No party should be comfortable with the financial backing of a peer who uses non-domicile tax status to avoid paying UK tax
Lord Ashcroft casts a long shadow on the next general election. According to the information released by the Electoral Commission, he has donated over £5m to the Conservative party and its associations. A large proportion of this money is targeted at marginal seats in order to swing the election for the Conservatives. The donations have been made by Bearwood Corporate Services, a UK-registered company ultimately controlled by Lord Ashcroft. However, the company has been making losses for years. Its most recent accounts for the year to 30 September 2008 show that the company had an accumulated loss of £3,928,665.
Ordinary folk make political donations out of income already taxed in the UK. But Bearwood did not have sufficient income to cover political donations. Most of the cash donated to the Conservative party has therefore come from Lord Ashcroft's operations in Belize. He enjoys lucrative tax breaks by basing his business empire in this Commonwealth member in Central America.
Now, ahead of a Freedom of Information statement by the Cabinet Office, Lord Ashcroft has acknowledged that he is non-domiciled in the UK for tax purposes. That means that he pays income tax on his personal income and gains arising in the UK, or foreign income and gains remitted to the UK. Unlike most other citizens, the law permits him to arrange his personal affairs in such a way that his worldwide income, subject to double taxation relief, is not taxed in the UK. Despite this, the Conservative party secured a life peerage for him, which therefore gave him a role as a legislator in the Houses of Parliament. In that capacity, he can speak and vote in the House of Lords on all legislative matters, including taxation, yet as an unelected appointee he cannot be removed, no matter how dissatisfied people may be with him.
Lord Ashcroft's statement sets out the March 2000 undertakings he gave to William Hague MP, the then leader of the Conservative party, that he would "take up permanent residence in the UK again" by the end of that year. Now, some ten years later, he says that this meant as "a long-term resident". It is time to make the entire correspondence between the Conservative party and Lord Ashcroft public.
Labour may wish to make political capital out of Lord Ashcroft's revelations, but it too has a less than unblemished record of appointing major party donors to positions of legislative power and cannot escape public censure. Lord Ashcroft is quick to see the opportunity to deflect criticism – pointing out that two of Labour's biggest givers, Lord Paul (recently made a privy councillor by the prime minister) and Sir Ronald Cohen, both long-term residents of the UK, are also "non-doms".
However, Labour donors have been known to be non-doms, while Lord Ashcroft – until now – maintained secrecy about his tax status. For years, the Conservative party also refused to make any clear statement on the issue. Labour donors have not given anything approaching £5m; nor have they targeted marginal seats to influence the outcome of the next general election. Still, the Labour party also needs to come clean. No political party should be allowed to ennoble donors in such a way that might give even the impression that political office is for sale.
The issues relating to Lord Ashcroft and other peers do not end with the acknowledgment that they are non-doms. Since they belong to a law-making assembly whose decisions govern our lives, their business affairs should be open to scrutiny and subject to disclosure. If peers are to regularise their affairs, they would need to explain the details of their business empires, offshore trusts, tax avoidance schemes and everything else that persons domiciled in the UK are required to answer for to the Inland Revenue and other authorities.
Of course, Lord Ashcroft and other peers may voluntarily release this information. But I am not holding my breath. But let there be no doubt: there will be further instalments in this saga.