Political Parties: Funding

Lord Dykes Excerpts

Wednesday 10th December 2014 Grand Committee

Asked by

[Lord Dykes]

To ask Her Majesty’s Government what plans they have to reform the funding of political parties in the United Kingdom.

[Lord Dykes (LD)]

My Lords, I am grateful for the opportunity to raise the question of the absence of an agreement on party funding by the political parties. This mainly, of course, affects the activities of the House of Commons rather than our own but it also reverberates throughout British politics.

I have to start on a sad and depressed note, which is unusual for me because I am normally a cheerful personality, I hope—at least that is what most members of my family still say to me. I feel sorry for MPs collectively because in recent years there has been a huge demoralisation in the House of Commons. This is a severe problem. British politics is in the doldrums, as we are all aware, and wondering how to get out of it. I am grateful, therefore, that the Minister is here today. I am sure he has many ideas on this issue but, in the time he has to discuss them today, he will concentrate mostly on the subject of the debate.

The reasons for this demoralisation are various. All party leaders actively overreacted, almost to the point of hysteria, on the MPs’ expenses scandal. There were some bad examples but the demoralisation of the House of Commons resulted from people being unfairly accused of doing things they did not do or which they did by mistake. Only a small number of MPs did anything seriously wrong—and they were, quite rightly, punished if that was appropriate—but others were driven out of politics without having done anything wrong. I can give plenty of names if anyone wants them.

Another reason over the long term was the blocking of MPs’ wage rises by various Prime Ministers. When I first came into politics, my boss, Edward Heath, was the only Prime Minister to immediately accept the independent recommendation of a substantial wage increase for MPs from, in those days, £3,000 to £4,500. Ever since then, every Prime Minister, of whatever hue, has blocked rises and the demoralisation caused by the freezing of MPs’ wages has partly produced that absence of morale.

On the question of party funding, there was much optimism when the subject was launched either side of the beginning of the coalition Government and afterwards. When Labour was replaced by a coalition for the first time in the post-war period, there was optimism that it might produce a better system in which people would be inclined to agree more. The party funding system was regarded as a serious problem which needed to be tackled. As we know, a committee was set up which produced some notable suggestions and I again commend its work. Could the politicians, the political leaders, their representatives and advisers agree on anything that emerged from the imbroglio unleashed by this quest for some kind of agreement on party funding? You had only to see the headlines in the papers, of whatever colour, in those days about how they were struggling to get there. One paper, at the end of October 2011, referred to the idea of using public money—£3 for every vote—as a state funding plan for political parties. Immediately most of the press objected violently to that idea. However, it happens in other countries—Germany is a notable example—on a large scale and helps to produce more sensible, modern, up-to-date politics dealing with complicated political economies, as Britain is.

Then, because austerity was gradually deepening, the parties got nervous about even suggesting that. They said that in a time of austerity it would be quite wrong of them to seek to use public money, although relatively small amounts had always been used for party research activities and so on—the Short money and the Cranborne money in the House of Lords. MPs urged swift action to limit donations to political parties. What a problem that now is. We have recently seen more and more donors coming to this place. I have to be careful in what I say because of course the Liberal Democrat Party has recently benefited from a £1 million bequest from Professor Watson of Cambridge University. At least it is not a donation from a living person. It is gratefully received by our party, which has a very modest budget of about only £4 million or £5 million in comparison with the larger figures for the other leading parties.

The three main political parties pledged in their election campaigns to take big money out of politics. They were embarrassed by the stories of huge donations, mainly for the Conservatives but also for the others, including ourselves. A fraudster who had offered us £2.5 million went to prison. There were mistakes, scandals and dramatic headlines. The Conservatives ended up offering their business supporters a sort of tariff of what they could get by contributing certain amounts of money. If they paid £2,000, they could have,

“a lively programme of drinks receptions, dinner and discussion groups”.

For £5,000, they could,

“meet and debate with MPs at a series of political lunches and receptions”.

For £10,000 they could have,

“dinners and political debate with eminent speakers from … business and politics”,

and for £25,000—I pause here for effect—they could,

“join senior figures from the … Party at dinners, lunches, drinks receptions, election result events and important campaign lunches”.

It is not only the Conservatives who do that; we all do it, although perhaps in a more modest way.

Again, it is a symptom of the problem that we really have to deal with, with consensus, on a cross-party basis. There is no harm in occasionally having a bit of consensus in British politics on major issues such as this. I feel that the public are turned off by the instantaneous opposition to a suggestion from another political party in order to compete with it as though an election is hovering. Of course, there is a general election approaching now and we have to acknowledge that. None the less, the differences between the parties remain at the margin and are sometimes infinitesimal. A politician from one party says, “We’re saying 18.4679% and that’s the right policy. Someone from another party says the figure is 17.237%, but that’s ridiculous”. The public get turned off by these marginal differences, as well as by politicians changing their mind. They keep shifting in their positions and the public become more and more bewildered, shut out and switched off by this very depressing phenomenon.

The talks resumed in the spring of 2012, having collapsed and the suggestions of the independent committee having been rejected by all the party leaders. I thought that the essence of setting up that independent Committee on Standards in Public Life was to reach agreement on the suggestions, including a cap on donations. The political parties ended up by shelving the funding reform talks, and by July 2013 there was a complete breakdown in any co-operation at all. Why was that? The original suggestion of a £5,000 limit was then dismissed as donations became larger and larger, and more and more members of parties became Members of the House of Lords—coincidentally, of course; there is no direct connection between the two, because that would be a criminal offence. The Lords now has just under 800 Members, many of them financial contributors. Good luck to them—they are entitled to do that under the present system.

We have to get away from this. My colleague, my noble friend Lord Oakeshott, who has now taken leave of absence, made himself thoroughly unpopular through some of his suggestions and behaviour not only in my party but also generally, and we have not heard from him since. However, he had a point when he suggested that voters could be asked whether they wanted to give £5 to a political party of their choice at the ballot box, and he also wanted to cap political donations at £5,000. That would stop wealthy donors having such power over political parties, and Mr Clegg could, for example, team up with Labour to co-operate on reforms of party funding if the Conservatives were less inclined to agree.

That led to what I believe to be Ed Miliband’s quite substantial reorganisation of unions’ individual funding systems. Members of trade unions now donate on a different basis and are not compulsorily obliged to give money to trade unions against their will. Ed Miliband’s reform in that area, which was quite a major step, did not get the credit in the British papers that it deserved. Again, that was part of this atmosphere, with the party leaders unable to co-operate and work with each other. I am sad to have to say this, but I thought we would get a better quality of politics coming from this thing.

This matter really needs to be dealt with very urgently indeed now. I hope that my noble friend will make some interesting suggestions today, and it will be very important to return to this subject. Presumably, alas, we cannot do it before the general election, for obvious reasons, but we must surely return to it after the election. The British public are really quite fed up with what has been happening and they want a sensible system. It may include some public money, on a limited basis. The total figures of £25 million, £75 million or £100 million are very modest for a five-year Parliament, even if public funding is to be involved, now the economy is recovering and people are feeling more self-confident in that sense.

The other thing is that donations must be capped and the attribution of union membership dues must be on a voluntary basis only. That should be officially registered, recognised and accepted by everybody, and then we will get to a position where we are on a more even keel and we will begin to restore the public’s confidence in our politics. I hope that there will be lots of other measures as well in the manifestos—and good policies of course—and then we will begin to make progress. But the whole of this five years has been wasted.

--- Later in debate ---

[Lord Wallace of Saltaire]

I will accept that. A proportion of the fees that individual members pay is deducted for a political fund which goes to one political party. How conscious or voluntary that is is, of course, part of the dispute.

I have a great deal of personal sympathy for the argument made by several noble Lords in support of gift aid tax relief. That is absolutely part of the way forward and it is one of the issues that quite a few of us, in whatever position we find ourselves after the election, should put straight back on to the agenda. We can then argue about the cap to be set, but again we are facing the problem that so far, the evidence of the number of voters who are sufficiently committed to any political party to want to pay money to it has fallen and we therefore need to increase it yet again. Some of us, and I am one of them, do our best to narrow the gap by entering the EuroMillions lottery each week and promising that we will give a substantial part of our winnings to our political party. Unfortunately only the SNP has benefited from that so far, not the Liberal Democrats or any other party.

I had expected the noble Lord, Lord Campbell-Savours, to ask me why the Government have not commenced the part of the last Act which deals with the tax status of donors. The answer I was ready to give to him, and which I cannot resist giving to him, is that the tax status of donors is actually not very easy to establish during a current tax year. For example, whether someone is domiciled in Britain or not is not entirely clear until after the end of the tax year. It is also a matter of confidentiality between the taxpayer and HMRC. If we are to have an information data gateway between HMRC and political parties that political parties can access, which might well be part of what we need to do, it will take us a year or two to establish—my notes say a minimum of two years. That, again, is an issue which we may wish to return to after the election. The question of whether or not a company is registered within Britain and carrying out serious activities in Britain is also a very difficult issue.

[Lord Dykes]

Would my noble friend also consider the possibility of imitating the American regulations so that owners of newspapers in Britain have to be based in the United Kingdom and pay UK personal taxes?

[Lord Wallace of Saltaire]

My Lords, the coalition Government have no policy on that, so I had better not comment. I think that that covers all the issues which have been raised. I encourage the noble Lords, Lord Campbell-Savours and Lord Dykes, to continue to press this. It is an issue to which we will all have to return after the next election.