He gave pounds 1m to Labour, and pounds 14m to the Tories. What did he expect in return?

The explosive issue of political sleaze was blown wide open yesterday by multi-million pound gifts made to Labour and the Tories by Bernie Ecclestone, the head of Formula One racing. With 'sleaze-free' Labour already damaged, Anthony Bevins and Kim Sengupta examine the fall-out.

Donations made by Mr Ecclestone, of pounds 1m to Labour and pounds 10m to the Tories, topped up with a pounds 4m loan, were capped last night by an allegation, passed to The Independent, that John Major and William Hague offered their benefactor a knighthood.

Well-placed political sources said Mr Major entertained Mr Ecclestone to lunch at Chequers before the election, and Mr Hague is said to have sent a letter to the Prime Minister, submitting Mr Ecclestone's name for a knighthood, after he became party leader in July.

The disclosure that Mr Ecclestone had given pounds 1m to Labour - now to be returned following the highly unexpected advice offered by Sir Patrick Neill QC, chairman of the Committee on Standards in Public Life - followed a day of speculation about the precise amount.

Labour's initial defence of secrecy was that the amount was private between the donor and the party, and could only be divulged by agreement. That publicity agreement had covered the pounds 1m donation made by Matthew Harding, vice-chairman of Chelsea Football Club, before his death in a helicopter crash last year. Because Mr Ecclestone had handed over his money in January, his name was not even included in the list of donors of over pounds 5,000 to the party last year.

That list, which includes people such as Jeremy Irons, Paul Hamlyn, Lord Puttnam, and David Sainsbury, and companies such as Tate & Lyle, Sun Life Corporation, Kingfisher Group, and Mirror Group newspapers, could now come under more intense scrutiny.

Mr Ecclestone last night questioned how significant donations could continue to be made in the light of events of the last 24 hours. "How can a donation be made in future, if one supports either party? And the unions are also big supporters - and why should they be allowed to be able do something other people can't?" he said.

The Prime Minister's office suggested that if a more generous-than-expected national minimum wage was introduced, trade union donations might have to be sent back, and that if ministers decided to help ban fox-hunting, similar donations from the Political Animal Lobby might have to be returned.

But Mr Blair's spokesman added zest to the controversy by saying that donations and actions taken by the Tories might also have to come under scrutiny. The more substantial contributions made by the building, brewing and tobacco industries over many years could open a Pandora's box for Tory high command.

Over the years, it has been alleged that Tory ministers have been switched or sacked for "taking on" the tobacco lobby, and the recommendations of a 1989 Monopolies and Mergers Committee report on the brewing industry were watered down.

Paddy Ashdown said yesterday that he had personally rejected the offer of a pounds 1m donation before the last election, an offer which The Independent has been told came from Mohamed Al Fayed.

As for the offer of a knighthood to Mr Ecclestone, a Conservative spokesman said last night: "There are matters on which we must deal with Downing Street on a confidential basis, as they fall under Privy Councillor terms. Honours and Northern Ireland are two examples of that basis, and as a result, we can neither confirm nor deny anything which falls within Privy Councillor dealings."

The mystery increased last night when The Independent was told Mr Ecclestone's name had been submitted to No 10 for a knighthood by Mr Major, but was struck off by Mr Blair. In fact, Mr Ecclestone's name was not on any list put to No 10 by Mr Major after he lost the May election.

Collision course, page 13