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Lord Goodhart: My Lords, I rise to support with some enthusiasm the amendment moved by the noble Lord, Lord MacKay of Ardbrecknish. The Neill committee regarded this as a matter of some importance. It does not involve a large amount of money. The Government estimate that it will cost about £4 million. As I said at Committee stage, even if one treats it as government spending, that will amount to £1 out of every £100,000 of government spending. It is, therefore, a negligible amount. In view of the enormous increases in public spending recently announced by the Government, it is absurd to use what I might call the schools and hospitals argument.

I turn briefly to the merits of the amendment. The Neill committee saw it as a considerable evil and very undesirable for parties to depend, to the extent that I believe both the Conservative and Labour parties now do, on donations of six or seven figures from very wealthy individuals--an opinion that is widely shared by the public. However, parties do need political funds. If they cannot get them from rich, individual donors--and, of course, one gets them much less nowadays from corporations than in the past--they will have to look to a large extent at numbers. We believe that it is important, by a carrot of this kind, to encourage more contributions from ordinary members and to make up whatever shortfall there may be from the falling off of large donations, which is one of the probable results of the new transparency regime.

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This sort of carrot provides a real incentive to parties to take what we believe is the right route in the shift from large individual funders to a much greater number of smaller donors.

We also believe that there is a wider advantage: namely, that it sends a message to the public that giving to political parties is not a duty, but something to be praised as a genuine contribution to the democratic system of this country. We note that in Canada there is a system to encourage small donors which is rather more generous than the proposal tabled by this amendment. The details are set out in one of the appendices at the back of this book. It is a system that works very well.

We believe that, in the same way as tax relief on charitable donations recognises that giving to charities is part of good citizenship, the tax system should also recognise that giving to political parties is good citizenship. It is not exactly the same as for charities. One could say that in a sense it is a duty for people to make charitable giving. It is obviously not a duty, and never would be, to give to a political party. For those who feel inclined to do so, it should be signalled that that is something which helps the democratic process. That, together with the practical reasons in this case, is why I believe that the amendment should be strongly supported. I have great pleasure in following the speech of the noble Lord, Lord Mackay.

10 p.m.

Baroness Gould of Potternewton: My Lords, I rise to oppose the amendment, as I did in committee. Perhaps I may pray in aid the point made earlier, that Neill is not a compelling reason for accepting any clause or amendment within the Bill.

As the noble Lord, Lord Goodhart, said, the Neill committee discussed this proposal at great length and came to the conclusion that the arguments against it were not strong. A problem I found within the report is that the committee does not identify why the arguments are not strong; it just states that they are not. That is the conclusion, which I do not find satisfactory.

I oppose the amendment for a number of reasons. That does not mean that I am opposed to the idea of small donations as opposed to the large ones we have now. However, I do not think that that is genuinely the answer. There are serious defects in the proposal, not in the wording but in principle.

The amendment provides two specific areas of discrimination. The unfairness of the system is that it will cost a non-taxpayer more to provide the same benefit to the party than it would a taxpayer. That is not terribly fair to the "little people" to whom the noble Lord, Lord Mackay referred. That position was highlighted to the Neill committee by Professor Vernon Bogdanor when he said:

    "It would be thought in this country to be inequitable that people who do not pay tax should not get the benefit that taxpayers would".

I do not think that can be accepted. It is a form of social exclusion.

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The noble Lord, Lord Goodhart, also said in committee--perhaps he will correct me if I am wrong--that few donors, except perhaps students, would be people who are not themselves taxpayers, at least at the basic rate. I cannot quite accept that. My understanding is that of the 47 million adults in Britain, only 26 million pay tax. It might therefore be interpreted that this clause and these proposals encourage parties to court taxpayers at the expense of other members of the community, such as perhaps the poorer pensioners, students and non-working partners. Many women are involved in the non-working partner element, and I certainly hope political parties will be courting them.

A further factor of importance in respect of taxpayers is that only some 8 million--that is, 30 per cent--file their own tax returns. That means that tax returns are filed for employees by their employers. In some cases, they would not want to disclose that they are giving a donation to a political party and would therefore not choose that route.

Lord Goodhart: My Lords, I am grateful to the noble Baroness for giving way. Perhaps I may say that the system which is proposed by the Neill committee would not involve any disclosure to an employer of the fact that an employee was making a payment. The employee is not getting the money back. A taxpayer simply signs a piece of paper which goes to the political party along with the donation and the party which receives the money. It would never go through the PAYE system and it would never need to be mentioned to the employer.

Baroness Gould of Potternewton: My Lords, I am very grateful to the noble Lord for that explanation because that is certainly not the interpretation that the Labour Party puts on the clause. I shall make sure that it is aware of that particular interpretation and then we can perhaps discuss the matter further.

The second area of discrimination is the restriction on small parties. I raised that matter in Committee, but since then I have given more thought to the question. While I believe that the provision discriminates against small parties, there is a particular problem in the sense that if we included small parties that might give support to extremist parties. Therefore, we have a dilemma and the only way out of it is not to follow this route at all. I would like to see parties such as the Green Party benefit from this measure, but I would not like to see the National Front benefit. We have quite serious problems there.

The other point concerns state funding. I accept that the Neill committee may not have identified tax relief for state funding, but the House of Commons Select Committee report of 1994 identified tax incentives as a form of public subsidy, that is to say, state funding. That view was fully supported by the Conservative Party in its evidence to the Select Committee. I would like to know what has changed its mind. If the party thought it was state funding then, why does the Conservative Party not believe that that is the case now? I am sure that we shall be told, as we have been

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in the past, that we have Short money, Cranborne money, free postage and so forth, at elections. But all those fundings are specific; we are now suggesting something that is general state funding with no specific strings attached. I accept that sometimes the strings are difficult to identify. General state funding has been consistently opposed by the party opposite.

The aim of the Neill committee has been to clean up politics and to provide absolute transparency and clarity. I believe that the additional subsidy to political parties from the state would not assist that process. If there is no case for direct grants through state aid, I do not believe that there is a case for tax relief.

Perhaps I may make a couple of small points. It has been suggested that if we follow this particular road it will help increase the membership of political parties. It is a mistaken motivation to gain membership through an essentially economic activity rather than through political motivation.

I would like advice on the next point because I may be misinterpreting it. The qualifying donation at the moment is £500. What safeguards are there in this clause, or in Neill, that at some future point it may not be increased to £5,000 or £50,000 so that big donations receive tax relief? I cannot see any assurance anywhere that that does not happen. There are too many flaws in the amendment. I do not believe that the clause as it stands is transparent enough in the way in which the procedure would work.

Lord Hodgson of Astley Abbotts: My Lords, before the noble Baroness sits down, perhaps she can enlighten me on one matter. For example, if a charity such as the Royal National Lifeboat Institution recovers tax, does she regard that as being state subsidy or funding for the RNLI?

Baroness Gould of Potternewton: My Lords, it is and I have no objection to it.

Lord Wedderburn of Charlton: My Lords, I agree entirely with what my noble friend has just said. Perhaps I may put a question to the noble Lord, Lord Mackay of Ardbrecknish, or to anyone else who would like to take it on. If this clause were passed, whatever the actual machinery and the recipient of the advantage, there would be tax advantages for gifts to charities and gifts to registered political parties. Would not that be bound to open up the position of think tanks?

Some think tanks are charities and some are not. It is a sensitive area, as I know well from being indirectly involved in an application for charitable status by a body that thought it was like a think tank. Does the noble Lord, Lord Mackay, agree that if charities and registered parties receive tax advantages, the position of think tanks and tax relief on donations to those that are not yet charities--of which there are many--would also logically be opened up?

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