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TWO businessmen have
demanded immediate repayment of their secret
loans to Labour, threatening financial crisis
for the party.
The formal demands, for a
sum totalling at least £1.5m, will necessitate a
fire sale of the party’s London headquarters to
pay the debts.
The “loans-for-honours”
scandal now threatens to derail the party’s
campaign for next month’s local elections.
Labour has a slender lead in the latest poll,
with support at 35%, ahead of the Conservatives
at 33% and the Lib Dems at 17%.
This
weekend, speaking from his home in Monaco,
Gordon Crawford, a computing tycoon whose wealth
is estimated at £95m, said he had formally
notified the Labour party that his £500,000 loan
must now be repaid with interest. The interest,
charged at 6.5%, is thought to add a further
£32,500 to Labour’s debt. “The money was a
commercial loan and it has already reached the
end of its term,” he said. “Last month, I
notified the party that it will be repaid. We
are now in the period where it is
due.”
The identity of the second man
demanding repayment is not known. However, it is
thought to be Nigel Morris, the American-based
founder of
the Capital One financial services
group, who lent the party £1m. He was
unavailable for comment last week.
A
further two of the 12 businessmen who lent
Labour a total of almost £14m are also expected
to demand that their money is repaid later in
the year, although the party has yet to be
formally notified. In total, Labour will
therefore have to find at least £3.5m by
October.
Sir Christopher Evans, the
biotech tycoon, said this weekend that he would
be demanding the repayment of his £1m loan “this
summer”. Rod Aldridge, the outgoing chairman of
Capita, an outsourcing company, said he is to
ask for his £1m loan, plus interest, to be
repaid in October.
Labour is also
expecting to repay a £2m loan to Lord Sainsbury,
the science minister, in July. However, sources
said he was preparing to make a sizable donation
to compensate for the loan
repayment.
Since the start of the year,
the party has struggled to attract donations
from wealthy individuals. It is thought to have
landed only one six-figure donation, of £250,000
in January. The Tories, by contrast, raised
£6.2m from backers between January and
March.
The repayment demands have shocked
Labour, which initially assumed that most of the
money would be written off. One Labour source
told The Sunday Times last month: “The clear
intention with the loans was that they should
not be paid back — at least not until Blair was
no longer leader.”
However, yesterday a
source said: “It is now clear most of them [the
lenders] are going to have their money back.
They are already calling the loans in.” The only
lenders said to have indicated to the party that
they will extend the terms of their loans are
the four men put forward for peerages — Sir
David Garrard, Sir Gulam Noon, Barry Townsley
and Chai Patel. Their nominations were blocked
by the House of Lords Appointments Commission
which vets potential peers.
On Friday,
Lord Heseltine, the Tory former deputy prime
minister, described the loans-for-honours
scandal as “one of the most corrupt situations”
he had seen in his political lifetime.
Transparency International, an anti-corruption
watchdog, has sent a dossier to Scotland Yard
claiming that more than seven separate offences,
including bribery and conspiracy to defraud, may
have been committed by party officials in the
scandal.
Jack Dromey, the Labour party
treasurer, said he believed people around Blair
“consciously” sought to exploit loopholes in the
law by raising cash for the party through loans
rather than donations.
Labour is now
preparing to sell its Westminster headquarters,
valued at £6m, to plug the black hole in its
finances. However, the party is understood to
have an outstanding mortgage of £5.5m from the
Co-operative Bank so the sale will raise only
£500,000. It is thought not to have any other
saleable assets.
Party sources are
confident they can arrange new finance from
banks to pay off the loans. One source insisted:
“There is no financial crisis. It will not be a
problem.” However, senior sources contacted by
The Sunday Times declined to explain where the
money to repay the lenders would be found. A
spokesman for the party declined to comment on
Labour’s financial
arrangements.
Financial experts believe
the party would struggle to borrow from a bank
as commercial organisations would be wary of
making an unsecured loan. The loans offered by
the businessmen attracted a low rate of
interest.
The source said Labour turned
to wealthy benefactors in the run-up to the 2005
general election, after it was refused extra
credit by its bank. He added that the party
would have risked losing the election had it not
accepted the loans. “The party was desperate in
2005, the situation was terrible,” he said. “It
is very simple . . . we wouldn’t have won the
election without the loans.”
Those who
lent the party money are among the country’s
richest people. Crawford, 51, is one of the
biggest winners from the boom in high-tech
companies and made £76m from the sale of his
financial software firm London Bridge Software.
He is ranked 609th in this year’s Sunday Times
Rich List. Morris, 47, whose fortune is valued
at £360m, founded a global credit card company.
He was born in Essex but is based largely in
Virginia, America.
Labour’s most recent
accounts, for 2004, show the party spent £2.8m
more than it raised and ended the year more than
£12m in debt.
Blair may now be forced to
turn back to the trade unions for money,
emboldening them to demand stronger influence
over policy. The government recently indicated
it will surrender to pressure from the unions by
dropping plans to cut the generosity of pensions
for local government workers.
Labour is
drawing up proposals for a reform of political
funding. A review is expected to recommend state
funding.
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