Labour takes £50,000 from donor it rejected

A businessman rejected by Labour as a donor last year is to give £50,000 to the party to help it recover from the financial crisis it faces following the "cash for peerages" affair.

Anthony Bailey, 36, was one of 28 people who declared in a national press advertisement they were "proud to help fund the Labour Party". It was issued on Wednesday at the same time as it emerged that Lord Levy, the party's chief fundraiser, had been arrested by police investigating allegations of links between donations and nominations for a peerage.

Mr Bailey's inclusion surprised some Labour insiders. Last year, the party reportedly turned down his offer of £500,000 amid concerns that he was a lobbyist with clients including members of the Saudi royal family and defence companies such as BAE.

At the time his website said: "We know how many key governments and parliaments work and who are the key decision-makers within them that influence policy decisions. We can often facilitate meetings for our client with government or parliamentary officials and advisers."

Mr Bailey has been credited with raising £8m for Tony Blair's flagship city academies initiative as a member of the ministerial task force. The scheme was dragged into the controversy after Des Smith, a headmaster and government adviser, suggested that sponsors might receive honours.

Labour's decision to accept a £50,000 offer from Mr Bailey is seen by its opponents as a sign that the party is desperate to raise funds. Accounts to be published by the Electoral Commission next Tuesday are expected to show that Labour has plunged £26m into debt, and officials fear that the damaging publicity sparked by the "cash for honours" scandal will deter potential donors.

Angus MacNeil, the Scottish National Party MP whose complaint prompted Scotland Yard's investigation, said: "Labour is scraping the bottom of the barrel. It is so desperate that it's publicising the name of someone it wanted nothing to do with a year ago. It should explain what has changed."

Foreign donations are banned under a 2000 law pushed through by Labour.

Party officials insist that Mr Bailey's original offer was declined because of newspaper speculation, not because of a potential conflict of interest over any work in the Middle East.

Sir Jeremy Beecham, chairman of Labour's national executive committee (NEC), said: "The Labour Party has to be absolutely satisfied and prudent about the details of any donation under the terms of the Political Parties Elections and Referendums Act 2000. NEC officers approved the acceptance of a donation from Mr Bailey and welcome his support as a committed Labour Party member and inter-faith worker."

Mr Bailey has been recognised by 10 foreign governments for his inter-faith, community and charity work at home and abroad, including Portugal and Morocco. He was knighted by Pope John Paul II in 2004 for his inter-faith work.

He is part-time chairman of Eligo International, a company advising corporations, governments and NGOs on protocol and ceremonial issues as well as communications issues relating to inter-faith, art and cultural organisations and special events. Since 1993, he has relied on private consultancy work and property investment for his income.

Ahmed Suleiman, a spokesman for Eligo International, said the donation to Labour was a personal matter for Mr Bailey, and had no relation with the company's work.

Mr Bailey said that he was "delighted to be able to financially support the Labour Party at this time" and had supported it since its election in 1997.

He added that he "firmly believes in Labour's fundamental mission to secure a Britain built on equality and fairness" and supported its social and economic cohesion programmes, especially those directed at Britain's diverse ethnic and religious communities.