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Last Updated: Thursday, 21 December 2006, 10:03 GMT
The Lords suitability question
By Robert Peston
BBC business editor

Whether or not Tony Blair or Lord Levy or anyone else is charged following the police probe into the awarding of honours, the loans-for-peerages affair will leave its stain on British politics and on New Labour.

Prime Minister Tony Blair
The prime minister does not have to agree with the commission

What's been forgotten in all the furore over the criminal probe is this startling fact: three out of the four Labour lenders who were nominated for peerages were deemed unfit to be Lords by the independent Appointments' Commission before that Commission knew about the loans.

The exception was Sir Gulam Noon, the curry magnate, who was encouraged to withdraw his acceptance of a peerage after the commission was made aware that he'd made a loan.

Just ponder that for a moment. The commission which vets prospective peers judged that the prime minister's choice of working peers - or those selected for their loyalty to the party rather than any great contribution to public life - didn't pass muster.

Reputation test

The commission has two tests for political nominees: were they of good standing in the community, both in general terms and with regard to regulatory agencies; and would their presence in the Lords enhance or diminish the reputation of the Lords.

The commission determined that Barry Townsley, Sir David Garrard and Chai Patel were unsuitable, without any reference to their loans - and had it known about the loans, well that would have been double reason for the commission to recommend against them.

It's hard not to feel sympathy for them. Normally the commission's judgement would have happened in great secrecy - but in this case it became public because the nominations list, with their names on it, had already been leaked.

And the prime minister doesn't actually have to accept the verdict of the commission - he could have appointed them anyway - though all three ultimately withdrew their acceptance of the peerage offer.

Poor judgement?

Now, in a way it's astonishing that this aspect of the loans affair hasn't been a bigger story. At the very least it seems to be a manifestation of poor judgement by the team at Downing Street which puts forward candidates.

The point is that six other Blair nominees in the same list of prospective new Lords were deemed to be suitable. And none of them had made loans.

So this is the question: is it pure coincidence that 75% of those nominees who'd made loans were deemed by the commission to be intrinsically unsuitable to be Lords, while 100% of those who hadn't made loans were hunky dory? Those may be statistics of significance.

Tony Blair told the police only last week that the lenders' financial support for Labour could not conceivably be a barrier to their nomination.

But it's odd, at the very least, that he should have such a different view from the Lords Appointments Commission about the necessary qualifications to be a Labour peer.

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