Labour's treasurer 'kept party in dark
over loan deals'
By Toby Helm, Chief Political Correspondent
(Filed: 16/03/2007)
The "peerages for loans" controversy threatened to engulf Tony Blair as Labour's treasurer said he had been "kept in the dark" about the policy and called for a full investigation by the Electoral Commission.
Jack Dromey, the husband of Harriet Harman, the constitutional affairs minister, effectively accused the Prime Minister of running a secret funding operation involving millions of pounds without the knowledge of the party's elected officials.
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His remarks suggested that millions of pounds raised in loans before the election did not go through the normal party accounts.
In a statement that revealed the extent of his anger, Mr Dromey, the treasurer for the past two years, said he had started an urgent inquiry that would report to the ruling National Executive Committee next week. Its purpose was to ensure that "never again are elected officers of the Labour Party kept in the dark".
Mr Dromey, one of the party's most respected figures, said he had also asked the Electoral Commission, the party funding watchdog, to investigate.
"It was the Labour Party that campaigned in opposition for action to ensure that there was the necessary transparency as part of the clean-up of politics," he said. "The Labour Party needs to put its house in order to restore public and party members' confidence."
It is understood that Mr Dromey was incensed by reports that Mr Blair's close ally and envoy to the Middle East, Lord Levy, had acted as the go-between - completely without his knowledge - to secure loans of about £4.5 million from three supporters who were subsequently recommended for peerages.
The loans could be kept secret because only donations - or gifts - of more than £5,000 have to be declared to the Electoral Commission.
It is understood that Matt Carter, who stepped down as the general secretary last year, was aware of the loans, while Mr Dromey, a senior official at the Transport and General Workers' Union whose job as treasurer is not full time, was kept in ignorance.
Mr Dromey told Channel 4 News that Sir Jeremy Beecham, the chairman of the executive committee, had also been unaware of the loans.
While there had been no "illegality", there had been "impropriety." He suggested that he would question Mr Blair if necessary to get to the bottom of what happened.
The party said the "day to day" management of finances was "a matter for the general secretary", adding: "We can confirm that at the time the loans were taken out the party treasurer was unaware of them."
Mr Dromey said that Peter Watt, the new general secretary, would also take part in the investigation, suggesting that he, too, had no idea of the loans until newspaper stories revealed them last weekend.
Mr Dromey made his statement after Sir David Garrard, whom Mr Blair recommended for a peerage following his loan of about £2 million to the party last year, withdrew his name from the list. He was apparently tired of the row surrounding his nomination.
Sir David, who has contributed £2.4 million to one of Mr Blair's favoured city academies, said he was "disappointed" that the independent Appointments Commission that blocked the nomination had not asked him to "clarify" any issues it thought should be investigated.
Last month another Labour donor, Barry Townsley, who lent Labour about £1 million before being nominated to the Upper House, asked Mr Blair to scrap his nomination.
He told friends he had done so because he felt that the negative publicity surrounding the whole process did not make his elevation to the Lords worthwhile.
Allegations that Mr Blair was abusing the patronage system by hiding donations in the form of loans and offering peerages in return resurfaced last weekend after another donor, Chai Patel, the chief executive of the Priory health care group, revealed details of Labour's methods.
Mr Patel, who was offered a peerage after lending the party £1.5 million last year, said he had been prepared to give the money as a gift. But senior party figures had persuaded him to hand it over as a loan instead, on which interest would be paid at commercial rates.
By raising money in this way, political parties do not have to declare it to the Electoral Commission, which makes the figures public. As a result, they hope to avoid accusations that they are selling peerages or other honours.
Donations of £5,000 and over have to be declared to the commission but loans do not, unless they are agreed at a rate of interest which is lower than the commercial rate.
Mr Patel, who has not withdrawn his name from the list, said he had not sought or expected a peerage. But he conceded that the honours system had been "reduced to a bazaar" in which people asked "what was the price of a peerage?"
Sir David withdrew from the nomination process a day after the cross-party House of Commons public administration select committee announced a full inquiry into the way peerages are awarded.
Tony Wright, the committee's Labour chairman, said last night that Sir David, Mr Patel and Mr Townsley might be invited to give evidence.
A spokesman for Sir David said he was told that he had been nominated for his "lifelong commitment" to child welfare and education and his "vigorous" support for the city academies programme.
She added: "He has thanked the Prime Minister for having nominated him, assuring him of his continued commitment to him and to the Government and most particularly to the Government's education programme and policy."
Simon Hughes, the Liberal Democrats' constitutional affairs spokesman, called for all nominations to the House of Lords to be frozen until better systems were in place to prevent a link between donations and nominations to the Upper House.
Telegraph News Labour's treasurer 'kept party in dark over loan deals'