Capita boss quits over Blair loan

Mr Aldridge said the loan had been 'in good faith'

The chairman of outsourcing firm Capita is stepping down over "spurious" claims his £1m loan to Labour resulted in the group getting government contracts.

Rod Aldridge, one of 12 donors who lent the party almost £14m in total before the last election, said he did "not want this misconception to continue".

Chancellor Gordon Brown said the political funding system had to be reformed to increase "transparency".

An influential Commons committee has also launched an inquiry into funding.

'Made in good faith'

The constitutional affairs committee will interview Lord Levy, Tony Blair's chief fundraiser, on his role in persuading Labour backers to make loans.

Lord Levy will also be questioned by the public administration committee.

Tony Blair has denied suggestions that he nominated wealthy supporters for peerages in return for Labour Party loans.

I have every confidence that the team at Capita will continue to go from strength to strength Rod Aldridge, Capita chairman See Capita's share price

Mr Brown told BBC Radio 4's Today programme: "People should be free to give donations to political parties, as well as charities and other organisations, and their motives for doing so should not be impugned because these are made normally in good faith by people who want to help the cause they believe in."

Meanwhile, the Electoral Commission is expected to finalise its guidelines on political loans at a meeting in London.

These are thought likely to be introduced in the Electoral Administration Bill, which is currently going through parliament.

Mr Aldridge, who has run Capita since its foundation in 1984, said: "At present, the group's reputation is being questioned because of my personal decision to lend money to the Labour Party.

"As I have made clear, this was entirely my own decision as an individual, made in good faith as a long-standing supporter of the party."

MPs' investigation

"There have been suggestions that this loan has resulted in the group being awarded government contracts. This is entirely spurious," he said.

"Whilst anyone who is associated with the public procurement process would understand that this view has no credibility, I do not want this misconception to continue, as I remain passionate about the group's wellbeing."

NAMES OF LABOUR PARTY LENDERS: Rod Aldridge - £1m Richard Caring - £2m Gordon Crawford - £500,000 Prof Sir Christopher Evans - £1m Sir David Garrard - £2.3m Nigel Morris - £1m Sir Gulam Noon - £250,000 Dr Chai Patel - £1.5m Andrew Rosenfeld - £1m Lord Sainsbury - £2m Barry Townsley - £1m Derek Tullett - £400,000 Total: £13,950,000 Profiles: Labour lenders How are Lords appointed?

Meanwhile the Commons constitutional affairs committee will look at alternative funding methods for parties, such as money from the state.

It will also discuss "safeguards", such as setting a cap on donations.

Committee chairman Alan Beith said: "Party funding is a significant component of the existing democratic system on which our constitution rests and recent events have underlined the problems and dangers surrounding it.

"We realised that there was an urgent need to take evidence in the course of an open and transparent inquiry in order to ensure public confidence in the integrity of the democratic process."

On Tuesday Scotland Yard said it was examining three complaints that Labour had breached the honours system - something it denies.

The investigation will focus on whether the Honours (Prevention of Abuses) Act 1925 was upheld and whether honours were given by Labour in return for loans or donations.