A brief history of government financial scandals

It may be difficult to believe, given what we know about human nature, and in particular the avaricious nature of political mankind, but before 1974 there was no parliamentary register of interests and, beyond a voluntary obligation to “declare an interest” during parliamentary proceedings, MPs and peers could do as they wished as far as their financial affairs were concerned. Some external activities, such as board membership, would be in the public domain, but others quite easily concealed. Honourable members were expected and trusted to be honourable, and the House of Commons was expected to govern itself, with no “independent” scrutiny or authority constitutionally appropriate, derived from the principle of parliamentary sovereignty.

Arguably, as William Hague reflects, these days emails, texts and other electronic communications make such activities trickier than in the era of a nod and a wink; but there has never been a golden age of political propriety. Even in the Edwardian era there were ministers engaged in insider trading (in the then “tech stock” Marconi), and David Lloyd George famously funded himself and his party through a fairly blatant sale of honours.

Heaven knows what they got up to. Some financial scandals emerged from time to time, but unless the legislators of the past were uniquely virtuous, it is likely that the forces of greed were at work in the past just as in the present. The difference now is that there are many more rules to evade.

A series of scandals related to the activities of the corrupt architect John Poulson that broke in the early 1970s were the reason for the establishment of the basic register of interests. The most notable casualty of the time was a near-forgotten figure, Reggie Maudling, former chancellor and serving as home secretary when the stories about his unwise business dealings become public. Among others things Reggie had enjoyed the benefit of a swimming pool paid for by Poulson, though, like much else in Poulson’s empire, it was not built to last. The collapse of a number of property forms and “secondary” banks at the time also embroiled a few politicians, much to their embarrassment.

It was the start of a long period of “cat and mouse” games, where a scandal would break, rules would be tightened up, new loopholes were then found, and the rules had to be revised yet again, until the wit of lobbyists, politicians and lawyers found new ways to evade propriety. Thus, after the rules on lobbying were tightened in 2014, by his own government, David Cameron was subsequently able to operate as an informal rather than registered consultant lobbyist.

When MPs found that they could “flip” their homes to maximise profits, and furnish them nicely on the “John Lewis list” (echoes of that still today), they pushed and pushed the limits until the public found out they’d claim for duck houses and bath plugs. During the “cash for honours” scandal during the Blair government it was found that wealthy donors were encouraged to “lend” money to the Labour Party, which need not be recorded, rather than helping through outright gifts, which did have to be more transparent. So serious were the claims about “buying” peerages and the like that the police interviewed Tony Blair for two hours at No 10, an unwelcome first for a serving premier. Clare Short commented about her party at the time in words that might be uttered today about the Conservatives: “What we’re getting is a bubble of these clever people who’ve captured the state, don’t need a party, don’t need any members, don’t have turbulent people having opinions, who then get money from rich people and run our state without consulting anyone else.” For decades the funding of the Conservative Party was deliberately opaque, with funds flowing through a series of shadow companies named, fittingly, after rivers.

Yet some breaches are plain crude and crass. The “cash for questions” affair in the 1990s was a simple business of brown envelopes of cash or benefits in kind passing hands from Mohammed Al Fayed to various MPs to represent his interests, undeclared, in Parliament. Sometimes a lobbying firm was involved; sometimes not. They were plainly bribes, and a major current of the “sleaze” that overwhelmed John Major and his government.

A closer parallel, perhaps, with the Downing Street flat row today is the £373,000 lent to Peter Mandelson by his fellow cabinet member Geoffrey Robinson. Mandelson was able to move into the trendy Notting Hill district as a result, the reward at last for long years of working for the party on modest wages instead of earning a fortune in business, say. But the loan was unknown even to his friend and confidant the prime minister, Tony Blair, and it was obviously a breach of the Nolan principles in public life, brought in after the cash for questions affair. However, the arrangement was known to the chancellor of the exchequer, Gordon Brown. Brown and Mandelson had once been close, but fell out about Blair getting the party leadership in 1994; after that their relations were cool, to say the least. In due course the story about the irregular home loan made its way into the press, and Mandelson had to resign from the government. The lesson is that being “secretly” beholden to any individual financially is a risk to political life and limb, as well as to the integrity of the system. Even if, as Boris Johnson likes to claim, no one much cares, it can still finish you off if, or when, you get caught.