Mr Brown must end Labour's love affair with dodgy millionaires

By STEPHEN GLOVER

Last updated at 22:22 28 November 2007

What is it about the Labour Party and money? During Tony Blair's Prime Ministership we had the Bernie Ecclestone affair, and the controversies over Lakshmi Mittal and the Hindujas. The final months of Mr Blair's tenure at Number 10 were dominated by the Metropolitan Police inquiry into 'cash for honours', though ultimately no charges were brought.

Actually, Labour's weakness with money goes back further than Mr Blair. In the Harold Wilson years, for example, T Dan Smith, the Labour leader of Newcastle city council, was sent to prison for corruption, along with his fellow crook, the architect John Poulson.

No one supposes the Tories are innocent in these matters, but they usually bring a degree of sophistication to their dealings with multi-millionaires.

Again and again - and particularly during the Blair years - the Labour Party has sought out tycoons with an eye on their money.

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Most of us could have spotted the peculiarities of these characters a mile away, and would have steered a very wide course.

David Abrahams, the Newcastle property developer, is in this tradition, though he has the distinction of being poorer than most of Labour's former rich friends.

No one suggests any illegality on his part, but he is, at the very least, a highly controversial figure.

Yet New Labour was not only prepared to accept money from him. It allowed him to divert his donations through intermediaries so that his identity as a Labour benefactor would be concealed.

This is a very Labour story. There are reasons, however, for supposing that this row may turn out to be more damaging than any which took place in the Blairite years.

I do not necessarily mean that the scandal is worse than those involving Ecclestone or Mittal or the Hindujas. That could be argued either way.

What one might call external factors are less amenable to Gordon Brown than they ever were to Mr Blair.

This case comes after a series of major cock-ups, including Northern Rock and the loss of two discs by HM Revenue and Customs containing personal information about 25 million people, which have already discredited this administration.

If this were the first setback Mr Brown had suffered since becoming Prime Minister, he might have borne it better. Yesterday's remark by Vince Cable, acting leader of the Lib Dems, that Mr Brown's reputation had gone "from Stalin to Mr Bean" in weeks, scored a bull's-eye.

Mr Brown is also vulnerable because the attitude of the media has changed.

In earlier scandals involving Tony Blair, the BBC and the Left-wing Press were often slow to rev up, and sometimes never did. Mr Blair tended to be given the benefit of the doubt in many quarters.

Now, the BBC is leading the charge against Mr Brown. The Prime Minister is not helped by having media advisers who in some instances are clodhoppers in comparison to Mr Blair's.

And, of course, no one could deny the facts of the case are pretty bad. When Peter Watt resigned on Monday as Labour's general secretary, we were led to believe that he was the only person who knew that Mr Abrahams had diverted more than £650,000 to the party using other people's names.

Incidentally, where has Mr Watt disappeared to? Let's hope he has not been buried in some New Labour salt-mine.

Yesterday, the party's new chief fundraiser Jon Mendelsohn - successor to Lord Levy, aka Lord Cashpoint, twice arrested during the "cash for honours" investigation - was forced to admit he had known about this extraordinary funding arrangement since September.

He wrote to Mr Abrahams at the end of last week expressing appreciation for "all the support you have given over the years" and seeking another meeting when the property developer was next in London, apparently to squeeze some more money out of him.

Mr Mendelsohn says, rather implausibly I think, that his purpose in writing to Mr Abrahams was to regularise matters.

Is it really credible that Messrs Watt and Mendelsohn were the only senior members of the Labour Party in the loop? Of course not.

The protestations of Harriet Harman, Labour deputy leader and chairwoman of the party, that she did not know about Mr Abrahams' set-up carry little credibility.

She received a £5,000 donation from him diverted via a third party to help her with expenses incurred during the deputy leadership campaign. Ironically, her husband, Jack Dromey, Labour's honorary treasurer, may lose his job for not knowing about Mr Abrahams' scheme when he might have been expected to.

Mr Brown is in deeper water than Mr Blair ever was with comparative scandals.

This may be unfair in some ways: Mr Abrahams has been clandestinely giving money to the party for four years, and in that sense may be accounted more of a Blairite creature than a Brownite one. He came with the job.

But since when was politics fair? Mr Brown is in a hole, and at the moment he appears unable to stop digging himself further into it.

On Tuesday he freely admitted that New Labour broke the law over Mr Abrahams' donations. Normally when the law is broken the police are called in, but so far the ball has been left in the court of the Crown Prosecution Service and the Electoral Commission.

Mr Brown has also announced an internal inquiry consisting of Larry Whitty, a former general secretary of the Labour Party, a left-leaning former bishop, and a probably sympathetic retired judge.

Believe it or not, their report will be submitted to Harriet Harman, as chairwoman of the party.

Can you beat it? Such an inquiry would make the investigations of Lords Hutton and Butler into the Iraq war look positively forensic. If Mr Brown considers the matter for a moment, he will surely realise that the conclusions of such a review would be regarded by the public with contempt even if they were well-founded.

Setting up a patently biased inquiry, whose findings are bound to be disbelieved, is not intelligent politics. The police will have to be involved, and Mr Brown should be leading the call rather than waiting for it to happen.

If he wishes to re-establish his credentials as someone who believes in honest and open government, he will institute a more credible inquiry than one involving cronies, and ensure that it does not report to Harriet Harman.

As for his suggestion that official state funding may be the answer, that will not do either. The solution to shoplifting is not to hand out free goods to shop-lifters.

Equally, the solution to political chicanery is not to allow it to continue, unexamined, under a different system in which taxpayers, rather than private donors, are required to foot the bill for the re-election of politicians.

Mr Brown must instead put an end to New Labour's peculiar affection for dodgy millionaires, and its propensity to bend the rules when it raises money.

He may not have created these habits, but they come with the job, and he will be judged by his determination to tackle them.