Andrew Feldman moved quickly on Saturday night to cauterise the damage caused by Peter Cruddas, demanding the resignation of the Conservative party treasurer as soon as the news broke that the City millionaire had promised private meetings with the prime minister in exchange for p donations of £250,000.

The party’s co-chairman had little option, said one ally on Sunday. “Peter had literally exposed a hand grenade under himself, Andrew knew he had to go.”

The undercover sting has also blown wide open once again the thorny and intractable issue of party funding in the UK. While the public remains deeply concerned at corruption in politics, the three main parties cannot seem to find common ground on how to reform the system.

Time and again, talks have been killed off by partisan squabbling. Sir Christopher Kelly, chairman of the committee on standards in public life, put forward a proposal last November for a £10,000 annual cap on individual donations, changes in union funding and a £3-per-vote state payment for political parties.

His proposals foundered, with all three parties rejecting them as politically untenable in an era of austerity.

But the differences run far deeper than that, with neither the Tories nor Labour prepared to overhaul their funding structures.

The Conservatives, funded by wealthy individuals, will not countenance capping donations at £10,000 unless the unions backing Labour agree to shift from a system where union members contract out of paying a political levy to a system of contracting in.

Political opponents of the Tories were quick to hit out. David Miliband, former foreign secretary and brother of the Labour leader Ed Miliband, called the disclosures grotesque.

But “cash-for-access” scandals are by no means a preserve of the Conservative party. All three big parties have been tarnished by such revelations in recent years.

The previous Labour government was hit when three former cabinet ministers – Geoff Hoon, Stephen Byers and Patricia Hewitt – were suspended from the parliamentary party over allegations that they were prepared to take cash to influence government policy.

Another Tory scandal broke last December when Tim Collins, managing director of Bell Pottinger Public Affairs, boasted to undercover reporters of how he had worked with Mr Cameron and George Osborne in the Conservative Research Department.

“I’ve been working with people like Steve Hilton, David Cameron, George Osborne for 20 years-plus. There is not a problem getting messages through,” Mr Collins told the reporter.

In 2005 Michael Brown, a convicted fraudster, donated £2.4m to the Liberal Democrats. The Electoral Commission ruled the donation was permissible but the party has been under pressure to give the money back.

Tory insiders were adamant that Mr Cruddas’s boasting about access was the action of one misguided “rogue trader” rather than a signal of more corrosive practices at the heart of the party. They stressed that Mr Cruddas had never been to the Number 10 flat, although they admitted other donors may have had private dinners with the Camerons.

Rogue trader or not, however, the cash-for-access incident has wider ramifications for the prime minister. It plays into the perception being peddled by his political opponents of an unhealthy closeness between Mr Cameron and the country’s power brokers – symbolised during the phone hacking scandal by his friendship with Rebekah Brooks, the former chief executive of News International.

The revelations highlight a grey area in transparency: while official meetings between the prime minister and cabinet colleagues must be declared, those hosted either as social events or under the guise of party donor events do not need to be.

“This goes right to David Cameron,” said one Labour source. “When he is having private dinner parties in his own flat, he must wonder who his guests are and why they are there. He can’t just shrug his shoulders. We are going to hold his feet to the fire on this.”

Before he became prime minister, Mr Cameron said in 2010 that “secret corporate lobbying” was the “next scandal waiting to happen in British politics”.

He will be under great pressure to heed Sir Christopher Kelly’s words and show the courage and leadership needed to clean up party funding.

Additional reporting by George Parker

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