A system of tax relief that treats political donations like gifts to charity will be among the options for reform proposed by Labour after the outcry over secret loans.

Plans to allow funding limits to be linked to the size of membership organisations — thus preserving the ability of unions to give large sums to Labour — are also likely to be proposed by Hazel Blears, the party chairman.

Ms Blears wants the debate over party funding reform to be part of a broader campaign to revive political activism and involvement following the allegations of “cash for peerages”. The draft consultation document was seen by the Labour Party’s national executive committee this week.

The final document will form the party’s evidence to an inquiry into state funding by Sir Hayden Phillips, a former Whitehall mandarin.

£9m care bill

The Ministry of Defence has spent more than £9 million treating staff for psychiatric problems at the chain of Priory health clinics founded by a Labour donor.

More than £4 million was spent by the ministry at the clinics, which were founded by Chai Patel, its current chief executive, during 2004-05 according to the figures given by a defence minister. Tom Watson said that the contract with the Priory Group replaced the psychiatric care provided by the Duchess of Kent Psychiatric Hospital.

Deportation move

Five of the eight terror suspects arrested on Wednesday face expulsion to Libya after Britain signed a deal with President Gaddafi of Libya to ensure that they are not mistreated. Officials say that moves to deport the five will begin “as swiftly as possible”. More arrests are expected as part of a new crackdown on militants. Tony Blair has been criticised for failing to enforce his 12-point plan, announced after the July 7 bombs last year, to fast-track the deportation of foreign Islamic extremists.

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