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Lord Campbell-Savours: My Lords, I shall also speak to Amendment 30. These amendments were debated at great length in Committee. They were originally tabled in the House of Commons and have been vigorously opposed by the Government at all stages. I shall argue on two counts: first, the merits of the amendment are set out in the letter from Mr Gordon Prentice MP; and, secondly, the procedural issues arising out of the handling of the amendments in the Commons, as set out in the letter from Martin Linton MP.
The case on merit, in my view, turns on whether a person who is not liable to tax in the United Kingdom should be permitted to make a substantial political donation that may well run into millions of pounds to a political party, and thereby influence the result of a general election. That is the question. I believe that they should not be allowed. Individuals collectively pay their taxes in the belief that, having done so, it is they who should have the right to influence how their taxes are used—not some person who deliberately avoids liability to United Kingdom taxation. It is the payment of and liability for tax that gives us the right to decide. It is our money and not theirs. It is for us, who are liable to tax, to decide which Government should be in place to decide how our taxes are used.
I shall repeat the scenario I put to the Committee. I shall exaggerate to make my point. If a Ukrainian billionaire philanthropist, entrepreneur, oligarch, public benefactor, or whatever acquires British residency, buys a home in London, spends most of his or her time abroad, refuses to make him or herself liable for tax in the United Kingdom, and then offers a political party a £5 million donation, should the political party be permitted to accept it? The public would be appalled; the political party would be discredited; and Parliament’s credibility would be further undermined. As the law stands, that can happen. My amendment would make it unlawful for any person who is not UK-liable for tax purposes, and is not a non-domiciled UK resident, to make a substantial donation to a political party. A cap on such donations would be defined in law.
The amendment is based on the simple principle: if you want to donate you have to be liable to tax. Of course, there are limitations. If a person is not ordinarily resident, he or she will be liable to tax on income arising only in the United Kingdom. Only someone who can spend 183 days or more in the UK is a UK resident under the six-month rule. Someone will be regarded as a resident if they come to the United Kingdom regularly and after four tax years they visit during those years for an average of 91 days or more a year. I am told that that is the current position.
We know that non-UK taxpayers can have a huge impact on the outcome of general elections. The Rowntree report published last year, Purity of Elections in the United Kingdom: Causes for Concern, states:
“There is substantial evidence to suggest that money could have a powerful impact on the outcome of general elections, particularly where targeted at marginal constituencies over sustained periods of time”.
A well-known public figure, who lives offshore and refuses to make himself liable to tax in the United Kingdom, converted a £3 million loan into a gift to a political party. He then went on to donate a further £100,000 to that party and an additional £30,000 to a
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“The permissibility requirements in the 2000 Act are intended to ensure that only people and organisations with a close relationship to the UK can donate to political parties. It is for Parliament to decide if this is appropriate”.
That is what the amendments do.
How would they work in practice? A person wishing to make a donation simply ticks a box on their tax return and the Electoral Commission need only certify with HMRC that that is the case. It would be a simple procedure in circumstances when a donation could on occasion influence the result of a general election. Of course, it would apply only in circumstances when a donation exceeded a threshold laid down in regulations. The House may want to consider a letter to Mr Tony Wright, chairman of the House of Commons Public Administration Committee and the House of Lords Appointments Commission. The letter announced the changes to the selection criteria for Peers. It stated:
“I am writing to notify you of a slight strengthening of the selection criteria which the Appointments Commission will in future use when assessing nominees for non-party-political peerages. The Commission has agreed these changes as part of its review of policies and procedures and in the light of experience”.
A copy of the press notice is attached, which states:
“The Commission also wants to strengthen the existing requirement that a nominee should be resident in the UK for tax purposes, and be willing to confirm his or her acceptance of the requirement to remain so. This strengthening will also be reflected in our vetting criteria for future party-political and other nominations for peerages”.
Surely, if appointment to the Lords requires UK residency for tax purposes and a liability to tax within the United Kingdom, it must follow that donations of millions of pounds to political parties, which could influence general elections to the elected House of Commons, must have at the least the same tax liability requirement. As many of my colleagues in this House have asked me over recent weeks, how can the Government justify the position that they have taken on this issue?
7 pm
If the high standards which the public demand of Parliament are to be met in a way that the Prime Minister recently proposed, surely now is the time to deal with this utterly unacceptable practice in our tax system? The Government last week circulated to Members on this side of the House—and to all Members, I presume, in the spirit of fair play—their explanation and, indeed, justification for refusing to accept these amendments. They gave a number of reasons, which I shall take individually. The Government’s own circulated document says,
“The amendments would restrict only one form of democratic participation (making a donation) according to tax status whilst leaving other forms unrestricted”.
- “standing as a candidate for and sitting in a legislature, voting or campaigning as a ‘third party’ pressure group”.
“There is a real Article 11 ECHR (right to freedom of association) issue. It may be lawful to restrict who may give donations if the restriction is justified and proportionate. But a tax status restriction is problematic if it restricts donations but not voting”,
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In other words, they are saying that a tax status restriction is problematic if it restricts donations but does not restrict voting. They then pray in aid Article 11 of the Convention, somehow likening the right of a single individual to cast a vote in the Pimlico Churchill Gardens polling station at a general election to the right to donate millions of pounds to a political party and thereby influence the result of that whole election campaign. The logic behind that is ludicrous: one vote equivalent to a contribution of millions of pounds. I feel sure that a few lawyers in this House would readily make a meal of that excuse.
“There is a risk that the amendments would result in donations being diverted through other routes ... companies, unincorporated associations”.
My response to that is: why do the Government themselves not table amendments in this House on Third Reading or, if the amendments were to go through, on the Commons consideration of Lords amendments to deal with that problem, if it exists? I invited my noble friend to do so in Committee. If the principle of a tax restriction were to be established in this House, there is no reason why further work could not be done by the Treasury on tax law relating to “companies and unincorporated associations”.
- “difficulty in establishing whether an individual is resident and, particularly, domiciled. HMRC does not routinely hold this information for the majority of taxpayers. Establishing residence and domicile would usually require HMRC to undertake an investigation at considerable time and expense. It is not clear how parties would satisfy themselves before deciding whether to accept a donation. Resident status is ‘retrospective’ in that it is dependent upon the amount of time an individual has spent in the UK in the previous 12 months, so very difficult to establish at a given point in the middle of a year if an individual is ‘resident’”.
These amendments place no responsibility whatever on HMRC to investigate the tax status of an individual. It is the individual making a tax return who makes the declaration; he or she is responsible. If HMRC indicates to the Electoral Commission that the donor’s tax return indicates UK tax status, signed off under the statutory declaration by the taxpayer, then the commission would have met the requirements of the law under these amendments, if carried by the House. It would be for the donor to establish whether he or she was domiciled; or, they could take professional advice on that matter if they were not aware whether they were domiciled.
“In order to enforce the new requirement, recipients of donations and the Electoral Commission would need to be able to verify that a donation was permissible and would require access to HMRC information. HMRC has a statutory duty to maintain taxpayer confidentiality”.
In reply to that, let me make it absolutely clear that all the Electoral Commission needs to know from HMRC is: has the donor ticked the box on a tax return? Recipients of donations would have no need whatever to approach HMRC. Then, they say that they,
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- “need to be mindful of a commitment in the 2008 Budget that there would be no further changes to the taxation regime for non-domiciles in the rest of this Parliament or the next”.
To that, I reply: there is nothing in my proposed amendments that would increase the liability to tax. Indeed, I could not table such an amendment in this House.
I have been asked what would happen if, despite a Revenue declaration, a party was found to have been misled by a donor and had received an impermissible donation. In my view, it would be a perfectly reasonable defence for a party to argue that it received approval for the donation on the basis of HMRC’s confirmation to the Electoral Commission that the box had been ticked. However, it would concentrate the minds of political parties when seeking to ensure the validity of donations.
Finally, I turn to what some people refer to as the most important argument of all. What happened when these amendments were originally moved in the Commons? They followed on the important work done, over a number of years, by Martin Linton. These two amendments were originally moved in the Commons by Gordon Prentice. They were supported by 218 Members of Parliament—probably among some of the highest signatory endorsements for amendments in the history of the House of Commons. They were supported by nearly all political parties, yet they were not debated. They got caught up in a procedural wrangle.
These amendments constituted the fourth group out of a total of six scheduled for debate on day two of proceedings on the Bill. I do not want to go into the detail, but they caught up in an argument over a programme motion, which effectively excluded them under House of Commons procedure. As I say, they were neither debated nor voted on—a classic example of a Commons failure to properly scrutinise amendments. This is our opportunity to show the Commons the value of scrutiny arrangements in the Lords. The Commons are desperate to have the opportunity to debate and vote on these amendments, and many a screen is going in that House this evening with people watching our debate. They want the opportunity to vote on these amendments. We can give them that opportunity. I beg to move.
Lord Tyler: My Lords, I and my colleagues very strongly support these amendments, as we did in Grand Committee. Indeed, my noble friend Lord Oakeshott may refer to the specific issue of how the criteria for entry into this House now follows the pattern to which the noble Lord, Lord Campbell-Savours, has already referred. For goodness sake, if it is practically possible to identify the tax status of those entering this House, it must surely also be possible to do the very same thing for donors to political parties. I intend to speak only briefly on this issue, as I hope that we shall also hear from the noble Lord, Lord Rooker, who has put his name to these amendments.
As the noble Lord, Lord Campbell-Savours, has already said, this set of amendments had the support of an unusually large number of Members of Parliament, from the Back Benches of all parties. They were tabled by Mr Gordon Prentice but not put to the vote; by an accident of history, they were not passed there. However,
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When we discussed this in Committee, Ministers came up with a number of apparent practical difficulties. I suggest to them that where there is a will, there is a way. It is important that they should be forced to look carefully at the practicalities of this between now and Third Reading, and if they cannot accept that it is practical to do this at that stage, we should nevertheless demand that there is an opportunity for the other place to discuss this. There is an issue of principle here. Members of your Lordships' House who are steeped in history will recall that the rebels in the United States went under the great slogan, “No taxation without representation”. In a sense, we are turning that upside down and saying, “No representation without taxation”. That is the basic fact. It is surely right that no person who is not liable for tax in the United Kingdom should be permitted to influence the use of taxpayers’ money, money paid by those who do pay tax and are liable—you and me. That should be an intrinsic principle.
There is a subsidiary issue that I would like to draw to the attention of the Minister at this stage because it arises out of this. In his letter of 12 June, he wrote:
“I know that concerns have been expressed about the potential for making multiple donations just below the thresholds to avoid the recording and reporting requirements”.
In the otherwise very comprehensive briefing that he has given at all stages, the Minister has been very conscientious in giving us a response to a query or a concern of that sort, but no such response appeared in this letter, at Second Reading or in Committee. A foreign donor could very easily avoid the restrictions of reporting or recording by simply making a payment every week of the year, but just below the threshold— £1 below the threshold every week of the year—so we have to be extremely careful. Even if this amendment is passed, and I hope it will be, we must be very careful that that other loophole is not still available to foreign donors who, because they keep just below the threshold, are not required to be recorded or reported to the commission.
If we leave the Bill as it is, without a clear statement that these sorts of donations from foreign sources are not permissible, the Bill will not fulfil the requirements that the Government have placed upon it. Even since the Bill was in Grand Committee, there is greater awareness of the potential corruption of our political system by people with very large chequebooks who can buy their way into influencing a relatively small number of constituencies, the marginal seats. It takes us right the way back to the purchase of seats before the Reform Act 1832. As the noble Lord, Lord Campbell-Savours, said, unless we stand up for the right of citizens of this country who pay taxes to be the people who decide how our political system works, the House of Commons will not get its opportunity, and the Bill will be weaker for it.
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Lord Borrie: My Lords, my noble friend Lord Campbell-Savours has made a powerful case not only on the substance of the matter, but on enabling the other place, which was prevented from discussing the matter, not only to discuss but to determine whether a restriction should be placed on non-UK residents making donations to political parties.
My noble friend may not have drafted the perfect amendment because, for example, it seems to leave it possible for non-UK residents to make donations indirectly through an unincorporated association or a company, but unless the Minister undertakes this evening to bring forward an improved amendment with similar objectives to those of my noble friend Lord Campbell-Savours, I am inclined to vote for his amendment so that MPs and parliamentary draftsman can pool their respective skills to improve upon it.
7.15 pm
It may be said that restrictions on donations are restricting one form of democratic participation according to tax status while leaving other forms unrestricted. I do not regard the making of huge, unlimited donations in the same light as the right to vote, the right to have fair elections or the right to stand as a candidate for the other place. I doubt the suggestion that a restriction on donations might breach Article 11 of the European Convention on Human Rights. This has been raised by the Government with no supporting evidence or legal argument; they simply posed the view that this restriction on donations suggested by my noble friend would be a breach of the provision for freedom of association and assembly. There are restrictions on the right to vote in many of the convention countries, including our own. We are contemplating reducing the voting age. There are restrictions on the way in which elections are run. Surely, if it is suggested that restrictions on the finance that may be provided by a donor to a political party contravene Article 11, it would suggest that Article 11 of the convention is rigid, clear and specific. However, I am sure that it is not so, and I cannot imagine that a full, successful argument could be made that my noble friend’s proposal would result in a breach of the convention. I support my noble friend.
Lord Williamson of Horton: My Lords, I agree with the purpose of the amendment. Over 10 years, I have taken very great care not to criticise on the Floor of this House the legislative procedures in the other place. I say only that I am depressed that an amendment on this question, which was tabled for Report in the other House in the names of 216 or, possibly, 218 Members of Parliament, was never discussed because of the timetabling, procedures and the use of a programme motion. It is open to us to adopt the amendment in the name of the noble Lord, Lord Campbell-Savours, thus making it possible for the other House to discuss the proposal, so let us do that.
Baroness Gould of Potternewton: My Lords, I rise with a little trepidation to put a slightly different point of view. I have great sympathy with the fact that this was not discussed in the House of Commons, and it should have been. It says an awful lot about the procedures of the House of Commons that 216 MPs
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I will do so because the amendment is so badly flawed that I do not feel able to support it. It does not do what it is attempting to do. I have great sympathy with what it is attempting to achieve. I think it is diabolical that large sums can be spent prior to an election in the way that they have been in the past, but this amendment does not solve that problem. It does not solve the problem of a non-UK taxpayer putting money through companies or unincorporated associations. To prevent that would need another amendment, which we do not have in front of us. Nor does it do what I would like it to do, which is to say that large donations should not be spent before a general election from wherever they come. I can only cite from my own constituency, where one of the candidates spent £90,000 of his own money prior to the last general election. There is nothing in this amendment to stop that happening next time. I wish there was, but this amendment does not do what a lot of people believe it will do.
Lord Goodhart: My Lords, might the noble Baroness consider dealing with that point by supporting the amendment tabled by the noble Lord, Lord Campbell-Savours, and then supporting my noble friend’s amendments to cap the contributions?
Baroness Gould of Potternewton: My Lords, I do not think the two things go together, with the greatest respect. We will come to the capping of donations later. The noble Lord does not know what my view is on that; he will have to wait and see. But this amendment does not do what a lot of people believe it does. I am not certain what the procedure would be to get an amendment which eliminated that loophole in respect of companies or unincorporated associations through the Commons if this amendment went back to the other place. I am not certain that it would be feasible.
We have had some discussion already on the concerns the Government have raised in response to this amendment. One is the anomaly about democratic participation. It may be said that there is no relevance between giving money to a political party and affecting the outcome of an election. My constituency won irrespective of the £90,000 donation from another candidate. But I accept it has an effect. Also, if we say that a person cannot give a donation but can be a Member of this House or a candidate for the Commons and can win, does that not have an enormous influence on how taxpayers’ money is spent? It is not just a question of how it is spent in elections, but also of how it is spent on all the other issues that we deal with. Those people have the right to sit in this place and the other place and spend that money. That is another flaw in the argument.
I share the concern raised by the Electoral Commission about the need to verify whether a donation is permissible. The Electoral Commission’s own data suggest that
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