Pizzas galore!

He was appointed by Gordon Brown in September - after all the donations were received - to raise money for Labour's next election campaign. Jon Mendelsohn began checking records of past Labour donors and says that in late September he was told by Peter Watt that several listed donors were proxies for David Abrahams. Despite being told this was lawful, Mr Mendelsohn says he was unhappy with the arrangement and planned to end it, which was why he wrote to Mr Abrahams last week seeking a meeting. Mr Mendelsohn did not, however, tell anyone on Labour's NEC. Is it coincidence that Labour's fund-raiser wrote to Mr Abrahams days before the storm broke? Certainly, the two men did not get on, having fallen out as prominent members of Labour Friends of Israel.

Will anyone be prosecuted?

They may well be. But it is for the Electoral Commission, the watchdog body, to conclude its inquiry and then decide whether to call in the police or prosecutors. Gordon Brown has already admitted that the concealed donations were "not lawfully declared". The law covering third-party donations says that the "agent" or middleman must tell the party who the money is actually from and that failure to comply "without reasonable excuse" is an offence. Those potentially in the firing line are David Abrahams himself; his solicitor, John McCarthy who made the largest third-party payments and was not beholden to him as an employee; and Peter Watt, Labour's former general secretary, who admitted that he knew of the arrangement.

Do the Tories and Liberal Democrats have similar problems?

They have certainly been there before. In the early 1990s, the Conservatives accepted donations of £440,000 from Asil Nadir, who later fled to Northern Cyrpus when his Polly Peck business empire went bankrupt. Before the 2005 election, the Liberal Democrats accepted £2.4 million from a company linked to Michael Brown, who was later jailed for two years for perjury and a passport offence. In both cases the Tory and Lib Dem defence was the same as Labour’s now: the money was accepted in good faith. Neither party repaid the money, as Labour has now, however.

What are the implications for reforms to the funding of political parties?

In the short term, Labour’s rules for handling donations will be overhauled. Lord Whitty, a former party general secretary, will recommend changes, to be reviewed by a retired judge and a bishop. In the longer term, Gordon Brown’s room for manoeuvre has been weakened further as he weighs up whether to push through legal spending limits on political parties, effectively imposing them on the Conservatives. Doing so without cross-party consensus always looked risky. Now Labour’s motives would be subject to even further suspicion. And voters’ appetite for giving more state funds to political parties has probably shrunk still further.

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