Tighter 'sleaze' rules will hit Labour

NEW RULES on funding political parties threaten to jeopardise Labour's financial links with the trade unions and its new relationships with commercial sponsors.

Under the proposals drawn up by the Neill committee on standards in public life, political parties would have to declare the value of sponsorships and donations in kind, such as staff or equipment loaned in the run up to an election.

The new rules will have wide-ranging implications for Labour's relationship with the trade unions, which gave it an estimated pounds 7m worth of support in non-cash donations during last year's general election.

Lord Neill has decided that sponsorship and the loan of equipment, premises or personnel should be treated in the same way as cash.

Labour stands to profit from this week's party conference, having secured an estimated pounds 300,000 in sponsorship. It was accused of "hiring out" its MPs after it emerged that paying stallholders in Blackpool could request six Labour politicians to visit their stands.

"It's a matter of common sense that if you have to disclose a cash donation then you should have to disclose also the value of other forms of contribution - it might be a company lending its helicopter or a union loaning paid staff," one member of the committee said.

The Neill committee's report, which was finalised last week, concludes that far greater transparency is needed in the way in which political donations are made. It makes radical recommendations designed to clean up public life and restore the reputation of politicians following allegations of sleaze.

Labour politicians originally thought the Neill committee's recommendations would hit the Conservative Party hard, and are likely to be extremely irritated by the potential impact on their own party's financial affairs.

Blind trusts into which people can donate anonymously - like the one used to fund Tony Blair's office in opposition - will be banned. The committee judged that the secret accounts were simply a way of "evading" the rules on disclosure and so contravened the principles of transparency.

Also to be closed is the loophole through which donors make hundreds of small gifts to different constituencies - allowing them to avoid having their names published because no single gift is large enough to force disclosure.

The committee also considered the link between donations and honours, in the wake of accusations that the Prime Minister had rewarded generous Labour donors with peerages and knighthoods. Its report is expected to recommend that there should be a "cooling off" period between a donation being made and an honour given to ensure that everything is seen to be absolutely above board.

Among the recommendations are:

Setting up of a new electoral commission to monitor donations, assess whether or not a contributor was trying to "buy influence", and ensure that all gifts were declared properly.

Giving powers to the commission to investigate allegations of impropriety, and to prosecute party leaders if they breach rules on funding.

Disclosing the identity of major funders, no matter how their contributions were made.

Putting on a statutory footing the existing voluntary agreement by all parties to declare any donations over pounds 5,000.

Backing Mr Blair's pledge to ban foreign donations.