The Committee on Standards in Public Life, chaired by Lord Nolan, will this week consider whether to extend its inquiries into the opaque world of party finance - a move certain to embarrass the Conservative Party.
Lord Nolan is ready to take on such an inquiry. But Mr Major will argue that an investigation in the run-up to the general election would be beyond the committee's terms of reference. He set them and only he can alter. them, Mr Major will argue. "The remit is the remit" said a source close to the Prime Minister.
However, allies of Lord Nolan pointed out that his first report, published last week, had already touched on Labour Party funding in the field of trade union-sponsored MPs - undermining Mr Major's narrow definition of its powers.
"If party funds have got strings attached, if the money is being provided in return for favours, it would come within our terms of reference," the source argued.
Although the judge favours an investigation, his nine-member committee is divided. Resignations, particularly from former Conservative Defence Secretary Tom King, might ensue. But at least three are likely to argue strongly on Tuesday for an investigation into party finance. One said: "I don't see how we can look any further at the question of consultancies and directorships without looking at the funding of political parties."
Some of the committee believe the question will have to be dealt with at some point; the question is whether to tackle it head-on. One option is to delay any action until the committee reviews the situation in 12 months' time.
Lord Nolan's committee might have to be reconstituted and given additional powers to call for documents and witnesses, on the lines of a Commons Select Committee. Hitherto, Nolan has worked on evidence given voluntarily, but the Conservative Party has consistently refused to answer questions about where its money comes from. Contributions from the fugitive tycoon Asil Nadir and Hong Kong business interests have fuelled speculation.
The row follows Mr Major's broad welcome for the Nolan report's findings. The Prime Minister has set up an ad hoc committee, including David Hunt, Chancellor of the Duchy of Lancaster, Tony Newton, Leader of the Commons and Richard Ryder, the Chief Whip, to discuss implementation of the aspects of Nolan which relate to government, civil service and quangos.
On Thursday, MPs will be given a free vote when they debate those parts of the report which concern their conduct, such as disclosure of consultancy earnings.
Yesterday the Labour Party demanded that Nolan be allowed to investigate Tory finances. "The funding of political parties in this country needs transparency," said a spokesman. "And that is palpably lacking as far as the Conservative Party is concerned."
If John Major blocked such an inquiry, he added, an incoming Labour administration would immediately give the job to Nolan and legislate on his recommendations.
Liberal Democrats joined the inquiry call. Robert Maclennan MP, party spokesman on constitutional affairs, said: "The funding of political parties entails a risk of allowing individuals or organisations to buy influence."
The party argues that the Asil Nadir episode showed that some of Conservatives' funding "comes from extremely dubious overseas sources". Those providing funds might be doing so to secure political favours, including government contracts, changes in policy and tax privileges.
"At the same time, the apparent connection between published company contributions and the allocation of honours and policy outcomes has long been a matter of public concern," said a spokesman. "In short, the present system of party funding is tainted with corruption."
Lord Nolan is also considering widening his field of inquiry to cover the House of Lords and local government. Further investigations are possible into the police and freemasons.
Alan Watkins, page 25
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