Sunday, March 12, 2006

Follow the Money

It is well knowm that Tony will happily sell you a peerage. The going rate is a bung of around half a million pound to the Labour Party. It's all open and above board. Investors are all equally aware of the size of the investment required and the return it will yield. The take up rate has been slow but steady.

Now, it seems that it's also possible to purchase one through the direct provision of financial services to the Party.

For an investor, this is obviously a fantastic new opportunity. Why spend £500,000 on a "donation" to the Labour Party when they'll give you a peerage and interest on a £1.5 million loan? What could be better than profiting from the purchase of your peerage? Blair must literally have investors queuing up to take advantage of this once in a lifetime opportunity.

Before agreeing to contribute to the new fund, it should be pointed out that there are risks just as with any other investment. The Labour Party says:
There is nothing wrong with donating or lending money to a political party as long as the rules are strictly adhered to. The issue here, regarding the loans that they have made, is whether the strict rules set by the Electoral Commission regarding the declaration of loans that have been made at a commercial rate, have been fully observed. They have.
This may sound alarm bells for potential investors. Why are the Party willing to pay commercial rates of interest and provide additional incentives in the form of a peerage? This makes no financial sense unless the Labour Party is unable to secure these commercial rates in the normal commercial market. Would an equivalent loan have been supplied by the market? If so, why did the party not simply avail themselves of the services of the market, thus avoiding any possibility of the appearance of financial impropriety.

And so, before wholeheartedly recommending this new opportunity, my advice is that it may be worth a detailed inquiry into the credit history of the Labour Party. Do they have the guaranteed income which would satisfy a commercial lender as to their ability to maintain the loan? The suspicion must be that the additional reward of a peerage may be on offer due to a potentially high risk of default. This would explain why the Party was apparently unable to secure the £1.5m required through traditional financial institutions.

In summary then, this does appear to be a fantastic opportunity for potential investors. The opportunity to earn money while buying your peerage, rather than after it is bought as has traditionally been the case, is a hugely exciting new prospect. Before investing, however, it may be worth investigating the finances of the Labour Party is some detail in order to get a full understanding of the potential risks.

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