Political Parties: Funding

Lord Kennedy of Southwark Excerpts

Wednesday 10th December 2014 Grand Committee

[Lord Kennedy of Southwark (Lab)]

My Lords, like my noble friend Lord Campbell-Savours, I thank the noble Lord, Lord Dykes, for introducing this debate. I agree with him that he is a happy and friendly noble Lord. I always enjoy our conversations together, whether they are in the Bishops’ Bar, outside the Table Office when we are waiting to put our Questions down, or anywhere else. I see the points that he makes about politicians and the low feelings in the House of Commons. Unlike the noble Lord and my noble friend Lord Campbell-Savours, I have never served in the other place but Members there and Members of this House are honourable and only a few exceptions cause problems.

The funding of political parties is an extremely important issue, and having healthy parties is crucial to our democracy. Whether locally or nationally, most people elected to public office stand on a party ticket. Those elected to form the Government of the UK, the Opposition or devolved institutions or to form the administration of a local council are drawn from people who, in virtually all cases, are elected from party tickets.

However, before we get to the point of seeking elected office, parties must have structures and procedures in place. They must have built up organisations and developed the skills to undertake campaigns. All this costs money, and everyone in this debate wants the funding of our political parties to be transparent, open and free from suspicion of people buying influence or seeking favours.

Over a number of years there have, as my noble friend and the noble Lord, Lord Dykes, said, been a number of attempts to reform party funding. The present interests or concerns can be traced back to the 1990s and the last years of the Conservative Government led by John Major. The biggest reform followed the report undertaken by the Committee on Standards in Public Life, which led to the 2000 Act commonly known as PPERA. It introduced spending limits for national election campaigns, the regulation of donations, the publication of what money had been received in each quarter by the parties and the publication of annual accounts, among other things, including the establishment of the Electoral Commission.

Since then, there have been other problems. After the 2005 election, we saw allegations of cash for peerages, which went on for well over a year. We then had the review by Sir Hayden Phillips, to which other noble Lords have referred, but the interparty talks were suspended in 2007. Then we had the election of the coalition Government, whose agreement said:

“We will also pursue a detailed agreement on limiting donations and reforming party funding in order to remove big money from politics”.

We have had the inquiry by the Committee on Standards in Public Life into party finance, published in November 2011. It is a good report with lots of sensible recommendations on how party funding could be reformed. However, the biggest problem is that the public—the taxpayer—would not accept additional public funds going to parties when we are in such difficult economic times and when efforts to improve the public finances and the economy are set to continue well into the next Parliament, no matter which party or parties are in government after May next year. That is the real issue and one that the parties cannot ignore.

The interparty talks again failed to reach agreement, as the noble Lord, Lord Dykes, said, and the Government moved ahead with their lobbying Bill. There have been other developments. In terms of my own party, my noble friend Lord Collins led a review which fundamentally changed the relationship we have with the trade unions, with individual union members having to opt in, as the noble Lord, Lord Dykes, said. That in itself may bring about other changes regarding the funding of political parties. These are difficult issues to resolve but I am firmly of the opinion that they must be resolved by agreement between the parties and that that agreement must not produce winners or losers. It needs to be a fair funding settlement whereby, in effect, every party has to give up something or make changes but where every party also gains as well. My noble friend Lord Campbell-Savours made some powerful points about how important it is to look at what impact that might have, particularly on the smaller parties. A deal can be made only on that basis and that is the real challenge for everyone who wants to seek a resolution to this problem.

The Political and Constitutional Reform Committee came to similar conclusions in its report published on 29 January 2012. It said that a solution perceived as partisan would undermine any positive impact on public opinion which would otherwise be achieved by resolving this issue.

I want to move on and look at some of the suggestions that have been made in recent years. Some have considerable merit and others not so much. As I said before, additional state support for parties in our present economic climate is not something that, in my opinion, the public are going to accept, but the proposals put forward by Andrew Tyrie MP, John Denham MP and the noble Lord, Lord Tyler—particularly in connection with making savings on things such as the freepost costs and possibly using that money in a different way—are certainly worth exploring further. I wonder whether the noble Lord, Lord Wallace of Saltaire, has any idea of the sums of money that would be involved, which might be used in a different way. Would it be possible for this money to be used to begin to limit the size on donations received by a political party? I do not have any figures but could a start be made? It would be good to get the noble Lord’s views on this.

Often when people look at party funding reform, it is suggested that there should be some reduction in the national local spending limits to curtail expenditure and stop the development of an arms race. In a previous life I was the director of finance for the Labour Party. A political party is not shielded from the everyday cost pressures that any other organisation faces. I refer to things like mortgage payments, rents, pay claims, IT costs, insurance and other office costs. Many of these limits for campaigning in national elections have not risen for many years. I really do not want to see an arms race, but parties must be able to mount effective campaigns with reasonable expenditure limits.

I have always liked the idea of fixing limits, but then building in a process whereby an annual uprating for inflation is made as a matter of course. That would let you protect the original decision you made and allow for reasonable annual increases which would not become a row after a number of years because no one had actually dealt with the issue. Then you have to deal with rises to cover four or five years in one go.

I did this with the Labour Party membership fee. No one ever wanted to put the fees up and they were withering on the vine. After five or six years we would end up having a big row because the fees had to be put up. There was always trouble at conference about this, so I proposed, and it was agreed by the National Executive Committee, that in future our fees would be put up on 1 January every year using the October figure for RPI, rounded up to the nearest 50p. We had a standard rate membership fee and a reduced rate at half that which was for unemployed and retired people, and then we had a rate for elected people such as Members of the House of Lords. That was to be double the standard rate. It took the heat out of everything. There are no more rows about membership fees at party conferences or anywhere else. The system is simple, fair and reasonable, and everyone accepts it.

I have always been a bit reluctant to entertain schemes that involve tax reliefs, but I wonder if the noble Lord, Lord Wallace of Saltaire, could say a little about what thinking there is in government about them. My noble friend Lord Campbell-Savours made some valuable points about this area.

The noble Lord, Lord Wallace, has kindly written to me this week about the question of the governance of the Electoral Commission. I know that we are not going to look at this issue until after the election, if at all, but I do think that if any of these changes take place, we must also look at how the regulator is held to account and is subject to proper challenge. I do not believe that speeches in the House of Commons present that proper challenge in areas such as the governance of the Electoral Commission. These are major issues that need to be taken on, so we need to make sure that they are done properly. I was for many years an electoral commissioner and my experience tells me that we need to look very carefully at the whole question of the commission’s governance.

In conclusion, I thank the noble Lord, Lord Dykes, for tabling this short debate. It is important that we have healthy political parties that can function properly and that the political system is free from the suspicion of acting improperly in relation to party funding matters. While we often sit and watch the TV or see in the newspapers an opponent’s party getting caught up in all sorts of funding nonsense, as my noble friend Lord Campbell-Savours has said, in the end we all lose because people begin to think that all the parties are at it. They think that the system is corrupt and we all suffer as a result. It is really important that we get this right. There should be no winners or losers, but a fair, functioning system that actually respects everyone.

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[Lord Kennedy of Southwark]

I have been in the House for almost five years. When I filled in the forms I was in the bizarre position of having to explain that I was actually being paid a salary by the Labour Party. It paid me money.

[Lord Wallace of Saltaire]

I wish my party had paid me. The first time I worked for my party, in the 1966 general election, when I took four weeks off from writing my PhD to be the party’s assistant press officer, I worked flat out—probably 14 to 16 hours a day for four weeks. At the end of it, Lord Byers, who was then the party’s chair, presented me with a £50 note, which I had never seen before and which in those days was a substantial sum of money. I and a friend spent a very enjoyable holiday in France on the basis of that £50 note. That is the only occasion on which I have benefited from money flowing the other way.

There is a consensus on the need to limit the impact of money on politics. There is also a particularly negative campaign from the right-wing media that we are all in politics only for the money. All I say on that is that I would encourage the noble Lord, Lord Campbell-Savours, who pursues many very effective campaigns in politics, also to campaign to ensure that those right-wing newspapers pay their full taxes in the country which they seek to defend because we all know that they do their utmost to avoid that.

The problem for all of us is that political campaigning costs money and the public, as consumers of politics, expect the parties to put leaflets through their doors, to phone them and to maintain websites, Twitter feeds and so on. When I was out in Hull two or three weeks ago, people told me on the doorstep, “How good to see you. Hardly anyone ever comes round and asks us about our political attitudes”. I was glad that we were doing it there, but in quite a lot of constituencies, no parties really manage to do that actively. We know that it does not come for free and that maintaining a basic constituency organisation requires a level of funding. Voters complain vigorously when parties do not maintain contact with them but show no willingness to help pay for those activities.

That pushes us towards the question of donors. The noble Lord, Lord Campbell-Savours, and other noble Lords asked whether all the political parties could manage on less money and depend more on volunteers—but we all face similar problems in how many volunteers we can attract. Perish the thought, but if UKIP had three or four really major donors, that might drive the three parties together to an eventual consensus on this issue.

We all know the context for this debate. The Political Parties, Elections and Referendums Act 2000 introduced some important changes in the field of party funding. It established the Electoral Commission, about which the noble Lord, Lord Kennedy, has rightly raised issues today and on previous occasions. It required political parties to register with the Electoral Commission, set down accounting requirements for parties, introduced controls on donations to parties and their members, and controlled campaign expenditure within certain periods, both for parties and third parties in national election campaigns. I stress “control periods” because I suspect that all three parties have spent a fair amount of money in the last four weeks. We are just about to start the control period for the election; that is part of the problem. The Act set down rules on the donations received and expenses incurred in election campaigns and required companies to obtain approval before making political donations. These provisions are useful and important. Political parties have to keep records of donations over £500, and donations over £7,500 have to be declared to the Electoral Commission, which publishes details every quarter of donations received by political parties. That information is published on its website and is accessible to all—so far, so good. Parties can only receive donations from permissible sources: individuals who are on the electoral register, UK-registered companies—I stress “registered” as that raises a number of questions of definition—trade unions, building societies and other bodies such as unincorporated associations and limited liability partnerships.

The Electoral Administration Act 2006 introduced further provisions on the disclosure of loans to political parties. Since these reforms, there have been continued public and media attacks on large donations and on trade union funding—to which I shall return—which have led to further reports. These include the 2004 review by the Electoral Commission, reports by Sir Hayden Phillips and the Constitutional Affairs Select Committee in 2006 and, most recently, in 2011, a report from the Committee on Standards in Public Life, which recommended, among other things, a £10,000 annual cap on donations, trade union members having to opt in to fees paid to political parties if donations are to be counted individually—I stress that was a proposal from the Committee on Standards in Public Life; it was not a partisan proposal by other political parties—and an increase in public funding.

The problem is in getting consensus among the political parties on this. We all have different interests and we all have different sources of donations. My party has proudly said on its website that when the Electoral Commission has published the number of donations to political parties, over the past three years we have received on several occasions more individual donations than the Labour Party. The problem is that we have not received half as many large corporate donations or donations from other collectivities known as trade unions, or indeed any other large donations—let alone those received by the Conservative Party. In that sense, it does us good as a democratic principle, but it does not provide us with the money we need to employ staff, work on our website and do all the other things that need to be done.

We had a further round of discussions in the light of the report of the Committee on Standards in Public Life which the Deputy Prime Minister convened in 2012-13. Seven meetings were held and the Deputy Prime Minister made one thing clear in setting out the remit, which was that in the current circumstances of a squeeze on public spending, there was no possibility of increasing state funding for political parties. After those discussions, the group failed to agree, and it is quite clear that between now and the next election we are not going to make any progress. Over the past 25 years we have established a whole set of additional funding for political parties—Short money, Cranborne money and the like—which has been very useful and has helped us to carry out our parliamentary functions and to raise the quality of our political research. However, public support for the expansion of political public funding is clearly absent at the present moment. So those talks broke down and we are stuck. We need to fund political parties and we benefit enormously from not having to pay for radio and television advertising, but politics and political campaigning cost money.

The noble Lord, Lord Campbell-Savours, raised the question of the extent to which the harsh regulation that we all suffer, including under IPSA once you are elected, discourages political recruitment and political retention. I think that that is an enormous problem and we will all need to address it once the election is out of the way and we have seen many good MPs from all parties retire rather than continue. I think that the noble Lord and I would probably agree that some of the best of the new Conservative intake are retiring after one period in Parliament, regrettably, because they really do not want to put up with the situation in which they live. That is a loss to us all in terms of democratic politics as much as those retiring from other parties.

[Lord Wallace of Saltaire]

My Lords, for many of us, the world in its current form ends on 8 May 2015. If anyone here knows what the shape of the new Government will be, I would love them to tell me so that I can put down a large sum with the bookmakers and donate the winnings to my political party. I have no knowledge of that. What I am saying is that awkward people like the noble Lord, Lord Campbell-Savours, should insist, as soon as they come back, that it is put back on the agenda because it is a very important question and we cannot get away from it. I therefore encourage him to continue to stir on all of this.

I am not entirely sure that I agree with the noble Lord that trade unions act as virtuous collectivities, which I think is what he was saying, with benign general secretaries representing the enlightened interests of their diverse memberships. That is not quite how I see all the general secretaries of trade unions, so there are some questions around that.

[Lord Kennedy of Southwark]

Will the noble Lord accept that our contributions come from individual members paying in so many pence per week? The contributions come from individual trade union members paying the political levy.

[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.

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[Lord Wallace of Saltaire]

My Lords, I will see what can be done in that respect and, if possible, I will write to the noble Lord.

[Lord Kennedy of Southwark]

I also mentioned the whole issue of freepost. I know he does not have figures here, but maybe we could look again at how much we spend on freepost in the UK, and use that money in a slightly different way.

[Lord Wallace of Saltaire]

Again, I will take that back and see whether we can write to the noble Lord.