we need to raise and spend so that political parties can work. That debate has to be tied to the work of the Electoral Commission on the capping of spending by political parties. We need to look at what they can reasonably raise, and what they reasonably need to spend. Clearly, there should be a limit on how much can be raised. If we are going to cap how much parties can spend, there is a limit to how far state funding will go.

Equally, it is important that the funding is tied to legitimate political parties, in the sense that they genuinely contest elections. It may be that, whether it relates to the Scottish Parliament, the Welsh Assembly or this place, there is a minimum requirement to contest seats and attain a minimum level of support. I am not trying to exclude groups because they have an extreme

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view. I am simply saying that we do not want people to set up pseudo-parties, as we have seen in some parts of the world, to access funds to buy themselves a holiday home, a pensioners' rest home or one of the other examples that we have seen.

I have heard an argument that the proposal might help some extreme groups; I would say that we have to contest with them democratically. I would point out that the present system has the potential for one multi-millionaire to fund the British National party, the National Front or any other party at higher levels than the existing political mainstream parties. It is just a matter of chance whether someone comes along with sufficient money to do so.

Under the system that I propose, it is a question of whether they can recruit sufficient individual members willing to put themselves up publicly as party donors, in order to win match funding. I do not believe that the extremists in this country can win that membership support. All the evidence is quite to the contrary. If a group such as the Greens, which has developed in relatively recent decades, could build up membership and a measure of electoral success, why should it not be able to obtain funding in the same way as those of us who are already privileged to be here already? It should be all about the ability to find people who will join, support and make small donations to groups that reflect their political beliefs.

So far, I have made arguments very similar to those of other hon. Members, but the reason, above all, why I wanted to take the opportunity to make my argument was to highlight another issue, on which I shall finish. It is my belief that there have been a couple of major drivers affecting turnout that have tended to be under-stressed. One is a loss of belief in the political system itself. That loss of belief is very closely tied to the feeling that all political parties are much the same and, above all, that they are all in it for themselves; they are all scrabbling around with multi-millionaires and are not really interested in the concerns of ordinary people. All of us here know that that is generally far from true and that we all deal with individual cases all the time, which is our primary job. However, that is the perception and it has gone a long way towards distancing the electorate from the political parties.

The second factor relates to the fact that people are less involved in community groups. That has affected not only political parties, but everything from the Women's Institute to the local parish council. People are less willing to get involved in the community because they can make other choices; through television, through video and through the ability to get in the car and travel much longer distances to join friends and relatives. They no longer have to be involved in the local community in the same way. Because of that, we have seen a huge decline in political membership and in activity on the doorstop. As a response, political parties have increasingly moved their smaller and smaller numbers of troops to a handful of political seats that they think can be won in any election. In a safe seat, people are unlikely to see anyone knocking on the door or much in the way of literature because the activists there will have been asked to go to the next-door seat, which might be more easily won or lost.

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We see that happening as a strategy in all the political parties. We know that where there are the highest levels of political activity, there are the highest election turnouts. Where there are the lowest levels of political activity, there are the lowest turnouts. A process of refocusing the political parties so that they move away from a large number of people concentrating on a small number of individual donors—the high donation unit—and concentrate instead on building individual membership will in itself not only deliver a sleaze-free political funding system, but generate a much higher level of political activity on the ground. Parties will then be forced to concentrate on building membership in order to fund their activities, rather than on a few dinners with multi-millionaires, which is what happens with much of the effort at the present time.

I have some figures, which, again, by chance, relate to the Conservative party. However, I make no particular criticism of the Conservative party. Figures recently released on the breakdown of staff show that, in 1997, the Conservative party employed 59 regional and 147 central staff, but that that has now changed to 18 regional and 172 central staff. That centralisation process is happening across the board.

If we are to have a genuinely vibrant democracy, we need not only to move away from tying funding to very wealthy individuals who inevitably seek some return, but to rebuild the membership on the ground to deliver the electoral message in the conventional way. We should never forget that the original reason for the development of mass-membership parties was the extension of the franchise and the need to get the vote out. It is not simply the case that, somehow, people today are massively less willing to vote. It is also true that political parties spend much less time persuading large numbers of people on the ground to become involved in getting people out to vote. That has made a very significant difference.

Mr. Andrew Love (Edmonton): I apologise to the hon. Gentleman for missing the start of his speech. I understand his concern about the very large donations that have caused difficulty across the political spectrum, but how can we move towards a system of state funding, as he suggests, at a time when the standing of politics and politicians is so low? Surely he recognises the considerable difficulties with public opinion in moving in that direction.

Matthew Taylor : I am well aware of the concerns expressed by the hon. Gentleman and, not least, the Government. We have a chicken-and-egg situation; if we are not prepared to tackle the reasons for the decline in public standing, one of which is the issue of funding, we will never solve the problem. Therefore, the issue must be faced head on. In the scale of things, we are talking about tiny amounts of money. All in, £10 million or £20 million might be needed to achieve the process.

Crucially, it is exactly that concern that is leading to the development of state funding in a much less upfront way. Back-door funding does not tie in with building membership on the ground or developing dynamic, active political parties. It leads to the freezing of the existing system and the development of central funding of political parties, which is exactly what has led to the near-death of active memberships in other countries in

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which parties have such funding. If hon. Members want a lot of money to go to central headquarters—untied to membership and freezing the success of existing political structures—they should allow development to continue as it is. It does not confront the electorate, and the Daily Mail and The Daily Telegraph are less likely to run attacking editorials on politicians because we have introduced state funding. But the truth is that we are introducing state funding, although we are doing it in the worst possible way.

It is time that the House said no to that and developed a system that is about making parties concentrate again on attracting and involving ordinary members. That is how we will deliver a vibrant democracy. We have to take it on the chin, because people would far prefer the results of that system to the present accumulation of sleaze that affects every Government, no matter how principled their intentions may be.

11.22 am

Caroline Flint (Don Valley): One thing is certainly true; democracy is not cheap. I have been a member of the Labour party since 1979 and have always been a grassroots activist. I cannot speak for the Liberal Democrats, but we in the Labour party value our grassroots activists. I see my hon. Friend the Parliamentary Secretary, the Member for Doncaster, Central (Ms Winterton), in her place; I can assure the hon. Member for Truro and St. Austell (Matthew Taylor) that, in Doncaster, we canvass and campaign, even though we are in a safe Labour area. That is probably why the Liberal Democrats have not had much success in Doncaster.

I congratulate the hon. Member for Truro and St. Austell on securing the debate today. We need a debate in which we can explore several different options, because the subject is complex. Let us have an honest debate about the different ways in which the state funds parties, whether through Short money, MPs' salaries or, at local government level, time off for councillors to carry out their civic responsibilities and allowances for councillors to do their job.

Perhaps we should consider an audit of what is currently provided to allow democracy to flourish. It could be the starting point for further exploration across the party divide of how we can address some of the issues that the hon. Gentleman raised. There is no doubt that we will have a job in achieving public support and confidence in any such moves. Even an audit might cause certain negative reactions. It would be interesting to see how the press and broadcasting media respond to it.

As I said at the outset, democracy is not cheap. In 1997, I had the opportunity to visit America as part of an all-party delegation. We met representatives from Congress and state legislatures. I asked some of them about funding in America, why so much had to be spent and why a reasonable cap was not put on the amount of money allowed to be raised and spent. I was told that a price could not be put on democracy; my response was that if the price were the same for everyone, we would all have an equal chance within the framework.

I am conscious that other hon. Members want to speak, but I want to make a few points about some of the areas that could be looked at. The cap on election spending could be revisited to see whether it should be reduced.

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In the debate and in the language we use, it is easy to play to an agenda of defending our position as politicians. Dare I say it, but most of the people I meet from all parties in this House try to do a decent job and represent their constituents well. Across the party divide, we may have different ideas of what we want and how to get it, but we generally have a set of beliefs that drives our politics. Many of those beliefs are tied into how we believe communities can better be represented and served by appropriate laws, depending on where we come from. We should not allow ourselves to fall into the trap of always defending ourselves against the negative backlash against politicians. Whatever we do, politicians will not top a poll of people's favourite profession. Such polls, even on the august "Today" programme, are rather flimsy in their contribution to the general debate about politics.

We should use language that can be branded—perhaps that is not the right word—democracy-building and explain how we can achieve that. I have a couple of ideas to throw into the pot. I believe that individuals who want to make a contribution to a political party should be served in the same way as those who give to charity through the gift aid programme. People often say they are not interested in politics and do not want to take part, but we do not encourage activity and involvement in politics by suggesting that giving to a political party is not as nice as giving to a charity. I fully support charitable giving, but we could consider whether individual donations of up to, for example, £5,000 should be tax-free.

Mr. William Cash (Stone): Does the hon. Lady remember that the Neill committee suggested in 1998 that there should be tax relief for donations? I am not trying to cause her difficulty—I am sure that I could not even if I tried—but the proposal was turned down by the Labour Government.

Caroline Flint (Don Valley): As I have said, today we are debating how to move forward. I am making my contribution to that debate and I believe that such matters are up for discussion again. The Labour party never thought, having had openness and transparency in our funding rules before 1997, that when we came into government and proposed legislation to make political funding more transparent, that would not calm or reassure people, but would lead to negative press comment so that everyone who gives money is scrutinised. That is not good for democracy.

The debate is open again and we should revisit areas against which political parties, including my own, may have set their face. I am referring to relatively small donations that people may want to make because they feel it is their civic duty; those people are interested in politics and want to be part of it.

Another area that is worth considering is the establishment of what I would call a democracy fund. By that, I mean that individual donors or companies that are interested in supporting politics or a political party could donate to a democracy fund, which could be administered by the Electoral Commission and would be like a blind trust. Donors would use the commission as a third party and could designate that they want the money to go to the Liberal Democrats, Labour or the

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Conservatives. That would then be sent via the Electoral Commission and, as far as possible, it would not be in the public domain.

Companies or individuals might wish to give money to support democracy or political parties in general, so a formula could be devised to decide how the commission should divide such money between the political parties. That could be based on the number of MPs or councillors, or on their share of the vote. That is one way in which the larger donations could be channelled to move us away from the present publicity, which does none of us any good.

Although I believe that we should do an audit of how the state supports democracy to help inform the debate, I am not sure if state funding could totally provide for political parties. I am also unsure about whether we could win the argument on what matters parties need to fund but that the public may not want to fund. There will need to be a mixture of state funding that should, if possible, be agreed across the party divide, as well as a framework in which people can support their party's activities.

We should support the people who, individually and in small ways, support their parties of choice through the tax system, and establishing a democracy fund that allows the Electoral Commission to act as a broker for large donations might be a way of overcoming the negative publicity that has been continually fed to us for what seems like a very long time.

11.31 am

Mr. Robert Syms (Poole): I also welcome the debate, which was intelligently introduced by the hon. Member for Truro and St. Austell (Matthew Taylor). The subject needs a wide public debate. My hon. Friend the Member for Stone (Mr. Cash) will be the Conservative's official spokesman, but I am vice-chairman of the party and will say something about our position.

We are opposed to the principle of state funding. Why should taxpayers who do not subscribe to the views and values of my party be forced to contribute towards it? Do we think that people's priorities—which may include the national health service, the police and schools—should be displaced by taking money from taxpayers, many of whom may not be particularly well off, and contributing it towards political parties? There may be less hostility towards giving to a mainstream party, but such a funding system always includes the possibility of extremists—whether they are the British National party or Sinn Fein—benefiting from state funding. When listening to the hon. Member for Truro and St. Austell, I wondered whether the contribution to the parties would come out of the 1p rise in income tax advocated by the Liberal Democrats. I am not convinced by any of the arguments.

I fear that a major state contribution would dissuade many people from making smaller contributions in the constituencies; they would not want to contribute because the state was supporting the parties. There is that danger, although how the scheme is designed would be relevant. We have heard a great deal about how it would make politics rather more honest. People talk about purifying the system, but there is a danger that

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state funding could ossify the system. State funding would tend to go to political party headquarters, which would inevitably build up power at central office, the Labour office in Millbank and other major centres. That would not be good for a political party's diversity and grass roots.

Looking abroad, we can see that whether political systems are corrupt has much to do with the culture of the country. Germany has heavy state funding and yet, recently, Chancellor Kohl and many others within the German system have had problems because of illegal funding. Even today Kohl is in difficulty because he will not give up certain donors to the CDU because of the problems of funding in the past.

There have just been presidential and Assembly elections in France, and there has been some comment about the French President, some of the funding arrangements and the use of that money in France. The French system is funded fairly heavily by taxpayers. Indeed, one of the driving forces behind the centre-right coalition to support the President in the recent Assembly elections was that for every seat won, there would be a matching contribution from the state. Culture has a lot to do with it. Despite what one reads in the papers, I believe that the culture of British politics is honest. There is not a vast number of former colleagues or former party treasurers in jail at the moment. The reason is that although sometimes a party's activities do not smell as good as they could, no one has been convicted of any wrongdoing. By and large, we have pretty high standards in the United Kingdom.

As has been mentioned, we have Short money and Cranbourne money. The reason for that is simple. We have an over-mighty Government system, backed by the full power of intelligent civil servants. If one believes in a democracy of Government and robust Opposition, there should be some contribution towards the policy making of the parties that may form today's Opposition and tomorrow's Government. That has been our tradition of recent years and is not unreasonable. My party is also fairly relaxed about funding some degree of foreign travel for politicians so that they can look at the alternative systems abroad, moving forward the e-democracy agenda and modernising things.

There may be a logic, which the hon. Member for Truro and St. Austell has mentioned, in training councillors. They fulfil important roles in a large corporate structure that delivers many important services. There is always a balance to be struck and it is a matter of where one draws the boundaries. I do not think that the case has yet been made for saying that money should be given to political parties for overtly campaigning purposes. I tend to take a different view about large donors. People have given to all political parties; even the Liberal Democrats have been the beneficiaries of large donors in the past. People give their hard-earned money to a cause in which they believe and are often vilified, possibly unjustly.

If one tells people who may well have deep pockets that they cannot contribute, one must also question whether trade unions should be able to contribute. If we put caps on individuals, what do we do about political action committees or pressure groups? A group that wished to ban hunting could easily raise a lot of money to give to a political party. There are many issues here

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and I do not see why wealthy individuals should be excluded from spending their money in the way that they want. Some people would want to buy villas; others will want to give to political parties. We have been pretty well governed over the last 50 to 100 years—one need only look at Argentina to see a state that is very badly governed—and we have a lot to be proud of within the UK.

I do not think that the case for state funding has been made, although there are different ways to deliver a particular outcome. The point my hon. Friend the Member for Stone made about the Neill committee's reference to tax advantages might be a means of putting money through to small individual contributors, rather than centrally through the parties. By and large my party does not think that the argument has been made. As the hon. Member for Don Valley (Caroline Flint) said, supporting political parties would not be popular. However, political movements should be sufficiently vibrant and successful to be able to raise the money needed to run political campaigns.

In any case, we all have a limited budget to spend on general elections. I know of no party that could not put up some 600 candidates at the general election. I do not know whether there have always been sufficient funds for an essential national campaign. However, all political parties have been able to fund at least their local campaigns by selling jam, cheese, wines and so on. In Poole, there are endless raffle tickets from my association. This is an interesting debate, but I do not think that the case has yet been made. We should be cautious before we go down this road, because the consequences may adversely affect the vibrant grassroots politics that we need.

11.40 am

Dr. Alan Whitehead (Southampton, Test): I hope that my contribution will at least be interesting in terms of the sociology of Parliament. I replied as a Minister to an Adjournment debate on 22 May, which the hon. Member for Chichester (Mr. Tyrie) proposed. Hon. Members may be interested to hear what I have to say a month later as a non-Minister on what is, in essence, the same subject. As I said at the time, the hon. Gentleman's contribution to that debate was thoughtful and substantially right. If he contributes this morning, he may want to add to his comment that there is a crisis, with which I concur.

We must be clear that there is a crisis in the future funding of political parties. Funding for political parties, as established in recent years, will not dry up overnight. That crisis will not suddenly appear upon us tomorrow, but the rules on disclosure and all the paraphernalia that goes with them mean that eventually it will. Some parties may believe that they can buck the trend; the remarks made by the hon. Member for Poole (Mr. Syms) seem to suggest that that is in the mind of the Conservative party. However, a substantial donor to that party recently said that the Government had made it almost impossible for companies to give money without appearing corrupt and that they now had to justify it to their shareholders. However, with all the allegations about sleaze, they could not say that it helped to gain access to, or keep up their profile with, the Government. It was a bureaucratic nightmare, and not worth the hassle.

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I agree with my hon. Friend the Member for Don Valley (Caroline Flint) that the arrangements that our party made before legislation was enacted in 1997 are a good thing, and shed much light on the question of donations. It is true that the public do not want companies or individuals buying their way to political influence. Nor do they believe that large donations are given just because the donor felt like it. We are in this conundrum for honourable reasons. Donations have largely been cleaned up and made more transparent, so the problems surrounding them will largely disappear. Does that matter? Yes, it does. In his previous contribution, the hon. Member for Chichester pointed out that politics in general is alive and well as a public activity, but that party politics is not. We should ask ourselves why politics in general is alive and well.

The hon. Member for Truro and St. Austell (Matthew Taylor) suggested that participation in communities has dropped off. That is true of communities of place, but all the evidence suggests that that is not true of the activities that relate to social capital more generally. People are engaging in different activities that are nevertheless substantial and vibrant. They are active in what one might call participative politics; making representations and petitions, and engaging in campaigns for organisations. The question that we must ask is to whom are those people making representations when they are acting in their role as participative politicians. The answer is political parties; local government, the Opposition in Parliament, the Government or whatever. In other words, they make representations to the agencies whereby the representative process is determined.

If we believe that this country can have a representative process without political parties, we are bucking the trend of every representative or democratic process throughout history. Even in the Athenian agora, two parties were represented to try to organise different ideas for representation in the democratic debating processes of the Athenian body politic.

The politics of a body that seeks representation must be different from the politics of a pressure group that participates in the democratic process, but it will incorporate many features of the politics of such a group. The hon. Member for Truro and St. Austell mentioned that one activity of a political party is campaigning. In many ways, that goes alongside the processes undertaken by participative political organisations, but it is only part of the process that culminates in the seeking of representation and political power nationally or locally.

A body that seeks representation must have an overall programme that mediates between the concerns of the various participative political groups. Communities and pressure groups cannot run towns and cities, or indeed national Governments. The process of deciding on the priorities of various participative groups must be undertaken through the representative process. However, there seems to be a crisis not only of funding, but in the imbalance between the participative and representative processes.

Mr. Cash : Is the hon. Gentleman perhaps falling into a slight trap in his argument, in that part of the problem is the overwhipping of decision making in the parliamentary system? A great deal of disillusionment is

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caused when the electorate know the reason why, for example, he is taking a slightly divergent view now from the position that he took in government; that is part and parcel of that problem. I am not criticising the hon. Gentleman. I am simply saying that the question of why there is low turnout and cynicism is somewhat deeper than that of where the money comes from.

Dr. Whitehead : The hon. Gentleman is certainly right to say that there is a deeper issue. We need to discuss a number of issues, but the position that I am taking this morning is not fundamentally different from what I was saying just a month ago. Perhaps I am expressing it in rather clearer terms. The hon. Gentleman talked about overwhipping, but he needs to relate that to the ideas that I have advanced.

The hon. Member for Wyre Forest (Dr. Taylor) achieved election as a result of a participative democratic campaign, but the idea of 600-odd people representing something similar in the Chamber and organising anything like the representative process is absurd. That would not happen. Instead, various people would coalesce to form parties to decide how a representative programme should be undertaken. We should not spend too much time considering the idea that loose whipping or, in some people's ideal world, the removal of political parties would somehow solve the crisis of representation, because that simply would not happen. It would not produce anything like a satisfactory representative process.

The result of the crisis is that most members of the public treat political parties as fixtures of the landscape, with mysterious people who are lobbied, pilloried or asked to do certain things, depending on how the public view their position at any particular time. Why they are there or how they have got there is not usually asked.

What can we do about the problem? How do we ensure that the process of representation is kept alive? Some hon. Members suggested a block grant, which I agree might well ossify political parties. A political party in Sweden receives block grant funding from the state but, because of the way in which the block grant system operates, it has not contested two general elections.

It is not a question of whether the state funds political parties, but of the circumstances under which it does. The hon. Member for Truro and St. Austell pointed out that, by accretion, we are funding—according to the hon. Member for Chichester—about 40 per cent. of the activities of political parties between elections and about 60 per cent. at elections. However, we are doing so under an unaccountable and ineffective block grant system, which replicates many of the problems in other countries that hon. Members criticised.

Clearly, the idea that participative democracy should be "of the people" and a representative democracy "of the state" is deemed inappropriate, yet surprisingly many voluntary organisations are effectively funded by the state—by the local authority, Home Office grants, project funding and so forth—without becoming clients of the state in the process.

The hon. Member for Chichester suggested matching funding on money raised through the activities of political parties, which is one way of looking at the

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problem. My hon. Friend the Member for North Warwickshire (Mr. O'Brien), now the Under-Secretary of State for Foreign and Commonwealth Affairs, has suggested a tick-box on tax returns, whereby people could tick a box that would give money either to a particular political party or to none. That strongly counters the hon. Member for Poole, who said that taxpayers would object to blocks of money being given to political parties with which they disagree. If taxpayers can play an active role in deciding whether their bit of tax should go to a particular party or to no party, it overcomes the objection. Furthermore, if political parties were incompetent in engaging the public in support for the political process, people would not tick any boxes and political parties generally would not secure large amounts of funding.

After this morning's debate, I am confident of drawing out two principles and one prediction. First, it is widely acknowledged that funding must relate to the effect of party activity; otherwise we will have a ghost system. Secondly, there must be a consensus; otherwise the temptations to free-ride on the initiative of a particular party while actually doing it down will be enormous. A unilateral decision by a party in government would be seen simply as a party in power voting money for itself. It is essential that the political community—inside and outside the House—debates the issues and that the debate ranges more widely than considerations of party advantage. Finally, my prediction is that it will happen, so we should take care to do it well.

11.53 am

Mr. Andrew Tyrie (Chichester): I have already participated in an Adjournment debate on this subject, so I shall not delay Westminster Hall for long today. I am grateful to the hon. Member for Southampton, Test (Dr. Whitehead) for his comments. I agree with virtually everything that he said.

I should like to make a few quick points. First, we cannot go on with the public perceiving political parties to be inherently corrupt. It is not just the short-term issue of Mittal, Ecclestone, Hinduja, Enron or PowderJect: it goes much deeper and is infecting respect for our entire polity. Whatever the reality, the perception is corroding trust in politicians generally. In any case, the public is partly right. Does anyone seriously believe that these donors never bend an ear and never have any influence? Of course not. One way or another, they manage to get privileged access to those with power and influence.

Secondly, everybody knows that honours are trafficked. Peerages can be bought and parties fund themselves partly from those donations. That is wholly unacceptable. Mass parties are dying—they are 10 per cent. of the size that they were 50 years ago—so the parties alone cannot finance themselves. It is not possible to fund political parties through individual subscriptions and no major democracy tries to do so any longer.

Thirdly, recent attempts to clean up politics where party donations are concerned have failed; with the best of intentions, they have made the situation worse. As the hon. Member for Southampton, Test said, the shareholder declaration rules have destroyed the broad

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base of small donations from companies. While there is a broad base, people do not believe that parties are dependent on each individual firm. Once that has gone, they do believe that the small number of large donations confers influence. The individual declaration rule's £5,000 threshold has swept away a range of people who would be prepared to donate money but are not willing to take the public flak for having done so. As a result, all parties have been thrown into the hands of a small number of large donors and the public perception of corruption has worsened. I am in favour of the transparency rules, but we should be under no illusion about the crisis that they have generated.

Point four is that the unacceptable practices that take place in order to fund political parties infect public perception of other issues—the standing of politicians and the credibility of the Government—and respect for all those in public life. We cannot carry on in that way.

What can be done? First, we must acknowledge the scale of the problem. That is what we are all trying to do today. Secondly, we must discard the myth that we would be crossing a Rubicon if we introduced state funding. I tried to show in an article in The Times, and I have shown elsewhere, that 40 per cent. of funding of political parties between elections and 60 per cent. of the campaigning costs of parties already comes in cash or kind from state sources.

Thirdly, we must work towards a system that encourages the recruitment of grassroots members; we must try to stabilise our party structure at that level in the course of introducing a state funding system. That is why I am in favour of match funding and I was delighted to hear that the Liberal Democrat party is too. Our view is shared by many in my party and, I suspect, by a large number in the Labour party. There is scope for agreement.

Fourthly, whatever we end up having to introduce, we must do it on the basis of firm caps on overall spending. We must not allow the perception to get about that very rich people can buy political parties. That will happen if there are no such caps.

The hon. Member for Don Valley (Caroline Flint) referred to what we can learn from the experience of the United States. She might like to read an interesting passage in the Neill committee report. The US has very firm caps on funding of political parties and political activity. However, those are circumvented under the first amendment, which has led to the proliferation of political action committees. I am deeply concerned about that matter; the Neill committee, although it addressed it, did not analyse it correctly. In addition, the introduction of the Human Rights Act into our law has worrying implications. In the 1998 Bowman case, the European Court of Human Rights ruled that in certain circumstances the UK's existing caps are illegal. That may set a precedent for erosion of the existing caps.

In the Bowman case, the defence of margin of appreciation was used. I shall not go into that, but we could not go much further if all our caps were illegal. I merely make the point that there is a danger in applying the Human Rights Act. Similarly, American attempts to place caps on spending have been destroyed or circumvented by reference to the first amendment in the Supreme Court.

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Mr. Cash : Perhaps I could help my hon. Friend with respect to the Human Rights Act. Lord Hoffmann made it clear in an important case—Secretary of State for the Home Department ex parte Simms and O'Brien—that the British Parliament is still able to amend that Act, provided that any amendment is clear and unambiguous. My hon. Friend said that we would have to accept the political cost, although I do not necessarily think that that applies, but we could ensure that we would not be trapped, were we subsequently to table amendments to remove the difficulties that he described.

Mr. Tyrie : I thought that something of a legal nature might draw my hon. Friend the Member for Stone (Mr. Cash) to his feet. I urge him to read the exchanges that took place on the matter in the Neill committee, which are extremely detailed and deal with the point made by my hon. Friend the Member for Poole (Mr. Syms). The extent to which the Human Rights Act may impinge on our ability to impose caps is a matter of considerable controversy among experts, and many leading political scientists and lawyers think that there is cause for concern; I put it no higher than that at the moment, because it is not yet a cause for alarm.

I shall just make one or two more points, because I have already had a good innings on this subject on other occasions. I strongly agree with my hon. Friend the Member for Poole that state funding is no elixir for curing the sickness of political corruption in any political system. He is right to say that there is corruption in many countries that already have state funding. He is right that the origins of corruption are much deeper than a country's structure and lie in its culture. There is no doubt, however, that the perception of corruption is deepening in this country. Action might assuage it, and we should act urgently. We cannot allow the impression to deepen that influence is for sale, and that political parties can be bought.

The Government already know that, and it is interesting that the hon. Member for Southampton, Test came to the Chamber to make another speech today. Why are they not acting? I suspect that it is because they do not want to take the political flak for introducing state funding. They want a coalition, so that they can share the political flak. I see that Labour Members are nodding; in agreement, I think. Of course, the public do not like politicians voting themselves money in any shape or form. Whoever takes the lead in introducing state funding will take the flak. Governments have to give a lead on such issues. There is no avoiding the flak; the governing party must take it on the nose. Whenever there is a row, for example about sleaze in the House, the governing party always ends up being hit harder than anyone else. The governing party must govern.

Martin Linton (Battersea): Will the hon. Gentleman give way?

Mr. Tyrie : I will not, because I am about to conclude.

If the Government propose a fair system, such as a system of match funding—I think the Liberal Democrats would agree with that, and many Conservative Members would go along with it—they will find that they have a huge amount of support and win the argument. Already, the pass has been sold on

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that by the increasing acceptance of the need for some tax relief on donations to political parties. If a fair hearing is given to the argument, I am confident that we can win it. If we win it, we will make the British political system less corrupt and better respected.

Mr. John Cummings (in the Chair): In calling the hon. Member for Bassetlaw (John Mann), I remind hon. Members that we are moving towards the closing speeches.

Mr. Paul Tyler (North Cornwall): On a point of order, Mr. Cummings. Is it not the custom that the last half-hour is allocated to the three Front Benchers? It is already four minutes past 12. Would not the Liberal Democrat spokesman normally be called by noon at the latest?

Mr. John Cummings (in the Chair): I am mindful of the fact that hon. Members have been waiting a considerable time to make contributions. If they adhere to my request, I am sure that everyone will be allocated time.

12.5 pm

John Mann (Bassetlaw): I will be extremely brief, even though people in the villages of Bassetlaw speak of nothing but the state funding of political parties.

Let me demonstrate my point by proposing that representatives of the three parties stick their election leaflets through people's letterboxes in the villages of Bassetlaw, and then ask voters, "Would you care to pay for the leaflet that we have chosen to give you? That will be your contribution to removing sleaze from British political life." I suspect that even I would have problems persuading the good people of Bassetlaw to pay, and I certainly would not envy Conservative colleagues who attempted to persuade them. That highlights the fundamental difference between electioneering and other forms of political activity. Any suggestion that the state should fund electioneering and political campaigning is fundamentally wrong and has no popular support.

There is a certain irony in hon. Members talking about the low standing of politicians, when those same hon. Members are the most enthusiastic about increasing the number of politicians by means of elected regional assemblies, elected mayors and an elected House of Lords. That irony will hit home, because the general public are somewhat cynical about the numbers of politicians and about attempts to increase them.

The examples of France and Germany have been well illustrated and demonstrate that state funding does not remove sleaze. However, the United States example is even more powerful. Changes were made before the 1996 presidential elections; I visited the country at the time to study state funding. The result of those changes was that the different political parties and politicians found different ways to get additional money. The new, tighter rules came in, but the amount of money doubled. Whatever rules are introduced on state funding, people will find other ways to give money, such as by using outside bodies.

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It has been said that the size of political parties is declining, but that is wrong; there is a short-term problem. The Labour party did not contest the majority of seats in the country until 1935, and the Liberal Democrat party did not contest all national seats until 1970. My family has been active in the Labour party since 1901, so I know that the "halcyon days of large party membership" is a myth. There have been periods of large membership and periods of small membership. In the 1950s, when all sides fiddled the figures, levels of active membership were extremely low. Hon. Members who look at the records at Warwick university and elsewhere, and at the membership books of constituency and branch Labour parties, will see how low the levels of active membership have sometimes been.

There is an alternative, which has been tried and tested for 100 years. There is a cap of about £10,000 on what we can spend in elections at constituency level, and that system works well. If we increased the amount to £30,000 or £40,000, people would start to spend that much. Setting the level at £10,000 creates fairness at the local level, but we have failed to impose a sufficiently low cap at the national level.

I would like party political broadcasts and billboards to be banned, and I have tabled an early-day motion on billboards, which has been signed by more than 30 hon. Members. I would also like paid advertising in newspapers to be banned. The most effective way to do that would be significantly to lower the national expenditure limit at elections. The present level of fundraising would then not be required, and politics would be much healthier.

12.8 pm

Mr. Paul Tyler (North Cornwall): I am grateful to my hon. Friend the Member for Truro and St. Austell (Matthew Taylor) for introducing a thoughtful and interesting debate, which is one of several that we have had on the subject. It should be encouraging that a remarkable degree of consensus is developing.

The hon. Member for Bassetlaw (John Mann) is probably the only person in the country who personally delivers his election address with his colleagues in his constituency. There is a huge amount of state funding, both in kind and in cash, and we deny that at our peril, because, as my hon. Friend said, we are conning the electorate.

The hon. Member for Poole (Mr. Syms) struck a rather discordant note when he suggested that the Conservative party is "opposed to the principle of state funding". Let me remind him that Short money in the current year to the Conservative party was £3,459,536. Cranborne money in the House of Lords came to £230,556. The Leader of the Opposition's office and all the other bits and pieces around it cost £765,394. The policy development fund is a new fund of £438,890. If the electorate knew that the so-called official Opposition was taking some £5 million, not counting the amount in kind, they might very well react in the way that the hon. Member for Bassetlaw suggests.

It is an absolute hypocritical illusion to pretend that we do not already have state funding. What my hon. Friend the Member for Truro and St. Austell said is absolutely true; people do not know it. That is what I think is so critical. I shall not quote the hon. Member for

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Chichester at length; he has already taken up so much of my time that it would be unfair. On several occasions he has pointed out, very fairly and accurately, that there is a real concept of a sleaze operation in this place, and that is not fair. We are bringing upon ourselves the opprobrium of the electorate for totally absurd reasons. However, we are doing so because people think that there must be some good reason for people donating to political parties.

I have several quotes from people of all parties on this issue, who feel that the time has come to bring out into the open some effective linkage between state funding and the actual membership of the political parties, as my hon. Friend said. Let me quote two who think that the present system does not work. On the occasion of the award of a peerage to Michael Ashcroft, a major donor to the Conservative party, Lord Cranborne, former leader of the Conservatives in the Lords, said it was

Sir Edward Heath, in robust form, went even further:

He pointed out that clearly the £3 million donation to the Conservative party must have been for some purpose, and he said:

I am not going to quote the chairman of the Labour party, but I am going to quote the Leader of the House of Commons, who said a fortnight ago:

From all sides—a former Minister, a very distinguished member of the Conservative party who has done a great deal of work on the subject, the hon. Member for Don Valley (Caroline Flint) and my hon. Friend the Member for Truro and St. Austell—there is a great gathering consensus.

In the past the Government have taken the view that unless there is a centre of gravity—a view that all parties can subscribe to—they cannot move. I endorse precisely what the hon. Member for Chichester said. It is up to the Government to lead on this—not just in the interests of the present Parliament or in order to deal with the problems of Enron and Andersen and all the other controversies that have been taking place—but for the health of our democracy. We have to re-engage the actual commitment to the political process with the way in which the political process is funded. That is why I think that the suggestion that my hon. Friend the Member for Truro and St. Austell has made that funding has to be related to the membership of the party, and what it gives to that party, is critical.

If I may say so, the tax issue—the use of some tax credit arrangement—is a bit of a red herring because a large number of people do not fill in tax returns. Many people do not pay tax. To exclude them from the ability and the opportunity to contribute to the political process would be utterly wrong. The way to proceed is precisely the way in which my hon. Friend has suggested.

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Mr. Cummings, I want to give maximum time for the Minister to respond because I look forward with great interest to see the extent to which her text, from the new Department responsible, differs from the previous text of the hon. Member for Southampton, Test (Dr. Whitehead).

As a final comment, I would say that I cannot go back as far as the Athenians, but I know that every single party during the time of parliamentary democracy in this country has suffered from this problem. My party, in its previous incarnation as the Liberal party, suffered from it. As we all know, Lloyd George abused the system disastrously and did great harm to the political process and Parliament, but why did he do it? He did it because he became detached from the political party that he had previously led. He was no longer the leader of the Liberal party when he became Prime Minister. So, the political process was detached from the real people who mattered; the electorate. We have got to reattach it.

We must make sure that there is a consensus on the way in which the funding of political parties takes place, whether or not that is direct funding. I have already quoted examples of the way in which the Conservative party is funded, and the Government are also very substantially funded to undertake their political duties. We need a consensus on being open and honest about funding, but we should also recognise that that is simply not enough. We must find ways of ensuring that party members' commitment to political parties is translated into cash support for the democratic system.

12.16 pm

Mr. William Cash (Stone): I have found the debate interesting. It is an important debate, and I am grateful to the hon. Member for Truro and St. Austell (Matthew Taylor) for having introduced it. It is an ongoing debate, as my hon. Friend the Member for Chichester (Mr. Tyrie) has made clear. The hon. Member for Southampton, Test (Dr. Whitehead) has also participated in the debate, and I have no doubt that we shall go on discussing the matter for some time.

At this juncture, I do not need to add more than was said by my hon. Friend the Member for Poole (Mr. Syms). The view that he has expressed on the subject is his, mine and that of the Conservative party. In the limited time left, it would be unnecessary for me to repeat word for word what he said. That is the line that our party takes. However, I have some observations to make on the reasons why we are engaging in this debate at the present time. I have already said that I do not believe that low turnout and some of the problems attributed to such things as sleaze are going to be solved by the state funding solution proposed.

I agree entirely that an element of state funding is already available through the Short money and the Cranbourne money. That is clear. However, as my hon. Friend the Member for Poole said, that is really for technical objectives rather than for broader democratic aims. If we look at what is going on in Germany, we can see that in 1998, £180 million was made available for the party-political system, the biggest state funding of which I am aware in Europe. However, no one could say that the German system is free of corruption and sleaze. The perceptions of politics in Germany, and the criticisms heaped on politicians at the top, in a country

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that receives such vast sums of state funding, in my view contradict the whole basis of the argument for state funding. We in the Conservative party believe, as my hon. Friend the Member for Poole suggested, that it would be better for the money to go on other priorities such as schools, transport and health. We are opposed to the taxpayer funding political parties and do not think that the case has been made for state funding.

I have touched on the question of over-whipping. There is some cynicism. Before I was appointed to my present position, I spoke from the Back Benches in the debate on the strengthening of Parliament on what I believe are the real reasons why there is so much cynicism in the electorate today and why low turnouts are so prevalent. The real answer is that the fault lies, as I said in a Committee yesterday, in the increase of money, from £1.5 million to £7.5 million, being made available to the Electoral Commission for so-called public awareness on democracy and the electoral systems. Such things are seeping into the system. People think that the problems of cynicism and low turnout can be solved by throwing money at them. That is just not true. The whole question of spin and lack of trust, about which we have heard much in the past few days—broken promises and so on—has much more to do with the problem.

I shall be interested to hear what the Minister has to say. Therefore, I do not intend to go on much longer, as she will not have a chance to say anything. However, the then Home Secretary—now the Foreign Secretary—the right hon. Member for Blackburn (Mr. Straw), summed up the matter well in the debate on the Political Parties, Elections and Referendums Act 2000 when he said that

The Prime Minister himself stated two years ago that he was unequivocally against state aid.

The words of the then Home Secretary are eloquent. I happen to agree with him and think that he addressed the real problem. Powerful arguments against state funding were also put forward in the Neill committee report, and I would have liked an opportunity to go through them. However, as they are on the record, it is as well that I simply refer to them.

The question of compulsion to contribute to the support of political parties even if people strongly disagree with one or other of the parties is extremely important. The Neill committee report stated:

We had a vigorous Communist party in this country that, some would say, was essentially undemocratic. Other parties could appear. Serious questions arise,

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irrespective of how repugnant the policies of such parties may be, if, through a system of state funding, we were to impose censorship.

12.22 pm

The Parliamentary Secretary, Lord Chancellor's Department (Ms Rosie Winterton) : First, I congratulate the hon. Member for Truro and St. Austell (Matthew Taylor) on securing a debate on what is clearly a topical issue. Judging from the contributions that have been made today, it is of great interest to the House. I know that this debate is one of a series that have taken place. I thought that the response of my hon. Friend the Member for Southampton, Test (Dr. Whitehead) was extremely clear, and I reassure the hon. Member for North Cornwall (Mr. Tyler) that my text may be slightly different; he will not be able to draw the comparison that he wants to draw.

We have heard much today about consensus. The consensus that came through in the debate was that we all agree that political parties are at the root of our democracy and provide an opportunity for grassroots involvement, a forum for debate and a means of engaging with the electorate. More than a million people in Britain are members of political parties, and we would all wish to pay tribute to them, as my hon. Friend the Member for Don Valley (Caroline Flint) did so eloquently. Such people in our constituencies spend their lives encouraging others to use their right to vote, helping on polling day, delivering leaflets and canvassing. Obviously, the hon. Member for Truro and St. Austell has some difficulties in motivating his party members, but I am sure that my hon. Friend the Member for Don Valley would be happy to give him some tips on how she does it so successfully in Doncaster.

However, party political activities cannot just be supported by voluntary labour. They need funding, and that is what we are discussing today. There is nothing inherently wrong with parties seeking donations and funding from supporters. Many hon. Members made the point that it is a right of individuals to support a political party as they choose. Members of Parliament should not be embarrassed about that, and we should make the point more often.The hon. Member for Poole (Mr. Syms) made an interesting contribution on that matter. We must safeguard that right against possible abuse by parties or donors.

The hon. Member for North Cornwall touched on the fact that perception of abuse is important and the hon. Member for Chichester (Mr. Tyrie) said last month:

We should make that point more often.

There is a desire that we take steps to provide a framework in which we ensure openness and transparency in political fund raising. The Labour Government implemented the recommendations of the Neill committee. I intended to go through some of those recommendations, but that is not possible in the time available.

I turn to the work that is being done by the Electoral Commission because I know that hon. Members are interested in hearing more about that. The commission

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has begun a review of the issues concerning state funding. Many hon. Members referred to international comparisons, and the commission's preliminary work is to make a comparison of international systems. It will also examine the main methods of supporting political parties by making an assessment of their benefits and disbenefits. My hon. Friend the Member for Don Valley asked whether it would look at the audit of existing support. That is obviously something that the commission will need to do.

The commission's preparatory work will be used to test public opinion with a series of public hearings to take evidence. The scope of the study will include, among other things, the link between state funding and donations, and the relationship between parties and their supporters. It will also examine the case for change. From its findings will emerge recommendations to the Government.

The review is intended to be comprehensive and wide-ranging, and I shall outline the timetable. The initial research should be ready by the end of the year and submissions will be invited during the first quarter of 2003 with an options paper being ready for the summer. We can expect to see a final report early in 2004. Many contributions have been made today and I hope that hon. Members will use the opportunity of the commission's work to make their views known to it.

On the point made by the hon. Member for Truro and St. Austell about support being available at the moment to political parties, he suggested that that was in some way secret. Such matters are discussed in Parliament, so his sense of creeping state funding by the back door or as an excuse should be challenged. Parliament has an input into that debate and the whole issue of Short money. It is important to examine closely all the issues that have been raised today. As we have heard, there are many differences of opinion among Members of Parliament, but I am sure that today's debate will make an important contribution to those ongoing discussions, and that hon. Members have benefited from the contributions that have been made.

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