How the PM failed in his pledge to clean up politics

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Tony Blair rode to power in 1997 on the back of repeated promises to "clean up politics" after the sleaze-ridden years of Tory rule. How did the man who promised that Labour would be "purer than pure" become the first serving prime minister to be questioned by police during a criminal investigation?

Even his friends admit Mr Blair has always been more than a little starstruck by rich people. When Labour became increasingly dependent on big donations from wealthy businessmen, he didn't lose sleep over it. He wanted Labour to be pro-business rather than pro-union.

These factors came together in an explosive mix after he nominated for peerages four businessmen who had made loans to Labour at last year's general election. Whatever the outcome of Scotland Yard's investigation, yesterday's drama in Downing Street will be remembered as one of the big events of the Blair era.

It is also likely to have far-reaching implications for the political system. The "cash for honours" affair will strengthen the hand of supporters of radical House of Lords reform. They will argue that in a modern democracy leaders should not handpick the people who make our laws.

When MPs vote on the composition of the Lords in the new year, they may well go much further than the "50 per cent elected" second chamber proposed by Jack Straw, the Commons Leader, which would still leave half the members appointed. The affair will also have ramifications for the way politics is funded.

Ironically, it has made Labour even more dependent on union money since big individual donations have all but dried up. Labour is more than £20m in the red and the unions have agreed a £500,000 emergency donation. In the longer run, the need for an all-party agreement on party funding is acute. But there is little sign that an inquiry by Sir Hayden Phillips, a former Whitehall mandarin, will find a consensus.

The unions and many Labour MPs are angry about his plans to restrict union funding as part of a £50,000 cap on donations, which would be coupled with tighter limits on party spending and a further injection of taxpayers' money to parties. The Tories are sitting pretty. Under David Cameron, the money is rolling in and they can play the "union card" against Labour - even if it is an example of the "Punch and Judy politics" Mr Cameron promised to avoid.

It is far too late for Mr Blair to honour his pledge to "clean up politics". The task will fall to his successor, probably Gordon Brown, who has plenty of ideas about restoring trust in politicians. Mr Blair thinks Labour's "trust problem" will go when he goes. Others are not so sure.