Tories face call to repay Rothschild £1m loan

The Conservative party faced demands last night to repay a huge loan from a member of the Rothschild banking family made through a company set up with the sole purpose of protecting her anonymity.

An Observer investigation has found that the party has benefited from a £1m loan from Lady Victoria de Rothschild, made via a 'non-trading' company that conducts no business and has had no other function in its four-year history than to lend the Tories money.

Documents filed with the Electoral Commission show the party received the loan for £1,014,000 from a company called Ironmade Ltd on 1 June 2005 and is not due to pay it off until 2010.

Ironmade's accounts reveal the firm has been dormant since it was created in April 2005. According to the accounts, 'the ultimate controlling party of the company is Victoria, Lady de Rothschild, by virtue of her control of the entire issued share capital'. Prior to the loan, de Rothschild gave the party almost £130,000 via a series of donations made between 2002 and 2005 under her own name.

Legislation barring anonymous loans, and those from non-trading companies, was introduced in 2006, after the de Rothschild loan was made, so the Tories can legitimately claim all parties were acting within the law.

Some of the loan is understood to have been repaid this year. But the party's decision to continue the loan arrangement after the 2006 law change is an embarrassment as it attempts to shrug off the latest row over funding. Last week party officials said they accepted money only from 'legitimate UK trading companies'.

Denis MacShane, Labour MP for Rotherham, called for the loan to be repaid. 'David Cameron is showing a contempt for British democracy's rules on party financing,' MacShane said. 'If they had an ounce of integrity left, they would only work within the law as it stands.'

Lord Bell, de Rothschild's spokesman, said his client, a former Conservative party treasurer once married to the financier Sir Evelyn de Rothschild, asked her secretary and solicitor to be the company secretary and director so she would 'not be bothered by journalists'. 'At the time she made the loan, it was absolutely proper and legal for her to do so,' Bell said. 'She was subsequently questioned by police about the loan as part of the "cash for honours" investigation and was cleared of any wrongdoing. The loan she made was approved by Lord Marland'. Marland was then treasurer of the party.

The revelation comes amid a fierce row triggered by allegations the shadow Chancellor, George Osborne, discussed with the Tories' chief fundraiser, Andrew Feldman, a possible donation from Oleg Deripaska, after meeting the Russian billionaire on his yacht in Corfu last summer.

As the toxic row threatened to spill into its second week, Lord Mandelson, the Business Secretary, who also spent time on Deripaska's yacht, yesterday admitted meeting the oligarch two years earlier than previously revealed. European Commission officials had said the two had met socially in 2006 and 2007. But, in a letter to the Times, Mandelson said they first met in 2004. He accepts people may have been misled by a statement issued by his officials.

Senior Tories suggested Osborne will in future remove himself from discussions about donations. But the party's attempts to deflect mounting interest in its finances is unlikely to be helped by the revelation of the de Rothschild loan.

Bell said last night: 'I don't think it's a secret loan,' he said. 'It's not that difficult to find out who is behind it. It just requires a little bit more work by an investigator.'

Asked to comment on the firm's nontrading status, Elizabeth Alexander, Ironmade's company secretary since May 2005, said: 'Talk to the others' and hung up. David Catchpole, who resigned as a director of the company in June 2008, said: 'I can't discuss any of that. I am not employed by my former company any more or the client.'

A spokesman for the Tories said: 'The loan is fully declared to the Electoral Commission and permissible under the rules as they stood at the time and remains fully permissible now.'

Interest in Tory party funding was renewed last week following the extraordinary spat between Osborne and another member of the Rothschild family, Nat, a distant cousin of Lady Victoria. Nat Rothschild, a hedge-fund manager, blames Osborne for leaking embarrassing details about his friend Mandelson. Furious at Osborne's apparent indiscretion, Rothschild went public with allegations about him and Deripaska.

Senior Tories said conversations about donations must now be left to Feldman. 'That is a simple lesson to learn,' said one shadow minister. The vetting process currently applied to people seeking meetings with David Cameron, designed to prevent him associating with anyone potentially scandalous or embarrassing, will be extended to other senior figures.

The party is still braced for the findings of an inquiry into shadow cabinet minister Caroline Spelman's use of Commons expenses to pay her nanny. A report from the parliamentary standards commissioner is not expected until later this autumn.

Hidden loan that boosted Tories
Lady de Rothschild wanted to make a £1m loan to the Conservative party. How she did it reveals much about the murky world of party financing.

http://www.guardian.co.uk/politics/2008/oct/26/party-funding-conservatives-rothschild