Blair at a loss to defend sleaze claims

Published on Monday 18 February 2002 00:00

TONY Blair’s credibility in the Lakshmi Mittal "cash-for-influence" controversy appeared torn to shreds last night, after Downing Street failed to explain how the Indian steel tycoon had ever acted in Britain’s interests.

The Prime Minister’s official spokesman stonewalled inquiries about why Mr Blair had personally endorsed a take-over venture by Mr Mittal, when the billionaire Labour donor had spent thousands of pounds in America lobbying against British interests and jobs.

The opposition parties were swift to pounce, claiming that Mr Blair had covered up his decision effectively to back a foreign firm in preference to Corus, the ailing business that was formerly British Steel.

They claimed that Mr Blair had been influenced by the 125,000 donation Mr Mittal made to Labour before the general election last year - an allegation that was compounded by the revelation yesterday that the government had helped Mr Mittal’s Caribbean-based LNM company to obtain a "soft" loan of 70 million to enable him to buy Romania's Sidex steel industry.

The Conservatives called for an immediate inquiry into the so-called Steelgate scandal, leaving the government to fend off fresh allegations of sleaze.

Disgruntled Labour back-benchers also vented their unhappiness at the government’s link with Mr Mittal.

Kate Hoey, a former home office and sports minister, said yesterday: "In this case, he [Mr Blair] may have thought it was in the interests of the country. The problem is if you’re in Wales and working for the steel industry it doesn’t look very good."

It was confirmed yesterday that LNM had been granted a loan of 70 million by the European Bank for Regeneration and Development which had been crucial in its acquisition of Sidex.

Officials in Clare Short’s International Development Department instructed the British representative on the EBRD to vote for the loan.

It was granted despite Mr Mittal’s activities in the US, where his American-based companies had lobbied President Bush to apply tariffs of 40 per cent on steel imports.

Downing Street’s spokesman said yesterday that Ms Short was "livid" that the integrity of her officials was being questioned.

However, Adam Price, the Plaid Cymru MP who first uncovered the links between the Labour Party and Mr Mittal, said: "This example of Tony Blair’s support for a foreign competitor is extraordinary.

"Over-capacity is why steelworkers in some of our poorest communities are losing their jobs. Why was similar help not extended to Corus?"

With the government already on the back foot after the publication of an opinion poll which showed that Labour, for the first time, are viewed as sleazier than the Conservatives, the Downing Street press machine went on the offensive.

Mr Blair’s official spokesman dismissed the latest revelations about Mr Mittal’s business interests as "hysteria overload".

He said suggestions that the government's relations with Mr Mittal were sleazy could be seen in that way only if viewed through a "prism of suspicion".

The spokesman went on: "If you want to put every piece of advice through the prism of suspicion and allegation, and if you say everybody is at it and everyone’s reasons are disreputable, you are going to have thousands of stories."

And, as the government struggled to conceal its fury that its link with Mr Mittal was being held up to such intense scrutiny, it wheeled out its Scottish hardmen to deny forcibly allegations that the Labour administration was mired in sleaze as the Steelgate scandal deepened.

John Reid, the Northern Ireland Secretary, and Lord Macdonald, the Cabinet Office minister, undertook a frenetic round of interviews to claim that the government had fallen victim to "an unprecedented attack from the Tory press".

However, their efforts failed to quash the growing demands for an inquiry into the entire Mittal affair.

Iain Duncan Smith, leader of the Conservative Party, said: "My concern is that what the Prime Minister and what the government seem to be doing now is leaving us with huge doubts about their probity, huge doubts about their honesty."

He added: "British taxpayers have now apparently subsidised this man, as well as letters from the Prime Minister’s office going to support his purchase of a Romanian steel company.

"The worst and most bizarre part about this is although the government said that it is a British company - it is not. I think that there are some very serious questions now outstanding."

The disclosures yesterday capped a dismal week for Labour when its defence of Mr Blair's support of Mr Mittal’s take-over of Sidex unravelled and the Prime Minister was pilloried for brushing it off as "Garbagegate".

There were further negative headlines when an opinion poll showed that Labour, for the first time, was regarded as significantly more sleazy than the Conservative Party.

The results of the poll, by YouGov for The Sunday Times, followed seven days dominated by government disarray over its manipulation of the news and the resignation of Jo Moore and Martin Sixsmith, two spin doctors in the Department of Transport.

According to the poll, 60 per cent of people think Labour gives the impression of being "sleazy and disreputable", compared with 41 per cent who think that of the Tories.

The poll appeared to spur the government into its most staunch defence yet of its relations with Mr Mittal and its recommendation to the EBRD.

Ministers also continued to insist that it had been in Britain's interests for Mr Blair to write to Romania’s prime minister, Adrian Nastase, to promote the Sidex sale to Mr Mittal, whose firms are foreign and employ fewer than 100 people in the UK.

Lord Macdonald told Sky TV’s Sunday With Adam Boulton programme: "Our ambassador over there said it was a company that should be backed. That company had a presence in Britain. It was run by somebody who was on the voters’ roll in Britain."

And in a sideswipe that was later echoed by Mr Reid, Lord Macdonald added: "I think we are facing an unprecedented attack from the Tory press.

"They’re setting an agenda which is to try to discredit us and to undermine the issues on which we fight, which are the issues that the people care about," he added.