THE Labour Party has confirmed it had received almost £14 million in loans from individual supporters but insisted they were “in full compliance” with party funding rules.

By Graham Dines

THE Labour Party has confirmed it had received almost £14 million in loans from individual supporters but insisted they were “in full compliance” with party funding rules.

The total is considerably higher than the £4 million worth of loans already known to have been given to the party by three millionaire backers in the run-up to last year's General Election.

A party spokesman admitted: “These loans were taken out in full compliance with the rules of the Political Parties, Elections and Referendums Act.

“The loans will be recorded in our annual accounts 2006 (covering January to December 2005) in the usual way.”

Controversy over the loans was ignited on Wednesday, when party treasurer Jack Dromey launched an internal inquiry after revealing he had not been informed about the money.

Elected party officials had been "kept in the dark'' by 10 Downing Street, he said.

Mr Dromey is due to report to the party's ruling National Executive Committee next Tuesday.

Prime Minister Tony Blair yesterday confirmed that he had been aware that the party was borrowing large sums from individual supporters.

Unlike gifts, loans at commercial rates of interest do not have to be declared to the Electoral Commission for publication in its quarterly register of donations to parties, but the Commission moved yesterday to close this loophole.

Health Secretary Patricia Hewitt today insisted there was no truth in “outrageous”' allegations that Labour was selling seats in the House of Lords.

“I think it has been unwise to have loans that - although they were perfectly legal and although nothing wrong has been done in terms of these allegations about peerages for loans and all the rest of it - nonetheless gives rise to suspicion.

“Quite clearly, we have got to do something about the business of loans. Of course they are not transparent.2

Labour's former deputy leader Lord Hattersley last night said he was “horrified”' by the sums taken by the party in loans without the knowledge of Mr Dromey. “It all demonstrates that the Labour Party leadership is too obsessed with the world of money. The Labour Party should not behave in this way.”

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