Page last updated at 21:25 GMT, Monday, 15 June 2009 22:25 UK

Government defeat on tax exiles

Lord Ashcroft
Labour peers have Tory donor Lord Ashcroft in their sights

The government has been defeated in the House of Lords over donations to political parties by tax exiles.

Labour rebels and Lib Dem peers passed an amendment to the Political Parties and Elections Bill.

It stated that only people resident in the UK for taxation purposes could make donations to political parties.

The amendment may now be debated in the Commons but its chance of success is slim due to government opposition. The Conservatives also oppose the idea.

Many Labour figures have long been unhappy about the tax status of Tory deputy chairman and donor Lord Ashcroft.


Lord Ashcroft, who was partly brought up in Belize and has close business ties with the former British colony, is one of the party's main donors and is helping fund its efforts to win marginal seats at the next election.

The Conservatives have always insisted his donations are legal under electoral law requiring donors to be registered to vote in the UK and for companies making donations to be registered at Companies House.

But in February the Electoral Commission began a probe into donations to the Tories made by one of his firms.

And Lord Ashcroft has not confirmed whether he is resident in the UK or pays taxes in the country.

It was reported last year that David Cameron had asked Lord Ashcroft to clarify his tax affairs following assurances he made when he was made a peer in 2000.

Asked recently about the issue, shadow foreign secretary William Hague said he had "no reason" to believe the peer had not complied with his commitments.

The amendment to the Political Parties and Elections Bill on tax guarantees, tabled by Labour peer Lord Campbell-Savours, was passed in the Lords by 22 votes.

Forty-six Labour peers backed the amendment, the largest rebellion in the Lords since 1997.

Lord Campbell-Savours said the public rightly believed that "foreign" donors should not be influencing the political process by giving money to political parties.

For the government, Lord Bach said he was not sure residence-based restrictions could be properly enforced as the authorities did not have comprehensive details of taxpayers' domicile status.

He said the matter should be examined more thoroughly as part of the government's constitutional reform review later this year.

Earlier this year, Labour MP Gordon Prentice got the support of 216 colleagues for a similar measure but the matter was not considered at the time.

Unlike in the Lords, there is no guarantee that the matter will be debated in the Commons.

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