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Lord Bach: I congratulate the noble Lord on having found Clause 146(4)(a).

Dealing with Amendment No. 174, the point is to require any order under Clause 62 to be made on the recommendation of the electoral commission rather than merely after consultation with the commission. In other words, no order could be made unless the commission recommended that it be made. We advise the Committee not to accept the amendment.

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The intention behind Clause 62 is to set up a clear expectation on the part of Parliament that the special provision for frequent donation reports should apply to the elections specified in the clause as well as to Westminster general elections. It is one of those matters on which the opinion of the electoral commission is not necessarily required. But the consultation with the commission which Clause 62, as presently drafted, already requires would enable the commission to make any observations that it sees fit with regard to when the special reporting requirement should kick in and any modifications proposed in the draft order. I invite the noble Lord to withdraw his amendment.

Lord Mackay of Ardbrecknish: In this case I shall say, perhaps for the first time today, that I shall read what the noble Lord has said. I understand the point that he is making, but I would rather that the electoral commission had a little more weight in this process than it will under the Bill as currently framed. I may return with a slightly varied amendment that takes into account what the Minister has just said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bach moved Amendment No. 174A:

    Page 40, line 4, leave out ("section 57(3) to (12) and").

On Question, amendment agreed to.

[Amendment No. 175 not moved.]

Clause 62, as amended, agreed to.

Clause 63 [Reporting of multiple small donations]:

[Amendment No. 176 not moved.]

On Question, Whether Clause 63 shall stand part of the Bill?

Lord Mackay of Ardbrecknish: Instead of taking a fine knife to insert amendments into a clause, this time I am using a blunderbuss. I am seeking to take the whole clause out. That is the easiest way to address this question.

The clause states that donors--not the parties that receive the donation, but the donors themselves--must make a report to the commission in respect of donations that they give in certain circumstances.

This is a serious point. I know that as the days have gone, we have traded back and forward obedience or otherwise to the Neill recommendations, but in this case the Government really have not taken on board what the Neill committee said. It is a major departure so far as donors are concerned.

In his report, the noble Lord, Lord Neill, discusses the persons or bodies responsible for reporting or disclosing (at paragraph 4.50 and thereafter). Perhaps I may quickly quote from this section of the report, because it is well written and better explained than any paraphrase I could do attempt:

    "In theory there are three possibilities: the obligation could be placed on the donor, or on the political party centrally, or on each sub-unit within the political party's national or regional structure . . . We exclude the donor. It would be wholly unreasonable to

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    saddle a donor with a legal obligation to report backed by criminal sanctions. The donor should be entitled to make his gift and walk away without further obligation".

There are not too many "ifs" and "buts" in that quote. Indeed, it is very bold: "It would be wholly unreasonable".

I believe that the noble Lord, Lord Bassam, is to reply, but his noble friend Lord Bach knows all about the tests of "reasonableness", and so on, that lawyers enjoy. It seems to me that the phrase, "wholly unreasonable" is pretty well shutting the door on this one. The noble Lord, Lord Neill, and his committee were very positive about this. The obligation should not be placed on the donor. This clause places it on the donor. I do not believe that to be right; and I agree with the Neill committee.

The donor makes his donation; it is then up to the political party concerned to decide initially whether it is a permissible donation. If it is, the party should accept it and report. To ask the donor to report this and to introduce criminal penalties in this respect is going far too far. Political parties are legitimate organisations. If someone gives them money, he must think that that is fair. He should not have to report to a body to say that he has given money to a political party.

It is late at night. I shall not go on about this clause. However, I feel quite strongly about it. I shall want to know in some detail--indeed, I shall need some convincing--why the Government have decided to part from the Neill committee and place this obligation on the donor. I do not know whether they are trying to scare off donors to political parties. But, returning to points made from the Liberal Democrat Benches by the noble Lord, Lord McNally, earlier on, it is clear that all our parties find it hard enough to persuade people to give donations. Frankly, we may find that, suddenly, every donor will begin think, "My goodness, what will happen if I don't report--what is the level?" How are they to know? The end result will be that we shall all find it much more difficult to persuade people to give the reasonably modest donations referred to in this clause. I hope that the Government will reconsider this clause. Indeed, I may even receive some support from the Liberal Democrats on this point.

Lord Hodgson of Astley Abbotts: I should like to speak briefly in support of my noble friend. In my earlier comments, I referred to the regulator's search for neatness and "regulatory capture". This is another example of the latter and gives me an opportunity to have another crack at it from a different angle. This clause would duplicate what is being done for political parties. I am not clear what it will add to the sum of human knowledge, let alone that of the commission and of the public. It will simply impose an unreasonable burden on people seeking to support the political process.

I am all for disclosure, but such information needs to be disclosed only once. As I understand it, that disclosure will take place via the political parties.

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However, we are now to have a duplicate system under this clause. It is proposed to impose obligations on individuals that otherwise political parties could properly fulfil. I am anxious about this because it seems to me that what we are seeking here is neatness at the expense of reality and effectiveness. I can envisage a situation where either inadvertent non-compliance takes place though ignorance rather than through malice aforethought, or where people are scared off from supporting the political party of their choice. My noble friend has made a serious point.

Lord Goodhart: I, too, should like to express some concern about this clause. I understand to some extent why it has got into the Bill. The significant fact is that the Government are proposing--for reasons which I believe are correct--to alter the original proposals of the Neill committee that all donations should be recorded, except for anonymous gifts of less than £50, to a rule that any gift of less than £200 can be accepted without having to be recorded. There are good reasons for that in that it would simplify the administration involved. However, I can also understand why the Government feel that that may open up a method of evasion.

However, I believe that the measure will hit a good many people who are not aware that they are being hit. I have a standing order for a payment of £200 a month to my constituency association. If the rule were changed so that gifts of more than £200 had to be reported--rather than gifts of £200--that would shift on to me the responsibility to report my gift. If the rule is changed, at least I shall be aware of that. However, a number of other donors in my situation simply would not realise that the rule had been changed and that they were under a personal obligation to report.

I believe that rather than having this clause the Government would do better to make it an offence deliberately to split up donations into a number of gifts not exceeding £200 for the purpose of evading the disclosure requirement. That offence may be difficult to prove. However, serious evasion would involve many gifts of £200 or more being given. A few innocent cases may slip through the net where no reporting takes place because no individual donation is more than £200. It is better to accept that that may happen rather than put donors in a position where they may unwittingly find themselves in breach of an obligation to report of which they are unaware. I hope that the Government will reconsider the matter.

Lord Bassam of Brighton: I shall take some care in explaining our position on this matter. Clause 63 places a duty upon donors to report to the electoral commission multiple small donations to a registered party where these, in aggregate, would exceed £5,000. Paragraph 13 of Schedule 6 applies similar requirements in respect of donations to individuals and members associations where these would exceed £1,000 in aggregate.

It may be helpful if I explain the purpose of these provisions. The definition of donation set out in this part does not include contributions the value of which

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is less than £200. As the Neill committee concluded, a de minimis limit is necessary if political parties are not to be placed under an unnecessarily heavy administrative burden. That is why we adopted that course. However, there is no doubt that the existence of a de minimis limit would offer some scope for evasion of the reporting requirements in respect of disclosable donations. It would be possible for a donor determined to evade the disclosure requirements to make a number of donations just below the de minimis limit to a political party. Someone could make 10,000 20,000 or 50,000 donations of £199, perhaps by computer.

Clause 63 and paragraph 13 of Schedule 6 are intended to deter the evasion of the disclosure requirements in this way. I should emphasise that in this situation the duty lies wholly with the donor. As I understand the position, that is the only case where that applies in the Bill. It would be possible to require that the donor make his or her report to the political party concerned, which could in turn be required to include the details in its quarterly donation report. However, as the party may well not have kept records of donations below the de minimis limit--that is not an unreasonable assumption--it would have no way of verifying the contents of the donor's report. So it is more appropriate to require that the report be made by the donor direct to the commission.

In placing the reporting requirement on the donor rather than the recipient of the donation, these provisions depart from the underlying and main body of controls set out in the Bill. But the problem which these provisions are intended to address is an inevitable consequence of applying a workable scheme to the parties themselves. These are necessary provisions if one of the more obvious means of evading the controls set out in the Bill is to be countered while still containing the burden on parties within reasonable limits. It is that balance that we seek to strike.

I remind the noble Lord, Lord Mackay, that at Recommendation 18 the Neill committee recommended that,

    "it should be a criminal offence to attempt to evade or render nugatory the statutory reporting requirements relating to disclosable donations".

Clause 63 is one of a number of provisions in Part IV of the Bill which gives effect to that recommendation.

I accept that it is a difficult issue but it is essential if we are to regulate that intermediate range of donations. The noble Lord, Lord Mackay, said, rightly, that we were departing from the Neill committee in this regard. We believe that this is the most efficient way to achieve this without placing too heavy a burden on the political parties. Throughout the debate, that point has been a clarion call from the Benches opposite. We need to deal with the situation where someone could make a number of donations, perhaps of less than £200, with some sinister intent.

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I ask Members of the Committee to reflect carefully on what we say. I can envisage some of the difficulties but we seek to ensure that we have a fair system of regulation which protects the political parties as much as anything else.

11 p.m.

Lord Norton of Louth: I understand the argument that the Minister advances and the problem he seeks to address. However, there is the problem of the onus it places on the donors. How does the noble Lord expect donors to be in a position to comply with the requirements of the clause? The clause requires the donors to put in a report to the electoral commission by 31st January of the year following the year in which the donations are made. How will donors know where the electoral commission exists? How will they be aware of these requirements? Someone may be fully aware of them and seek to evade. But there may be those who give money generously but without being fully aware of this requirement. What is the mechanism for ensuring that donors are aware that they have to comply with this requirement?

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