Jacob Rees-Mogg. Image: UK Parliament, Attribution 3.0 Unported (CC BY 3.0)

The UK parliamentary standards watchdog is probing the financial affairs of a group of Tory ultra-Brexiteers, led by Jacob Rees-Mogg and former Brexit Minister Steve Baker, openDemocracy can reveal today.

The European Research Group (ERG) has dominated news headlines this week, with reports of plots to oust prime minister Theresa May if she does not abandon her Chequers plan, and putting forward heavily criticised proposals for the Irish border.

In June, the Independent Parliamentary Standards Authority (IPSA) wrote to the ERG seeking clarification about how it uses taxpayer money – and other unknown “sources of funding”. IPSA was reacting to concerns about public money being misused to support the ERG’s high-profile political campaign for a hard-line, uncompromised Brexit.

The ERG has received ‘research funds’ (paid out of MPs’ expense claims, and therefore ultimately funded by the taxpayer) from the offices of key current and former cabinet ministers such as Michael Gove, Sajid Javid, Andrea Leadsom, Penny Mordaunt, Chris Grayling, David Gauke and David Davis. The group uses one bank account to lodge the funds received from IPSA for parliamentary ‘research’ services.

However in June this year the ERG confirmed to IPSA that it holds a second bank account for paying for drinks, MPs’ breakfasts and other expenses. The existence of the second account was not referred to in IPSA’s initial review of the group’s research output, which was conducted last year. At the time, IPSA concluded that “the ERG was found to have noticeably less formal governance structure and internal controls… which could present a risk to compliance.”

IPSA has subsequently requested assurances from the hard-Brexit group about the way different income streams are managed through the two bank accounts. IPSA told the ERG it required “further conversation with you about how this separation [of accounts and funds] is maintained.” Groups are not allowed to use parliamentary funding for “party-political purposes.”

The ERG responded by saying that the second bank account “pays for occasional functions, MPs’ breakfasts, drinks, etc. That’s it really.”

IPSA met the ERG in early July to discuss the matter. openDemocracy have requested further information from IPSA about this meeting and the ERG’s second bank account.

The ERG is highly secretive about its membership list, even though its activities are taxpayer-funded. The group is thought to include 80 Tory MPs, and it is currently under no obligation to publish its accounts.

The result is that the British public is entitled to very little information about the financial and political activities of a key group of Tory MPs which colleagues say operates as a “party-within-a-party”, and which stands accused of holding Theresa May hostage over the final deal with Brussels.

Political neutrality a “bad joke”, says Tory MP

Email from IPSA to the ERG, asking them to provide materials on which they will be assessed, obtained by openDemocracy under the Freedom of Information Act.

According to emails obtained by openDemocracy, one ERG bank account lodges the funds received from MPs who claim taxpayers cash for so-called “pooled research.” Since 2011 this has amounted to at least £300,000 – but, as the ERG refuses to publish its full membership list of MPs, the true figure could be far higher.

However in emails exchanged between the ERG and IPSA, the parliamentary watchdog states that the ERG has “other sources of funding” which “presumably can be used for campaigning/party political activity”.

IPSA told the ERG that they had a responsibility to “seek assurances” that funds were being properly used.

In another email sent to IPSA in June this year, the ERG states that it does not, as a research group, “do political campaigning.” This assurance followed an openDemocracy investigation last year which revealed that taxpayer cash was being used to fund what many Tory and Labour MPs saw as partisan political activity.

After openDemocracy’s reporting on this issue last year, IPSA said it “examined” the ERG’s research output and concluded it was largely “factual and informative” and not “party-political”. However, the extent of the review appears to have been limited to a basic request to the ERG to submit a selection of “briefing material”.

The review had limited concerns over only one ERG document, which said that Labour’s decision to vote against the Withdrawal Bill in 2017 was “irresponsible, a breach of trust with their voters and a vote to create chaos.” IPSA told the ERG that it should “avoid using similar language in the future.”

One Tory MP familiar with the output of the ERG questioned whether the group’s output could be seen as not party-political: “IPSA must have been handed a nicely filleted folder of safe stuff if it reached the conclusion that all was fair and balanced. ERG activities of the last week alone show the idea of party political neutrality to be a bad joke,” the MP told openDemocracy.

“Alternative solutions” to Chequers

The lobbying company headed by Lynton Crosby, CTF Partners, were reported by The Sunday Times to be working with the ERG to derail Theresa May’s proposed deal with the EU worked out at Chequers in July. The CTF-ERG tie-up is thought to be targeting May with the aim of replacing her with Boris Johnson before all the strands of any Brexit deal are formally secured.

The ERG were also reported to have hired Hans Maessen, the former president of the Dutch customs association, to help them compile alternative solutions to the Chequers plan.

It is not clear if CTF Partners are charging the ERG their usual retainer fee, regarded as being among the highest in the UK lobbying industry. Maessen has also refused to comment on the veracity of the ERG link, or if he is working with Rees-Mogg on a pro bono basis.

This week a private meeting of the ERG with more than 50 MPs attending reportedly discussed ways of ousting the prime minister. The gathering, in the Thatcher Room at Portcullis House, considered the timing of a possible confidence vote against the PM if she did not ditch the Chequers plan.

Under current parliamentary funding rules, MPs must not use IPSA funding for party political purposes. In another email sent to the ERG in September last year, IPSA make it clear that “party political briefings are not eligible for IPSA funding.”

One Tory MP who has previously been outspoken about the influence of the ERG told openDemocracy that the immediate unity of the Conservative party was now in the hands of “a few historically blind and economically innumerate ideologues.” They added: “Both IPSA and the Electoral Commission should do all they can to make public everything they know on this group of MPs."

‘No comment’ on other sources of Brexit cash

The Electoral Commission (EC) is legally entitled to be informed of donations above £7,500 to the ERG. One donation of £10,000 was lodged with the commission in March last year. The name ‘Paul Dyer’ is listed by the regulator. No further details are given.

Additionally, in 2016 £6,500 was given to the ERG by the obscure Glasgow-based Constitutional Research Council (CRC), the organisation responsible for channelling the controversial £435,000 pro-Brexit donation to Northern Ireland’s DUP ahead of the 2016 EU referendum. Former Brexit minister Steve Baker, then chair of the ERG, said the CRC cash was used to fund a Christmas 2016 hospitality party for ERG members.

The CRC’s chair, Richard Cook, has refused to comment on where the money given to the ERG originated, just as he has refused to divulge where the controversial DUP donation came from. He is not required by law to do either.

As no accounts are published by the ERG, there is no way of verifying if other donations of under £7,500 have been received and lodged in the non-IPSA bank account.

Theresa May’s gamble

The ERG’s power as a group of unified Brexiters who want a clean, no-ties break with Brussels will be crucial to the outcome of the UK parliament’s vote on whatever Brexit deal Britain makes with the European Union.

Steve Baker, a former Brexit minister credited with transforming the ERG from quiet irrelevance into a forceful, secretive unit that Downing Street cannot ignore, told a private meeting in Westminster this week that 80 Tory MPs would vote against the prime minister’s Chequers’ plan.

Whether Baker is overplaying the influence of MPs under his control is unclear, but it remains a risk Number 10 has not yet been prepared to take. It is understood that the current Brexit minister, Dominic Raab, conducts a daily telephone update call to either Baker or Rees-Mogg on the state of negotiations with Brussels.

Full details of the information contained in the IPSA emails seen by openDemocracy were put to Rees-Mogg’s ERG office. The group was asked to comment on its accounts, on any financial relationship with Sir Lynton Crosby and Hans Maessen, and on the research material it sent to IPSA.

At the time of publication no reply had been received.