Could seven millionaire donors bankrupt Labour?

In denial: Harriet Harman Pic-courtesy http//:thisislondon.co.uk

The Labour Party is sitting on a financial time bomb which could go off at the next general election in 2015.

Tony Blair  made great play when Lord

In the money: Chai Patel pic courtesy:BBC

Levy managed to recruit millionaire donors to the party to end its dominance by union money. The whole thing ended in tears after the ” cash for peerages” scandal. Even though there was not a single prosecution  this brought unwelcome publicity for all concerned.

The result was that some got their money back and the rest agreed to keep their money there to prevent Labour going bust. Everybody thought that the loans were interest free and they were.

But from August 1 last year the seven remaining millionaires started getting an inflation busting 6.5 per cent  on the £8.9m they had lent the party. Not only was this far better than the C0-op Bank’s modest 3.5 per cent charged on a £2m credit facility to the party but nobody anywhere else could get like it from a bank or building society.

The seven remaining millionaires are Sir Richard  Caring, owner of The Ivy restaurant, Soho House and Annabels night club,£2m ;Sir David Garrard, retired City property developer, £2m after he converted £300,000 into a donation; Dr Chai Patel,  former owner of The Priory rehabilitation centre and now running a private equity company, £1.5 m; Rod Aldridge, former founder of outsourcing firm Capita and now running a trust, £1m; Nigel Morris, founder of Capital One, a loans and savings bank £1m; stockbroker, Barry Townsley, £1m and Sir Derek Tulloch, financier and executive chair of the Hong Kong Stock Exchange, £400,000.

Two donors –Nigel Morris and Barry Townsley - according to an Electoral Commission document have upped their interest rate to 6.75 per cent.

One of the outstanding donors, Sir Richard Caring, is now a supporter of David Cameron and has donated some £140,000 in gifts and prizes to party events.

Most of the others now seem to have retired from business and are running trusts and in Rod Aldridge’s case, two academy schools with two more in the pipeline.

Labour’s attitude so far has been ostrich like. Harriet Harman, the deputy party chair, when questioned at the Parliamentary Press Gallery lunch this month  by me about this said this: ” Don’t believe what you read or for that matter what you write.”

Well, Harriet I do believe that Labour’s returns to the Electoral Commission are honest and above-board and that is what they say, for better or worse.  Make up you own mind, see them here.http://registers.electoralcommission.org.uk/regulatory-issues/labpartyloans.cfm.

The horror about this situation is that I calculate that the rolled up interest could add almost another £2m to a party that doesn’t have a lot of cash. It can only be paid back by relying on party members or union donations and is all due plus interest on 30 September 2015.

It also lays the party open to serious repercussions. If I were a particularly mischievous official at Conservative Central Office I might whisper into the ear of my new supporter, Sir Richard Caring, and suggest he might just demand his money back  as Labour is fighting an election.

Labour’s NEC  needs to start planning now how they are going to handle this. Otherwise the People’s Party has put itself at the mercy of some very rich and powerful people with the potential to bankrupt them.

25 thoughts on “Could seven millionaire donors bankrupt Labour?

  1. At least Labour are consistent – deficit denial for the country and deficit denial for their own finances.

  2. Labour will do what they did with the economy. Borrow more to try to pay off the debt.

    Yes, they really are that stupid.

  3. Pingback: Caring Labour Lender Donating Interest to Tories - Guy Fawkes' blog

  4. So we’re being lectured on how the economy should be run by a party teetering on the verge of bankruptcy, whose shadow chancellor is in trouble over debt AND expenses claims.

  5. Love the Google Ad at the bottom… though this isn’t an option here I don’t think.

    Ads by Google
    Declare Yourself Bankrupt
    Become Bankrupt in 3 Easy Steps. Be totally Debt Free in 12 months

  6. Oh, if only we were still in power! We could just confiscate all that lovely money, just like we used to do.

  7. AV will save the day since AV will give labour permanent grip on power owing to size of client state (6 million public sector employees and millions on benefits) and deals with libdems to advise the respective core vote to put the other party second and conservs last on ballot forms. AV is the ultimate short sell signal for sterling!

  8. This issue will grow and grow then bite Labour in the Bum. The present Shadow Cabinet led by Miliband thinks money things are simply beneath him. They were reared by Gordon Brown who always told them that money was never an issue!! They just spent us, the Taxpayers into Bankruptcy and will do the same to the Labour Party. Dumb!!!

  9. The Champagne socialists could easily bail out Labour.
    But of course they won’t because like all socialists they think other people should put up the money for them.

  10. Pingback: Labour and its loans from seven millionaires | Westminster blog | Jim Pickard and Alex Barker share their views on the UK’s political scene for the Financial Times – FT.com

  11. When Prescott was running for party treasurer I suggested that no matter how much debt they get into they can use the same stunningly successful policies that they applied to the nation as a whole and look to borrow more money to pay off their debts. I would most likely need hospital care for ruptured sides should the whole stinking Labour ship sink in a sea of IOU’s and final demands.

  12. With the Labour Party being an unincorporated association, without corporate personality, the notion of “bankrupting” it as an entity is interesting – I don’t think it is legally possible.

    AIUI unincorporated associations cannot have debts – the debts would probably be with the officers, NEC members, or trustees (current or former), or possibly all the members, or the delegates at a conference that accepted the accounts that listed the debts (thereby knowingly accepting responsibility and joining the contract).

    I think any attempt to use the law to collect the debt would lead to a very complex legal case to figure out who exactly within the labour party is legally responsible, and probably exposing public details some politicians would rather stay hidden. I suspect the Labour Party size and complexity goes beyond existing unincorporated association case law, so even top lawyers could not be confident of the outcome.

    If you want a brief online legal primer on the issues, I suggest pages 2-3 and 7-12 of the recent Scottish Law Commission report 217:

    http://www.scotlawcom.gov.uk/law-reform-projects/completed-projects/unincorporated-associations/

    Although this is on Scottish law, I think English law is similar in this area, being largely based on shared precedents. NB I am not a lawyer.

  13. … looking thru that Scottish Law Commission repart again, there is a one paragraph super-short summary of the law:

    “Contracts with third parties

    2.4 Since an association has no status in law, liability under a contract purportedly entered into on its behalf is likely to be a personal liability of some or all of the members of the association who have expressly or impliedly authorised it. Depending on the circumstances, that might be all of the members (where, for example, the contract was authorised or ratified at a general meeting), or all of the management committee, or one or more persons (whether office-bearers or not) who assumed the responsibility for entering into the contract. This is unsatisfactory from the point of view of committee members undertaking liabilities on behalf of the club. Such liabilities could be substantial: for example, redundancy payments to former employees, or the cost of statutory repairs to buildings or dilapidations at the termination of a lease. Provided that the committee members act within their express or implied authority, they will have a right of relief against association funds. This may not, however, be sufficient to prevent them from sustaining personal loss. They have no right of relief against other members for anything beyond their respective subscriptions.”

    But still well worth reading pages 2 to 3 and 7 to 12 for a better understanding.

    The report also says English law is essentially the same as Scottish in footnote 3 on page 7:

    “We are not aware of any material differences between the law of Scotland and the law of England and Wales regarding unincorporated associations. In this Report we cite decisions from England and Wales, and also Privy Council judgments in appeals from other Commonwealth jurisdictions, as representing the law of Scotland where, as is often the case, no Scottish authority exists.”

    • I heard that to, but I think that is an over simplification. I think you have to think about it in contract-law terms, where there is an implied contract with a number of specific individuals.

      You have to think of the events that enable individuals to leave and join the loan contract. eg Signed handover paperwork that assigns the existing contracts to the new General Secretary. Possibly taking up a new NEC position, if the joiners paperwork alludes to the loans. Agreeing the accounts might also be a sufficient assent to join the contract.

      Obviously when the loan terms were renegotiated that probably created a new contract with whoever signed it on the Labour Party side.

      I’ve read that the Labour Party has moved all finance discussion into a sub-committee. Purpose partly so a particular clique has control, but I suspect that it might mean no legal liability for NEC members outside that sub-committee. Reading the Scottish Law Commission report suggests the contract can only be with individuals who know (or should have known) sufficient detail of the contract. If ordinary NEC members are blocked from knowing the detail, I suspect a court might well say they cannot be parties to the loan contract.

      I suspect this may end up in the courts eventually if the rich individuals all want to get thier money back, rather than turning them into gifts at some point.

  14. As I understand it Labours total Debt is around £27Million, made up of loans & overdraft. The policy appears to be to refuse to discuss it.

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