Under-fire Blair slams 'Garbagegate'

Tony Blair has insisted he did nothing wrong in signing a letter which helped a firm owned by a Labour Party donor land a lucrative contract in Romania.

He said the letter, sent to the prime minister of Romania endorsing the sale of the country's state steel industry to Indian tycoon Lakshmi Mittal, was "entirely justified".

Mr Blair was responding to a question from Conservative leader Iain Duncan Smith, who asked whether he knew that Mr Mittal was a Labour donor when he signed the letter.

It's interesting that you now call it garbage when a concern is raised that you as prime minister...write a letter in support of a company which is a competitor to our main steel manufacturer

Iain Duncan Smith

Mr Blair said the letter he signed did not mention Mr Mittal but his company LNM.

But even if he had known the company was owned by a Labour donor, Mr Blair said, it would not have made a difference.

"This has been a complete load of nonsense from the beginning," Mr Blair told MPs during a heated exchange at Prime Minister's Question Time.

"It is not Watergate, it is Garbagegate.

"It is the biggest load of garbage since the last load of garbage, which was Enron," he said, referring to the collapsed US energy giant which the Tories claim bought access to Labour ministers in an attempt to influence policy.

Contradiction

Mr Duncan Smith hit back, telling Mr Blair: "It's interesting that you now call it garbage when a concern is raised that you as the prime minister, on behalf of the whole country, write a letter in support of a company, which is a competitor to our main steel manufacturer."

Mr Blair repeated his assertion that the letter was written "at the instigation of the British embassy in Romania".

If we are looking at the record of this government I don't know why they don't simply hang a 'for hire' sign over Downing Street

Tim Collins, shadow cabinet office minister

BBC Political Editor Andrew Marr said: "This is a very simple story to understand after all: bloke gives a lot of money to the Labour Party, gets a favour. Are the two things connected? If so then money can buy favours."

He added that it was possible that Mr Blair would rethink his approach to party funding because of the dangers inherent in accepting private donations.

Downing Street's version of events - that the letter had not played any significant role in the winning of the contract - appeared to be contradicted by the British Embassy in Romania.

An embassy official told the BBC's World at One that the letter from Mr Blair was an important factor in clinching the deal for Mr Mittal.

Personal tax

Mr Blair's claim that he was simply "celebrating" the success of a British company has also come under opposition scrutiny, after it emerged that LNM is registered in the Dutch Antilles and employs less than 1% of its workforce in the UK.

Mr Mittal, an Indian citizen who lives in Hampstead, London, and pays personal tax in the UK, gave £125,000 to the Labour Party during the General Election campaign last year.

The Romanian prime minister, Adrian Nastase, is said to have been reassured by British intervention that LNM was a credible bidder and more than a minor offshore operation.

UK Ambassador to Romania Richard Ralph said the letter was intended to express support for British involvement in Romania's privatisation of the decade.

Friends?

But new questions are being asked about Downing Street's insistence that Mr Blair had no idea that Mr Mittal had given the party £125,000. Mr Duncan Smith asked Mr Blair three times whether he knew.

Two newspapers reported on Wednesday that the original draft of Mr Blair's letter indicated that he and Mr Mittal were friends.

The prime minister's official spokesman did not deny the letter was changed to remove the description of the boss of LNM as a friend of Mr Blair's.