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Lord Dubs: My Lords, because it is the only political party which operates both within the United Kingdom and in another country.

Lord Mackay of Ardbrecknish: My Lords, my exemption of the Republic of Ireland electors from the ban addresses the noble Lord's point. That is my original point about this being a series of bricks that builds up the position where I take on board the objections of noble Lords opposite.

With the exception of the two noble Lords I mentioned and the Minister, no noble Lord is in the least happy. I could repeat some of the points made. I shall not do so, apart from to say this. If the noble Lord, Lord Fitt, believes these amendments to be proper and sensible amendments to accept, it might be worth those noble Lords who intend meekly to obey the Government Whip thinking about it before they vote. I commend the amendment to the House.

27 Nov 2000 : Column 1129

4.13 p.m.

On Question, Whether the said amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 148; Not-Contents, 167.

Division No. 1


Aberdare, L.
Ackner, L.
Alexander of Weedon, L.
Allenby of Megiddo, V.
Ampthill, L.
Anelay of St Johns, B.
Arran, E.
Ashcroft, L.
Astor, V.
Astor of Hever, L.
Attlee, E.
Barber, L.
Belstead, L.
Blackwell, L.
Blatch, B.
Brabazon of Tara, L.
Bridgeman, V.
Brougham and Vaux, L.
Burnham, L. [Teller]
Buscombe, B.
Butterworth, L.
Byford, B.
Campbell of Alloway, L.
Campbell of Croy, L.
Carlisle of Bucklow, L.
Carnegy of Lour, B.
Chadlington, L.
Chilver, L.
Cockfield, L.
Coe, L.
Cope of Berkeley, L.
Courtown, E.
Craig of Radley, L.
Craigavon, V.
Cranborne, V.
Crathorne, L.
Crickhowell, L.
Cuckney, L.
Cumberlege, B.
Denham, L.
Dixon-Smith, L.
Dundee, E.
Eccles of Moulton, B.
Eden of Winton, L.
Elles, B.
Elliott of Morpeth, L.
Elton, L.
Erroll, E.
Feldman, L.
Fitt, L.
Fookes, B.
Freeman, L.
Gardner of Parkes, B.
Geddes, L.
Glentoran, L.
Goschen, V.
Gray of Contin, L.
Greenway, L.
Hanham, B.
Haslam, L.
Hayhoe, L.
Henley, L. [Teller]
Higgins, L.
Hodgson of Astley Abbotts, L.
Hogg, B.
Home, E.
Hooper, B.
Howe, E.
Howe of Aberavon, L.
Howell of Guildford, L.
Hunt of Wirral, L.
James of Holland Park, B.
Jellicoe, E.
Jopling, L.
Kimball, L.
Kingsland, L.
Lamont of Lerwick, L.
Lane of Horsell, L.
Liverpool, E.
Luke, L.
Lyell, L.
McColl of Dulwich, L.
Macfarlane of Bearsden, L.
Mackay of Ardbrecknish, L.
Mackay of Clashfern, L.
Marlesford, L.
Marsh, L.
Mason of Barnsley, L.
Miller of Hendon, B.
Molyneaux of Killead, L.
Monson, L.
Montrose, D.
Moore of Lower Marsh, L.
Moore of Wolvercote, L.
Mowbray and Stourton, L.
Murton of Lindisfarne, L.
Naseby, L.
Neill of Bladen, L.
Noakes, B.
Northbourne, L.
Northbrook, L.
Northesk, E.
Norton of Louth, L.
O'Cathain, B.
Oppenheim-Barnes, B.
Palumbo, L.
Park of Monmouth, B.
Patten, L.
Pearson of Rannoch, L.
Perry of Walton, L.
Peyton of Yeovil, L.
Pilkington of Oxenford, L.
Platt of Writtle, B.
Plumb, L.
Plummer of St. Marylebone, L.
Powell of Bayswater, L.
Quinton, L.
Rawlings, B.
Rawlinson of Ewell, L.
Reay, L.
Rees, L.
Rees-Mogg, L.
Renton, L.
Roberts of Conwy, L.
Sainsbury of Preston Candover, L.
Sanderson of Bowden, L.
Seccombe, B.
Selborne, E.
Selkirk of Douglas, L.
Sharples, B.
Shaw of Northstead, L.
Simon of Glaisdale, L.
Slim, V.
Soulsby of Swaffham Prior, L.
Stewartby, L.
Strange, B.
Strathclyde, L.
Tenby, V.
Thatcher, B.
Trefgarne, L.
Trumpington, B.
Vivian, L.
Walker of Worcester, L.
Warnock, B.
Weatherill, L.
Willoughby de Broke, L.
Wolfson, L.
Young, B.


Acton, L.
Addington, L.
Ahmed, L.
Alli, L.
Amos, B.
Andrews, B.
Archer of Sandwell, L.
Ashley of Stoke, L.
Ashton of Upholland, B.
Bach, L.
Barker, B.
Barnett, L.
Bassam of Brighton, L.
Berkeley, L.
Bernstein of Craigweil, L.
Billingham, B.
Blackstone, B.
Borrie, L.
Bradshaw, L.
Bragg, L.
Bristol, Bp.
Brooke of Alverthorpe, L.
Bruce of Donington, L.
Burlison, L.
Carter, L. [Teller]
Chandos, V.
Clarke of Hampstead, L.
Clement-Jones, L.
Clinton-Davis, L.
Cocks of Hartcliffe, L.
Cohen of Pimlico, B.
David, B.
Davies of Coity, L.
Davies of Oldham, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Dholakia, L.
Dixon, L.
Dubs, L.
Ezra, L.
Falconer of Thoroton, L.
Falkland, V.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Fyfe of Fairfield, L.
Gale, B.
Gibson of Market Rasen, B.
Gladwin of Clee, L.
Goldsmith, L.
Gordon of Strathblane, L.
Goudie, B.
Gould of Potternewton, B.
Grabiner, L.
Graham of Edmonton, L.
Greaves, L.
Grenfell, L.
Hamwee, B.
Hardy of Wath, L.
Harris of Greenwich, L.
Harris of Haringey, L.
Harrison, L.
Haskel, L.
Haskins, L.
Hayman, B.
Hilton of Eggardon, B.
Hogg of Cumbernauld, L.
Hollis of Heigham, B.
Hooson, L.
Howells of St. Davids, B.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Irvine of Lairg, L. (Lord Chancellor)
Jacobs, L.
Janner of Braunstone, L.
Jay of Paddington, B. (Lord Privy Seal)
Jeger, B.
Jenkins of Putney, L.
King of West Bromwich, L.
Layard, L.
Lea of Crondall, L.
Lipsey, L.
Lockwood, B.
Lofthouse of Pontefract, L.
Longford, E.
McCarthy, L.
McIntosh of Haringey, L. [Teller]
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McNally, L.
Maddock, B.
Mallalieu, B.
Massey of Darwen, B.
Merlyn-Rees, L.
Methuen, L.
Miller of Chilthorne Domer, B.
Mishcon, L.
Mitchell, L.
Molloy, L.
Morgan, L.
Morris of Castle Morris, L.
Morris of Manchester, L.
Newby, L.
Nicol, B.
Northover, B.
Oakeshott of Seagrove Bay, L.
Peston, L.
Phillips of Sudbury, L.
Plant of Highfield, L.
Ponsonby of Shulbrede, L.
Prys-Davies, L.
Ramsay of Cartvale, B.
Randall of St. Budeaux, L.
Redesdale, L.
Rendell of Babergh, B.
Rennard, L.
Richardson of Calow, B.
Rodgers of Quarry Bank, L.
Roll of Ipsden, L.
Roper, L.
Russell, E.
Sainsbury of Turville, L.
Sandberg, L.
Sawyer, L.
Scotland of Asthal, B.
Scott of Needham Market, B.
Sewel, L.
Sharman, L.
Sharp of Guildford, B.
Shepherd, L.
Shore of Stepney, L.
Shutt of Greetland, L.
Simon, V.
Simon of Highbury, L.
Smith of Clifton, L.
Smith of Leigh, L.
Steel of Aikwood, L.
Stone of Blackheath, L.
Strabolgi, L.
Symons of Vernham Dean, B.
Taverne, L.
Taylor of Blackburn, L.
Thomas of Walliswood, B.
Thomson of Monifieth, L.
Thornton, B.
Tomlinson, L.
Tope, L.
Tordoff, L.
Turnberg, L.
Uddin, B.
Varley, L.
Wallace of Saltaire, L.
Walmsley, B.
Warner, L.
Warwick of Undercliffe, B.
Watson of Richmond, L.
Wedderburn of Charlton, L.
Whitaker, B.
Whitty, L.
Wigoder, L.
Wilkins, B.
Williams of Crosby, B.
Williams of Elvel, L.
Williams of Mostyn, L.
Winston, L.
Woolmer of Leeds, L.

Resolved in the negative, and amendment disagreed to accordingly.

27 Nov 2000 : Column 1131

4.23 p.m.

Lord Mackay of Ardbrecknish moved Amendment No. 5:

    After Clause 69, insert the following new clause--


(" . After section 379 of the Income and Corporation Taxes Act 1988 (interpretation of sections 369 to 378) there shall be inserted--
"Tax relief on political donations.
379AA.--(1) Tax relief shall be available to an individual ("the donor") in accordance with this section on qualifying political donations made by him of up to £500 in any year of assessment.
(2) A donation is a qualifying political donation for the purposes of this section if it is made to a registered political party (other than a minor party) and--
(a) it takes the form of the payment of a sum of money,
(b) it is not subject to a condition as to repayment,
(c) it is not conditional on or associated with, or part of an arrangement involving, the acquisition of property by the political party, its members or accounting units, otherwise than by way of gift, from the donor or a person connected with him, and
(d) the donor is a registered elector.
(3) For the purposes of this section a political party is an eligible political party if--
(a) it is a registered party within the meaning of section 22 of this Act other than a minor party, and
(b) at the last general election preceding the donation in question--
(i) two members of that party were elected to the House of Commons, or
(ii) one member of that party was elected to the House of Commons and not less than 150,000 votes were given to candidates who were members of that party.
(4) If an individual makes a qualifying donation he shall be entitled, on making the payment, to deduct and retain out of it a sum equal to basic rate tax thereon.
(5) Where a sum is deducted under subsection (4) above, the sum deducted shall be treated as income tax paid by the person to whom the payment is made.

27 Nov 2000 : Column 1132

(6) Any person by whom a qualifying donation is received shall be entitled to recover from the Board, in accordance with regulations, an amount which by virtue of subsection (5) above is treated as income tax paid by him; and any amount so recovered shall be treated for the purposes of the Tax Acts in like manner as the qualifying political donation to which it relates.
(7) The following provisions of the Taxes Management Act 1970, namely--
(a) section 29(1)(c) (excessive relief) as it has effect apart from section 29(2) to (10) of that Act,
(b) section 30 (tax paid in error, etc) apart from subsection (1B),
(c) section 86 (interest), and
(d) section 95 (incorrect return or accounts),
shall apply in relation to an amount which is paid to any person by the Board as an amount recoverable in accordance with regulations made by virtue of subsection (6) above but to which that person is not entitled as if it were income tax which ought not to have been repaid and, where that amount was claimed by that person, as if it had been repaid as respects a chargeable period as a relief which was not due.
(8) In the application of section 86 of the Taxes Management Act 1970 by virtue of section (7) above in relation to sums due and payable by virtue of an assessment made for the whole or part of a year of assessment ("the relevant year of assessment") under section 29(1)(c) or 30 of that Act, as applied by that subsection, the relevant date--
(a) is 1st January in the relevant year of assessment in a case where the person falling within subsection (5) above has made a relevant interim claim; and
(b) in any other case is the later of the following dates, that is to say--
(i) 1st January in the relevant year of assessment; or
(ii) the date of the making of the payment by the Board which gives rise to the assessment.
(9) The Board may by regulations make provision--
(a) for the purposes of any provision of this section which relates to any matter or thing to be specified by or done in accordance with regulations;
(b) with respect to the furnishing of information by donors or recipients, including, in the case of recipients, the inspection of books, documents and other records on behalf of the Board; and
(c) generally for giving effect to this section.
(10) In this section--
"financial year" in relation to any person, means a financial year of that person for the purposes of the relevant regulations;
"interim claim" means an interim claim within the meaning of the relevant regulations;
"relevant interim claim" means, in relation to an assessment made for a period coterminous with, or falling wholly within, a person's financial year, an interim claim made for a period falling wholly or partly within that financial year; and
"the relevant regulations" means regulations made under subsection (9) above.
(11) Section 839 of this Act shall apply for the purposes of this section to determine whether one person is connected with another."").

The noble Lord said: My Lords, this amendment deals with the issue of tax relief, in respect of which the Government have decided to depart from the recommendations of the Neill committee. Chapter 8 of the Neill report deals with the question of allowing tax relief on donations to political parties in the same way that tax relief is given to charities.

27 Nov 2000 : Column 1133

I could develop this argument at some length. I could even read out the recommendations of the Neill committee on this matter. If I did so, I believe that your Lordships would be convinced. However, that would take time. In addition, I know that government supporters tend to wear earmuffs so that they are unable to hear good arguments, and that they are allowed to remove the earmuffs only when the Whips think that the arguments are bad. I believe that the arguments are extremely good. I therefore hope that they are listening.

The conclusion to which Neill came, on page 99 of the report, was:

    "Tax relief by deduction at source should be introduced, limited to the basic rate, on donations of up to £500 a year to 'eligible', registered political parties".

I shall precis the argument. Having decided that donations of over £500 should be made public, and having decided that donations to British political parties should come only from people on the electoral register in this country, the Neill committee felt that the time had come to encourage small donors. In addition, concern was expressed about the involvement of people in the democratic process, a concern shared by all of us. I have previously said that political parties are about the most important voluntary organisations in the country, bar none, because they form the very basis of the political system. Without political parties, one cannot have democracy. They are, therefore, very important.

We saw in last week's by-elections, with very poor turn-outs, a reduced interest in the political process. I believe that that interest extends to members of political parties. It is not easy to retain members. One way of encouraging people to donate to political parties may be to explain to them that their donations will be treated in the same way as their charitable donations. Interestingly, inheritance tax is already treated in that way, from which political parties doubtless also benefit a little.

I want to make only one other point about the Neill committee. Reference was made in paragraph 6 of the report to evidence presented from Germany. In Germany, where a system of tax relief was introduced in 1974, the pattern of giving to political parties has changed in favour of many small donations and against large donations. I should have thought that the Government and the Opposition could agree on this. Is that not where we want to end up--with many more small donors to political parties? The German experience demonstrated that that was encouraged in relation to tax relief. Political parties know that there is an extra incentive to getting small donors. This is an important point. It would help the funding of political parties. It would perhaps help them to set up the bureaucracy needed by this Bill. A certain amount of money raised by political parties at the moment will be side-stepped into the setting up of procedures to carry out some of the burdens imposed by this Bill on the political parties. That seems to me a sensible way of helping.

27 Nov 2000 : Column 1134

I am told that tax relief would cost the Government about £4 million. It would be a good way of filling the gap that the Neil committee contended would be left by donors ceasing to make large donations to political parties. I believe that it would also underline to the public the importance of our political parties and the importance of supporting them, both in terms of canvassing and donating the money that political parties need. I beg to move.

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