Labour to vet donations in attempt to head off 'cash for favours' claims

Labour leaders were stung into setting up a new system for vetting donations to the party yesterday in an attempt to halt the tide of allegations about "cash for favours".

A new fund-raising committee headed by Charles Clarke, the Labour chairman, will turn down donations if there is any conflict of interest or if donors seek something in return from the Government.

Lord Levy, Labour's chief fund-raiser and Tony Blair's personal envoy to the Middle East, will serve on the committee but his role has been diluted after bad publicity. A Labour source said: "We will not just take money from anyone Lord Levy pulls in. In future, fund-raising will not revolve around one man and the party will say yes or no."

The move follows controversies over the £125,000 donation by the steel magnate Lakshmi Mittal and the £100,000 gift by Richard Desmond, the news-paper and soft porn publisher.

Mr Clarke insisted Labour had done nothing wrong but admitted it had been on the "back foot". Under a new code, donors giving more than £5,000 will have to pledge they are "broadly committed" to Labour's aims and values and to provide support "without seeking personal or commercial advancement for themselves or others".

Labour is almost £5m in the red and the move is also aimed at reassuring potential donors.

The other members of the committee are: Lord Evans of Temple Guiting, chairman of Faber and Faber; Baroness Jay of Paddington, former leader of the House of Lords; David Triesman, Labour's general secretary; and Margaret Prosser, deputy leader of the Transport and General Workers' Union.

Mark Seddon, a member of Labour's National Executive Committee, which approved the changes, said Lord Levy was not a "good choice". But the fund-raiser insisted there was no conflict of interest over his different roles. Tim Collins, shadow Cabinet Office Minister, called for, "a genuinely independent, non-partisan watchdog."