The slogan on the jaunty shopping bag swinging from Conservative arms at the party’s Manchester conference this week said it all: I Love Low Taxes.

It was a freebie from the Taxpayers’ Alliance, the campaign group whose message of cuts – in tax and spending – coursed through the Tories once more this week, and will help set the agenda for the general election.

Since it was launched six years ago the alliance has become arguably the most influential pressure group in the country, yet neither the people who run it, or the backers who pay for it, have come under a great deal of scrutiny.

Its critics ask whether it really is an alliance of ordinary taxpayers, as the name is clearly intended to suggest, and how close it is to the Tory party hierarchy which seems to have adopted some of its radical ideas.

Certainly not all is as it seems. The same group that speaks out against government waste on Newsnight and in the pages of newspapers also runs a campaign against radicalising schoolbooks published by the Palestinian Authority and has formed an alliance with a Slovakian rightwing group

The group’s leadership is no less esoteric. Alongside a fund manager, a petroleum geologist and a former chief economist at Lehman Brothers on the board, the directors include a retired teacher who lives in France and does not pay British tax.

But none of that has stopped frontbench Conservatives and business leaders flocking to the TPA, and at the Tory conference policy after policy seemed to bear the TPA’s stamp.

“The idea of tearing down the walls of big government as Cameron did in his speech on Thursday is something we have been talking about for years,” said its chief executive, Matthew Elliott, yesterday. “The Tory party has moved onto our agenda.”

George Osborne’s public sector pay freeze was recommended by the TPA last month and Elliott, who describes himself as “a free-market libertarian”, said he had been “banging on about” the idea that no public worker should earn more than the prime minister without the chancellor’s approval long before Osborne announced it.

The rightwing media have fallen in love too and the TPA claims a higher profile in print than Friends of the Earth and the Confederation of British Industry. Framed front pages line Elliott’s office near the House of Commons as evidence of its success at creating the climate of opinion in which radical cuts to tax and spending can be made.

In the last year the Daily Mail quoted the TPA in 517 articles. The Sun obliged 307 times, once bizarrely on page 3 when a topless Keeley parroted the TPA’s line against energy taxes. The Guardian mentioned the group 29 times.

The TPA’s proposals include scrapping the secondary school building programme, child benefit and Sure Start centres for the youngest children. The range of its work reflects how influential the group has become in a relatively short space of time, but also raises questions over how it manages to pay for what has become a £1m a year operation. The alliance refuses to publish details of its income or its benefactors.

But a Guardian investigation has established that a large part of its funds come from wealthy donors, many of whom are prominent supporters of the Conservative party. Sixty per cent of donations come from individuals or groups giving more than £5,000. The Midlands Industrial Council, which has donated £1.5m to the Conservatives since 2003, said it has given around £80,000 on behalf of 32 owners of private companies. Tony Gallagher, owner of Gallagher UK, a property company that gave the Conservatives £250,000 in 2007, is a member of the MIC, as is Christopher Kelly who owns the international haulage firm Keltruck, and Robert Edmiston who owns IM Group, a large car importer.

“The concern for our members is that vast amounts of public money are being spent and we don’t get value for that money,” said David Wall, secretary of the MIC. “Our members’ tax money is being wasted … [the TPA] start making some noise and all of a sudden it is on the agenda of the political parties.”

A spokesman for Sir Anthony Bamford, the JCB tycoon, whose family and company have donated more than £1m to the Conservatives, said he has helped fund the TPA, as has the construction magnate Malcolm McAlpine.

David Alberto, co-owner of serviced office company Avanta, has donated Elliott and his 14 staff a suite in Westminster worth £100,000 a year because he opposes the level of tax on businesses. Alberto has an offshore family trust but said 90% of his wealth is in the UK, where he pays tax.

Other businessmen named by the TPA as supporters include spread betting tycoon Stuart Wheeler who gave £5m to the Conservatives before he endorsed the UK Independance party; Sir Rocco Forte, the hotelier; and Sir John Craven, chairman of mining group Lonmin. Labour figures certainly believe that the alliance is close to the Tories. “This is an arms-length Tory front operation run by big powerful business interests who want to remove themselves from paying tax by poisoning the well of public debate around the issue,” said Labour MP Jon Cruddas.

“They are hugely influential,” added a senior Labour figure. “It says something about the state of our party that we are letting them continue unchecked. Many Labour MPs are very worried that they are likely to grow in stature as the election approaches.”

Elliott flatly denied the TPA was “a Conservative front organisation”, and added that Lord Ashcroft, the party’s deputy chairman who is known to bankroll many Conservative candidates in marginal seats, is not a donor.

They do not appear to need him. Funding has soared from £67,457 in 2005 to more than £1m and the number of supporters has increased 60% this year as a result of the combined effect of the recession and the MPs’ expenses scandal.

Conservative politicians have also gathered round. Every month the TPA runs an open meeting for members of right-leaning thinktanks and politicians. In the last year talks have been given by Eric Pickles, the Conservative party chairman, Liam Fox, the shadow defence secretary, and former shadow home secretary David Davis.

They are chaired by Stephan Shakespeare, the owner of ConservativeHome.com, a political website. Its editor, Tim Montgomerie, has claimed: “The TPA is more likely to deliver Eurosceptic change than Ukip.”

Tim Horton, research director of the left-leaning Fabian Society, who has investigated the TPA, claimed the group is “fundamental to the Conservatives’ political strategy”, which he said was to destroy public confidence in politicians’ ability to deliver public services, thereby paving the way for cuts.

“There is something deeply dishonest about their campaigns on government waste,” he said. “Their aim isn’t to make public spending work better, but to slash it dramatically. Yet none of them will campaign on their true vision of society: fewer public services. At least Thatcher was honest about the deal: less ‘public’ means you go private.”

Elliott insists the TPA has grassroots support. It has a database of 3,000 activists who have given money or time and 32,000 supporters who “tend to be middle-aged, probably Eurosceptic, and they tend to be right-leaning, but not party political”, according to a source with knowledge of the group.

When TPA began in 2003 there was really no kind of alliance ‑ just Elliott, then a 25-year-old political researcher for Conservative MEP Timothy Kirkhope. As a politics student Elliott had been impressed by Republican grassroots campaigns to cut tax and spending he had seen in America – particularly the work of Grover Norquist who campaigned against Hillary Clinton’s healthcare plans during Bill Clinton’s presidency.

“Up until that point Britain didn’t need a taxpayers’ group because we had the Conservatives, but then they stopped talking about it and so I saw a niche,” he said.

His idea was to influence politics “not as an inside job [lobbying politicians] but to go by public opinion and the press”.

That year his wife, Florence Heath, a petroleum geologist, joined as director with Andrew Allum, a management consultant who is now chairman.

In a strange choice, Heath’s father, Alexander, was also appointed despite living in France and not paying any British tax.

The board now features no one who could be described as just an ordinary taxpayer. Members include Ruth Lea, the former chief economist at Lehman Brothers, Mike Denham, a former Treasury economist who worked on tax and spending under Margaret Thatcher, and Saul Haydon Rowe, partner at financial firm Devon Capital LLP.

Some of the group’s fringe campaigns also seem to dilute the idea that this is an alliance of ordinary taxpayers. Its campaign against “hate education” in the Palestinian territories stemmed from Elliott’s personal concern about incitement of hatred towards Jewish people in the Middle East, his pro-Israel stance and the perception that British taxpayers’ money was being misused to subsidise the publication of incendiary schoolbooks there.

It is also about to launch “Big Brother Watch” led by David Cameron’s former chief of staff, Alex Deane, to “fight injustice and to protect personal liberties”.

Elliott believes the grassroots support of its main cause will grow.

“I want lots more members,” he said. “I would like to get to a situation where we have as many members as the Liberal Democrats.

“Perhaps our time will come next year if there are public sector strikes [over the proposed Tory cuts]. That will be a key recruiter. We contend that wages in the public sector are higher than for similar jobs in the private sector. On top of that public sector workers have final salary pensions, so if they strike there will be frustration among the general public.”

Key funder the MIC said the TPA must be equally aggressive in its campaign against the waste of taxpayers’ money, if it is to continue to finance the TPA.

“The last thing we would want is to be accused of funding a political party by the back door,” said David Wall.

Elliott insists the TPA will challenge a Tory government just as vigorously.

“I intend to take on David Cameron on value for money as aggressively as I have Gordon Brown,” he said. “[If there are strikes] we will take on the unions as well as the government.”

Who’s who: Alliance’s backers



David Alberto, 41, the co-owner of Avanta, a serviced offices company with operations in London, India and the United Arab Emirates, has donated free serviced office space in Westminster worth an estimated £100,000 a year.

“My bugbear is taxes and the cost of the state and how it has grown,” Alberto said. “It is wrong to be spending a greater and greater proportion of GDP on central government. Stamp duty and capital gains tax have restricted our ability to expand.”He said he keeps money in a family trust offshore, but the bulk of his wealth is held in his UK-registered companies.

Malcolm McAlpine, 92, a director of Sir Robert McAlpine, the construction firm building London’s Olympic stadium, has given an undisclosed amount to the TPA. “Our family business … advocates value for money government and we, for some years, supported the Taxpayers Alliance, which brings to general attention a large number of instances of apparent excessive and unproductive expenditure of public funds,” he said.

The TPA has criticised the Olympics project, which is funded with £9.3bn in public money.

“The fact that one supports an institution does not mean that one agrees or disagrees with every detail of their policies,” said McAlpine.

Anthony Bamford, 63, a director of Staffordshire-based JC Bamford, which manufactures JCB diggers, has made minor donations in a private capacity, his spokesman said.

Bamford has also donated large sums of money to the Conservative party.