Labour loans to be investigated

Jack Dromey is investigating the issue

Labour's treasurer has revealed that he and other elected officials did not know the party had secretly borrowed millions of pounds last year.

Jack Dromey said he will investigate the issue with the party's general secretary and report next Tuesday.

His comments follow a furore over three men recommended for peerages after lending Labour money. Unlike donations, loans do not have to be declared.

Mr Dromey said Downing Street had not shown enough respect for the party.

He is calling on the Electoral Commission to investigate the issue of political parties taking out loans from non-commercial sources.

'In the dark'

Mr Dromey, who is also deputy general secretary of the Transport and General Workers' Union and husband of minister Harriet Harman, complained that neither he nor Labour's elected chairman knew about the loans from businessmen, despite being regularly consulted about bank loans.

He only found out when details of the money emerged in the newspapers and wants to find out who obtained them for the Labour Party.

"It cannot be right that the elected officers were kept in the dark," he told BBC News.

It is quite staggering Nigel Evans Conservative MP Tycoon says no to peerage

Mr Dromey said Labour now needed to put its house in order to restore the confidence of the party and the public.

Downing Street must have known before him about the loans - which amounted to "millions" of pounds, he said.

"It's wrong that Downing Street thinks it can run the Labour Party: we are an elected party, a democratic party," he said.

It is important it is investigated and we find out precisely where the money came from, what it was for and on what terms Labour MP Kelvin Hopkins

A Labour spokesman said the party's day-to-day management was a matter for Labour's general secretary.

"The Labour Party has always and continues to fully comply with the strict laws set by the Electoral Commission regarding fund-raising, donations and loans," he added.

But Angela Eagle, a member of the Labour's national executive committee, said she was disappointed Labour might have copied the Tories in using loans to get around laws on disclosing donations.

Labour MP Kelvin Hopkins, a Commons Public Administration Committee member, echoed Mr Dromey's call for an Electoral Commission investigation.

"It is important it is investigated and we find out precisely where the money came from, what it was for and on what terms," Mr Hopkins told BBC Radio 4's Today programme.

"There are all sorts of questions that should be answered."

Enron comparison

Conservative MP Nigel Evans called for an independent inquiry to find out where the money had come from and where it was now.

"Even Enron would be amazed at hearing the sort of accounting practices that are going on within the Labour Party," Mr Evans told the BBC.

"I have never known anything like it. It is quite staggering."

Sir David says he no longer wants a peerage

The latest furore comes after a property millionaire who lent money to Labour Party before last year's election asked Mr Blair to stop his nomination for a peerage.

Sir David Garrard, who also gave £2.4m to one of Mr Blair's flagship city academies, says he made an unspecified loan to Labour "on commercial terms".

He is one of three businessmen whose peerages were blocked by the House of Lords Appointments' Commission.

Sir David's spokeswoman said he had been told the peerage was for his life-long commitment to "child welfare and education", plus his "vigorous support" of the government's education policy.