BRITIAN: The row over political funding, patronage and "cash for peerages" deepened yesterday as the Labour Party admitted raising £14 million in secret loans ahead of last year's general election.
Following the withdrawal of two of three nominations for Labour "working peers" blocked by the Appointments Commission, Health Secretary Patricia Hewitt insisted "there is no evidence at all for this outrageous suggestion that people have been buying peerages or have been offered peerages for sale".
However, amid reports of renewed tensions between Tony Blair and Gordon Brown, former deputy leader Lord (Roy) Hattersley said he was "horrified" by the sums involved, which showed New Labour "too obsessed with the world of money".
In a letter to Labour MPs, party chairman Ian McCartney stressed that these funds - more than three times previous estimates - had been "legitimately raised" and that "every single penny was used on delivering election victories for Labour and nothing else".
Mr McCartney said he understood "a number of colleagues" were unhappy about the issue of the loans but said it was "important to emphasise that the party acted within electoral law at all times" and that "electoral law is much stronger today than it was a decade ago thanks to our hard work in arguing for, and voting for, changes in the system". And he confirmed his intention with fellow officers to ask Labour's National Executive Committee on Tuesday to agree that the party will in future treat all commercial loans in exactly the same way as donations.
However these moves toward greater transparency and disclosure were being driven by the inquiry initiated earlier this week by party treasurer Jack Dromey, who said he had been "kept in the dark" about the loans and accused 10 Downing Street of failing to respect the Labour Party.
While promising to reveal the source of future loans, a party spokesman made clear this could not apply retrospectively to previous loans. "These loans were taken out in full compliance with the rules of the Political Parties, Elections and Referendums Act," he said. "They were made confidentially and it would be a breach of trust of these people."
Downing Street continued its efforts to defuse the controversy yesterday, confirming that a former senior civil servant, Sir Hayden Phillips, has been appointed to lead cross-party talks on the future of party political funding.
Labour may be hoping for some respite this weekend from expected newspaper stories detailing the extent of loans raised by the Conservatives to fund their 2005 general election campaign.
However the conspiratorial air at Westminster was filled with continuing speculation about the timing of Mr Dromey's direct challenge to Mr Blair, and its impact on internal party opinion about the timetable for a change in the leadership promised by Mr Blair's decision not to seek a fourth term.
While dismissing suggestions that Mr Dromey was acting on Mr Brown's behalf, Labour MP Diane Abbott also raised the possibility of fresh "scandal" ahead, possibly resulting from Mr Dromey's discoveries about what she described as "New Labour's inner circle and their adventures in influence peddling and in the world of the super rich".