THE Liberal Democrats have agreed to tighten procedures for vetting donations after the controversy over their acceptance of £2.4 million from a tax exile via a fledgeling company.

The party’s ruling body was briefed on talks between its officials and the Electoral Commission, the funding and elections watchdog, on checking donations. Talks are also planned with the Tories and Labour.

The commission has expressed concern about “the extent and robustness” of initial Lib Dem checks on whether it was legal to accept the money from Michael Brown, who lives in Majorca and is not registered to vote in Britain, via a new company, 5th Avenue Partners.

The discussion by the Federal Executive Committee was the first occasion on which Mr Brown’s donation, the biggest in the Lib Dems’ history, had been considered by one of the party’s formal bodies. Lord Razzall, who is Charles Kennedy’s closest adviser and who handled the donation, was present but the discussion was led by David Griffiths, chairman of the party’s Federal Finance and Administration Committee.

Mr Griffiths raised the subject of Mr Brown’s donation under an agenda item on the Political Parties, Elections and Referendums Act and spoke of the legal requirement for corporate donations that the company must be trading, one source told The Times.

In the discussion that followed, some committee members expressed concern at the impact the controversy over Mr Brown’s donation would have on rank-and-file members. There was also concern that some of the resulting criticism was politically motivated.

But the committee appeared satisfied that the Electoral Commission had told the Lib Dems that it was reasonable for the party to regard the donation as permissible, although this was subject to any further information coming to light.

One Lib Dem official said the talks with the commission would focus on how the legal requirement to check the permissibility of corporate donations should be applied to new companies about which less information might be available.

“There is a genuine dilemma about what carrying out adequate checks constitutes and the fact you don’t have the immediate, obvious route of going into Companies House and flicking through accounts for the past 12 years,” the official said.

There remains concern among some grassroots Lib Dems over who approved Mr Brown’s donation and the effectiveness with which the unprecedented sum was spent.

“Liberal values are transparency, accountability, openness, consultation; it is not immediately apparent that these will have been followed in this particular case,” one activist told The Times.

“I suspect the truth is this decision was taken, as most decisions in the party are taken, by the Lord Razzall who is accountable to nobody.”

In a letter to The Times last week, Mr Brown said he gave the money “to invest in the infrastructure of the party”. In fact it was spent largely on billboard and newspaper advertisements which no made no lasting contribution to the party’s development. It was spent chiefly under the direction of Lord Rennard, although senior Lib Dems say Mr Brown’s four donations, in February and March, were too late to be invested in campaign resources such as telephone canvassing.

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