Labour moves to end cash row

Blair will seek to turn the tables on the Tories

By BBC News Online's political correspondent Nick Assinder.

The last thing Tony Blair needed to start the New Year was another row over party funding.

Ministers still wince at the memory of the Bernie Ecclestone affair which hit them so soon after the 1997 election landslide.

That incident took some of the gloss off Labour's squeaky clean image and damaged Tony Blair personally.

And the latest row had the potential to cause even more damage - particularly in the run-up to the general election.

So after a couple of days of horrendous headlines, Labour has moved to stop the row in its tracks.

The revelation that publisher Lord Hamlyn was the donor has taken most of the heat out of the affair and spared Tony Blair a long-running embarrassment.

Lord Hamlyn has been a regular donor to the party and there is no suggestion, unlike in the Ecclestone affair, that his donation had any strings attached.

Echoes of Ecclestone affair

The Ecclestone gift raised suspicions that, as a result, the prime minister had decided to exempt Formula One from the ban on tobacco advertising.

And during that row, the prime minister was forced to go on TV in a mini-address to the nation and tell people he was a pretty straight kind of guy.

Political capital

There will be no similar broadcast this time and the prime minister will see this as the end of the affair.

However, his critics are determined to squeeze all possible political capital out of the row and are now insisting Labour has only named Lord Hamlyn because they were "shamed" into it.

It is also highly likely that the name would have come out in any case.

The revelation only came after intense pressure by opposition parties and, more importantly, a growing number of Labour MPs led by PLP chairman Clive Soley.

They were drawing parallels with the Ecclestone affair and demanding disclosure to dispel any hint that favours were being sought in return for the cash.

Soley led demands

They also claimed it appeared Labour was desperately seeking large donations before its own rules on disclosure come into force next month - leading to allegations of hypocrisy.

But Labour now believes it can turn the tables on the opposition parties by pointing out it was under no obligation to reveal the donor's identity, but did so in the name of openness.

And party chair, Maggie Jones, has suggested that, if the new rules are being applied retrospectively, then the Tories should reveal the names of their big donors.

The Tories were already hampered by their own past controversies over donors and may now be ready to drop the issue.

Impossible to resist

But the incident has raised the whole question of future party funding.

Both Labour and the Tories are desperately trying to raise the £20m needed for the next election campaign.

Labour no longer gets the huge amounts of cash it once did from the union movement and is eager to win donations from individuals and businesses.

Meanwhile, the Tories have seen their traditional source of revenue from big business drying up.

Neither party is anywhere near its goal and the likely election date of 3 May is rushing towards them.

So a £2m donation, with a demand for anonymity, would have been virtually impossible to resist.

And both parties fear that the new rules, under which donations of over £5,000 will have to be made public, could dissuade some from making large cash gifts in future.

One effect of the row will be to boost the campaign for some form of central funding of all political parties although there are serious concerns over any alternative system which would force taxpayers to foot the bill.

But Tony Blair's overwhelming wish will be to close down the whole matter and focus his MPs' attention back on the next election campaign.