Although Frank Hester is the largest donor to the British Conservative Party, he remained relatively unknown until he became embroiled in controversy over allegations of racism.
The 58-year-old founder of The Phoenix Partnership, a software company with an estimated fortune of £415m, was reported to have said in 2019 that he could see images of the former Labor Party at his company’s Leeds headquarters, and in March made headlines. Rep. Diane Abbott made him want to “hate all black women.”
This debate raised important questions about racism in the upper echelons of Britain’s business and political elites. But it also raised questions about the benefits, as well as the potential risks, of political donations for wealthy people around the world. Mr Hester has donated £10 million to the Conservative Party.
Gina Miller, a financier who is standing as leader of the True and Fair Party in the next UK general election, said: It is important to remember that this is only a threat to people or parties who are hiding something. ”
Billionaire businessman John Caldwell donated £500,000 to the Conservative Party before the 2019 general election. Asked if the Hester controversy would deter him from making further political donations, he told FT Wealth that it would not.
“However, individuals who donate large sums of money to political parties must accept the public scrutiny that comes with it,” he warns.
In a statement released by TPP, Hester acknowledged that he had been rude to Abbott in a private meeting several years ago, but added that “his criticism had nothing to do with her gender or the color of her skin.” There was none.” The statement added that Hester “wants to make clear that he believes racism is a poison that has no place in public life.”
But the uproar is more than just a warning to Britain’s wealthy. Large donations are made by wealthy individuals to political organizations around the world, and Hester’s situation goes unnoticed.
“Politics has become so divisive that you have to be careful who you support, because it can backfire.” , says an adviser to a wealthy American family who requested anonymity. “You also have to make sure your house is in order,” he said, adding that corporate donations can also fall through and should be considered carefully.
In fact, in the wake of the Capitol riot in Washington in 2021, a number of large U.S. companies, including Citigroup, American Express, and the Marriott hotel chain, joined the Republican Party in voting against Joe Biden’s victory. He announced that he would suspend donations to members of Congress. Organizations have suspended donations after supporters of Donald Trump stormed the headquarters of the U.S. government, causing violence that left five people dead.
“Rest assured that we will not support candidates who do not respect the rule of law,” Candy Wolf, Citi’s head of global government affairs, wrote at the time.
Despite the risks associated with supporting a political party, both Miller and Caldwell believe that donations play an important role in politics, and were quick to point out that the Hester scandal should not deter them from doing so. .
said Caldwell, who founded the now-defunct mobile phone company Phones4U. “In my opinion, there is nothing wrong with donating to political parties because I have a strong personal belief that political parties are in the best long-term national interest and provide long-term benefits.” The heart is the people; It is the ability of the people to fulfill the promises they have made. ”
Mr Miller, who donated £10,000 to Labor before the 2015 election, said: ‘People who give their money to support a party that reflects their values and fights for them have nothing to fear. ” he added.
They also agree that donations should be fully transparent and that dark money, whose sources are not disclosed, should not be allowed to influence political opinion. is.
The issue surfaced in the United States in 2022, when the New York Times, in collaboration with investigative news organizations ProPublica and The Lever, reported on a right-wing group controlled by legal activist Leonard Leo, who advised President Trump on his Supreme Court selections. revealed that it existed. was the beneficiary of a $1.6 billion donation from 90-year-old manufacturing magnate Valle Seed. The money was raised through a series of opaque transactions over two years.
As a former adviser to President Trump on judicial nominations, Leo helped establish a conservative majority on the Supreme Court that eliminated constitutional protections for abortion rights. Leo’s Marble Freedom Trust is not required to disclose its donors.
Referring specifically to the situation in the UK, where political parties accepted £93 million in donations last year, Mr Caldwell said: “The public has a right to know where political parties and the Electoral Commission, which regulates political funding in the UK, derives their income.” has rules regarding this type of donation.
“We need to focus on accountability and transparency, and ensure that donors cannot protect themselves from scrutiny. To do that, now is the time to ensure that current rules are fit for purpose. This may be a great opportunity to reconsider whether or not you have one.”
Miller agrees. “The UK’s Public Life Standards Commission proposed annual limits on donations to prevent ‘influence auctions’ and access to Westminster dignitaries, but it was shelved for 15 years and ignored by all MPs. The main status quo party.
“There should be a cap on the amount people can donate per year or per parliamentary term. The True & Fair Party believes the cap should be set at £100,000. [per donor] for each parliamentary term. ”
Mr Hester donated £5m to the Conservative Party in May 2023 and a further £5m through his company in November last year. TPP also donated a £15,900 helicopter flight to Chancellor Rishi Sunak at the end of 2023.
However, Tortoise Media reported that Hester had donated an additional £5 million, which was more than previously known and written about in the media. This discrepancy reportedly occurred because the register is only updated quarterly, creating a lag between receipt of money and publication.
If the £5 million is confirmed in the next Electoral Commission update in June, it would bring total donations from Hester over the past year to £15 million, although Hester’s company has made the largest contribution in the past eight years. It has won more than £400m of NHS and prison contracts. The Conservative Party declined to comment.
Some fear that the huge increase in political donations in the UK in recent decades is giving them undue influence over government appointments and decisions. In 2022, the Cage Research Center at the University of Warwick published a paper examining political donations to British political parties over the past 20 years, which is currently being updated. The study found that donations almost tripled in 20 years, rising from £41m in 2001 to £101m in 2019. The study also shows that individual donations have increased significantly, with 60% of donations now coming from wealthy individuals. . By comparison, before the late 2010s he was at 40%.
Mirko Draka, director of the Cage Research Center, told FT Wealth: “As donations increase, a group of high-value donors that we call ‘super donors’ is emerging.”
With Mr. Hester in mind, he suggests these individuals should be very careful about their donations. “In today’s highly polarized political climate, the trade-offs associated with donations are changing. Large donations invite scrutiny from partisans on the other side. You have to be prepared to be turned upside down.”
The research paper noted that Britain’s donations have traditionally been considered relatively unimportant compared to the United States. However, “the significant increase in political party donations seen over the past 20 years suggests that they are having a very real impact on the workings of the UK’s democratic process.”
For campaigners, the answer is simple. Rules need to be tightened. However, it feels like the opposite is happening in the UK, with the level of donations that need to be declared rising from £7,500 to £11,180 earlier this year.
Jess Garland, research and policy director at the Electoral Reform Institute, said: “Without transparency and ultimately without donor restraint, politics will be for sale. With more than one in five candidates for parliamentary seats being party donors, there are many questions to ask about the role of money in politics.
“The greatest influence should be exercised by voters, not by the richest voters.”
Mr Miller added that political parties are “of course going to be judged by their allies, and that’s to be expected, but it’s also a two-way street.” She says wealthy people like Hester would be wise to “remember that.”
This article is part of FT Wealthphilanthropy, entrepreneurs, family offices, alternative and impact investing.