Money trouble for UK Labour with donations in the spotlight

A multimillionaire who has been arrested by police investigating the cash-for-peerages affair says he was "extremely shocked and dismayed" and would never have loaned the Labour Party money if he had known what would happen.

The timing of Sir Christopher Evans' arrest is extremely embarrassing for Tony Blair as he faces his last Labour Party conference as party leader this week.

Blair's readiness to accept donations and loans from wealthy businessmen has been a source of friction between him and Labour's traditionalists, who were content with the old system of trade union donations and individual subscriptions.

Sir Christopher, a leading figure in the biotechnology industry, is the third person held by police investigating claims that potential backers were promised peerages in exchange for their support, which is illegal under a law passed in 1925.

He described his arrest as "mind-boggling" and vehemently denied that he has done anything wrong.

But Scottish National Party MP Angus MacNeil, whose complaint set off the police inquiry, said: "This is a significant development and again justifies my decision to report this matter to the police."

"Let us not forget that, in total, 80p of every £1 of individual donations to the Labour Party come from people who have been honoured.

"Corruption has no place in politics in any advanced Western democracy. I hope this investigation goes the whole way in cleaning up Parliament."

Lord Levy, Labour's chief fundraiser, who was arrested during the northern summer, has retained Blair's confidence despite the allegations, and was prominently involved in the Prime Minister's three-day visit to the Middle East this month.

Sir Christopher, who was bailed last Wednesday, said: "I voluntarily attended the police interview and have always been happy to provide the police with any information they have requested. There was nothing raised in the interview that caused me or my solicitor any concern or to think that I have done something wrong. I have done nothing wrong and have absolutely nothing to hide.

"I am willingly co-operating with this inquiry and fully respect the job the police officers are doing, although I am disappointed that the technicality of arrest was used in this situation. My solicitors felt it was unnecessary, particularly since I had always indicated my willingness to co-operate fully.

"I am extremely frustrated to be placed in this situation as a result of what I believed to be a straightforward commercial loan to the Labour Party to assist them with their cash flow for the last election campaign.

"I never made a secret of the loan and if I had been asked at any time whether I had made a loan would have confirmed the fact. My record as a long-standing Labour donor and supporter was there for all to see.

"The reason I made the loan was precisely because I was not prepared to make such a substantial donation to the Labour Party. From the outset I made it clear that the money would be a commercial, interest-bearing loan which was to be repaid in full and that remains the case.

"Frankly, if I thought for one moment that I would be placed in this embarrassing and mind-boggling position, I would not have made the loan."

His solicitor, Neil Micklethwaite, said Sir Christopher had not been charged with any offence.

Meanwhile, a TV documentary to be screened this week will claim Lord Levy blocked moves to publish the names of big Labour donors from the past.

Former Downing Street aide Lance Price tells Channel 4's Dispatches that the peer was "apoplectic with rage" at the proposal and went to the Prime Minister, who backed him up.

The alleged row happened before the Government introduced laws to disclose the names of major donors.

- INDEPENDENT