Tag Archives: party-funding

Which side is Peter Watt’s side of the story?

Why has Peter Watt chosen now to put forward his side of the story? It is hard to see how any of this helps the Labour Party’s cause. If his book were being published six months earlier he could at least argue that there was still time to get rid of Brown; if his book were published six months later it wouldn’t matter either way (and it would subsequently be less profitable for him to do so). One hopes that the full book will go some way to answering that question but at the moment it is mystifying.

Based on the Mail on Sunday extracts, I would tentatively conclude two things. The first thing is that Gordon Brown is even more of a waste of space than I assumed he was. Even if only half the things in these extracts are true, they portray a man totally ill suited to lead the country, let alone a general election campaign.

But if Brown comes off badly, in many respects Watt himself comes off worse. The extracts all have the tone of someone who appears to deny any personal responsibility whatsoever. This may just be selective editing on the Mail’s part – seeking to emphasise all the bits that put Brown in the worst possible light – but it is hard to see how they managed to do this when publishing the substantive section on the Abrahams affair.

David told me he used an accountant to ‘legally gift’ the money to his associates.

He had apparently been advised that as long as they were UK residents, on an electoral roll, and – however briefly – legal and rightful owners of the money, there was no problem. Every donation was reported to the Electoral Commission.

Over a five-year period, Kidd, Ruddick, Dunn and McCarthy collectively gave us a total of £600,000 – money that was gratefully received.

Kidd had also donated money to Harriet Harman’s deputy leadership campaign. Nobody at HQ ever really thought these donations were anything other than lawful.

If no-one really thought that was the case then Labour is in an even worse state than we thought. As Mark Pack pointed out at the time, the guidence emailed to him and Watt by the Electoral Commission was quite emphatic. And as someone whose job at the time mainly consisted of pointing out all the potential loopholes of the Political Parties Elections and Referendums Act 2000, it was clear to me that any rational person perusing the law would quickly conclude that such an act was against both the spirit and the letter of the law. The problem with the law was how easy it would be to bypass in practice, not what it said (in this instance at least).

To read the fact that Watt still maintains that he had been neither negligent nor dishonest therefore is quite gobsmacking. To make matters worse, it appears to flatly contradict this article – written by Watt’s ghost writer Isabel Oakeshott – where it is “understood” that Watt did not know that the donations from Raymond Ruddick and Janet Kidd came from Abrahams:

Now the case against Watt is on the brink of collapse following evidence that he did not know that David Abrahams, the Newcastle businessman and donor, was using agents and took reasonable steps to ensure the gifts did not break the law.

Watt is said by friends to have been devastated by the so called Donorgate affair, believing senior party officials had made him a scapegoat. Sources involved in the inquiry say Watt told police that he believed the go-betweens – Raymond Ruddick, Janet Kidd and two others – were donating the cash in their own right.

It is against the law to make a donation to a party on behalf of someone else without making the true source of the cash clear. No prosecutions have been brought, however, and lawyers believe the wording of the law make a successful case unlikely.

This 2008 account flatly contradicts the Mail extracts. In the latter, Watt admits that he knew about Abrahams using Kidd, Ruddick and others to act as go betweens. In the former, he apparently told the police the exact opposite.

Given Oakeshott and Watt’s subsequent relationship, it seems highly likely that Watt himself was the source for the 2008 article. Perhaps the full book will in some way reconcile these two wavering accounts from the same people. Either way, the account given in the latest extract is barely credible.

Overall, Watt comes across in these extracts as an innocent, something which I don’t mean as a compliment. It suggests that he was out of his depth. It is an interesting counterfactual to wonder whether a more grizzled national secretary would have been able to keep Gordon Brown on track when he wavered over the 2007 phony election.

It is worth noting that, in keeping with other Labour national secretaries, Watt was elected by the National Executive Committee not employed. He was also not Tony Blair’s choice, with the “grassroots alliance” out voting him by 16 to 10. Whatever misgivings I might have about how the Lib Dems’ equivalent – the Chief Executive – is appointed and held to account – I wouldn’t wish Labour’s system on my worst enemies. You need a system whereby committees can come to a consensus, not one in which the individual is seen to be owned by a particular faction on day one. No wonder Brown didn’t bother dealing with him directly and left it to Douglas Alexander to work as his intermediary. The very best thing that can be said about this working relationship is that it cost Labour an unneccesary £1.2million.

Peter Watt has decided to tweet his experience of this book launch, using the very Grant Shapps-esque “peterwatt123“. Thus far, his utterances regarding the launch and extracts have been very Kung Fu, with him tweeting this morning that “Loyalty is a two way street” (there’s a philosophy essay in that). More bizarrely, with both his profile picture and past tweets, he appears to be using his kids as a shield on the apparent assumption that people will go easy on a family man (see this as another case in point). Why not keep this stuff seperate from the book? It’s all very odd (and before you argue that these tweets are none of my business, I was only alerted to them because his publisher started promoting them).

Michael Brown donation: we got lucky

So the Lib Dems won’t be handing back the £2.4m donation from 5th Avenue Partners Ltd after all. Yay.

I do hope however (against all the evidence?) that this won’t now result in large numbers of Lib Dems crowing about how the party’s actions have been vindicated and that the was never any question that the legitimacy of the donation was ever in doubt. The simple fact of the matter is that we cocked up, we got lucky and the law is deeply flawed.

Reading the case summary, it would appear that the party has been saved by the fact that Michael Brown has been found guilty of fraud. The question rested on whether 5th Avenue Partners Ltd was acting as an “agent” to siphon money from Michael Brown or his German company 5th Avenue Partners Gmbh, both of which could not legally donate directly. But because it emerged that the money came from investments made by 5th Avenue Partners Ltd’s clients – i.e. Robert Mann et al – then it is legitimate. Of course, Robert Mann and the Fraud Squad might demur from the word “legitimate”.

Now, the party had no way of knowing the extent of Michael Brown’s deception. Nor can it be denied that it went out of its way to establish whether there was anything out there to suggest Brown was not a man they should be doing business with. But the fact of the matter is the world is a big place and with the benefit of hindsight it is clear the party was looking in the wrong place.

Fundamentally, it has never been clearly established who took the decision to accept the donation. Treasurer Reg Clark resigned shortly before the first donation in circumstances that have never been made clear. The party’s federal executive was not involved, nor was the finance and administration committee. And you don’t need hindsight to tell you that accepting £2.4m from a man who comes out of nowhere, who isn’t resident in the country, whose company hasn’t yet filed its first set of accounts to Companies House and whose donation has come so late you can’t properly spend in the general election anyway, is an unacceptable risk. But then I suppose Lib Dem politicians were as goggle eyed with the glamour of the hedge funder as all other politicians at the time, and had lost all perspective. Exerting caution only makes sense if you aren’t wined and dined by city wideboys on a weekly basis.

Suffice to say, a law which lets one party off on a technicality like that, while forcing another party to repay hundreds of thousands of pounds simply because a donor dropped off the electoral roll for a couple of months, is an ass. And an Electoral Commission which takes so long to establish such technicalities has deep organisational problems as well. We need a system which doesn’t potentially force political parties to go bankrupt because of the mistakes of a couple of officials by allowing parties to get the Electoral Commission to clear large donations in advance.

And so we turn to Michael Ashcroft and Bearwood Corporate Services Ltd. Here again, the Electoral Commission have been dragging their heels for months. On the one hand, things look precarious for the Tories because, on the face of it anyway, it does not appear that Ashcroft has been defrauding any UK investors. But if the Electoral Commission have managed to conclude that 5th Avenue Partners Ltd was trading legitimately then I wouldn’t hold your breath. As for what is really going on, that’s anyone’s guess.

Note: I was a member of the Lib Dems’ Federal Executive from January 2003 until I resigned in November 2005. I was a member of the Federal Finance and Administration Committee from February 2005 until my resignation from the FE.

So where do we go from here?

The most fascinating aspect of the expenses scandal is how quickly the debate has moved onto a debate about meaningful democratic and constitutional reform. I have to admit, I didn’t quite see it coming, and while there have been rumbles within what you might call the “democratic reform community” about making a big push in the run up to the general election, it seemed to be more driven by the need to be seen to be doing something rather than a belief that it would actually happen.

Yet things have moved on very quickly. I’ve been amazed at the number of Labour politicians who have come out of the woodwork in recent weeks and professed support for, not merely electoral reform, but actual proportional representation. It is fair to say this has been rumbling on for a while now. Compass, and with it Jon Cruddas MP, came of the fence a couple of months ago. Today we see Alan Johnson out himself as well.

Just six months ago, the orthodoxy amongst electoral reformers in the Labour Party was to bang on about Alternative Vote as being the only option – a ludicrous notion since it would cost almost as much pain to achieve but with almost none of the benefits of full electoral reform. Johnson and others are still talking about the Jenkins proposals – a failed and rather complex fudge designed to keep Tony Blair happy which I am sure Roy Jenkins himself would have disowned by now had he lived long enough. But either way we are a long way from having to decide precisely what system should be used; the call at this stage is for a referendum to be held on the same day as the general election to establish the principle.

The important thing that needs to be emphasised is that mere proportional representation is not enough. Peter Kellner (http://www.independent.co.uk/news/uk/politics/politics-the-only-way-is-up-1690137.html) is half right when he says PR has “nothing to do with probity.” Mark Thompson has done a splendid job demonstrating how the first-past-the-post system and expenses abuse are inextricably linked (this is a brilliant example about how a single blog post can influence a national debate, given the number of times I’ve read or heard it referred to by people in the mainstream media over the past week).

Most PR systems in fact do increase probity, but it isn’t the proportionality that does this but the way they allow voters to choose between candidates within a single party. The list system used for the European Elections does not allow for this and we ought to rule it out for Westminster elections straight away. The Additional Member System used for the Scottish Parliament and Welsh Assembly is an improvement but is still limiting (the Welsh Assembly rule against ‘dual candidacy’ gives voters even less choice).

While my personal preference would be single transferable vote in multi-member constituencies, I would be content with any open list system that allows voters to select from candidates rather than parties. The size of the constituency matters too. As we saw in the Scottish local elections in 2007, three member constituencies don’t really allow for much competition within parties at all.

For many people, including some Liberal Democrats, talk of PR is intolerable because it threatens the “constituency link.” The “constituency link” is in fact one of the most pernicious aspects of modern politics. Of course MPs should have a sense of place, but the idea that they should all be responsible for their own relatively small parishes is ludicrous. As Simon Jenkins has cogently argued, as MPs have transformed themselves into caseworkers over the past few decades, they have conspired to strip local government of its authority. And as Andrew Rawnsley puts it, the Liberal Democrats bear a large amount of responsibility for this. Our use of “pavement politics” (which isn’t the same thing as community politics, but rather a perversion of it) as a tool for gaining MPs has made a lot of sense in terms of narrow party interest but has actually hurt the causes for both decentralisation and electoral reform. With the political system in flux and Chris Rennard no longer in the captain’s chair, we have a real opportunity to rethink this.

The biggest irony is that the MP-constituency link is at its closest in the Republic of Ireland, where they have STV. Indeed, Conservative peer David Trimble spends his retirement in the House of Lords railing against it for precisely the opposite reasons that his leader opposes it. To be fair, he has a point, but while Ireland has an average of 26,000 people per elector, in the UK it is closer to 90,000. Irish politics is dominated by two parties divided by history rather than ideology – a state of affairs which is gradually breaking down over time. In the UK, the main thing that causes parties to fight on similar ideological ground is FPTP. In other words, while STV would inevitably lead to more accountability in the UK, we have no reason to expect that the parochialism of Irish politics will come along with it.

Electoral reform is the sine qua non; the one thing that seperates the genuine reformers from the people simply attempting to profit from the debacle – no wonder the Telegraph is in such a flap about it (electoral reform? Fuck! No! More Tories! That’s the answer! Honest!). But won’t be sufficient in my view and will be subject to a full onslaught by the Tory press. For that reason, reformers need to arm themselves with a number of other reforms too. The question is, what?

I don’t think the time has come for a full written constitution to sort everything out, although I do think we’ll have one within 20 years due to a number of factors (if you want to know why precisely, you’ll need to read Unlocking Democracy: 20 Years of Charter 88 and in particular its concluding chapter). Short of that, there have been a lot of suggestions doing the rounds, some of which are better than others.

I’m all for reducing the number of MPs (something which the Tories are demanding, despite the fact it would weaken their precious constituency link), but one of the practical problems the Lib Dems’ Better Governance Working Group came across when we considered this in 2007 was the impact it would have in increasing the dominance of the payroll vote in the House of Commons. Ultimately, I think David Starkey is right: we need to seperate the legislature and the executive entirely. In the short term however, we could simply get rid of the convention that ministers must also be parliamentarians. It is a nonsense in any case which has lead to the Lords being stuffed with placemen despite the fact that their Commons shadows can’t actually ask them any questions. Worried about democratic accountability? Then let them address the Commons regardless of their membership and subject appointments to parliamentary scrutiny.

I’m all for lowering the barriers to get involved in politics and introducing primaries, but let’s not kid ourselves that it will lead to any great increase in participation. If the low level of participation in US primaries (other than major contests such as the presidential nomination) doesn’t convince you, then what about the tiny level number of voters who took part in Jury Team? Opening up the selection of party leaders would be a positive step forward but for parliamentary candidates it would be little more than a figleaf. In any case, the effect of electoral reform would be to introduce a system which in effect combines the functions of both a primary and election.

Recall is problematic. Without electoral reform it would be pernicious, making MPs in marginal constituencies even more vulnerable while leaving MPs in safe seats relatively untroubled. Nick Clegg’s proposal of only allowing recall if the MP in question has been caught breaking the rules is equally problematic: who decides if they broke rules and wouldn’t a vote be little more than a formality if they were censured in such a way? Why not just go straight for a by-election.

With electoral reform however, on reflection (you’ll notice I’ve changed my mind here), I can see it working, if the recall petitions are for recalling all the MPs representing the constituency in question rather than just one of them. That way, it can’t be used simply to force out minority parties.

Finally, there is the question of party funding. There are, in my view, strong arguments for incentive-based funding systems (e.g. small donations up to £50 get matched by state support on a pound-for-pound basis, thereby encouraging parties to collect comparatively small donations from a wide base), but I am under no illusions that now is not the time to win that argument. What most certainly does need to be introduced is a cap on donations so that rich people and union chiefs can’t simply buy the system. Both Labour and the Conservatives have at various times over the past few years claimed to support this in principle but both are totally compromised by a dependency on, respectively, the unions and Lord Ashcroft’s cronies.

The Lib Dems have a window of opportunity to force this issue. As I wrote last month, the party should unilaterally impose a cap of its own. The Michael Brown story rumbles on and Clegg’s defence looks pretty thin. It is time we did something to signal that we have learned from our mistakes (and they are mistakes – I don’t care how many checks you make, you should never take millions of pounds from someone who you’ve only known a couple of months).

Anything else? Lords reform would be nice, but must take a lower priority until the Commons is sorted out first in my view (12 months ago, when the prospect of Commons reform was a distant possibility, the calculation was different). I’d still like to see us move towards agenda initiative and veto. Without a written constitution however, a full system of citizens initiative and referendum would be highly problematic. It would be mistaken though to think we can fit every reform anyone has ever wanted into this narrow window of opportunity. The good news is that if we can fix the Commons, the prospect of more democracy further down the line can only be increased.