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Last Updated: Thursday, 28 December 2006, 10:44 GMT
Byers warns against donation cap
Stephen Byers
Stephen Byers said Labour support was key
Capping donations to political parties would be unacceptable to the Labour Party, one of the prime minister's closest allies has said.

Ex-minister Stephen Byers wrote to Sir Hayden Phillips, who is reviewing party funding, warning that even arch Labour modernisers would not agree to capping.

In the letter, seen by BBC News, he says a proposed 50,000 cap would wreck any chance of cross-party consensus.

Sir Hayden is due to publish his government-backed review in January.

Labour wants a small increase in state funding, stringent caps on spending and voluntary caps to be placed on donations by each party, which can reflect historic links.

Draft proposal

However, Sir Hayden emerged from two meetings with Tony Blair and Downing Street officials late last month with the impression that the Labour leadership would accept a 50,000 limit on donations.

His draft proposal prompted an angry reaction from within the Labour Party, which fears it would endanger their funding - and historic links with - trade unions.

Furious Labour MPs accused senior officials of directly contradicting official party policy.

Mr Byers, a Blairite, has stepped in to draw the fire. In the letter to Sir Hayden he says that even to a moderniser like him the proposals are unworkable.

PM's position

And he warned that without Labour agreement the proposed reforms would fail.

The BBC understands the prime minister is aware of the letter's contents which are said to reflect his "current thinking".

The letter appears to be an attempt to shore up Mr Blair's position inside his own party in the dying days of his premiership, says BBC political correspondent James Hardy.

Sir Hayden, meanwhile, is believed to be looking at suggesting a voluntary approach to donations and spending.

The Tories have called for a large increase in state funding for all parties with more than two Commons seats, a cap of 50,000 on all donations, the phasing out of corporate donations - including from trade unions, and tax relief for donations.

Secret loans

The funding review was ordered at the height of the "cash for honours" probe, initially prompted by the discovery that a number of people nominated for peerages had secretly lent money to the Labour Party.

It then emerged that ahead of the last election Labour was secretly lent nearly 14m and the Conservatives 16m. The Liberal Democrats said they borrowed 850,000 from three backers.

Until these revelations prompted a rule change, large loans on a commercial basis to political parties did not have to be publicly disclosed. Large donations already had to be declared.

Police are continuing to investigate whether peerages have been offered in exchange for cash. All concerned in the inquiry deny wrongdoing.

MPs urge political donation cap
19 Dec 06 |  UK Politics
Labour meeting over funding anger
14 Dec 06 |  UK Politics
Q&A: Political party funding
19 Dec 06 |  UK Politics

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