The UK’s lobbying body, the Office of the Registrar of Consultant Lobbyists (ORCL), has found that a Qatar-based lobbying firm did not need to declare its lobbying of a UK Minister due to the VAT exemption, a widely criticised loophole in UK lobbying rules. The decision followed a complaint by Spotlight on Corruption in light of reporting by the journalist, Peter Geoghegan.
Background to the VAT exemption
As the Transparency of Lobbying, Non-party Campaigning and Trade Union Administration Act 2014 (the Lobbying Act) made its way through Parliament, the then government amended it to exclude those who are not VAT-registered from needing to register as a consultant lobbyist. A Minister set out the rationale for the change:
“The Government are committed to ensuring that small businesses are not subject to disproportionate burdens. An exclusion for those small businesses that are not VAT registered from the requirement to register as consultant lobbyists will ensure that whatever burden may be associated with registration will not be placed on them. The VAT registration represents a clear threshold.”
Under the Lobbying Act, organisations and individuals are considered to be carrying out consultant lobbying if they meet three tests:
- they communicate with a Minister or Permanent Secretary in relation to legislation, government policy, public contracts or other specified areas;
- this is done in the course of a business and for payment from a client; and
- they are registered under the Value Added Tax Act 1994.
The third test means that any UK-based lobbyist with a turnover below £90,000 – and any foreign business, which would not need to register for VAT – can lobby the government without registering as a consultant lobbyist and publicly declaring their clients.
This is one of many loopholes in the UK’s regime for lobbying transparency, a system described as “not fit for purpose” by the Committee on Standards in Public Life.
Criticism of the exemption by independent experts
The government-commissioned review by Nigel Boardman, following the Greensill scandal, recommended in 2021 that the exemption should be removed. When the government responded to that review years later, they rejected Boardman’s proposal on the basis that it would need primary legislation, which they had no plans to bring forward.
Before the Greensill scandal erupted, the government had initiated scrutiny of the Lobbying Act, with an inquiry conducted by Parliament’s Public Administration and Constitutional Affairs Committee (PACAC). Evidence to that inquiry highlighted major loopholes in the Lobbying Act which conceal lobbying activity, including the VAT exemption:
- The Chartered Institute of Public Relations (CIPR) concluded that the Act is “not fit for purpose” and called for it to be overhauled. CIPR said the VAT threshold should be scrapped, adding that it “creates a perverse incentive to employ lobbyists who are not required to register for VAT” to avoid registering as a lobbyist.
- Another lobby trade group, the Public Relations and Communications Association (PRCA), called the VAT exemption “an obvious loophole” which should be removed. They identified that the “threshold seems to be an arbitrary decision point, and it does not reflect the activities undertaken.”
- The Registrar of Consultant Lobbyists, Harry Rich, also called for the exemption to be removed. Rich said it was likely that lobbyists beneath the VAT threshold are undertaking significant lobbying and found it “hard to see how their exclusion from the requirement to register supports the Act’s transparency intention.”
- Transparency International UK highlighted that the exemption “ends up giving us less visibility of the activities of overseas entities and their attempts to influence our democratic process.” They contrasted this with the government’s efforts to address foreign interference in UK politics through the National Security Act.
When PACAC raised experts’ concerns about the exemption with a Minister, Alex Burghart, he said the government had “come to a different conclusion.” The government’s assessment was that “you would not be able to do terribly much as a VAT-exempt organisation … and it is unlikely to be a core part of the work of a business that is VAT exempt.”
PACAC’s final report called for wide-ranging changes to the system for lobbying transparency. As part of this, they recommended scrapping the VAT exemption and concluded that “there are other ways of mitigating the regulatory burden on small firms that do not present such a sizeable loophole to allow lobbying to go undisclosed.”
The recent decision by ORCL adds to the growing body of evidence that the government’s assessment was wrong and underlines the need for urgent reform.
ORCL’s investigation into Global Counsel
Peter Geoghegan reported in September 2024 that a lobbying firm, Global Counsel, had run an undisclosed lobbying campaign on behalf of Qatar’s freeports.
In January 2023, the CEO of Global Counsel, Benjamin Wegg-Prosser, met a then Minister in the Department for International Trade, Lord Johnson. This was reported in departmental transparency data as “introductory meeting to discuss UK trade and investment flows.” Johnson met Wegg-Prosser months later “to discuss ongoing projects.”
FOI releases show that Wegg-Prosser had emphasised the opportunities to the UK created by Qatar free zones and recommended “twinning” UK freeports with free trade zones in the Gulf, and that the two had discussed Global Counsel’s operations in Qatar.
Johnson went on to meet the state-backed Qatar Free Zones Authority in June 2023. Another FOI response revealed that this meeting with the CEO of the Qatar Free Zones Authority, which took place in the House of Lords, was also attended by Global Counsel MENA’s Regional Director and a representative from the Qatar Embassy.
Throughout the period in which Global Counsel’s meetings with the Minister took place, the firm did not list the Authority as a client on the lobbying register.
Spotlight on Corruption wrote to ORCL to request an investigation into Global Counsel’s lobbying for the Authority. After considering the matter, ORCL found that the Authority was a client of Global Counsel MENA, a subsidiary of Global Counsel UK. Because it is a foreign business without VAT registration, it did not need to register as a consultant lobbyist or publicly report that it had lobbied the Minister on behalf of the Authority.
Bolstering the case for reform
This is not the first time the VAT exemption has been engaged following questions about compliance with the Lobbying Act. Of the 53 investigations opened by ORCL between June 2019 and February 2024, CIPR found that only three resulted in civil penalties. The VAT exemption was successfully engaged in 20% of the investigations.
The fact that a foreign state-backed enterprise can pay an overseas lobbying firm to engage with a Minister on sensitive areas of government policy, without any requirement for transparency, underlines the need for the VAT exemption to be removed.
Suggestions were made to PACAC for an alternative minimum threshold. PRCA noted that moving from a flat fee structure to graduated fees based on turnover would achieve the aims of the VAT exemption. CIPR meanwhile said other tests could be used, such as turnover, organisation size or the activity of the lobbying. Rich noted that “you can do an awful lot of good consultant lobbying for much less than that threshold” and suggested that the “crude” VAT threshold could be replaced with a limit on the number of lobbying activities.
The episode highlights wider weaknesses in the regime for lobbying transparency. In particular, departmental descriptions of meetings did not give any meaningful insight into what was discussed and failed to mention meeting Global Counsel MENA. This lack of transparency in departmental lobbying data is a longstanding and ongoing problem.
Removing the VAT exemption, as part of a broader package of reforms recommended by independent experts, would help the government to deliver on its manifesto commitment to restore “trust between the public and politics.” This should include:
- Creating a central, public database of departments’ transparency data, and publishing data on a monthly rather than quarterly basis.
- Bringing special advisers into the scope of transparency requirements.
- Properly closing the loophole by which informal lobbying is not disclosed.
- Increasing accountability for the quality and timelines of departmental transparency releases.
- Tightening the loopholes in the lobbying register, including the VAT and incidental lobbying exemptions, and expanding the register to include in-house lobbyists, as a means of verifying departmental transparency releases.
The fact that a foreign state-backed enterprise can pay an overseas lobbying firm to engage with a Minister on sensitive areas of government policy, without any requirement for transparency, underlines the need for the VAT exemption to be removed.
