It is ironic that the worse the Conservative Party has managed the economy, the more money it needs to spend to get itself re-elected. The Conservatives are now desperately trying to raise funds to fight this year’s election, just when people can least afford to give them any.
The Tories apparently need £25 million to fight this election. But it is difficult to gauge their chances of raising this. Indeed all aspects of the Tory party’s finances are difficult to fathom. For a party keen on straightforward accounting, it is strange that its own annual accounts are as bland and flimsy as those of a Panamanian shipping company.
The financial situation of our governing party is summed up in three pages, and from what little they reveal it seems that the party is a very expensive one. In 1991 it spent £5 million more than it received, and £4 million too much in 1990. Its debt is not stated, but is estimated at £12 million. So much for the ethics of good housekeeping — or perhaps the Tories are just following their own advice to consumers to ‘spend their way out of recession’.
In 1991 the Tories raised £13 million — a healthy increase over the previous year’s total of £9 million. But only a fraction of this money can be traced to its sources.
The local constituencies donated £1.3 million, which it raised in the time-honoured fashion of garden parties, tombolas and raffles. An entry entitled ‘Other Income’ accounted for £1.2 million, and the remaining £10.5 million came from equally unspecified donations.
There are two sorts of donations — when people give other people’s money, i.e. shareholders’ money, which is shrouded in controversy; and when they give their own money, which is shrouded in secrecy.
Shareholders’ money is easier to give and more rewarding. The company board does not have to ask shareholders’ approval for their money to be given away, if it is agreed by the board; it merely has to state in the annual accounts how much the company gave. As annual accounts generally come out three months after the company’s year end, it is possible that shareholders may only hear of this kind donation of their money 15 months later.
Many companies have a financial year end of December 31. With the general election campaign just getting under way, a company board could now authorize a donation of any size which the shareholders — the actual owners of the company — would only hear of in March 1993. If the grateful Conservatives win, the chairman might be rewarded in next year’s Honours List before his shareholders know anything about the donation.
In 1990, the latest year for which information is available, 200 UK companies made donations to the Conservatives, adding up to £3 million.
This £3 million has been rewarded by a number of knighthoods and peerages. Of the 20 life peerages awarded for contributions to British industry over the last ten years, 17 have gone to chairmen whose companies authorized donations to the Conservatives. Allied Lyons gave £300,000 and chairman Derek Holden- Brown was knighted before he resigned over a currency trading scandal; British Airways gave £130,000 and John King became a life peer; Hanson Trust gave £275,000 and Lord Hanson emerged, recently followed by his partner Gordon White, who is based in the United States and who is not even a Hanson director. Phil Harris, who set up a chain of cheap carpet shops, paid £40,000 a year to fund two salaries at Central Office and became Sir Phil Harris — and his company is now bust.
It is interesting to spot the companies which have stopped giving donations to the Tories. British & Commonwealth gave £320,000 between 1986 and 1988 before going bust in 1990. Last year British Airways cancelled its regular donation of £40,000. A number of property companies including Mountleigh, Speyhawk, Costain, Frogmore and Higgs & Hill have stopped their regular donations which added up to £100,000 altogether. Even Taylor Woodrow which, over the years, has given around £1 million (Frank Taylor was made a peer in 1983) has cut its annual donation from £150,000 to just £24,000. All these reduced donations stem from the recession, which property companies partly blame on the Government.
‘It is difficult to find funds to give for political support during such a bad recession,’ said the chairman of one property company. ‘Our shareholders really insist that we keep the cash intact as they are concerned about their dividend payments.
‘Of course, I could tell them that their dividends will suffer higher taxation under Labour, so a political donation to the Conservatives is money well spent, but it is a very sensitive subject.’
But if recession-hit companies are only giving £3 million a year, the Tories can be reassured that individual gifts have risen — they now account for £7.5 million out of the total income of £13 million. The only trouble with these gifts is that they are completely secret. If Britain was an African country and the ruling government admitted that a Greek ship-owner had given them a donation of £2 million, people would assume that he had an ulterior motive. Well, the Conservatives received £2 million from a Greek shipper called John Latsis purely out of the kindness of his heart. Greek ship-owners are like that.
Michael Ashcroft is another unlikely donor. It is reputed — and not denied — that he has underwritten the Conservatives’ interest bill. Ashcroft is not renowned for his charity. Indeed, he runs one of the most tax-efficient companies on the Stock Exchange, ADT, which is registered in Bermuda. Perhaps he supports the Tories to the tune of £300,000 a year in lieu of the taxes he has so efficiently saved. There are a number of other highly secretive individuals who have a lot to lose should a Labour government be elected. For example the Reichmann brothers, who are building Canary Wharf, the most expensive office development in the world, have an excellent relationship with the present Government. The Government has assisted the Canary Wharf project with an ambitious roadbuilding programme, an extension to the London Underground (to which the Reichmanns contributed) and a rebuilding project of the Docklands Light Railway. But the Reichmanns’ company finances are about as secretive as the Tory party’s and it is impossible to tell whether they have donated anything.
There are rumours that Hong Kong businessmen have contributed a good deal of funds this year. Indeed it was revealed last October that a Hong Kong businessman, Li Ka-Shing, had given the Tories £100,000. Li Ka-Shing not only has an interest in the contract to build the new Hong Kong airport, but he is also involved in redeveloping King’s Cross. Both Mrs Thatcher and John Major had met Mr Li while on official visits to Hong Kong.
John Major recently hosted a dinner for successful Asian businessmen at Number 10. This is a clever move as word that the Tories look after Asian interests spreads quickly through the Asian community. But one of the businessmen there got hold of the wrong end of the stick: ‘I will give the Tory party £1.3 million when they make the first Asian peer.’ He generously offered this with a refreshing candour which revealed why they thought they had all been gathered together. He had to be told that the Conservative Party does not work like that. But £1.5 million is a mouth-watering prospect for the Government — and many Asians have done a good deal for British industry...
The trouble with not disclosing the sources of payment is that nobody can warn the political party concerned about receiving ‘funny money’. When the Labour Party received funds from the late Robert Maxwell, people could point out the propriety or otherwise of receiving this. But nobody knows how some contributors to party funds really earn their money. Would the Tories still accept it if it turned out to come from dealing in arms or drugs or just somebody’s pension fund?
The truth remains that nobody knows where 50 per cent of the Tory party’s funds come from. All those posters, those party political broadcasts, opinion polls — who’s paying for them? Peter Hardy, a spokesman for the Charter Movement which lobbies for greater democracy within the Conservative Party, described the embarrassment he feels over the party’s finances: ‘It’s simply bizarre to think that foreigners should give the governing party of this country £2 million. It’s highly embarrassing for us. Nobody gives £2 million for nothing, and even if they then get nothing — no honour, no soft contract, no dinner at Downing Street — it’s unacceptable if they originally felt that they might get something.
‘Look at Lord King. He stopped giving £40,000 a year because he felt the Government was not acting in BA’s best interests. There was some business over allocating flight paths. Well, the logical interpretation of that is that he gave money in the first place to secure these deals for British Airways — and that’s not fair on other airlines.’
The Charter Movement campaigns for greater financial accountability and would like the Conservatives to publish a balance sheet.
‘The Tories could be bankrupt for all I know,’ Peter Hardy points out. ‘They never tell us anything. You will never get to see the party Treasurer, Lord Beaverbrook — I don’t think I’ve ever heard him say anything either on or off the record. The funds are kept in absolute secrecy.
‘I would like a genuine mass membership party where everyone can contribute and where the finances are totally open. Then we wouldn’t get all these shocks when people such as Asil Nadir donate thousands of pounds and go bust.’
Indeed, my approach to speak to Lord Beaverbrook, Lord Laing and Sir John Cope, the three Tory treasurers, was denied. Even Sir Brian Wylebore-Smith, another fund-raising grandee, refused to comment.
I’m sorry,’ said their assistant Tim Bayley, ‘you’ll just have to read the tea-leaves.’
Despite the Tories’ financial deficit at Central Office, at the constituency level the party is handsomely funded. All those garden parties really do seem to bring in lots of cash.
John Strafford is the treasurer of the Wessex Area. ‘There’s lots of cash in the constituencies, but we don’t want to hand it over to Central Office,’ he said. ‘In my area alone I would estimate there is about £3 million sitting in local Conservative Party bank accounts. But we see Central Office as very profligate — their refurbishment alone cost around £4 million which is a lot of wallpaper.
‘Most constituencies budget on a four- year basis. Now that the election has been delayed, many of them will be even more reluctant to hand over funds. They will be feeling pretty squeezed themselves.’
I asked him what would happen if the Central Office went bust. ‘That’s an excellent question. I never get answers to questions like that — Lord Beaverbrook just won’t discuss it, which is a pity as they’re deep in the red.
‘The financial position is so bad that it will force the party to become more accountable in the future. There must be changes after the election.’
Despite raising all this cash — and it should be remembered that Labour will only spend around £4 million on the election and the Liberals under £1 million — the Conservatives cannot guarantee that it encourages people to vote for them. Indeed it may very well be the case that every Tory poster reminds people how awful the recession has been, of how long the Tories have been in power, and prompts them to vote Labour.
And above it all hovers the great unanswerable question: will there be a hung parliament? In which case the Conservatives will have to go through the whole procedure all over again.