Tony Blair tonight announced that Labour Party would declare all future loans as he tried to defuse the growing cash-for-peerages row.

The Conservatives swiftly followed suit, announcing that they would also reveal the identities of future lenders. The Liberal Democrats have yet to announce whether they intend to amend their policy of disclosing the names of their businessmen lenders, but not the sum borrowed.

The British Prime Minister also announced that he was in favour of another independent figure being appointed to advise ministers on their financial interests, a move which No 10 had rejected during the height of the Tessa Jowell affair.

The announcement came after Jack Dromey, the Labour treasurer, complained that he had been left in the dark about loans of millions of pounds given to the party in the run-up to the last election.

Lenders were later recommended for peerages by Mr Blair but their appointment has so far been stalled by the independent appointments commission that is supposed to vet applications. Two have since asked for their names to be withdrawn from consideration.

Under Electoral Commission rules, loans at commercial rates of interest do not have to be declared by political parties, while straightforward donations do. The commission today urged all parties to declare loans.

Labour later issued a statement saying: "This morning the Electoral Commission, whilst recognising that commercial loans to political parties are not interpreted as donations and do not need to be declared, recommended that parties declare full details of all loans on the same basis as donations.

"This is welcomed by the NEC Officers who, at next week’s meeting of the National Executive Committee, will propose that all future commercial loans agreed by the party be declared publicly, including their sources."

After Mr Dromey launched an internal Labour inquiry into the party’s borrowings, his wife, the constitutional affairs minister Harriet Harman, asked to be relieved of responsibility for electoral administration and Lords reform issues which had formed part of her brief.

At a No 10 press conference this morning the Prime Minister said he wanted to "take the politics out" of the honours system.

He said: "In relation to the nominations for the House of Lords I’m the first Prime Minister to give away patronage rather than keep the system simply for myself.

"It is true, however, obviously as a result of what has happened that there is public concern and that is why it is sensible, in my view, to then go and complete the reforms.

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