Fury over 'cash for knighthood'

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John Major was facing a political furore over his New Year's Honours list today after the millionaire tycoon who lent the Tory party pounds 4m was listed among the knighthoods.

Graham Kirkham, chief of the DFS furniture chain, also took pounds 5,533,637 of his pounds 10m salary for the year ending August 1993 in antiques and works of art, so that the company saved pounds 500,000 in employers' National Insurance.

Today's knighthood comes in recognition of Sir Graham's charitable services to the Duke of Edinburgh's award and the Animal Health Trust.

But it was immediately condemned by Labour who claimed it was the crudest instance yet of using the honours system to reward generosity to the Tory party.

John Prescott, Labour's deputy leader, said: "Whatever the official reason, this seems like the crudest example yet of honours being given for financial services received by the Tory party."

From starting work as a Doncaster furniture shop salesman more than 35 years ago, Sir Graham has gone on to became one of the top 50 richest men in Britain.

His entrepreneurial talents all through the Thatcher years led him to amass a multi-million pound personal fortune from which he was able to give a cash-strapped Conservative Central Office a pounds 4m three-month loan in January after John Major went to meet him at his Yorkshire estate where he houses his art treasures.

With all interest on the money going permanently to the party, the gesture was one of the largest personal contributions ever made to a British political party.

It came at a time when the party's principal banker, the Royal Bank of Scotland, was becoming increasingly concerned over its overdraft - then about pounds 16m - and cutbacks in company donations.

The disclosure that when still a privately owned company DFS had paid Sir Graham partly in paintings and furniture, saving pounds 500,000 in National Insurance contributions, came after the company was floated on the stock market and so obliged to publish annual reports.

While Sir Graham and his company had done nothing illegal at the time, the episode provoked Labour charges that the Conservatives had accepted money from a man Labour claimed had not paid his fair share of taxes to the country.

Downing Street insisted that Sir Graham's links with the Conservative Party had nothing whatever to do with his nomination for the knighthood, and he was said not to have been nominated by the party.

"The citation [in the Honours' list] is quite clear," a Downing Street source said. "He was not given this award for political services. He was given it for charitable services."

The row is an embarrassment to the Prime Minister in the wake of his efforts over recent years to create a more "classless" honours system that reflected a wider spectrum of society and gave more recognition to community work.

Approaching 40 per cent of this year's list, from holders of the humble MBE up to knighthoods, had received the backing of members of the public writing into Downing Street.

Although Number 10 declined to be drawn on how many honours resulted solely from public nominations, it said that about 400 names on the Prime Minister's 1,036-strong list had been picked specifically for voluntary and community service.

However, Mr Prescott said: "So much for John Major's claim that his honours system was for the ordinary man. Frankly, this award must by the cause of some serious concern."

Labour stuck to its long-standing convention of not putting forward political nominations for honours, and a spokeswoman said yesterday that that stance would continue under a Labour government.

The affair is bound to revive complaints over Conservative-sympathising businessmen apparently being rewarded with honours for making donations to the party's funds.