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
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.