Elections Bill

Lord Rennard Excerpts

Report stage
Monday 25th April 2022 Lords Chamber

Moved by

[Lord Rennard]

48: Clause 19, leave out Clause 19

[Lord Rennard (LD)]

My Lords, after a long debate on a substantive issue, this will probably be a rather shorter, more technical debate. First, I thank the noble Lord, Lord Collins of Highbury, from the Labour Front Bench, and the noble Baroness, Lady Bennett, from the Greens, for supporting the amendment to delete Clause 19 in Committee. I am also grateful to the Minister, the noble Lord, Lord True, and his team for engaging on this issue of accounting for election expenditure in constituencies. The Government’s position appears to be that no change in law is proposed. I therefore think that Clause 19 is unnecessary. The Government say that it is about clarification, but I think this has been provided by the courts and that guidance from the Electoral Commission—provided it remains independent—should suffice.

The Government blame confusion about the rules for election spending in constituencies for the prosecution of the Conservative candidate, the Conservative agent and a senior Conservative HQ staff member following the campaign in South Thanet during the 2015 general election. However, it does not address the widespread concern after that election that the basic principles of the Corrupt and Illegal Practices Prevention Act 1883, which first provided a level playing field in constituency election campaigns, were being subverted in that election.

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[Lord True (Con)]

My Lords, as noble Lords will know, Clause 19 is there to clarify the law on benefits in kind and make it clear that candidates need to report only benefits in kind that they have actually used or which they or their election agent have directed, authorised or encouraged someone else to use on their behalf. We had some discussion on this in Committee, as the noble Lord acknowledges. This was already widely understood to be true, prior to the Supreme Court judgment in R v Mackinlay and others. The Supreme Court judgment has led to concerns that candidates and agents could be responsible for spending they had not consented to or were unaware of or not involved in. This is an unacceptable situation and risks a chilling effect on people willing to put themselves forward as candidates and agents.

The noble Lord has been so kind as to refer to the positive engagement we had and I thank him for his continued interest in and engagement on the topic. In response to some of the concerns he raised, including those raised again today, I am happy to provide clarity on the government position. The noble Lord, Lord Rennard, asked two specific questions and I can say to him that the Government are absolutely committed to the long-standing principle of a level playing field for general election campaigns, whether in campaigning being carried out at constituency level or nationally. The noble Lord referred to a statement made by my noble friend Lord Young of Cookham in 2019 when agreeing with the importance of the principle of a level playing field in relation to spending at elections. The Government maintain the commitment my noble friend gave; nothing in the Bill seeks to undermine that principle.

The proposals in the Bill will not change the fundamental principle that party spending in support of a particular candidate in a local area falls to be recorded as candidate spending against the local limit. Instead, the clauses bring forward changes seeking to maintain the level playing field by ensuring that all candidates and agents across the political spectrum are clear and confident in their legal responsibilities. Clause 19 also makes an equivalent amendment to the same rules for other types of campaigners, such as political parties and third-party campaigners, to ensure that the rules are consistent. We believe that these changes will bring much-needed reassurance and clarity to candidates and their agents on the rules which apply to notional expenditure for reserved elections. In combination with expanded statutory guidance—which we will discuss shortly—from the Electoral Commission on this matter provided for in Clause 20, this measure will support compliance with the rules and ensure that those wishing to participate in public life can feel confident doing so, clear in their obligations.

The noble Lord, Lord Rennard, asked a further and very specific question. I can say to him that the Government are not acting in response to the judgment of Southwark Crown Court in 2019 in relation to campaigning in South Thanet in 2015. However, the Supreme Court’s judgment in 2018 related specifically to the consideration of a particular point of law and concluded that there was no requirement for authorisation in Section 90(3) of the 2000 Act, which was contrary to the understanding of many and led to concerns about what expenses could potentially be incurred on a candidate’s behalf even without their knowledge. As a result, there have been calls from across the political spectrum for clarification of those rules. A cross-party committee of MPs, PACAC and the Law Commission have called for clarity on the rules in recent reports. The changes enacted by the Bill will only clarify the law so that it can be commonly understood. As I said, any uncertainty could lead to a democratic chilling effect, with candidates and election agents, who are often volunteers and fearful of their personal circumstances, unwilling to expose themselves to risk.

Finally, it is important to note that Section 75 of the Representation of the People Act 1983 already prohibits “local” third-party spending over £700 which has not been “authorised in writing”; therefore, it requires specific authorisation. Where such spending is authorised by a candidate, the candidate must also report on the spending incurred by the third party. If a third party, which could include a political party, spends over that threshold without authorisation, an offence has been committed. The Elections Bill does not alter this. Where a third party, including a political party, has provided property, goods and services free of charge or at a discount, or has made use of property, this must be recorded as a notional expense.

I can assure the noble Lord on those points that we are absolutely committed to the assurance my noble friend gave and that we are not acting in response to the judgment of Southwark Crown Court in 2019 in relation to 2015 and the issues of uncertainty that have arisen. Therefore, I hope that the noble Lord will accept those assurances and be ready to withdraw his amendment that would remove this clause from the Bill.

[Lord Rennard (LD)]

My Lords, I am grateful to the Minister for those warm words and his reassurance, and for his engagement and that of his officials on this important issue of election law. We have certainly made great progress on the issue since we began discussing what may happen in relation to notional expenditure and the original Private Member’s Bill, but I take from everything that he says, when he refers to clarification following the Supreme Court judgment, that any court in future would say that nothing in this clause should be taken as a change in the law.

I remain unconvinced that it is necessary but I am pleased that the Minister, in his correspondence, particularly that to all Members of the House on 4 April—if I may paraphrase slightly what he said—made it clear that there is no get out of jail free card for a candidate or agent who encourages excessive spending in a constituency and simply relies on the claim not to have authorised it. The word “encouraging” is quite significant in how that may be taken in a court in future should there be controversy over election expenses. It means that there cannot be a nod and a wink to expenditure in the cause of winning a constituency without accepting that such expenditure must be specifically authorised, to a £700 limit, for a third party. An election agent who told their HQ that they were delivering a leaflet with the local volunteers over the weekend so it would be convenient if two coachloads of paid activists could come on Wednesday and Thursday would certainly be encouraging illegal spending, as would providing them with maps and assisting them with their dining and hotel arrangements when they came to canvass or deliver in the constituency.

In my view, it remains a loophole that we must examine at another time that parties can post huge quantities of direct mail to a constituency aimed at influencing the vote there but claim that it is nothing to do with the local candidate. However, given that the Electoral Commission should retain its independence to advise on such matters, and that such advice could again be evidence in court, I beg leave to withdraw the amendment.

Amendment 48 withdrawn.

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[Baroness Hayman of Ullock]

My Lords, this amendment was not tabled in Committee. This is the first time we have looked at it. It addresses recent concerns that have been raised around non-dom status and donations from non-doms. I thought it was important that this was acknowledged during our discussions on the Bill.

The Labour Party believes that non-dom status should be abolished. We have recently made that very clear. We believe that there should instead be a modern scheme for people who are genuinely living in the UK for short periods. We want to address the fact that we can have small group of high-income people who live in the UK and are able to access non-dom status. We do not believe that they should be able to continue to avoid paying UK tax on their overseas income for up to 15 years, as is currently possible with the system we have at the moment.

We believe we should look at the systems in other countries and put in place something similar that is suitable for our country. For example, Japan, France and Canada have much better systems in place, where genuinely temporary residents who are here for short periods would not pay tax on overseas income gains, but that would not be possible for those who are here much longer.

This would bring about a clear, simple system. If we look at what we are doing at the moment, the rules are around 200 years old. It also means that the domicile is passed down through people’s fathers. It seems extraordinary that we still work by those laws. Surely it needs to be properly looked at and considered. I understand that HMRC has to use four complicated flow charts just to determine someone’s domicile. We have been talking about simplifying electoral law; this is something else that clearly needs looking at and simplifying.

We think that a temporary tax regime for residents would work. It would provide some tax advantages, but only for short periods of time, unlike the way the system is at the moment. Fundamentally, we believe that if you make your home in Britain long-term, you should pay tax here on all your income.

We are also concerned that the current system prevents non-doms investing their foreign income in the UK, as bringing it here means that it then becomes liable for UK tax, so there is no advantage for them to do so. That means that non-doms who earn income in tax havens and other low-tax jurisdictions would face a large financial penalty if they attempted to bring that income here to the UK. We do not believe that this is good for business; we should be encouraging more investment in the UK through these wealthy people.

We are aware that the Government have a business investment relief scheme which is intended to fix this, but we do not believe that it is working properly. The latest figures show that less than 1% of non-doms invest their overseas income in the UK in any given year, and that cannot be good for UK business. In addition, if we made these changes, it would bring us into line with other major economies. The UK is one of the only large economies which has these arrangements. As I have said before, France and Canada, for example, have different regimes, as does Germany.

This issue needs serious consideration. The Government need to address it and the Elections Bill provides an opportunity to do so. I will be interested to hear what the Minister has to say in response. However, because this is such an important matter and it needs to be dealt with, if I do not hear from the Minister serious ways in which it can be addressed, I will consider testing the opinion of the House.

[Lord Rennard (LD)]

My Lords, elections and donations are about choice. People who have non-dom status choose not to pay their tax here and, while they have this status, they live abroad for more than nine months of the year. The fundamental question raised by this amendment is: should they be able to donate the perhaps millions of pounds which they save in taxes by being non-doms to a political party, for example, which might want to preserve that beneficial tax status for them? In other words, we might connect the two principles of being able to give millions to a party and benefit by not paying millions which other people might consider are owed in taxes.

There are a number of occasions in our debates when we say that what we are doing is asking the other place to think again. However, we are not, on this principle, asking the other place or even this House to think again. The legislation which said that non-doms should not be able to donate to political parties was passed by both Houses in 2009. So we are not asking anyone to think again; we are simply asking for the legislation, passed with the approval of both Houses, to be implemented. Since 2010, various excuses have been put forward as to why this has been supposedly difficult or impractical, even though it was approved by Parliament. Essentially, the excuse provided is that the HMRC says, “Well, all tax issues are confidential, so you can’t implement this”. However, a form of declaration accompanying any donation, saying, “I am not a non-dom, so I am entitled to donate”, might well suffice and fit the bill. If you were making a false declaration, that could be an offence.

However, I do not really accept the HMRC’s argument—or rather, the Government’s argument put forward on behalf of the HMRC. For example, when Parliament said that if you are a higher-rate taxpayer, you should not benefit from child benefit—which I think was a fair measure—you needed to sign a declaration to the HMRC saying, “Someone in this household pays a higher rate of tax, so I can’t receive child benefit”. Why, therefore, can you not sign a declaration saying, “Someone in this household is a non-dom and therefore cannot donate to a political party”?

This debate is really about some of the fundamental parts of the Bill. The extension of the right to vote beyond 15 years is not really going to extend voting rights for very many people. For the reasons I outlined at Second Reading and will not go through again, the postal vote system, needed by most people who vote overseas, is so slow that very few votes would count in a general election. However, through this Bill the ability to donate unlimited amounts of money is being extended to a lot of people, including non-doms. A little earlier today, when discussing a technical aspect of the Bill, the Minister kindly confirmed that the Government’s position is very much to maintain a level playing field at local constituency level and nationally. However, I do not believe that this is happening. This extension of the right to vote is more about the right to donate, and should not be applied to non-doms.

In December 2020, the Government said that they wanted to increase the national expenditure limits for political parties in a general election “in line with inflation”. In 2000, Parliament agreed that there should be a level playing field between the main parties in elections. The principle was very much that it had to be a level playing field, not that each of the parties should be able to spend up to £20 million. If we increase that £20 million limit, or thereabouts, by the rate of inflation since 2000, that is a 79% increase. Therefore, the national expenditure limit, if increased in line with inflation since 2000, would go up for the Conservative Party, for example, from almost £20 million to almost £36 million. Where is that extra £16 million going to come from? Much of it will come from overseas donors, many of whom are non-doms. I do not think that this appeals to the British sense of fair play, and it should not happen.

[Lord True (Con)]

My Lords, I fear that I am not going to be able to allow the noble Baroness to remain in her seat for the rest of the evening. The Government cannot agree to these provisions, which seek to bring into practice a provision from the 2009 Act regarding donations from non-resident donors. Noble Lords will recall that in Committee, my noble friend Lord Howe replied to the approach of the noble Lord, Lord Rennard, on this same uncommenced provision.

The Government’s position on the matter remains unchanged, but it is important briefly to place on record the reasons why. The Government have no current plans to bring into force the uncommenced provision, Section 10, regarding donations from non-resident donors. It would be extremely difficult to make the provision work, as the Electoral Commission warned in 2009 when the Bill was going through Parliament. The coalition Government, in which the noble Lord, Lord Rennard, was influential, did not implement it between 2010 and 2015. The fundamental issue is that it is not workable, given that an individual’s tax status is subject legally to confidentiality. It would therefore be difficult or even impossible for the Electoral Commission, political parties, which would face fines for this, and other campaigners accurately to determine whether a donor met the test set out in Section 10.

I acknowledge that the Labour Party has come forward. I do not wish to get into a debate about the Labour Party’s fiscal proposals—that is slightly outside the scope of the Bill—but I know that Sir Keir will send a thank you letter to the noble Baroness for having raised this issue. Our principle, basically, is that taxation is not the basis of enfranchisement in the UK. As a British citizen is able to vote in an election for a political party, they should be able to donate, subject to requirements for transparency in donations, which we have discussed. There is also a precedent whereby those who do not pay income tax rightly remain entitled to vote. A lot of low-paid people do not pay income tax, but they have a legitimate right to vote. I know that perceptions differ on this issue. I remind the House that on two occasions, in 2009 and 2013, the Electoral Commission warned about the practical implications of the policy. For these reasons, and because of the duty of confidentiality in taxation, which would have to be overridden by other legislation, the Government cannot support the noble Baroness’s amendment.