At the heart of these series of articles are examples of political corruption, defined as the misuse of power for personal gain. We haven’t had to dig too deeply to find the most obvious and egregious cases showing how some politicians and businesses exploit their privileged positions to enrich themselves, as well as their friends and families. As we have highlighted in previous reports, the Covid pandemic provided a feeding frenzy of corruption. The carefully drafted procurement rules were ignored, and those with personal contacts rather than expertise were handed contracts worth millions of pounds.
The UK has fallen down the Corruption Perceptions Index
It is perhaps no surprise then that, according to Transparency International, the UK’s score in the 2022 Corruption Perceptions Index (CPI) fell sharply to 73 from 78 in 2021, resulting in a seven place tumble in the global rankings from 11th to 18th. The report highlights that the fall in the UK’s score was driven by an increased perception of corruption in public office . .
The UK is still seen as the money-laundering capital of the world
The UK was also described as the money-laundering capital of the world. In an article in 2019, Oliver Bullough, author of Butler to the World: How Britain Became the Servant of Tycoons, Tax Dodgers, Kleptocrats and Criminals, revealed how easy it was to hide stolen money and fraudulent schemes in the UK, using a giant loophole in company law. At the time, no one checked the ownership details entered when creating a company. People could call themselves Mickey Mouse, with a registered address on Mars, and get away with it. Bullough discovered owners on the Companies House site called “Xxx Stalin” and “Mr Mmmmmm Xxxxxxxxxxx”, whose address was given as “Mmmmmmm, Mmmmmm, Mmm, MMM”. One investigation found that 4,000 company owners, according to their submitted details, were under the age of two.
On 10th January 2020, changes to the government’s Money Laundering Regulations came into force with the intention of closing at least some of these loopholes.
However, failures of enforcement and implementation of the law – plus the exploitation of loopholes by professional enablers – has meant that little has been done in practice to prevent kleptocratic wealth and political agendas from entering Britain.
The National Crime Agency estimates that money laundering costs the UK £100bn a year. With the money come people fleeing the consequences of their crimes, welcomed into this country through the government’s “golden visa” scheme: a red carpet laid out for the very rich. 151,500 golden visas were handed out between 2019 and 2022.
None of this features in the official definitions of corruption. Corruption is what little people do. But kleptocrats in other countries are merely clients of the bigger thieves in London. Processing everyone else’s corruption is the basis of much of the wealth of this country. When you start to understand this, the contention by the author of Gomorrah, Roberto Saviano, that the UK is the most corrupt nation on Earth, begins to make sense.
Legal case proves that private equity firms have been paying too little tax for more than 35 years
In May, the Good Law Project took legal action with the founder of Ecotricity, Dale Vince, to force the UK tax authorities to admit that some private equity fund managers have been paying too little tax for more than 35 years.
Since 1987, HMRC has taxed the money that managers receive from private equity funds as capital gains – at a rate of 28% – instead of as trading income, which is taxed at 47%. This has resulted in the government losing hundreds of millions of pounds a year – enough to pay the salaries of more than 10,000 nurses.
The Good Law Project argued that the practice, known as buyout funds, was unlawful. This is the situation where investors buy mature companies with borrowed money, use the company’s assets and income to pay off the debt, then sell them on.
The HMRC was forced to concede the key argument raised, accepting that the money that managers receive from buyout funds – known in the trade as their “carried interest” – “would be taxable as trading income in the hands of UK tax resident individuals”.
The HMRC expects those individuals affected to file their self-assessment returns accordingly. We can but hope.
Business Donations to the Tory Party
The process of awarding large, lucrative government contracts continues to be a serious issue for concern, and there is evidence that many of these are linked to political donations.
Getting a foot in the door at political conferences
It is no surprise then that getting a foot in the door with the Conservative Party is the dream of many business leaders. That is why lunch with Rishi Sunak and the chance to hobnob with senior ministers was worth paying £3,300 a person at the Conservatives’ conference business day this year.
Business leaders have also started to court a more compliant Labour Party that looks as though it has a chance of winning the next General Election. According to The Guardian, the Labour Party’s conference business dinner for 300 corporate figures sold out at an unprecedented rate this year, However, attendance didn’t warrant the large sums paid to sit at the table with Rishi Sunak. The party was forced to lower the price of entry to its own event for SMEs from £400 in May to £75 in September.
One of the companies to showcase its wares at the conference was Wrightbus, owned by the Tory donor Jo Bamford, with the firm exhibiting a hydrogen bus at both Labour and Conservative events.
Labour is planning to woo businesses by holding a business conference later this year. They have placed policies such as overhauling business rates, promoting growth and fiscal responsibility at the heart of their offer.
Political Donations to the Tory Party
Donations to the Tory Party from wealthy individuals continue to be an important source of income and the amounts being donated are increasing.
Mohamed Mansour was the first to give a £5m donation to the Tories ahead of next year’s election. The ex-minister in the government of Egypt’s former autocratic leader Hosni Mubarak is also a billionaire businessman behind a sprawling conglomerate called Unatrac.
His donation in May was then matched later in the summer by Frank Hester, a healthcare tech entrepreneur whose firm, the Phoenix Partnership (TPP), has won more than £135m in NHS contracts in recent years. His company, the Phoenix Partnership (TPP), paid out more than £20m in dividends between 2019 and 2022, with Hester the only shareholder.
The group supplies software to about 2,700 GP surgeries in England as well as support services to allow them to hold medical records for patients electronically.
These contracts were described as being subject to normal tender rules.
The housebuilding and property developers sector is one of the biggest sources of donations to the Conservative Party. At least 10% of donations received by the Conservative Party since 2010 came from property developers, real estate tycoons and others connected with the construction industry. A Guardian analysis found housebuilders, developers, and real estate tycoons have donated almost £40m to the Tories since 2010, when the Conservative and Liberal Democrat coalition took office.
It is surely a coincidence then that they have also benefited by billions of pounds from delays to low-carbon building regulations in the past eight years of Tory rule.
New donors
With the loss of some Johnson-era donors, Sunak’s party headquarters has turned to some fresh sources of cash. Some of the biggest contributors are Amit Lohia, nicknamed the Prince of Polyester on account of his clothing business, who gave a first donation of £2m this year, and Bassim Haidar, a Nigerian-born IT billionaire, who made his first donations this year, with £360,000 given since April. Another surprising new donor is Cantervale, a company owned by financier and dealmaker Amanda Staveley, which gave a donation of £50,000 in February – having previously given a small sum in 2019.
Hedge funders
The scale and pace of hedge fund donations appear to have dropped off since the Brexit era. But Alan Howard, co-founder of Brevan Howard, made a £1m donation in May, having funded the party since 2018. Another big donor from the world of finance is Christopher Harborne, a Thailand-based cryptocurrency investor, who gave £500,000 to the party in the autumn of last year, as well as £1m to the office of Johnson.
A network of friends
A group of donors who give each other awards, have links to each other’s companies or charities and are involved in Conservative circles has emerged. One of the key figures is Selva Pankaj, who owns a higher education institution, Regent College London, and is sponsoring this year’s “blue room” for Tory VIPs at the party conference. He has given more than £600,000 to the Conservatives since 2015, most recently £125,000 this year.
Others include Maurizio Bragagni, an Italian-British businessman who owns cable manufacturer Tratos, who has donated more than £300,000 since 2015, and Simon Blagden, who owns Avre Partnership, which has given £150,000 since 2020. The Tories’ biggest female donor, Lubov Chernukhin, the wife of a former deputy finance minister in Putin’s government, has loose connections to this circle as well. She has given about £2.5m to the party since 2012, continuing to donate this year. She acquired a British passport in 2011, which makes her donations legal.
All is not good news for Sunak’s Tory Party. Anthony Bamford, the Brexit-backing boss of JCB diggers who has given millions through his companies and helped fund Johnson’s wedding to Carrie, as well as giving the former prime minister free accommodation after he left No 10, has significantly reduced his contributions.