Cash-for-honours - the scandal grows

IN what is rapidly becoming the biggest political scandal of the new century, the Labour Party's treasurer Jack Dromey has begun an internal inquiry into secret loans received by the party without his knowledge in the run-up to the last General Election.

IN what is rapidly becoming the biggest political scandal of the new century, the Labour Party's treasurer Jack Dromey has begun an internal inquiry into secret loans received by the party without his knowledge in the run-up to the last General Election.

As concern escalates over “cash-for- honours,” Mr Dromey said he and other elected party officials had been “kept in the dark” about the loans from wealthy individuals, which ran into millions of pounds.

Mr Dromey has called on sleaze watchdogs from the Electoral Commission to look into the propriety of political parties accepting loans from non-commercial sources. He said Number 10 must have known about the money and had not “sufficiently respected” Labour Party institutions including its ruling National Executive Committee,

Unlike gifts from supporters, loans do not have to be disclosed in the Commission's regularly-updated register of donations to political parties. This means that questions about their source can normally be put off until the publication of the party's accounts, which in this case is not due until September 2006.

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The big questions are: just how was the Treasurer expected to balance Labour's books when, presumably, interest had to be repaid on millions of pounds sloshing about in one of the party's accounts about which he had no knowledge? Who had control over this separate account? Who solicited the loans, on what basis, and on whose orders was he operating?

The party insisted that it had “fully complied” with the Commission's rules on fund-raising. That might be technically correct, but neglecting to tell the person charged with keeping Labour's accounts lawful seems to be the very opposite of compliance.

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Mr Dromey, who is deputy general secretary of the TGWU union and married to constitutional affairs minister Harriet Harman, said he would make a preliminary report next Tuesday to the NEC, and would ask it to set up a panel to carry out a thorough investigation.

The existence of the pre-election loans to Labour came to light amid “cash-for-honours” allegations surrounding some of the party's millionaire backers. Dr Chai Patel, the founder of the Priory Clinics, and property tycoon Sir David Garrard each revealed that they gave large loans to Labour and were shortly afterwards nominated for peerages. Both have since declined seats in the House of Lords.

Mr Dromey said he had not seen any evidence to suggest the loans were given in exchange for peerages and did not know whether Mr Blair was involved in the decision to accept the money. But he said: “The Labour Party needs to put its house in order to restore public and party members' confidence.”

At his monthly press conference yesterday, Mr Blair tried to defuse the row. “As leader of the Labour Party, I take full responsibility for everything that is done in its name.”

Declaring it would be wrong to bar donors from receiving peerages, he said all political parties had to raise money and were allowed to make nominations for working peers.

But he conceded: “It would be more sensible if loans were treated in the same way as donations.”

He said the cash Labour had been lent had been spent on the General Election and its aftermath. “I have no doubt about that at all. This idea that somehow there was some sort of secret account and the money has gone to be spent on something completely different, as far as I am aware, is complete rubbish.”

The Electoral Commission later weighed in declaring: “There remains a fundamental question in the minds of voters as to why - if loans are really on commercial terms - parties are borrowing from supporters rather than commercial lenders.”

It called for details of all loans to be declared openly, no matter from which source they came.

At the very best, the saga proves just how out of touch Downing Street is with the Labour Party, coming on top of Wednesday's vote on education reforms when Tory MPs saved the Prime Minister for a humiliating defeat at the hands of 52 backbench rebels.

But have no doubt, Fleet Street will be trying to dig up the very worst.

KENNETH Clarke has become the latest top Tory politician to object to new leader David Cameron's plans to pull his Euro MPs out of the majority EPP-ED group in the European Parliament. Earlier in the week, Quentin Davies - newly elected chairman of the Conservative Group for Europe - said the party would resemble “dishonest double-glazing merchants” if Cameron got his way.

Not so, says East of England Tory Euro MP Geoffrey Van Orden, who is urging the party towards the exit doors. “Our major new allies would be mainstream parties of Government and other serious politicians that do not feel at ease with their current situation in the European Parliament.”

Meanwhile France and Germany have started confidential talks aimed at reducing the Constitution to its first two parts - part one, which sets out the EU's competences, and part two, the Charter of Fundamental Rights.

The revised treaty would then be resubmitted for ratification, with the UK, Ireland, Denmark and Poland putting it to referendums. Finland is expected to ratify the Constitution during its presidency of the EU in the second half of this year, and Portugal has said it will ratify a new version of the text as soon as it is agreed. The parliaments of Malta, Austria, Slovakia, Latvia, Hungary, Italy, Belgium, Greece, Spain, Cyprus, Lithuania, Luxembourg, Malta and Slovenia all approved the previous text.

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