Labour funders backing party despite loans scandal

Published on Sunday 24 September 2006 00:56

CASH-STRAPPED Labour chiefs have managed to persuade all but two of the tycoons who gave the party secret loans worth £12m extra time to pay the money back.

Annual accounts to be presented to the party conference today reveal that, amid the embarrassment of a police investigation into claims that the government offered honours in return for party donations, the party remains on good enough terms with most of its 12 big-ticket donors to prevent them pulling the rug away and demanding immediate repayment.

Labour was plunged into the "cash-for-peerages" scandal earlier this year when it was disclosed that the party had used funding rules to keep loans worth 12m secret. Scotland Yard started an investigation into the practice after it subsequently emerged that a number of the lenders had been nominated for peerages by the party hierarchy.

A report to conference by Labour treasurer Jack Dromey - who originally blew the lid off the questionable practice - today confirms that Labour agreed to repay the loans at a "commercial rate" of interest, which cost the party 436,000 in 2005 alone.

But, despite the party giving an obligation to repay the huge sums to its backers within 180 days or one year at most - and even though a number of the lenders have since expressed frustration that they have been dragged into the police investigation - 10 of the lenders have agreed to reschedule the loans to give the indebted party more time to pay the massive sums back.

The respite will help Labour keep a lid on its massive debts, which have soared beyond 25m since the last election.

The revelation comes a day after it emerged that exclusive access to Cabinet ministers and other senior Labour politicians is being offered for thousands of pounds at this week's party conference.

Labour is offering companies and special interest groups the opportunity "to engage first hand" with ministers and policy advisers who work in areas relevant to their business for 1,500 a head.