I promised to write further once I had been able to consider your response to Mr Clayton's complaint in the light of comments I was expecting from the House's Department of Finance and Administration (DFA).

In commenting on these matters, the DFA have drawn my attention to the guidance they issue to Members on publications funded from the IEP. A copy of the latest edition of this guidance is enclosed. All Members were sent a copy of it when the current version was issued in January 2003.

You will see that Rule 1 of the guidance says that the IEP "must not be used to fund party political activity or campaigning." This reflects the general prohibition on the use of the IEP for party political purposes which is set out in the Green Book on allowances and to which I referred in my letter of 3 August.

The two questions I need to consider therefore are whether the two sentences in your Spring 2004 "Westminster Report" about the Liberal Democrat's policy on the council tax to which I referred in my earlier letter constitute party political comment and whether the use of the IEP to help you fund their publication to your constituents was improper. I recognise from your letter of 15 September that you may not have intended to use the IEP improperly but, subject to any further points you may wish to make in responding to this letter, I take the view that the answer to the two questions I have posed is 'yes'.

In your letter to me you seek to justify the statements in your newsletter on the grounds that the overwhelming view of the House when local income tax was debated on 19 July was hostile to the Liberal Democrat's proposals. I note that this debate took place well after your parliamentary report had been circulated. Moreover this cannot be an acceptable justification as if it were, any comment critical of a minority party position not espoused by the other main parties would have to be accepted as legitimate but no comment critical of the policies of a majority party in the House could be regarded as justified.

I take the view that the simple test to be applied in such cases is whether or not the comment in question is party political in character. The two sentences in question in this case clearly were. Moreover inclusion of them does not flow naturally and strictly in the text from a description of what you have been doing in your capacity as a Member.

I fully recognise that the IEP funded just over 40% of the total cost of your "Westminster Report", with the remainder coming from other sources. Your news letter properly carried on page 3 the statement:

"The costs of printing and publishing this report is met from the incidental expenses provision and the distribution costs are covered by Devon businessmen."

However, I do not see that split funding of a publication removes the difficulty that the IEP (that is, public money) has been used to help publish a document containing party political comment.

I have significant reservations both about split-funding of publications containing party political comment and about any practice of Members submitting publications to the DFA for "clearance". I understand that these reservations are shared by the Department itself and that concerns about them were behind the guidance issued to Members, following discussion with the then Speaker's Advisory Panel on Members' Allowances, in January 2003. I also understand that if, nonetheless, you had submitted the text of your report in advance to the Department (and according to them they did not see it), they would have objected to the two sentences on page 1 which have given rise to the present complaint.

Subject to any further comment you may wish to make in the light of what I have said, I propose to make a formal report to the Committee on Standards and Privileges about Mr Clayton's complaint. I have decided to do this in part because of the general points of policy I have mentioned in the preceding paragraph, on which I think it would be useful to clarify the position and reinforce the guidance available to Members. I shall let you see the draft factual sections of this report, in line with the procedures approved by the House. In reporting to the Committee I shall make clear both the relatively minor extent of the party political comment in your "Westminster Report" (2 sentences in an 8 page document) and the fact that the final page of the Report was given over to an article by a Labour Member.

I look forward to receiving any further comments you may wish to make. If you want a word, please do not hesitate to ring my office to arrange for us to meet.

14 October 2004