Political Parties: Funding

My Lords, with the leave of the House, I shall repeat a Statement made earlier today by my right honourable friend the Leader of the other place. The Statement is as follows: ““With permission, I would like to make a Statement about the report of the review of party funding by Sir Hayden Phillips, entitled Strengthening Democracy: Fair and Sustainable Funding of Political Parties, which he published earlier this morning. Copies are available in the Vote Office and the Library. ““My right honourable friend the Prime Minister, in a Written Ministerial Statement this morning, thanked Sir Hayden on behalf of the Government for his hard work over the past 12 months. During the course of his review, Sir Hayden received submissions and held discussions with representatives of all the major political parties, as well as consulting the public, the Electoral Commission and various academic experts. ““Sir Hayden’s report identifies important principles which could form the basis of a lasting settlement of the party-funding system. However, as Sir Hayden himself concedes, a number of practicalities remain to be worked out and will require further discussion between the parties. We will play a full and constructive part in these talks. ““The issue of political party finance and spending is central to the debate about the health of our democracy. There is a keen public interest in securing lasting reform in a way which curbs wasteful spending, does not gratuitously advantage any one party at the expense of others and does not interfere in the internal structures of any political party. If the various parties can agree upon a reform package which meets these objectives, then we will have a funding regime which will increase public confidence in the probity of the democratic process and helpto stimulate grass-roots renewal of politicalparties. ““The most compelling need identified bySir Hayden is to end the political spending ‘arms race’, which has seen expenditure spiral upwards, even as party memberships have declined. In the 1997-2001 Parliament, the Government, with all-party support, sought to tackle the problem of excessive spending with what became the Political Parties, Elections and Referendums Act 2000—PPERA. This reflected key recommendations of the Committee on Standards in Public Life, chaired by Patrick Neill QC, now the noble Lord, Lord Neill of Bladen. PPERA introduced a national limit on campaign expenditure, created the Electoral Commission and made the funding system more transparent by requiring that all donations above £5,000 nationally and £1,000 locally be made public. ““By introducing such transparency, we all believed that public confidence in the system could be assured. But the recent revelations about unpublicised loans to parties by individuals, resulting from a loophole in PPERA, have clouded that transparency. In addition, the line between local and national spending has become blurred by developments such as political campaigning facilitated by the internet and other advances in telecommunications. As a consequence, a modest relaxation of spending controls in the 2000 Act at the local level has been exploited way beyond that intended by the legislation. ““Sir Hayden draws attention to the fact that spending by the two main parties in the 12 months before the last general election rose to £90 million, up nearly 40 per cent on the £65 million spent in a similar period in 2001. He must be right to say that the PPERA, "‘sought to control the level of spending, but it has proved inadequate to the challenge’." ““The immediate problem of transparency in relation to party loans has been resolved by means of the Electoral Administration Act 2006, which requires that loans be publicly declared in the same manner as donations. However, Sir Hayden has now advanced proposals for further reform. Crucially, he shows support for continuous spending limits at local and national level. He also proposes tighter controls on third-party expenditure and a reformed Electoral Commission with the power, capacity andpractical experience to perform its role as an effective regulator. ““The importance of effective spending limits cannot be overstated. As the Constitutional Affairs Select Committee observed in its report, Party Funding, published in December, the United States offers an instructive example of what can happen when political spending is left unchecked. It said that in 1976 the total cost of all US elections was $40 million; in 2004, the cost of federal elections alone was $3.9 billion—a 97 times increase. ““Sir Hayden also recommends the introduction of caps on donations. All three main parties are agreed in principle to some form of donation cap. The Constitutional Affairs Select Committee recommended a voluntary arrangement. We agree and think this would work, by providing enough flexibility to respect the different structures and traditions of the various parties. Sir Hayden offers welcome backing to the judgment of the Constitutional Affairs Committee that, "‘any move to change the nature of party funding must not stray into prescriptive devices to require political parties to organise internally in ways that violate their democratic relationships with other institutions’." ““Finally, Sir Hayden recommends the introduction of a higher level of state funding for political parties. The Constitutional Affairs Committee came to a similar view, but recognised the need for further debate about the values and principles which should govern such funding. ““As a 1976 report on party funding showed, there has long been a degree of state funding in UK politics. All political parties have had the opportunity to claim free television and radio broadcast slots, along with free postage. Since the 1970s, the provision of ‘Short money’ and ‘Cranborne money’ has given millions of pounds of state aid to the main opposition parties. This funding has increased more than threefold since 1997. In 2006, the total amount of Short money was £6.3 million, with over £4 million being paid to the main opposition party. ““The Neill committee noted in its 1998 report that arguments for and against state funding were ‘finely balanced’. Although Neill did not recommend a major extension, his committee concluded: "‘We can envisage circumstances in which substantially increased State funding of the political parties—including the funding of their general activities—might become an imperative’." Sir Hayden concludes that these circumstances now exist, and has put forward proposals for increased state funding based on electoral support and the recruitment of members. ““Our democracy could not function without the organisation of political parties of all shades and opinions, the platforms for debate and the exploration of ideas which they provide. Their work, and in particular the work of party foot-soldiers who devote time and energy to their cause, is fundamental to the health of the democratic process. ““To command high levels of public support, the funding arrangements for political parties must be fair and transparent. Through earlier legislation, Parliament has taken significant steps to put such a system in place. Sir Hayden Phillips' report has identified areas for further reform and identified some key principles. The task for the political parties is now to work out the practical arrangements of a fairer, more sustainable and more transparent funding regime. The public would expect nothing less””. My Lords, that concludes the Statement.