Another fine mess: Brown's new turmoil over third-party donors

Labour's friend in the North-east, David Abrahams, never flinches from a fight, whether with the council, the press or the Party. Brian Brady on a crisis that won't go away

Last Saturday evening began badly for Gordon Brown as he arrived late at a dinner for Prince Charles at the end of the Commonwealth Heads of Government meeting, blaming "terrible" traffic in the Ugandan capital, Kampala.

But the summit, the traffic, or even the discomfort of the heir to the throne, would turn out to be the least of the Prime Minister's worries during a turbulent evening.

As Mr Brown finally made his way out of the official residence of the Ugandan President, Yoweri Museveni, his evening took a turn for the worse. Back in the UK, his party officials were struggling to manage the latest disaster to beset his increasingly cursed regime.

Only months after the public ordeal of the "cash-for-peerages" investigation, Labour had been exposed for taking hundreds of thousands of pounds from a "reclusive" supporter channelling his cash through a network of secret proxy donors. Back in London, Mr Brown's unofficial deputy, Jack Straw, was undergoing the torment of a more comprehensive briefing as he prepared to offer the party's first line of defence on the BBC on Sunday morning. He was, according to aides, "dumbfounded" as the full details of the back-channels that had provided 670,000 to Labour since 2003 were disclosed. "How on earth did we ever agree to this?"

By the time the Prime Minister's plane touched down in London at 4.30 on Sunday afternoon, party officials were waiting for him with something approximating to the whole story. More importantly, general secretary Peter Watt was already "coughing to the whole thing", confessing that he had been aware of David Abrahams's unconventional arrangements. He had to go. Mr Brown's recent series of embarrassments had graduated to a full-blown crisis that raised questions about his integrity as well as his competence.

That Labour should stumble into a donor crisis so soon after the cash-for-peerages saga was astonishing; that Mr Abrahams should be behind the most mortal of many dangers to beset Mr Brown since he became Prime Minister is truly shocking. The unconventional business career, political activism and private life of the secret donor have been laid bare by the blizzard of coverage in recent days. But it tells barely half the story of the Labour mayor's son who has grown up to threaten the survival of one of the most influential Labour Prime Ministers of modern times.

"They didn't look into this carefully enough," one irate former minister in the North-east said of the party's decision to begin accepting donations from Mr Abrahams, albeit via a circuitous route, in 2003. "It might well be that they didn't ask around because they knew what the answer would have been."

David Abrahams was born into Labour aristocracy in Newcastle. His parents, Bennie and Marion, were both stalwarts of the city council and the established Jewish community that had formed the backbone of the local Labour Party for generations. As a young man he was as active in the party as many of his more celebrated colleagues, leafleting for his father at an early age and joining at the earliest opportunity. By his early thirties, Mr Abrahams was a Tyne & Wear councillor. He has as much traditional Labour credibility as Gordon Brown, and much more than "newcomers" such as Tony Blair.

It was, however, when he tried to push on to the next stage of his political career that he departed from the textbook trajectory. Mr Abrahams has been regarded as a problem by the Labour leadership ever since.

When Mr Abrahams touched down in Richmond, North Yorkshire, in 1990, he arrived as a would-be Labour candidate determined to unseat the new Tory MP, William Hague. The CV distributed to newspapers and local party members detailed his proud history of service and his mission "to arrest [sic] this constituency from the opposition by means of organisation, agitation and education".

The official history also described the candidate as a "self-employed retail manager". He was married, to "Anthea", and the couple had a son.

The faade began to crack in January 1991, when Mr Abrahams took part in a "sleep-out" in aid of the constituency's homeless, a generous gesture that was questioned a week later when it emerged that Newcastle City Council planned to prosecute him for illegally evicting a tenant from one of his properties.

Mr Abrahams was cleared of the charge later that year, but the damage had been done. The case had revealed that the candidate was actually a wealthy landlord who owned scores of houses and care homes in Newcastle under the name "David Martin". The revelation that Anthea was not his wife, and her subsequent claims that he had offered her money to act as his partner "for about six months" during the selection process, only accelerated his inevitable deselection.

Mr Abrahams turned up repeatedly for interview in an attempt to get on the list of approved Labour candidates for Newcastle City Council elections during the 1990s, and he was rejected every time. The Richmond dbcle has ensured that he has never been selected to represent Labour at any public election.

Mr Abrahams's response appears to have been to throw himself deeper into the labyrinthine business career that plunged him into his political difficulties in the first place largely under the second name he claims his father urged him to use for his commercial affairs many years ago. It does not appear to have been motivated by any love of money; his former "wife" last night recalled how Mr Abrahams would leave carrier-bags full of money around his house "as it was of no consequence". Nonetheless, official records reveal connections with eight separate companies two of them dissolved registered under two names, at three properties and three birth-dates two of them the same day, but a decade apart.

The key positions at his six active directorships are shared between him and employees Janet Kidd and Ray Ruddick, who were improbably revealed last week as two of Labour's biggest donors.

Mr Brown was not told until Monday that Janet Kidd had offered to support his leadership campaign, and had been turned down, but it was only a flicker of good news. On Tuesday, Labour officials made it plain to the Prime Minister that it was hard to see how the party could return Mr Abrahams's money and still ensure that staff wages were paid. Instant repayment risked plunging the party into "a crisis of both finance and morale". Nevertheless, the Prime Minister insisted the donations were "tainted" and would have to be returned immediately. Mr Brown's later concession at his monthly press conference that the donations had been "unlawful" made a police investigation almost inevitable; it was confirmed to Mr Brown exactly a minute before it was announced on the television news.

On Wednesday, as Mr Brown desperately repelled the latest attacks from David Cameron at Prime Minister's Questions, he performed better than in recent weeks. But when the acting leader of the Liberal Democrats brought the House down with the borrowed observation that Mr Brown had "gone from Stalin to Mr Bean", it laid bare the depth of the crisis besetting him.

"There is nothing more damaging for serious politicians than laughter," observed grim-faced former minister Mark Fisher.

Regardless of the traumatic past seven days, the Labour hierarchy is already casting its sights much further back in time. The internal party inquiry, led by Lord Whitty, will investigate the conduct of "previous regimes and past general secretaries" in supervising and regulating donations of the type that have brought the party into disrepute in the past week. The historic nature of the inquiry, and the ready-made excuse that any sins were committed before Mr Brown arrived in No 10, explains the enthusiasm for "throwing out the bodies" so quickly. In particular, as one minister predicted: "He will be looking specifically at the monitoring when the very first donation of this kind surfaced."

The former minister Lord Triesman, a Blairite loyalist, was in charge of the party when it accepted a 25,000 cheque drawn on the account of "lifelong Conservative supporter" Janet Dunn, on 31 January 2003, as the party stepped up its funding drive for the 2005 election. "We need to know whether Triesman checked this donation and why it was allowed through," the government source added. "This was a significant amount of money; it could only have been allowed through if someone was vouching for the money. The key question is 'who?'."

Labour's chief election fundraiser Jon Mendelsohn's long-range dispute with Mr Abrahams over allegations that Mr Mendelsohn had known about his unusual system of donating money underlines the fact that Labour does not know how to handle Mr Abrahams, who has a history of fighting perceived slights and injustices. He appealed against his deselection; he took a newspaper to court and won when it suggested he had been dishonest in using two names; and, when his Newcastle hotel was removed from the city's official guide after a council investigation upheld complaints against security and conditions there, he fought that.

He may lose more battles than he wins, but David Abrahams never shrinks from a fight even when it is with the party to which he professes a lifelong allegiance. This time, the Labour Party is certain to be the biggest loser.