In March 2006, several men nominated for life peerages by then Prime Minister, Tony Blair , were rejected by the House Of Lords Appointments Commission . It was later revealed they had loaned large amounts of money to the governing Labour Party ,1 at the suggestion of Labour fundraiser Lord Levy . Suspicion was aroused by some that the peerages were a '' Quid Pro Quo '' for the loans, and the incident was referred to the Metropolitan Police by Scottish National Party MP Angus MacNeil as a breach of the law against selling Honours .2 During the investigation various members of the Labour Party (including Tony Blair), the Conservatives and the Liberal Democrats were questioned, and Labour's Lord Levy was Arrest ed and later released on Bail .
Following the unveiling of the scandal the Labour party had to repay the loans and was said to be in financial difficulty.3 The police investigation was long and involved. It expanded to encompass potential charges of perverting the course of justice, apparently relating to suspected attempts to present evidence to the police in a particular way. At one point the Attorney General , Lord Goldsmith , obtained an injunction against the BBC, preventing them from reporting a story they claimed was in the public interest: this raised the possibility of a conflict of interest, the Attorney General being a political appointee. Tony Blair was interviewed three times as Prime Minister, though not under caution.
After a long review of the police file, it was reported on 20 July 2007 that the Crown Prosecution Service would not bring any charges against any of the individuals involved. Their decision stated that while peerages ''may'' have been given in exchange for loans, it could not find direct evidence that that had been agreed in advance; this direct evidence of an agreement in advance is what would be required for a successful prosecution. http://news.bbc.co.uk/1/hi/uk_politics/6907594.stm No charges on 'cash for honours' Notwithstanding the lack of any charges, members of the Labour party considered that the investigation had severely undermined Tony Blair's position, and possibly hastened his resignation as Prime Minister.[http://www.bbc.co.uk/blogs/nickrobinson/2007/07/no_charges.html No Charges]
Historically, hereditary peerages were awarded to members of the landowning Aristocracy and royal favourites. In the late 19th century, peerages began to be awarded to industrialists with increasing frequency. Well-substantiated allegations that titles were sold during David Lloyd George 's Prime Ministership led to the passing of the Honours (Prevention Of Abuses) Act 1925 . In the second half of the 20th century the granting of hereditary peerages, other than to members of the Royal Family, virtually ceased, giving way to Life Peer ages, which have been granted since the passing of the Life Peerages Act 1958 . They are given to a wide range of individuals on the recommendation of the leaders of the major British political parties, including opposition parties.
In May 1998, the then Chairman of the Political Honours Scrutiny Committee, former Conservative Cabinet Minister Lord Pym , told a House of Commons Select Committee that the committee considered a political donation a point in a nominee's favour as it indicated involvement in public life, and that the nominee had "put their money where his mouth is". The House of Lords Appointments Commission was established in 2000 to check the suitability of those nominated for an honour.
In the summer of 2005, a list of 28 people nominated for Working Peerages was prepared. The list contained 11 Labour nominees, 8 Conservatives , 5 Liberal Democrats , 3 members of the Democratic Unionist Party and one member of the Ulster Unionist Party . The Green Party Of England And Wales ultimately declined to nominate. The list was referred to the Appointments Commission in the usual way. Publication of the list was delayed and stories began to appear in the press stating that the Commission had concerns about some of those nominated on grounds of their large donations to political parties.4 In February 2006, stockbroker Barry Townsley , who had donated £6,000 (and loaned £1m on commercial terms)5 to the Labour Party and contributed £1.5m to a City Academy under a government scheme, withdrew his acceptance on the grounds of press intrusion into his private life.
Townsley, who was the subject of an investigation by the Serious Fraud Office , was followed by property millionaire Sir David Garrard , who withdrew his name in March 2006. Sir Gulam Noon , the British-Indian food company millionaire, was also nominated by the Labour Party after having made donations and loaned money (he also had his nomination rejected by the Appointments Commission). Sir Gulam told the Times newspaper a "senior party man" told him "there was no reason why I should declare this loan because it was refundable". "I was told by this same person that because there was interest on the loan it was a commercial matter and would not come under the same party funding rules as a donation."6
The list of working peers, minus the withdrawn and queried names, was published on 10 April 2006 . Downing Street press release , April 10, 2006
On 8 March 2006 , Dr Chai Patel (Director of the Priory healthcare group) who had donated £10,000 to the Labour Party complained that he was being rejected by the Commission. He said "It is a fact that I have donated, but what is being implicated is that I would be rewarded with a peerage. I have never asked for any favour for the money that I have donated. My children suggested that if I had not given this money, I would not be seen in this light. But I happen to support this Government. I gave money to the party because I happen to believe in what it stands for. I can't change what has happened." Patel stated that he had asked a Queen's Counsel for advice on whether his human rights were being abused by the Commission.
On 29 March 2006 , Patel withdrew his name from the list of nominees for a peerage. He said that at no time did he have any expectation of a reward nor had he been offered anything in return, yet on a BBC 'Today' programme he expressed the view that he wanted to serve in the Upper House (the Lords) as he felt that his life experience ensured that he could make a valuable contribution there.7 He has also stated in a letter to the House of Lords Appointments Commission that "I feel that, given my accumulated experience and deep sense of public service, as well as being able to devote the time to undertake the responsibility effectively, I would be able to make a contribution to the parliamentary process."
The 1997 General Election Labour Party Manifesto was entitled "new Labour because Britain deserves better". In the section headed "We will clean up politics", the text pointed to the debasing of democracy through Conservative MPs who had taken Cash For Asking Questions in the House Of Commons . A pledge was made to the "reform of party funding to end sleaze" with the commitment to a law to require all parties to declare the source of all donations above a minimum figure, which Labour already did voluntarily. Foreign funding would be banned. These commitments were delivered in 2000 with the Political Parties, Elections And Referendums Act 2000 .
It also described the need to reform the House of Lords which would end the right by law of hereditary peers to sit and vote in the House of Lords. This commitment was delivered in 1999 with the House Of Lords Act 1999 . In relation to the system of appointment of life peers Labour’s stated objective was to ensure that over time party appointees as life peers would more accurately reflect the proportion of votes cast at the previous general election, a commitment that has since been altered so that the two main parties in the House of Lords should instead have approximately equal strength.
On 12 March 2006 , the '' Sunday Times '' reported that shortly before being told that he would receive a peerage, Patel had been asked to change a donation to the Labour Party he was planning to make into an unsecured loan. On 26 March 2006 , '' The Independent '' confirmed that it was Lord Levy who had asked Patel to switch using this unsecured loan approach.8 He agreed and loaned £1.5m to the party, telling them that he would be prepared to change the loan into a donation at some point in the future. Over the next few days stories were printed which stated that the Labour Party had borrowed £3.5 million from private individuals during 2005, the year of a General Election . It was subsequently revealed that a total of £13.95 million had been loaned by wealthy individuals to support Labour's election campaign.9 The figures released mean the bulk of the £17.94m the party spent on its general election campaign was paid for by loans from individuals. The terms of the loans were confidential.
Loans made on commercial terms, at between 1% and 3% above the banking Base Rate as was the case here, are not subject to reporting requirements to the Electoral Commission .10 However the Treasurer of the Party, Jack Dromey , stated publicly that neither he nor Labour's elected National Executive Committee chairman Sir Jeremy Beecham had knowledge of or involvement in the loans and had only become aware when he read about it in the newspapers. Dromey stated that he was regularly consulted about conventional bank loans. As well as announcing his own investigation he called on the Electoral Commission to investigate the issue of political parties taking out loans from non-commercial sources.11
(Tribune 2006/3/24 p5). Dromey's announcement created much media interest to which Blair had to respond to at his monthly press conference the next day. Blair said he wanted to shake up of the honours system and improve the rules covering party funding.12
The affair centred on two aspects of Labour's political fund raising activities. First, to what degree was there a tacit or implied relationship between the large scale donors and their subsequent recognition via the Honours System ? Second, the rules on party funding (applicable to all political parties in the UK) require that anyone donating £5,000 or more must be named - but loans of any amount do not have to be declared provided they are made on commercial terms. This loophole raises accusations of undue secrecy and potentially calls into question the probity of those involved in procurement and handling of such large and anonymous sums, particularly when the elected party treasurer was unaware of the existence of the loans.
Lord Levy , a close friend of Tony Blair (who is the Prime Minister's personal envoy to the Middle East, as well as occasional tennis partner), had raised funds for Labour and was identified in the press as a key figure in arranging the loans and on 17 March 2006 it was announced that the Public Administration Select Committee of the House of Commons had invited him to give evidence on political financing.13 Committee Chairman Tony Wright said:
:"With continuing speculation about whether the system of scrutiny is sufficiently robust and as part of our wider inquiry into current standards of probity in public life, we will be hearing from those charged with scrutinising nominations to ensure that there are robust safeguards against honours for sale."
Another issue was repayment: the Labour Party owed about £14m before the election. The interest on the loans amounted to £900,000 a year and some of the loans had to be repaid within months, either through further borrowing or gifts. In these circumstances, one unanswered question concerned why Lord Levy asked for loans rather than gifts.
It was disclosed on 25 March 2006 that the only persons privy to details of the loans were Tony Blair, Lord Levy and Matt Carter .14
On , David Hencke, March 25 , 2006
The Guardian revealed that many of the people who had made loans to the Labour party had been major donors to charities with which Lord Levy had been involved, namely, the Community Service Volunteers , Jewish Care and the NSPCC . Sir David Garrard , Andrew Rosenfeld , and Barry Townsley are patrons of Jewish Care; Richard Caring, proprietor of The Ivy in London , had raised £10m for the NSPCC, and Sir David Garrard, Dr. Chai Patel , Andrew Rosenfeld, Richard Caring , and Derek Tullett are all connected to the Community Service Volunteers .
In July 2006 it came to public attention that Lord Levy had allegedly told Sir Gulam Noon , a businessman nominated for a peerage, not to tell the Lords vetting committee about his loan to the Labour party. On 20 April 2005 Noon had agreed to lend Labour £250,000 on commercial terms. He paid the funds on 28 April. He had originally offered to make a donation of between £50,000 and £75,000 but Levy wanted £1m. They then negotiated a loan, rather than a donation.
A letter sent to Sir Gulam at this time by Labour said that his £250,000 loan was not "reportable" under relevant legislation.
On 3 October 2006 , Sir Gulam was informed by a Labour official that the prime minister was nominating him for a peerage. On 4 October 2006 , Sir Gulam received the nomination forms for joining the House of Lords. These asked him to list his contributions to Labour. Sir Gulam gave the papers to his accountant, who put down the £250,000 on the form along with just over £220,000 of straight donations he had made since 2000.
On 5 October 2006 Lord Levy told Sir Gulam that he should not have included the £250,000 on the papers sent to the Lords Appointments Commission, because it was not a donation, and was therefore not legally required to be disclosed. Sir Gulam retrieved the papers from Downing Street and submitted a revised document that made no mention of the £250,000.
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