Political Parties and Elections Bill

My Lords, Amendments 64, 65 and 66 would provide tax relief for small donations. Amendments 64 and 66 are in my name, and Amendment 65, which is an amendment to Amendment 64, is in the name of the noble Lord, Lord Campbell-Savours. These amendments have been grouped with Amendments 38 and 39, which, for reasons explained by my noble friend Lord Tyler, would impose a cap on large donations. However, these two sub-groups, if I may call them that, are not dependent on each other. Tax relief on small donations can be given whether or not there is a cap on large ones, and a cap on large donations can be imposed whether or not tax relief is given for small donations. However, there is an interaction between these two sub-groups because a cap on large donations is likely to reduce party funds and, if that happens, parties will have to do more fundraising from ordinary members and supporters, as in the outstanding example of the fundraising by President Barack Obama during his campaign last autumn. Tax relief on small donations will also help to achieve more fundraising from ordinary members. The idea of giving tax relief on small or moderate donations has had considerable support in the United Kingdom and has been adopted in a number of foreign countries. Tax relief on modest donations was recommended by the Committee on Standards in Public Life, of which I was then a member, in its report on party-political funding published in 1998. In that report, the committee proposed an upper limit for tax relief of £500. I have kept to that figure in this amendment, in spite of the time that has passed. I am glad to say that two other members of that committee are present: the noble Lord, Lord MacGregor, who was then a member and certainly, with me, was an active supporter of the proposal to allow tax relief, and the noble Lord, Lord Neill of Bladen, who was the chairman of the committee at that time. Giving tax relief on modest donations has many advantages. It is highly undesirable that all funds should come from the Government, as that greatly reduces the need to recruit members and discourages greater contact with voters. However, it is even worse if party funding comes mainly from a small number of rich donors making large donations. That is a travesty of democracy and enables rich donors to have far too much control over party policy. It is important to encourage parties by giving tax relief for small or moderate donations, including membership subscriptions. We recognise that giving to charities should be encouraged by tax relief to donors. We believe that tax relief could be extended to donations to political parties, as those donations are also very much in the public interest and deserve tax relief. Tax relief has been given on inheritance tax in this context since the Inheritance Tax Act 1984—25 years ago—which exempted donations by will for the political parties that won at least two seats at the previous general election or one seat and at least 150,000 votes in total. Relief from inheritance tax should surely be extended to income tax. The obvious method would be to use a version of the Gift Aid system. I suggest, first, that the eligibility of a party to claim benefit of tax relief should be the same as that now for inheritance tax; that is, two seats at the last general election or one seat and at least 150,000 votes. Secondly, tax relief should be limited to the first £500 of donations made in any one tax year by any one donor. Thirdly, whereas a charity donor can rightly reclaim a higher rate of tax relief on the amount of Gift Aid donations, donors to political parties should not be able to do so, to avoid putting the relatively well-to-do donors in a better position. Fourthly, tax relief should be given only for gifts by individuals. All those conditions are set out in Amendment 64. They produce a simple and workable system, which in Grand Committee was supported by Members from all three parties. The Electoral Commission has said in its briefing for this Report stage: ""In principle the Commission welcomes measures that incentivise public engagement in politics and help parties to campaign effectively. Proposals for fiscal incentives are for Parliament to consider in the light of other priorities"." The "other priorities" are the rub now. I recognise that we are in a difficult tax situation. I was asked in Grand Committee for an estimate of the amount of money that would need to be returned by the Government every year under the scheme. It is impossible to tell, but my guess put an upper limit at £5 million. Since the original version had cut off at £1,000 rather than £500 and, more importantly perhaps, since recent events must have decreased the willingness of members of the public to contribute to political parties, the present prospective upper limit is probably something less than £4 million. I understand the problem, but if the Government are not willing to pay that small sum in the near future, I suggest two alternatives. The first would be to accept Amendments 64 and 66 but to withhold the commencement order for that new clause and schedule until the financial situation makes this easier. The other would be to accept Amendment 65 from the noble Lord, Lord Campbell-Savours, which is an amendment to my Amendment 64 and would reduce the cut-off point from £500 to £15 a year. I do not in principle welcome Amendment 65, because it would produce too little money, but if the Government were prepared to accept it, but not to accept the unamended format of my Amendment 64, I would say that a quarter of a loaf is better than no bread. In those circumstances, although not in others, I would accept the amendment proposed by the noble Lord, Lord Campbell-Savours. Amendments 64 and 66 provide a simple system for the waiver of taxation on modest donations by individuals to recognise political parties. That is a good thing in its own right, and even more so if supplies of money to political parties are cut back by the capping of large donations. I invite your Lordships’ House to support Amendments 64 and 66.