Some sincere contrition might have belped to salvage the situation. Peter Hain's public statement on Saturday in fact made a bad position worse. The Work and Pensions Secretary adopted a defiant posture, minimised the seriousness of inexcusable mistakes made in the funding of his bid to be Labour's deputy leader and insisted that it was “absurd” to suggest that he had sought to conceal those who had backed him with substantial donations. It is Mr Hain, in fact, who is absurd.

Mistakes will be made in reporting the financing of politics. The arrangements outlined in the Political Parties, Elections and Referendums Act 2000 are comparatively new and the battle to succeed John Prescott last year was the first time they had been tested in an internal Labour contest. It is no surprise that some contributions are accepted that, on closer inspection, should not have been, or that errors occur in the accounting of legitimate cash. But the scale of what occurred in Mr Hain's case was wildly beyond that which can be put down, as he blithely said, to “poor administration”. “I am a busy man who surrounds himself with incompetents” is not an adequate explanation. That he turned out to be a joke candidate does not make this a laughing matter.

The source of much of that money compounds this fiasco. Much has been made of the fact that the Progressive Policies Forum is a think-tank that has so far been brain-dead. It would have been more disturbing, however, if it had had the time and inclination to publish anything. For it is now obvious that the sole purpose of this organisation was to provide ideas and policies that one contender for the deputy leadership, Mr Hain, might benefit from, yet the names of those who had bankrolled the enterprise would have remained secret. As events transpired, when the inept Hain campaign discovered that it had severely overspent its budget in its drive to capture fifth place in this election it instead turned to the dormant think-tank as a private piggy bank.

The purpose and the spirit of the legislation relating to political funding in Britain is completely clear, even if some of its specific provisions are more arcane. It is that there must be absolute disclosure of any funding above a certain level which is designed to influence a party, a ballot or a plebiscite. It was ignoring that spirit which led Tony Blair into the cash-for-honours scandal and embarrassed Gordon Brown once it was revealed that the Labour Party had accepted money from a businessman who had used conduits for his cheques rather than admit the extent of his financial commitment.

The principle of absolute disclosure has been badly discredited and must be restored urgently. Politics in this country will never be as expensive as in the US but the advent of the internet alone means that the inflation rate for campaigning is likely to increase over the coming decade. Total transparency in funding is, therefore, crucial.

The departure of a Cabinet minister from office for his failure to treat the rules with the honour they deserve would send a strong if belated signal that they will not be treated with disregard in future. It would remind all politicians that they are legally responsible for what happens in their name and should take their personal obligations in this respect extremely seriously. The search for legal loopholes would be discouraged. In different circumstances, Mr Hain might have ended up as deputy prime minister last summer. He should not remain as the Work and Pensions Secretary this winter.