Will the Conservatives hand back a major donor’s cash after his Diane Abbott comments?

Good morning. By the standards of British political funding, £10m is a great deal of money – and it would be hugely useful to the Conservatives as they prepare to fight the next election.

That is why they are deeply reluctant to hand back the donations of Frank Hester, a healthcare tech entrepreneur – even though Rishi Sunak has acknowledged that Hester’s remarks about Diane Abbott making him “want to hate all black women” were “racist and wrong”. (Hester has accepted that his remarks were “rude” and apologised, but claimed that his comments were “nothing to do with her gender nor colour of skin”.)

Sunak stuck to that line under questioning from Keir Starmer yesterday. But a majority of the public, and even some on the prime minister’s own side, say that the money should be returned. In a powerful opinion piece published today, Abbott herself says that the remarks were upsetting, but not surprising – and calls on the Labour party, which she notes has its own history of subjecting her to disproportionate criticism, to do more to challenge racism “even if it costs us a few points in the polls”.

Today’s newsletter, with the Guardian’s Whitehall editor, Rowena Mason – who has been investigating Hester for months – is about why the money is so important, what it reveals about the state of British political funding, and what it would take for the Tories to hand it back. Here are the headlines.

Five big stories

In depth: ‘Losing £10m would blow a really big hole in Tory finances’

In February, the Conservatives confirmed that Frank Hester was the “biggest ever donor” to the party – giving £10m in a year. Hester told the Daily Telegraph that it was a specific endorsement of Sunak. Asked if he might give more before the election, he said: “If it’s going to help Rishi, then I would say, ‘Never say never’. I really think he’s the right guy.”

Because Hester’s company had won NHS and prison contracts worth £400m over the last eight years, there was already scrutiny of his relationship with the party. Now the Conservatives reluctance to hand the money back has put a spotlight on his donations in particular – and the system of party funding in general.

How important is Hester’s money to the Conservatives?

Last year, the Conservative party raised £48m from donors; £10m of that came from Frank Hester.

That money can be spent on the party’s ordinary running costs, but it is arguably most important as a contribution to the expense of running a general election campaign, from targeted online ads to telephone bills.

Losing Hester’s £10m “would blow a really big hole in their finances”, Rowena said. “It would certainly be a problem for the party in the run-up to the election. Having said that, they’ve already comfortably exceeded raising the £34m they’re allowed to spend in the pre-election period – so others will argue that they would be able to handle it.”

In any case, the clearest indication of the Conservative party’s own view of whether it needs the money is its actions: the easiest way to blunt the Hester story would be to pay the money back. So far, that hasn’t happened.

What can donors expect in return for such vast sums?

“The parties will tell you that the donors’ reward is the satisfaction of helping a cause that is close to their hearts,” said Rowena – and, of course, it is true that many wealthy people have strong political convictions.

But there may be other factors in play, too. “We know that there is a pattern of donors tending to get access to ministers, getting invited to functions, and if they’re very big donors they may get to have discussions about policy areas that matter to them,” Rowena said. Hester said recently that he had had “some quite long conversations with Rishi about AI”.

That’s perfectly legal – but many have noted that his company, the Phoenix Partnership, supplies computer systems to the NHS and has recently announced a “suite of AI solutions about to launch, focused on the NHS’s key clinical and operations priorities”.

“If donors talk to politicians about party matters, they don’t have to be recorded anywhere,” Rowena said. “If those conversations veer into government business, they ought to be reported back to the relevant department. But it’s very difficult to know what happens in one-on-one conversations.”

There is, meanwhile, the question of whether donors might get peerages or other honours in exchange for their money. In 2022, Rowena reported that one in 10 Conservative peers were big donors worth a total of £50m to the party. “The parties will deny this forever – but there is a clear correlation to honours,” she said. “But the parties say that they got there on their own merit.” (Hester does not have a peerage, and his prospects of getting one appear significantly smaller than they did a few days ago.)

What are the limits on party funding?

Political parties can take donations of as much as they like from private individuals registered on the UK electoral roll. Donations of more than £11,180 to the central party have to be reported to the Electoral Commission, recently increased from £7,500.

Campaign groups are concerned about the loophole in donations from “unincorporated associations” – groups with loose registration rules that are allowed to donate up to £25,000 a year without declaring their sources. Last year, Politico reported that over the previous five years, such groups donated more than £14m to political parties.

While there is no limit on donations, there are rules in place about how much the parties can spend on election campaigns. The government recently raised the spending limit for the pre-election period from £19m to £34m. That change reflects inflation since the limits were last set in 2000 – but, the Guardian’s Heather Stewart wrote in this excellent survey of the impact of money on politics on Monday, “the shift will only amplify the centrality of big money to politics in the UK, much of it raised from a small number of mega-rich donors”.

Are Labour and the Conservatives evenly matched?

A cynic might assume that the Conservatives would be unlikely to increase the spending cap unless they felt it would be to their political advantage.

“It has traditionally been easier for the Conservatives to raise money from private donors and companies,” Rowena said. “Labour has relied a lot more on union money, and the thinking may have been that it would leave them lagging behind. But Labour has been catching up recently. When the opposition party is so far ahead, some donors may conclude that they want to back the probable next party of government.”

Labour received £31m in donations last year, £13m of it from individuals and companies – a record, but still £17m behind the Conservatives’ total of £48m, £36m of which came from individuals.

While there is still a meaningful gap, “there has been a huge effort by Labour to woo business people and present themselves as the credible party of business,” Rowena said. “But the more money you accept from private sources and companies, the more you expose yourself to claims about vested interests – so people will be keeping a very close eye on them, too.”

Is there anything that could make the Tories hand Hester’s money back?

As things stand, Sunak has acknowledged that Hester’s remarks were racist but said that he has apologised and that his “remorse should be accepted”. (We should note that Hester’s apology was for rudeness, not because he accepted that what he said was racist.)

“It’s not unusual for the other parties to call for the money to be handed back in these circumstances,” Rowena said. “Generally, the party in question is pretty reluctant to do so. But what could be different about this case is that we’re starting to hear some Conservative voices saying the same thing”.

Andy Street, the Tory mayor of the West Midlands, said yesterday that if he were in the same position as Sunak, he would “think about the company I kept and I would give that money back”. And the Scottish Conservatives said that the UK party “should carefully review the donations it has received from Hester in response to his remarks”.

At the moment, those calls still appear to be resistible for the prime minister. “But if it’s not just the usual suspects, Sunak has some thinking to do over the next few days,” Rowena said. “We don’t know where the tipping point is for him concluding that the money isn’t worth the political cost.”

What else we’ve been reading

• Anita Chaudhuri spoke with Rhaina Cohen (pictured, centre), author of The Other Significant Others, about why friendships are not given the same standing in society as romantic relationships. Though Cohen convincingly argues that we should have more formalised setups for deep platonic relationships, Chaudhuri wonders what good could come out of taking one of life’s “obligation-free” zones and filling it with contracts, vows and promises. Nimo

• In a climate of international pressure on reproductive rights, Juno Carey – a pseudonym – has written a book drawing on her experiences as a midwife to put women at the centre of the discussion on abortion. She tells Zoe Williams: “People will drive through the night, they will sleep in their cars, they will do anything to get the treatment they need.” Archie

• When Birmingham council announced its bankruptcy it pointed to the equal pay claims raised by women over the last decade as part of the reason. Samira Shackle explains why scapegoating one group does little else but obscure the bigger problems behind the financial crisis unfolding in local authorities. Nimo

• This video reveals first-hand a conversation between Emmanuel Macron and Vladimir Putin in the days before Russia’s invasion of Ukraine. It’s a very rare insight into the frantic diplomacy carried out before the war began – and how flagrantly Putin dissembled to other world leaders. Archie

• Anger has been building in Canada, where a seemingly defunct family reunification program has failed to get a single Palestinian out of Gaza. Yara El Murr reports from Toronto on why the scheme has been so slow and the impact it is having on families who are trying to help their loved ones flee violence. Nimo

Sport

Football | A sensational second-half comeback inspired by Antoine Semenyo saw Bournemouth beat Luton 4-3, denying their opponents the chance to move out of the relegation zone. In the Champions League round of 16, Atlético Madrid beat Inter 3-2 on penalties thanks to Jan Oblak’s heroics in goal, while goals from Jadon Sancho and Marco Reus guided Borussia Dortmund past PSV Eindhoven.

Cheltenham | On day two of the Cheltenham festival, Captain Guinness, ridden by Rachael Blackmore, was the unlikely winner of the Queen Mother Champion Chase after 2-9 favourite El Fabiolo was pulled up with well over a mile still to run. Meanwhile, trainer Willie Mullins achieved his 100th festival winner when Jasmin De Vaux took the Champion Bumper.

Tennis | Emma Navarro continued her breakthrough season with a 6-3, 3-6, 6-2 win against the Australian Open champion Aryna Sabalenka to reach the BNP Paribas Open quarter-finals in Indian Wells. Navarro, who won her first WTA title in Hobart this year, was able to outlast the world No 2 in a back-and-forth contest.

The front pages

“Abbott accuses Tories of ‘playing race card’ as Hester row intensifies” says the Guardian, while the i goes with “Tory reliance on race row major donor revealed”. Take a deep breath for the Daily Mirror’s furniture: “A new low … anti-extremist report slates Tories as PM refused to hand back race rant donor’s £10m … then minister admits they’d happily accept MORE” – and that’s not all, there’s a banner, “Same old nasty party”. “Gove to identify Muslim groups as extremists” –that’s the Daily Telegraph,while the Daily Express leads with “Migrant flight plans to Rwanda in ‘good place’”. “Shapps backs spending 3% on our defence” – that’s the Daily Mail. Top story in the Financial Times is “Washington held secret talks with Iran in push to halt Red Sea attacks”. The Metro has “Shame of you … Ed Sheeran’s verdict as ticket tout family faces jail over £6.5m scam”. Finally, the Times runs with positive health news: “Deaths from cancer in middle age fall by third”.

Today in Focus

Cartoon of the day | Ben Jennings

The Upside

A bit of good news to remind you that the world’s not all bad

The Children’s Art Gallery in Lagos is a social enterprise founded in 2022 that encourages young people, particularly those from low-income families, into the arts. The gallery spans two floors on Victoria Island, with sweeping views of the Atlantic Ocean and walls covered in paintings and drawings by children aged between four and 17. Not only does the enterprise encourage creativity in children, it also helps them sell their work to build a better life for themselves, in a country marred by poverty.

Eleven-year-old Fiyinfoluwa Adeniji made 1m naira ($650) from the sale of two paintings last year and hopes he will be able to sell his latest collection of landscape paintings. The gallery accepts submissions from any child who has permission from their parent or guardian and also actively recruits through outreach. Last year, TCAG generated $40,000 from the sale of the children’s art to buyers from around the world, with at least 80% of the proceeds going to the artist.

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