The blue Baron: how the Tories rely on Ashcroft

Should David Cameron walk into Downing Street next year as prime minister, he will owe his sucess in significant measure to one man.

Baron Ashcroft of Chichester, deputy chairman of the Conservative Party, has not only masterminded the Tories' enormously successful strategy in the country's most marginal seats, he has largely paid for it all as well.

But as his party is on the verge of a return to government, the worry in Conservative circles is that their biggest supporter may also be their biggest liability as he await the results of an official inquiry into the eligibility of his donations.

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By law, a British political party can only accept a donation from someone registered to vote in the country or from a company carrying on business in the UK. But Michael Ashcroft – despite his peerage and tireless work for the party – does not appear to be registered to vote and the enquiry is now investigating whether his company Bearwood Corporate Services Ltd was eligible to give money either.

The nightmare scenario for him is that the Electoral Commission could conclude that the millions of pounds given to the party were not permissible.

Bearwood gave the Tories £1,600,893 in 2008 alone, making it the party's biggest source of funds that year. The 2009 figure will probably be larger still. Bearwood is known to have one UK client, because in 2008-09 the firm received $300,000 (£181,000) in consultancy fees from BCB Holdings. However, BCB Holdings is another Ashcroft company, so that book-keeping entry does not really tell us whether Bearwood is a genuine trading company, or just a conduit through which Lord Ashcroft funds the Tories.

This is something which the Electoral Commission has been striving to find out for a whole year. They started asking questions about Bearwood last October, and launched a formal investigation on 30 January, after a complaint from John Mann, the Labour MP. It has turned into the second-longest enquiry in the commission's history, exceeded only by their investigation of the £2.4m donation to the Liberal Democrats from the jailed tycoon Michael Brown. The commission still cannot say when it might end.

The commission will not say whether Lord Ashcroft is registered to vote in the UK, because it fears that any public statement could jeopardise its enquiry. He cannot be traced through published electoral registers, and his spokesman refused to answer this or any other question from The Independent yesterday.

But an answer can be deduced from a complaint that was made to the Electoral Commission in February 2008, after published accounts showed that three different Conservative associations said that they had received money from Lord Ashcroft. As the commission started to investigate, all three were told to alter their accounts and show the money as having come from Bearwood Corporate Services. This implies that Lord Ashcroft is not entitled by law to give money to British political parties, which means that he is not a UK-registered voter.

This begs another question: does Lord Ashcroft pay any tax in the UK? When he was granted his peerage nine years ago, in the face of controversy over his tax status, a statement from 10 Downing Street said that he had given a "clear and unequivocal assurance" that he would domicile himself in the UK for tax purposes. Apparently even David Cameron does not know, and does not ask, whether he has made good this promise. When asked about his deputy chairman's tax status at a press conference this week, Mr Cameron said it was a private matter between Lord Ashcroft and the Inland Revenue.

Almost two years ago, the Labour MP Gordon Prentice decided that if we cannot know whether Lord Ashcroft pays tax, we should at least know to whom he made his "clear and unequivocal" promise, and whether it was in writing or by word of mouth.

Mr Prentice asked the Cabinet Secretary, Sir Gus O'Donnell, when he was giving evidence to a Commons committee, but failed to receive an answer. In March 2008, he sent a formal request to the Information Commissioner. That is now turning into the longest enquiry in the history of the Information Commissioner's office, with no answer forthcoming.

The short history of his relations with successive Tory leaders is that he wielded huge influence under William Hague, who made him party treasurer and secured him a life peerage. The next two leaders, Iain Duncan Smith and Michael Howard, kept a certain distance from him, partly in reaction to the publicity his presence in Conservative Central Office had attracted. In those days, Bearwood gave money directly to local Conservative parties, who entered the sums in their accounts. More than half the seats that the Conservatives won back in 2005 had been helped by money from Lord Ashcroft. That year, Mr Cameron invited him back into Conservative headquarters as deputy chairman, in charge of campaigning in targeted seats. His money is now subsumed into the party's central funds.

This year, Lord Ashcroft has also branched out into the specialist media. He is an investor in the magazine Total Politics, and has bought a half share in the website ConservativeHome. Both editors say that Lord Ashcroft has never interfered with editorial policy, but when he bought half the website PoliticsHome its left-leaning editor-in-chief, Andrew Rawnsley, resigned, along with many of the site's panel of experts.

With Lord Ashcroft back in action, Labour and Lib Dem MPs with small majorities to defend have found themselves up against Tory challengers who can afford to pay for regular newsletters delivered to every door, advertisements in local newspapers, and telephone surveys to sound out the individual concerns of voters, which in many cases are followed up by targeted mailshots.

In Gordon Prentice's marginal seat of Pendle in Lancashire, the accounts of the local Conservative association show that they spent nearly £82,000 in 2008. That is thought to be just a fraction of the money the Tories have actually sunk into Pendle, because much of the cost is borne by party headquarters. Tony Greaves, a Liberal Democrat peer who lives locally, reckons that the true figure is around £250,000.

There is a similar picture in almost any seat on the Tory target list because these days, it seems, Lord Ashcroft is everywhere – except of course on the electoral roll or anywhere that might make him liable to pay UK taxes.

Electoral Commission and Lord Ashcroft

*The Electoral Commission was asked in February 2008 whether Lord Ashcroft, as an alleged tax exile, is entitled to donate to a UK political party.

*The question has not been answered, because Lord Ashcroft's donations are made through his company, Bearwood Corporate Services.

*The Electoral Commission was asked in January 2009, by Labour MP John Mann, whether Bearwood is a genuine UK trading company entitled to give donations.

*The Commission says it is still investigating.

*In March 2008, Labour MP Gordon Prentice asked the Information Commissioner to whom Lord Ashcroft made a promise that he would become a UK taxpayer.

*The Commissioner's office says that it hopes to answer the question soon.