Ashcroft to be banned from giving more money to Tories

Straw backs change in law that would deprive Conservative Party of vital source of funding
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Lord Ashcroft, the business tycoon who has given millions to the Conservative Party, is to be banned by law from giving any more unless he pays tax as a UK resident.

Lord Ashcroft, who has been deputy chairman of the Tory party since David Cameron became leader in 2005, has refused to discuss his tax affairs, but Labour MPs suspect he has told HM Revenue & Customs that he lives abroad.

Jack Straw, the Secretary of State for Justice, has bowed to the wishes of rebel Labour MPs and peers who have been pushing for a change in the law to ban political donations from tax exiles.

On Monday, he will ask the Commons to agree an amendment to the Political Parties and Elections Bill which will ban parties from accepting a donation of more than £7,500 from an individual unless "the individual's liability to income tax for the preceding tax year falls to be determined on the basis that the individual was resident and domiciled in the United Kingdom". The ban will also apply to Lord Laidlaw, a Monaco-based multimillionaire.

Lord Ashcroft's lavish bankrolling of the Conservative Party has earned the gratitude of successive Tory leaders including William Hague and David Cameron, but has been a source of continuous irritation to Labour MPs, particularly in constituencies where local Tories have received a slice of the Ashcroft millions.

An analysis by Labour of the results of the 2005 general election showed that, in 24 of the 36 seats that the Tories took from Labour, the constituency Conservative associations had been bankrolled by Lord Ashcroft or other rich donors. Since 2005, Lord Ashcroft has been channelling money into marginal seats still held by Labour.

Lord Ashcroft has extensive business interests in Belize, and Labour MPs suspect that he is domiciled there for tax purposes, to avoid UK rates. He was refused a peerage in 1999, in part because he was not a UK taxpayer, but the peerage was granted a year later, after William Hague had written to protest on his behalf, and Lord Ashcroft had given what he described as "a clear and unequivocal assurance"that he would terminate his tax exile status. He now insists that his tax affairs are private.

He was treasurer of the Conservative Party under William Hague, as well as being the party's biggest single donor. He is now in charge of opinion research and strategy in marginal seats.

Lord Laidlaw, who made a fortune from organising business conferences, gave £3m to the Tories in 2007, but in February he announced that he would not give any more until his tax status was resolved.

In March, 216 MPs signed a Commons motion to ban tax exiles from making political donations, but the move was blocked by the Government, who thought it could not be made to work in practice. In the House of Lords, the Labour peer Lord Campbell-Savours led a successful move to insert the amendment into the Political Parties Bill.

Mr Straw met rebel MPs and peers this week and told them that he had been won over.

"His objection was never on a point of principle, and officials have been working flat out to make this workable in practice," an aide said yesterday.

Lord Ashcroft: The Tories' billionaire

*Lord Ashcroft, a 63-year-old billionaire, spent part of his boyhood in Belize and holds joint UK and Belizian citizenship. He has donated huge sums to the Conservatives through a UK-based company called Bearwood Securities, but it is alleged that much of it actually comes from the Central American country. Labour MPs claim that it is a test of David Cameron's commitment to open government that Lord Ashcroft's tax status and the source of his donations should be made known.

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