Anti-sleaze watchdog criticises party loans

The head of an anti-sleaze watchdog has increased the pressure on the Metropolitan Police inquiry to recommend charges in the "cash-for-peerages" affair.

Sir Alistair Graham, the chair of the Committee on Standards in Public Life, made it clear he did not believe that the loans were on commercial terms, opening senior Labour figures to the threat of prosecution.

The Metropolitan Police anti-corruption unit is expected shortly to complete a round of interviews with senior aides to Tony Blair before sending the file to the Crown Prosecution Service.

Sir Alistair said the failure of party fund raisers to declare the cash could leave them in breach of the electoral rules.

"Let's be in the real world about this," Sir Alistair said. "I have no doubt that that when those loans were being made, that people thought: well hopefully we'll be able to lengthen the length of time over which the loan is repaid or we may be able to translate it into a donation. The whole point of the legislation was to produce transparency in relation to political parties. So I'm not letting the political parties off the hook."

He insisted he was not accusing the political parties of breaking the law. But his remarks will have increased the pressure on the police to defy those who believe no charges will be laid.

Sir Alistair also criticised another watchdog, the Electoral Commission, for failing to take tougher action over the loans.

In a report, Sir Alistair accused the Commission of "a lack of courage, competence and leadership" in its role as regulator of party funding and said that it should have issued guidance on the loans as soon as it became aware of them in April 2005.

The report called for the Commission to be stripped of some of its functions in order to concentrate on its core tasks of regulating party funding and the electoral process.