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Lord Molyneaux of Killead: My Lords, I support the amendment. I believe that that is also the view of parties in Northern Ireland, with the exception of one which naturally takes the view that with a gun you do

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not need gift aid. I am not sure that the public are fully aware of the existing state aid to parties in the form of Short money, free postage at elections and so on. As one who was involved in the electoral process at the other end of the building, I believe that the beneficial effect of the amendment is that it would involve a far greater number of people, who would not regard this as state aid but who would believe that they were stakeholders (if I may use that term) in the party to which they have made a contribution.

We all share the concern--our colleagues at the other end of the building feel more strongly about it than we do--about the steady erosion in the turn-out at elections, be they general elections, European elections or by-elections. We all welcome action, such at that proposed in the amendment, to arouse greater interest in democracy.

Lord Hodgson of Astley Abbotts: My Lords, at Second Reading the Minister described one of the purposes of this Bill as being to revive involvement in our democracy. As my noble friend said, there has been a diminution in the roots of democracy and an increase in the power of the centre. That process can be reversed in two ways, which are not mutually exclusive: first, one can encourage local political involvement and commitment; secondly, one can encourage local economic involvement and commitment. I believe that we should do both as widely as possible.

The amendment provides only a modest incentive for individuals to take an economic interest in the well-being of whatever political party they seek to support. To meet the needs of transparency, we must limit that support; and this amendment does so. As the noble Lord, Lord Goodhart, said, no one can argue that £500 per head is a sum likely to lead to difficulty in that regard.

On Report, the Minister referred to the dangers of the sum being increased. That argument did not convince me. The amendment will amend primary legislation. Therefore, any change to it will require further primary legislation. No Parliament can seek to bind its successors. The Bill can be no exception. But if a successor Parliament proposed to increase or decrease the sum before us, surely the contrary case would be fully ventilated.

During the lengthy stages of the Bill noble Lords have talked about the value and importance of broadening the base of the funding of our political parties. This modest measure will significantly assist in that. I hope my noble friend will press strongly his amendment.

Lord Marsh: My Lords, the noble Lord has said that in the future any opportunity for changes in the position will come before both Houses and be duly debated. I believe that that will be so. I believe also that every time it happens the limits will increase. The present situation is that none of the parties is really underfunded. They all mount large campaigns. What has happened is that the party machine is in many cases bigger than the politicians. I do not find that

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particularly attractive. In terms of principle it is highly undesirable. There is no difficulty in raising large sums of money. The problem--it is always the problem with money--is that every time people get it, they want to spend more than they have.

Lord McNally: My Lords, my noble friend Lord Goodhart spoke from the Neill committee Benches. It is my responsibility to say that on this occasion the Liberal Democrats will be supporting the Opposition in their amendment.

I disagree with the noble Lord, Lord Peyton. Parties in a democracy are thoroughly healthy. It is just nostalgia to go back to some non-existent day when we were all independents. If there was a golden age perhaps it was one when every boy and girl born alive in this world was either a little Conservative or a little Liberal. I have got that one wrong, but noble Lords will know what I mean.

Lord Peyton of Yeovil: My Lords, I have no desire whatever to go back to that distant age, with or without the company of the noble Lord. What I am saying is that the political parties have grown too fat and obese. They need to change. I would not want to go back to anything. I hope the noble Lord will accept that.

Lord McNally: My Lords, I thoroughly accept that. I remember the days when the Conservative agents were seen as the brigade of guards of political agents. That was when there was, perhaps, a disparity in funding between the two parties. I should also put on record that I have always admired the party agents. They are a very important part of the system.

The debate today has echoed with sinners repenting, not least from the Conservative Benches. I hate to tell the noble Baroness, Lady Fookes, but this is state funding of political parties. If one is not willing to grit one's teeth and vote for it as such, then one had better vote with the Government.

As the noble Lord, Lord Neill, and my noble friend Lord Goodhart know, I believe that the Neill committee missed an open goal by not going straight for state funding of political parties. It would have made our politics a great deal healthier. But as a second best this proposal has attractions, especially if it is carried with the other amendment--it is another conversion by the Conservative Party--which suggests an overall cap of £15 million. The real danger arises when parties are set these very large sums which will not be raised by jumble sales and Christmas fetes, but by big donors.

What is attractive to us about the Bill is its pincer movement. On the one hand it caps expenditure so that parties do not have to go cap in hand to big donors. The amendment will bring in the other side of the pincer, a positive incentive to go and find individuals to participate in the political process and get tax relief for the parties. We support the amendment.

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To the Conservatives I only say that there is a totally politically incorrect story of a young lady offered first £1 million and then £1 for her services. At the £1 offer she said, "What kind of girl do you think I am?" and the answer is, "Well, we know what you are. We are now haggling about the price". If the Conservatives support this amendment, they are supporting state funding of political parties and we really are just haggling about the sum.

Lord Bassam of Brighton: My Lords, I have enjoyed this debate more than I thought I would. Not only has it given me a sense of deja vu, it has also been a debate riddled with contradiction. It seems to me that it is true that two opposites can agree.

I have listened to noble Lords from the two parties opposite. Although they disagree on where they come from, they agree on one thing; that is, they want tax relief. It is a question for those noble Lords on the Benches opposite who are concerned about direct state funding as to whether they can live with that and support the position of the noble Lord, Lord Mackay.

The noble Baroness, Lady Fookes, and the noble Lord, Lord Campbell of Alloway, do not like state funding. The noble Lord, Lord Peyton, is only half-heartedly in support of it. He made a coruscating attack on the growth of the central bureaucracy of political parties. I found much to agree with in what the noble Lord said. That was echoed very wisely by the noble Lord, Lord Marsh.

Where is the Conservative Party coming from? This is state funding by the back door, or, perhaps now the cat has been carefully let out of the bag by the noble Lord, Lord McNally, and rather nicely let out of the bag by the noble Lord, Lord Goodhart, it is clear that tax relief is state funding. Tax relief is a state-funded subsidy to political parties. If that is the case, how is it that noble Lords on the Opposition Benches can so enthusiastically support this? It is worth quoting the Conservative Party's evidence to the Neill committee. It said:

    "We do not believe that a convincing case has been made for taxpayers' money to be directed towards the campaigning activities of political parties ... Forcing taxpayers to contribute to the cost of Party political activities of which they do not approve would be a very significant step. It could only be justified if it were believed that it would otherwise be impossible for political parties to operate effectively".

So is it the case that members of the Conservative Party have now come to the conclusion that their political life has reached such a strange and unfortunate pass that it is impossible for them to operate effectively as a political party? Is it because they are in a state of penury or is it that they have been converted by the full weight of the argument of the noble Lord, Lord McNally, on the issue? I am intrigued to see whether I am right or wrong.

Several good arguments have been raised in the debate in favour of tax relief. The encouragement of small donors is a very laudable point. But where was the compelling and telling evidence that, as a fruit of this particular move, there was going to be a mad rush of small donors to the Conservative Party, the Liberal

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Democrat Party, or, for that matter, the Labour Party? There was no compelling evidence given in that case. There was an argument made but no compelling evidence.

We heard too that one of the arguments against the proposal--the schools and hospitals argument--was riddled with falsehood. The noble Lord, Lord Goodhart, made that point. Yes, I take the point, and it is not an argument which I shall deploy against the proposal. But I make the following point because I think it is an interesting one. It is interesting to me that the Conservatives now place a premium on state funding by the back door while deciding as a party that they favour tax cuts. They put tax relief on political donations--the state funding of political parties--above the proper funding of public services, which their programme would commit the country to cutting.

It is no doubt the case that tax relief as a form of gift aid for charities has been most successful in the past. The noble Lord, Lord Goodhart, said--I may be misquoting him here--that it is like the state giving recognition to the important and valuable work of charities. That was certainly the case that was argued for gift aid tax relief by a succession of Conservative Party Chancellors. That is exactly what this is--it is gift aid to political parties. The Labour Party is opposed to that. We have been opposed to it in the past; we are opposed to it now; and we will no doubt be opposed to it in the future. The Tories need to be honest with us today and say that they accept that this is state funding for political parties. If they do not, I cannot understand the logic of their argument. Indeed, I have not understood the logic of their argument throughout our debates on the matter.

5 p.m.

Lord Jacobs: My Lords, before the Minister sits down, does he accept that there is general disapproval of large donors? For many years I have been a large donor to my political party. But we would welcome government encouragement to small donors. We are not in a privileged position. It is a position that we accept reluctantly. By bringing in support for small donors who give to political parties, the Government now have an opportunity to remove the undesirable effect of having a number of large donors in all our parties.

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