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Political Parties and Elections Bill


3rd March 2009

Jonathan Djanogly supports the need for transparency in political donations, but raises concerns that if the thresholds at which political parties are required to verify the source are too-low it will make the requirement unworkable.

Mr. Jonathan Djanogly (Huntingdon) (Con): As the Bill stands, clause 8 creates a new requirement for a donor to make a declaration in respect of donations for a sum exceeding the specified threshold. The intention behind the clause, and the related schedule 3, is to clarify the source of donations. Essentially, transparency is the goal. Schedule 3 makes changes analogous to those made by clause 8 in relation to donations made to individuals and members' associations so as to recognise third parties and permitted participants. Although we support the goal of transparency, earlier in the Bill's passage we had many concerns about the provision. In particular, we were concerned to ensure that small donations were not subject to a potentially burdensome and demanding declaration system. After much negotiation and effort, we have, thankfully, made great progress since then, particularly in increasing the thresholds for declaration from the low original sum of £200. In this day and age, using that sum was particularly out of touch.

The Government have also removed the unworkable requirement that parties verify the donation. In combination with the £200 threshold, that requirement would have made the administration of donations almost impossible. It was agreed by all, including the Electoral Commission, that amendments increasing the thresholds and removing the verification requirement were the way forward. Again, the verification requirement would have placed a great burden on local and national party officers alike. Of greatest concern was the potential impact on local party officers. As the Minister said, they are frequently volunteers, and we felt that the Bill in the form considered in Committee risked permanently discouraging those at the grass roots of politics from engaging with the political system. Even for lawyers or experts in money laundering, the requirement would have been almost unworkable, let alone for busy unpaid local volunteers.

When the Bill went into Committee, any donation of more than £200 would have come within its ambit. That would have resulted in approximately 100,000 declarations being required in relation to Conservative party donations alone, leading to an administratively unworkable work load. As a result, we felt that the political system would be damaged, rather than enhanced. After much effort in Committee, the thresholds were increased to £5,000 at national level and £1,000 at local level. We still had concerns, however. It is a simple fact that political parties need funds to fulfil their democratic roles, and the thresholds are still set at a lower level than we had expected. Fortunately, the Government have come back again and admitted that the clause is still deficient, and have tabled these amendments that we are discussing today.

Government amendments 94 to 111 and new clause 19 are a response to widespread objections to the surprisingly low thresholds for declaration originally proposed in the Bill. The Government amendments increase the sums to £7,500 for donations made nationally and £1,500 for donations made locally. I shall return to the thresholds in discussing our amendments. I can confirm that we are reasonably satisfied with the national threshold, but that we have tabled amendments to increase the local threshold from the £1,500 proposed by the Government to the more appropriate figure of £3,000. We had considered increasing this figure to match the national threshold, as that would have been simpler for all concerned, but £3,000 is where we are at on this issue.

New clause 19, which addresses the so-called "permissibility threshold", serves two important purposes. First, it introduces further consistency to the 2000 Act by amending relevant sections so that the figures are in line with the proposed increased thresholds in amendments 94 to 111. Secondly, it increases the recordable threshold to £500 from £200-another improvement. As it stands, part IV of the 2000 Act imposes restrictions on the sources of donations; it prevents certain foreign and anonymous donations to political parties and makes registered parties subject to reporting requirements when in receipt of donations of more than a certain value. The new clause serves to amend the relevant sections of PPERA, specifically in part IV, and the related schedules 7, 7A, 11 and 15. The Act specifies which payments or services to a party are not to be regarded as a donation and are therefore not subject to any requirements-any donation of £200 or less is to be disregarded. The new clause amends the sum, increasing it to £500. Accordingly, any donation of £500 or less would not be subject to the regime.

The increased figure serves a number of goals, and the threshold, generally, is a significant one. Principally, the increased sum aims to reduce administrative burden-a reduced strain will be placed on parties in relation to less financially significant sums. The sum should also prevent donors of smaller sums-those up to the more realistic figure-from being discouraged from contributing money. I am thinking of, for instance, ticket prices for attending local fundraising events. It is important that less significant sums donated in that manner are not caught up in the complexities of this Bill. Again, I stress that we should be encouraging engagement at the grass-roots level of politics; by having a higher level, we carve out individuals who are involved at the base level of politics and who are in no way targets of the legislation. It is sensible to remove entirely from any such conversation those lower sums. I am sure that all hon. Members will be aware that the voluntary levels of party structures and local fundraising are normally entirely divorced from the more complex upper echelons of party funding. Furthermore, as the Minister has pointed out, it should not be forgotten that the PPERA provisions that set the £200 level were debated almost a decade ago. Given the time lag, there is a need for a more valid and fair level at which to disregard the potentially oppressive PPERA restrictions.

Although we approve of increasing the threshold, we remain concerned that £500 is not enough. That sum is still very low in the grand scheme of party financing, and for the reasons I have highlighted, extra caution should be exercised to ensure that minor donations do not end up falling within the ambit of this substantial and intimidating-for individuals-legislation. Although we appreciate that the Government have attempted to address these widespread concerns, new clause 19's changes to part IV of the 2000 Act may not go far enough; a greater sum of £1,000, for example, might be more appropriate.

As the Minister said, this is a matter of judgment and balance. The potential for excessive burden does not extend solely to the donor; in particular, I draw hon. Members' attention to the potential for requirements to be placed on local volunteers in relation to small donations that nevertheless remain above the proposed level of £500. The accounting rules are extremely technical and complex, as is even the guidance produced on the rules. In addition, we need to consider the fact that, because of the voluntary nature of local associations, many of those responsible for accounting are volunteers. Again, I suggest that it is sensible to remove entirely the possibility of an unnecessary burden being placed on donors and volunteers; extending the threshold to a sum such as £1,000 would ensure that there was far less room for doubt.

Martin Linton: Does the hon. Gentleman agree that raising the level to £1,000 would make it relatively easy for a donor making a weekly donation of that sum to give £50,000 without it even showing up on the radar of the political parties legislation? Would that not open the door to large-scale donations that would go unrecorded and unreported?

Mr. Djanogly: I do not think that that can happen, because it is a catch-all provision. However, we are not opposed conceptually to anti-avoidance provisions. I am talking about the good guys who want to give money for the right reasons, not the loopholes, which we would be happy to see addressed.

Martin Linton: But this provision would create a loophole, because it would set the recording level. The recipient of donations of as much as £999 would not even be obliged to write down the name of the donor on a piece of paper. The donor could be someone from overseas, and they would be able to make large donations.

Mr. Djanogly: My understanding is that there are anti-avoidance provisions. Taking the hon. Gentleman's point at face value, the same problem could be held to exist for a limit of £500, £200 or any other amount. If the anti-avoidance provisions need to be tightened up, we would not be averse to considering that.

If the threshold were extended to £1,000, there would be less room for doubt. It has already become increasingly difficult to recruit and retain volunteers, but we need to encourage enthusiasm for politics at a local level. In that context, I do not understand the Electoral Commission's concerns that the Government's proposed increase has the potential to reduce confidence in the transparency and integrity of party and election finance. From previous conversations, we know that the Government have an open mind on this issue, and it may be that their low-bid amendment reflects the concern held by the Electoral Commission. When it comes to setting a level, however, I would argue that it is a matter for Parliament to decide the limit. While we accept new clause 19, we are concerned that the permissibility threshold is reviewed further in the later stages of the Bill.

Our amendments 124, 125, 129, 131 and 133 would increase the threshold for local donations to £3,000 from the current level of £1,500. They would also provide for indexation, about which we are concerned because of the likely high levels of inflation as we come out of Labour's recession. Such sums can look out of kilter after only a few years. I should note that we have tabled other amendments, such as amendments (a), (b) and (c) to new clause 19, which would provide for indexation for all the threshold figures in the Bill.

The declaration requirement is considerable and should be required only in the case of considerable donations. Smaller donations, which will comprise the majority in number, should be less rigorously regulated. Increasing the reporting threshold figure to £3,000 would remove the lower-level donations from the ambit of the Bill and further reduce the administrative burden locally.

Rob Marris: I do not understand, especially given the state of the world economy and the prospect of deflation haunting us, why the hon. Gentleman is talking about upwards-only indexation. That seems strange to me.

Mr. Djanogly: We have provided that indexation should be upward only on the basis that to date none of the thresholds has been reduced. If the hon. Gentleman is concerned about complexity, I put it to him that having an upward and downward measure would certainly increase the amount of complexity involved.

Rob Marris: It would not do so if the Government adopted the excellent proposal that someone made earlier-that the adjustment should be made only once in each Parliament. In that case, the complexity for the individual volunteer would be the same whether the figure was £450 or £550 or stayed at £500. It is no more complex to adjust to a figure going from £500 to £450 than it is to adjust to one that has gone from £500 to £550.

4.45 pm

Mr. Djanogly: The hon. Gentleman has made his point, which is worth looking at. We would not be averse to debating his proposal along with others that will hopefully be considered in the context of the Government's response.

More specifically, an increase in the threshold would further emphasise the importance of catching the larger and more significant sums. Narrowing the ambit of the Bill would focus the commission on the more serious tasks that it faces, avoiding donors, local associations, volunteers and electoral commissioners being bogged down in misunderstandings and disputes over lesser sums.

The amendments would serve three connected purposes. First, they would reduce the administrative burden for donors and parties. Again, I remind hon. Members that the measure will place a significant obligation on a great number of donors. Secondly and simultaneously, an increased limit would emphasise the importance of declarations of larger donations. That would ensure that an appropriate level of scrutiny was applied to the more significant sums. Indeed, it is in relation to the larger sums that suspicious and offending activity is most likely to take place. Finally, an increased limit would remove the discouraging requirements in relation to smaller donations. Accordingly, fewer people donating at the very important grassroots level would feel exposed to the declarations regime and such people would therefore not be discouraged from giving.

We must avoid pushing interested persons further away from political engagement by importing complex legal requirements into the local party funding scheme. The wrong that the measure is intended to tackle is very far departed from the vast majority of scenarios involving sums under £3,000. If we succumb to the temptation to over-regulate, we will succeed only in taking the political system further away from the general public. In this way, we will defeat some of the Bill's key goals in the process.

By tabling their own increases, the Government have shown that they support the principle behind increased thresholds. We therefore believe that the further increase introduced by our amendments would reinforce the theme of the Bill, rather than detract from it. The Minister's acknowledgement of the fairness of our £3,000 proposal is welcome. In the light of his kind offer, we shall not press the amendment to a Division. We look forward to seeing the Government amendments in the other place. I take the Minister's point on certain technical issues that he mentioned, which his draftsmen will no doubt address in their drafting of his amendments.

As I stated, clause 8 creates a new responsibility for donors to political parties to declare any outside source of a donation. Although I repeat our support for the concept of transparency, there must be sensible limits in place to protect the vast majority of honest and genuine participants in the democratic process. The general impact of clause 8 could be costly in both time and money for parties locally. It is at this most fundamental and important level that such burdens are most heavily felt. Bearing in mind this negative potential, our amendment 121 seeks to provide a positive defence for those who have made an innocent mistake.

As we have emphasised throughout our deliberations, this is a complex Bill and it may prove easy to innocently fall foul of the law in PPERA. Even a brief review of the clause in relation to a declaration reveals the lack of certainty for a lay person-for example, the concept of "value of the benefit" and the provision of a benefit "in connection with" a donation. Although we do not dispute the need for such provisions, it is important to ensure that a positive defence is in place if the complex measures are unwittingly not complied with.

By including the commission in the process, amendment 121 looks to see that adequate and specialised scrutiny would be placed on any person who asserted the defence. By positively confirming that the defence exists, we can ensure that the Bill is in kilter with other legislation that creates criminal offences. It is important to remember that guilt of a criminal offence, with the obvious stigma attached, is at stake. As it stands, the drafting of proposed section 54A(6) to the 2000 Act does not adequately address our concerns. It merely states:

"A person who knowingly or recklessly makes a false declaration under this section commits an offence."

There is no confirmation that a person would not commit an offence in the case of an innocent mistake. From our perspective, the drafting of section 54A(5), as proposed in clause 8(2), is not sufficiently prescriptive in that respect. The Bill is silent, and might unfairly cast a doubt over the honesty of an innocent person. There may be a lack of clarity about how the law works in practice, especially when the legislation is first enacted. As such, it seems fair positively to provide a clear defence.

Rob Marris: The hon. Gentleman will correct me if I am wrong, but according to my recollection, he is a lawyer; in fact, I believe that he still moonlights as one. I suggest to him that amendment 122 would change a subjective test into an objective one, and that amendment 121 would introduce a subjective test. He is proposing contradictory amendments that would create great complexity. Were both amendments agreed to, we would end up with the replacement of a subjective test by an objective test and then the reintroduction of a subjective test.

Mr. Djanogly: That is not the case, because the defences are different. They are not put together. Let me continue my line of thought; the hon. Gentleman can then come back, if he likes.

I should like to draw a comparison with section 167 of the Representation of the People Act 1983, which shows the point that we are making. It stated that when a person had to be charged with an offence under its provisions, they could apply to the High Court, an election court or other court as appropriate for relief from liability, on the grounds that

"the act or omission arose from inadvertence or from accidental miscalculation or from some other reasonable cause of a like nature, and in any case did not arise from any want of good faith".

The 1983 Act is an effective example of our amendment in practice. We tabled a near-identical amendment in Committee, but the Minister dismissed it. He said:

"Hon. Members spoke about the 1983 Act, but that framework was replaced by the 2000 Act...We do not believe that the amendment is necessary, but of course we hear the concerns about the dangers of an overzealous approach to enforcement-of the minor, technical breaches." --[ Official Report, Political Parties and Elections Public Bill Committee, 20 November 2008; c. 379.]

The 1983 Act may have been replaced, but that does not mean that it is not a good example of what we want to get to. The Minister concedes that there is a concern about an over-zealous approach by the commission and that we should address that concern by clarifying the defence.

We should act now to avoid the dangers that we have identified and that the Minister has confirmed. There should be no harm in adding this extra layer of protection. Perhaps the technical point that the hon. Member for Cambridge (David Howarth) made earlier is valid, but I say here and now that the Conservative party has been the only one to have supported the concept of an innocent mistake-and we are sticking by it. I am pleased that the Minister seems to be coming around to our way of thinking.

Mr. Wills: I rise on behalf of my hon. Friend the Member for Battersea (Martin Linton). On a point of record, I should say that, as the hon. Gentleman may recall, my hon. Friend also had a lot to say about the issue in Committee.

Mr. Djanogly: He did, and I congratulate him on having done so, but he was not speaking from the Front Bench, unless I am mistaken; the Minister may wish to put me right on that.

The Electoral Commission seems to have concerns about the amendment. It says that it could considerably weaken the eligibility of declarations made under clause 8. However, I put it to the commission that we need a mechanism to deal with the issue. To that extent, the policy of straight rebuttal that the Minister advanced in Committee was not productive. However, he seems to have made a significant about-turn on the issue, at least in general terms; I was heartened by what he said. Nevertheless, so far there have been no specifics, so we will press amendment 121 to a Division at the appropriate stage this afternoon.

Mr. Wills: I am anxious that the hon. Gentleman should not be under any misapprehension. I said to him that I did not believe that the offence in new section 54A(6), with which these Opposition amendments are primarily concerned, is one of the offences that we consider too wide at the moment. We are bringing the amendments forward in the other place, and as I have said, we will reframe some of this. We have, as always, listened carefully to what hon. Members have said, particularly the cogent arguments made by my hon. Friend the Member for Battersea (Martin Linton) in Committee. We want to achieve the stated aim, but not in this context. Some specifics have already been given today, and I would not want the hon. Gentleman to be under any misapprehension.

Mr. Djanogly: I am thankful to the Minister for putting the record straight. That makes it more important that we request a Division on amendment 121.

Amendment 122 would change the requirement for a declaration under new section 54A(1) to be made

"to the best of the individual's knowledge and belief"

by inserting a less oppressive requirement of "reasonable" knowledge. As it stands, the Bill imposes a considerable obligation on the donor by requiring them to apply the highest level of their knowledge and belief in stating whether subsection (2) applies. Subsection (2) applies if another person has provided the donor with money or another benefit in excess of the threshold in subsection (2)(b). It therefore has two layers: the fact of the provision and the value of the provision. In the case of the latter, subsection (2)(b) applies if the "value of the benefit" exceeds the threshold. Satisfying that requirement could be especially difficult. Likewise, it may be equally tough to apply one's best knowledge in deciding whether another person has provided a benefit

"in connection with the making of the donation".

That is emphasised by the lack of an obligation in the Bill for the commission to provide guidance on valuing benefits, so the potential to catch out honest donors is considerable. The provision implies that the person must use all efforts to ascertain whether a vague link or high value of an obscure benefit requires a declaration. When we consider the sanction for failure in this respect, we see that that is a tough standard to satisfy.

In short, the provision can serve only to discourage donations and engagement with the political system. I remind the Minister that he accepted the principle at stake in Committee, where he said:

"Of course reasonableness is important. For instance, when someone is required to give an opinion it should be a reasonable one." --[ Official Report, Political Parties and Elections Public Bill Committee, 20 November 2008; c. 371.]

That being the case, why not incorporate it clearly in the Bill? This requirement is oppressive and potentially counter-productive in terms of the wider goals of the legislation. Our amendment seeks to temper the Bill and bring it into line with the mutual expectation that reasonableness, rather than best knowledge, is the correct requirement in these circumstances.

James Brokenshire: My hon. Friend, and indeed the Minister, talked about the concept of acting in good faith. To that extent, there is some commonality of approach in trying to deal with good faith actions and bad faith actions, if I may use those terms. That is difficult to frame in a legislative way. Does my hon. Friend agree that there is an issue as regards the "best endeavours" obligation-the extent to which people need to make investigations to ensure that they are satisfied-and that there is, equally, a correlation with the recklessness test that appears later on as to whether an offence is triggered? Does he agree that a combination of those steps could lead to uncertainty, which I assume relates to the good faith that he is trying to achieve?

Mr. Djanogly: My hon. Friend makes an interesting and valid point that I hope will be taken on board and considered by the Minister as he reviews the clause as a whole.

Rob Marris: As I understand amendment 121, the hon. Gentleman seeks to apply a subjective test to actions that may have taken place under new section 54A(2)(a) and (b). However, the amendment does not narrow things that much. I can see the mischief in subsection (2) that he is trying to address, but his amendment does not refer to that subsection, so it seems too widely drawn.

Mr. Djanogly: The hon. Gentleman may have a point. We presented two defences that need to be reviewed, and perhaps they are not as connected as they should be-something that we can review. He agreed conceptually with one of the defences that I advanced, and found interest in the other one as well, so we are talking along the same lines to a great extent. I agree that we would want to look at amendment 122 further as we moved on to the later stages, and that will be done in the other place.

5 pm

Amendment 8 was tabled by the hon. Member for Leeds, North-East (Mr. Hamilton). It would require future donation and transaction reports published pursuant to section 62 of PPERA which relate to a relevant donation by an unincorporated association to include the names and addresses of all donors donating £5,000 or more to that unincorporated association, and the names and addresses of all of the members of that association. Essentially, it is a look-through provision in respect of which we agree with the Electoral Commission; it is too widely drawn, such that is onerous and disproportionate. I do not want to spend too long on it because it has been effectively superseded by Government new clause 20, which we will come to in a later grouping.

Finally, I address our amendments 123, 126, 127, 128, 130, 132, 134, 135, 136, 137, 138 and 139, which all provide for indexation of the remaining threshold sums. As I said, we believe that they are important provisions that will ensure that inflation does not leave the thresholds at an excessively low real level, and that the figures will increase in line with inflation. Some have said that they do not like the proposals or that there is no practical need for them for various reasons, including that section 155 of the 2000 Act already allows the Government to increase thresholds to reflect changes in the value of money. That is all very well in theory, but in practice, Parliament will have other things to do than reconsider those figures annually. That is why such provisions should go into the Bill, and why we were happy to hear from the Minister that that point has been conceded by the Government. We look forward to receiving his amendments during further stages in the other place; I also appreciate his point about the need for a rounding figure to keep the figures clear and unconfusing. We will be open-minded on how such a provision is best put into effect.

...

Mr. Djanogly: New clause 1, tabled by the hon. Member for Cambridge (David Howarth), proposes a cap on donations set at £50,000, which would be an annual limit. It would insert a new subsection 1A into section 54 of PPERA requiring that parties do not accept donations from a permissible donor if that donor had already donated £50,000 in the same calendar year.Taken by itself, the new clause looks fairly straightforward, so I agree with the hon. Member for Cambridge that taking this new clause on its own is somewhat misleading, because it is of course a very complicated issue, as the Secretary of State set out. It is the unfortunate backdrop to the debate on new clause 1 and other new clauses tabled by the Liberal Democrats that secrecy and suspicion have long tainted the donation regime. However, as the Secretary of State pointed out, most people who make donations are honest and want to contribute to the societies in which they live through their donations to political parties.As the Secretary of State said, the process started with Lord Neill's Committee on Standards in Public Life, and the subsequent inquiry, "The Funding of Political Parties in the United Kingdom". The Neill report was published in October 1998 and suggested, among other things, greater transparency in donations. While the Committee's report is relevant to the new clause, it did also pave the way for further work in the area of electoral reform, and the gauntlet was recently taken up by Sir Hayden Phillips. His report, published in March 2007, made several suggestions intended to breathe life into the democratic system and revive political engagement. Indeed, by his calculations, party membership had sunk from one in every 11 citizens 50 years ago to about one in 88 in 2007. That is a grave statistic that we should all think long and hard about.Whatever Hayden Phillips thought about individual caps-and I heard a difference of opinion between the Secretary of State and the hon. Gentleman-we can accept for the purposes of this debate that his suggestions are, as a package, behind the new clause and others that the Liberal Democrats have tabled. However, we are concerned about the timing and whether this Bill is the correct forum in which to discuss such wide-scale reforms that have, for better or worse, been discounted so far.David Howarth: The hon. Gentleman asked about the timing of the proposal. If not now, when? The Bill is about party political funding and comes after the Hayden Phillips talks. I cannot think of a better time to discuss caps.

...

Mr. Djanogly: The Hayden Phillips talks took place and, for one reason or another, were not completed. As far as we are concerned, they are ongoing business, but for the purposes of the Bill, they are not on the table. We can debate for ever and a day why the Hayden Phillips process failed. I hope my hon. Friend the Member for Chichester (Mr. Tyrie), who was present, will give us the benefit of his experience. The harsh reality, which the Liberal Democrats seem to fail to recognise, is that what is on the table today is a Bill that, I agree, is somewhat lacklustre. The debate surrounding individual and collective caps is therefore a debate for another day.

In the report Hayden Phillips was keen to emphasise that a common approach cannot be delivered in the short term, and that consensus must be reached in finding a long-term solution. The Bill is designed to ensure that that Electoral Commission has adequate powers to deal with the provisions of PPERA. It introduces some transparency through reporting requirements and adjustments to thresholds. Yes, the Bill is a tinkering exercise rather than an overhaul, but the Conservative party will remain willing to seek that overhaul, even if that means moving back to the Hayden Phillips process or, as seems probable, beyond it.

Let us be clear that when we have that further debate we shall require a thorough review of the relationship between the trade unions and the Labour party. If we were to review the need for caps, we maintain that any legislation must address the whole spectrum of donations. We need to ensure that thorough coverage of all equivalent sources of funding is guaranteed. That, of course, includes donations from trade unions.

We understand and agree that limits on funding and spending should be up for debate, but implementing them in the Bill and allowing the union funding of Labour to remain unreformed-including, as the hon. Member for Cambridge said, the use of opt-out rather than opt-in to political funds and the inability to choose the party destination of political funds-would be very damaging.

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