Britain:Labour's attempt to reclaim control of the political agenda was derailed last night when the party's most senior official resigned after admitting he knew a millionaire businessman was using intermediaries to secretly donate hundreds of thousands of pounds.
A week after being hit with claims of incompetence over lost data, the British government was reeling over allegations the party had been dishonest about the source of the third-biggest donation received under Gordon Brown's leadership.
Peter Watt quit as general secretary after acknowledging that he knew all along that the property developer David Abrahams gave money to associates who passed the cash on to the Labour Party. Mr Watt's resignation came less than 48 hours after Labour said he would lead the investigation into the affair.
The revelation is a wounding blow to Mr Brown, who hoped to evade the kind of controversies over party fundraising that bedevilled Tony Blair's last 18 months in office. It also sabotaged the prime minister's attempts to refocus the government after recent debacles.
Last night the Tories demanded a full explanation from Labour as they voiced extreme scepticism that Mr Watt was, as the party claimed, the only official to know of the circumstances of the donations. Brown aides said he had never heard of Mr Abrahams before the weekend and insisted he knew nothing of the secret donations.
Labour is now having to consider whether to return the money, although it may be forced to by the electoral commission, which has started an investigation. On Sunday it emerged that Janet Kidd, a secretary, and a builder, Ray Ruddick, who lives in an ex-council house and said he hated politicians, were registered as providing £381,850 (€533,192) to Labour since 2003. Some £222,000 (€310,000) had been given since the handover of power in Downing Street, making the pair the third-biggest donors to Labour under Mr Brown.
Mr Watt said in his statement last night that some of Mr Abrahams's money had been passed through a solicitor, named last night as John McCarthy, from Newcastle. Labour said Mr Watt was the only official to know. He spoke to Mr Brown, a member of the NEC, late yesterday afternoon and told him he was going to resign.
Mr Abrahams, a high-profile figure in the northeast business community and known to Labour MPs in the region, admitted the money had come from him. He had disguised the source, he said, to preserve his privacy. But when the story broke in the Mail on Sunday, the electoral commission immediately made inquiries after recognising that there may have been a breach of the Political Parties, Elections and Referendums Act, 2000.
Mr Watt (37) acknowledged he was legally responsible for reporting details of donations to the commission. "I was aware of arrangements whereby David Abrahams gave gifts to business associates and a solicitor who were permissible donors and who in turn passed them on to the Labour Party and I believed at the time my reporting obligations had been appropriately complied with."