Political Parties and Elections Bill

The intention behind Amendments 82 and 84 is to seek to tie the ability of an individual to make a political donation to his or her taxation status. In order to be considered a permissible donor, the 2000 Act requires that an individual must be registered in an electoral register. Amendment 82 would introduce two further conditions or requirements. First, the individual would have to be resident in the United Kingdom for the purposes of the Income Tax Act 2007; and, secondly, that individual would have to not be a non-domiciled United Kingdom resident. Amendment 84, in turn, would require a donor to affirm that these two additional conditions are met under any statement made as to the source of a donation, as will be required under the provisions of Clause 8. As the Committee has heard, identical amendments were tabled in the other place but were not reached. It goes without saying that the Government recognise the force of support that these amendments enjoy in another place. I can confirm, and do so, that we understand the argument that the ability of an individual to participate in the democratic processes of this country should be linked to their taxation status in a broad sense. But if these amendments were passed, that would not introduce any further controls on donations from other permissible donors—for example, from companies, and I shall come back to companies in a moment, and non-incorporated bodies. It could therefore have the effect of diverting these donations through other, less transparent routes. The amendments that we are to deal with later in the name of the noble Lord, Lord Tyler, Amendments 89, 90 and 142, seek, as I understand it, to prevent people who are not allowed to vote in local, parliamentary and European elections, and companies controlled by those people and other impermissible donors, from giving political donations. The qualification is not linked to the tax status of individuals or companies; it is the right to vote that the amendments will deal with, rather than the tax that they pay. The noble Lord, Lord Pearson of Rannoch, asked about companies donating under European law. To donate, a company must be incorporated in the UK or in an EU member state, but must still carry on business in the United Kingdom. That is at Section 54(2)(b) of PPERA. Effectively, the amendment, even if carried, would not achieve the clear objective that it appears intended to achieve. My noble friend asked the perfectly proper question of why the Government do not add an amendment to that effect. In order to donate to UK political parties, companies have to be registered and carry on business in the UK. The Government acknowledge the concerns that have been expressed about the scope for evasion of the ban on foreign donations contained in these provisions. As we have indicated throughout—and I shall say a little more about this later—the Government are of course willing to discuss how these provisions might be improved and are willing to hear representations on the best way forward. However, we believe that we should move forward on any proposals for better regulation in this area, if we can, on the basis of consensus. We think that in the long term that is much the best solution. There are wider issues to consider than those that the amendments would address. We are concerned—and it is a fair concern—that if these wider issues are not looked at, we risk creating a constitutional anomaly. The amendments tabled by my noble friend seek to prevent those who do not pay certain types of tax in this country from donating in their individual capacity to a political party or other regulated recipient. However, they do not attempt to prevent those same people from participating in a very active way in our democracy in a number of significant ways, including by voting, sitting in our legislature and standing as a candidate to sit in our legislature. That would be a significant anomaly for which there would be, on the face of it, no obvious explanation. Because of the concern about the potential for creating constitutional anomalies, which we should try not to create if we can help it, we believe that broader consideration is needed of the relationship between, on the one hand, an individual’s right to civic and democratic participation and, on the other hand, their responsibilities and, in particular, their taxation status. Noble Lords may be aware—and let me tell them if they are not—that we approached the Committee on Standards in Public Life to suggest that it might want to consider the issue. However, we were advised that the work programme of the committee does not allow it to pursue the matter at present. We are continuing to reflect on how best to take forward this very important matter. We are, however, clear that it would be wrong to tie democratic rights in one area to taxation status, as the amendments propose, while leaving other democratic rights unfettered. Let me deal with some of the significant practical and legal difficulties which mean that the amendments proposed might not work in their current form. I shall mention briefly a few of these. First, the amendments raise real practical difficulties, which cannot be wished away, about how a recipient party or the Electoral Commission would be able to verify whether or not what a donor told them about their taxation status was accurate. Coming to a sustainable view about whether or not someone is resident or domiciled in the UK for tax purposes raises complex issues that it may be difficult for either a party or the commission—both may be involved—to resolve on their own without expending considerable time and, potentially, money. An individual’s taxation status is essentially retrospective—a tax return is normally submitted at the end of a financial year—and it might, therefore, be difficult at a point of time in the middle of a year to determine what an individual’s tax status is. One way to deal with this might be to enable information about taxation status to be shared among key stakeholders in the process. Information on whether an individual is resident and/or domiciled in this country for taxation purposes is currently held only by Her Majesty’s Revenue and Customs in certain circumstances. HMRC does not collect data on residence and domicile status unless it is relevant to an individual’s tax calculation, and it does not hold a list of individuals who are non-resident or non-domiciled. It may be that for the proposal to be fully effective, HMRC would need to collect additional information specifically for this purpose in addition to any information it currently holds. The Electoral Commission or others would want to be able to access this information, whether it be routinely or on a more limited basis. I hardly need to tell the Committee that the confidentiality and data-sharing implications of any proposal to tie residency to donation permissibility would at the very least have to be carefully considered given Her Majesty’s Revenue and Customs’ statutory duty to preserve taxpayer confidentiality. I note that the Electoral Commission has expressed concerns about the workability of the proposal in its briefing note on the Bill ahead of the debate. It is worth quoting what it says about this aspect. The commission states: ""In order to assess whether any donation from an individual is permissible, the recipient would need access to authoritative information about that individual’s tax status. The Commission would also need access to that information to confirm compliance. We think it highly unlikely that this will be achievable in practice or (if so) that the resulting burden on regulated entities and on HM Revenue and Customs would be proportionate"." I should also note that at present many people are potentially unaware of the concept of domicile or their domicile status because it is not relevant to their tax affairs. For example, domicile is irrelevant if you have no overseas income. Under this amendment people unaware of their domicile status could unwittingly commit an offence by giving to a political party. My second practical point, if that is the right expression, is that following the changes made in the 2008 Budget, my right honourable friend the Chancellor of the Exchequer gave a commitment that there would be no further substantial changes to the taxation regime for resident non-domiciles in the rest of this Parliament or the next. Any change to the rules on permissibility of donations should be mindful of this commitment. Finally, we must also consider any legal implications arising from a proposal further to limit the ability to participate in our electoral system, whether through a narrow limitation on the ability to make donations or something wider on participation more generally. It is possible—I do not say that it is inevitable, but it is possible—that the proposals in this area would touch on some key principles. For example, any limitation on participation may well raise issues relating to Article 10 of the ECHR, the right to freedom of expression, and Article 11, the right to freedom of association. We must bear in mind that this amendment proposes a restriction that would apply to UK citizens who happen not to be resident in the UK for various tax purposes. Any proposal that seeks to limit the right to democratic participation of a UK citizen, whether it is in this field of donation or any other, will require particularly careful scrutiny and may raise legal issues for which there may be little established precedent. So I hope that the Government can be forgiven for acting here with some caution. Any potential legal issue will almost certainly be complicated by focusing only on donations, rather than by taking a more consistent approach across the board towards the issue of tax status and participation in politics more generally. These matters may be complex and it is clearly sensible to take the proper amount of time to examine them with the care that they deserve. I do not consider that a task of that detail and potential complexity can safely be completed during the timetable allowed for by this Bill. There are many other points to bear in mind, some of which have been raised during this debate and which the Government will reflect on in taking forward work on this complex issue. I thank my noble friend for raising this issue in the way that he has and for giving us the opportunity to have this debate, which, I suspect, we may in some way or another come back to at a later stage of the Bill.