Sunday, December 09, 2007

Dodgy donations - a Labour disease

Every day we learn more about the elaborate ways in which Labour has been raising funds illegally from private donors. There hardly seems to be a businessman in Britain who hasn’t been tapped for a grand or so through some obscure conduit.

From wee Charlie Gordon harvesting “995s” from property developer chums from his cooncil days - “unintentionally” of course - through to bigger fish like Northern businessmen David Abrahams infiltrating £600,000 through elaborate, and Labour-sanctioned networks of proxy donors. The illegality is clearly systemic and ongoing. There were reports yesterday that Abrahams had been approached, again, by Labour for funds as recently as this autumn. It was also alleged that the Glasgow businessman, Imran Khand, donated more than £300,000 to Labour through a front organisation, Muslim Friends of Labour.

Wendy Alexander hasn’t resigned yet, but her donors are considering their position. Willie Haughey, the Glasgow businessman who has bankrolled the Scottish Labour establishment to the tune of £1m says he is cutting them off. He told a Sunday newspaper that he’d been assured his money had not been used to finance Wendy Alexander’s campaign, when of course it had. The Scottish Labour leader is still insisting that she knew nothing of the crazy antics of her fund-raisers. Unfortunately for her, she can’t escape legal liability.

All this has happened since the cash for honours scandal revealed that Labour had been raising secret loans from millionaires, who subsequently were nominated for knighthoods and peerages. “a k or a big p”. All of which raises the question: has Labour lost, not only the plot, but also the will to survive? For the party to be breaking its own laws on party funding in the aftermath of a scandal in which the former prime minister was interviewed twice by the police over sleaze simply beggars belief. It suggests that Labour has become so dependent on dodgy donations it’s incapable of functioning without them.

In a hilarious aside, it also emerged that the Labour Party actually received £180,000 in public funds to educate itself about the new funding rules. This money was provided under the Political Parties, Referendums and Elections Act, 2000., which set up the Electoral Commission and the rules against foreign and proxy donors. Clearly, Labour is a slow learner, or perhaps the cash was just trousered as if it were just another donation.

Now, I’m not saying that dependence on businessmen is a uniquely Labour phenomenon. We learned last week just how much the SNP relied on the £625.000 from the Stagecoach tycoon, and Keep the Clause activist, Brian Souter - though, crucially, his donation was entirely legal and open. It seems that billionaire golf developers like Donald Trump have an open door to the First Minister, Alex Salmond’s, office. The Tories are dependent on two big donors, Lord Ashcroft and Lord Laidlaw, both of whom appear to live abroad. Lord Ashcroft, has given £2.6 million to the Tories since 2003, and influence can be gauged by the fact that his office in Tory headquarters is larger than the Tory leader, David Cameron’s. The Liberal Democrats also found itself handling money donated an international fraudster, Michael Brown.

Clearly, when the dust settles, and the boys in blue have finished their inquiries, there will have to be further action to stop money talking so loudly in politics. Now is hardly the time to be talking about state funding - there would be a riots in the streets if we started throwing more taxpayer’s money at this lot. But it is surely time to demand that the political parties at least obey the existing laws to the letter.

Labour has, of its own admission, repeatedly broken its own laws on political donations, and it keeps doing so. Surely the least that the public should expect is that those who have been involved in this, however “unintentionally”, should be required to step aside from public office until this is all cleared up. It is much too serious a matter, now, for pleas of “it wisnae me” and “I didnae ken”. Our entire political system is in the dock here, and if Gordon Brown does not act with firmness and purpose - and, yes, a little ruthlessness - then the public will conclude that the prime minister is content to be on the wrong side of his own law.

It is a matter of moral hazard. If no one pays any penalty for these egregious mistakes, it will send a message to the entire political world - and to businessmen and ethnic groups - that our politics is indeed for sale, as it is in many other countries. The Electoral Commission, set up by Labour to police the laws on funding, has an onerous responsibility here to act firmly and decisively. If it appears to be under sway from the political establishment then it will lose all credibility and our politics will descend into the mire.

Beyond a cleansing of the stables, there needs to be greater institutional distance between the state and the business world. For there is worrying evidence that money talks at the very highest levels of government. The big finance houses, the Citi’s, Merrills, Morgans involved in the sub-prime affair don’t deal in 995s or proxy donations. Instead they operate a revolving door with the higher reaches of government, both here and in the USA.

Last week, Jonathan Powell, Tony Blair’s former chief of staff, joined Morgan Stanley’s UK investment banking division. It’s a two way street. Gordon Brown recently hired Jeremy Haywood, co-head of Morgan Stanley, as his head of domestic policy. This kind of crossover happens so frequently, that no one seems to be bothered about it. The Tories were far worse, but that isn’t the point. In 1961, Dwight D. Eisenhower warned America about the growing influence of what he called the”military industrial complex”. What we have now is a financial-political complex, an oligopoly of global banks and investment institutions which have started to exert undue influence over government and other arms of economic policy.

Last week, the Bank of England came under intense pressure from the mortgage lenders and the banks to bale them out of the debt crisis by cutting interest rates. Had Mervyn King not done their bidding, he risked being crucified, as he nearly was over Northern Rock.
In fact, there was very little justification for cutting interest rates right now, with inflationary pressures only too evident in the explosion of food and oil prices.

The Bank is not only reneging in its own mission to combat inflation, it is encouraging a revival of the irresponsible bank lending which got us into this mess in the first place. It is like trying to help an alcoholic by giving him another drink. The public interest is being squeezed out of this new nexus of financial influence. To paraphrase Harold Wilson, just because we’re paranoid doesn’t mean there isn’t a conspiracy going on.

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