New Statesman & Society, 4 November 1994

Paul Anderson and Nyta Mann report on the likelihood of the new Nolan committee on standards in public life doing its job properly 

The remit handed by John Major last week to the new committee on standards in public life looks spectacularly wide-ranging.

Lord Justice Nolan and the nine newly appointed members of the body he will chair are: “To examine current concerns about the standards of conduct of all holders of public office, including arrange¬ments relating to financial and commercial activities, and make recommenda¬tions as to any changes in present arrangements which might be required to ensure the highest standards of propriety in public life.”

Nolan’s brief may read like a radical attempt to address the manifest growth, to the point of corruption, of political patronage. But the Prime Minister’s intention is clear: damage limitation.

Take, for starters, the restriction of the committee’s scope to investigate, as Major put it in the House of Commons last week, “general procedures, rather than . . . individual cases”. Major has made plain that he wants Nolan to steer clear of the specific allegations that have so far resulted in two ministerial resignations (junior Northern Ireland minister Tim Smith and corporate affairs minister Neil Hamilton) and internal investigations – albeit less than half-hearted – into the activities of two cabinet ministers (Home Secretary Michael Howard and Treasury Chief Secretary Jonathan Aitken).

But it is precisely these individ¬ual cases, involving exclusively Conservative politicians, that pushed Major to set up the new committee in the first place. Next, there is the Prime Minister’s assertion that Nolan will not look into the funding of political parties (see below). In response to a question from Peter Shore MP last week – now Labour’s representative on the Nolan committee – Major insisted: “This inquiry will deal with government matters, government appoint¬ments and government behaviour. It has nothing to do with the financing of political parties, which has been dealt with by the Home Affairs Select Committee.”

To thus remove the murky area of Tory Party funding from the committee’s independent examinations makes a nonsense of an inquiry set up in order to quell anxiety over, among other recent scandals, the “cash-for-questions” episode. For if a Tory MP is considered improperly beholden to a company that pays him a few grand to table a parliamentary question, what does that make the obligation owed by the Conservative Party as a whole to those companies that so amply bankroll it? And where does that obligation place the party when it is in govern-ment, and for so long a stretch as the past 15 years?

Added to these omissions is the fact that the body Lord Nolan presides over is simply a committee of inquiry. It has no legal or constitutional powers. Witnesses can be invited to help it with its inquiries, but may not be compelled to appear before it. Following its deliberations, the committee can come up with any recommendations it likes, but implementing any of them will rely on M Ps voting in par¬liament to do so.

But to be fair to Nolan and his committee, they may yet prove themselves to be as awkward as an independent inquiry should be. Nolan himself has already declared that although the investigation of individual cases is up to the Commons Privileges Committee, his own inquiry “will be equally anxious to find out just what has happened, what has gone wrong and what we can learn from it”. We can presume also that two of the party political appointments to the committee – Labour’s Peter Shore and the Liberal Democrats’ Lord Thomson of Monfieth – will do their utmost to ensure that party funding finds its way onto the agenda.

The seven non-politician members of the committee may themselves prove determined to examine whatever “sleaze” issue takes their fancy. As one put it to NSS:” I was struck by the fact that Number 10 phoned me up and asked me to be on the committee without looking into my background at all. They don’t know what I think about anything.”

Another member echoed Labour leader Tony Blair’s accusation that the setting up of the inquiry was “decision-making on the run” on the part of the Prime Minister: “I don’t think Major’s thought it through properly. If you look at our brief, we could actually look at anything we want to. This is a bit of a ticking time-bomb for him.”

But even if the Nolan inquiry does ignore Major’s advice on what it should look at, it is unlikely to get very far. Labour members of the Home Affairs Select Committee, which last year looked at the whole issue of sources of party funding, know only too well that attempting to shed light on Tory Party finances is a difficult game. “Even if Nolan does look at that, whoever the committee asks in to give evidence will just stonewall him, like they did to us,” predicts Chris Mullin MP, a member of the Home Affairs committee. “Nolan won’t get any information out of anyone. It’s a subject the Tories cannot afford to permit anyone to look into.”

Party funding – the elephant in the room

However Nolan ends up interpreting his remit, the first areas the committee will look into are those that have dominated the news over the past fortnight: members’ interests – in particular, gifts to ministers and other MPs – and appointments to quangos.

On these, the Conservatives have themselves acknowledged that it may be time for a tightening of existing rules. But on the bigger questions, it would be wise not to hold your breath. Bankrolling the Tory party Whether or not Nolan looks at the delicate question of funding of political parties is a moot point.

But it is difficult to see how the committee can proceed without considering party funding. The problem, simply put, is that there are good reasons to believe that the Conservatives have systematically taken money from companies and individuals who are in the business of buying influence.

The Tories’ finances are one of the great unsolved mysteries of British politics. They publish only the skimpiest of accounts themselves (which show that the average they raised annually between 1987 and 1992 was £33.7 million, compared with Labour’s average off £15.9 million and the Lib Dems’ of £2.9 million), and they have operated several “front organisations” for channelling funds discreetly into their own coffers-most notoriously British United Industrialists, which was closed down in 1991.

 It is only through the assiduous work of the non-party Labour Research Department, which trawls through companies’ accounts looking for political donations (all companies must by law declare all political donations of more than £200, although many don’t), that a partial picture of the Tories’ corporate backers is available: details of laundered company donations and donations from individuals (often in fact the same thing) are even harder to come by. Of £37.9 million received by Conservative Central Office between April 1987and March 1991, £21.9 million cannot be traced from any published source.

By contrast, all trade union donations to Labour (which make up more than half the party’s income) are declared in the unions’ accounts, and Labour has announced its willingness to declare all individual donations of £5,000 and over. 

What’s known about the Tories is that they have received substantial sums from companies and individuals with commercial interests in government spending and policy decisions. The big corporate donors in the past 15 years include defence, engineering and construction companies that have benefited from large government contracts, tobacco companies that want to prevent legal constraints on advertising their products, and privatised utilities. 

Between 1979 and 1992, the top ten corporate donors to the Tories were United Biscuits (£1 million); Hanson Trust (£852,000);Taylor Woodrow (£837,000); British & Commonwealth (£824,000); George Weston Holdings (£820,000); P&O (£727,500); Forte (£694,000); Westem United Investments (£620,000); Glaxo (£600,000);Trafalgar House (£590,000); Newarthill (£560,000); and Barings (£537,000).

Known individual donors since 1979 include:

  • Asil Nadir, disgraced head of Polly Peck and currently a fugitive from British justice in his native northern Cyprus, whose contribution Tory funds totalled £440,000; 
  • John Latsis, the Greek shipping magnate and one-time backer of the Greek junta.who reputed to have given £2 million; 
  • Octav Botnar, former head of Nissan UK, currently in exile, wanted for defrauding the government of £97million in unpaid taxes, who gave £1 million in the early 1980s; 
  • Li Ka Shing, the richest man in Hong Kong who gave £500,000, and Tsui Tsin-tong, another Hong Kong businessman with strong links with China; 
  • Harrods boss Mohamed AI-Fayed, who revealed a fortnight ago that he had given a total of £250,000 in the mid-1980s when the government was being lobbied by his arch-rival Tiny Rowland to take legal action against him over the Harrods sale. 

Donors to Tory funds have been rewarded with honours and with positions on government-appointed bodies. Between 1979 and 1993,18 life peerages and 82 knighthoods were given to industrialists connected with 76 companies which between them gave£17.4million to the Conservative Party and its various front organisations. 

Labour MP George Howarth last month produced a study of appointments toquanj thatshows widespread favouringof people associated with companies that have given the Tories. Funding of political parties has long beer source of controversy – and it is unlikely that Nolan committee will be able to come upwii proposals acceptable to all sides if it does address the problem. 

The Commons Select Committee on Home Affairs considered the issue between 1992 and 1994, but split down the middle between its Tory and Labour members when it came to producing a report in March. On the casting vote of its Tory chairman, it endorsed by six votes to five a report proclaiming that little is wrong with the British system of funding, and recommending only improved party accounting practices and a new code of conduct governing donations to parties. 

An alternative report drafted by Labour MP Chris Mullin, rejected by the same margin demanded a string of reforms all directed al Tories: compulsory publication in party accounts of all donations of more than £5,000; a ban on donations from foreign individuals and companies; strict limits on national party spending during general election campaigns; mandatory ballots of shareholders to approve political donations companies; a ban on honours for industrialists whose parties have given to political parties and a ban on political donations by recently privatised companies. If Nolan gets on to this subject, he is likely to find opinion on his committee just as radically divided. 

 MPs for hire: outside interests

One of the questions that Nolan will definitely address is that of MPs’ outside interests-the extent to which MPs use their position to pursue private interests and what can be done to control it. 

This is at the centre of the most recent scandals to have rocked the government-junior Northern Ireland minister Tim Smith and corporate affairs minister Neil Hamilton were both forced to resign from the government after Mohamed Al Fayed’s allegations that he had paid them to ask parliamentary questions while they were backbenchers.

Eariier this year, in a sting operation mounted by the Sunday Times, Tory MPs Graham Riddick and David Tredinnick agreed to table questions for a bogus company for £1,000 a time. Both were suspended as parliamentary private secretaries. 

But there is more to the issue than the specific allegations of “cash-for-questions” currently under investigation by the Commons Select Committee on Privileges. More than 200 of the 651 MPs, most of them Tories, declare in the most recent Register of Members’ Interests that they are employed as parliamentary consultants to lobbying firms and other commercial organisations. 

Many Tory MPs also have substantial interests as directors and shareholders of private companies: most of the 290-plus paying directorships declared in the Register of Members’ Interests are held by Tories. By contrast, all but a handful of Labour MPs receive nothing other than income from occasional journalism and trade-union sponsorship (the latter nearly always passed on to their constituency parties). 

Ministers are covered by strict rules governing their outside interests, laid down in Questions of Procedure for Ministers: on appointment, they are required to resign any directorships they hold (with some exceptions) and to dispose of investments that might give rise to a conflict of interests. 

David Mellor resigned as heritage secretary in 1992 after it was revealed that his holiday was paid for by the daughter of a senior member of the Palestine Liberation Organisation, and Northern Ireland minister Michael Mates went in June 1993 after questions were raised about his relationship with fugitive businessman Asil Nadir. 

The furore over Jonathan Aitken and who paid his Paris hotel bill has reached fever-pitch because of concerns about a possible conflict of interest between his strong business links with Saudi Arabia and his position as a junior defence minister. 

Rules governing other MPs are much laxer. There is a longstanding practice of the Commons that MPs should declare any relevant material interest when speaking in the House orin committee, and since 1974 they have been required to complete entries for the Register of Members’ Interests. 

The register was set up in the wake of the Poulson scandal “to provide information of any pecuniary interest or other material benefit which a member receives which might reasonably be thought by others to influence his or her actions, speeches or votes in parliament, or actions taken in his or her capacity as a member of parliament”. 

MPs complete their entries themselves and are supposed to declare remunerated directorships of companies, outside employment, any clients for whom they have rendered services as an MP, donations and gifts received (including paid-for foreign trips), and property and share holdings. Crucially, however, MPs are not required to declare how much they get or what precisely they do – and, because the duty to register in full and accurately is not determined by statute, the punishment for failing to comply is whatever the Commons decides its hould be after the Commons Select Committee on Members’ Interests reports on any complaint (which is usually not much).

The result is that the register is less informative than it could be. Nolan is sure to hear calls-rejected by the Members’ Interests Committee last year-both for requiring MPs to declare exactly what they do for what sum, and for making it a statutory duty for MPs to complete the register fully and accurately.

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