Labour Party loan liabilities

rwendland Fri Jan 25, 2008 at 07:35:05 PM GMT Print-friendly version Facebook

Tribune today has a dramatic article about Labour Party attempts to reschedule up to £14 million of loans, and that NEC members could be personally liable for the debts if legal action is taken. Apparently a last resort of converting the party into a limited company is being considered by some, to protect the NEC members from liability!




The article claims "Some of [the 12 large providers of loans] are apparently spitting blood and all of them are pissed off", and there have been acrimonious rows with donors who want their cash returned. Total borrowings stand at about £20 million. The latest public donation numbers are for 2007 Q3, when about £4.7 million of donations were taken (including £2 million from Lord Sainsbury, possibly a conversion of his £2m loan).

I thought the Labour Party legally was an "unincorporated association", and that all members were jointly liable for debts. So £20 million between 180,000 of us is about £110 of liability each. But the article claims just the NEC are personally liable. This may be due to the complexity of trust-law where the officers/NEC are acting as trustees on behalf of the unincorporated association to hold property and debts. Are there any lawyers or accountants out there that can explain better?

I wouldn't like to be in Jack Dromey or the forthcoming GenSec's shoes!

My feelings are: what a fine financial mess Blair & Co got the party into.

For the record, the large loans as at 30 September 2007 making up £19.45 million of the £20.2 million, with their loan repayment/review dates, were:

£3,500,000        31/12/2006        Co-operative Bank (secured credit facility)      - overdue
£2,300,000        28/04/2007        Sir David Garrard      - overdue
£2,000,000        13/09/2007        Lord Sainsbury      - overdue
£2,000,000        28/02/2008        Richard Caring      - due soon
£2,000,000        13/12/2006        Unity Trust Bank (secured credit facility)      - overdue
£1,500,000        07/08/2007        Dr Chai Patel CBE      - overdue
£1,000,000        28/02/2009        Andrew Rosenfeld
£1,000,000        25/04/2008        Barry Townsley      - due soon
£1,000,000        30/09/2007        Nigel Morris      - due
£1,000,000        ongoing              Sir Christopher Evans
£500,000           Indefinite           Gordon Crawford
£500,000           12/10/2009        Rod Aldridge
£500,000           12/10/2008        Rod Aldridge
£400,000           30/09/2007        Derek Tullett CBE      - due
£250,000           31/10/2007        Sir Gulam Noon      - due

Update: The 2006 accounts (note 28) explains a bit about the repayment terms of the large loans from individuals: "if the loan is not repaid on the expiry of its initial term, then the loan is generally repayable 180 days after the Party receives a written repayment notice." So a nominally overdue loan may not need repaying. I wonder how many repayment notices have been received?



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Labour Party loan liabilities | 18 comments (18 topical)

Re: Labour Party loan liabilities (#1)

by TrueLabour on Sat Jan 26, 2008 at 08:50:47 AM GMT

Where is Jack Dromey?

In the dark as usual.

If he had an ounce of self respect he would resign as he is unable to perform the job of Treasurer. 

 


Re: Labour Party loan liabilities (#4)

by rwendland on Sat Jan 26, 2008 at 01:01:53 PM GMT

The reports are that only Tony Blair, Lord Levy and Matt Carter knew of the loans at the time they were made. Jack Dromey said when he found out:

"Neither the elected chairman nor myself as the elected treasurer of the party knew anthing whatsover about these loans obtained in 2005" ...  "I have, therefore, commenced an enquiry into the securing of loans in secret by the Labour party in 2005"  ... to ascertain "what we need to do to ensure that never again the elected officers of the Labour party are kept in the dark" 

I think Jack Dromey was dropped in it over this, though maybe he was remiss in accepting financial reports from the GenSec/senior-employees without probing primary financial documents and lower level financial staff for assurance.

If this gets into a legal bunfight it will be interesting to discover if Blair, Levy & Carter had the legal right to enter into these loans on behalf of the party in the way it is alleged they did - it must be a possibility those who knew where exceeded their powers and so would be held legally liable for the loans.


[ Parent ]

Re: Labour Party loan liabilities (#5)

by doctordunc on Sat Jan 26, 2008 at 01:12:50 PM GMT

To be honest, I think that's what we should hope for.


[ Parent ]

Re: Labour Party loan liabilities (#17)

by rwendland on Wed Jan 30, 2008 at 12:01:25 AM GMT

doctordunc, it seems this was thought thru back in 2006 when a group of labour lawyers and constituency chairs considered going to the High Court to get a ruling that the fundraisers had acted ultra vires. That could have left the Labour Party no longer having to pay back a penny to any of the lenders, leaving them having to sue whoever signed the agreement (Carter?), or Levy and possibly Blair, to get their money back if they wanted to.

Seems to me that the NEC should properly have to authorise a trustee to accept a loan under Clause VIII.3(i) powers. Possibly the asset trustees, the directors of Labour Party Nominees Limited or Labour Party Properties Limited under Clause II.2.(j) of the constitution, could also accept a debt. But I don't see an obvious constitutional rule that gives the GenSec and/or Party Leader on their own the power to accept a loan as trustee on behalf of the Labour Party. So it does seem possible that legally these loans are not with the Labour Party, but with the individual(s) who made the agreement.

Maybe this is why some of the large lenders are apparently "spitting blood" - maybe they realise they have no easy way of taking legal action against the party, as the legal situation is so difficult.

Perhaps this is a chance for our Deputy Leader (and Treasurer's partner), Harriet Harman QC, to show her metal and have a go at saving the party £14 million in the courts! However I suspect that no-one will stir this pot until after the next election.


[ Parent ]

Re: Labour Party loan liabilities (#7)

by swatantra on Sat Jan 26, 2008 at 03:14:38 PM GMT

I still feel that, Blair Levy, and Carter still have some explaining to do about these loans. Levy is bringing out his memoirs soon; will it kiss and tell or a cover up? 
If the NEC are the 'legal entity' for decision making then they will have to foot the bill; perhaps we won't see many people jumping forward to be nominated to the NEC in future. Individual members of the LP cannot be held responsible or liable for any costs.


[ Parent ]

Re: Labour Party loan liabilities (#2)

by Curlew on Sat Jan 26, 2008 at 08:56:41 AM GMT

If members have no say in how cash is garnered or spent then members can have no liability.


Re: Labour Party loan liabilities (#3)

by doctordunc on Sat Jan 26, 2008 at 09:16:35 AM GMT

It's just absurd.  How did we allow ourselves to get into a spending war with the tories? How did we allow ourselves to get so dependent on large individual donations/loans?    I know people got cross with me for saying it last time, but this is just part of the true cost of the New Labour Project - and we could literally be paying it!


Re: Labour Party loan liabilities (#6)

by lastword on Sat Jan 26, 2008 at 03:02:56 PM GMT

Never mind Jack Dromey, where were the party's LAWYERS in all of this?


[ Parent ]

Re: Labour Party loan liabilities (#8)

by HenryG on Sat Jan 26, 2008 at 06:50:15 PM GMT

There's been a lot of discussion about Wiseman standing for the NEC and his 'right' to stand against the CLGA slate. Reading this thread about liabilities NEC could personally face, he'd be forgiven for exercising his right to withdraw! 


Re: Labour Party loan liabilities (#9)

by ComradeNorton on Sat Jan 26, 2008 at 10:17:48 PM GMT

Is it just me or isn't it a bit disturbing that the party's leadership is taking out long-term loans against a short-term asset (a single election)?

I know we live in a credit card society but to take out loans rather than receive donations just doesn't make common sense.


[ Parent ]

Re: Labour Party loan liabilities (#10)

by doctordunc on Sat Jan 26, 2008 at 10:20:30 PM GMT

It only makes sense if people are unwilling to have their names known when they donate (these loans were - originally - secret).

Trade union funding is open, clean and democratic: celebrate it!


[ Parent ]

Re: Labour Party loan liabilities (#11)

by ComradeNorton on Sat Jan 26, 2008 at 11:37:57 PM GMT

But then it is seen as a way around the rules, it all comes out and the loans are recalled by some pretty peed off lenders leaving us in the sticky stuff.

The phrase "too cleaver by half" comes to mind.


[ Parent ]

Re: Labour Party loan liabilities (#12)

by doctordunc on Sun Jan 27, 2008 at 02:15:21 PM GMT

I agree.


[ Parent ]

Re: Labour Party loan liabilities (#13)

by Wiseman on Sun Jan 27, 2008 at 07:41:34 PM GMT

Good point as they are the controlling body of the party.  If we have just stuck to small donations and union money, we wouldn't have this problem. 

The lesson is to stay away from anything other than were you come from as a party!

Wiseman


[ Parent ]

Bring on the salaried beneficiaries (#14)

by rwendland on Sun Jan 27, 2008 at 09:21:02 PM GMT

My proposal to pay off these debts is to call upon the salaried beneficiaries of recent elections to make a significant donation to party funds.

If nearly all of the 440 Labour MPs, MEPs, MSPs and AMs contributed £20k each, that would amount to about £8 million, getting on for half the outstanding debt. Probably enough to fend-off a crisis. Those that refused could take their luck with CLP re-selection next time, and fund their own re-election expenses.

We'd have to hope the Unions and Co-operative movement will be willing bail out the party again for the rest over a few years. Though if I was a Union leader I'd be playing hard-ball, given how little the govt has enacted in the way of Union friendly legislation.

If necessary there would have to be another call on the salaried parliamentarians to make up the rest.

We shouldn't be dependent on a fresh set of rich individuals to bail us out from the first lot. We sold off 16 Old Queen Street HQ for £5.8 million in 2006 leaving only about £3 million in tangible assets (less a £750k "onerous lease"), so no solution there.

Any thoughts on this? It would require concerted CLP will-power to drive this through, but the alternatives look bleak to me. We'd have to go with this soon, before the beneficiaries of that expensive 2005 election are gone! Or are there sensible alternatives?

For some financial context 2006 party expenditure was £26.6 million, with a £800k deficit for the year. Donations were £5.4 million for 2006, affiliations+membership were £12.3 million. Paying off the debts from cost-savings looks very tough. Interest alone on the £20 million debt must be about £1.25 million/year.


Re: Bring on the salaried beneficiaries (#16)

by Curlew on Mon Jan 28, 2008 at 11:43:03 AM GMT

Making the beneficiaries pay makes a lot of sense to me rwendland.  However, if they were made to pay after the event they would only end up voting in significant pay rises in compensation.


An amendment to this could be that prospective MPs should take out a loan of about £10K each which should go to party funds, to be paid back after an election.


[ Parent ]

Re: Labour Party loan liabilities (#15)

by treborc on Mon Jan 28, 2008 at 07:56:56 AM GMT

I doubt many MP's would see this as good politics, they might well ask for donations.


Re: Labour Party loan liabilities (#19)

by pipesmoke on Mon Feb 04, 2008 at 01:34:17 PM GMT

Money Box live is covering credit and debt this afternoon (Mon 4th Feb) and advising on when to declare bankruptsy. Perhaps the Nec should listen.


Labour Party loan liabilities | 18 comments (18 topical)