BRITAIN’S richest man is preparing to bail out Labour by pledging £2m to save the party from financial ruin after the cash-for-honours scandal.

The donation from Lakshmi Mittal, an Indian-born billionaire, will help Labour to pay off huge loans it controversially took from wealthy businessmen before the last general election.

The deal is understood to have been negotiated by Tony Blair and Lord Levy, Labour’s chief fundraiser, who is on bail after being arrested in the summer.

It will prove contentious because Mittal was embroiled in a “cash-for-favours” row in 2001 when Blair backed one of his business deals after the billionaire gave the party £125,000.

The money is also likely to attract criticism from Labour backbenchers concerned about Blair’s apparent financial reliance on a few millionaire backers and on Levy.

Blair had hoped the £2m gift would remain confidential until May, when the Electoral Commission discloses all donations received by political parties in the first three months of 2007.

Senior party figures are now worried that disclosure of Mittal’s pledge may lead him to withdraw it.

Mittal, whose fortune was valued at more than £14 billion in last year’s Sunday Times Rich List, controls the world’s biggest steel company and is seeking to diversify into oil and gas. He is negotiating to take a stake in a multi-billion-barrel oilfield in Kazakhstan. Levy is Blair’s “special envoy” to the country.

His gift is likely to be the last big donation negotiated by Levy, who has raised tens of millions for Blair since becoming Labour’s chief fundraiser more than a decade ago.

Levy had stopped fundraising after the furore caused by the disclosure that Labour had secretly taken loans from wealthy businessmen to fund the last general election. However, the prime minister is thought to have turned to Levy as the party’s debts have risen to almost £23m.

A Labour spokesman said last night: “Mr Mittal has been a committed supporter of the party for many years, and any financial gift from one of the world’s most successful businessmen is very welcome.” Mittal was unavailable for comment.

Explore UK News

• Crime News

• Education News

• Health News

• Scotland News

Times Recommends

• A vicar’s wife: ‘There is no one to fight for us’
• Every little helps at the supermarket
• Ugg or Fitflop? The battle of the boots