The Lib Dems' money woes are growing

Clegg's party might need a spell in opposition just to balance the books.

The Electoral Commission has published its accounts of political party income and expenditure. The table showing the financial state of health of the top 14 - the ones that get £250,000 or more - is available here.

The item that has made a few headlines is the drop in income for the Tories. The party's takings were down by 45 per cent on the previous year - now at the same level they were last at in 2003. That's wilderness income. Of course, the Conservative coffers will fill up again as an election approaches. They always do. But the fall in revenue might also reflect disquiet among big donors at negative publicity attached to the status of being seen to be a Cameron crony (especially after this incident) and irritation at the party leadership's willingness to indulge media bashing of bankers, high pay and fat-cattery.  The Telegraph's Ben Brogan wrote a column earlier this week suggesting donors were sniffing around Boris Johnson as a friendlier protege.

Labour also received less than last year but, thanks to the trade unions, the party's funding stream is a little more stable (although there is a political price to be paid for that dependency ... the subject of another much longer blog another time).

One thing that caught my eye in this year's accounts though was the perennial shortage of cash felt by the Lib Dems. They take in a fraction of the sums enjoyed by the big two and, unlike their rivals, spend more than they earn. One of the cruelties of coalition for the Lib Dems is that power has not suddenly opened up new exciting financing opportunities. Joining the governing big league has not granted entry to some exclusive high rolling donors club. Meanwhile, the party has lost the "short money" made available by the state to official opposition parties. And to make matters worse, Lib Dem councillors traditionally chip in around 10 per cent of their allowances to help fund the party. So the massacres in local elections in recent years have put a further squeeze on income. The Lib Dems, in other words, are utterly broke.

One senior Labour figure recently suggested to me that this would ultimately be the factor that breaks the coalition. The Lib Dems, this theory goes, will have to quit the government a year or so before an election so they can get their short money back. Without it they simply wouldn't be able to mount a campaign. Now that could be spite and mischief from the enemy camp (the shadow cabinet figure involved is no admirer of the Cleggists) but senior Lib Dems themselves don't deny privately that they have serious money woes. Maybe staying in government to the very bitter end will prove a luxury they can't afford.

Entering government has cost Clegg's party money as well as votes. Photograph: Getty Images

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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BHS is Theresa May’s big chance to reform capitalism – she’d better take it

Almost everyone is disgusted by the tale of BHS. 

Back in 2013, Theresa May gave a speech that might yet prove significant. In it, she declared: “Believing in free markets doesn’t mean we believe that anything goes.”

Capitalism wasn’t perfect, she continued: 

“Where it’s manifestly failing, where it’s losing public support, where it’s not helping to provide opportunity for all, we have to reform it.”

Three years on and just days into her premiership, May has the chance to be a reformist, thanks to one hell of an example of failing capitalism – BHS. 

The report from the Work and Pensions select committee was damning. Philip Green, the business tycoon, bought BHS and took more out than he put in. In a difficult environment, and without new investment, it began to bleed money. Green’s prize became a liability, and by 2014 he was desperate to get rid of it. He found a willing buyer, Paul Sutton, but the buyer had previously been convicted of fraud. So he sold it to Sutton’s former driver instead, for a quid. Yes, you read that right. He sold it to a crook’s driver for a quid.

This might all sound like a ludicrous but entertaining deal, if it wasn’t for the thousands of hapless BHS workers involved. One year later, the business collapsed, along with their job prospects. Not only that, but Green’s lack of attention to the pension fund meant their dreams of a comfortable retirement were now in jeopardy. 

The report called BHS “the unacceptable face of capitalism”. It concluded: 

"The truth is that a large proportion of those who have got rich or richer off the back of BHS are to blame. Sir Philip Green, Dominic Chappell and their respective directors, advisers and hangers-on are all culpable. 

“The tragedy is that those who have lost out are the ordinary employees and pensioners.”

May appears to agree. Her spokeswoman told journalists the PM would “look carefully” at policies to tackle “corporate irresponsibility”. 

She should take the opportunity.

Attempts to reshape capitalism are almost always blunted in practice. Corporations can make threats of their own. Think of Google’s sweetheart tax deals, banks’ excessive pay. Each time politicians tried to clamp down, there were threats of moving overseas. If the economy weakens in response to Brexit, the power to call the shots should tip more towards these companies. 

But this time, there will be few defenders of the BHS approach.

Firstly, the report's revelations about corporate governance damage many well-known brands, which are tarnished by association. Financial services firms will be just as keen as the public to avoid another BHS. Simon Walker, director general of the Institute of Directors, said that the circumstances of the collapse of BHS were “a blight on the reputation of British business”.

Secondly, the pensions issue will not go away. Neglected by Green until it was too late, the £571m hole in the BHS pension finances is extreme. But Tom McPhail from pensions firm Hargreaves Lansdown has warned there are thousands of other defined benefit schemes struggling with deficits. In the light of BHS, May has an opportunity to take an otherwise dusty issue – protections for workplace pensions - and place it top of the agenda. 

Thirdly, the BHS scandal is wreathed in the kind of opaque company structures loathed by voters on the left and right alike. The report found the Green family used private, offshore companies to direct the flow of money away from BHS, which made it in turn hard to investigate. The report stated: “These arrangements were designed to reduce tax bills. They have also had the effect of reducing levels of corporate transparency.”

BHS may have failed as a company, but its demise has succeeded in uniting the left and right. Trade unionists want more protection for workers; City boys are worried about their reputation; patriots mourn the death of a proud British company. May has a mandate to clean up capitalism - she should seize it.