Watchdog rejects yacht probe request

Westminster watchdogs today rejected a fresh call for an inquiry into claims that shadow chancellor George Osborne sought an illegal donation from a Russian billionaire.

Liberal Democrat home affairs spokesman Chris Huhne wrote to Electoral Commission chairman Sam Younger urging him to launch a probe or produce a clarification of the law to explain why the allegations against Mr Osborne fall outside his remit.

But the Commission responded that it saw no reason to change its view that soliciting a donation which was not eventually made could not constitute a breach of the law.

Conservative leader David Cameron today repeated his defence of his embattled shadow chancellor, insisting Mr Osborne and Tory fundraiser Andrew Feldman did nothing wrong in meeting Oleg Deripaska on board the aluminium tycoon's yacht off Corfu this summer.

But Mr Huhne said: "The law suggests that George Osborne and Andrew Feldman have been sailing very close to the wind.

"The Electoral Commission should either launch an inquiry or clarify its interpretation of the law."

Under the Political Parties Elections and Referendums Act 2000 it would have been illegal for Mr Deripaska, who is reputed to be Russia's richest man, to donate to a British party as he is not on the UK electoral register.

It would also have been illegal for the Tories to accept a "disguised" gift through one of the oligarch's British companies.

The Tories have insisted that, as no money was received, the law was not breached.

Campaigning for the Glenrothes by-election today, Mr Cameron said: "No money was asked for and none was received.

"You can't really have a financial scandal without any finance. That's all there really is to say about it."

He dismissed Prime Minister Gordon Brown's call yesterday for "the authorities" to investigate the affair as a "desperate" attempt to keep the story alive.

In his letter today, Mr Huhne highlighted section 61 (1) of the Act, which makes it an offence to "knowingly (do) any act in furtherance of any arrangement which facilitates or is likely to facilitate" a gift from an impermissible donor.

"It seems clear from the act that an offence does not require a donation, but merely 'any arrangement... likely to facilitate' donations from an impermissible donor," said the Lib Dem frontbencher."

A spokesman for the Commission responded: "We have received a letter from Chris Huhne. Our position remains the same, that we have seen no evidence of any offence."

Meanwhile, Liberal Democrat MP Norman Baker has written to parliamentary standards commissioner John Lyon asking whether Mr Osborne's stay in the Corfu villa of his university friend Nat Rothschild should have been entered in the register of MPs' interests.

It was Mr Rothschild who first brought the meeting with Mr Deripaska to public attention, with a letter to The Times in which he claimed Mr Osborne and Mr Feldman went on board the yacht Queen K to solicit a £50,000 donation.

Reports today suggested the banking heir had offered the Tories a truce, while warning he will return to the attack if they make any efforts to cast further doubt on his version of events.

His initial letter had only been intended as a "slap on the wrist" for Osborne, who Mr Rothschild blames for leaking details of a private conversation with Business Secretary Lord Mandelson during a dinner he hosted in Corfu.

A source close to Mr Rothschild said: "This is not a white flag of surrender. He dropped his bombshell because he was angry. This is not a campaign to get George."

Mr Rothschild has written witness statements backing his allegations from two friends, including a former adviser to President Bill Clinton, said the source, adding: "If anything is put out that in any way contradicts what he has said, Nat will come back."

Asked if he would sack Mr Osborne if it turned out he had not been telling the truth, Mr Cameron said: "If my mother had wheels she'd be a bicycle.

"The point is, he is telling the truth; he has said very clearly what he has done and what he has said."

MPs are required to register any "pecuniary interest or other material benefit" with a value of more than about £630 "which might reasonably be thought by others to influence his or her actions, speeches or votes in Parliament, or actions taken in his or her capacity as a Member of Parliament".

But the code of conduct states: "If a Member considers that any benefit he or she has received falls within the definition of the main purpose of the Register ... even though it does not exceed the 1% threshold, the Member should register it."

Mr Baker told BBC Radio 4's The World At One: "I think it's very important you establish the rules, not just for Mr Osborne's case, but also Peter Mandelson and any other MPs who may have been involved in accepting hospitality from a third party.

"Here we have Mr Osborne accepting hospitality from someone who is a financier and investment adviser, who is in a position to potentially gain benefit from his discussions with the Shadow Chancellor. In those circumstances, Mr Osborne would be wise to register it."

Earlier a Labour MP's attempts to raise the allegations in the Commons were blocked by Speaker Michael Martin - on the grounds that he had not first warned Mr Osborne of his intentions.

Mr Martin intervened when David Winnick asked Sir Peter Viggers, who answers on behalf of the Electoral Commission, whether the watchdog would investigate the allegations.

It is a convention - not always observed - that MPs normally inform a colleague if they are planning to attack their behaviour in the chamber.