Labour Falls for the Big Gift

Article excerpt

Tony Blair will have to clean up party funding if he is to avoid the scandals which beset the Tories.

Very rich men are now the key element in the finances - and thus arguably the policies - of both major British political parties. The historic division in party funding, in which the unions supported Labour and big business the Conservatives, has given way to a more mobile universe wherein both parties vie for the favours of entrepreneurs - sometimes the same entrepreneurs.

In such a universe, scandal is inevitable. These men, creators of their own fortunes, are often attended by controversy, lawsuits and high-profile publicity. They are routinely described as "driven", rarely hide their wealth and invariably stand to gain - or lose - commercially from decisions made by government.

Labour and Conservatives both depend on them, but both suffer very large headaches because of them. The Tories' is the larger: the businessmen they turned to as corporate donations declined and the cost of elections soared included a number of foreign-based individuals against whom criminal charges are pending, or around whom scandal circles. Now William Hague, the Tory leader, wishes large donations to he openly declared and has decreed an end to money from abroad; that threatens the financial base of his party, but the extraordinarily compromised nature of some of his large donors leaves him little choice.

He has made an unconvincing start. Last month he appointed as deputy treasurer of the party Michael Ashcroft, a Florida-based tax exile who is allowed to spend 90 days a year in the UK and who moved his company, ADT, to Bermuda. If Ashcroft is to concentrate on raising money from UK-based business, he is a strange choice.

Labour's dilemma is less acute than the Tories', but is more complex. The success enjoyed by the party fundraisers over the past three years in attracting very large donations has left it with a curious cocktail of support, which embraces everything from large sums from the trade unions and from business people who dislike trade unions; through individuals such as Bernie Ecclestone of Formula One and David Sainsbury of the Sainsbury store chain, whose business could benefit directly from government decisions; to a group of businessmen involved in Jewish charities whose decisions to give to Labour have been crucially influenced by the party's strong pro-Israeli stance under both Tony Blair and his predecessor John Smith; and a strong endorsement from corporations and individuals because of a more pro-European policy. In all of these areas there are growing tensions.

The approval that business extended to the Conservatives grew thin in the 1990s. The agenda of union reform, privatisation and lowering of taxes had largely been achieved; the party was turning against the European Union, which frightened the big corporations; and John Major proved unable to avoid the gradual Balkanisation of the party.

Big corporations do still give to the Tories. Just before the last election, the Weetabix cereal group gave [pounds]250,000, perhaps the largest corporate donation ever, having previously only given small amounts. More than 400 companies gave more than [pounds]14 million between 1992 and 1997, with the food group Wittington leading the list at [pounds]600,000 over the five years, followed by the Hanson group at [pounds]500,000, Hambros Bank at [pounds]430,000, P&O at [pounds]400,000 and the merchant bank Robert Fleming at [pounds]325,000.

But some large companies stopped giving, including Glaxo Wellcome, Allied Domecq and - an unkind cut - the United Biscuits group, which had been, under the chairmanship of Sir Hector Laing, one of the great Thatcherite supporters in the eighties. And even the largest donor among the corporates was easily capped by the rich individuals upon whom the Tories have increasingly come to rely.

Two of these begat large scandals which dog the party still. …