Labour is facing fresh investigations into its funding after questions were raised about whether a series of loans totalling more than £380,000 were lawful because intermediaries were used to shield the identity of a major donor.
David Abrahams, a wealthy property developer, yesterday admitted he used the names of "friends and colleagues" in an attempt to avoid publicity when donating substantial sums over a four-year year period to the Labour Party.
Mr Abrahams admitted he gave the money to his "friends and colleagues" Janet Kidd and Ray Ruddick to give to the party after it was revealed they did not have the money and did not support the party.
Ray Ruddick lives in a council house and drives a battered Transit van, and said: "I can't stand Labour."
But according to the official register of the commission, Mr Ruddick, who works for Mr Abrahams, has donated £196,850 to Labour since 2003. Ms Kidd works as a secretary to Mr Abrahams and she is officially listed as donating £185,000 since 2003.
The Electoral Commission demanded an explanation as Jack Straw, the Justice Secretary, admitted the donations were "plainly not transparent".
"Whether these arrangements are within the letter of the law they are plainly not transparent. I am concerned about them," he said. "I shall ask both the Electoral Commission and my officials for immediate advice on what action should be taken."
Under electoral law, donations made via third parties are unlawful unless the person behind the donation is declared or there is a "reasonable excuse".
Around two-thirds of the sum that was donated – a total of £220,000 – was given to Labour since Gordon Brown became leader in June, making them Mr Brown's third-biggest donors after Lord Sainsbury and the businessman Mahmoud Khayami.
Mr Abrahams, 53, who owns a string of property firms in Newcastle, has strong links to Labour. He served as a Labour councillor in Tyne and Wear and his late father, Bennie Abrahams, was Lord Mayor of Newcastle.
He said: "I'm a member of the Labour Party and have been ...since I was 15. I have been fortunate enough to be able to make substantial donations to several charitable organisations as well as to the Labour Party. But I am a very private person and I did not want to seek publicity. I gifted money to my friends and colleagues so they could make perfectly legal donations on my behalf. "
Mr Ruddick, 55, who is a director of several of Mr Abraham's property companies, initially denied ever having made donations to Labour, saying he "couldn't stand the party nor any politicians". He later said he had given some money to Labour, laughing off the row and declared he was off to play bingo.
Chris Grayling, the Shadow Pensions Secretary, said: "This whole affair raises serious questions about the level of scrutiny that the Labour Party carries out into the donations it receives."
Gordon Brown, meanwhile, had been planning a political fightback today by vowing that his Government will not be blown off course by crises such as Northern Rock and the loss of sensitive personal data on 25 million people.
In a speech to the CBI's annual conference in London, the Prime Minister will promise business leaders that he will take the tough long-term decisions needed to safeguard the country's prosperity.
Mr Brown flew home last night from the Commonwealth conference in Uganda, anxious to put behind him his worst week since becoming Prime Minister.
Jack Straw, the Justice Secretary, said the Labour Party had to "hold its nerve" and hinted that Mr Brown could go to 2010 before calling an election.
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