TONY BLAIR has revealed the huge funding pressures on Labour in private remarks to party workers, saying that they need to find four or five times more cash to fight the next election.

Mr Blair told senior party figures that the extra cash was desperately needed to match expected Conservative spending in target seats from now until the next election.

His verdict came after an analysis of Tory spending in the two years before last year’s election, which showed that Labour was outspent by a factor of 2.4 to 1 in 93 target seats. In three seats that Labour lost, the Tories spent more than ten times as much in the months before the election was called.

Labour insiders believe that extra Tory spending power cost the party at least a dozen seats in the general election last year and they will push for annual constituency spending limits. Spending is now strictly capped only from when the election is called. Senior Labour figures are alarmed at the pace of the “arms race” in party funding, which some fear is driving the dash for cash behind the “cash for honours” scandal.

Peter Bradley, who lost his seat of The Wrekin after the Tories spent 10.9 times as much as Labour, has compiled an analysis of targeted funding from Electoral Commission figures. Mr Bradley said: “My research identifies a strong correlation between a party’s capacity to outspend its rivals and the swing in its favour in key marginal seats.

“It also shows how this link was systematically and successfully exploited by a consortium of donors to one of the major parties last year in a deliberate, but perfectly lawful, attempt to influence election results.”

The Electoral Commission has proposed a cap in funding for four months before an election, but Mr Bradley’s research shows that seats were sent extra cash for at least 18 months before this. The funding race has started for the next general election and prompted Mr Blair’s warning to Labour’s National Executive Committee, according to minutes seen by The Times.

The disclosure, which will increase calls for better regulation of party funding, comes as another Cabinet minister was dragged into the “cash for honours” affair. It emerged yesterday that David Miliband, the Local Government Minister, was named by Des Smith, the former government adviser arrested last week by Scotland Yard, in a conversation with an undercover reporter.

The Sunday Times released fresh details of a meeting in which Mr Smith suggested that a businessman could approach Mr Miliband with a view to securing a knighthood in return for sponsoring a city academy.

A Labour spokesman flatly denied any suggestion that Mr Miliband had nominated anyone for an honour for backing an academy or any other form of government sponsorship. The spokesman said that Mr Miliband had met Mr Smith only once and that the subject of honours was not raised.

Martin Bell, the former independent MP, called yesterday for Mr Blair to suspend all appointments to the Lords until the “cash for honours” scandal was resolved.

Downing Street denied reports yesterday that detectives in the “cash for honours” inquiry were preparing to interview Mr Blair. A No 10 spokeswoman said: “We have received no such request.” Scotland Yard refused to comment.

Mr Smith resigned from his post helping to recruit sponsors for academies this year after he was recorded by The Sunday Times suggesting that donors could get honours in return. A reporter purported to represent a businessman called Malcolm who was interested in sponsoring an academy.

Mr Smith said: “I’ll introduce him [Malcolm] to David Miliband and say, ‘Knighthood? This is the man.’ ”

Mr Miliband’s spokeswoman said: “There is not a single allegation of impropriety by David Miliband in the Sunday Times article. Any suggestion that Mr Miliband has nominated anyone for an honour for sponsoring a city academy or for sponsoring any other government policy is completely without foundation.”

THIS WEEK IN PARLIAMENT

TODAY
Not sitting.

TOMORROW
Commons: Health Questions; Commons Bill, second reading; short debate on competition in classified directory advertising. Westminster Hall: Debates on United Nations reform; role of Territorial Army Lords: Parliament (Participation of Members of the House of Commons) Bill, third reading; Animal Welfare Bill, second reading; debate on Nigeria.

WEDNESDAY
Commons: Questions to the Deputy Prime Minister; Questions to the Prime Minister; address to mark the Queen’s 80th birthday; Northern Ireland (Miscellaneous Provisions) Bill, committee. Westminster Hall: Debates on progress of democracy in Belarus; Northern Ireland fishing industry. Lords: Scottish Parliament (Candidates) Bill, committee; Government of Wales Bill, committee; debate on inquiry into Deepcut Army barracks.

THURSDAY
Commons: Environment, Food and Rural Affairs Questions; Northern Ireland (Miscellaneous Provisions) Bill, committee. Westminster Hall: Debate on Science and Technology Select Committee report on forensic science on trial. Lords: Address to mark the Queen’s 80th birthday; debates on alternatives to foxhunting, the electricity supply industry and science and technology in education policy; Lighter Evenings (Experiment) Bill, committee.

FRIDAY
Not sitting.

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