BRITAIN: British prime minister Tony Blair signalled possible reforms of party political funding and the honours system yesterday as he battled suggestions of Labour "sleaze" in the escalating "cash for peerages" row.
However, the Liberal Democrat leader in the Lords, Lord McNally, said Mr Blair's apparent readiness to "take the politics out" of the honours system was merely "a sticking plaster" in light of "irrefutable and direct linkage between big donations and patronage". And Labour backbenchers also voiced alarm about what one described as Downing Street's operation of "some sort of parallel party with slush funds", even as Mr Blair proposed inter-party talks to see if consensus was possible on a cap on donations and enhanced state funding for political parties.
At his monthly press conference Mr Blair emphatically denied he had nominated three people for the House of Lords in return for loans given to Labour. "I am completely satisfied that there has been no breach of any of the rules in relation to Labour Party nominations." He insisted it would be wrong to bar suitable donors from receiving peerages.
However, Mr Blair was forced to apologise to Labour Party treasurer Jack Dromey, conceding that "of course" he "should have known" about the millions of pounds raised secretly for the party in the run-up to last year's general election.
Under laws introduced by the Blair government, parties are obliged to declare donations but not loans raised at commercial rates of interest. And in a further effort to defuse the issue last night, Labour announced it planned to declare all future "commercial" borrowings, and their source, in line with the Electoral Commission's recommendation. The Tories quickly followed suit, saying they too would name future but not past donors.
In its statement the commission said: "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. The Electoral Commission believes the current requirements are not sufficient to enable the parties to deal with this question. The only way of doing so is to declare full details, including the sources, of all the loans parties receive, whether they regard them as having been made on commercial terms or not."
But yesterday's headline-grabbing initiatives did not spare Mr Blair's embarrassment on the morning after he carried his controversial Education Bill. Mr Blair dismissed suggestions that Mr Dromey's intervention might have been timed to cause him maximum political damage.
"I'm sure that's not the motivation at all," he said, while admitting he would have "much preferred" to be talking about his domestic reform agenda. Mr Blair also explained that in law Labour's general secretary was ultimately responsible for the party's finances, while insisting the loans raised had been used for "the general election and its aftermath" and would show in the party's accounts. He also suggested his current embarrassment was in part at least the result of failure to carry through his earlier attempts to reform the system.
"It is true, however, obviously as a result of what has happened, that there is public concern, and that is why it is sensible to then go and complete the reforms." Asked if he had made a mistake, Mr Blair replied: "If you look back on the events of the past few months, yes. I think it is clear it would be more sensible if loans were treated in the same way as donations." But, he was unable to explain how Mr Dromey could have missed millions of pounds in the party's accounts, and why he was "kept in the dark" in the first place.