Paying the price for Ashcroft’s millions

Lord Paul has been described as the "Labour Ashcroft", yet the differences between them are stark.

On Monday morning, my phone rang. "Please hold for Lord Paul," said a woman with a cut-glass accent at the other end. I held. "Hello, Lord Paul here. I have some news I want to share with you." Lord Paul of Marylebone, Labour peer, party donor and 88th wealthiest person in Britain, according to the Sunday Times Rich List, is one of the so-called non-doms who have found themselves at the centre of a political firestorm. He founded the steel company Caparo in 1968, two years after coming to the UK to seek treatment for his young daughter Ambika, who died tragically of leukaemia at the age of four.

He was knighted in 1978 and became a life peer in 1996. "I was appointed a peer by John Major, not by the Labour government," he reminded me. In 2008, he became the first Indian-born peer to be made deputy Speaker of the Lords, and in 2009 he joined the Privy Council. It is only in recent weeks, however, that he has become the focus of intense political and media scrutiny, dragged into the row over the tax status of the Tory donor Michael Ashcroft. Why focus on Lord Ashcroft's non-dom status, repeated the Conservatives and their apologists in the press, when Labour's Lord Paul is a non-dom, too?

Question of judgement

But Paul called me to announce that he had decided to end his "non-dom" status (a story I published on Newstatesman.com), in anticipation of legislation that will force all MPs and peers to pay UK tax on their overseas earnings, and in the wake of the Tories' attacks on him. “I think they have been caught with their pants down, and what better than try to reflect on others?" he said.

One Tory-supporting tabloid has referred to him as the "Labour Ashcroft", yet the differences between them are stark. Ashcroft, unlike Paul, is deputy chairman of his party, and in charge of co-ordinating the Tories' crucial marginal seats campaign. Ashcroft, unlike Paul, has donated millions of pounds to his party, and is alleged to have avoided millions in tax in recent years. When I asked Paul how much his decision to pay full taxes would cost him, he replied: "Definitely not millions of pounds, or hundreds of thousands." One source suggests to me that his tax bill might be as low as £10,000. The Liberal Democrats have alleged that Ashcroft has avoided paying £127m in tax over the past decade.

This cannot be dismissed as a story for the Westminster village. In the wake of the expenses scandal, and in the midst of a recession, the public is fed up with the pernicious influence of money on politics. The idea that voters would not be outraged by a tax-avoiding billionaire donor who wields influence over the would-be party of government itself demonstrates a bubble mentality.

More than half of the respondents in a YouGov poll said they believe the Ashcroft ­affair has damaged the Conservatives. "Punters might not know who Lord Ashcroft is, but there is a real sense that this row has proved the Tories haven't changed," says a Downing Street insider. Ultimately, this story is not about Ash­croft, but about David Cameron (who made him deputy chairman in 2005) and his de facto deputy, William Hague (who pushed for Ash­croft to be ennobled in 2000).

Three issues remain almost wholly unresolved. First, the all-important matter of judgement. Why did Cameron and Hague not insist on full disclosure from the Belizean baron much earlier? Ashcroft's tax status has been a strategic liability for several years. As Peter Mandelson has remarked: "If he [Cameron] knew the truth, he should have fired Ashcroft. If not, why was he too afraid to ask Ashcroft the awkward direct question"

And this is no "politically motivated campaign" by Labour, as the Tories claim. Barry Legg, a former Conservative Party chief executive, says that both Hague and Cameron should have posed some "pretty obvious questions" to Ashcroft about his tax affairs. Lord Tebbit, the party's former chairman, says "it would have been better for Lord Ashcroft to have said what we now know some years ago".

In a BBC interview, Cameron tried hard to claim credit for Ashcroft's admission. "What people have seen from me over the past week is answers to the questions that need answering," he said. "It has been done. And it was done by me - right?" Not quite. Cameron and Ashcroft only decided to release the "confession" once the Cabinet Office warned that it was about to publish the private undertakings the Tory donor had given when he was ennobled. It's unlikely, after all, that the Tory leader would have chosen to resolve a toxic, ten-year-old problem so soon before a general election.

No escape

Second, there is the matter of transparency and honesty. Since the expenses scandal, Tories have liked to quote the US Supreme Court justice Louis Brandeis: "Sunlight is the best disinfectant." This month, however, the Electoral Commission revealed that party officials had refused to co-operate with its inquiry into donations made by Ashcroft's company Bearwood Corporate Services.

Third, there is the question of Ashcroft's future. The former UN ambassador for the Belize government has long been rumoured to have had an eye on a Foreign Office post under his friend Hague as foreign secretary. Cameron has yet to rule this out. (I asked Paul if he had any aspirations to join a future Labour government. "I have no interest in being a minister," he said. "I'm too old for it anyway.")

Tory strategists had hoped that Ashcroft's "confession" would draw a line under the matter. They were wrong. "This issue is not closed," says a senior Labour source, with a smile. Secret Whitehall papers are expected to be released in the next few days as the public administration select committee holds a one-off session on the negotiations over his peerage. Ashcroft has been invited to give evidence - but, ever evasive, he has yet to confirm if he will attend.

Weeks away from a general election, the fundamental question remains - what does Cameron's mishandling of the controversy say about his "modernising" leadership of a "rebranded" Tory party? Has it changed, or does Ashcroft, in Mandelson's words, have its leader "by the balls"? Tory strategists remain paranoid about the accusation of "same old Tories". But until Ashcroft is ejected from the Tory inner circle, it will be difficult to escape the charge.