Andrew Sparrow, senior political correspondent

The Guardian, Wednesday 4 February 2009 08.00 GMT

Article history

Ministers are under pressure to back a proposal supported by Labour backbenchers for people to be banned from donating to political parties unless they are resident in the UK for tax purposes.

Gordon Prentice, the MP for Pendle, hopes to force a vote on the issue when the political parties and elections bill is next debated in the Commons.  More than 60 Labour MPs have already put their names to his amendment, which is also supported by the Liberal Democrats and the Scottish and Welsh nationalists.

The justice secretary, Jack Straw, who is in charge of the bill, has not committed himself to supporting the proposal, but Prentice believes that ministers would be reluctant to order Labour MPs to vote against an amendment with such strong support in party circles.

Although the Labour government legislated to stop foreigners donating to political parties, they are still allowed to accept money from British citizens who are tax exiles.  Prentice describes this as the "Laidlaw loophole", in a reference to the Tory peer who has given the Conservative party more than £4m since 2001, according to Electoral Commission figures.

Lord Laidlaw's donations are particularly controversial because in 2004, when he was being considered for a peerage, he told the House of Lords appointments commission that he would become resident in the UK for tax purposes.  But the peer, who is based in Monaco and on leave of absence from the Lords, did not honour his promise, resulting in the Lords appointments commission taking the unusual step of rebuking him in its annual report in 2007.

Laidlaw continues to donate to the Tories.  Last year, according to the commission, he gave more than £100,000, including a £25,000 donation to Boris Johnson's mayoral campaign.

The Prentice amendment is also aimed at Lord Ashcroft, the Conservative party deputy chairman who made similar commitments to Laidlaw when being considered for his peerage.

Ashcroft, who has given more than £4m to the Tories since 2001 and whose influence is particularly resented by Labour because he channels his money into marginal seats where Labour MPs are particularly vulnerable, refuses to answer questions about his tax status, although David Cameron has said that he has had a "reassurance" about Ashcroft honouring the commitments he gave.

Straw is said to be worried about imposing a ban on tax exiles donating to political parties because he is worried about the Tories retaliating by reopening the issue of Labour's reliance on trade-union funding. Labour also has at least one prominent donor, Lord Paul, who is registered as non-domiciled for tax purposes.

Yesterday, when Prentice asked Straw during justice questions in the Commons if the government would accept his proposal, Straw was noncommital.  "We will obviously actively consider [it]," he said.

As a backbencher, Prentice cannot ensure that his amendment will be put to a vote.  But he believes that, if more than 100 MPs show their support for it, the Speaker will agree to its being put to a division.

A vote could take place next Monday, when the bill is debated at report stage for the first time, or the following Monday, when the report stage is due to conclude.

Prentice's amendment would ban political parties from accepting money from anyone who was not resident in the UK for income tax purposes.  It would also require them to make a declaration to this effect, identifying anyone who had donated more than £5,000 as a UK resident for the purposes of the Income Tax Act 2007.

Prentice said yesterday: "It is quite wrong that people are bankrolling political parties here in Britain when they do not pay UK taxes."