Lord Ashcroft and the Conservative Party: the financial controversies

With Michael Ashcroft back in the news over his financial support for the Conservative Party, this post provides a quick recap of the past controversies over Michael Ashcroft, the Conservative Party and political funding.

Ashcroft’s sequence of senior Conservative posts

Under William Hague, Ashcroft was Treasurer of the Conservative Party (1998-2001), becoming a peer and member of the House of Lords in 2000. He was involved in a protracted dispute with The Times, which had been investigating some of the sources of his wealth. A libel action was settled out of court, with both sides paying their own legal costs.

After Hague’s departure, there was a gap of several years before Ashcroft once again held senior office in the Conservative Party, coming back as Deputy Chairman after the 2005 general election. This role, combined with his financial contributions, have given him huge influence over the Conservative Party’s target seats operation.

Ashcroft’s influence on the Conservative Party’s direction

He paid privately for an extensive polling operation during the 2005 campaign, the results of which – along with his book, Smell the coffee: A wake-up call for the Conservative Party – played a significant part in the modernising debates in the Conservative Party.

Tim Montgomerie has commented on ConservativeHome that, “I think his polling operation and Smell The Coffee report did too much to send the Cameron project in an über-modernising direction.”

Ashcroft and the House of Lords

Prior to being made a peer in 2000, Michael Ashcroft promised that he would return to the UK and pay income tax:

After Lord Ashcroft’s nomination for a peerage was rejected in 1999 – in part because of his status as a tax exile – Mr Hague wrote to Downing Street demanding a change of heart on the grounds that the businessman intended to become resident in Britain “in order properly to fulfil his responsibilities in the House of Lords”.

Mr Hague added: “This decision will cost him (and benefit the Treasury) tens of millions a year in tax, yet he considers it worthwhile.”

Despite this assurance, Lord Ashcroft was said to be resident in Belize during 2004, almost five years later. In October that year, in the House of Lords register of peers’ expenses claims, Lord Ashcroft’s “location of main residence” was declared to be Belize. A House of Lords spokesman said: “The peers themselves have to put it in writing when they inform the accountants office of their main residence.” [The Guardian]

Lord Ashcroft has repeatedly refused to say whether he is legally resident in the UK and whether he pays UK income tax. The Conservative Party itself has also refused to answer such queries, with David Cameron deflecting questions and saying that are not a matter for him (even though Ashcroft takes the Conservative Party whip in the Lords and works in Conservative Central Office).

The issue is a regular source of criticism of both the Conservative Party and Lord Ashcroft, even from sources normally friendly to the Conservatives. For example, in September 2008 two Spectator journalists both hit out:

Lord Ashcroft’s tax status … is a huge strategic liability – and one that a half competent Labour party would exploit … It is reckless for the Tories to let this issue fester – James Forsyth

There is no denying that Lord Ashcroft’s tax status is an growing embarrassment. I suspect that Ashcroft feels untouchable, having seen off several media investigations into him. But it still looks dodgy, and as the election approaches there will be mounting questions as to why a man so crucial to Cameron’s operation may no be domiciled in Britain for tax purposes. It’s a problem that will not go away – Fraser Nelson

Secret loans

Lord Ashcroft was caught up in the secret loans scandal of 2006, when it emerged that the Conservatives had received £20 million in loans, including £3.5 million from Ashcroft. The revelations precipitated a change in the law in order to ensure that such financial support could not be kept secret in future.

Failure to declare donations from Michael Ashcroft

One of Lord Ashcroft’s companies, Bearwood Corporate Services, has been a frequent donor to the Conservative Party. However, there was a string of failures by local Conservative Associations to declare the money they received. In February 2008, the Evening Standard listed three, whilst in November 2006 a series of others were named by the Electoral Commission.

Where are Ashcroft’s funds coming from?

In September 2008, the Sunday Times published a detailed investigation into the sources of the Michael Ashcroft funds used to financially support the Conservative Party:

5,000-mile money trail to Tory HQ
Lord Ashcroft uses a string of firms to channel cash from Belize to his party

Following this report, a Labour MP – John Mann – wrote to the Electoral Commission asking them to investigate. An initial review by them concluded that there are grounds for a full investigation, and this is the news which broke about last week.

The issue is that whilst UK companies can donate to UK political parties, overseas companies (and individuals) cannot. The question is whether overseas money was funnelled into a political party in contravention of the rules: was the money foreign, and if it was, did the means by which it got to a British political party break the law? Watch this space, as they say.