LORD WEDDERBURN, who has been a Labour peer for nearly 30 years, has left the party benches in protest at Tony Blair’s policies and allegations of cash for honours.

Wedderburn, a renowned legal expert, has written to Lord Grocott, Labour’s chief whip in the Lords, saying he can no longer support the party’s policies and “malodorous practices”.

He is now sitting on the cross-benches, where peers vote and speak entirely independently. He says the undermining of civil liberties with anti-terrorism legislation and the decision to invade Iraq contributed to his decision, but the allegations of cash for honours was the “breaking point”.

“I can’t follow the whip of people who approve of all that,” he said last week. “I don’t know whether or not the government has behaved illegally, but it has created a stench in politics. People are looking at the Lords and are saying, ‘What the hell is going on?’ “I was in hospital over the summer and a nurse asked me how I got my title and then she giggled. It made me realise how many people now see the house.”

Wedderburn said that even before the secret loans scheme was revealed by The Sunday Times in March this year, he was concerned businessmen were being given peerages after making large donations to Labour.

He said he did not understand why Lord Drayson, a businessman and Labour donor, was made a peer and given a job as a defence minister. “There are people in the House of Lords who find it quite preposterous,” he said.

Drayson was however described as “a man of ability” by Blair aides when he was made a minister.

Wedderburn said he was also opposed to the undermining of civil liberties with anti-terror laws and the invasion of Iraq. “Now not even the generals will defend it. We all know what skulduggery went on with the dodgy dossiers and Blair was personally involved in that,” he said.

Wedderburn, who has been a member of the Labour party since 1946, says he will retain his party membership. He promises to fight any attempt to expel him. “If they try to expel me, they will have a long haul and anyway Blair is finished,” he said.

Wedderburn is a former professor of commercial law at the London School of Economics and was employment spokesman for the Labour party for 13 years. He has taught some of the country’s leading lawyers, including Lord Irvine, the former lord chancellor.

Detectives are still investigating whether Labour broke any laws in secretly obtaining loans from 12 businessmen, four of whom were subsequently nominated for peerages. Blair is waiting to hear whether he will be interviewed under caution.

It was reported last night that police have discussed with the Crown Prosecution Service whether any of the suspects in the scandal may be liable to prosecution for false accounting as well as whether they may have breached electoral laws or the law against selling honours.

When the prime minister was forced to admit the loans operation, he pledged a review of party funding. However, The Sunday Times has established that one of the 12 lenders, Sir David Garrard, has lent the party a further £300,000. When Labour detailed the loans it had obtained in March 2005, Garrard was revealed to have lent £2.3m. Electoral Commission documents, however, show he has since lent the additional money.

Both of his loans are due to be paid back in 2007. Other lenders, like Garrard, have agreed to extend their loans but there is concern that the funds might be demanded back if Gordon Brown succeeds Blair.

Sir Hayden Phillips, who was asked by Blair to review political funding, is expected to publish a preliminary report this week. It is likely to set out options for wider state funding of parties and possible restrictions on the size of donations.

Phillips is also expected to propose tougher powers for the party funding watchdog. Last month he told MPs he believed a more “proactive” and “nimble” Electoral Commission with the ability to intervene earlier might have prevented the current crisis. He said the commission had wind of the parties’ decision to accept large loans, which did not have to be declared, but it did not act until the scandal became public.

The Commons public administration committee has recommended any honours list that Blair draws up before leaving office should be vetted by the Lords appointments commission. It is understood Downing Street has already agreed to this.

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