A hedge fund tycoon who hosted Kwasi Kwarteng for a champagne party hours after last month’s mini-Budget is among scores of wealthy financiers and City firms who have donated more than £3.6m to the Conservative Party this year, analysis by The Independent reveals.
Investment banks, asset management firms, hedge funds, insurers and other financial services companies and high net-worth individuals linked to them have made just over 100 deposits to the Tories since 1 January.
Mr Kwarteng’s mini-Budget caused chaos in the markets and prompted the Bank of England to intervene with an emergency £65bn bond-buying scheme to prop up pension funds at risk of collapse, as the cost of government borrowing rose to levels similar to those seen in Greece and Italy.
Discontent about the state of the markets sparked a fresh rebellion among Tory back benchers, many of whom were already uneasy about Mr Kwarteng and then prime minister Liz Truss’s tax-cutting agenda – which predominately benefited the better-off – amid the cost of living crisis.
Despite warnings from Rishi Sunak, the former chancellor and now prime minister – and most mainstream economists that his plans would cause a run on the pound and send interest rates soaring – Mr Kwarteng in his financial statement to MPs in the House of Commons on 23 September pressed ahead with announcing tax cuts to be funded by more government borrowing.
He said he would abolish the 45p top rate of tax for those earning more than £150,000 per year. Although the decision has since been reversed, it and the winder financial package outlined by Mr Kwarteng at the despatch box caused the pound to slump against the dollar and in Asian trading, while the cost of government borrowing soared.
Almost all of the measures outlined in Mr Kwarteng’s financial statement were scrapped by Jeremy Hunt when he took over as chancellor on 14 October.
Andrew Law, a financier worth a reported £750m who hosted Mr Kwarteng at the drinks gathering, has been one of the Conservative Party’s most prolific donors over the past two decades. According to analysis of official records, Mr Law alone has given the Conservative Party £110,000 since the turn of the year.
Labour wrote to Jake Berry, the former Conservative Party chairman – who was also present at the gathering – calling on him to release a list of names of those in attendance and whether they pledged donations or paid a fee to be there.
In his statement, Mr Kwarteng also announced he was scrapping the cap on bankers’ bonuses, introduced by the European Union in the aftermath of the crash. He argued that it would make the City more competitive, attracting the world’s top talent to London and thereby increasing the UK’s tax return. Critics say unlimited bonuses led to the type of risk-taking that caused the 2008 crisis.
Mr Kwarteng said at the time he planned a deregulation blitz for financial services firms in the City of London, which was being framed as “Big Bang 2.0” – a nod to the reforms carried out by the late prime minister Margaret Thatcher in the late 1980s.
Under the plans, EU rules limiting investments by insurance firms were to be scrapped in return for them investing in the social care system. Kwarteng later met with City chiefs to hear their proposals on how to make the government’s growth plan work.
He and Ms Truss also vowed to reverse Mr Sunak’s pledge to raise corporation tax and vowed to reduce the rate of income tax on dividends, measures which have also been axed by Mr Hunt, who was reappointed to the role of chancellor after Mr Sunak formed a government on 25 October.
Of the £3.6m donated to the Conservative Party in the six months from 1 January to 30 June, £386,307.61 came from banks and investment banks or individuals with links to them.
Some £100,000 came from insurance firms or donors associated with the industry, while the remaining £3.1m came from an assortment of hedge funds, asset and wealth management companies, venture capital firms and other financial services businesses, or people linked to them.
In the previous six-month period, from 1 July to 31 December, the total amount of donations to the party from the financial world was £2,120,334.72 – over £1m less than in the six-month period in 2022.
Of that total, £854,051.58 came from banks, investment banks or individuals with links to them. Some £24,000.00 came from insurance companies or people with links to the industry, while the remaining £1,242,283 came from hedge funds, asset and wealth management companies, venture capital firms and other financial services businesses, or people linked to them.
There is no suggestion that there is anything untoward about any of the donations.
Malik Karim, the Conservative Party treasurer, was one of the party’s most prolific donors during this 12-month period. Donations registered in his name since July last year total just under £1m. Mr Karim, appointed to his role by former party co-chairman Ben Elliot in September 2021, is the founder and chief executive of Fenchurch Advisory Partners, an investment banking firm in London. Two of Mr Malik’s colleagues at the firm also made donations worth £60,000.
Anneliese Dodds, the Labour Party chairwoman, said the analysis shows the Conservative Party is “in the pockets of their wealthy donors”, adding that the consequences of Mr Kwarteng’s statement would saddle future generations with more debt.
“As the party of fiscal responsibility, only a Labour government will provide the economic stability and fairer, greener future that we need,” she added.
Fran Boait, executive director of Positive Money, an advocacy group that campaigns for sustainable economic growth, said: “The deep ties between politics and finance help explain why, instead of a cost of living budget, we got a bankers’ budget.
“With banks and hedge funds writing their own rules, it’s no surprise that we’re seeing the chancellor cut benefits for the poorest households while lifting a cap on banker bonuses and deregulating the City.”
Ms Boair added: “We need fair limits on what can be spent on politicians and their parties, a ban on all private sector second jobs for MPs and stronger disclosure standards to restore faith in our democracy.”
A Conservative Party spokesperson said: “The Conservative Party is funded by membership, fundraising and donations. Donations to the Conservative Party are properly and transparently declared to the electoral commission, openly published by them, and comply fully with the law. Fundraising is a legitimate part of the democratic process.”
Mr Kwarteng, Mr Law and Mr Malik did not respond to requests for comment.
