Leading article: Labour dodged its own laws again

All three of this country's most recent prime ministers have had problems with the integrity of their party's finances. Of the three, Gordon Brown would seem to hold to the highest ethical standard. Not that John Major was personally corrupt. It was more that he failed to recognise that the world had moved on, and he allowed the Conservative Party to persist in its outdated conviction that the source of its money was nobody's business but its own. He was also weak when it came to dealing with members of his party, most notably Neil Hamilton, who broke the rules that did exist.

Tony Blair, who benefited from Mr Major's weakness, now regrets he made such play of "Tory sleaze" in the 1997 election. No doubt he also wishes that he had never used the phrase "purer than pure", which was hung round his neck like a burning tyre. But nothing could have saved him from the auto-trashing of his own reputation brought on by the cash-for-honours scandal, first exposed by this newspaper.

It is a curiosity that in raising secret loans from putative peers no law was broken, whereas in the present case of proxy donations it almost certainly was. Yet Mr Blair is more deserving of censure than Mr Brown. Although the Crown Prosecution Service decided that Mr Blair stayed within the letter of the law, his conduct was reprehensible. He passed a law requiring disclosure and then approved a device to get round it: non-declarable loans instead of declarable gifts. Worse, while the fact of the loans was still secret, he nominated four of the lenders for peerages.

The present situation is the opposite. Although the law has been broken, Mr Brown's conduct has been right and proper. As soon as he found out about it, the official responsible, Peter Watt, resigned and Brown insisted that the money be repaid.

That said, the headlines as they have unfolded over the past seven days have been ghastly. It does not look good that Mr Brown said that Mr Watt was the only person in the party that knew about David Abrahams' circuitous generosity. It turned out that Jon Mendelsohn, appointed by Mr Brown to take over Lord Levy's role as Labour's main fundraiser, also knew. Nor does it look good that Mr Mendelsohn's main line of defence is to say after the story broke that he was going to put a stop to proxy donations. Nor that he had just written a letter to Mr Abrahams that could have been interpreted as asking for more money. It looks bad that Harriet Harman, the deputy Labour leader, should have accepted a donation rejected by the Brown for Leader campaign. It looks like a tangled web when Peter Hain said he had forgotten to declare a 5,000 contribution from Mr Mendelsohn.

But perception and reality have diverged in the course of the past week. It looks bad for Mr Brown, but the facts ought not to be so damaging to him. Mr Mendelsohn in particular still faces searching questions. If he can answer them, or if he quits, Mr Brown can shake this off.

The use of proxy donors began when Mr Blair was leader. Mr Blair's spokesman says he knew nothing about it, but it is consistent with the culture of dodging Labour's own law. So far, it has not been established that Mr Abrahams stood to gain from his covert generosity unlike Bernie Ecclestone or the wannabe peers. In the matter of motive, the most plausible would seem to be, as Mr Abrahams says, writing exclusively for The Independent on Sunday today, his desire to avoid "unwanted publicity". (Well, that worked, didn't it?)

Mr Brown also did the right thing yesterday in resuming the search for cross-party agreement on a more robust set of rules on party funding. There is, of course, no necessary connection between last week's fiasco and the Phillips review. Mr Abrahams' donations were in breach of the existing law, which needs to be retained. Sir Hayden Phillips has been looking at ways in which that law should be extended to deal with the weaknesses that have emerged since the 2000 Act came into force. His review was stalled by both main parties playing politics: the Conservatives want to make it harder for Labour to collect the levy from trade unionists; Labour want to make it harder for Lord Ashcroft to pump money into marginal seats.

Last week's crisis ought to persuade David Cameron and Mr Brown that they have a common interest in reaching agreement. All politicians are the losers in stories like this, even if things look worse at the moment for Mr Brown than his opponents.

In all this, Mr Brown has one huge asset, which is that the people know that he is a man of personal integrity. Not for him the slowness to act of Mr Major or the cynical work-round-the-rules of Mr Blair. The other thing we do know about Mr Brown is that he has reserves of resilience of which we lesser mortals can know nothing. The last week has not looked good for him, but perception and reality will converge again and he will recover.