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Gordon Brown said today that secret donations to his party through middlemen were "completely unacceptable" and promised they would be repaid, as the funding scandal engulfed his party chairman and two Cabinet Ministers.
Questioned during his monthly press conference, the Prime Minister insisted he did not know until Saturday night about £600,000 of donations made through four intermediaries to the Labour Party by property developer David Abrahams.
In a day of turmoil Harriet Harman, the Labour party chairman, admitted she had received a £5,000 donation through Janet Kidd, a secretary, during her campaign for the Labour deputy leadership. She said she had not realised Ms Kidd was acting for Mr Abrahams and that she would return the money.
Hilary Benn, the Environment Secretary, also disclosed he had turned down a donation from Ms Kidd after he was warned it was on behalf of Mr Abrahams. He later accepted the money when it was offered as a direct donation.

Douglas Alexander, the International Development Secretary, was also forced to deny any wrongdoing after it emerged his old department gave Mr Abrahams the go ahead to build a business park shortly after a large donation to the Labour party.
It emerged today that Mr Abrahams had relied on four intermediaries to make donations in secret. Janet Dunn, who is thought to have been the first person used by Mr Abrahams, donated £25,000 on January 31, 2003. He later turned to Ms Kidd and Ray Ruddick, a builder, both of whom are directors of a number of his business interests, and to Newcastle-based solicitor John McCarthy, who was used as a conduit to donate more than £200,000.
Subjected to a barrage of questions at his press conference, Mr Brown pledged action to clear up the funding process and announced an internal investigation.
"What has happened, where political donations have not been lawfully declared, is completely unacceptable, cannot be justified in any way and this behaviour should never happen again in future," Mr Brown said at Downing Street. He added: "The money was not lawfully declared so it will be returned."
Mr Brown stressed that an Electoral Commission investigation would ascertain whether other donations had been given through middlemen and that Labour would act on its conclusions. The Commission was this afternoon reported to have consulted the Crown Prosecution Service on the matter, amid speculation that a criminal investigation could follow.
He added that the Government had launched its own review into the way funding is received, chaired by the retired judge Lord McCluskey and the former Bishop of Oxford, Lord Harries. They are due to report back to the party chairman, Ms Harman, on the changes that need to be made.
The Prime Minister insisted he did not recall meeting Mr Abrahams and the first he knew of the scandal was when he was contacted over the weekend about a Sunday newspaper investigation.
"The first I knew of this was on Saturday night," he said. "I may have talked to Mr Abrahams. I do not recall those conversations," he added.
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Just who was it who called the Tories the party of 'sleaze'? .........New Labour, desperate to win an election, just as they are desperate to cling to power now at any cost. Politics in this country have declined to the point where nobody can be trusted. Turnout at a General Election will be poor due to public disenchantment and distrust of all politicians and quite rightly so!
Rod Ballard, Leicester,
It would be interesting to know if Peter Watt was one of the several suspected Labour conspirators, along with Blair, interviewed by the police in connection with the sales-for-honours debacle. It really is time for the CPS to be replaced by a truly independent body to assess whether criminal law had been transgressed. That body should also re-assess what action needs to be taken against Blair, Levy and others in the original alleged purchase of honours by certain individuals.
The one productive outcome to these unabated Labour scandals is that Mr Abraham's chances of an honours are now well and truly scotched, provided, of course, that Blair remains out of UK politics. As for Gordon Brown's defence in all this, didn't his father ever tell him that, ignorance is not a plausible defence given his ultimate job description. In the parallel words of one great American President, the buck also stops with the Prime MInister.
Edward Willhoft, Epsom, UK
Gordon Brown does not seem to know a lot, as to how his goverment is being run does he!
Don't think he is up to the job!
mat, herts, uk
It's interesting that none of the Labour big-wigs can remember having talked with or met Mr Abrahams. Footage on yesterday evening's news showed him sitting in the front row of Tony Blair's leaving do. Non-disclosure of the source of a donation is a criminal offence. If Labour politicians knew the true identity of the donor they should be forced to resign.
alex, Barcelona,
And we used to think the Tories were sleazy! This lot have turned sleaze into an art form.
Rod Ballard, Leicester,
Harriet's favorite song, Money makes the world go around the world go around.
Robert, Wales, UK
Oh dear, another rather arrogant politician with a whiff of corruption about her.
Neil, Gloucestershire, England
When UKIP accepted an illegal donation, they were hauled through the courts and some of the funds were confiscated> These funds should not be returned, but confiscated, I am sure the treasury could do with them.
K Wells, Bognor Regis Sussex, England
Good point from Phil. The Chair of Labour's NEC on Newsnight yesterday repeatedly emphasised this is a party issue, not a governmental issue. I hope payment of the inquiry costs is tracked by the media.
Chris, London,
I hope the Inquiry/Investigation covers the initial refusal of planning permission for this would-be donor's bid to build a business park, and then AFTER a donation to the Labour Party, the subsequent granting of permission.
Neil, Gloucestershire, England
All these inquiries into Labour's wrong-doings are goign to tie up our judiciary for a long time. Who's going to be left to administer justice to the regular crooks and robbers?
Nick, Esher, UK
£600k bung,25million lost names, $43 biilion of tax payers money to waste on Northern Rock, 5,000 or was 10 illegal security guards,500 or was it 600,000 iilegal immigrants.
Have I missed something ?
What next ?
Time to call it a day Labour !
dpc, London,
We are back to the days of sleaze and political corruption ,a reprise of the long death of the Major government where anything goes provided a high enough price tag can be attached and any sense of morality is as outdated as a cloth cap at a gathering of the New Labour faithful.
The more things change the more they stay the same.
BILL JACKSON, NOTTINGHAM, uk
Tony's laughing his socks off!
Roger J, kettering,
I recall that before I resigned as Political Education Officer [what do we need this for - I remember some 'New Labour' enthusiasts asking] for the Peckham Constituency Labour Party a decade or so ago, a couple of disagreeable activists to some, were expelled for 'Bringing the Party into Disrepute'. Our Harriet was the sitting MP whom I do not remember taking a stand on this. She has since served as the Labour Government's Chief Legal Office and while in office was unfortunately fined for 'speeding'; we were all informed by BBC Radio 4 this morning that the Labour Party General Secretary was previously its donations' 'Compliance Officer'. If it is true that 'what goes round comes around' these two must by now be overdue for of the Labour Party's own medicine as a token catharsis.
Nicholas Xenakis, Borough, London
Sleaze, sleaze sleaze. When will it ever end? When can we get rid of these crooked, arrogant and unworthy politicians?
Ian Dickson, Brighton, UK
Once again, a Labour Prime Minister finds himself omitting to tell us the full story.
Mr Brown, ( and Mr Blair on many occasions ) ought to have prefaced his explanation of this latest debacle with the phrase
"Now we have been found out...."
Stephen N Jones, Redditch, Worcestershire
If members of the tax paying public were to conduct their affairs with the government in the same way as the the Labour party then a implausible story and a denial of wrong doing if found out is all you would need to fill in tax returns. The wrong doing is transparent to all that are interested. This government is suffering from the same affliction that comes from being in government for too long just as the Tories did. The public are no longer as naive or as hopeful as they once were and no amount of spin will disguise the lies.
Mr Smith, Swindon, UK
From this side of the Atlantic it appears that something terribly wrong is happening in the NorthEast! First the Northern Rock affair, then the decline of The Magpies and now this Labour party donation fiasco. Can these events be linked?Does anyone have a theory?
Peter, New York, New York
If the cheques were signed by the donors - then the money in effect is given by them. In that case where the monies originated is irrelevant. However it then asks the question " Were the funds disclosed on tax returns by the donors to the effect that they had large sums of undisclosed income?" Presumably HMRC can now step in and redeem itself by throwing the proverbial book at the donors?
The disingenuous nature of Politicians, who no matter how often are caught with their hands in the till will continue so long as they are only ever given the political equivalent of an ASBO and "Carry on Regardless".
N Summers, Madrid, Spain
he "gifted" large sums of money
Well, the last time I checked, the receipt of 'gifts' of large sums of money was subject to Capital Gains Tax. Or is it just me that has to pay it?
We trust therefore that the Glum Bottler took 40% from each recipient, before they passed it on to NuLab ??
Thomas, Toulouse,
What a bunch of charlatans this government truly are. They came in on a ticket pledging to be whiter than white and all we have ever had since is lies and spin to such an extent that one cannot believe a word we are told by them.
D Case, Newquay,
Who is the inquiry reporting back to? A certain M/s Harman? Hang on, wasn't she an "unwitting receipient "of a donation? And this is an unbiased inquiry is it?
Somehow I think this will be yet another "Lessons have been learnt and it will not happen again". At this rate we must have thhe best educated political party in the world, that is till thed next time they get caught, then guess what ? Back to school.
Howard, Basildon, England
If the money paid to Harriet Harman, or any other politicion
donated by these means, has been spent who provides the money to be repaid.
michael rolfe, louth, Lincolnshire
Come on Dave C, put David Davis on to this - he'll have the head of Harriet (wasn't she the one who was going to cut red tape in 1997? - Ha).
Ian Burgess, Bristol,
Labour do not know what goes on in their own party.
Labour do no know how migrants have come to this country.
Labour do no know how to protect our data
Labour know how to tax and waste money.
Why do we trust them to run the country?
steve, chester,
"They are due to report back to the party chairman, Ms Harman, on the changes that need to be made."
Really? So the investigators now report to the instigators? How about asking for an inquiry into the Holocaust - and report back to Adolf Hitler?
Steve, London, UK
Lets face it no one really cares very much who donates to what party, its the transparency of the process thats the issue here. I personally cant see why anyone would want to donate anonymously unless they were doing something underhand or they expected something in return...there is no other explanation. And paying for favours is endemic in the many political systems (this is a big problem in USA)....as indeed it is in big business...BAE/Saudi? Its not morally right of course and having transparency doesnt mean we will know or understand the full extent of the players relationships/transactions but at least its a step in the right direction.
DR DAWN, NEW YORK, NEW YORK
Illegal activity? This should surely be a matter for the police and charges should be brought. Labour can't simply say sorry. Normal (non-politicians) can't just break the law, apologise when found out, and get away with it. Why should politicians be above the law?
This isn't simply a news story, they have broken the law and should be punished accordingly - resignations aren't enough.
Louise, London, UK
There is no point thinking about breaches of the law, breaking electoral rules or confidences by this government because they are untouchable, as was its predecessor. If any one prevails and and enquiry is held it will, as usual, give them a clean bill of health so why waste time and more importantly taxpayers money.
Nigel Ashurst, Leicester, England
Ooh, looks like another Ecclestone. Pay them a wodge of dough, get some 'benefit' like a business park consent, then wait for the scandal and get your money back. Labour get stiffed. By themselves. Again.
Can you imagine if anyone in the Labour Party had the first clue what they were doing? Its too scary to contemplate.
Tony, London,
There's a bad smell coming from this and I have a feeling that it is going to get a lot worse.
mr G, Leeds, Leeds UK
Durham's not the only Labour city with these problems. It might be useful for someone to have a look at Brighton & Hove, the redevelopment of the King Alfred Centre and donations to the local Labour Party by interested parties. To say nothing of the Falmer Stadium. Anywhere else?
ex-Brightonian, Norfolk, UK
There seems to have been a breach of the law here. Whether or not it was accidental and whether or not various people realised they were breaching the law is immaterial.
Ignorance of the law is no defence. The policie should be investigating. This has all the appearance of another cash for favours scandal and an'inquiry' is just not good enough.
Watt'sresignation is in no way honourable; he stated he was not aware of his duties and thereby admitted to being incompetent.
Edwin Thornber, Bucharest,
There must surely be prima facie evidence here for an investigation by the tax authorities (if they can be trusted not to lose the evidence). This would be called money-laundering in any other circumstances and shows just how corrupt the labour party has become once they got their grubby little hands on the levers of power.
peter smith, Montreal, QC, Canada
There must surely be prima facie evidence here for an investigation by the tax authorities (if they can be trusted not to lose the evidence). This would be called money-laundering in any other circumstances and shows just how corrupt the labour party has become once they got their grubby little hands on the levers of power.
peter smith, Montreal, QC, Canada
A few years ago the Serious Fraud Office investigated some irregular transactions within the Labour run Council in Durham.
It failed to come up with any prosecutions proving , in my view, that the SFO is as inept as the City Council it was investigating.
This latest revelation is nothing of a surprise to anyone who lives in Durham. The catalogue of calamitous planning decisions made beggars belief. There was also the nepotistic granting of planning permission involving a councillor and her brother-in-law.
It seems that the cat is out of the bag at last. I have no doubt thought this latest scandal will wash off the teflon coated City Council. I await any resulting investigation with interest. I hope the SFO gets it' act together before it heads north.
John , Durham,
"PM orders inquiry" Who is going to pay for the inquiry, the Labour Party or the tax payer? Let me guess...
Phil, London, UK