Criminal probe into honours

Scotland Yard announced tonight that it was investigating the Labour Party for possible abuse of a 1925 law prohibiting the sale of political honours arising from the cash-for-peerages row.

The news came in a brief statement from the Metropolitan Police, which said that it had received three complaints about Labour under the Honours (Prevention of Abuses) Act 1925. “These allegations are being investigated by the Specialist Crime Directorate,” it said.

Labour yesterday released the names of 12 businessmen who had made undisclosed loans to the party to finance its last general election campaign. Four of them were later nominated for peerages, but blocked by the Lords Appointment Commission.

The 1925 Act, brought in after the original “cash for peerages” scandal of 1922 when Lloyd George, the then Prime Minister, was shown to have been selling knighthoods and seats in the Lords.

The Act states: “Any person who accepts or agrees to accept or attempts to obtain from any person for himself or another the grant of a dignity or title of honour is guilty of a misdemeanour, and liable on conviction to imprisonment for two years or a fine of £500 or both.”

A Scottish National Party MP, Angus MacNeil, complained to the Metropolitan Police Commissioner Sir Ian Blair and to the Director of Public Prosecutions last week as revelations emerged of the first three undisclosed loans was revealed.

The Scotland Yard probe comes as a further embarrassment to Tony Blair after revelations that he ran a parallel fundraising operation through his close aide Lord Levy that raised £14 million without the knowledge of Jack Dromey, the party treasurer.

Earlier today, Labour’s ruling National Executive Committee announced that it was seizing back control of party finances and fundraising from Downing Street in an attempt to contain the damage.

After a three-hour meeting at No 10 attended by Mr Blair members of the committee issued a short statement of recommendations, saying that it would “resume its rightful responsibility for oversight of all matters of party funding and financing”. It also said that all future commercial loans and their sources - which until now have not had to be made public - would be declared.

The NEC also said that it would authorise a review of the damaging events of the past days which led last night to Labour releasing the names of its “rich list” of supporters.

The NEC said that it would fully co-operate with a review launched yesterday by Sir Hayden Phillips, a former Whitehall mandarin, which could lead to the introduction of state funding for political campaigns.

In the interim, its officers will take responsibility for overseeing all matters concerning donations and commercial loans, the statement said.

Sir Jeremy Beecham, the NEC chairman, said that the recommendations had been unanimously approved followed a “friendly and excellent discussion”. Tony Blair left the meeting without making any comment after around 90 minutes.

Sir Jeremy later denied that the Prime Minister had come under fire for signing off the loans without the knowledge of senior figures within the party, including the party treasurer, Jack Dromey. Sir Jeremy described this, diplomatically, as the result of “gaps in communication”.

“There were not any harsh words at all, it was a very constructive debate,” he said. “Everybody was concerned to move on. We recognise that there has been a problem, we are dealing with the problem and we want to move on.”

Sir Jeremy said all parties used loans but Labour was determined to move to a situation where there was complete transparency.

“I think it’s cast a bit of a cloud over all political parties,” he said. “I think we have been perhaps unfairly singled out for attention when loans have been used before. In fact, the Conservatives in particular borrow more over a longer period.”

Sir Jeremy denied Labour faced a funding crisis as a result of having to now pay back some of the money it was lent. He said: “It is anticipated loans may have to be repaid and if they have to be repaid, given time they will be repaid and we will find ways of doing that.”

The NEC insisted that no rules had been broken and sought to deflect attention on to the Conservatives by urging other parties to publish the names of the suppliers of loans.

The NEC’s decision came after Dr Chai Patel, the Labour donor whose complaint that he had been blocked from receiving a peerage opened the Pandora’s Box of party financing, alleged that Lord Levy had advised him to give the party a secret loan, rather than a donation.

Dr Patel said that it was only later that he discovered the request was because commercial loans do not have to be disclosed.

Dr Patel’s account mirrors that of Sir Gulam Noon, the “curry king”, whose nomination to the Lords has been blocked after it was discovered that a loan he made to Labour had not been disclosed. Sir Gulam said today that he has now asked for his name to be withdrawn from the list of nominations for working peers.

Dr Patel, founder of the Priory clinics, said he was upset by the suggestion of a link between loans and peerages. He said people had ignored his record of public service.

He added: “I feel very hurt. Where I have arrived is somewhere I wanted to be, which is to serve in public life. I see the second chamber as a legislative chamber, as a very serious place to be an unelected legislature.

“I believe I could have made a difference. I happen to voluntarily contribute some of the money I have towards a party I believe in.”

“Instead of having any acknowledgement for that, I have been dragged down into a two-dimensional person where I’ve somehow got money and I want to buy myself a bauble. That doesn’t seem like a fair way to be treated.”

Labour published last night a list of 11 other supporters who bankrolled the party’s election campaign with loans totalling almost £14 million. Among those named are a businessman who won more than £1 billion of government contracts and a venture capitalist whose company is under investigation by the Serious Fraud Office.

The Conservatives have said that they are not prepared to reveal the identities of the wealthy supporters who lent them up to £20 million to fight their election campaign “under any circumstances”.

Jonathan Marland, the Tory treasurer, said that he saw no reason to follow Labour’s example. “Labour are in a very big hole, of course. We are not in the same hole,” he told BBC Two’s Newsnight.

“They are embroiled in a serious mess relating to promises they have given to people who have lent them money. We are not in this mess because we are not in power. We don’t have patronage to give and we are not in the same position.”

Philippe Naughton and Simon Freeman