New curbs on party funding

COMPANIES THAT give money to political parties are to be forced to win their shareholders' approval before making the donations.

The move will be proposed today as part of a wide-ranging shake-up of political funding recommended by Lord Neill's committee on standards in public life, which will force parties to name businesses giving more than pounds 5,000 and individuals donating more than pounds 1,000.

The curbs on the rights of company bosses to give money will be included in the legislation to reform party funding. The Government will implement the main elements of the committee's 200-page report.

The change is expected to hit the Conservatives harder than Labour because they have traditionally relied heavily on cash support from companies.

Although Labour has recently provoked controversy by winning huge donations recently from millionaire businessmen, such as Lord Sainsbury and Bernie Ecclestone, most have been given on a personal basis rather than through their businesses.

Labour has, however, received smaller amounts from companies and named 14 in its recently published list of donors for 1997.

Between 1985 and 1997, the Tories received a total of pounds 46.5m from 650 firms.

Under the Companies Act, the amounts must be disclosed in the firm's annual accounts, but critics say this is "too little, too late", and that shareholders should be consulted before the money is given.

Labour has repeatedly claimed that the law is unfair because trade unions must win their members' approval in a ballot before setting up a political fund to give cash to Labour.

In its submission to the Neill committee, Labour proposed it should be made illegal for companies to donate money to a party without balloting their shareholders.

It suggested that a vote be taken at the firm's annual meeting. Labour said that individual shareholders who did not agree with the donation should be able to "opt out" of the cash aid by getting a rebate in proportion to their holding in the company.

When the Government turns the Neill report into legislation, it is expected to say that loans from companies to parties should be disclosed, as well as donations.

Some firms have loaned the Tories pounds 1m or more in recent years, which means the cash help does not have to be revealed in their accounts.

Jack Straw, the Home Secretary, will welcome the Neill committee's long- awaited report today, but the Government will not include legislation in the Queen's Speech next month on the grounds that the issues involved are complex.

Labour will challenge other parties to implement the key proposals in the Neill report immediately, before a new law takes effect in two years. But the Tories will criticise Labour for delaying its legislation.

"It seems that the Government is rowing back from Tony Blair's pledge to clean up politics," a Tory spokesman said last night.

Labour will be disappointed that the Neill committee proposes that people living abroad who have the right to vote in British elections should be allowed to give cash donations to political parties.

This definition would permit most of the "foreign donations" to the Tories in recent years to continue.

However, ministers may decide on tougher curbs on foreign funding when they draw up the legislation.