Govt U-turns on tax exile donations

By Ian Dunt and Alex Stevenson

The government has performed a spectacular U-turn on the law concerning party donations from tax exiles, losing cross-party consensus as a result.

Justice secretary Jack Straw had planned to overturn an amendment to the political parties and elections bill outlawing donations from tax exiles.

But he has now performed a volte-face and ordered Labour MPs to support the amendment, after pressure from backbenchers reported last week by

The law would put the Conservatives’ most important donor, Lord Ashcroft, in a difficult position.

He has refused to declare whether he pays tax in the UK or in Belize, where he spends most of his time and bases most of his extensive business interests.

Lord Ashcroft is pivotal to David Cameron’s plans to win the next general election, because his funding is aimed squarely at marginal constituencies. He has dedicated £5 million to the party’s efforts so far.

The amendment would ban donations of over £7,500 from individuals who do not pay UK taxes.

Martin Linton, leader of the ‘Ashcroft group’ of Labour backbenchers fighting for the amendment, told last week: “I feel that people will seize the opportunity to support this amendment, even if necessary against the government and the Conservative frontbench, because it is so clearly wrong that people who refuse to pay tax in this country, who go abroad because of taxes, should be able to influence our election and decide what our tax rates should be.”

Large swathes of the Labour backbenches, as well as the Liberal Democrats, supported Mr Linton’s efforts as chair of the so-called ‘Ashcroft group’. An amendment not selected for debate during the Commons stages of the bill attracted 216 signatures – nearly one-third of the lower House.

Had the government stood firm against these large numbers a major rebellion could have been faced, further hitting the government’s weakened authority in the wake of the Gurkhas defeat. The government was defeated in the Lords last month over the amendment.

A Ministry of Justice spokesman said: “The government supports the principle of proposals passed by the Lords and has tabled amendments designed to improve their workability, which will now be debated by the Commons.”

Liberal Democrat justice spokesman David Howarth said: “Jack Straw has finally bowed to pressure from across parliament to ban the biggest exercise in buying constituencies since rotten boroughs.

“But it shouldn’t have taken so long for ministers to see that it’s right in principle to stop large donations from people who do not pay tax in Britain.

“Now Tory donors will have to pay their dues to the country before they pay their subs to the Conservatives.

“David Cameron must now explain whether he will hold Lord Ashcroft to his promise on paying UK taxes, or stop accepting his millions.”