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Scandal threatens Britain's conservatives

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Scandal threatens Britain's conservatives

Labour signals it will question Lord Ashcroft's tax status

  • U.K. conservative leader David Cameron.
    paul_clarke/FlickrU.K. conservative leader David Cameron.

LONDON — With a general election expected to be called within weeks, Britain's opposition Conservative Party has watched its wafer-thin polling lead obliterated by a scandal about the tax status of its largest donor and important backroom operative — Lord Ashcroft.

Now in a dead heat with the Conservatives, the reigning Labour Party signaled Sunday that it meant to take full advantage of the scandal, when the business secretary, Lord Mandelson, mocked the Conservative leader as "too weak" to discipline the powerful Ashcroft in the wake of the tax disclosures.

After a decade of questioning about his tax status, and repeated assurances from Conservative Party leaders that he was in fact a resident for tax purposes, Ashcroft admitted last week that his vast offshore income was sheltered from the British taxman under the controversial non-domicile rule. As a "non-dom," to use the British shorthand, Ashcroft would pay tax only on income received inside the United Kingdom.

Ashcroft is a billionaire businessman whose corporate empire is run from Belize, the central American country previously known as British Honduras. The Conservative Party's deputy chairman, and one of its master tacticians, Ashcroft maintains a lavish beachfront mansion in Belize City, a 150-foot yacht and a luxurious Dassault Falcon EX 900 private jet, nicknamed the Flying Lion. Ashcroft's exotic life in his tropical hideaway has led the British press to dub him "Blofeld," after the James Bond villain with a similar taste in palm trees and sparkling waters.

The origins of the scandal go back a decade, to commitments Ashcroft made to the British government before he was made a peer — a member of the House of Lords.

Peerages are much sought-after baubles in the U.K., and although all honors technically come from the Queen, the party in power prepares regular lists of Britons to be knighted or ennobled. The opposition party is allowed to put names forward, and 10 years ago the Conservatives nominated Ashcroft.

The Political Honours Scrutiny Committee rejected him because he lived outside the country and did not pay U.K. taxes.

Ashcroft promptly wrote to William Hague, then the Conservative leader, making a "solemn and binding undertaking" that he would "take up permanent residence in the U.K. again before the end of this calendar year." The year was 2000.

Hague went public with Ashcroft's commitment, depicting the gesture as a selfless act that would funnel tens of millions of pounds from the tycoon's pocket into Britain's coffers.

Ashcroft's ennoblement was approved by the Labour government, and Mr. Ashcroft became Lord Ashcroft.

Yet the issue of his taxes would not go away. Was he paying any? If so, where? Ashcroft tried to dismiss such questions as his private business, but doubts persisted.

Two years ago the current Conservative leader, David Cameron, tried to smother the issue.

"I am satisfied," he told a reporter from The Times of London, "that the undertakings [Ashcroft] gave are being met," and that Ashcroft was indeed resident in the U.K. and paying taxes.

But only one day later, asked the same question, Cameron's answer changed.

"I have sought reassurances that the guarantees he made at the time are being met and they are being met," said Cameron. "How he pays his tax … is a matter you should put to him."

Instead, someone put it to the freedom of information commissioner. Knowing that the government was about to respond to the request, Ashcroft last week admitted his status.

The blow falls hard on Cameron, who has struggled to jettison his party's image as the party of upper-class privilege. He is under pressure from his own right, who view it as a mistake to abandon their traditional constituency. Making matters worse for Cameron, the Conservative's once comfortable lead over the governing Labour party has shrunk to 2 percent, despite the continued unpopularity of Prime Minister Gordon Brown.

Veteran political observers now expect a "hung Parliament," without a clear majority for any party — further calling into question Cameron's leadership.

In a weekend poll, 70 percent of respondents said they disapproved of Ashcroft's non-dom status, and 55 percent said they thought the issue had damaged the Conservatives.

Yesterday the scandal threatened to blow up into a constitutional crisis when it was reported that Lord Oakeshott, a senior spokesman for the Liberal Democratic Party, has written to a high cabinet official demanding an investigation of Ashcroft's ennoblement "to establish whether the Queen conferred a life peerage … under false pretences."

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