Hambros investors riled by gift to Tories

HAMBROS, the biggest corporate donor to the Conservative Party, is coming under pressure to slash its pounds 100,000-plus annual gift following a collapse in its profits and a dividend cut.

The annual report of the blue-blooded merchant bank, whose chairman, Lord Hambro, is senior treasurer of the Conservative Party and sits on the boards of four other major corporate donors, will reveal tomorrow that the bank gave the Tories pounds 104,000 in 1994. That makes Hambros the party's biggest corporate backer for the second year in succession.

But the bumper years for the Tories could soon be over. Some of Hambros' major shareholders appear increasingly concerned about the level of contributions.

A spokesman for Norwich Union, which holds a 4.7 per cent stake in Hambros, said: "If a company is cutting dividends you would have to look long and hard at the level of political donations they are making. There is scope for shareholders to take a stance."

However, any shareholder protest is likely to face the opposition of the insurer Guardian Royal Exchange. GRE holds just under 10 per cent of Hambros' shares, is chaired by Lord Hambro and itself gave pounds 50,000 to the Conservatives last year.

A GRE spokesman last week sought to play down the size of Hambros' political donation: "The money could just as easily be spent on an advertising campaign." He defended Lord Hambro's role: "He doesn't have a veto or exercise more than one vote per person. It's a board decision."

Hambros says the size of the donation was decided by directors more than a year ago, long before the full impact of weak bond markets and the continued depressed state of the housing market was known. Earlier this month, these factors were blamed for a 58 per cent drop in pre-tax profits to pounds 37m for the year to March 1995.

But the bank now hints that the level of this year's contribution, which has already been agreed by the bank's board, may be scaled down. "The principal concern in reaching a decision on political donations for the current financial year is the company's trading position", rather than turmoil within the Conservative Party, said a spokesman.

Although Lord Nolan, the law lord investigating standards in public life, has put off an investigation into political funding until after the next general election, influential City groups such as PIRC, the Pensions and Investments Research Consultancy, are lobbying for investors to have a greater say in political donations on an annual basis, in much the same way as they annually approve the reappointment of company directors.

Even if Hambros does soft-pedal on its political donations policy, the row about how such decisions are taken is unlikely to go away. Lord Hambro also sits on the boards of three other quoted companies - P&O, Taylor Woodrow and Legal & General - which all feature in the top 15 corporate donors. All three either raised or maintained their contributions to the Tories in the last financial year, whereas other leading companies have cut back or, in the case of Whitbread, Allied Domecq and Glaxo-Wellcome, stopped giving.

The dwindling flow of corporate funds has fuelled speculation about a financial crisis at the Tories' Smith Square headquarters, as the party struggles to service an estimated pounds 16.5m overdraft. Earlier this year the Prime Minister went to the Yorkshire mansion of a millionaire furniture entrepreneur, Graham Kirkham, to secure a loan of pounds 4m for the party.

Tory backers

Top 10 company donors

Hambros pounds 104,000

P&O pounds 100,000

Hanson pounds 100,000

ABF pounds 100,000

Forte pounds 82,000

Caledonia

Investments pounds 56,000

Tomkins pounds 52,000

Sun Alliance pounds 50,000

Guardian pounds 50,000

Inchcape pounds 40,000

Source: Labour Research Department, annual reports.