Blair hit by new row over cash for favours

Tony Blair faced fury from within Labour and opposition parties last night when a storm over a £100,000 donation from the porn magazine and newspaper owner Richard Desmond left the Government fighting the latest in a series of damaging allegations of sleaze.

Labour backbenchers and party activists expressed deep dismay, while the Conservatives demanded an inquiry into the donation, made just days after Stephen Byers, Secretary of State for Trade and Industry at the time, had cleared the way for Mr Desmond's controversial take-over of Express Newspapers.

The latest row, coming after allegations surrounding big donations to Labour by the Formula One boss, Bernie Ecclestone, and the steel magnate Lakshmi Mittal, will reignite the funding debate and increase pressure on Mr Blair to move towards state grants for parties. Labour faced allegations of sleaze last week after news emerged that a businessman, Paul Drayson, had given Labour two donations of £50,000 shortly before his firm won a £32m contract from the Department of Health.

Downing Street insisted that Mr Desmond had not discussed the donation with Mr Blair and a series of cabinet ministers lined up emphatically to deny allegations that Mr Byers had acted improperly in making his decision.

Critics pointed out that the gift was made days before new rules forcing parties to publish full details of donations became law. The donation will be published in Labour's annual accounts later this year, but did not have to appear in the Electoral Commission's quarterly breakdown of donations earlier this month.

The Conservatives accused Labour of trying to "bury" news of the donation, negotiated by the former Labour Party general secretary Margaret McDonagh. She later left the party for a senior job alongside Mr Desmond at Express Newspapers.

The latest allegations centre on an offer of free advertising made to the Labour Party by Mr Desmond. His company, Northern and Shell, said party officials had asked instead for a cash donation, to be ploughed back into advertising in Express titles.

Yesterday Mark Seddon, a member of Labour's national executive audit committee, said he had not been made aware of the Desmond donation and called for it to be returned immediately. "He is a totally inappropriate man for the party to take money from. The fear is, who will be next? We did not know anything about it and we are the people who are personally responsible for the Labour Party's accounts.

"This does further the argument for state funding of political parties. The Tories became unpopular through this sort of thing and Labour promised to be different."

The backbench Labour MP Ann Cryer said: "I feel uncom-fortable about receiving money from someone who has made his fortune from pornography."

Martin O'Neill, Labour chairman of the Commons Trade and Industry Select Committee, said: "If someone who had a dubious record as a potential pornographer offered me money for my constituency, I would say no."

Mr Byers said on the BBC's Breakfast with Frost yesterday that the takeover had been handled by the book. He said: "What happened here was that the Director General of Fair Trading recommended to me that this should not be referred to the Competition Commission."