Clause 8 : Declaration as to source of donationAmendment 29Moved by Lord Campbell-Savours29: Clause 8, page 7, line 14, at end insert—“(1A) In section 54 of the 2000 Act (permissible donors), in subsection (2)(a), after “register” there is inserted “who is resident in the United Kingdom for the purposes of Part 14 of the Income Tax Act 2007 and is not a non-domiciled United Kingdom resident”.” 

Lord Campbell-Savours: My Lords, I shall also speak to Amendment 30. These amendments were debated at great length in Committee. They were originally tabled in the House of Commons and have been vigorously opposed by the Government at all stages. I shall argue on two counts: first, the merits of the amendment are set out in the letter from Mr Gordon Prentice MP; and, secondly, the procedural issues arising out of the handling of the amendments in the Commons, as set out in the letter from Martin Linton MP. 

The case on merit, in my view, turns on whether a person who is not liable to tax in the United Kingdom should be permitted to make a substantial political donation that may well run into millions of pounds to a political party, and thereby influence the result of a general election. That is the question. I believe that they should not be allowed. Individuals collectively pay their taxes in the belief that, having done so, it is they who should have the right to influence how their taxes are used—not some person who deliberately avoids liability to United Kingdom taxation. It is the payment of and liability for tax that gives us the right to decide. It is our money and not theirs. It is for us, who are liable to tax, to decide which Government should be in place to decide how our taxes are used. 

I shall repeat the scenario I put to the Committee. I shall exaggerate to make my point. If a Ukrainian billionaire philanthropist, entrepreneur, oligarch, public benefactor, or whatever acquires British residency, buys a home in London, spends most of his or her time abroad, refuses to make him or herself liable for tax in the United Kingdom, and then offers a political party a £5 million donation, should the 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 the law stands, that can happen. My amendment would make it unlawful for any person who is not UK-liable for tax purposes, and is not a non-domiciled UK resident, to make a substantial donation to a political party. A cap on such donations would be defined in law. 

The amendment is based on the simple principle: if you want to donate you have to be liable to tax. Of course, there are limitations. If a person is not ordinarily resident, he or she will be liable to tax on income arising only in the United Kingdom. Only someone who can spend 183 days or more in the UK is a UK resident under the six-month rule. 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 for an average of 91 days or more a year. I am told that that is the current position. 

We know that non-UK taxpayers can have a huge impact on the outcome of general elections. 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”. 

A well-known public figure, who lives offshore and refuses to make himself liable to tax in the United Kingdom, converted a £3 million loan into a gift to a political party. He 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? The Electoral Commission has stated: 

“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 what the amendments do. 

How would they work in practice? A person wishing to make a donation simply ticks a box on their tax return and the Electoral Commission need only certify with HMRC that that is the case. It would be a simple procedure in circumstances when a donation could on occasion influence the result of a general election. Of course, it would apply only in circumstances when a donation exceeded a threshold laid down in regulations. The House may want to consider a letter to Mr Tony Wright, chairman of the House of Commons Public Administration Committee and the House of Lords Appointments Commission. The letter announced the changes to the selection criteria for Peers. It stated: 

“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 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 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 general elections to the elected House of Commons, must have at the least the same tax liability requirement. As many of my colleagues in this House have asked me over recent weeks, how can the Government justify the position that they have taken on this issue?

If the high standards which the public demand of Parliament are to be met in a way that the Prime Minister recently proposed, surely now is the time to deal with this utterly unacceptable practice in our tax system? The Government last week circulated to Members on this side of the House—and to all Members, I presume, in the spirit of fair play—their explanation and, indeed, justification for refusing to accept these amendments. They gave a number of reasons, which I shall take individually. The Government’s own circulated document says,

“There is a real Article 11 ECHR (right to freedom of association) issue. It may be lawful to restrict who may give donations if the restriction is justified and proportionate. But a tax status restriction is problematic if it restricts donations but not voting”,

or,“standing for Parliament”.That is their justification. 

In other words, they are saying that a tax status restriction is problematic if it restricts donations but does not restrict voting. They then pray in aid Article 11 of the Convention, somehow likening the right of a single individual to cast a vote in the Pimlico Churchill Gardens polling station at a general election to the right to donate millions of pounds to a political party and thereby influence the result of that whole election campaign. The logic behind that is ludicrous: one vote equivalent to a contribution of millions of pounds. I feel sure that a few lawyers in this House would readily make a meal of that excuse. 

The Government then say: 

“There is a risk that the amendments would result in donations being diverted through other routes ... companies, unincorporated associations”. 

My response to that is: why do the Government themselves not table amendments in this House on Third Reading or, if the amendments were to go through, on the Commons consideration of Lords amendments to deal with that problem, if it exists? I invited my noble friend to do so in Committee. If the principle of a tax restriction were to be established in this House, there is no reason why further work could not be done by the Treasury on tax law relating to “companies and unincorporated associations”. 

They then say there is a,“difficulty in establishing whether an individual is resident and, particularly, domiciled. HMRC does not routinely hold this information for the majority of taxpayers. Establishing residence and domicile would usually require HMRC to undertake an investigation at considerable time and expense. It is not clear how parties would satisfy themselves before deciding whether to accept a donation. Resident status is ‘retrospective’ in that it is dependent upon the amount of time an individual has spent in the UK in the previous 12 months, so very difficult to establish at a given point in the middle of a year if an individual is ‘resident’”.It, 

“also risks treating individuals unfairly who may not know whether they are domiciled or not”. 

These amendments place no responsibility whatever on HMRC to investigate the tax status of an individual. It is the individual making a tax return who makes the declaration; he or she is responsible. If HMRC indicates to the Electoral Commission that the donor’s tax return indicates UK tax status, signed off under the statutory declaration by the taxpayer, then the commission would have met the requirements of the law under these amendments, if carried by the House. It would be for the donor to establish whether he or she was domiciled; or, they could take professional advice on that matter if they were not aware whether they were domiciled. 

They then go on: 

“In order to enforce the new requirement, recipients of donations and the Electoral Commission would need to be able to verify that a donation was permissible and would require access to HMRC information. HMRC has a statutory duty to maintain taxpayer confidentiality”.In reply to that, let me make it absolutely clear that all the Electoral Commission needs to know from HMRC is: has the donor ticked the box on a tax return? Recipients of donations would have no need whatever to approach HMRC. Then, they say that they,

“need to be mindful of commitment in 2008 Budget that there would be no further changes to the taxation regime for non-domiciles in the rest of this Parliament or the next”.To that, I reply: there is nothing in my proposed amendments that would increase the liability to tax. Indeed, I could not table such an amendment in this House. 

I have been asked what would happen if, despite a Revenue declaration, a party was found to have been misled by a donor and had received an impermissible donation. In my view, it would be a perfectly reasonable defence for a party to argue that it received approval for the donation on the basis of HMRC’s confirmation to the Electoral Commission that the box had been ticked. However, it would concentrate the minds of political parties when seeking to ensure the validity of donations. 

Finally, I turn to what some people refer to as the most important argument of all. What happened when these amendments were originally moved in the Commons? They followed on the important work done, over a number of years, by Martin Linton. These two amendments were originally moved in the Commons by Gordon Prentice. They were supported by 218 Members of Parliament—probably among some of the highest signatory endorsements for amendments in the history of the House of Commons. They were supported by nearly all political parties, yet they were not debated. They got caught up in a procedural wrangle. 

These amendments constituted the fourth group out of a total of six scheduled for debate on day two of proceedings on the Bill. I do not want to go into the detail, but they caught up in an argument over a Programme Motion, which effectively excluded them under House of Commons procedure. As I say, they were neither debated nor voted on—a classic example of a Commons failure to properly scrutinise amendments. This is our opportunity to show the Commons the value of scrutiny arrangements in the Lords. The Commons are desperate to have the opportunity to debate and vote on these amendments, and many a screen is going in that House this evening with people watching our debate. They want the opportunity to vote on these amendments. We can give them that opportunity. I beg to move. 

Lord Tyler: My Lords, I and my colleagues very strongly support these amendments, as we did in Grand Committee. Indeed, my noble friend Lord Oakeshott may refer to the specific issue of how the criteria for entry into this House now follows the pattern to which the noble Lord, Lord Campbell-Savours, has already referred. For goodness sake, if it is practically possible to identify the tax status of those entering this House, it must surely also be possible to do the very same thing for donors to political parties. I intend to speak only briefly on this issue, as I hope that we shall also hear from the noble Lord, Lord Rooker, who has put his name to these amendments. 

As the noble Lord, Lord Campbell-Savours, has already said, this set of amendments had the support of an unusually large number of Members of Parliament, from the Back Benches of all parties. They were tabled by Mr Gordon Prentice but not put to the vote; by an accident of history, they were not passed there. However, unless we allow ourselves the privilege of putting this into the Bill, it will never be discussed in the House of Commons, despite the support of a very large number of Back Benchers. The effect is that it would require a permissible donor to be resident in the United Kingdom for the purposes of Part 14 of the Income Tax Act 2007, not simply to be a non-domiciled UK resident. 

When we discussed this in Committee, Ministers came up with a number of apparent practical difficulties. I suggest to them that where there is a will, there is a way. It is important that they should be forced to look carefully at the practicalities of this between now and Third Reading, and if they cannot accept that it is practical to do this at that stage, we should nevertheless demand that there is an opportunity for the other place to discuss this. There is an issue of principle here. Members of your Lordships' House who are steeped in history will recall that the rebels in the United States went under the great slogan, “No taxation without representation”. In a sense, we are turning that upside down and saying, “No representation without taxation”. That is the basic fact. It is surely right that no person who is not liable for tax in the United Kingdom should be permitted to influence the use of taxpayers’ money, money paid by those who do pay tax and are liable—you and me. That should be an intrinsic principle. 

There is a subsidiary issue that I would like to draw to the attention of the Minister at this stage because it arises out this. In his letter of 12 June, he wrote: 

“I know that concerns have been expressed about the potential for making multiple donations just below the thresholds to avoid the recording and reporting requirements”. 

In the otherwise very comprehensive briefing that he has given at all stages, the Minister has been very conscientious in giving us a response to a query or a concern of that sort, but no such response appeared in this letter, at Second Reading or in Committee. A foreign donor could very easily avoid the restrictions of reporting or recording by simply making a payment every week of the year, but just below the threshold— £1 below the threshold every week of the year—so we have to be extremely careful. Even if this amendment is passed, and I hope it will be, we must be very careful that that other loophole is not still available to foreign donors who, because they keep just below the threshold, are not required to be recorded or reported to the commission. 

If we leave the Bill as it is, without a clear statement that these sorts of donations from foreign sources are not permissible, the Bill will not fulfil the requirements that the Government have placed upon it. Even since the Bill was in Grand Committee, there is greater awareness of the potential corruption of our political system by people with very large chequebooks who can buy their way into influencing a relatively small number of constituencies, the marginal seats. It takes us right the way back to the purchase of seats before the Reform Act 1832. As the noble Lord, Lord Campbell-Savours, said, unless we stand up for the right of citizens of this country who pay taxes to be the people who decide how our political system works, the House of Commons will not get its opportunity, and the Bill will be weaker for it. 

Lord Borrie: My Lords, my noble friend Lord Campbell-Savours has made a powerful case not only on the substance of the matter, but on enabling the other place, which was prevented from discussing the matter, not only to discuss but to determine whether a restriction should be placed on non-UK residents making donations to political parties. 

My noble friend may not have drafted the perfect amendment because, for example, it seems to leave it possible for non-UK residents to make donations indirectly through an unincorporated association or a company, but unless the Minister undertakes this evening to bring forward an improved amendment with similar objectives to those of my noble friend Lord Campbell-Savours, I am inclined to vote for his amendment so that MPs and parliamentary draftsman can pool their respective skills to improve upon it.

7.15 pm

It may be said that restrictions on donations is restricting one form of democratic participation according to tax status while leaving other forms unrestricted. I do not regard the making of huge, unlimited donations in the same light as the right to vote, the right to have fair elections or the right to stand as a candidate for the other place. I doubt the suggestion that a restriction on donations might breach Article 11 of the European Convention on Human Rights. This has been raised by the Government with no supporting evidence or legal argument; they simply posed the view that this restriction on donations suggested by my noble friend would be a breach of the provision for freedom of association and assembly. There are restrictions on the right to vote in many of the convention countries, including our own. We are contemplating reducing the voting age. There are restrictions on the way in which elections are run. Surely, if it is suggested that restrictions on the finance that may be provided by a donor to a political party contravene Article 11, it would suggest that Article 11 of the convention is rigid, clear and specific. However, I am sure that it is not so, and I cannot imagine that a full, successful argument could be made that my noble friend’s proposal would result in a breach of the convention. I support my noble friend. 

Lord Williamson of Horton: My Lords, I agree with the purpose of the amendment. Over 10 years, I have taken very great care not to criticise on the Floor of this House the legislative procedures in the other place. I say only that I am depressed that an amendment on this question, which was tabled for Report in the other House in the names of 216 or, possibly, 218 Members of Parliament was never discussed because of the timetabling, procedures and the use of a programme motion. It is open to us to adopt the amendment in the name of the noble Lord, Lord Campbell-Savours, thus making it possible for the other House to discuss the proposal, so let us do that. 

Baroness Gould of Potternewton: My Lords, I rise with a little trepidation to put a slightly different point of view. I have great sympathy with the fact that this was not discussed in the House of Commons, and it should have been. It says an awful lot about the procedures of the House of Commons that 216 MPs can support an amendment and then it is decided not to take it. I can only say thank goodness we do not have procedures like that in the House of Lords. I genuinely hope—and I have said this to my noble friend—that there might be the possibility of some solution to this before we reach Third Reading. However if that is not possible, I shall vote with the Government. 

I will do so because the amendment is so badly flawed that I do not feel able to support it. It does not do what it is attempting to do. I have great sympathy with what it is attempting to achieve. I think it is diabolical that large sums can be spent prior to an election in the way that they have been in the past, but this amendment does not solve that problem. It does not solve the problem of a non-UK taxpayer putting money through companies or unincorporated associations. To prevent that would need another amendment, which we do not have in front of us. Nor does it do what I would like it to do, which is to say that large donations should not be spent before a general election from wherever they come. I can only cite from my own constituency, where one of the candidates spent £90,000 of his own money prior to the last general election. There is nothing in this amendment to stop that happening next time. I wish there was, but this amendment does not do what a lot of people believe it will do. 

Lord Goodhart: My Lords, might the noble Baroness consider dealing with that point by supporting the amendment tabled by the noble Lord, Lord Campbell-Savours, and then supporting my noble friend’s amendments to cap the contributions? 

Baroness Gould of Potternewton: My Lords, I do not think the two things go together, with the greatest respect. We will come to the capping of donations later. The noble Lord does not know what my view is on that; he will have to wait and see. But this amendment does not do what a lot of people believe it does. I am not certain what the procedure would be to get an amendment which eliminated that loophole in respect of companies or unincorporated associations through the Commons if this amendment went back to the other place. I am not certain that it would be feasible. 

We have had some discussion already on the concerns the Government have raised in response to this amendment. One is the anomaly about democratic participation. It may be said that there is no relevance between giving money to a political party and affecting the outcome of an election. My constituency won irrespective of the £90,000 donation from another candidate. But I accept it has an effect. Also, if we say that a person cannot give a donation but can be a Member of this House or a candidate for the Commons and can win, does that not have an enormous influence on how taxpayers’ money is spent? It is not just a question of how it is spent in elections, but also of how it is spent on all the other issues that we deal with. Those people have the right to sit in this place and the other place and spend that money. That is another flaw in the argument. 

I share the concern raised by the Electoral Commission about the need to verify whether a donation is permissible. The Electoral Commission’s own data suggest that more than 1,000 individual donations would need verification annually. That would be an extraordinarily difficult job. 

My other real concern is about the implication for constituency parties. At present political parties can fulfil their compliance duty to check that an individual is on an electoral role, or a company is registered at Companies House, by consulting public records. Obliging parties to check the residence status of donors for tax purposes would be an impossible task and I am sure it is nowhere near as easy as putting a cross on the tax form. Tax records are not public documents and, in any event, there is no single record of individual tax status. I am not sure whether, even if a cross would satisfy it, it would be possible to use that cross because information would then be being disclosed about that person’s tax. The consequence of that could be that a constituency party could find itself in difficulty and may end up having to repay the money. So there are many flaws in the argumentation. That is not to say that there is not a problem. Maybe there needs to be a wider discussion on the issue of tax status and participation in politics generally, but that is not a discussion for this Bill and this amendment does not achieve what it is intending to achieve.Lord Anderson of Swansea: My Lords, my noble friend recognises that there is a problem and argues that the amendment does not wholly meet it. Of course that is true, but I agree with the noble Lord, Lord Tyler, who made the point that, even though this House should probably be reluctant to intervene in elections since we are a unelected House, this amendment gives the opportunity for the elected House to make its own decision, and this is what we should allow it to do. 

I can see no reason for the Government’s rejection of this. The Government, in a rather civil-servant way, give 1,001 reasons why we should reject this, but do not come forward with any real reasons why this particular anomaly should not be met. The mischief which the noble Lord, Lord Campbell-Savours, seeks to meet is very clear; it is the mischief of the buying of elections by rich individuals who are not domiciled in this country. Quite properly the noble Lord, Lord Tyler, mentioned the good inverted US principle of no representation without taxation. Why should individuals have a disproportionate effect on our electoral process? 

I am thinking, for example, of a very competent colleague in the House of Commons, who lost his seat in 2005 and watched a tidal wave of money pour into his marginal seat from certain individuals in the years prior to the period when it was banned. He could do nothing about it. Clearly, only a relatively small number of marginal seats are laser-beamed in this way. This is not a partisan position. I hope the main Opposition also see the danger to our democracy of having elections bought in this way by very rich individuals. The awful thing for this individual was not that this tsunami of money poured into his constituency and overwhelmed him but that the money came from someone who was non-resident in this country. That is clearly the mischief that the noble Lord is seeking to meet. 

I simply ask this question of the Government: do they recognise that this is a problem at the very root of our democracy? Over the years, step by step, we have

tried to remove the influence of money on elections and corrupt practices—mostly, I concede, thanks to the Liberal Party over the centuries—from the great Reform Act through to secret ballots, seeking to remove various forms of corrupt practice and the effect of money on elections, so that one individual does not have a greater say in the determination of an election result than other, ordinary folk. Why can we not seek some means of doing it? It is not good enough simply to parade a series of individual objections to the points raised. Why will the Government not do something about it? And is the Conservative Party content to allow this possibility to pervert our democracy without accepting what is here and giving the House of Commons—the elected House—the opportunity to debate it and put it right if it is able to do so? 

Lord Neill of Bladen: My Lords, there are two debates going on. The first is whether the amendment is in substance correct, whatever nitpicking one can indulge in. The other is that we have a duty to give the other place a chance to vote on this issue. If I may take the liberty of pretending to be a member of the public, if asked, as a man in the street, whether I would approve of a wealthy foreigner—not even a member of the EU—paying a huge sum of money to one political party in the run-up to a general election, and it being acceptable under the rules for influence to be wielded in that way, the only possible answer would be, “What an absolutely outrageous suggestion—of course not. Surely that’s not allowed”. One would have to say, “Well, as a matter of fact, it is at the moment. We are talking about an amendment to stop it being possible”. I am sorry to fantasise, but I believe this is how people would react: “Well, I am all with it”. 

On the second issue, we now want to give the other place—we call it the House of Commons out in the street—a chance to vote on this portion of the Bill. The man in the street might say, “I thought this Bill came to you from the House of Commons. It must have thought about this”. One’s response would be, “No, I’m afraid I have to enlighten you on that point. It often does not consider very important parts—sometimes great chunks—of an Act of Parliament. The House never had the opportunity to debate this proposal. We are not suggesting chicanery. It somehow came out through the machinery; there was no chance of debate”. My ideal man in the street would say, “That is ridiculous. Give them a chance”.

7.30 pm

Lord Lea of Crondall: My Lords, it is probably incumbent on members of the Labour group who are inclined to support the amendment to explain themselves very briefly. 

At a time of constitutional renewal, and with the absurdity of the overuse of the guillotine in the House of Commons, there is a very powerful argument here. To put a shot across the bows of those who talk about constitutional change without having any way of meeting it—the noble Lord, Lord Tyler, produced a Bill on this earlier, and it seems to have been debated for a long time—I am very interested in and sympathetic to the premise with which my noble friend Lady Gould, who has enormous experience in this field, began.I also agree that the amendment does not do certain other things that may or may not logically be part of a jigsaw puzzle. Equally, I pick up the point that something needs to be done and that, if this amendment is carried, the Government must realise that they will have to put their brain to this with more urgency, so that when it gets back to the House of Commons—I doubt that that will be by Third Reading, but it may be—unless the procedures of the House of Commons are even more incomprehensible to Members of this House, the mysterious authorities there cannot simply say for the second time: “No, we are not going to take the amendment”. 

Lord Oakeshott of Seagrove Bay: My Lords, briefly, I support this amendment and the excellent speeches made by the noble Lord, Lord Campbell-Savours, and my noble friend Lord Tyler. The speeches were in support of the amendment, with the sole exception of the noble Baroness, Lady Gould. She made two points. First, she broadly agrees with the amendment but thinks that it does not go far enough. That is no reason to oppose it. Her practical point was that it would be very difficult for parties to check whether donations met this test. I do not think, off the top of my head, that it would be difficult. All one would need would be a requirement that any person making a donation signed a form to say that they were wholly resident or domiciled in this country for tax purposes, that a donation could not be accepted if that were not so, and that it would be a criminal offence to accept a donation without that form and a criminal offence to sign it if that were not true. It would be very easy indeed for the Electoral Commission to check with the tax authorities whether any person had signed the form wrongly. I cannot see that that is a problem. I see that the noble Lord, Lord Myners, is here. I know that he is very sympathetic to the drift of all this, and I am sure he will quickly tell me if I have not got this quite right. The noble Baroness, Lady Gould, is looking for problems where they do not exist. 

Baroness Gould of Potternewton: My Lords, I am sorry to intervene. The noble Lord has talked about individuals, which seems fine. That seems to be a very easy solution to the problem. However, the donations do not come from the individual directly; they come indirectly. How would he solve that particular problem? 

Lord Oakeshott of Seagrove Bay: My Lords, this is what I mean when I say that we should not accept any donations from companies at all. That is the solution to that one. 

My Bill, which is currently in Committee, requires that no one who is not ordinarily resident or domiciled in this country shall sit in this House. The Government say that they are very sympathetic to that. I am very glad for that sympathy, and I hope that it will soon be converted into practical action. However, the amendment before us today is arguably even more important than my own Bill. It is outrageous that non-resident Peers can sit and vote on our laws in this House, but it is even more outrageous that a person who does not pay full British tax can pay millions to a political party—money that is, in effect, filched from the British taxpayer by that person because he is not resident here and does not pay tax but can influence millions of votes. If the Government believe that this is wrong and must be stopped, why will they not accept the noble Lord’s amendment? If they say—as to some extent they have been saying, although I hope that has changed—that my Bill is the wrong way of dealing with the abuse of non-resident Peers sitting in the House, what is the right way of dealing with the abuse of donations that we all accept is happening? Why will the Government not act while they still have the power to do so? We are at the eleventh hour.

Lord Rooker: My Lords, I did not intend to speak, but I must say that I wholly support the amendment in the name of my noble friend Lord Campbell-Savours. I have two brief points to make. 

In June 1997 in a committee in the other place, my late colleague Audrey Wise and I tabled amendments to the Finance Bill. As well as being told that the amendments were inconvenient, we were told that they were in the wrong place in the Bill and were technically deficient—all those reasons. Our view was: “Make them okay. Put them in the right place in the Bill”. That is what the Government did, but they would not have done so if we had not tabled the amendments. I must say to your Lordships, although I would not dare to give examples, that on several occasions at the Dispatch Box in recent years I have moved government amendments or agreed to amendments to government Bills from noble Lords around the House that were not perfectly drafted. Our view was that we needed them so that the draftsmen in the other place could get to work to achieve our objective. That is done every day of the week. That is what parliamentary counsel is for. 

The general view among the population now is that we have banned donations from foreigners. Morally, you cannot argue that case if you allow the status quo on the taxation argument; the noble Lord, Lord Neill, made that point. If the amendment had not been on the amendment paper in the House of Commons, it would be quite wrong for us to try to put it in from here. The fact that it was on the amendment paper but not debated means that it was still part of the Bill’s proceedings. 

Generally speaking, if anyone outside this place asks us what we do, one of the key answers that we give is that we ask the House of Commons to think again. It will not think again unless the issue is on the amendment paper, and we can get it on to the amendment paper only if my noble friend’s amendment is accepted. I shall vote for it. 

Lord Warner: My Lords, briefly, I support all those who have spoken in favour of the amendment in the name of my noble friend Lord Campbell-Savours. I have one very simple point to make. Over the past few months, we have heard from all the leaders of the political parties their undying commitment to cleaning up politics. If we collude in supporting this Bill without an amendment of the kind which my noble friend has moved, we are colluding in not cleaning up politics. We should support the amendment. 

Lord Bates: My Lords, this has been a debate of outstanding quality. I am new to your Lordships’ House, and it is incredibly impressive to hear such skilled speeches and debates about the detail of this legislation. I shall touch on a few of those points without detracting from the outstanding experience that is present in this House and which I do not possess. 

In moving his amendment, the noble Lord, Lord Campbell-Savours, touched on a point with which we certainly agree: the procedural way in which matters are conducted down the other end of the Palace of Westminster—the over-frequent use of the guillotine and the stifling of debate—leaves much to be desired. That is not the case here. This amendment was moved in Grand Committee, again very ably. It sparked a debate that went on for an hour. During that time, the Minister gave a detailed, almost line-by-line, rebuttal of the reasons why the amendment would not work in the way that it was proposed. I found that argument quite persuasive. 

There is a need, which has been articulated by my right honourable friend David Cameron on a number of occasions, to remove big money from British politics. That desire is there and all parties of the House need to agree on how it should move forward. Hayden Phillips had almost reached that point before, sadly, the Government abandoned that pledge. Therefore, we are left with the difficulties before us. Very detailed restrictions are put on people who want to donate to political parties in this House. They have to be registered or be on the electoral register. The money has to come from a UK-registered corporation. In both those respects, it could be argued that there is some level of interest; namely, that either the person is resident and is on a register or that they are part of our economy and paying through a company which is registered here. 

We also need to bear in mind that context is important as regards the notion and the language of buying elections. I can understand why people use that sense of hyperbole— 

Lord Sewel: My Lords, I am grateful to the noble Lord for giving way. I accept that he is making a very balanced speech. But does he not accept that there is a core argument in your Lordships’ House, which addresses the role of an upper House, a revising and scrutinising House? The argument is that on a matter of significant interest, particularly if it affects how we carry out our politics, it is appropriate for this House to give the opportunity to the other House to make a determination on an issue of fundamental importance that it has not so far had the opportunity to decide. 

Lord Bates: My Lords, I follow the noble Lord’s argument. There is a sense in which it could be argued that the other place had an opportunity when Mr Gordon Prentice presented those Bills. The fact that that opportunity was denied by the business managers in the Commons is regrettable and we are redressing it by having a more reasoned debate in this place. I do not doubt that. Because they have behaved in a certain way once, the argument is to pass it back to see whether they will behave in the same way again. I am not entirely persuaded of that because of another point, which was touched on by the noble Baroness, Lady Gould, who pointed to some of the difficulties. On the way through this Bill and the legislation, we

have talked about the difficulty of too onerous a requirement being placed on volunteers within associations who could potentially make innocent mistakes, and the boundaries of knowledge. 

Certainly, it is possible to check whether a company is registered in the UK for tax purposes and to check the electoral register to see whether an individual is on that register. It is not possible for the average person to scrutinise tax records, which are private, in order to ascertain whether that is not the case. The solution is that there should be voluntary disclosure. In Committee, the Minister’s response pointed to some of the difficulties which that can land one in, because tax status is determined retrospectively. Tax returns are filled in at the end of a year. A register of electors is for the year ahead. In terms of those types of arguments, there is something to be considered.

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In addition, we are roping into funding and taxation the whole issue of residence and domicile for tax purposes. I am no tax specialist, but many learned Members seem to make a very handsome living out of determining who is and is not resident and domiciled for tax purposes. It may not be as clear cut as one might suggest as far as this proposal is concerned. Those big money elements of politics also need to caution people. Before the intervention, I referred to hyperbole and the buying of seats and the buying of elections. Big money has been around in politics for a long time. If I feel slightly saintly on this, it is because I spent a glorious weekend walking around the grounds of the Earl Grey’s house, Howick Hall in Northumberland. I feel at least some moral element of authority. In that respect, we are talking about nothing of that here. 

Especially in the days of the media, elections are won and lost by the veracity of the arguments and the compelling nature of the case put forward. If my party happens to be doing better in the elections at this time, it is because of the positive alternative offered by David Cameron to this country, which is put forward by the party. The electorate is capable of making those independent judgments. To minimise them or to use inappropriate language to question whether they are capable of making that judgment is perhaps unfair at these times. 

In conclusion, the matter has been aired and discussed. In Committee, the Minister gave a vigorous defence of the reasons why this is difficult to bring about from a legal point of view. We on this side of the House look forward to the day when big money is genuinely taken out of politics and those cross-party agreements— 

Noble Lords: Oh! 

Lord Bates: My Lords, that is genuinely the case. The Liberal Democrat Benches laugh at this, although their idea is that big money should not come from trade unions or businesses, but from the taxpayer. They want public money to fund their coffers. They want big money that is public money. That is unacceptable to the British public who are facing many pressures on public services and would not choose to fund political parties at this time. With those comments, we await the Minister’s rebuttal on these matters and we will support him in that. 

Lord Bach: My Lords, Amendments 29 and 30 would add to the permissibility requirements relating to donations from individuals. In addition to the existing requirement that an individual be registered in an electoral register, Amendment 29 would provide that an individual would have to be resident in the United Kingdom for the purposes of the Income Tax Act 2007 and would have to not be a non-domiciled United Kingdom resident. Amendment 30 would amend proposed new Section 54A of the 2000 Act by requiring any declaration by an individual donor as to the source of a donation to state that he satisfies these additional requirements. I agree with the noble Lord, Lord Bates, that this has been an outstanding debate and I thank all noble Lords who have spoken. 

As the House knows, these amendments were originally debated at some length in Grand Committee. The Government have listened carefully to the points that were made then and have been put again today, but I must inform the House that the Government continue to have serious concerns about these amendments on principled, practical and legal grounds. I want to reiterate these concerns and I apologise in advance if it takes a little time. I hope to address additional points raised in Grand Committee and in today’s debate. 

As we have said before, the Government recognise and understand the sentiment behind the amendments, which is that those who donate to political parties in this country should pay tax in this country. We also recognise, however, that making a donation is just one way in which an individual can participate in our democracy. There are many other ways, ranging from exercising the right to vote to standing as a candidate for the House of Commons and sitting in a legislature as we are tonight in the House of Lords. We believe that there is a spectrum of political involvement from voting at one end to sitting in the legislature at the other, with large political donations somewhere in-between. 

The Government have stated their firm belief that it would be wrong in principle to create an anomaly by introducing extra restrictions on only one form of participation without considering whether equivalent restrictions should be placed on other forms of participation. We believe that the issue of what should be the correct relationship between an individual’s taxation status and their right to civic and democratic participation needs to be looked at as a whole. I can tell the House tonight that this will be one of the issues that will be covered by the democratic renewal council in its deliberations, which are taking place now, on the wider constitutional reform agenda. I can give that commitment to the House this evening that it will be part of its brief to look at this issue as a whole. 

Notwithstanding this objection of principle, significant legal and practical difficulties must be given detailed consideration before any restriction on donations relating to tax status could be introduced. I am afraid that we are of the view that the amendments fail to deal adequately with these difficulties. As a result, they risk introducing a new restriction which could not be effectively

enforced and which could be open to legal challenge. Moreover, the amendments—and this is a crucial point, in our view—would not achieve their intended objective, since non-UK taxpayers could continue to have a role in funding political parties and other political entities through companies and unincorporated associations. For this combination of reasons, we are duty-bound, we feel, to resist these amendments.If carried and enacted, there is a risk—I choose my words carefully—that the amendments would interfere with Article 10, Article 11 or Article 3 of Protocol 1 of the European Convention on Human Rights. 

Lord Goodhart: My Lords, will all respect to the Minister, that seems to be a highly improbable interpretation of Articles 10 and 11 and Article 3 of the Protocol. Is there any authority that binds the Government not to accept legislation of the kind covered by this amendment? 

Lord Bach: My Lords, will the noble Lord just hear my argument on this, which I hope will deal with the point that he raises? Those articles are the right to freedom of expression, the right to freedom of assembly and association and the right to free elections. The articles might be engaged by limitations on the making of donations and any steps taken in this area would need careful legal consideration—I do not go further than that—in order to ensure that the proposal was compatible with the relevant convention rights. We do not say that it would breach them; we say that, if we do not consider imposing the restriction alongside the other restrictions—those on voting or being able to stand for Parliament—the risk of breach is, we believe, on advice, greater, because of the anomaly that it creates, for which there would be no obvious justification. This strengthens the argument for wider consideration of the whole matter, as we propose. I concede that the legal position is difficult and needs very careful consideration. If we are going to do something like this, we need to get it right. Without wider consideration, we genuinely risk not getting it correct. 

Lord Maclennan of Rogart: My Lords, is it seriously the Government’s intention to suggest that the European Convention on Human Rights would restrict the prevention of an election from being bought by people who are not even resident in the European Union? The Minister has not answered in one respect my noble friend’s inquiry as to whether there is any legal justification or legal precedent for the astonishing assertions that he has made. 

Lord Bach: My Lords, the advice that the Government have received on this issue is, I repeat, that there is a risk that we would be held in breach. I cannot do more than that; the noble Lord can make up his own mind. 

Lord Anderson of Swansea: My Lords, I have a simple question. Was that advice based on any authority? 

Lord Bach: My Lords, I am not in a position to be able to answer that. 

Noble Lords: Oh! 

Lord Bach: My Lords, noble Lords laugh, but that is a little unfair. The advice that we have received from our officials and that I mention to the House in as moderate and as cautious a way as I can is that there is a risk. If I was advised that there was no risk, I would not say that there was a risk. If we are told that there is a risk, I think that I am duty-bound to tell the House that, even if I have to do it through the laughter of noble Lords. 

If we are to focus only on donations, as the amendments propose, rather than on the full range of democratic participation, we think that concern would be heightened because, for a restriction of this type to be lawful, it has to be justified and proportionate in the interests of a democratic society. Focusing only on donations, as this amendment does, begs a question when assessing the compatibility of the proposal with ECHR rights. Why place a restriction on donations in this way now, but not on other forms of participation, on the grounds of tax status? There may be no easy answer to that question, especially if we have not considered, at the same time, whether it would be justified and proportionate to impose similar restrictions on other rights as well as this one, or, indeed, instead of it. We see that a wider review of the range of possible restrictions is essential in order to ensure that the approach taken here is lawful and proper. Without it, the risk of a finding that the proposal is incompatible with the ECHR is increased. This sort of review is exactly what we propose and the position of the lawfulness of this sort of restriction will be much clearer for it. A review such as this, however, is a major piece of work and is not possible within the timescale to which this Bill is working. 

Finally, we must not forget that the effects of these amendments would, in some cases, be to restrict the rights of UK citizens to participate in the democratic system. This will add extra difficulty. Any proposal that seeks to link an individual’s taxation status to their ability to donate would require clear information on the taxation status of all potential donors to be readily available. That information would need to be accessible to political parties and the Electoral Commission for the purposes of checking whether a donation was permitted. There are obvious and serious concerns about data protection. 

Her Majesty’s Revenue and Customs is the body that can establish whether an individual is resident and domiciled in the UK for tax purposes. However, as this information is relevant only to the tax liabilities of certain people with non-UK income, it does not routinely hold this information for all taxpayers. Even for those individuals who self-assess their residency or domicile status, this information is not in an easily accessible, retrievable or list-based form. 

Of course, HMRC can, where necessary, undertake an investigation to establish the residence and domicile status of any particular individual. Such investigations can involve considerable time and expense and are made on the basis of a risk assessment. To conduct an investigation into every individual who makes a political donation would require an investigation into an individual’s status at a given point. This would be a very significant undertaking and would need to be

based on facts that would require additional information gathering. An individual’s tax residence status can change from year to year and is, effectively, retrospective, as it is often based, among other criteria, on the amount of time that an individual has spent in the UK in the previous 12 months. Uncomfortable though it may be to hear, it could be very difficult to establish at a given point in the middle of a tax year whether an individual was or was likely to be regarded as resident at the end of that year.

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An individual’s domicile status is separate from his residence status. Domicile is a common-law concept relating to the country that a person thinks of as home. This is composed of a number of factors, such as the birth country of the father and the country with which a person feels that they have the most ties. It is not always straightforward for an individual to determine their domicile status. Many individuals are unlikely even to be aware of their domicile status, since it is irrelevant to their tax affairs, and they could therefore unwittingly commit an offence by making a donation that would be impermissible under these amendments. 

It is quite possible for someone to live in the UK for a number of years without acquiring UK domicile. For example, an Australian might live in the UK for 20 or more years but have family in Australia and intend returning to Australia on retirement. Despite the fact that this person was paying full UK tax on all earnings, their domicile could still be in Australia, meaning that, under these amendments, it would be an offence for them to give a political donation. I would be grateful if my noble friend would deal with that example in his reply and explain to the House why the amendments in his name would not lead to that completely unfair result for that individual. 

Even if Her Majesty’s Revenue and Customs were able easily to establish the taxation status of all donors, questions would remain as to how the requirement in the amendments could be enforced. Recipients of donations and the Electoral Commission would face great difficulty in verifying whether what a donor told them about their taxation status was accurate. As the House will know, the 2000 Act requires a donee to verify that a donation is permissible before accepting it. Requiring donees to be certain that a donation is from an individual who is both resident and domiciled in the UK for tax purposes would be a significant obligation that the House should be careful about imposing. The obligation could result in a reduction in the income of political parties. 

Realistically, the obligation could be satisfied only if parties and the commission were granted access to the information held by HMRC, either routinely or on a more limited basis. HMRC has a statutory duty under Section 18 of the Commissioners for Revenue and Customs Act 2005 to maintain taxpayer confidentiality. I hardly need say that the data-sharing and confidentiality implications of granting an exception in the case of all donors are, whether we like it or not, significant and would need to be thought through very carefully. 

I note once again that the Electoral Commission has expressed concerns about the workability of these proposals and their impact on political parties and other regulated entities in its briefing notes in advance of Committee and Report. On workability, the commission noted: 

“In many cases it may be difficult for the recipient of a donation to verify whether the donor is a resident in the UK for taxation purposes and not a non-domiciled UK resident. Further, Parliament may wish to consider the administrative implications for HMRC should the amendment be agreed. Commission data suggests that more than 1,000 individual donations would need verification annually”. 

Commenting on the impact on parties, the commission said: 

“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”. 

When we considered this point in Grand Committee and, of course, tonight, my noble friend Lord Campbell-Savours and others suggested a number of ways in which they thought that this problem might be addressed. My noble friend suggested that tax returns could include a tick-box for donors to indicate their taxation status and that the Electoral Commission could then certify with HMRC that a ticked return had been received. 

I have to advise noble Lords that tax returns already allow for people to declare whether they are resident and/or domiciled. However, most people are not required to complete a tax return at all. About 9 million people complete a return each year out of a UK population of 60 million—that is about 15 per cent. I remind the House that you have to make a return only if, first, Her Majesty’s Revenue and Customs sends you one or, secondly, if you have tax to pay and it has not sent you one. A vast majority of people pay the right amount of tax under PAYE or because tax is deducted at source, as with bank interest, so there is no tax to pay and no return needed. Fifty-one million people in the UK do not make a return each year; 9 million people do. Thus, for my noble friend’s suggested solution to work and to ensure that all donors had declared their residence status via a tax return, Her Majesty’s Revenue and Customs would have to issue many more tax returns for non-tax reasons. That would involve significant additional public expenditure, including potentially, we have been advised, the need to overhaul IT systems to enable them to cope with the routine of tax returns.  

Lord Goodhart: My Lords, is the Minister suggesting that any of the people who pay solely through PAYE are likely to make a massive donation to a political party? 

Lord Bach: My Lords, I am explaining that a very large number of people do not fill in tax returns, but there may well be people who, as in the Australian example that I gave to the noble Lord, are not domiciled in the country but pay UK tax through PAYE and have done for many years. That would mean that HMRC would have to change the way in which it did things at large public expense and with new IT if the amendments were to be carried and became law. 

Requiring donors to tick a box on their return would not overcome the retrospection objection to which I have referred. People are required to complete a return 10 months after the end of a tax year. If an individual makes a donation in the middle of one tax year, it might not be reasonable to expect them to know at that point what their residence status would be by the end of the year. Even if this information were collected, it would, as things stand, be illegal for HMRC to share it with the Electoral Commission. 

The noble Lord, Lord Tyler, noted tonight as well as in Grand Committee that the House of Lords Appointments Commission announced recently that it would strengthen the existing criteria requiring that nominees should be resident in the UK for taxation purposes. He argued that this process sets a precedent that could be used to confirm the permissibility of donors. However, the number of people seeking membership of your Lordships’ House is far smaller than the number who make donations to political parties. As we have heard, Electoral Commission data suggest that more than 1,000 individual donations would need verification annually. By contrast, fewer than 10 people are appointed to this House annually on the recommendations of the Appointments Commission. 

Indeed, the relationship between the Appointments Commission and HMRC is not a formal gateway for sharing information. HMRC simply informs the commission whether an individual meets all the criteria. These criteria include residence, but also whether there is an indication of any tax irregularities such as an investigation being under way. It is important to note that HMRC’s response does not go into detail other than to give a yes or no response to the query as to whether there are any issues of concern in an individual’s tax records. 

Lord Lea of Crondall: My Lords, I must have misunderstood what the Minister said, and I would be grateful if he would clarify it. The Appointments Commission, as we all know, is not yet subject to the Bill of the noble Lord, Lord Steel, which stipulates a statutory appointments commission, and deals in effect only with Cross-Benchers. Am I right that these Cross-Benchers are the people we are talking about? 

Lord Bach: My Lords, indeed not. It was suggested that the House of Lords Appointments Commission’s method of proceeding was a way that Her Majesty’s Revenue and Customs could proceed. However, the numbers are vastly different—that is the point at issue. There are very few people each year who apply to join the House of Lords compared to the large number of people who make donations to political parties, so it would not be an easy job for Her Majesty’s Revenue and Customs to supply answers, whereas it is comparatively easy for it to do so for those who apply to join the House. 

Lord Tyler: My Lords, is the Minister saying that, in principle, it is perfectly possible, and that it is just the numbers that are the problem? 

Lord Bach: My Lords, in principle almost anything is perfectly possible. Those of us here whose job it is to pass legislation that will work in the real world have to look beyond that to see whether what we are suggesting is realistic. My point is that, while in principle it might be possible, it would require huge amounts of public money and huge changes to the way HMRC works before it could be put into operation. I hope that that is a powerful point in suggesting that these amendments, attractive as clearly they are to a number of Members of the House, are unrealistic and cannot work.I will come to a conclusion. I apologise for going on— 

Noble Lords: Ha! 

Lord Bach: Well, it is important that the Government case is put, my Lords, particularly as this is a matter of some controversy in the House. I am sorry if noble Lords are becoming slightly impatient. As I have said, we understand completely the argument that my noble friend makes so well in raising the issue again through these amendments. I hope that he and other noble Lords have no doubt that the Government take the concerns seriously. We are continuing to reflect on how the issue might be taken forward. As I have said, the new democratic renewal council will have the issue on its agenda—but as a whole, not in part. These are complex issues—I do not think that any noble Lord would disagree—that must be considered in detail before any change in this area can be made. Failure to do so would leave us with flawed and unworkable law. It is all very well for us to talk about our scrutiny role, but that is to make sure that laws are not flawed or unworkable. Our strong view is that if we pass the amendment, we would be left in that position.Noble Lords will be aware that the issues of constitutional change and renewal are at the top of our political agenda. Many options for reform are being considered and discussed. The amendments before us, and the debate that we have had today, which I have praised already, are an important part of that discussion. However, the Government’s point is that it would be wrong to make change in only one small area now, as the amendment seeks to do, without considering the whole picture. It would be wrong to pass legislation that would not achieve its objective. It would be particularly wrong to do so before the logistics and data-sharing issues around such a proposal have been fully worked through. That is a major project, and realistically not one that can be completed between now and the Summer Recess, which we hope is the deadline for the Bill to obtain Royal Assent.Of course I ask my noble friend to withdraw his amendment. If he feels that he cannot, I ask my noble friends and other noble Lords to support the Government in the Lobby tonight.Lord Campbell-Savours: My Lords, my noble friend had very little to say about the position of the House of Commons—many of us will wonder why. The hour is late, everyone is waiting to vote and there are many things that I would like to say in response to my noble friend’s contribution. What I will recall from this debate is his likening of the casting of a single vote to the contribution of millions of pounds to a political party. They cannot be the same, yet the Government’s case seems to rest on that proposition, along with all the administrative difficulties that they say will arise in the event that the amendment is carried.I simply dispute their case. We took widely available advice on the question of what the impact would be on the department. The arguments that my noble friend has used this evening are new in that area alone. All the other arguments that he used are in response to questions, and are arguments that I used in my own contribution and answered quite comprehensively. I am indebted to the noble Lords, Lord Tyler, Lord Borrie, Lord Williamson, Lord Anderson, Lord Lea of Crondall, Lord Oakeshott, Lord Rooker and Lord Warner, and to the noble Baroness, Lady Gould of Potternewton, for their contributions. In particular, I would like us to reflect on the words of the noble Lord, Lord Neill. He questioned what the public—the man in the street—would say if asked what he expected of Parliament. In his view, my view and, I believe, the view of the great British public, this should be sorted out now. This is our only opportunity and I call upon my noble friends to join me in the Division Lobby to test the view of the House.

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Ahmed, L.
Andrews, B.
Anelay of St Johns, B.
Bach, L.
Bassam of Brighton, L. [Teller]
Bates, L.
Brett, L.
Bridgeman, V.
Brooke of Sutton Mandeville, L.
Brookman, L.
Brougham and Vaux, L.
Carter of Barnes, L.
Chandos, V.
Colwyn, L.
Cope of Berkeley, L.
Crawley, B.
Davidson of Glen Clova, L.
Davies of Coity, L.
De Mauley, L.
Desai, L.
Dixon-Smith, L.
Dundee, E.
Eccles, V.
Eccles of Moulton, B.
Farrington of Ribbleton, B.
Faulkner of Worcester, L. [Teller]
Filkin, L.
Fookes, B.
Ford, B.
Foster of Bishop Auckland, L.
Gale, B.
Gardner of Parkes, B.
Garel-Jones, L.
Gilbert, L.
Gould of Potternewton, B.
Hanningfield, L.
Harris of Haringey, L.
Harris of Peckham, L.
Henley, L.
Hilton of Eggardon, B.
Hodgson of Astley Abbotts, L.
Hooper, B.
Howard of Rising, L.
Howe, E.
Howe of Aberavon, L.
Jones, L.
Jopling, L.
King of West Bromwich, L.
Lindsay, E.
Liverpool, E.
Lofthouse of Pontefract, L.
Luke, L.
McDonagh, B.
Macdonald of Tradeston, L.
McIntosh of Hudnall, B.
McKenzie of Luton, L.
Mancroft, L.
Marlesford, L.
Masham of Ilton, B.
Montrose, D.
Morgan of Drefelin, B.
Morris of Bolton, B.
Myners, L.
Noakes, B.
Norton of Louth, L.
Perry of Southwark, B.
Pitkeathley, B.
Ponsonby of Shulbrede, L.

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