BRITAIN:Gordon Brown has moved swiftly to counter fresh allegations of Labour "sleaze" by ordering his party to return more than £600,000 in donations that were not lawfully declared.
In a robust defence of his own position, the prime minister yesterday sought to distance himself from the affair, insisting he did not know until last Saturday of the practice - which had grown since 2003 - that saw property developer David Abrahams conceal his donations to the party by making them through proxies, or middlemen, in breach of disclosure and transparency laws passed by Tony Blair's government in the same year.
Mr Abrahams has claimed he acted in this way to preserve his privacy and that he had been unaware that donors making contributions through agents had to be identified to the Electoral Commission.
The revealed breach of the rules forced the resignation on Monday of Labour's general secretary, Peter Watt, which Mr Brown described yesterday as "a necessary first step" in reviewing party procedures, ensuring that the party upheld "the highest standards", and that such a thing could never happen again.
Mr Watt was the official legally responsible for reporting donations to the commission, but claimed it was only after weekend press reports that he obtained legal advice informing him that there were additional reporting requirements.
The embarrassment for Mr Brown is that this "completely unacceptable" secret arrangement straddled successive Labour administrations, with Mr Abrahams emerging as the third largest donor to Labour since Mr Brown succeeded Mr Blair as party leader and prime minister.
One senior Labour source said last night he was amazed that, following the damage inflicted on Labour by the "cash for honours" affair, Mr Brown had not ordered a root-and-branch review of all party procedures and of its principal donors.
Amid questions regarding "who knew what?" about the arrangement inside Labour's high command, the media spotlight remained sharply focused on deputy leader Harriet Harman.
Ms Harman is married to party treasurer Jack Dromey, the official who originally blew the whistle on Mr Blair's Downing Street and complained he had been kept in the dark about the secret loans raised before the 2005 general election that triggered the controversial Scotland Yard inquiry.
Conservative leader David Cameron, meanwhile, accused Labour of showing "an indifference for the law", while acting Liberal Democrat leader Vince Cable suggested "an enormous can of worms had been opened up" by a government that should have introduced new party funding regulations.
At the same time, reported consultations between the Electoral Commission and the Crown Prosecution Service fuelled speculation about the likelihood of another damaging police inquiry and the possibility of criminal charges.
Some hours after Mr Brown's press conference, Ms Harman announced that she would be returning a donation of £5,000 given to her deputy leadership campaign last summer and accepted "in good faith" from a Janet Kidd, not knowing that Ms Kidd was Mr Abraham's secretary and that the money was being given on his behalf.
Ms Harman was unable to say whether contact had been initiated by Ms Kidd or her campaign team, or, specifically, whether Ms Kidd had been identified by someone in the Labour Party as a likely source of financial support.
Ms Harman said her team had confirmed Ms Kidd was "a pre-existing" Labour donor, that she had accepted the donation in good faith, acknowledged it and registered it, and done everything to ensure her campaign had honoured both "the spirit and the letter of the law".
However, that left unresolved questions in the light of the revelation that another deputy leadership candidate, Hilary Benn, had rejected a cheque from Ms Kidd after being advised by Baroness (Margaret) Jay about its true origin. Mr Benn later accepted a £5,000 gift from Mr Abrahams in his own name.
It was not clear last night how or why Baroness Jay would have been aware of Ms Kidd's association with Mr Abrahams, while senior cabinet members such as Ms Harmon were not.
PA adds: Former prime minister Tony Blair, in an interview for the television series The Blair Years, said he now regretted attacking the Tories over sleaze in the final years of the Major government.
Such attacks, Mr Blair said, contributed to a view that politics in general was corrupt, whereas in fact the "bad apples" were few and most people in public life wanted to do the best for their country.