Political Parties and Elections Bill

I am afraid that I shall spend a little more time on this amendment. I have tried to be brief on other matters to which I have referred in Committee, but this is a very controversial area and the debate we are now having will be followed closely in the House of Commons, whence these amendments originally came. This is an extremely important amendment which seeks to deal, in part, with a Linton loophole—that is, a loophole that has been identified by Martin Linton during his considerable work on these matters over the past 20 years. These two amendments were originally tabled in the House of Commons and were supported by 216 Members. They were probably among the highest signature-endorsed amendments ever produced in the Commons. Yet, for all sorts of reasons that I hesitate to go into in detail during proceedings in this Committee, the matter was not debated in the Commons. Amendments 84 and 85, to which there were 216 signatories, were tabled by Mr Prentice and constituted the fourth group of amendments scheduled for debate out of a total of six on day two of proceedings on the Bill. The House had from 3.40 pm to deal with all six groups, and had to complete its consideration by 7 pm. That left three hours and 20 minutes to deal with these highly controversial areas of the Bill. The first three areas included limits on donations, caps on donations and unincorporated associations. Consideration of this group began at 5.20 pm and was interrupted at 7 pm under the programme Motion governing Report stage—that was the amendment before this amendment could be called, with the result was that there was no debate in the House of Commons. Mr Prentice asked me whether I would move the amendments in this House, and I agreed. His argument is simple. He says: "We in the Commons were denied the opportunity to discuss these matters, and we now rely on you in the House of Lords to give us in the Commons the opportunity to deal with these matters". He goes on to say that if the pay-roll vote had been free to add their signatures to this amendment, a majority of the Commons would have supported the amendment. He is convinced that in a Division in the Commons, these amendments will go through. I bring these amendments to your Lordships’ House because the Commons was, under the programme procedure, denied the opportunity to debate and vote on these matters, and we should give them that opportunity; and because of the merits of the amendments. The question is simple. Why should a person who does not pay tax in the United Kingdom, or is not liable to tax on their earnings in the United Kingdom, be denied the right to influence the election of the Government by making a substantial political donation? The answer is because, as individual citizens, we collectively pay our taxes in the belief that, having paid them, we have the right to influence how they are used. The payment of, and liability for, tax gives us and not others the right to decide. It is our money, not theirs. It is for us to decide which Government should be in place to spend the money raised from us as citizens through taxation. Those who are not liable to taxation are not entitled, through the use of their money, to influence the Government that is in place to decide how our taxes are spent. Why should a person who is not liable for tax in the United Kingdom influence the use of taxpayers’ money paid by those who are liable for tax? I will exaggerate to make my point. If a Hungarian billionaire philanthropist, entrepreneur, oligarch, public benefactor—whatever you want to call him or her—acquires British residency, buys a home in London, spends most of his or her time abroad, refuses to make himself or herself liable for tax in the United Kingdom and then offers a political party a £10 million donation, should a UK 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 I understand it, that can happen under the law as it stands. The argument therefore turns on where we draw the line. What does the Prentice amendment do? It would make it unlawful for any person who is not a UK resident for tax purposes and is not a non-domicile UK resident to make a substantial donation to a political party. The higher limit of donations would be defined in law. The amendment is based on a simple principle: if you want to donate, you have to be liable to tax. Of course, there are limitations on that. If a person is not ordinarily resident, they are liable for tax only on income which arises in the United Kingdom and only a person who can spend 183 or more days in the UK is a UK resident under the six-month rule. Also, 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 on an average of 91 days or more a year. I am sure that if I am wrong legally on these matters, I will be corrected, but I have tried to source that material as accurately as I can. If I need to be corrected on the detail, then others should do so. We do know that these non-UK taxpayers can have a huge impact on the outcome of general elections. As 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"." I will not get into the names of people or even the parties involved because that is irrelevant to this debate, but one noble Lord who lives offshore refuses to make himself liable to tax in the United Kingdom. He converted a £3 million loan into a gift to a political party and then went on to donate a further £100,000 to that party and an additional £30,000 to a mayoral election campaign. Do we really believe that that is acceptable? As the Electoral Commission, which has got it right for once said: ""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 precisely what we are doing with this amendment. In a spirit of frankness, I should say that the Electoral Commission has allegedly expressed some reservations over the workability and proportionality of the Prentice amendment. But the enlightened Mr Prentice has considered its reservations and come up with a solution to the problems. He suggests that a donor simply ticks a box on his or her tax return and then the Electoral Commission needs only to certify with the Inland Revenue that that is the case—that a ticked tax return has been received. I cannot see how such a simple solution can be described as disproportional, particularly when such a donation could influence the result of a general election. Some people believe that such donations have influenced the results of general elections. Of course, it would apply only when donations exceeded a threshold laid down in regulation. I now draw the attention of the Committee to a letter from the House of Lords Appointments Commission to Mr Tony Wright, chairman of the Public Administration Committee, announcing changes to the selection criteria for Peers of the realm. It states: ""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 then 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 the 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 whole general elections—elections to the elected House, the House of Commons—must at the least have the same tax liability requirements. Finally, I turn to the response of the Government on these matters. They have circulated a document. I do not know how widely it was circulated, but it was sent to Members of Parliament in the House of Commons, certainly to Labour MPs, and perhaps even wider. However, I shall place it on the record because it is it is in the public interest. It is headed: ""Tax status and donations: Gordon Prentice amendments. Two amendments have been tabled by Gordon Prentice MP to make political donations from individuals who do not pay full UK tax illegal … there are a number of practical problems"." Paragraph 1 states: ""The amendments would not prevent non-UK taxpayer donations. The amendments as tabled would not in practice prevent political donations from non-UK taxpayers, as they could use other routes—such as companies or unincorporated associations—to pass on funds … These amendments would not affect company donations"." My response to that is very simple. Why do the Government—presumably the Government were behind the document that I am now reading—table amendments to deal with the deficiencies in that area of these amendments? I invite my noble friend to consider with his officials and other Ministers in the department whether it would be possible to table amendments on Report to deal with the deficiencies identified. I had a conversation with the Justice Secretary Mr Jack Straw about the matters raised in the next paragraph and he raised exactly these issues with me. Paragraph 2 states: ""The amendments would create an anomaly in rules regarding democratic participation. The amendments would allow a non-UK taxpayer to stand for election, collect and receive political donations, vote in elections and potentially sit in a democratically elected body. But the same individual would be barred from donating money—even to their own campaign. There is no coherent reason for this discrepancy,"—" say the Labour Government— ""and indeed such a move would be open to legal challenge on the grounds of unjustifiable difference of treatment. If there is a desire to tackle the residence and tax status of donors, it is preferable to do so in a broader context"." That is an interesting phrase. The document continues: ""Tackling the issue in a broader way means that any risk of legal challenge would be minimised"." So why do we not do that? Why do we not table an amendment on Report that tackles the matter in a broader way to deal with the concerns expressed in paragraph 2 of this document which has been circulated on behalf of the Labour Government—my party in Government? Paragraph 3 states: ""The amendments would be impractical and burdensome. An additional reason for opposing the amendment is that, as things currently stand, it would be very difficult to deliver in practice. This is particularly the case given the concerns surrounding confidentiality of tax data and the fact that such data are not readily verifiable (ascertaining whether a person is resident in the UK for tax purposes would in most cases require a specific investigation). Whereas at present political parties can fulfil their compliance duty to check that an individual is on the electoral roll, or a company is registered at Companies House, by consulting public records—obliging parties to check the tax/residence status of donors would be an impossible task. Tax records are not public documents and in any event there is no single record of individuals’ tax status"." We are not asking the public to have access; we are asking the Electoral Commission to go to the Revenue to check whether it would be compliant with the law in the event that it were to be incorporated in the law in the way that I suggest in the amendments. This opens up the further question of what would happen if a party was shown to have accepted an impermissible donation some time after the event. It would presumably be required to pay the money back, despite never having been able to verify whether the donation was permissible in the first place. Such a scenario would undermine the confidence of political parties, as well as the public, in the regulatory system. I would have thought that it would concentrate the minds of parties, that they would want to be sure that it was a permissible donor donating the money, and that it was within the law. It would probably make the parties extra diligent. I know that the Liberal Party, for a period, had some difficulties in this area and, on reflection, I am sure that it regretted what happened. But the point is that it must have concentrated its mind so that in the future it would not find itself in that difficulty again, as indeed is the case. We have all learnt from what happened over the Liberal experience. Let us tighten up the law in the way I am suggesting because we can make it work. I say to my noble friends, I do not know where this document came from, but it must have something to do with the Government. It is a criticism of the amendment and it certainly did not come from the Conservative Party. On the basis of the document here and the reservations expressed, why do we not table amendments on Report that deal with all these matters and then deal with the concerns expressed by 216 Members of Parliament of all political persuasions, not including the payroll vote? If this House carries the amendment when finally we divide on it—as we will do on the Floor of the House—the House of Commons will have the opportunity of deciding on something that it wants to decide on. I believe that it is the function of the House of Lords to give it every opportunity to do so. I beg to move.