Donors desert Starmer over first-year failures, Gaza and freebie fallout

Several people who gave money in the runup to the general election have refused to renew their donations since Keir Starmer came to power. “The top donors are not interested,” one senior Labour figure with knowledge of fundraising said.

Another party insider suggested there was “disappointment among many Labour donors, big and small, at the way the government has behaved” in its first year in office. “There are plenty of reasons why donor income drops off after an election but it’s rare for it to happen so precipitously as this,” the source said.

The financier Stuart Roden, the hedge fund manager Martin Taylor and the green energy industrialist Dale Vince are among the wealthy individuals who have not renewed their donations since last July, according to the latest Electoral Commission report.

Vince, owner of the renewable gas and electricity provider Ecotricity, told The Observer: “My biggest disappointment is Gaza and the lack of sanctions on Israel for the abhorrent treatment of the Palestinian people that we’re seeing every day.

“It’s beyond incredible, the abuses that we’re seeing taking place. We’re watching it every day, the genocide there, the ethnic cleansing, the war crimes, the targeting of journalists, in tandem with the lack of real action from western governments compared to what we’ve done to Russia for its invasion of Ukraine.”

Vince also said the prime minister must pay “more attention to wealth inequality and poverty” including scrapping the two-child benefit cap. “We’ve committed £22bn to carbon capture and storage, which is a bogus technology, and we could spend that money on better things. We’ve committed £15bn to Sizewell C, a nuclear power station. The two-child benefit cap would cost £3bn to reverse.”

Although he insisted he was “not on strike” and could donate to Labour again in future, Vince urged the chancellor to be radical in her upcoming budget. “I’d like to see a wealth tax,” he said. “We’ve got extreme poverty at the bottom end, millions of people are suffering from that and then we’ve got some very rich people who pay less tax than ordinary people… We should change that.”

Other donors have made clear that they are reluctant to give more money because of the way in which Lord Waheed Alli, the media entrepreneur and party donor, was “hung out to dry” over the “freebies” row.

One Labour source said: “In part, it’s because of the polling showing we may not get a second term. Another factor is how No 10 threw Waheed under the bus with their disastrous handling of the row over gifts of clothing and tickets last summer. Why give money to Labour when the party doesn’t defend your reasons for doing so?”

There is also a wider sense of dissatisfaction with Labour’s performance in government and political direction, according to insiders. “People who give us money aren’t so very different to the Labour party members giving up on us in that they want a government that does progressive things and has the self-confidence to make progressive arguments,” one party veteran said.

“Chasing after Reform and posing as tough guys on immigration may or may not be the best strategy to win working-class votes, but it doesn’t make anyone really want to reach deep into their pockets to pay for more Facebook adverts.”

The loss of high-value donations makes Labour more reliant on its trade union backers at a time when Unite is threatening to withdraw support. Last month Sharon Graham, the leader of Unite, said Labour should be “seriously concerned” after delegates at the union’s policy conference voted to rethink its relationship with the party. Labour’s finances have also been hit by the loss of the “Short” money paid to opposition parties from public funds.

The number of people working at party headquarters has dropped significantly since the election and a pay freeze has been imposed. Staff have been told the party is operating under a “recovery plan” with a view to bringing the finances into a “manageable deficit”.

Some in Labour are worried that the funding shortfall will make it hard to fund the campaigns for the Welsh and Scottish elections next year. One insider said the party needed at least £4m for next May’s local elections.

A Labour source said it was normal for party finances to take a hit in the year after an election. “The party has diverse sources of income from members as the largest political party in the UK in addition to our affiliates and donors,” they added.

“We expect another successful annual conference in September with a record business day. The party will always prioritise funding for election campaigns.”

The internal angst over the handling of the “freebies” row is laid bare in the new paperback edition of Tom Baldwin’s biography of the prime minister. Starmer “remains convinced the whole story could have been stamped on earlier,” Baldwin writes. He describes a meeting that the Labour leader held with party donors “fretting over how they should respond if anyone questioned their motives”. According to the book, “one of those present recalls him suggesting a very robust response. ‘I’d tell them to fuck off,’ Starmer said.”

A Labour party spokesperson said: “We do not provide a running commentary on party finances.”

Photographs by Ian Forsyth/Getty Images, Shahar Azran/WireImage, Dave Benett/Getty Images, Christopher Furlong/Getty Images