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Non-doms and donations

Non-dom donors to political parties continue to make news. Over the weekend, the Times  highlighted a row concerning Labour donor and a Deputy Speaker of the House of Lords Lord Paul’s appointment as a Privy Counsellor. The critics suggest that Lord Paul does not have the experience normally expected of a Privy Counsellor and then draw attention to the donations he has made to the Labour Party – see Iain Dale for a criticism along these lines.

At the same time, the controversy surrounding Lord Ashcroft’s tax status continues. The Conservatives have sought to limit the political damage by promising legislation to require MPs and peers to be full taxpayers. The strategy has had the effect of putting Ashcroft back into the headlines, but without pleasing the critics. Liberal Democrats have criticised the Conservatives for failing to support such a measure in the Lords earlier this year and have asked that party to support a legislative change prior to the election.

A Times editorial, while critical of the delaying tactic used by the Conservatives, gives David Cameron credit, saying that he ‘stood up to Lord Ashcroft, and confronted the issue of his tax status as no previous Conservative leader has been willing to do.’  Yet when the Guardian reported the proposal, it mentioned that

Conservative officials said Lord Ashcroft has been consulted about the proposed new law and has accepted the reform.

You might ask whether such consultation and acceptance is necessary, if the aim is to lay down the law to someone – isn’t his consent beside the point? However, you can see why it is politically prudent for the Conservatives to keep Ashcroft happy. Money still matters.

This coverage shows how both parties will seek to portray one another as in the pocket of wealthy donors, with the suggestion that special privileges are granted in return for payments. There are parallels between Lord Paul and Lord Ashcroft. Lord Paul is a non-dom, and while the position with Lord Ashcroft is not clear, it is sometimes assumed to be the same. Both donors are peers and party insiders with official roles – as opposed to external donors for whom giving money is the main contact with the party. Ashcroft’s money has been donated through the company Bearwood, and some of the money associated with Lord Paul has been given by the company Caparo.

Yet there are limits to the comparison. Lord Paul donated £10k to Labour in 2001, Caparo has given £14,250 to Labour since 2002 and £45k to Gordon Brown’s leadership campaign. By contrast, Bearwood Corporate Services has donated over £5 million to the Conservative Party since 2003. Finally, while Lord Paul is a non-dom for tax purposes, he is currently eligible to donate money to a political party (subject to a change in the law mentioned below). By contrast, some newspaper articles have asked whether Ashcroft is still on the electoral roll (which is another unclear matter).  If he is not, then he cannot make an individual donation (and only his UK-based companies can be a source of political funding).

On the last point, you may think the distinction is of less significance and that it is unacceptable for any non-dom to donate to a political party. This point was addressed in s.10 of the Political Parties and Elections of 2009, which amends the Political Parties, Elections and Referendums Act 2000, so that individuals can make donations over £7,500 only when ‘resident, ordinarily resident and domiciled in the United Kingdom in that year.’ However, the government has declined to bring the provision into force, so that, for the time being, donations from non-doms can still be a source of funds. This leaves open the potential for a number of non-doms to give money in the run-up to the election. In any event, once the provision is in force, it will not prohibit non-doms from channelling money to parties through UK-based companies.

Lurking in the background is the bigger question about large donations in general and whether a cap should be imposed on the amount that can be given to a political party. While this was a big issue some time ago with the Hayden Phillips Review, no agreement was reached between the major political parties on how donations from companies and trade unions should be treated under such a limit. The latest quarterly figures released by the Electoral Commission show the chances of any agreement in the near future to be remote, as both the major political parties depend on very different sources of funding.

The figures from the third quarter of 2009 show that while the Conservatives got £3.2 million from individual donors, Labour received £202,000. Companies gave £1.6 million to the Conservatives, but only £194,543 to Labour. However, Labour gained £2.4 million from trade unions. A cap on individual and company donations would, in the present conditions, impact on the Conservative Party, while an equivalent limit on trade union donations would quickly dry up funds for the Labour Party. This says nothing about the arguments in principle about whether a donation limit would be desirable, but it does show how the stakes are high and any legal control could affect the fortunes of one party more than another, in turn making an agreement less likely in practice.

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  1. March 1, 2010 at 10:16 pm

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