Big political donations are, or should be, indelibly stamped with the words “Combustible. Handle with Extreme Care.” Modern parties court these large dollops of cash actively. They need them because a secular decline in regular small contributions from thousands of party members has coincided with steep increases in the costs of wooing increasingly apathetic electorates. It is precisely because party funding gaps are a symptom of reduced public engagement with politics and confidence in politicians that the least whiff of suspicion of dodgy donations or of favours bought and sold spells instant political trouble.

The reek of party funding scandals can be almost impossible to dispel. Voters still remember the taunts of “Tory sleaze” with which Labour tormented the hapless John Major a decade back. Labour's credentials were badly damaged by cash-for-honours. Sauce for goose, sauce for gander, is once again the seasonal jingle.

Labour proudly claims authorship of the Political Parties, Elections and Referendums Act, which since 2000 has obliged parties to register names and amounts of all donations worth more than £5,000 with the Electoral Commission. Yet for four years the Labour Party's most senior managers have behaved as though the 2000 law did not exist, or did not really matter, or as though they had simply forgotten about it.

It beggars belief that David Abrahams, a keen attender of party events and the indirect source of about £600,000, a man made prominently welcome at Tony Blair's Sedgefield farewell, should now be declared an unknown quantity. It was as naive as it was, shall we say, careless of Peter Watt, the party general secretary who was previously head of its compliance division, to allow the party's third-largest donor to hide his identity behind proxies. It was bound to come out; and, if Mr Watt had indeed never read and digested section 54 of the 2000 Act which outlawed these practices, he was derelict in his duty. The same knowledge tests could be applied to Diane Hayter, chairman of Labour's National Executive Committee, who insists that complete checks were carried out on all donors; and to Baroness Jay of Paddington and other members of the vetting committee, which was specifically set up in 2002 to inspect donations above £5,000 yet failed for four years to ask why four donors of evidently slender means were writing such very large cheques. Lady Jay shared her suspicions with Hilary Benn — why with no one else? With Harrient Harman, for example, the “foolish virgin” of this sorry parable? What made Gordon Brown's camp reject a cheque from Mrs Kidd, when the party had been happy to cash £67,000 worth of cheques bearing her signature? What made her money good enough for the party but not good enough for Gordon? Was this merely someone's uninformed hunch? Finally, if the purpose of the letter to Mr Abrahams from Jon Mendelsohn, Mr Brown's election fundraiser, was really to halt an “unacceptable” practice, why was it so fulsomely courteous? Might it be that Mr Abrahams is feared as the keeper of secrets about which senior politicians knew what, and when?

This is the stuff of disaster for a Prime Minister whose “new start for new Labour” pitch made competence, devotion to principles and trust his hallmarks. After Northern Rock and the bank records fiasco, competence no longer sells. By ducking a November election, he sold the pass on decisiveness. Trust is now in the emergency ward. Full and fast disclosure is the only cure.