Peers defeat government over party donations from tax exiles

June 16, 2009 at 7:02 pm Leave a comment

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by Tony Grew

The House of Lords has approved an amendment that will end the practice of people who do not pay income tax in the UK donating money to political parties.

Both the government and the Conservative frontbench spoke against the amendment, which passed last night during the report stage of the Political Parties and Elections Bill.

The bill has passed all of its Commons stages.

Peers were unconvinced by Lord Bach, Parliamentary Under Secretary Of State at the Department of Justice, who claimed that the amendments would interfere with Article 10, Article 11 or Article 3 of Protocol 1 of the European Convention on Human Rights.

Under the amendment that passed a donor, in addition to the existing requirement that they be registered in an electoral register, would have to be resident in the United Kingdom for the purposes of the Income Tax Act 2007.

Lord Campbell-Savours told peers that non-UK taxpayers can have a huge impact on the outcome of general elections.

He quoted a Rowntree report published last year, Purity of Elections in the United Kingdom: Causes for Concern:

“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.”

He said that the amendments originally tabled in the House of Commons “have been vigorously opposed by the Government at all stages.”

“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,” he said.

“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.

“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.”

Lord Tyler told the House that Ministers came up with “a number of apparent practical difficulties.”

“I suggest to them that where there is a will, there is a way,” he said.

“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.”

Labour peer Lord Anderson of Swansea, also backed the amendment.

“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,” he said.

“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.”

Lord Oakeshott of Seagrove Bay was outraged that non-resident peers can sit and vote in the Lords.

“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,” he said.

“If the Government believe that this is wrong and must be stopped, why will they not accept the noble Lord’s amendment?”

Conservative frontbench spokesman Lord Bates claimed his party wanted an end to “big money” in British politics.

“That desire is there and all parties of the House need to agree on how it should move forward.

“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.

“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.

“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.”

When peers indicated their dissent, Lord Bates pressed on.

“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.”

Lord Bach told peers that the government “continue to have serious concerns about these amendments on principled, practical and legal grounds.”

While supporting the “senitment” behind the changes “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.”

Lord Bach said 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,” he said.

“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.

“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.”

Despite opposition from both frontbenches the Lorde voted Contents 107, Not-Contents 85 and Amendment 29 was agreed.

The Bill will have its Third Reading in the Lords on June 24th.

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