New Labour develops a smoker's cough

It has been, without doubt, Tony Blair's worst week in office. And it's not over yet. Westminster was awash with rumours last night of further revelations to come about New Labour's fund-raising activities, and the Prime Minister's apparently misty-eyed relationship with big businessmen. We shall see. Each attempt by Mr Blair and his aides to draw a line under the Formula One affair has ended in fresh embarrassment. And the British media certainly scent blood at the end of a week in which each admission about the party's relationship with the Formula One founder, Bernie Ecclestone, has been forced by press inquiry.

The roots of the controversy, which has brought charges of Labour "sleaze" to Mr Blair's door, are to be found in the party's anti-smoking policy. At the end of last week the Health Minister, Tessa Jowell, caused astonishment when - in a massive policy U-turn - she announced Formula One would be exempted from a proposed ban on tobacco sponsorship in sport.

The press detected a possible conflict of interests when it emerged that Ms Jowell's husband had legally advised the Formula One team. She vigorously defended herself against any suggestion of impropriety, letting it be known that she had cleared her involvement with both the Health Secretary and the Permanent Secretary of the Department in accordance with established procedure. Moreover, it emerged last weekend from unnamed "friends" of the Minister that she had argued against the Formula One exemption but was overruled by Mr Blair after his October meeting with Mr Ecclestone. By then, the press were on the trail of a much bigger story - from which it emerged that Labour last January received a £1 million donation from Mr Ecclestone. By yesterday, Mr Blair's problem was less to do with the original Formula One decision than with his party's highly evasive response to the nature of its relationship with Mr Ecclestone, and the discovery that its fundraising team had been in negotiation with Mr Ecclestone's office about a second donation.

Confronted with initial reports of a gift, Labour officials at first denied any had been received. But by Monday morning that line collapsed. The Chancellor, Gordon Brown, struggled to keep the lid on, insisting that, in accordance with the party's rules, any big donations (that is, over £5,000) would only be divulged at next September's party conference. Reports that Mr Ecclestone's gift was of the order of £1.5 million bolstered the suspicion that his munificence might have been of an order to influence the policy exemption decision. Still Labour was reluctant to tell - dismissing the £1.5 million as very wide of the mark.

On Tuesday lunchtime, the Home Secretary, Jack Straw, told the BBC he had no idea what sum was involved. But by mid-afternoon the secret could no longer be contained. It had, indeed, been £1 million. By now, however, Labour was in full fight-back.

The party let it be known that, on the advice of the standards watchdog, Sir Patrick Neill, it would be returning Mr Ecclestone's money. Sir Patrick had found Labour had breached no rules but recommended returning the donation "in order to avoid the appearance of undue influence over policy".

On Wednesday in the House of Commons, a bullish Mr Blair sought to lay the issue to rest. Clearly prepared, he told his first Tory challenger he would set out his position "with enthusiasm and relish". He explained that other countries, too, had similar exemption policies, and insisted the decision had been the right one taken for the right reasons.

Mr Blair sought the high ground, outlining his proposals for a full inquiry into party political funding - and turned the attack on the Tories, taunting that they never disclosed the source of any donations, and had yet to return fugitive tycoon Asil Nadir's £360,000.

It seemed to many on Wednesday afternoon that Mr Blair had done enough, and that the worst was probably behind him. But within hours, and not for the first time, Labour's famed presentational skills rebounded. In order to show that Labour's approach to donations was indeed fastidious, somebody told the London Times that it had declined a second donation from Mr Ecclestone.

Even as Mr Ecclestone hotly denied making any second offer, Labour officials conceded that their fund-raisers had been negotiating about a possible further gift. The mystery deepened. What was indisputable was that Labour's general secretary, Tom Sawyer, had already asked the standards watchdog if it would be all right to accept the second gift.

The disclosure of that correspondence between Mr Sawyer and Sir Patrick left Labour deeper in the mire. Mr Blair maintained yesterday that, when the possibility of a perceived conflict of interests arose, Labour sought Sir Patrick's advice and followed it "to the letter".

It transpires that Labour acted only after it learned of press inquiries; and that Sir Patrick was never told the scale of Mr Ecclestone's first donation. Moreover, contrary to the impression given by Mr Blair, Mr Sawyer's letter reads less like a request for an adjudication on the propriety of keeping the first gift than for the go-ahead to keep the second. Whatever about further revelations, Mr William Hague's demand for a Commons statement next week means Labour's "sleaze" headache isn't over yet. And the government's attempt to close down the controversy by refusing to put ministers on air isn't working either. That symbolic empty chair in the BBC's Newsnight studio only reinforces the sense that Labour has something to hide. New Politics for New Britain? Hardly.

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