Leaders: Lords donor scheme does democracy no favours

FOR years solemn promises have been made of a “new”, reformed politics, one in which public trust could be restored. Such lofty considerations look to have been thrown out of the window when it comes to membership of the House of Lords.

It remains an institution with a confused constitutional role and a muddled function. Its prime rationale is that it is a means by which the government and opposition parties can reward those who have pleased them, or are retired, difficult to place, or dangerous if left out in the cold. But it is also a means by which parties can reward those who have given substantial financial donations.

Thus, of a total of 30 new peers, major donors figure prominently. Among them are JCB boss Sir Anthony Bamford whose family and firm have given £2.5 million to the Conservatives; Scottish businessman Sir William Haughey, who has given £1.3m to Labour, and Domino’s Pizza entrepreneur Rumi Verjee, who has given more than £800,000 to the Liberal Democrats.

For these generous sums, party donors are rewarded with a seat in the upper chamber of the parliament, enjoying immediate and direct influence on the process of legislative scrutiny and revision. But if this is not paying for influence, what is?

Among the many objections to this system of conferring such privileged access to donors, three are outstanding. One is that it undermines and demeans those, including several of the newly created peers, who have performed public service over many years or whose wisdom and experience in science, academia, overseas service or public affairs would justify consideration for membership of a revising chamber.

Another is that it fosters cynicism and mistrust among the public that the process of law-making has indeed been reformed to any meaningful degree. This cannot be so while the wealthy and privileged are able, not just to sustain, but to further elevate their positions simply by working the patronage system.

What is the point of a clampdown on abuses of the lobbying system and outlawing the practice of cash for access when cash can be seen to so readily and effortlessly open doors to a chamber directly involved in the amending and approval of legislation?

And the third is the searching questions it raises over the purpose and function of the House of Lords itself. The latest batch of appointments takes the total membership of an institution already widely criticised for being overcrowded to 785, compared to 650 MPs in the House of Commons and 766 MEPs in the European Parliament. Indeed, it can only function at all so long as a large number of peers do not turn up.

The greater scandal at the heart of all this has been the failure to reform the House of Lords itself and to secure for the second chamber a clear, accountable status and function in the constitution.

Don’t delay sale of resurgent Lloyds

It has taken five years, a taxpayer-funded rescue, thousands of redundancies, huge losses on business lending and an as-yet to be completed divestment of 631 TSB branches, but at long last Lloyds Banking Group, which absorbed the stricken HBOS at the height of the financial crisis, looks to be firmly on course for recovery. And that opens the door for the start of a return of the taxpayers’ 39 per cent stake to the private sector.

That process may take several years before it is complete. But the government should not delay the first step just to gain political advantage on election eve. The omens are good for an early start. The bank turned in a profit of £2.1 billion in the six months to the end of June, well above expectations and against a loss previously of £456 million. The shares jumped 8 per cent yesterday to close at a near three-year high of 74.1p – above both the booked cost (61p) and actual cost (73.6p) when they were acquired.

As encouraging, bad debt provisions are sharply down, lending to small business is up, mortgage lending is notably higher, international operations have been pruned and a return to modest dividend payments looks likely next year.

As for longer-term considerations, the lessons of the HBOS debacle and the shattering loss of Scots prestige in banking and finance should never be forgotten. There is still unfinished business here, and action against former directors and executives responsible for the demise of HBOS must be pursued with vigour.

George Osborne will be tempted to announce the sell-off of the government’s stake at the Tory conference and begin before the next election, but he must move sooner than that.