Number 10 admits errors in deals for Labour donors

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Donald Macintyre: Mr Blair should find a new and cleaner way of paying for his party

Downing Street was forced to concede yesterday it should have been more open about two deals that triggered fresh claims of Labour donors paying for access to the Government.

Tony Blair's spokesman mounted a defence of the Prime Minister's decision to promote the sale of jet fighters to the Czech Republic. He also defended the decision that gave an exclusive contract for smallpox vaccines to a drugs firm.

The spokesman said there was nothing improper about either Mr Blair's decision to lobby on behalf of BAE Systems in Prague or the £32m contract with PowderJect Pharmaceuticals, both of which had made donations to the Labour Party.

The Independent on Sunday revealed Mr Blair had used a meeting last week with Milos Zeman, his Czech counterpart, to discuss the sale of 24 fighter planes.

At the same time, news emerged that PowderJect had won an exclusive deal to supply 20 million smallpox vaccines as a precaution against terrorist attack. Paul Drayson, its chief executive, donated £50,000 to Labour last year.

Mr Blair's spokesman said it may have been wiser to have revealed in advance the Government's support for the Czech deal "given the great hoo-ha" that now surrounded it.

Downing Street officials had been asked why Mr Blair was squeezing in a short trip to Prague at the end of a gruelling visit to America to meet President Bush. They claimed he was there only to discuss European Union enlargement.

The Prime Minister's spokesman said Mr Blair was proud to promote a contract that would bring £250m of business to BAE Systems. "The Prime Minister feels he has nothing to apologise for. He was batting for British jobs and British prosperity and it would have been a dereliction of duty if he hadn't," he said.

Downing Street also defended the PowderJect deal, citing "national security" reasons for the lack of a normal open and competitive tendering process for the contract.

The spokesman said ministers had taken advice that the firm was the only one that could provide a particular strain of vaccine quickly enough.

The officials knew PowderJect had made a Labour donation and, as a result, the decision to endorse the deal was made by Nigel Crisp, permanent secretary at the Department of Health, and not ministers.

The Government also defended Jonathan Powell, Mr Blair's chief of staff, over claims that he had solicited a £1m donation from the Formula One boss, Bernie Ecclestone.

"Anyone who knows him and met him knows that he's not only a very talented civil servant, he's also somebody of great integrity," the spokesman said. A Labour spokesman admitted Mr Powell had been in discussions with David Ward, an aide to Mr Ecclestone, but said that Mr Powell had "never" solicited, or initiated, the donation.

However, Max Mosley, president of the FIA, motor racing's governing body, repeated accusations that Mr Powell had been involved in approaching Mr Ecclestone for the donation in 1996. Mr Mosley's account tallies with a report in The Independent in 1997 that Mr Blair's chief aide had indeed been involved in securing the controversial donation. The report was strongly denied by Mr Powell at the time.

Charles Clarke, the Labour Party chairman, said the Government would always be dogged by accusations of cash for access as long as the system of party funding existed. He said: "If funding comes from an individual or an organisation and the Government makes a decision in relation to something done by that organisation, the argument can always be asserted there is a relationship between the two. If we are going to have a democratic system in Britain it needs to be funded. Whether that funding comes from individuals, trade unions or state funding, we need democratic politics funding."

John Prescott added his voice yesterday to calls for state funding of political parties, saying it was the only system that would allow Labour to avoid further allegations of sleaze.

?It is a problem for us,? the Deputy Prime Minister said. ?If the finance comes from the unions, then everyone says we are in the pockets of the unions. Tony Blair has changed a lot of that and we?re now getting contributions from business. But people are now saying we?re in the pockets of business.

?Political parties have to be financed somehow ? I think the only system under which you can be properly accountable is state financing.?