Millions of taxpayers' cash spent on venture capital fund run by Tory donor

Millions of pounds of taxpayers' money is being spent on a venture capital fund overseen by one of the Conservative Party's biggest donors, The Independent on Sunday can reveal.

The British Business Bank, which is run by the Department for Business, has committed £7.8m to the Dawn Capital II investment fund, Whitehall documents show. Dawn Capital II's parent company is Dawn Capital, whose chairman is Adrian Beecroft. Mr Beecroft has donated more than £700,000 to the Conservative Party, making him eligible for David Cameron's "Leader's Group" of top donors who are granted exclusive access to the Prime Minister.

Dawn Capital has in the past invested in Wonga.com, the payday lender which last month was criticised by the Financial Conduct Authority for sending fake lawyers' letters to its customers who owed money. While Dawn Capital's investment in Wonga.com is separate to Dawn Capital II, which is receiving public funding, the Labour MP Stella Creasy, who has campaigned against payday lenders, said the link was nevertheless of concern. She also questioned why public money was being invested in a fund with links to a high-profile Conservative donor.

The revelation comes amid growing criticism by MPs that another Tory donor, the Carphone Warehouse co-founder David Ross, could be selected as the new chairman of the education inspectorate Ofsted. Last night the Liberal Democrats questioned the suitability of Mr Ross, a friend of Mr Cameron. While Mr Ross, who has donated £220,000 to the Tories and is also a member of the Leader's Group, has experience in education as the founder of a chain of academies, critics have also questioned whether this would be a conflict of interest for an Ofsted chairman. Referring to Mr Ross's "colourful past" – which includes a bizarre scuffle involving a Lithuanian escort – a Lib Dem spokesman said: "I would be very surprised if the independent panel [drawing up a shortlist] thought David Ross was seen as a suitable figure who could command cross-party support."

open image in gallery

Last month the Business Secretary Vince Cable issued a Commons written statement celebrating the British Business Bank's £7.8m investment in Dawn Capital II, describing it as "innovative". The Department for Business's Strategic Plan, published at the same time, said the investment, in July last year, was one of the "highlights" of 2013. The British Business Bank was set up by the coalition to invest public money in small and medium businesses. It is understood that Dawn Capital II is investing in new technology businesses, including eCommera and Evrythng.

Mr Beecroft has donated a total of £722,276 to the Tories since Mr Cameron became leader, including £20,000 in March this year, while his wife Jacqueline has donated £50,000. Earlier this Parliament he was appointed by the Prime Minister to review employment law, but when the Beecroft Report was published two years ago ,his proposals to make it easier to sack under-performing employees were blocked by the Lib Dems.

Ms Creasy said last night: "When millions in public funding goes to a company linked to a major Tory donor there are questions for David Cameron to answer, especially when that company has links to a controversial payday lender. David Cameron needs to explain what went on here and what influence Tory donors have on government decision-making." It is understood that Mr Beecroft has never raised his business interests with the Prime Minister or Business ministers, and there is no suggestion of impropriety on Mr Beecroft's part.

open image in gallery

A spokesman for Dawn Capital said: "We invested in Wonga.com in 2007 because it promised to revolutionise online finance. Since we invested some of the world's top Venture Capital firms came in alongside us such as Accel Partners, Greylock, Meritech and others. It is now operating in a regulated industry and we look forward to the next chapter of the company's story as it launches other financial products and in new markets.

"Dawn Capital II continues to invest in outstanding technology companies mostly based in the UK. We are very proud to have Mr Beecroft as our Chairman."

A Business Department spokesman said: "The British Business Bank has not invested in Wonga, either directly or indirectly. The basic principles governing the investment policies of the Business Bank are approved by ministers, but ministers are not involved in the individual selection of bids for investment, which are made on a commercial basis by the Business Bank staff."

Whitehall sources said they were satisfied that Dawn Capital's investment in Wonga.com was separate to Dawn Capital II which received public cash.

Asked if Mr Cable was happy that the British Business Bank was investing in a fund whose chairman is a major donor to the Conservative Party, the spokesman said: "Investment decisions, which are made on commercial merit alone, do not take into account political affiliations."

Last month the police revealed they are considering a criminal investigation into Wonga.com over the fake legal letters. Mr Beecroft told The Independent on Sunday he knew nothing about the affair.

The Leader's Group of top donors gives its members access to David Cameron and other senior figures at dinners, lunches and receptions. Last week details of the financiers and millionaires who attended last year's Conservative Gala Dinner were revealed, prompting criticism that Mr Cameron's party is still largely reliant on rich donors for funding. The revelations of cash for access prompted Sir Alastair Graham, ex-chairman of the independent Committee on Standards in Public Life, to criticise secretive fundraising events.