Blair stands by Mandelson, as Ancram says New Labour `stinks of cronyism'
Mr Tony Blair was last night standing firm alongside his old ally, Mr Peter Mandelson, amid opposition pressure to sack the Trade and Industry Secretary, and criticism within his own party.
Downing Street insisted Mr Mandelson still had the Prime Minister's full confidence after the disclosure that he accepted a £373,000 loan at preferential interest rates from the Treasury Minister Mr Geoffrey Robinson.
But attempts to draw a line under the issue failed to silence demands for an explanation of the main question raised by the transaction.
Why did Mr Mandelson fail to inform his senior officials of the loan when he was told that his own department was investigating Mr Robinson's business affairs?
The Tory Party chairman, Mr Michael Ancram, said the situation "stinks" and challenged Mr Blair to act against the two ministers to prove that his government was not riddled with "cronyism".
Some Labour MPs began publicly questioning Mr Mandelson's judgment in not telling the Permanent Secretary at the DTI, Mr Michael Scholar, when he notified him of the inquiry into Mr Robinson last September.
The Prime Minister's official spokesman said Mr Blair was satisfied that Mr Mandelson had properly "insulated" himself from the investigation by agreeing with Mr Scholar that he would have nothing to do with the inquiry.
He said the Prime Minister accepted Mr Mandelson had not broken the ministerial code of conduct and there was no conflict of interest.
Mr Mandelson was also writing to the new Registrar of Members' Interests, Ms Elizabeth Filkin - who takes up her post in February - inviting her to rule on whether he had breached Commons rules by not declaring the loan.
Nevertheless, the disclosures were a deep embarrassment for the government, embracing two of its most controversial members.
The Prime Minister was only told on Thursday - just as he was about to make a Commons statement on the bombing of Iraq - after Mr Mandelson learned details were to appear in the press.
An indication of his exasperation was given by his spokesman, who, when asked about Mr Blair's reaction, said: "He looked at his watch."
Mr Mandelson himself suggested the media reporting of the affair reflected the fact that he and Mr Robinson were "two fairly publicity-friendly, controversial, fairly exotic personalities".
In a round of broadcast interviews, in an attempt to defuse the story, he acknowledged "with hindsight" it would have been better if he had told Mr Scholar about the loan.
But he insisted that Mr Robinson had no "ulterior motive" for providing him with the money. "I don't believe he had any political motivation at all in wishing to help me. He is a very wealthy man. There was no reason at the time or indeed since why I should have felt that he wasn't an appropriate person to loan me the sum," he said.
However, the Government assertion that the matter was over was angrily brushed aside by Mr Ancram.
"This is a devastating insight into the cronyism at the heart of New Labour. They seem to think they can do anything and get away with it.
"It is not just Peter Mandelson and Geoffrey Robinson's credibility which is on the line, it is the Prime Minister's, too. If he fails to act, we'll know everything he has said about standards in public life is a complete charade."
Spin doctor in free fall: page 14
Editorial comment: page 15