In an embarrassing climb-down, Labour announced last night it was returning the donation on the advice of Sir Patrick Neill, new chairman of the Committee on Standards in Public Life.
Mr Ecclestone, the president of the Formula One Constructors' Association, had had a meeting with Tony Blair before the Government decided that it wouldn't, after all, exclude Formula One racing from the ban on tobacco advertising. Also present was Max Mosley, who heads the sport's governing body. The donation, meeting and change of policy have been attacked by Opposition MPs.
A party source last night confirmed that Mr Ecclestone had made one donation of "more than pounds 5,000" to party funds before the general election. But how much was the donation? The party refused to say, sparking off more speculation at Westminster that it could amount to pounds 1.5m. But a party source dismissed that as "a seriously inaccurate guess". The source said Sir Patrick told the party that criticism of the donation would be "wrong and unfair. However he believes that in order to avoid even the appearance of any influence, on balance, we should return the donation and avert any further donation."
Labour's rules on disclosure require it to name those who donate more than pounds 5,000. Mr Ecclestone's name would have appeared in the accounts next year if it had not been returned.
Mr Blair took the decision to call in Sir Patrick at the end of last week. As the controversy mounted over the Government U-turn, and the financial links between the party and both Mr Ecclestone and Mr Mosley, Mr Blair asked Tom Sawyer, the party's general secretary to inform Sir Patrick about any donations to the party.
Sir Patrick, who officially took over yesterday from Lord Nolan in the anti-sleaze role, left the party with no option but to return the money, but the Tories were scenting more blood on the tracks, and were determined to follow-up the disclosures.
Sir Patrick said last night that he was "delighted" by the party's action, but it will increase the calls for total reform of party funding, possibly leading to state funding.
"I make no criticism of the party for originally receiving a donation from Mr Ecclestone, but in the light of the changed circumstances I stressed the importance of those in public life being judged not only by the reality but also by the appearance," he said.
"I submitted my advice to the general secretary [Mr Sawyer] and I am extremely pleased with the speed with which he has moved to accept it and to announce that fact."
Labour sources said that Mr Blair had already called on Sir Patrick to carry out an inquiry into party funding before the row erupted.
The party insisted that Mr Mosley was in a different category, as a long- standing party supporter who made undisclosed sums, believed to be small, to the One Thousand Club, for which minimum donations are pounds 1,000. No money was paid to the "blind" trusts set up for the leader in Opposition.
Last night Mr Ecclestone said he had made a donation to the Labour Party but never sought any favours from the party or government.
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