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Wednesday, 30 January, 2002, 10:24 GMT
Q&A: Enron sleaze row

What's all the fuss about - surely companies make donations to political parties all the time?

Companies do indeed make political donations, sometimes - as in the case of Enron - to more than one party at a time.

Firms in heavily-regulated industries, such as Enron, see it as a legitimate part of the political "lobbying" process.

The company bosses want an opportunity to meet constiuency MPs and government ministers, and if that means buying a table at a fund-raising gala then so be it.

The parties need the cash to fund election campaigns.

As Labour has sought to distance itself from its traditional backers in the trade unions, it has increasingly sought out business support.

Indeed, Tony Blair has often paraded Labour's new friends in big business as an example of how it has shaken-off its past reliance on the unions.

It is very unlikely that a row would have blown up over Enron's relatively small UK political donations if the company had not collapsed in such spectacular and apparently corrupt circumstances.

So what exactly are Labour being accused of?

The Conservatives - who have also taken money from Enron in the past, something they now say they regret - are trying to suggest that access to Labour ministers, and by inference Labour policy, could be up for sale.

Labour's critics point to a change in policy on gas-powered fire stations as possible evidence of Enron's influence.

They have also raised suspicions over a decision not to refer Enron's takeover of Wessex Water to the Monopolies and Merger Commission.

Labour claims both decisions were entirely justifiable and had nothing to do with political lobbying or party donations.

What was the alleged chain of events?

Labour came to power in 1997 promising an end to the so-called "dash for gas".

The Conservative policy of leaving Britain's energy needs to the market had led to an over-reliance on gas-fired power stations, at the expense, Labour claimed, of Britain's hard-pressed coal industry.

In June 1998 Trade and Industry Secretary Margaret Beckett published a Green Paper saying there were "serious distortions" in the electricity market.

It proposed a short term freeze on planning consents for gas-fired power stations.

Ministers met Enron executives six times over the next two years, to hear the case for gas-fired energy.

The company also paid about 38,000 through sponsorship, including buying gala dinner tickets, into Labour Party coffers.

In November 2000, the government changed its policy to lift the moratorium on gas fired power stations.

The government claimed this would lead to cheaper electricity bills - but the Left accused Labour of selling out its traditional supporters in the coal industry.

Was Tony Blair involved?

Downing Street claims the prime minister has "no record" of meeting Enron executives, although he may have "bumped into them" informally at party gatherings.

But a US document obtained by the Guardian newspaper in 1999 reported that Mr Blair had intervened "to water down the moratorium proposals".

Conservative Party chairman David Davis has called for "further clarification" of the US document, which appears to suggest Mr Blair not only knew about ministers' meetings with Enron, but personally intervened to secure a change of policy.

The Tories are keen to resurrect charges of sleaze, which Labour used so effectively against them when they were last in government.

They would like to see a replay of the Bernie Ecclestone debacle, which blew up in the early days of the Blair government.

Labour was forced to pay back a 1m donation to Formula One boss Ecclestone, after allegations that it had exempted the sport from a proposed ban on tobacco advertising.

So are Labour guilty of sleaze over Enron?

The government is adamant that it did nothing wrong and has nothing to hide.

Energy ministers meet energy companies all the time as part of the normal political process, Downing Street argues.

And there is no concrete evidence that the Labour Party or the government has broken any rules or guidelines.

The opposition is simply calling for "clarification" of Labour's links with Enron.

Labour says it would be "absurd" to suggest that any government would announce a fundamental change in its energy policy a week after a gala dinner.

Potentially far more damaging are the links between Labour and Enron's accountants Andersen (formerly part of Arthur Andersen).

Labour forged close links with the firm in opposition. Arthur Andersen carried out unpaid research work for the party and senior Labour figure Patricia Hewitt, now trade and industry secretary, worked for the company in the early 1990s.

When Labour came into power in 1997 it lifted a long-term ban on Arthur Andersen doing government work.

Labour claims it was merely following the recommendations of an independent report, which the outgoing Tory administration had not had time to act on.

The Tories claim that version of events is "misleading" and they have questioned Labour's close ties with Arthur Andersen, as it was then known.

Arthur Anderson has since split into two - its consulting arm becoming Accenture and its accounting business Andersen.

How much damage will this row do to the government?

The row goes to the heart of Labour's relationship with business and the way political parties are funded.

Traditionally, the party received the bulk of its funding from the unions but recent years have seen the amount it gets from industry increased.

The episode could have wider implications for the political process and could renew the debate over whether political parties should get their funding from the state.

Labour's links with Andersen and Accenture will also be seized upon by the unions and opponents of public-private partnership deals.

Arthur Andersen - more recently its former consultants business Accenture - have been highly influential on Labour policy on public-private partnerships, even though the companies have stood to make millions of pounds from such deals.

The BBC's Nick Robinson
"Mr Hodge has shon a ligt into the murky world of politicians and business"
Conservative Vice Chairman Tim Collins
"I've already expressed regret that we took money from Enron"
Lord MacGregor, Cttee on Standards in Public Life
"The Andersen tentacles seem to run deep with this government"

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See also:

29 Jan 02 | UK Politics
28 Jan 02 | UK Politics
14 Jan 02 | Business
28 Jan 02 | UK Politics
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