We need to change the regulation of Party Finance, says Lib Dem Peer Lord Rennard.

Lord Rennard is a Liberal Democrat Peer, former Director of Campaigns & Elections for the Party under Paddy Ashdown, and Chief Executive under Charles Kennedy.  He was Joint Secretary of the Labour/Lib Dem Consultative Committee preparing for measures of Constitutional Reform that was chaired by Robin Cook and Bob Maclennan to prepare plans for constitutional reform post the 1997 general election.

In 1997, the Conservative Party was estimated to have spent £28m unsuccessfully seeking the re-election of John Major’s Government.  Whilst unsuccessful, the figure shows the “arms race” in party spending since the Conservative national campaigns in the general elections of 1974. These were reckoned to have cost less than £100,000 on each occasion (equivalent to about £570,000 at 1997 prices). 

This fifty-fold increase in the Conservatives’ spending on national campaigns in a twenty-three-year period, illustrates the value that parties can put on spending, and the associated fundraising, even if it does not always determine the outcome of the election.  The debates on the Political Parties, Elections, and Referendum Act (known as PPERA) of 2000, in which I led for the Liberal Democrats, centred on the need to control this arms race by imposing a national limit on such spending in the year before a general election. 

I argued for a lower limit, but a figure of £19.5m became the legal maximum for parties, based on £30k for each of the parties with candidates standing in all 650 seats, and a proportionate limit for those standing in fewer seats.

In many ways the legislation had the opposite effect of what was intended. Spending continued to accelerate, especially that which parties targeted at marginal seats. The national limit only applied for the year before a general election, and many items of expenditure such as staffing were excluded. Whilst rules for spending specifically in support of a candidate were purportedly being “clarified”, this was done in such a way that unlimited spending by them was now allowed prior to the formal election period. National spending targeted at marginal seats was now deemed to be permissible, even during the election period, provided that the candidate’s name did not feature in the campaign materials.

Prior to 2000, what was generally considered by election law experts to be “national spending” had to be just that; money that was spent across the country, not concentrated in individual target seats. Paid advertising in newspapers and on billboards had to be seen to be national campaigning for the party across the whole of the country. For more than a century, spending in support of candidates in individual seats had been strictly limited by the Corrupt and Illegal Practices Prevention Act of 1883. This had been introduced by Gladstone’s Liberal Government, using the language of the time in its preamble, which states that, ‘If its provisions are honestly carried out, the length of a man’s purse will not, as now, be such an important factor … and the way will be opened for many men of talent, with small means, to take part in the government of the country, who have been hitherto deterred from seeking a seat in the House of Commons by the great expense which a contest entails’.

Big donors, and the parties that they supported, were soon able to take advantage of the new situation. There was still no cap on the amount of money which any permitted donor could contribute. I was unsuccessful in proposing amendments to the effect that they could contribute a maximum of £50,000 in any one year. This meant that prior to the 2005 General Election, Lord Ashcroft the billionaire tax exile who was made Conservative Party Treasurer and a Tory Peer, gave well over £10 million to the Conservatives. After the election he boasted in his book, ‘Dirty Politics, Dirty Times’ that his money influenced the outcome in 25 of the 33 seats that the Conservatives had gained.

Ten years later, when David Cameron gained an overall majority for the Conservatives, I estimated that his party had spent around £250,000 in many of the seats that it gained.

The Blair Government’s opposition to a cap on donations in 2000 may well have been based on his preference for being dependent on the £1million+ donations obtained by Lord Levy, rather than relying on Trade Union funding. But the issue of very big donations to political parties can corrupt them, and donors who provide money that may have arrived from foreign sources is an issue of national security.

My Lib Dem colleague Lord Wallace of Saltaire was accused by a Minister of ‘spreading rumours’ when he referred to continuing uncertainty about the origins of several donations to the Conservative Party. He has highlighted the fact that the Conservative Government has been avoiding proper scrutiny of Russian interference in UK elections and the EU referendum.

The Intelligence and Security Committee of Parliament (ISC) Russia report says that: ‘We have not been provided with any post-referendum assessment of Russian attempts at interference … This situation is in stark contrast to the US handling of allegations of Russian interference in the 2016 presidential election, where an intelligence community assessment was produced within two months of the vote, with an unclassified summary being made public.”

The Panama Papers have resulted in fresh questions for the Conservatives about donations made by the wife of a former Russian minister. Lubov Chernukhin is one of the biggest donors to the Tories, giving more than £1.8m since 2012. The leaked documents revealed that her personal wealth comes from her husband Vladimir, who has been financially linked to people who were close to the Kremlin, although she is a UK citizen and as such legally allowed to donate. Mrs Chernukhin’s winning auction bids at Tory fundraisers have resulted in her playing tennis with Boris Johnson and dining with Theresa May, when she was prime minister.

The BBC’s Panama Papers team reported that, ‘A businessman whose companies have backed 34 Tory MPs made millions from an allegedly corrupt Russian pipeline deal,’ according to the leaked files. Their investigation showed that he secretly benefitted from the alleged $4bn fraud in Russia. His lawyers said ‘there is no evidence whatsoever’ that he behaved improperly, but the BBC discovered documents revealing Mr Fedotov as a secret owner of a company called VNIIST that benefitted from hundreds of millions of dollars in contracts from Transneft, the Russian state-owned oil and gas pipeline company.

In 2021, it reported that, ‘Former oil executive Victor Fedotov owns a firm currently seeking UK government approval for a controversial energy link between the UK and France’.

The excellent Transparency International, has drawn attention to revelations from the BBC and Evening Standard that Javad Marandi, a major donor to the Conservative Party, who gave them £663,800 in donations, has been named in connection with court proceedings as a key part of an international money laundering operation. His business partner,  Javanshir Feyziyev, an MP in Azerbaijan, forfeited over £5m received through UK companies that the National Crime Agency demonstrated to a court were central to a vast money laundering scheme known as the Azerbaijani Laundromat.

Mr Marandi strongly denies wrongdoing and isn’t subject to criminal sanction. But Duncan Hames of Transparency International warned that, ‘While members of big donor clubs may be motivated simply by the privilege of meeting our politicians, these groups give the appearance of something much more influential. According to our research, the public think wealthy individuals have far too much say in politics and that more needs to be done to address this. To reduce the perception and reality of cash being exchanged for favours, we need to end political parties’ reliance on a small group of large, wealthy donors’.

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