Corporate funding of all‑party groups 'next big scandal' after huge rise under the coalition

MP warns of the rapid growth of the unofficial Westminster bodies

David Cameron and MP Nadhim Zahawi, co-chair of an APPG on Kurdistan (Getty)

Corporate funding of all-party parliamentary groups (APPGs) should be banned, according to a senior MP who has warned that the unofficial Westminster bodies "are the next big scandal waiting to happen" after a huge rise in their numbers under the coalition government.

Labour's Graham Allen said that vested interests and lobbyists funding these groups – however worthy their cause – raises understandable concerns among voters. Politicians who care passionately about particular issues are "perfectly capable" of running APPGs themselves, he added.

The Nottingham North MP, who is also chair of the political and constitutional reform committee, told The Independent on Sunday: "I don't see why any APPG needs external funding. What does it bring? I've never needed that for any APPG I've been involved in. No money needs to change hands.

"MPs who care passionately about a particular issue are perfectly capable of running all-party groups themselves or with the help of their dedicated staff. It only takes a few minutes to book rooms or prepare briefs – they need no help from outsiders."

The Independent revealed last week that Conservative MP Nadhim Zahawi, co-chair of the APPG on Kurdistan, recently led a delegation of MPs to the region which included a visit to an oil field run by a company in which he has publicly declared he holds shares. That group's secretariat services are provided for by Gulf Keystone Petroleum International whose parent company is a major oil player in Kurdistan.

Other groups receive large sums of money from the interests they promote. The APPG on health has received more than £100,000 in "membership fees" from 12 companies in the past year, including Pfizer and Alliance Boots Ltd.

The APPG on beer, which has about 300 MPs as members, has been given more than £50,000 in funding from some of the UK's biggest drinks companies over the past year. Diageo, whose brands include Guinness and Red Stripe, Molson Coors and Carlsberg UK, is among firms who have paid at least £5,000 each to the group. The Society of Independent Brewers has also donated £10,000.

In addition, 50 other companies have donated to the group – but, as their donations fall below the £1,500 threshold for registering benefits, they are not declared.

Most of the money is spent on employing Robert Humphreys, who has been the beer group's secretary for 22 years. Despite being an APPG "insider", he believes the system is flawed. "The system for reporting all the financial assistance we get could be much clearer and I have always said that," he said. "The value of any administration provided to APPGs by outside groups should also be declared, so that everything is clearer. It's a great pity that isn't the case, as APPGs can add a lot of value to the democratic process."

Mr Allen said most APPGs did really good work but that a "massive proliferation" of them since 2010, largely due to new MPs frustrated with the conventional parliamentary process, meant it was time for a new regulatory regime. He described them as "the next big scandal waiting to happen" – an echo of David Cameron's infamous warning about the entire lobbying industry – in a Commons debate earlier this month.

He said "a few simple rules", such as the ban on external funding, would prevent APPGs from becoming the next big scandal in Parliament. He also said that MPs should be discouraged from presenting their APPGs as having similar powers to select committees, the influential official bodies that are central to the business of Westminster.

He said: "The vast majority of these [APPGs], like MPs themselves, are hard working, creative and committed, but, as the Mercer case warns us, to retain and build credibility we need to regulate now for the occasional bad one."

According to the official register, there are 605 APPGs, 137 country groups and 468 subject groups. The varied tapestry ranges from APPGs on aviation, beer and body image to the death penalty, Crossrail, stem cell transplantation and the Baha'i faith.

While some have their secretariat services – people who work on behalf of the group to set up meetings and visits to companies or countries, for example – provided by charities, such as the NSPCC for the APPG on child protection, others have them paid for by political lobbyists. The Whitehouse Consultancy, a public affairs firm, supports the APPG on international religious freedom or belief. The group has received more than £34,000 in donations since June last year. Among its other donors is Conservative Party co-treasurer Michael Farmer, the hedge fund manager who has donated more than £2.5m to his party. He gave £15,000 and former Ernst & Young partner Amin Mawji gave £2,400 to the APPG. Other donors included the National Spiritual Assembly of the Baha'is in the United Kingdom and the Redeemed Christian Church of God. The group's website has little information and does not say how all the donations have been spent.

The APPG on ITV – which exists "to provide a forum for parliamentarians to consider and discuss the role and contribution of ITV in broadcasting in the UK and regulatory issues" – has its secretariat services provided by ITV. Not-for-profit organisation Oil and Gas UK supports the APPG on oil and gas, which also receives support from the UK Petroleum Industry Association.

At a Commons debate last week, following a standards committee report into the operation of APPGs, MPs debated new regulations for the groups. The committee made a number of recommendations, including greater transparency not only about APPGs' external support, but also about the activities funded by such support.

Kevin Barron, chair of the committee, said that politicians should not be embarrassed by APPGs, but there was a suspicion and danger they could be misused. He said: "We need a regime that reduces the chance of such misuse … Our proposals in this report are based on five principles: ensuring parliamentary control of all-party groups; ensuring responsibility and accountability; financial transparency; improved understanding; and proportionality."

His Labour colleague Hugh Bayley, who was chair of the APPG on Africa for a decade, said: "Good and effective all-party groups – they are a mixed bag: some are extremely good and effective, others less so –can have a real influence on public policy. Some are truly independent and use that independent voice to great effect. Others are less than entirely independent; they are a front for particular interests or lobbies, sometimes a pretty transparent front – which is a better option – and sometimes a not particularly transparent front."

Conservative MP and dentist Sir Paul Beresford, who chairs three APPGs – on police, skin and dentistry – said he was always amused by the "mythology surrounding APPGs".

He said: "The sceptical media and others need to realise that APPGs with transparency and light regulation are preferable to ad hoc groups operating without transparency, undercover, which would be the result if APPGs were limited in number or were over-regulated."

Mr Bayley said the standards committee's recommendations were a move in the right direction but that more work was needed to regulate the groups properly.

He said: "I agree with [Mr Allen] that there is a scandal to come about the way in which outside interests lobby in the House of Commons. I do not believe that the Lobbying Bill has addressed the problem properly, and I believe that the rotten tail of the all-party group spectrum provides inappropriate opportunities for outside interests to lobby in this place."