Labour to change party funding system

Labour's National Executive Committee is to take responsibility for party funding, following the recent row over 'loans-for-peerages'.

Following a meeting at 10 Downing Street, the NEC issued a statement saying that it would resume its "rightful responsibility" for overseeing all matters of party funding. It would also ensure that all future loans would be made public.

Labour has now published a list containing the names of 12 wealthy businessmen who provided the party with loans totalling almost £14 million before the last General Election.

The row began when it emerged that several businessmen who had lent the Labour party money had been nominated for peerages.

Last week Prime Minister Tony Blair strongly denied any suggestions of a link between the loans and the nominations, saying: "It shouldn't be one in exchange for the other and it wasn't."

However, the party treasurer Jack Dromey said that he had not known about the loans.

Mr Blair is understood to have attended this morning's meeting for an hour-and-a-half.

The NEC also said that it would co-operate fully with the inquiry into party funding by former senior civil servant Sir Hayden Phillips, which was announced yesterday.

Commenting on today's announcement by the NEC, Liberal Democrat party president Simon Hughes said: "The Labour list confirms the legitimacy of asking questions about people who lend money and are then nominated for the Lords."

Mr Hughes also said that the list raised "serious questions about the connections between the direction of government policy and the influence of its major contributors."

All three political parties have received loans. The Liberal Democrats have named those who lent the party money.

However, the Conservatives have refused to name the identities of the supporters who contributed money to their election campaign. Tory treasurer Jonathan Marland told BBC Two's 'Newsnight' programme last night that the party would not disclose where their loans came from "under any circumstances". He said: "We don't have patronage to give and we are not in the same position."

The Conservatives have proposed introducing a cap on the size of donations parties can receive; limiting them to £50,000 per donation, and reducing the amount that parties can spend during a General Election campaign from £20 million to £15 million.

On Monday, the Lord Chancellor suggested that a ban on secret loans should be introduced to the Electoral Administration Bill, which is currently going through parliament.

Lord Falconer also said that the law could be retrospective, meaning that parties would also have to declare the details of previous party loans.

(KMcA/GB)