Andrew Grice: The Week in Politics

The succession issue is in play. It's that bad

The "Under the Bus" game has begun. Labour MPs are gossiping about who would take over if Gordon Brown resigns before the next election. That is how bad things are after a disastrous week for the Prime Minister dominated by the scandal over Labour's secret donations.

All politicians enjoy guessing who would take over if their leader fell under a bus. But just five months into the Brown premiership, it is ominous that Labour backbenchers discuss the relative merits of Jack Straw, Alan Johnson and David Miliband as they stare gloomily into their beer.

The parallels with John Major's government have grown since I wrote about them a week ago. Allegations of sleaze have now been added to incompetence. The Major government had both, plus a divided party. Labour isn't as divided yet, but the cracks are showing at the very top.

The other echo of the Major years is of a government trying to show it is running the country but actually sinking into a mire of its own making. Mr Brown tried to relaunch this week but policy announcements were drowned out by the funding row. That happened repeatedly to Sir John.

I can't imagine that Mr Brown will be forced to resign. There is no suggestion he is corrupt, and he is not directly responsible for many the Government's problems. But the voters can be very unforgiving and he could be fatally wounded if they decide his government has lost the plot after Datagate and Donorgate.

Once the see-saw has tipped, it requires heavy lifting to tip it back. Labour MPs are saying Mr Brown will need to take dramatic action to turn round public perceptions. So I would expect anyone who is criticised by the Labour inquiry into the secret donations to face the high jump.

Mr Brown's strategy of being "not Blair" requires him to be strong on the issue of trust, which his predecessor lost by going to war on a false prospectus. That's why Mr Brown has talked about constitutional reforms aimed at rebuilding trust in politics.

He may have had good reasons to be "not Blair", but the limitations of this approach are becoming apparent. If people judge that he's just as bad as Mr Blair on the trust issue, he will have big problems.

At one level Labour's implosion this week is terribly unfair, but politics isn't fair. The irony is that the crisis stems from a genuine attempt by Labour to clean up party funding when it came to power in 1997. At the time, all donations could be kept secret, so we rarely knew which businessmen funded parties, or whether donors were given peerages. The Tories took money from foreigners (including some dodgy businessmen), a practice that was banned by Labour.

Mr Blair was warned by senior Labour officials that publication of all donations of 5,000 and above would boomerang on the party now that it was in government. But he went ahead in the interests of transparency.

The trouble is that Labour didn't stick to the rules it introduced. So we had loans worth millions of pounds which broke the spirit if not the letter of Labour's clean-up law, provoking the debilitating "cash-for-honours" affair. You might have thought Labour would learn its lesson after all the damage that caused. Mr Brown presumed it had wrongly. Now we learn that Labour headquarters broke the same law by allowing at least one donor to remain anonymous by accepting his money via four middlemen. So the police may soon be knocking on the door of No 10 again. You couldn't make it up.

Nor could David Cameron, who had a perfect backdrop for his first meeting with George Bush in Washington. In TV interviews, he legitimately asked how Mr Brown could run the country if he couldn't run his party with the White House in the background (message: I am a prime minister-in-waiting).

The Tory leader also said the affair raised "very serious questions" about Mr Brown's integrity. That was over the top, the sort of jibe that damages politics as a whole. Politicians in glass houses shouldn't throw stones. The Tories take money from third parties. The Midlands Industrial Council (MIC) pumped 370,000 into marginal seats before the last election. In the past year, it has given 345,000 to the Tories' constituency campaign services board, 150,000 to party HQ and 40,000 to David Davis, the shadow Home Secretary. Although a list of its donors was published last year, the MIC will not announce new members.

Labour is likely to ban secret "third party" donations when it brings in another law to clear up the mess created by the latest crisis. Many Labour MPs hope the saga will prove the case for state funding for the parties so they have to rely less on people like Mr Abrahams.

There is a strong case for more state funding. It would be controversial, but could be on a "pound for pound" basis with the state matching small donations to encourage parties to attract new supporters. Labour and the Tories blame each other for the collapse of talks on the issue last month. They should get round the table again.

The temptation for the Tories will be to let Labour stew in its own juices. They already receive 4.5m a year as the official Opposition, with no equivalent payment for Labour, and donations are rolling. They would rather not limit their deputy chairman Lord Ashcroft's heavy spending in marginal seats between elections. They know it would be difficult for a discredited Labour government to change the law on funding without all-party agreement.

Yet if as Prime Minister, Mr Cameron could easily be haunted by his own "cash-for-favours" controversy. He might regret not cleaning up party funding when he had the chance. There won't be a better time than now.

Read Andrew Grice online at independent.co.uk/todayinpolitics