Wealthy elites should not be allowed to hijack democracy
This election once again highlights the class divide. In political ringside we have the Labour Party funded by the meagre resources of some trade unions (subject to numerous legal restrictions about whether they can fund political parties) and ordinary people often lacking financial resource, who have to dig deep and hard to find resources to support political parties.
In case you need any reminder, here are some statistics about income and wealth distribution. The richest one per cent of the population owns almost a quarter of the country’s wealth whilst the top five per cent owns 44 per cent of all wealth. According to the Poverty Site, the poorest tenth of the population has 1.3 per cent of the country’s total income and the second poorest tenth have four per cent. In contrast, the richest tenth have 31 per cent and the second richest tenth have 15 per cent of all income.
The other side of political divide is the Conservative Party funded by big business, hedge funds, bankers, financial engineers and corporate elites. They have been well rewarded with cuts in corporation tax and income tax, knock down privatisations, weakening of trade unions and feather-duster regulation of banks, tax avoiders and sundry. Pleased with their returns, corporate elites shower even more money on the Conservatives.
By mid-May 2016, the Conservatives received more than four times as much money in donations as Labour, a trend which has since accelerated.
Here is a glimpse of some of the donors funding the Conservative Party and then make up your mind about the quality of finance, the returns sought by donors and the company that the Conservatives keep.
In May 2017, the Serious Fraud Office launched an investigation into Petrofac, a company operated by a major Conservative donor. The company’s chief executive and his wife have given the Tories more than £700,000 since 2009.
Mining executive Michael Davis and a member the Tories’ elite Leader’s Group gave £317,000 to the Tories and helps to recruit wealthy individuals to the party’s cause. Davis served as the Chief Executive of Xstrata plc, an Anglo-Swiss multinational mining company, until its merger with Glencore in 2013. Xstrata’s registered office was in London, it was headquartered in the Swiss tax haven of Zug. The business which bought out Xstrata, Glencore, is also based in Zug.
Michael Spencer, once dubbed the City of London’s richest man, has donated more than four million to the Conservatives. Spencer, a personal friend of David Cameron, is the chief executive of spread betting firm Icap, which was fined £54m for its role in the Libor-rigging scandal. There is no suggestion that Spencer was personally implicated in anything. The Tories made at least four attempts to secure a peerage for him, most recently in 2016 but failed.
Lycamobile has been one of the Conservative Party’s major corporate donors, contributing £614,300 in 2016 and nearly £1m the year before. The company is involved in a tax dispute with HMRC. Last month, its auditor resigned saying:
“We could not obtain sufficient, appropriate audit evidence … as with 2014 and 2015, again in 2016 we were not able to obtain all the information and explanations from the company that we considered necessary for the purpose of our audit. We were also unable to determine whether adequate accounting records have been kept by the company”.
So far, no accounting or corporate regulator has intervened.
Lord James Lupton is a non-executive director of Lloyds Banking Group plc, a major donor to the Conservative Party and a member of the Tories’ elite Leader’s Group. He was deputy chairman of Barings, the bank famously crashed by ‘rogue trader’ Nick Lesson in 1995. He is currently a senior adviser (formerly Chairman and Partner) at Greenhill & Co International LLP, a financial services advisory firm. His entry in the House of Lords Register of Members’ Interests shows numerous shareholdings in business with offshore tax haven operations. He is estimated to have given £2.5 million to the Conservative Party in 2015 became a peer. In July 2016, he donated £25,000 to Theresa May’s leadership campaign.
Wealthy and corporate interests are not making donations because they have a burning desire to invigorate democracy or advance the interests of the working class. They see party funding as an investment which can pay rich dividends. For example, in the period leading to the 2010 general election, the Big four accounting firms (PricewaterhouseCoopers, Deloitte, Ernst & Young and KPMG) gave about £3.5 million to the Conservative Party and provided advisers and consultants to shape party policies.
The Conservative Party emerged as the largest party and formed a coalition government with Liberal Democrats. Previously, the firms had been unable to get much work from the Audit Commission, a body responsible for audits of local authorities, the NHS and Housing Associations. Much to the delight of the firms in 2012 the Audit Commission was forced to outsource £100 million of its inspection work to private audit firms. In 2015, the government abolished the Audit Commission altogether.
The system is rigged and enables wealthy elites to hijack democracy. It needs to be reformed.
Prem Sikka is Emeritus Professor of Accounting at the University of Essex
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