Loans row could lead to corruption charges

Scotland Yard has not ruled out corruption charges in loans for peerages inquiry

Wednesday, 29, Mar 2006 12:00

Scotland Yard's inquiry into the so-called loans for peerages scandal is looking at allegations of corruption, it has been revealed.

The news comes after the Electoral Commission today called for the issue of loans made to political parties instead of donations to be reviewed.

In its breakdown of campaign spending at the last election, the watchdog says parties understand financial transparency is vital to maintain public trust, but warns "further work" is needed to make the sources of political funding clearer.

The report comes after it was revealed that the Metropolitan police inquiry into breaches of the 1925 Honours (Prevention of Abuses) Act, which bars the sale of honours, may look into whether donors have received preferential treatment.

Deputy assistant commissioner John Yates wrote to the public administration committee earlier this week asking them to postpone their investigations into the issue, on the basis that they may conflict with a criminal inquiry.

"Many of the individuals that you wished to hear evidence from may be the very people that could be central to our criminal inquiry, either as witnesses or suspects," he wrote to committee chairman Tony Wright.

The MP said: "[Mr Yates] suggested that corruption charges could also be involved."

Mr Wright has agreed to postpone his inquiry for a few weeks, but insisted that "these matters alleged go to the heart of the political and parliamentary process, and we think it vital that parliament should investigate as soon as possible".

The issue centres around revelations that donors to the Labour party had been asked to give loans instead of donations, because these loans – as long as they are lent at commercial interest rates – do not have to be declared to the Electoral Commission.

Given that a number of major contributors to the party have since been given a seat in the House of Lords, or at least have been nominated, this raised questions of whether there was any impropriety – something Downing Street has vigorously denied.

In response to the furore, the Electoral Commission wrote to party treasurers last week asking them to provide details of any undeclared loans that had not been given on a commercial basis – and therefore would count as donations.

But it appears that all the parties acted properly, as no further loans have been declared by today's deadline.

The commission's report reveals a total of £41 million was spent in campaigning for last year's general election – 84 per cent of this was spent by Labour or the Conservatives, who paid out £17.9 million each, just short of the £18 million upper limit.

The Liberal Democrats spent just £4.3 million, while campaign groups spent £1.7 million and individual candidates spent £14 million.

Across all the parties, the largest proportion (37 per cent) was spent on advertising, followed by sending material to electors (22 per cent) and rallies and events (ten per cent).