Labour to refuse million-pound party donations

Labour is to promise that it will no longer accept the £1m donations from rich businessmen which provoked the "cash for honours" affair.

Under a new policy, to be agreed at Labour's annual conference later this month, the party will pledge to impose its own ceiling on donations but reject calls for a statutory limit.

Peter Watt, Labour's general secretary, has told private meetings of senior party figures that the £1m gifts from wealthy individuals to Labour and the Tories have "corrupted" politics and led to them taking out loans to get round legislation saying that donations of more than £5,000 had to be disclosed.

Labour is expected to cut its spending by £4m and announce 20 voluntary redundancies in order to reduce a £27m deficit.

A policy document to be discussed by Labour's national executive committee next week and the conference the following week promises to end the spending "arms race" with the Tories through annual spending limits on all parties at national and local level.

But it argues that parties should be left to decide their own ceiling on individual donations rather than have a limit imposed.

The Tories have proposed a £50,000 ceiling on donations to all parties. But Labour's policy statement says that would give the Tories a "wholly unacceptable funding advantage" since they have many more donors willing to give around that amount.

It would also threaten Labour's income from the trade unions, on which it has become more dependent as big donations dry up after the "cash for honours" row.

In the margins of this week's TUC conference in Brighton, senior Labour figures have been appealing for more union cash. Union leaders were told the party would have serious difficulty in paying the wages of its staff by the turn of the year, according to tomorrow's issue of Tribune magazine.