Revealed: the Conservatives' secret millions

Loophole lets donors whose identities are 'hidden' swell the party coffers. Brian Brady reports

The Conservative Party has pulled in millions of pounds from "hidden" donors through a loophole that allows wealthy backers to fund political parties while keeping their identities secret.

The Tories have collected more than £6m from "Unincorporated Associations" (UAs) since 2001, more than half of it since David Cameron took over as leader in December 2005. The party has increased the total of donations from UAs to more than £1m a year as the next general election nears, but it refuses to reveal the identities of all the individuals behind the donations.

The associations take in scores of local Conservative groups that raise funds for the party at constituency level. But there is a potential loophole which would allow a major donor to contribute unknown via this route. UAs also include dining clubs and collections of businessmen – such as the controversial Midlands Industrial Council – which have pumped hundreds of thousands of pounds into party coffers.

News of the UA donations came as it was revealed that David Cameron had also attracted up to £2m worth of donations into his exclusive Leader's Club group from a number of hedge fund tycoons.

The revelations threaten to embarrass the Tory leader on the eve of his annual party conference in Birmingham today. They also raise fresh questions over his commitment to transparency in the party's finances. Questioned on the source of donations to the party last February, Mr Cameron declared: "Any arrangements we enter into are ones we are prepared to protect and defend in a court of public opinion."

Nevertheless, businessman such as Paul Ruddock and David Craigen of Lansdowne Partners had each donated £50,000 for membership of the club which gave them access to the Tory leader. Michael Hintze, Michael Alen-Buckley, Alan Howard, Hugh Sloane and Stanley Fink were also revealed as others donors to the club. Rosemary Said, the English wife of Syrian-born businessman Wafic Said, also contributed £50,000, as did Catherine Lagrange, the wife of Belgian hedge fund boss Pierre.

Peter Facey, director of the pressure group Unlock Democracy, said the Leader's Club system raised questions of "cash for access". He said: "We have a situation where a man with a good chance of being the next prime minister is offering people a high level of access, including dinner in his own house, for £50,000. A couple of years into a Conservative government, when there is a big contract in the offing and one of these donors is in the running for it, people would be justified in asking whether their connections with the party would have an impact on the final decision. Tony Blair came up against this problem."

Details of the Leader's Club donations will be revealed in a Channel 4 Dispatches documentary tomorrow night. Tory Central Office sought to play down the claims yesterday. "We have donors from a wide range of businesses, including retail, industry, property, insurance and financial management. All donations are legal and comply with Electoral Commission rules. The Conservative Party has led the way on party-funding reform. Only when Labour failed to address the question of their heavy reliance on trade unions did recent talks on the issue collapse," a spokesman said.

Funding experts and Labour critics claim the UAs undermine efforts to improve openness in British politics. The same critics warn that the system could allow "impermissible donors" including foreign nationals to get round rules banning them from contributing to British parties.

The Conservatives denied UAs hid donors, but refused to reveal the names of contributors to funds. A spokesman insisted donors were often local party workers. The Tories claimed Labour had collected more than £2m from UAs over the past seven years. However, records show the vast majority of Labour's UA donations are identifiable local councillors.

"It would not be fair to raise suspicions over supper clubs that are there solely to raise money for local parties," said James Graham of Unlock Democracy. "But there are a large number of other unincorporated associations whose details and membership are far less clear cut, and they are giving millions of pounds to party funds, effectively in secret. The attraction of this route can be seen by the astronomical rise in donations from UAs since 2001. It is a huge loophole and it must be closed." Overall, donations from UAs rose from £633,000 in 2001 to £2.1m last year – more than half of it by Conservatives.

It is the UAs withdirect – and lucrative – connections to senior Tories that have now attracted greater scrutiny. Mr Cameron's Principal Patrons' Club brought in more than £34,000, making it the second biggest contributor to constituency finances.

George Osborne's Patrons' Club and Portcullis Club between them brought in more than £50,000 for his Tatton constituency last year. The constituencies of shadow ministers including Andrew Lansley, Eric Pickles, Michael Gove and Patrick McLoughlin also benefited from thousands of pounds from UAs.

A Labour spokesperson said: "The Tories continue to conceal their shadowy funding arrangements and refuse to answer questions about their party funding. When you scratch beneath the surface of David Cameron's warm words on transparency in party funding, donations to the Conservative party remain secretive."

The Ministry of Justice confirmed it was planning to close a loophole that allowed individuals to make donations "large enough to be considered as influential", while remaining secret.